The short version
Small online businesses are usually priced as a multiple of annual profit. If a site makes £100 a month and sells for £2,400, it’s being valued at 2x: £1,200 of annual profit, times two. The maths is the same in dollars.
Around two times annual profit is a common starting point for small deals. Flippa’s published figures on completed sales put the average for deals between $100,000 and $250,000 at a little over 2x, and smaller deals often go for less. Treat that as a reference point, not a rule. The right number for any one business depends on how reliable its profit is.
So valuing a business comes down to two questions: what is the real profit, and how much should you trust it?
Step 1: Work out the real profit
Ask for a month-by-month profit and loss account for at least the last 12 months, with every revenue source and every cost on its own line. Then adjust it.
Check the add-backs
Sellers often quote seller’s discretionary earnings, or SDE: profit before the owner pays themselves, with some costs “added back” because, they say, you won’t need them. Some add-backs are fair, like a one-off redesign. Many aren’t. If the business can’t run without a tool, a freelancer or an ad budget, that cost stays in.
Account for the owner’s time
If the seller spends ten hours a week on the business, someone has to do that work after the sale. If it’s you, part of the profit is really a wage. If you’ll pay someone else, deduct what that would cost.
Choose the right period
If the last three months are well below the 12-month average, value the business on the recent figure. If they’re well above it, use the 12-month average and ask what changed. Sellers sometimes push profit up in the months before a sale.
Got a listing in front of you? Run its numbers through the free checker for a verdict, the red flags and a fair offer range.
Step 2: Choose the multiple
Once you have a profit figure you believe, move the multiple up or down for risk.
| Pushes the multiple up | Pushes it down |
|---|---|
| Two or more years of steady trading | Less than a year of history |
| Profit that’s stable or growing | Profit that’s falling or spiky |
| Income from several sources | Most income from one source, like Google or a single Amazon listing |
| A few hours of work a week | A job disguised as a business |
| Recurring revenue, like subscriptions | One-off sales that have to be won again every month |
| Read-only access to every account | Screenshots only |
| Accounts that transfer into your name | Accounts that can only be shared, or a brand built on the owner |
A business with most of the left-hand column can justify 2.5x to 3x. One with several items from the right-hand column might be worth 1x or less, and nothing at all if you can’t verify the numbers.
Step 3: Sense-check the price
Two quick tests help. The first is payback: at 2x, it takes 24 months of unchanged profit to earn back what you paid. Ask yourself whether you’d be comfortable if profit fell by a third in that time.
The second is your hourly rate. Divide monthly profit by the hours the business really takes each month. If the answer is below what you’d accept for a part-time job, you’re buying a job, not an asset.
A worked example
Say a content site is listed at £3,000. The seller reports average profit of £150 a month over the last year, but only £110 a month over the last three. Around 70% of its traffic comes from Google search, and the owner says it takes four hours a week.
- Real profit: profit is falling, so use the recent £110 a month, or £1,320 a year.
- Multiple: heavy reliance on Google and a downward trend both argue for less than 2x. Around 1.5x is fair.
- Value: £1,320 × 1.5 is about £2,000.
- Hourly rate: £110 over roughly 17 hours a month is about £6.40 an hour.
The asking price is about 2.3 times the recent annual profit. An opening offer of £1,800 to £2,000 is reasonable, with a short explanation of how you got there. The low hourly rate also tells you the value is in growing the site, not in what it earns today.
What you shouldn’t pay for
Projections, “untapped potential” and the hours the seller has put in are worth nothing to you. Neither is the age of the domain on its own. You’re buying the profit the business makes now, and paying for upside only once it has already happened.