How do you figure out how much your online business is worth?
Due to the absence of tangible assets, valuing an online business is difficult. However, this company is also subject to the same revenue and profit considerations as any other business. Any online business’s value can be determined using these dependable methods.
Choose a revenue model.
The ways in which various online businesses make money differ. Knowing a company’s financial operations is helpful. Find out how your business makes money by analyzing it. Does it earn money through product sales or advertising, subscriptions, and lead generation? You will be able to determine whether that company is valuable and where the money comes from with this information.
Examine the Revenues of the Prior 12 Months.
Businesses are valued by professional analysts by looking at their gross income over the past few years. Sum up these earnings. This information can be found in the balance sheets of the company.
Divide by 3 or 6.
Is your company a business? Then, multiply the income from the previous 12 months by 3. Multiply the trailing 12-month revenue by 6 if it is a content company that makes money from donations and advertising. To see how you’re doing, compare it to other businesses in your industry.
Calculate yearly expenses.
Reduce the company’s value in proportion to its expenses. Advertising, a merchant’s fee, a hosting fee, administrative fees, and bank fees are among the costs. There is no formula for how much to deduct for an online business. But find out if your expenses account for 75% of your revenue.
Traffic.
An online business’s primary source of revenue is traffic. An online business is worthless without traffic because it won’t sell anything. As a result, traffic is a big factor in how much your online business is worth. Good traffic is what matters.
The revenue per user (RPU) method is used to determine the quality of traffic. Knowing the value of each visitor is helped by this. The best way to determine which traffic channel performs best is with this metric.
Concentration should be taken into account when looking at traffic statistics. Knowing how diverse the traffic channels are will be helpful. Is organic search bringing in 70% of traffic, or are there other channels that only bring in a small portion? The more diverse and high-quality traffic your online business receives, the more valuable it is.
Base of customers.
Your online business will be worth more if you have a loyal customer base. If you have an active customer base, you will have repeat customers who will continue to make purchases from you. This shows that your products are great and that you have a good relationship with your customers.
Here, take into consideration the following:
-How does your company acquire new customers?
-How much does it cost to acquire new customers?
-How exclusive is your clientele and how rapidly is it expanding?
-How many of your rivals are there?
-Do you already have a mailing list?
-What is your rate of churn?
Consider the bigger picture to determine your company’s true worth.
At some point or another, every successful online entrepreneur has made mistakes in their business. All of it is a part of learning. Despite the fact that mistakes are inevitable, you can avoid a number of common errors in online marketing.
