Does your Internet business model have a five-year business plan? If so, do you have an exit strategy too?
The exit multiples for online publications are running between 10 and 15, with an average of 12. That means if your business is making $1 million in profit after five years, it probably can be sold for $12 million.
If we know, in the planning stage, that the business can be launched for $500,000 and sold for $12 million in five years, that is an attractive return on investment.
In other words, a business launched for $500,000 in 2010, that in 2015 is making $1 million annually, can be sold for $12 million. That’s a simple return on investment of 24X.
Projecting how much your publishing enterprise will be worth requires you to take the long view of your business, as a banker or investor would. It’s not only about how much the business makes, year-to-year.
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A five-year business plan is an absolutely essential calculation for attracting investors. Their diversity of expectations can be very wide ranging.
Some financial backers might be satisfied with 5X or 10X their investment after 5 years.
Venture capitalists are often looking for a 40X or 50X multiple.
Alternatively, when a mom-and-pop operation launches a small publication with $100,000 of personal savings, the owners might be very satisfied with a business that simply pays them a good salary. They may not have expectations to sell the business in the foreseeable future.
Either way, it’s a good idea to have a five-year business plan to sort out any scenario that might happen.
If you feel your website could be doing more for your business, maybe you should take a hard look at your revenue strategy. One aspect to being successful on the internet lies in choosing the right business model and supporting infrastructure. When you have these correct parts in place, you are ultimately lowering operating costs and bolstering higher revenue possibilities.
So what is your online strategy?
