Platform risk
Definition
Platform risk is the exposure a business carries when its traffic, distribution, payments or hosting sit on a third party that can change its rules without notice. At $50k–$150k it rarely stops a deal, but it decides where inside the conventional multiple range a business lands.
Platform risk is the exposure a business carries when its traffic, distribution, payments or hosting sit on a third party that can change its rules without notice. Search algorithms, app stores, social feeds, API providers and integration directories all qualify.
At a $50,000 to $150,000 deal, nobody expects zero platform risk. Almost every business in this band rests on someone else's infrastructure somewhere, and buyers know it. What they want to understand is how much of the revenue depends on a single external decision, and what happens to the business the week after that decision goes the wrong way.
A product built entirely inside one company's ecosystem is worth acquiring. It is worth acquiring at a lower multiple.
Where it bites
In the multiple, and occasionally in the diligence questions that end a conversation. Buyers ask for the traffic split by source going back twelve months, the history of any policy changes you have absorbed, and whether the API you depend on has a written commercial agreement or a free tier that could close. They also look for scars. A site that lost 40% of sessions in a past algorithm update and recovered is a different proposition from one that has never been tested.
Worked example
A content site earning $36,000 of trailing annual profit, with 82% of sessions arriving from organic search and monetisation through one ad network. Market convention for content sites is 1.5–3× trailing annual profit. Concentration like that puts it near the bottom of the range, so around $58,000 rather than the $100,000 a diversified site of the same size might reach.
The fix is slow and it works. An email list of 11,000 with a 35% open rate, plus a quarter of revenue moved to direct placements, moves the same business up the range on the next attempt.
Platform risk is worth naming in your own listing before a buyer names it for you. Sellers who present the traffic split honestly, with the mitigation they have already built, get argued with far less. Buyers discount what they discover more than what they are told.
Related: single-channel-dependency, transferability, stack-transfer
See what a business at this level is listed at.
Everything on sale between $50,000 and $150,000, on the same fields.