During our vetting process, we look at the website’s history of earnings and traffic to make sure both are stable and have passed our verification process. Once they’ve been qualified, we list the sites based on a 18X-46x multiple of net monthly profit.
Here’s the formula we use: Sales Price = Monthly Net Profit X Multiple + Discounted Assets (if any) + Wholesale Inventory (if any)
Net monthly profit is usually determined by looking at the average of 3 to 12 months of revenue, subtracting any costs (COGS, marketing/advertising, hosting, virtual assistants, content, etc.) and dividing by three. In some instances where the business is seasonal or has been around a long time, we’ll use a 12 month average instead to reflect seasonality - which is clearly mentioned in each listing. The longer month average we can use for a business, the larger the multiple will usually be (along with other proprietary factors we take into account).
Here are a few examples:
Example 1: Content-based AdSense site that’s made $4,500 in net profit in the last 3 months.
We’ll take the monthly average ($1,500) and multiply by the multiple to determine the price. ($30,000 at a 20x multiple) You’ll receive 85% of the final sales price or $25,500 in this case.
Example 2: Dropshipping Halloween site that earned $60,000 in gross revenue Sep/Oct/Nov and $10,000 in profit. It’s made $80,000 in all of 2013 with $12,000 in profit. They’ve got inventory value with wholesale value of $5,000.
Because the site is seasonal, we’ll look at the average net monthly profit earnings from 2013 ($1,000/month) and multiply that by by the multiple ($20,000 if we use a 20x). With $5,000 in inventory, that puts the price of the site at $25,000.
Example 3: Lead generation site in the education niche that earned $12,300 over the last three months with $100/month in hosting costs and $500/month in paid traffic.
The site has made $4,100/month in gross revenue, but we’ll subtract the $100/month and $500/month worth of costs, putting the net profit at $3,500/month. We’ll list the site for $70,000 again at a 20x multiple.
The longer your business has been around, the more traffic, higher amount it earns and other factors all go into our decision of what your business's multiple will be.