Selling internet buesiness?
Question am I selling the internet business for a fair price:
Start up cost 4, 000 dollars, internet earns 20 dollars on Sat, and 20. on sunday. 10 dollars each day of the week.
I am selling it for 20 percent of start up cost., That's it.
Is this a fair price? Or what factors should I take into consideration when selling this business?
- 1 decade agoFavorite Answer
Too low. I've sold internet businesses so I can tell you that you should sell for the fair market value of your company. Although there are several different ways to figure this out and most require an experienced investment banker, you should at least use discounted cash flow analysis. Let me explain the concept by an easy illustration that everyone understands: The Lottery. If you win $1 Million, the Lottery will want to pay you $33,333 over 30 years. But, you can take an immediate payout instead of $850,000 now. How do they come up with $850,000? That is called the time value of money and is calculated using the Net Present Value. What you are calculating is what is $1 Million spread over 30 year worth to you if you could have it all today.
Apply this same concept to your business. Let's say your business earns an average of $6,000 a year and let's say that if you took that money and invested it you would earn a 15% rate of return. Now, let's say you plan to operate this business at this same level, and assuming it doesnt grow AT ALL, over the next 10 years. Using the Net Present Value calculation, your business is worth somewhere around $56,000! (Using quick math, don't quote me).
Discounted Cash Flow Analysis is a more complicated, but more accurate way to calculate this but is based on the same concept and would take into account that if you worked at your business it would probably make more money over time, so it would be worth even more! Don't get hosed, show them who is boss.
Good luck.Source(s): Here is some good reading on the subject http://www.answers.com/topic/discounted-cash-flow?...