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While searching the marketplace, you may be wondering how we calculated the listing price. During our vetting process, we look at the history of earnings and traffic to make sure both are stable and have passed our verification process. Once they’ve been qualified, we list the business based on a multiple of net monthly profit.
Here’s the formula we use:
Sales Price = Monthly Net Profit X Multiple + Discounted Assets (if any) + Wholesale Inventory (if any)
How is the business price determined?
Example: Dropshipping Halloween business that earned $120,000 in gross revenue Sep/Oct/Nov and $20,000 in profit. It’s made $160,000 in all of 2015 with $24,000 in profit. They’ve got inventory value with wholesale value of $10,000.
Because the business is seasonal, we’ll look at the average net monthly profit earnings from 2015 ($2,000/month) and multiply that by the multiple (Let’s use 30X or $60,000). Since it has $10,000 in inventory, that puts the price of the business at $70,000.
Businesses are constantly updating their monthly income, it is essential that we also update our listing prices based on the new data. Therefore, Empire Flippers updates the prices at the beginning of each month.
What to look for when purchasing a new business
When searching around the EF Marketplace it is imperative to perform due diligence before purchasing a business. There are eight key points that every buyer should look at while researching new businesses.
8 Key Points to Look at When Buying a Business:
- Stability of Income- look for trends like whether or not income fluctuates
- Income Upside for Buyer- Is there an obvious improvement you can make to the new site?
- Repeatable and Scaleable Traffic Sources- What are the main sources of traffic?
- Uniqueness of Content- How new and unique is the content?
- Clean Layout or Design- Is the website aesthetically pleasing?
- Have a Clean Back Link Profile- Did the site use a PBN?
- Timing- When is the best time to buy a online business?
- Seller- Get to know the seller
Read more about these 8 key factors
Next week, we’ll be giving an overview about why we hide URLs and how this actually protects the buyer!