How to Value an Online Business

Valuation starts with sustainable economics and adjusts for risk, growth, transferability and market evidence.

Normalize the economics

Separate genuine operating expenses from unusual, discretionary or owner-specific items. Depending on the business and deal context, buyers may discuss measures such as SDE or EBITDA.

Understand the multiple

A multiple summarizes how buyers price a stream of earnings or revenue. It is not universal: business model, size, growth, concentration, defensibility and buyer demand all matter.

Adjust for quality

• Revenue and traffic concentration
• Customer retention and churn
• Margins and growth
• Founder dependence
• Documented operations
• Transferability of assets and contracts

Use comparable evidence carefully

Comparable transactions can frame a range, but no two businesses are identical. Use market data as evidence, not as a substitute for analyzing the asset in front of you.