Viability of Selling a web development business

**ubersportz** · 09-18-2008 02:26 AM

Hypothetically speaking, if you had a business that developed websites and then sold them for profit on sitepoint etc. and also did web design for small businesses and you making around 3000-4000 a month doing so, how much could you sell this business for?

**Aletheides** · 09-18-2008 05:07 AM

Do you hypothetically have a website that gets a continuos flow of clients every month?

**ubersportz** · 09-18-2008 05:21 AM

Yes that would be fair to say

**jasaunders** · 09-18-2008 09:22 AM

Wow, such a broad question. It depends on so many additional factors that there is no accurate answer. Businesses can be valued by one of a dozen plus methods. The most common being using an earnings multiple, where the multiple is based on your industry, growth prospects, ROI, cash flow, and other factors. Larger than that, it includes what assets your business includes and valuing those assets. and for your business, the key question would be what happens to the human capital? Are you a one man show and how will the work get done if you sell? How will the transition take place? Are there employees of the company and are they likely to stay on and what is their worth to the company? If you do all the work and you sell, essentially your company is near worthless because the intellectual capital and skillset which runs the company is gone.

So to give you an answer, your company is probably worth somewhere between $10 and $320,000.

**flnazrael** · 09-18-2008 11:36 AM

So to give you an answer, your company is probably worth somewhere between $10 and $320,000.

ROFL. That was great.

**Aletheides** · 09-18-2008 05:30 PM

It's hard to say like jasaunders is saying.

Maybe somewhere between 25-60k if you had a website with good organic rankings that was bringing in clients for you. More if you have employees to delegate to and its essentially turnkey for the buyer.

But this niche is ultra competitive, so good luck on that.

**ubersportz** · 09-19-2008 07:53 AM

So what your saying is a reliable outsourcing method or delegation of key duties is the predominating value adding factor if the owner is still gaining a good ROI? Here is a more precise question. Web design, online advertising deals (where ads are purchased from website publishers and sold for a profit to media buyers) and website development/trading are the activities of the enterprise. Web design is completely outsourced at low cost but high quality. Ad deals are done by owner (it really only requires a good salesman and some industry knowledge) and the business owns a string of web developments earning money that are classed as inventory and can be sold with the proceeds from sale going to new website purchases, also outsourced as a more full time role. NP of $800/month from webdesign. NP of $2400 a month from website sales and trading and earnings. NP of $500/month from ad deals. Can you give me a good valuation with this info? Assets = $9,000 including websites, ad space owned, 'hard assets' - computers etc. and the business website.

Would 24 times monthly earnings+assets be accpetable? I mean google used to trade at a PE well inexcess of 30 (not sure what it is now) and admitedly the owner would have to put in around 10 hours of work a week to maintain current earnings but surely a PE of 2 is not unreasonable??

**Aletheides** · 09-19-2008 07:52 PM

Yes, if the business owner has a handsoff system to handle the incoming clients then all the better.

You're saying you have websites you're sitting on earning revenue? It might be better to just sell these individually.

**ubersportz** · 09-20-2008 04:46 AM

Thanks for the feedback

**matt_15** · 09-20-2008 07:21 AM

If your doing all the work, then you are the main asset. With you gone, the company isnt worth much.

**The Stealthy One** · 09-20-2008 11:15 AM

matt_15 is right - the company is worthless without you. It really is that simple.

**ubersportz** · 09-21-2008 06:01 AM

I thought I mentioned that all is involved on the part of the owner is replying to emails, calls and then outsourcing the work. Most people can read emails and make/reply to calls. Also, worthless i feel is a bit far fetched, the new owner could easily employ someone if the previous owner had been doing the work.

**bluemc** · 09-21-2008 06:36 AM

you business would not be worth nothing if you are gone. you can only make money on your work which is a service business.

**namedia** · 09-22-2008 07:10 AM

Thats a total joke, your telling me that net assets of 9000 will suddenly become worthless hahaha and that there is no one else in the world competent enough to organize some freelancers to outsource to and email them work?? Come on.

**namedia** · 09-22-2008 07:13 AM

Goldman Sachs is a service business and I'm pretty sure they wouldnt become worthless if their CEO was replaced. And please, no sarcasim about the financial crisis.