How to value an online business

Almost every small online business trades at a multiple of its yearly profit — what brokers call seller's discretionary earnings (SDE): the money the owner actually keeps, with their own salary and one-off costs added back.

The ranges, roughly

SaaS with real recurring revenue clears 3–4.5× yearly profit. Content and advertising sites go for 2.4–3.6×. E-commerce lands at 2–3.2×, newsletters 2–3×, agencies and service businesses lower still, because the owner usually is the product. Our valuation calculator does this arithmetic for you.

What moves a business inside its range

Up: age (three years beats one), diversified traffic and revenue, documented processes, low owner hours, clean books a buyer can verify from bank statements. Down: one traffic source, one big customer, one supplier, or numbers that exist only in a spreadsheet.

The two classic mistakes

Buyers overpay for revenue — a business doing $40k/month in revenue and $1k in profit is a $30k business, not a $1m one. Sellers overprice potential — "could easily be doubled" is priced at zero by every serious buyer, because if it were easy the seller would have done it.

The number the calculator gives you is a starting point for negotiation. The price is whatever someone pays after seeing the real books.