In browsing around a little bit, I have seen some people say that a good measure of a site's worth is somewhere between 6 and 12 months revenue. Looking at it from an economic point of view, this seems very low to me. Can someone tell me what I'm missing? Just for now, let's assume that revenue = profit (eg no costs associated with the site). And let's say we evaluate the value of the site at 6 months' revenue That would mean our ROI would equal approximately 200% (given that revenue remains constant during the year). From an investment standpoint, 10% is considered good return. If we base our valuation off of this, that would mean that our site would be worth 10*(annual profit). This would equal 12*10*(monthy profit). In other words, the value of the site would equal 120*(monthly profit) which in our case is 120*(monthly revenue). And you would be making a 10% annual return on your investment. So then our site should be worth 20x as much as the "rule of thumb" assumed at the beginning (and sometimes recommended on these forums). Where did I go wrong in my calculations? Why are sites selling for so much less?
The revenue of a site can change dramatically in a short time period. There are very few guarantees with websites... Also, since all business is happening through a forum, people are iffy about spending so much on a shaky investment dealing with someone that they only know by their screenname. So, sellers have to lower their prices in order to sell their stuff.
Ok, thanks for the responses guys. Glad I'm not completely off-base. I guess I did forget to factor in the increased risk.
This entirely depends upon the site in question, and factors such as time the site takes to update, etc should be taken into account.
just revenue figures are not counted , you need to check the expence also while buying it, how much money is spent to generate the revenue and wats net profit also it depends on growth of the website. lot more factors.
It depends what kind of site it is, how long it has been up for etc... most sites that sell low are because theres a looot of risk with them, including being sandboxed next day and losing all revenue.