Revenue Appraisal Tool
In traditional business takeover theory, a business' value is
estimated in multiples of monthly revenue. The standard multiple, or
range of multiples, varies depending on the type of business. This is
basic, and simple enough that it needs no more explanation than that.
This leaves us with certain difficulties, however. Firstly, earning
revenue is not synonymous with making profits, and secondly, a site's
revenue streams aren't taken into account by a simple assessment of
revenue.
Lower - Higher Multiple:
These are the months you are calculating revenue for. Usually web businesses
are evaluated at 12 to 18 months of revenue.
Revenue vs Profits:
Many websites earn a revenue but don't make a profit because costs
exceed revenue. A situation where costs are greater than revenue is
commonly known as being in the red, or running a deficit. Depending on
the website, such a situation presents either humongous potential or a
seductive trap. The following are the key issues in differentiating
one from the other.
Sources of Revenue, or Revenue Streams:
With respect to sources of revenue, finding out if a website's revenue
streams are diverse and sustainable is the main task of a site
flipper. In terms of being varied, the desirable amount of revenue diversity
grows proportionally to a business. For example, a small business with
a handful of revenue streams can be contented. Any more might cause
logistical difficulties, while any less would put the business in an
undesirably risky and dependant position.
This revenue appraisal tool is based on
Site Flip's
Website Appraisals 101: Revenue Range Appraisals article, and was developed in
conjunction with Website Auction Hub.
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