Value of a network of sites

[Ballswinger]

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We are interested in knowing just how much our network of affiliate sites might be worth but unsure of how to value them.

The sites (mobile related) turnover £ 250,000 per annum for us.

I understand that valuing affiliate sites is not comparable to selling an ongoing business so has anyone any idea of how much we should ask for?

Has anyone any experience of selling affiliate sites?

Any help appreciated and offers welcome.

As many of you are aware, we are entering into a new venture (real world) and would ideally like to give it as much time as possible.

Andrew

Tech Enterprises

[drivetowin]

Realise you probably wouldnt want to broadcast it on a public site but knowing the annual profit is more useful for calculating worth than turnover

As the old saying goes - turnover is vanity profit is sanity

[accelerator]

Your business would be valued on a multiple of the yearly profits (usually before tax) it makes.

I could not tell you what kind of multiples affiliate sites are achieving, but I would guess at at least 3.

I expect that there are some quoted mobile phone retailers (carphonewarehouse?) that you could compare against. Look at something called the price (stock market price) / earnings (earnings per share before tax) ratio that they are on, and you have something to compare against for valuing your affiliate business.

There are a number of share valuation techniques that also might be helpful to you, see http://www.motleyfool.co.uk for more valuation tips.

Rgds

Accelerator

[pricethat]

3 times annual turnover for affiliate sites sounds a little optimistic to me. I guess its down to however much someone wants to pay for it, but any profit is generally down to the hard work that was put in over the year and not solely down to the business having any real good will attached to it.

The problem with online websites is that there isnt really any asset in what it does now as next week, month, year could be a completely different ball game.

A prime example of that for example might be mobile content sites, they were making a lot of money earlier this year, then overnight slumping by more than 50% in some cases.

I think obviously its worth a fair amount of money but if its profits come in via what you spent on ppc then the value really isnt that high, what people will want to see is the profits and exactly what your business does to get those profits. If those profits came from natural seo traffic then i wouldnt pay 3 times its yearly as google and others could change their rankings tomorrow and then its worth nothing.

Hope thats of some help

[getvisible]

I've been going throught the same thing with the accountants - trying to value my business.

The problems you'll have to weigh up is:

1. How much the future earnngs potential relies on your own personal expertise
2. The balance of that future earnings potential - do you rely heavily on one source of income, be it market (mobiles) or merchant?
3. Can you take that technology with you?
4. Are you going to set up again in the same industry?
5. Are there any hidden risks to the business?
6. Are there any major competitive pressures around the corner
7. Does any potential buyer need any specialist expertise to continue profit generation?

These are specifically based on "exit". Valuing a company for accounts purposes and sales purposes are different.

I agree that 3* could be high, but that's with the knowledge I have of your business. If you had unique and patentable technology that could bring large forward profit steams then you could see 10*. I remember the P/E ratios of 70 / 80 times in the boom years!

If there is no new, totally unique, market changing technology then I'd say around 1.5*.