How to value a website or online store

Here is how to value a website: work out its verified average monthly net profit, then multiply it by a figure that reflects how stable and transferable that profit is. A brand-new store with no sales history is different, and is priced as a build rather than a multiple.

This guide explains the method, the factors that push a price up or down, and how to tell whether an asking price is reasonable. It does not give you a magic multiple, because there isn't one.

How to value a website: the profit-multiple method

Most established online businesses are priced the same basic way:

1. Find the verified profit. Take the last 6 to 12 months of revenue and subtract every real cost of running the business.
2. Average it by month. Monthly averages smooth out one strong or weak month.
3. Apply a multiple. Multiply the monthly average by a number of months. Some people express the same idea as a multiple of annual profit. Either way, the question is: how many months or years of profit is this business worth to a buyer?

The math is easy. The judgement is in steps 1 and 3: whether the profit is real, and how much risk comes with it.

Net profit vs SDE

You will see two profit figures used.

• Net profit is revenue minus all costs, including anyone paid to run the business.
• Seller's discretionary earnings (SDE) is profit for one owner-operator. It adds back the owner's own pay and one-off personal expenses that a new owner would not carry.

SDE is common for small stores where the owner does most of the work. That is fine, but remember what it means: the profit assumes you will do that work yourself. If you plan to hire someone, subtract their cost before you apply a multiple.

Why profit, not revenue

Revenue tells you how much money passes through the store. Profit tells you how much stays. Two stores with the same sales can have very different costs for products, shipping, ads and apps. You are buying what the business leaves behind, so value it on profit.

Where the profit number comes from

A multiple applied to a wrong number gives a wrong price. Before you think about multiples, verify profit from sources the seller cannot easily edit: the store platform's own reports, payment processor payouts, and bank deposits. Our website due diligence checklist walks through each one.

Watch for these adjustments when a seller hands you a profit figure:

• Costs left out: apps, hosting, contractor fees, or the seller's own time.
• Ad spend that was cut just before the sale, which makes profit look higher for a few months while sales fade.
• Add-backs that are not really one-off.
• Refunds and chargebacks not netted out.

What raises or lowers the multiple

Multiples vary widely by size, age, niche and risk. Rather than hunt for the "right" number, list the factors that make this particular profit more or less likely to continue after you take over.

Tends to raise value	Tends to lower value
Long, steady earnings history	Short history or recent sharp spike
Traffic from several sources	Most traffic from one channel or one ad account
Several suppliers, or a supplier who will sign with you	One supplier tied to the seller personally
Repeat customers and an email list collected with consent	Every sale needs new paid traffic
Few hours needed each week	Heavy owner involvement
Clean trademark and domain history	Name conflicts or a domain with a bad past
Compliant product claims	Health claims a regulator would object to
Growing or stable niche	Fad products or declining demand

Each line on the right is a risk you inherit. A higher risk means you should either pay less, ask for protection in the deal (such as part of the price paid later if earnings hold), or walk away.

Size

Smaller businesses usually carry more risk per dollar of profit, because one lost supplier or one bad month matters more. Price that extra risk in. Do not assume a multiple you saw quoted for a large business applies to a small store.

Niche

Pet supply, outdoor and health products each have their own risks. Pet supply often has repeat purchases. Outdoor gear can be seasonal, so look at a full year before you judge a month. Health and wellness stores carry regulatory risk around product claims, which can lower value if the pages need rewriting or products need removing.

How to check an asking price

1. Recalculate profit yourself from the verified sources, not the listing.
2. Divide the asking price by your monthly profit. That gives you the implied multiple in months.
3. Look at comparable sales. Marketplaces and brokers publish listings and some publish sold prices. Look at businesses of similar size, age and niche, and note that asking prices are not the same as sale prices.
4. Ask how long until you get your money back. If the implied multiple is 30 months, you need the profit to hold for about 30 months just to break even, before counting your time.
5. Adjust for the risks you found. Use the table above as a list of reasons to offer less.

If you are comparing where to buy, Flippa vs Empire Flippers vs buying direct covers how each route handles verification.

A worked example

The numbers below are made up to show the arithmetic. They are not market figures.

Say a store's verified profit over the last 12 months averages $2,000 a month after every cost, including apps and ad spend. The seller has not counted the 15 hours a week they spend on customer service. If you would pay someone to do that work, subtract that cost first. Say it brings real profit to $1,600 a month.

The asking price is $48,000. Against the seller's figure, that is 24 months of profit. Against your corrected figure, it is 30 months. Same store, same price, very different deal. That gap is why you recalculate profit yourself before you think about the multiple at all.

Deal structure can matter as much as price

If you find risks but still want the store, you do not have to choose between the full asking price and walking away. Common ways to share risk with the seller include:

• Paying part later. Part of the price is paid after a set period, if earnings hold.
• A handover period. The seller agrees to answer questions and help with suppliers for a set number of weeks.
• Escrow. Your money is held by a third party until every account has been handed over.
• Warranties in the agreement. The seller states in writing that the figures they gave you are accurate, and the agreement says what happens if they are not.

Any of these is worth more than a small discount if it protects you against the risk you are most worried about.

Why a starter store with no revenue is priced as a build

A brand-new store has no sales history. There is no profit to multiply, so the multiple method does not apply. Anyone who values a new store on projected earnings is asking you to pay today for results that have not happened.

A starter store is priced the way you would price any build: by what you receive and what it would cost you to get it another way. That includes:

• Domain, design, and store setup
• Product selection and product pages
• Supplier or dropship accounts set up in your name
• Required policies and basic settings
• The hours you save by not doing it yourself

To judge a starter store price, compare it with the cost of hiring someone to build the same thing, or the value of your own time doing it. Then plan your own budget for marketing, because a new store needs traffic before it can earn anything.

A starter store's value on resale depends on the earnings you build. If you run it well for a year or two, it can then be valued on a profit multiple like any other established store.

You can see what is included in starter builds for pet supply and other niches on our listings.

Common valuation mistakes

• Using revenue instead of profit.
• Accepting the seller's profit number without checking it.
• Applying a multiple quoted for large businesses to a small store.
• Ignoring the owner's time when the profit is SDE.
• Paying an earnings multiple for a store that has no earnings.

Common questions

How do you value a website?

Most established websites are valued as a multiple of their average monthly net profit or seller's discretionary earnings (SDE). You verify the profit, then choose a multiple based on age, stability, niche and risk.

What is SDE?

Seller's discretionary earnings is the profit the business produces for one owner-operator: revenue minus operating costs, with the owner's own pay and one-off personal expenses added back.

What is a typical website valuation multiple?

There is no single number. Multiples vary widely by size, age, niche and risk, so treat any quoted figure as one data point and check recent comparable sales yourself.

How is a brand-new store with no revenue valued?

It cannot be valued on a multiple, because there is no profit to multiply. It is priced as a build: the work, setup, content and accounts you receive, compared with what it would cost you to do it yourself.

Should revenue or profit be used to value a website?

Profit. Two stores with the same revenue can have very different costs, and a buyer is paying for the money the business leaves behind, not the money that passes through it.