"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 purchase price. br br First, it’s important to note that this is NOT Bricks & Mortar. So many business brokers and M&A firms today are pass-downs from the days before selling Internet companies was a reality. These brokers still attempt to use old school methods to value these businesses, which again we feel could potentially cause a business owner to leave something on the table at closing. But you can’t blame them; for decades they sold manufacturing companies, buildings, restaurants, convenience stores, franchises and more. But when it comes to the sale of a digital business, especially in the Middle Market, you need the experience of tech professionals – those with specific experience selling technology companies. br br Second, a web company’s value should include a review of scale opportunities, and the subsequent cost of scale. This will help identify near term growth opportunities in order to create a future cash flow model, post-sale and post-scale. If a business can be expanded into other marketplaces, if the advertising budget has either been underserved or not served properly, if organic search is a large portion of its visitor mix, if the business is in a niche sector or otherwise has barriers to entry, or if a business has created its own brand, then these are a few of the factors that should be analyzed when calculating an Internet Company’s value. br br For this reason and many more, we simply don’t understand how companies can use an online “calculator” to identify the value of a website, its domain or other property. A simple calculator with a few inputs is simply not the proper way to look at a tech company’s value. Rather, you need the advice of an expert technology broker – one that understands not only the business itself, but also has a network of buyers waiting for solid technology deals. br br At ValleyBiggs, we have an abundance of experience selling web companies and a large buyer pool waiting for us to provide the next deal.