How much is a site that makes $1500/month worth?

I've bought and sold a lot of sites, with values into the millions, and I can tell you that there is no one size fits all answer.

Basically, however, you need to look at two things: the earnings of the site (after ALL costs are deducted, including not only hosting but a fair wage for whoever would be needed to do any maintenance for the site) and its trajectory (whether it is likely to be making more money or less money in the future).

For small, independent websites, the most common error that people make is coming up with a revenue figure without taking into account all the costs. Typically, for example, someone may put five to ten hours a week into the site, answering emails, tweaking the site design, doing a little marketing, creating stuff to post, and so on. That's not a lot of time and it usually is something they enjoy, so to them it seems like practically nothing and does not get factored into the costs. If you are buying the site, and especially if you are buying 50 or 100 sites like it, you need to hire someone to do that five to ten hours a week. Depending on the type of work involved, and how much technical expertise they need to perform the duties (and in a lot of small sites there is no content management system in place, so they need to have some technical skills), those may not be cheap hires. If you are paying folks $10 to $20 an hour to maintain the website (below the market for tech guys, but not way off market for writers and the like with the ability to do a little HTML and database maintenance), that 5 to 10 hours turns into a cost of $50 to $200 weekly that needs to be deducted from the earnings.

Put another way, your earnings number needs to be a true, passive earnings number to be meaningful. However much time it takes, and whatever level of expertise it takes, that needs to come out of the site value to make the passive earnings number realistic.

If the site makes $1000 a month for you, but would cost $1500 month to hire someone to maintain it, it would have no value to someone like me. It might have value to another hobbyist who views the maintenance time as a paid hobby, but that's a much smaller and generally less well capitalized group of buyers.

Then, you need to look at the trajectory. If, for example, you have a community site based around the Matrix movie trilogy, odds are it has already seen its best days. Traffic and earnings are likely to trend down over time. If you are in a niche where direct ad sales just are not going to happen (say, a joke site) because there is no industry targetting those kinds of visitors, there is a good chance that your earnings will trend down as targetting algorithms get better and ad networks like Google pay less for access to those visitors. And so on.

Traffic, page rank, the niche it is in, all bear on the trajectory. If you have monster traffic, a great page rank, and are in a vertical niche that would support direct ad sales, but have no revenues, someone like me would take that into account and pay more if they thought they could grow the earnings. Similar calculations come into play for a site that is established (say, three or four years old) and growing rapidly in a way that suggests that traffic can grow further.

Once you get to a true passive number with at least a flat trajectory, three years of earnings is not at all unreasonable. The reason most small websites sell for 1x annual earnings is that the earnings are not truly passive, and sophisticated buyers build in a cushion for people to work on the site and, in some cases, for the platform upgrades you need to put in place so folks without huge technical chops can work on the site.

 

Nice response and nice first post Ray!

 

Thanks for the shout out.