
Ask HN: What's my profitable startup worth? (detailed stats provided) - throwawayValue
I&#x27;ve been running a US-based real estate related startup for a few years. I handle all aspects of the business myself from coding thru customer service and I&#x27;ve set it up so that it can run on auto-pilot for long periods of time (ie. months) while I focus on other interests. It&#x27;s never been marketed, doesn&#x27;t have a blog or any social presence. It does however have some great clients &amp; industry partners who view my business as being more than a one person show. I have previously received multiple buyout offers, but until now I haven&#x27;t seriously considered selling and I&#x27;m not sure if I actually will or not.<p>TRAFFIC<p>2013: 1.4M sessions, 5.4M pageviews &amp; 33% bounce (60% desktop, 32% mobile &amp; 8% tablet)<p>2014: 1.7M sessions, 6.2M pageviews &amp; 54% bounce (42% desktop, 48% mobile &amp; 10% tablet)<p>2015: 2.5M sessions, 10.8M pageviews &amp; 54% bounce (28% desktop, 64% mobile &amp; 6% tablet)<p><i>Source of traffic: 50% organic, 37% referral, 13% direct &amp; 0% social</i><p>REVENUE<p>2013: $135k revenue - $2k expenses = $130k profit<p>2014: $105k revenue - $5k expenses = $100k profit<p>2015: $140k revenue - $5k expenses = $135k profit<p><i>Source of revenue: 30% AdSense, 20% users &amp; 50% affiliate marketing</i><p><i>Expenses: hosting &amp; credit card processing fees</i><p><i>2014 revenue reduction: caused by affiliate marketer closing their program</i><p>For obvious reasons, I’m using a throwaway account, but I will answer followup questions. However, I won’t disclose the name of my startup or it&#x27;s address.<p>So what do you think my startup is worth?
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dsacco
Congratulations on your success thus far.

There are several pricing models one can use for small business valuation. In
this case, your company earns revenue using advertising (AdSense and
affiliate). Companies like this are priced differently from e.g. SaaS startups
which are in turn priced differently from companies selling enterprise desktop
software.

The industry standard for ad revenue companies is a 20-24x multiplier on the
most recent (sustained, not outlying) monthly profits. Specifically, it would
be the following:

(20..24(135/12)) = 225 - 275

There is your answer. Your company would likely fetch between 225k (cheap) to
275k (expensive). Most folks on marketplaces like Flippa (which is where
predominantly ad-revenue companies like yours are brokered) would value it as
such.

There are other factors which can inflate the price of your company to maybe a
30x monthly profit valuation, but in general that will be the range. It's good
that most of your traffic comes from organic searches, advertising arbitrage
is risky and often results in a downgrade.

~~~
throwawayValue
Thank you for taking the time to respond.

So far all of the offers that I've received, some from "known" companies,
value the business based upon it's traffic, users, brand & future potential
within the real estate industry. And surprisingly, none have shown much
interest in the ad revenue.

So this is really why I'm seeking outside advice on what others think based
upon the little information that I've provided. I'm really at a crossroads
where I need to decide if I want to truly focus on it or sell it so I can
focus on another startup that's unrelated to the real estate industry.

~~~
nicholas73
Serious question: why do you need to sell to focus on another startup, when
you say this one is pretty much autopilot?

It seems whatever time you save on upkeep will be used by income anxiety
instead.

