There is too much rubbish around on site valuation and online tools give webmasters valuations more designed to boost their egos than provide accurate reflection of site value. Sitepoint has published The Ultimate Guide to Valuing Websites (to which I made a small contribution). It's great stuff and what every webmaster should know if he ever wants to sell his site (or buy one for that matter).
Good one but that's too lengthy, people would like easy tools which show valuation through accurate computation.
I have tried...but it tells you that you need to improve revenue...so doesnt tell how much estimated you can sell...
For those who have $50 sites, it's not worth bothering to read the article. For those who have sites worth a fair bit of money it's well worth reading six pages to see what adds value to your site, how buyers value your site and what's the type of price you can sell it for. Domino, the last page tells you what kind of multiple sites sell for - it's broken down by category: Content Sites/Forums/etc. etc. For those with short attention spans there's even a quick link to a valuation tool so you can just see the numbers and pictures and not have to read all the text
Exactly. For those of us who are full timers with sites of REAL value, this is a nice guide. That is, for those who are serious about the online business and investment. Many who've been in this game for some time already know how to property value internet property. I agree with the original posters summation on this topic. I have posted countless times on the correct ways to value internet property in this very forum. Even the Shoe has posted a very detailed break down of things to consider on his blog a few months back. However many simply want to rely on some tool. The fact of the matter is that some of us are doing online as a BUSINESS and others are beer money barons who nickel and dime to make some extra beer money. So laziness and apathy tend to define their decisions. Anyone using any kind of 'tool' website to value any website or domain is a pure lazy noob. Anyone citing these sites as a resource are basically calling themselves out as such. It's not that hard to put value on a website. Some time, and simple math is about it. But if you can't spend the time to properly evaluate your wares. No one should give you the time in purchasing it either. 2 cents
I take it you are talking about Shoe's article here: Part I ... and continuing to other parts. With all respect to Shoemoney - and he makes a lot of good points - but it isn't a very professional article. He does have extensive experience with buying sites but not really with the accounting and theory behind business valuations, what goes into valuations, and how buyers value sites. He has said a lot in that series but never once mentions the underlying truth about a value representing current worth of future income streams. But it was a good read anyway, thanks for pointing it out.
The article is an excellent guide to someone with a website as a real business. It may be Valuation 101 to people in the business of buying and selling brick and mortar businesses, but it is a great guide for someone who thinks that a rule-of-thumb like "10x monthly revenue" has any real relevance to someone who is running a web-based business with both revenues and expenses. I strongly recommend the article to anyone who sees their future in developing a websites as an operating business.
That's right, Business Attorney. There are too many people who seem to believe in arbitary multiples they've heard somewhere. The lazy ones will continue to tout those multiples as it's an easy way to sound like you know something! The smart ones will take the time to learn what contributes value... and they will benefit from that via higher prices for their sites.
There are a lot more factors that go into evaluating web properties. Domain. Type of site. How long has it been around. Type of revenue. Maintenance versus profit. Time invested daily, weekly, monthly. Type of traffic/referrals. Number of links and age of those links. Memberships, e-mail lists, etc. Most importantly proof to back up all claims.
You're sort of on the right track. That's covered by what is called "Net Profit". NP is the total revenue minus all the costs, including notional costs like a salary for the webmaster. There is only one type of revenue. If you're suggesting the quality of the revenue stream plays a part, you are right. But that's part of the "risk" portion of the calculation. There are two main factors: the anticipated future earnings and the risk the buyer attributes to the certainty of those earnings. Everything else supports one or the other of those two. The quality of the revenue stream would be a risk influence. Actually, none of those have any value beyond what the buyers sees them contributing to the profit (link). I know, it's hard to believe. You'll have to trust me on that or speak to a good accountant Proof isn't part of the valuation, it's part of the due-diligence. Seriously, I think you'd benefit from reading the article.
Actually toots, you are wrong here. Where to begin. Let's start here and put you on the right track. There are many different websites. Membership with recurring revenue, affiliate, one time sales, PPC, PPS, ad sales, ad networks, and so forth. To suggest that all revenue is the same, you are incorrect out of the gate. Some are more stable then others, and after a sale will continue. Others may go up or down depending on the revenue stream. A site with say 200 members, and recurring revenue base and a history of rebilling members is worth more than some affiliate, or 1 time sale site like an ebook or PPC site easily. To lump in all revenue streams, as you are insinuating, and giving them the same value is wrong out of the gate. Just like not factoring in a recurring membership base. How long have you been doing online as a full time business again? I just would like to know that out for starters, and follow that with what end of the $XXX,XXX range you were in for online income? I've been doing online for over a decade. Bought and sold plenty of sites, and content, and anyone in this game for any real period of time, and built, bought, or sold sites in the $XX,XXX+ range know a bit more about the true value of a site. Again, to correct your misinformation you are pointing to here is a prime example on DP. The pump and dump. The BST section is full of people who do the following.... Buy traffic. Again, my uninformed friend, I will again correct you to the fact that not factoring in links, referrals and traffic sources is not accurate. Anyone buying more than a $50.00 blog want to see where the traffic is coming and from and if it's organic, or just another DP pump and dump. You can find them on SP as well, but the BST is notorious for it. Just like forums with pre-bought membership lists, buying posts in forum, and Yahoo answers, and countless other scams that I see on a daily basis to rip off noobs. This is so funny, I'll leave it to stand on it's own merit. Hopefully it impressed someone as it's irrelevant to the point. But hopefully it gets you some e-penis points. Merkersarl, I am not going to keep going back and forth with you and your SP lore. You have your way of evaluating, as does Shoe, and myself, and SP, and whatever article you were pointing at. All are partially right to some degree. But there are far too many sites, types, and factors for any simple formula, or answer. Which was my point in the first place. There is no url, or evaluation site, or simple answer to a complex valuation. I've made my point that there is more than one way to value a site, and many factors at play. Now, that said. I am done going back and forth with you. If you would like to keep going, have at it.
As far as each individual buyer is concerned he can value it however he wants and nobody can explain what some buyers see in the rubbish they buy. However, there are sound business principles that underline the valuation of assets and the valuation of businesses - they aren't fluid and flexible and open to interpretation. Smart investors investing real money (rather than your imaginary $70K ) generally defer to established business valuation principles. If you're such an expert, how about giving us some breakdowns as to how to you think these factors translate into numbers?
there are many more factors, but finding a resource that covers the important ones is a good find. there are a variety of places to check domain value, none are perfect. i ran several domains through ebizvaluations.com and got some good feedback. the domains aren't mine but i'm closely associated with them and the results were favorable compared to other methods of checking. nice resource Merkersarl, thanks. greenies for ya.
Thanks, sawz. I agree, no one single source can be correct. At the end of the day, whatever figures they give you... some buyer with deep pockets could come and offer you double that! But, at it is the only tool that compares your site, traffic, earnings, PR, amount of work required, type of site etc. with others that have sold recently it does come pretty close.