Today’s segment is going to focus on the valuation of eCommerce websites in the Middle Market. The valuation process is a key factor for the vast majority of Business Owners when reviewing exit opportunities, yet so few intermediaries understand the Internet Sector, which is critical to truly understanding how to value a web-based business. Most of the brokers and intermediaries we’ve come across like to provide a multiple to cash flow for their valuation formula. In our opinion, this could potentially ignore many other factors and aspects of a digital business, like intellectual property, search metrics, growth rate, etc. As Internet Business Owners ourselves, we understand the point of view a Seller might have when they ask that potential buyers look beyond the standard earning multiple. But what factors can really have an arguable impact on the purchase price of a business? With web companies, there’s a lot to think about when looking at the past, current and future operations to attempt to derive a...
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