If I were in your shoes I'd never sell unless I get a multiple that approaches
S&P. Which already pays rather poorly for income considering how low interest
rates are. This is only if your business is forecast to be steady though.

~~~
throwawayValue
That's basically what I've been doing the past few years and the reason why
I've rejected previous offers. My thought process has been, why accept $XXXk
when I'll just earn it anyway within X years and I'll still have the business.

I have launched a few things during the past few years which are also
generating revenue, but my latest idea will require a lot more time, focus &
marketing spend to get off the ground. Also, it would be very nice to be able
to pay off my mortgage & have a decent cushion in the bank.

------
nicholas73
Your startup is worth whatever it is worth to the buyer. This is a serious
statement.

Unlike S&P stocks, a small startup does not have many buyers looking into your
valuation. What one buyer is willing to pay will vary widely from another.

A prospective buyer will consider things besides your revenue history. Such as
operation risk, potential synergy, possible changes for growth, if you are a
competitor, etc. Then there is their own financial situation, and the form you
are willing to take payment (like stock vs. cash).

As a poor example, if I were to buy your site, I'd take your profit and
discount taxes I would owe plus some salary for my time to upkeep it (another
buyer could be more or less depending on their resources). So the profit would
be down to say 80k.

From there, I note that there virtually is no growth in revenue despite the
growth in pageviews. Assuming no way to fix the CPM, my worry would be whether
I could get my money back, especially if there could be a real estate peak.

So average Joe like me might be willing to pay a paltry 1-3x multiple of
profit* (and mostly because I don't have much money to risk). A collector of
web businesses might go up to 5x, as a guess, more if there is growth.

The best companies in the world (like S&P companies) fetch anywhere between
10x to 20x+ so it's highly unlikely you get that without exploding growth.

* By profit I mean after taxes and the acquirer's expenses.

~~~
throwawayValue
You are correct - different buyers will value the business differently based
upon their intentions for it. Some would be more interested in growing the
SaaS side, so far all of the offers I've received are related to this, whereas
others might be more interested in growing the AdSense & affiliate revenue.

Important to note, my business provides a service which will always be in
demand no matter if real estate is booming or busting.

I think if I could get a 5x sale price I would take it. Best so far has been
4x and none have been below 3x.

~~~
hanniabu
While it's true that the value to certain buyers will vary, if you do decide
to sell, then it is your job to sell it to them. They'll only pay as much as
they'll see it's worth. If they're not the most business savvy or
entrepreneurial person, they will obviously not see much value and therefore
would not be willing to pay a lot. However, if you explain the value and
potential additional revenue streams as well as adjusted growth estimates,
then they'll see past the current basic revenue stream. Take a look above at
iheartmemcache's answer (the really long one). He does a great job at pointing
out the possibilities to maximize revenue.

If this angle doesn't work, then try growing the business a little more in the
direction of the aforementioned comment for a bit. Once you've succeeded in
growing the business a bit and proving the model, go and start selling it
again to people whom have contacted you previously.

~~~
throwawayValue
You're right - it is my responsibility to sell it and so far I've just been
listening to offers and haven't countered because I wasn't interested in
selling at those times. However, I now would counter all offers with a
reasonable asking price and detail the reasons for that price as well as my
thoughts on where the growth potential is.

I agree that iheartmemcache's response really hit it on the head and I was
waiting to see if it generated any other responses. The strategy he laid out
is exactly in line with what I've been thinking.

------
davismwfl
First, congrats, you did something that many of us fail at more than once. But
in the end, you have a hobby business that is not really growing but only
teetering so far, likely because as you said you aren't putting in a lot of
time and using it only as a side thing.

I really am not trying to be an ass, but I am trying to be honest based on my
own experiences. Your business isn't worth as much as you would like, although
it is quite valuable in many ways. Simply put, you don't have a $135k profit
on revenue of $140k because you are discounting the real cost to run and grow
the business which someone else will have to hire out at least a portion of,
pay taxes on, pay state fees etc. So in reality, assuming the person is
willing to assume at least 2-3 of the hats (business, finance and customer
service) and hire out the technical then they may net $10-80k depending on if
they hire contractors or a full time person.

At the same time like others already pointed out, it will boil down to how
much is someone willing to pay. But outside of a corporation that finds your
project attractive because of market fit, or leads or something along those
lines, sophisticated individuals with cash will not pay major multiples for a
business that is essentially only mildly profitable after they factor in costs
to maintain and grow it. So your best bet is to sell to a corporation that has
sunk costs already that is happy to take the extra revenue and leads and run.

