SOP 48: Earnings Multiple vs. DCF — Pricing the Asset

SOP 48: Earnings Multiple vs. DCF — Pricing the Asset

Two valuation methods. One is standard, one catches what the other misses.

— Use the monthly-earnings multiple for the headline price: trailing-12-month average net profit times the niche multiple (content sites commonly 30–45x monthly net). Fast, market-standard, what brokers quote.
— Use a simple discounted cash flow (DCF) as a sanity check when traffic is trending — up or down. Project 24–36 months of declining or growing profit and discount it. A multiple ignores trajectory; DCF prices it in.
— Divergence rule: if the multiple says $200k but your DCF (factoring a 15%/year organic decline) says $130k, the trend is your negotiation lever — quote the DCF.
— Always use trailing-12-month net, never last-month annualized — sellers time the sale to a traffic spike.

Pass criterion: both methods land within 20%, or you have explained the gap before offering.

Save this — run it every deal.