Thinking Of Selling Your Web Site? How To Determine Your Web Site’s Value
If you are an Internet entrepreneur, selling your web site will be one of the most important business decisions you will ever make. After making it grow, you only got one chance to sell your site. Once you sign and closed the sale, that’s it! No turning back, whether you think you sold the web site for a price too low or whether you shouldn’t have sold it at all.
by Nach Maravilla – PowerHomeBiz.com:
Web site owners have a different reason for creating their sites. You may have created your web site with the goal of making it as your sole or additional revenue source. Or you may have altruistic motives whereby you don’t really aim to make big money (or any money, for that matter) out of it, but simply want to get your message across your target audience. Whatever your objective, you put time, energy, even considerable expense in nurturing the web site and seeing its audience or customers grow.
However, for some reasons, there may come a time when you would want to sell your web site. Maybe, it has already served its purpose and you want to move to a different direction. Or possibly, it is only marginally successful and you think spending more time and energy to it is a waste. You may also possibly consider the web site as a short-lived opportunity that you want to dispose quickly.
Whatever the situation, selling your website will be one of the most important biz decisions you will ever make. After making it grow possibly for years, you only got one chance to sell your site. Once you sign on the dotted line and closed the sale, that’s it! No turning back for you, whether you think you sold it for a price too low or whether you shouldn’t have sold it at all.
It is therefore important to carefully consider some steps before selling your web site. And one of the main questions you will ask is: how do I set a price tag on the web site? What is the web site’s value?
One important point, though: there are no clear-cut ways and established formula to determine a web site’s value. In fact, making an accurate valuation is a judgment call, where not all parties may agree. Nevertheless, below are two ways commonly used to assess a web site, which you can use in combination with other factors that may be relevant to your web site:
* Multiple of the profit it turns in
. Many practitioners in the field put a web site’s value using a straight formula: 10 times of its net profit. The rationale is that 10x is the lower level bottom foundation of return on investment. For a web site that earns a profit of $100,000 a year, then its value can be placed at $1 million!
However, this formula is too simplistic (why multiple of 10, and not multiple of 15 or 20?). Imagine this scenario: a web site with a domain name keyword.com only makes $50 a month of profit, while another web site with the domain name keyword1-keyword2-keyword3.biz generates monthly profit of $500 per month. Then using the 10x valuation method, the first web site’s value despite its coveted domain name is only $500, while the site with the longer hyphenated domain name could fetch up to $5,000. Given this case, the 10x valuation formula does not really make any sense.
* Cost involved in replicating the website
. Similar to brick and mortar businesses, another method of valuation is determining the price of the web site based on its inventory and assets. For a website, the inventory & assets would include the quality and quantity of its content and images, as well as scripts or applications that may have been purchased or developed specifically for the web site.
It could also include the size of its customer list or database; as well as number of subscribers. In fact, many web sites could command higher prices by the sheer size of its customer database alone.
Aside from the above factors, there are other important considerations you need to include in setting the price of your web site:
* Branding and industry stature
* Target audience
* Domain name
* Income Diversification
* Traffic Diversification
* Non-compete clause
* Site Potential
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