I sold a site of e-commerce for $250,000 and several other niche sites for a five-digit price tag. I would like to share with you a method of assessment that you can use to put a price on your web property today.
If a website owner or a blogger starts with the initial objective of their sale in one day site, it is my belief that every successful blog owner has thought at one point on the potential of their web property sale. At least they will be asked how much their web property is a value - especially when it starts to generate a decent sum.
In fact, I think that hardly anyone think a sale as an exit strategy when they start at the very first. It is generally a passion, hobby or something else that a potential sale, which motivates a person to begin to make money online - unless of course they are a business online as an e-commerce site, on the first day.When a Web site becomes profitable, it has the potential to become marketable. You can deliberately contemplate selling either because of boredom, because you have found a better alternative use of your time, because of a potential use of the financial product or any of several other reasons.
If so, you know what is your Web site?
When a web property begins to generate profits, it becomes a productive asset income, as a rental property or a small business. Just as the property and business are assessed and sold on the open market, a website or blog may be too. Therefore, develop a web property is not very different to promote any other income-producing assets.
The quantitative aspect of the evaluation is not rocket science, in my opinion. You take current site and spending, understand profits that are the flow of net cash and then project a value based on a multiplier of gains.
Net income, or cash flows, is commonly known as EBITDA in the business world. This means: earnings before interest, taxes, depreciation and amortization. The multiplier is applied to this next number with a value, or price for the property.
Income and expenditure are what they are: they are not subjective any way. But where that you get a multiplier of gains of? Evaluate recent sales of websites which is similar to yours to get an idea of what kind of multiplier was paid for each of them. This number will be greater in a stronger and smaller economic period in weak economic times such as those which we are now in.
There is no standard multiplier, however. Similar to real estate, if the numbers are available based on recent sales of blog, great. But otherwise, the value of your Web site is only as much as someone else is willing to bid for it. Of course, you have the option not to sell for that you might feel is a low ball offer.
Another thing to consider is if the site is also monetized as it can be today. Is it possible to add more private sidebar ads and generate more profits on a residual basis, for example? A buyer would be definitively assess this potential monetization and this factor in their purchase decision.
Here is where the subjectivity evaluation of blog comes in. Actively a company sold to a multiplier of two gains are not comparable with a passive business of the same size as a passive business requires much less effort to manage and maintain. Take into account how much the cost and effort of the owner of the web property will have to invest in the passive company to generate a dollar in profit. Then ask how this compares with an active business.
Factors such as the effort, operation of price structure, sustainability, relevance and long-term perspectives that all play an important role in determining what reasonable web special property value should be. At the end of the day, none of this is an exact science, but it's a way to arrive at a rational or justifiable price.
For example, nobody was scalability long-term Google or LinkedIn. In fact, we know today. The market had a certain (multiplier) estimate set at each company became public and has a different one today. It will probably be another at the time that you have finished reading and comment on this post. Wait the multiplier to evolve, especially in a dynamic and changing industry such as this.
When I've been originally requested by an Ebay power seller potentially sell my e-commerce business, the company was generating approximately $60,000 per year in profits. After weeks of discussion back and forth, we settled on a sale price of a little less than $250 000, or about four times the annual salary of $60,000.
The quantitative part of the deal was simple. The qualitative part is that dragged out of the negotiation. The seller of power had already purchased a business of commerce similar to multiple pay three. They had paid $90,000 for a company that generated some $30,000 in annual profits. However, I was not prepared to accept a price of $180,000, which was three times the annual salary of my site. In addition, my company has shown a growing trend in terms of web traffic, acquisition of customers, sales and profits. These qualitative measures needed to be "cooked" in the contract to make it viable for me. I managed to persuade that the buyer, and we have sealed the deal at four times the annual salary.
Lesson key here is that while as acquisitions based strictly on bills multiple good gains in theory, they rarely work out in practice, if my level or the level of the Fortune 500. Our repeated attempts to clarify the nature of the agreement to a pure science have never worked, and probably Won't in the future. Assessments, although mainly by the financials underlying, rely heavily on the qualitative aspects that are unique to each buyer and seller and subjective.
What do you think of this method of assessment? You have alternatives to share? Is this a fair way to determine the value of your web property? I would like to hear your thoughts in the comments.
If you want to be brave and bold and open your kimono for me and other readers: what do you your web property value is today on the open market, if you use this method of valuation?
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