Internet Businesses For Sale – A Quick Guide

This quick guide will help you to focus your thoughts on what kind of Internet business for sale you should be looking to buy. The two basic categories are established Internet businesses and start-up Internet businesses.

Established Internet Businesses For Sale

Your valuation of an established Internet business should be based on its yearly profitability. A common sale price valuation is calculated as a multiple of the annual net operating cash flow of the Internet business. EBITDA or Earnings Before Interest, Taxes, Depreciation and Amortization is the most common standard for brick and mortar businesses and can be applied to internet businesses as well. Established Internet businesses with a reliable earnings record are expected to sell within a range from 2 to 5 times EBITDA.

Some factors that affect the multiple are:

• Are revenues and profits growing year over year, flat or falling?
• How many years in business?
• Does the domain name have branded value?
• How good is the search engine positioning for keywords?
• How many unique visitors?
• The size of the e-mail or subscriber database if any?
• Is the business in a profitable niche?

An established Internet business with an EBITDA of $10,000 would have an expected valuation of $20,000-$50,000. Spending that kind of money for an Internet business may or may not be attractive to you. It will probably depend on how much cash you have to invest, and how much time you want to spend growing your Internet business.

Start-Up Internet Businesses For Sale

Startup Internet businesses do not have an earnings record, even if they have produced some revenue, and therefore cannot be valued based on earnings. How then can we determine the value of a start-up Internet business?

We do not have to reinvent the wheel. Although the factors that affect the multiple for the valuation of an established Internet business do not apply, some of the other factors do.

• Does the domain name have a value in itself? Do people search for the domain name keywords?
• Are pages in the web site indexed by Google for the most relevant keywords? Is there a well-researched keyword list that is ready to be exploited?
• Is the business in a profitable niche?
• Does the business have growth potential?

Although you cannot put a specific dollar value on any of the above factors we believe they are essential characteristics for a start-up internet business.

The buying question is can you produce the same results for the same or less money – and do you have the time to do so?