Article
The Ultimate Web Site Valuation Guide
Incentivized Sites
Paid to Click (PTC), survey, and toolbar installation sites perform even more poorly than proxy sites. At just 3.5 x monthly income it’s almost not worth selling for many sellers, as just shelving the site for a few months could see them earn more than an outright sale. And many owners do just that—running the site down rather than risk listing at auction and spooking the member base.
Product Selling Sites
These are strange beasts. Sites selling both physical and digital products keep appearing regularly in various marketplaces, but buyers seem reluctant to dive in. With shipping of physical products, there’s obvious geographical issues when pitching sites to a global audience, but even though that limitation doesn’t apply in drop shipping and e-product delivery, buyers seem wary about taking on a business involving dealing face to face with customers. Apart from the customer services adding to the overheads, there’s an element of fraud (chargebacks), management, PPC or other required skills, and an appreciation of how easy these businesses are to duplicate, all of which affect buyer enthusiasm.
Prices range from 1.8 x monthly revenue (for an ebook product) to 200 x monthly revenue for a physical product that comes with its own trademark and other IP rights.
There are some web businesses not included in any of the above categories:
Notes on Calculations
- These value calculations are not set in stone. Multiples vary based on market sentiment, supply of sites coming up for sale, number of buyers in the market, the synergies that buyers may recognize, timing, location of listing, credit offered by seller, form of payment, or the buyer’s mood on the day!
- The calculations are quoted as a multiple of earnings, since earnings are what buyers tend to be looking for.
- The main value buyers see in historical earnings is that they are often a guide to future earnings. It’s the expected future earnings that are of the most interest to buyers.
- Those future earnings can come directly from the site, from changes the new owner makes, or even from closing that site down (for example, if that site is the only competitor in a niche, you could expect increased business at your old site as a result of closing the newly acquired one) or transferring its assets!
Summary
Good luck with weighing up what your site is worth, and deciding upon its future! The considerations we've discovered should go a long way towards helping you decide whether to launch into selling your web business. If your assessment suggests that such a sale would be feasible and advantageous, the advice here will ensure that you gain the best possible price, and support you as you do so.
If you’d like to value your own site before selling it, or value a site you are looking to buy, don’t forget to try this valuation tool, which values sites based on the logic in this article. The business documents are a highly useful tool to adopt in your business practices, too. Some more terms associated with buying and selling web sites can be found in this glossary.
Other Useful Links
There is a lot of valuation misinformation on the Web. Here are a couple of articles that I recommend reading:
- a great explanation on the current value of future cash flows
- more commentary on how to value a web site
- a list of other valuation tools
Acknowledgments
Many thanks to Macro at SitePoint, who is probably the most active buyer at the world’s most used site-for-sale forums (SitePoint interviewed him here). And to oddsod at Webmasterworld, who has advised hundreds of people on selling their sites (some threads he has provided public expert advice can be found here and here). Then there’s Mark, whose advice is the official guide on one of the world’s oldest site-for-sale forums. Thanks also to Merkersarl and Foggy at DigitalPoint, Edman, hooperman, 3Six, and others at SitePoint; Peter T. Davis, long-time moderator of SitePoint’s Site-For-Sale forums and writer on site-flipping and domaining; Barry Dunlop at site brokerage firm MidasCode Ltd; sellmeurdomain and friends at Namepros; the three anonymous donors from DNF; Mike from iMarket Ventures, author of The Business End of Websites: Advertising Arbitrage and Website Valuation; and others too numerous to mention without whom this article wouldn’t have been possible.
Disclaimer: The valuations in this article and produced by the EBizValuations tool are not meant to be legally binding valuations that comply with guidance from the International Valuation Standards Committee, National Association of Certified Valuation Analysts Standards, Government Accounting Standards Board, Financial Accounting Standards Board, International Accounting Standards Committee/Board, Revenue Rulings 59-60 & 68-609, or any other national or international standard or recommendation. Should you require a valuation for any formal purpose, please consult the appropriate professionals.