Every online business is different, there are not two that are absolutely similar. Therefore, valuing a business is a unique process and something that is strictly individual for any business. While there are some standard ways and approaches to learning more about your online business’ value and worth, the one that can offer absolute relevance and effectiveness is determined by the unique structure and model of your online business. This is why there are as many online business value strategies as there are many online businesses out there on the market. When it comes to your unique scrutiny, you have to pay attention to all its unique details and aspects, all tangible and intangible assets.

However, there are some general tips and recommendations that can be given when you need some help for valuing your e-business and understanding its value. The first one of them is not being too biased and emotional. It is right that this is your online business, something you have built from ground zero, something you have developed and grew with all the hard work, energy, time, and money you have invested.

It may be a unique idea or intellectual property you came up with, it may be something you love with all your heart and soul, but just because your online business is so special to you, it doesn’t mean that potential buyers will look at it the same way. And you don’t have to blame them, putting a price tag on something you love is very difficult and there are so many complex emotions and feelings surrounding this process, but it is not the same with the potential buyers, who are no emotionally attached to your business and all they want is a good deal and an enterprise they know will bring them success. Therefore, you are always recommended to ask for a professional point of view of someone non-biased.

Maybe a financial advisor can help you a lot of clearly understanding the real selling price and value of your online business. A financial advisor, a website broker, a legal advisor, no matter who you hire to help you gain understanding about the value and worth of your e-business, they will guide you through the whole process and learn more about what selling price reflects the value of your e-business. Furthermore, even if you are not planning to sell your online business at this point, you are always recommended to have a good idea of its value at any point. This will be very helpful not only in the process of smoothly running your business, but it will also give you a good idea at when is the right time to actually sell your e-business at its highest selling price.

It is a good idea to start checking what the competitors are doing and what is the selling price of their online businesses, similar online products, and services such as domains, websites, apps, etc. However, your online business will have a unique profit and loss statement that will highly determine its value. And you don’t know what exactly is happening in your neighbour’s house, right?

There are three main approaches to the valuation process:

The Asset Approach

In order to calculate the value of your e-business through the asset approach, you want to add up and depreciate all of the business’ tangible and intangible assets. Tangible assets for online businesses will usually include the company’s intellectual property such as patents, trademarks, incorporation documents, etc.

The Income Approach

Now you need to calculate the current net value of the income of the e-business. The present value is also determined by the forecast for future cash flows and possible discounts based on the age of the business or predictable future earning instability. Alternatively, you can find your business’ EBITDA, its earnings before interest, tax, depreciation, and amortization, and multiply the figure by a certain factor. In general, you want to at least roughly calculate the business’ profitability and its ability to repay interest or debts.

The Market Approach

Without calculating cash flow or ROI, the market approach, as the most subjective one of the three, is offering an estimate of the earning potential of the e-business by taking into account current market demand. Once other similar e-business are evaluated, then the worth of your business is calculated. The sales price is compared to metrics such as revenue and earnings.

Each of these three methods have its pros and cons and it is up to you and your unique online business model plus the unique market situation you are in to decide on whether to use all three methods, use some of them, don’t use them at all and approach valuation of your e-business differently.

Online Business Value Beyond Assets and Liabilities

It is great to understand your business’ assets and liabilities, but if assets do not bring profits, why to even bother with them? You can, instead, try to understand and find out what are the important value drivers of your online business. These can be intangibles, such as the price, the products or services, customer mix, name, website and online presence, marketing and advertising, specific niche. It can even be a combination of them all or most of them.

No matter how you will determine the value and worth of your e-business, there is one important thing to remember about what will make potential buyers interested in your online business and it is not all its assets and profit. The easier it is for the buyer to acquire the business and continue with the stream of earnings and profit, the most valuable your business is in their eyes.