Not saying you couldn't get $150k to even at the high end $300k, but it will
take a special set of circumstances. Otherwise, I'd say you are looking at
more like a $60k-150k type of sale being far more likely.

No matter what, good luck and I hope you can maximize your benefit.

~~~
throwawayValue
You're exactly right - different buyers will value my business in different
ways and selling to a buyer like the one you described would make no sense. At
a minimum, I'd be better off keeping it on auto-pilot.

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santa_boy
Just trying to understand the context better. What does your startup do in
real estate? What is the revenue model? What is the affiliate revenue that you
are able to generate?

~~~
throwawayValue
Great questions and for obvious reasons I don't want to be very specific about
the site's niche within the real estate industry, but the service that it
provides will always be in demand by the general public & industry
professionals.

The intent was that the majority of revenue would come from paid users (SaaS
model), but AdSense & affiliate brings in more. I could probably change that
by marketing, which I've never done, and I might do just that if I decide to
keep it.

------
someotheridiot
I had 16M pageviews in 2015 and a hell of a lot less adsense earnings than you
:( What's your CPM?

~~~
merqurio
16M ! That's amazing ! Can I ask you what is your page about ?

~~~
someotheridiot
[https://rebrickable.com](https://rebrickable.com) \- A LEGO database that
shows you which sets you can build from your existing collection, also
includes thousands of fan-submitted designs.

My adsense earnings are terrible though, I've always assumed because the site
is more image heavy than text.

~~~
fratlas
What's your CPM? I average around $1, and that's just for a simple webgame
(almost no text).

~~~
someotheridiot
$0.20 to $0.30 :(

~~~
fratlas
Assuming a %1 click rate (seems to be the rate on my site), that's still $48k
(optimistic); not bad!

~~~
someotheridiot
I don't show ads for every page view (only unregistered users), and click rate
is more like 0.1%. Now I feel like I'm doing something very wrong... advice
welcome!

~~~
throwawayValue
Based upon my own experience, make sure your site is responsive and place at
least 2 responsive ads per page. I don't turn off ads for registered users and
I've never had a user complain.

Also, find out how many of your users are blocking ads - my site is roughly
5%. However, I am aware of sites that have a younger demographic and 75-80% of
their users are blocking ads.

------
soneca
patio11 sold his business through this site and said only positive things
about it: [http://feinternational.com/](http://feinternational.com/)

Considering that it is worth how much someone is willing to pay, might be a
great place to some benchmarking.

~~~
throwawayValue
I've heard of them and might contact them, but I'm not really interested in
paying a broker fee unless they could get a premium price.

~~~
soneca
I understand, but what I am suggesting is looking in their "sold listings" to
get a benchmark on how much your startup is worth.

IMO it answers your post question much better than any HN commenter might do
(except if a HN commenter is willing to actually buy your startup)

~~~
throwawayValue
Excellent idea - you sir/ma'am are a genius!!

~~~
codegeek
I will be careful about SOLD listings there. They never list the actual
selling price but only the asking price. So you don't know what the final sale
price was.

~~~
brianwawok
Sold price is a good ceiling best case number, which is somewhat useful still.

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kohanz
Did you include any hours you spent working on the business in the expenses?

~~~
throwawayValue
Business was created prior to 2013 and apart from a few tweaks here & there,
it's pretty much on auto-pilot.

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kilroy123
I'm just curious, how long did it take you to get up to 5M page views?

~~~
throwawayValue
It took a few years of working on it evenings & weekends while I had a 9-5.
During that time I always thought of my salary as VC money.

------
hatred
Wondering how you go about achieving dramatic bounce rate reductions?

~~~
throwawayValue
For the past 30 days the bounce rate has averaged 43% and traffic has roughly
doubled.

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tmaly
you might need a few more years of data to get a decent discounted free cash
flow valuation.

~~~
huac
eh, you can run a DCF on monthly data if you wanted. but no idea what relevant
discount rate would be.

