Asset-based valuation
Definition
Asset-based valuation prices a business on what its component parts would be worth to a buyer assembling them from scratch, rather than on a multiple of earnings. For an asset with users or traffic and no trailing profit, it is the only method that produces a number at all.
Asset-based valuation prices a business on what its component parts would be worth to a buyer assembling them from scratch, rather than on a multiple of what it earns. For an asset with no trailing profit, it is the only method that produces a number at all.
Between $10,000 and $50,000, a large share of what changes hands has users or traffic and little or no revenue behind it. There is nothing to multiply. Price comes from what the thing would cost to rebuild, what the user or traffic base is worth to somebody who can charge for it, and how plausible the route to charging actually is. A profit multiple applied to an asset earning nothing returns zero, and quoting 2× or 3× on a pre-revenue product reads as carelessness to anyone who has priced one.
Where it bites
In the gap between a seller's build cost and a buyer's rebuild cost. Sellers count the hours they spent learning the problem. Buyers count the weeks a competent developer would need now, with current tooling, knowing in advance exactly what to make. Those two figures are rarely within half of each other, and the second one sets the price.
Buyers get it wrong in the opposite direction. Anchor only on rebuild cost and you pay for code while getting the audience for free, which is usually the part nobody can rebuild at any price.
Worked example
A content site listed at $22,000 with 25,000 monthly sessions and no advertising of any kind. Commissioning its 180 articles again would run about $14,000 at $75 each, and the domain carries four years of history. On that split the build accounts for roughly $14,000 and the traffic base for the remaining $8,000, or about $0.32 per monthly session.
Whether $22,000 is fair turns on what those sessions can be made to do. Display advertising on 25,000 sessions is a few hundred dollars a month at conventional rates. Commercial-intent traffic with an affiliate fit behind it is a different answer, and the buyer has to decide which one they are looking at before they pay.
Asset-based valuation is slower to argue than a multiple and much harder to fake. Sellers who itemise what they actually built, and buyers who price the rebuild honestly, usually land within a few thousand dollars of each other. Every business that later exits on a clean profit multiple started as a pile of parts somebody priced this way.
Related: replacement-cost, monetisation-path, profit-multiple, how-to-value-a-business-with-users-but-no-revenue
See what a business at this level is listed at.
Everything on sale between $50,000 and $150,000, on the same fields.