TRAFFIC
2013: 1.4M sessions, 5.4M pageviews & 33% bounce (60% desktop, 32% mobile & 8% tablet)
2014: 1.7M sessions, 6.2M pageviews & 54% bounce (42% desktop, 48% mobile & 10% tablet)
2015: 2.5M sessions, 10.8M pageviews & 54% bounce (28% desktop, 64% mobile & 6% tablet)
Source of traffic: 50% organic, 37% referral, 13% direct & 0% social
REVENUE
2013: $135k revenue - $2k expenses = $130k profit
2014: $105k revenue - $5k expenses = $100k profit
2015: $140k revenue - $5k expenses = $135k profit
Source of revenue: 30% AdSense, 20% users & 50% affiliate marketing
Expenses: hosting & credit card processing fees
2014 revenue reduction: caused by affiliate marketer closing their program
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's address.
So what do you think my startup is worth?
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.
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.
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.
Grow it like a small business or find someone who's a professional real estate agent with extensive experience in the online markets, and figure out an edge. Whether it's selling insurance affiliate services or something else along the lines of that, what you have right now is a very valuable entity that's being severely under-capitalized.
The fact that you have paying users is indicative that youve generated trust and deliver value. Right now you're in a powerful position. I'm assuming most of that affiliate marketing is for creditkarma credit checks/mortgage prequalification leads. I'm not sure what your numbers are in terms of conversions but I can tell you definitively with the traffic youre pushing you're at the point where you can call up those agencies and threaten to take your business elsewhere unless they make an offer to increase your rate. If you're going through an affiliate marketing program, they're taking a cut between you and the lender. You have the power in that relationship (that is, you leave and he loses all his revenue without any recourse; if he leaves you, you can just sign up with someone else who'll happily take your leads). Alternatively, I've seen deals go through where mid-sized regional banks offer a massive rate for exclusivity.
Those numbers are great especially for mobile. If you do sell it, sell a chunk of it (~30%, no more than 49%, you want to retain ownership on this trust me. He might want majority, in which case the middle-ground is to structure the deal with buy-out terms that are amenable to both parties, allowing you to essentially defer the large decision of selling a potentially profitable, under-utilized business until you see how it develops) for _significantly_ more than that 270k-350k estimate. The reason Zillow/Redfin/etc are making an offer right now (whatever they're offering, ask for 3x) is because they know how valuable your traffic is and are aware that you're undercapitalizing that traffic. If you find the right person who has experience in that market and offer him that 30% ownership with a huge incentive bonus for any revenue growth that's beyond the estimated growth curve.
Think about it this way: 250k is the price of a moderately decent house in a non-major city. If a real estate agent manages to close 20 deals over the course of 3 years at a little over 6 houses a year at 250k, he has already passed your one-time revenue cash out at 250k. I can safely say that at least 20 agents are making their 6% rip a week because of your site with those numbers.
Those SEO numbers are insanely good, especially since mobile is so important in housing sales (e.g., 100k will get you a fantastic app that someone can turn on when they're driving through a neighborhood they like, and you can sell those listings to agents for premium access for 200-300/mo. Compare that to reddit where mobile-aware doesn't add much to the value proposition).
Email me if you want to chat more. Contact information is in my profile.
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.
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.
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.
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.
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.
My adsense earnings are terrible though, I've always assumed because the site is more image heavy than text.
Considering that it is worth how much someone is willing to pay, might be a great place to some benchmarking.
What's to loose other than a few hours of work filling out their questionaire about your business?
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)
