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How to Value a Website

Measure Website WorthAre you considering selling your website and would like to know how to value the site? Perhaps someone has approached you and offered to buy your site. Maybe the idea of cashing out on your website for a lump sum appeals to you. Whatever your motivation is for selling, you need to know what price tag to put on it.  That’s what this post is all about.

8 Things That Add Value to a Website

The first step to understanding how to value your site is to put yourself in the shoes of your potential buyer. Why are they interested in your site to begin with? More than likely it’s for one or more of the following reasons:

  • Automation – You’ve created something in your site which lets you “do more with less”. You may have passive income streams or systems you’ve developed that the seller would like to leverage further.
  • Scaling – Your site has potential to grow. You may be close to ranking for valuable keywords or you’ve created the business in a way that it won’t fall apart if it doubles or triples in traffic.
  • Diversity – You have multiple revenue streams, multiple sources of traffic, multiple suppliers, etc. Your site hasn’t placed all its eggs in one basket.
  • Monetization – You have a track record of consistent or growing revenue streams.
  • Relationships – You maintain a relationship with your email list, social media followers, rss subscribers, etc. You have solid joint venture partners, suppliers, and other key stakeholders who will remain after the sale.
  • Traffic – You generate targeted traffic in a valuable market. You have sources of free traffic or can profitably pay for traffic.
  • Buzz – You have a quality backlink profile and your content is being shared around the social web or in the press. You have strong brand awareness.
  • Intellectual Property – You have unique, quality content throughout your site. You have create proprietary products.

Think about how each of these areas might affect the value of your site in the prospective buyer’s eyes.

Website Valuation Methods

There are a few typical methods buyers use to value a website. They are:

  • Comparable Sales – Buyers may look at recent sales on website marketplaces to find comparable sale data. This is similar to how a company like Zillow values real estate.
  • Revenue Multiple – Buyers may base their valuation on historical earnings of a site. These are typically based on a monthly or annual multiple. Higher multiples are achieved when a site has a longer history of steady or growing profits.
  • Traffic Value – Buyers may base their valuation on the value of the traffic a site receives. Typically the value is based on how much a business might pay on Google Adwords for the same amount of traffic.
  • Reverse Engineering Cost – Buyers will typically analyze time and cost to reverse engineer your website on their own.  This may limit the maximum valuation for sites without proprietary intellectual property or sites in non-competitive markets.
  • Customer Value – Buyers who have their own products or services may value your website based on how many customers they expect to convert by integrating their offerings into your website. Sites in highly valuable markets such as insurance may enjoy particularly high valuations due to this factor.

Once you understand the methods your potential buyer might use to value your website, you can work backwards from metrics such as monthly unique visits to determine the approximate value they will place on your site.

How Different Buyers Value Websites

Different buyers will value your website differently. For instance:

  • Passive Income Buyers – These buyers want to see consistent earnings over time and place importance on low-maintenance. They will base their valuation on their ability to see a return on their money by maintaining the status quo. These types of buyers typically value sites at 10-24x monthly profit.
  • Major Company Buyers – These buyers typically buy a site for the intellectual property or for its ability to generate new clients. A major company knows how much they are willing to pay for each customer they acquire and may value your site based on this. Valuations are all over the place with this type of buyer but they are typically only buying sites for $250,000 or more.
  • Improvement Buyers – These buyers typically value sites based on their return on investment after they make improvements to the site. These types of buyers look for sites which are under-monetized, have overlooked traffic sources, or have synergies with their other sites. These types of buyers typically attempt to base their valuations on historical monthly earnings of a site but in some cases will base their valuations from 6-18x the monthly expected earnings after their improvements have been made.

 Conclusion

The biggest key to getting the maximum value for a site is to find buyers who will use a valuation method that results in the maximum price for your site. Once you understand what motivates buyers, you can feel more in control of the negotiation. It also allows you to determine your best option for selling your site. If you’re looking to sell your site to a private buyer, you might want to consider submitting your site on the FlipWebsites.com sell your site page. You may also want to read our article on “What is my website worth?“.

 

12 January, 2012 Posted by:
Chris Yates Filed under: Selling Websites Comments (1)

Selling Your Website – How Much Does Your Business Rely On You?

Your Website Isn’t Sell-able Because of YOU!

This can be the case more than you might think. I’ve recently been consulting with a large online retailer website that’s had fantastic success running a drop ship operation as a family business.

In the midst of a bad economy, he has 8 years of solid growth, and is projected to break $2 Million in sales this year!

The business is amazing, and I’ve been able to become intimately familiar with all the day to day operations. It’s a great business, in an evergreen market, and it’s growing at a rate of about 50% a year.

But, this website and business isn’t ready to sell, yet. Why? Because if the current owner left town tomorrow, it would crumble.

Is that what your business is like?

One of the most difficult things to overcome in a website you’re ready to sell, is the business’ dependence upon you. And oddly enough, when you actually achieve building a business that grows and thrives whether or not you’re around, you end up not wanting to sell it!

It’s important to build your business, doing everything through the lens of this question: “Does this make my business more sell-able?” Because should the day come that you DO want to sell it, you’ll only be able to do so if YOU are able to leave.

So, here’s a few things you can do to make your business less centered around your own personal efforts to keep it running.

1.) Apply the 80/20 rule. A lot of great books talk about the 80/20 rule, but in a nutshell, it basically means that 80% of your success, is derived from 20% of your effort. Which means the other 80% of the time you spend in your business, is likely the stuff you’re wasting time on, and it doesn’t make you more money. Find out what that one most important thing is, and immediately find alternative ways to get the other stuff done by other people, software, or systems.

2.) Create process maps. Boil it down to a science. “My business includes doing X, Y, and Z.” Color by numbers. As you’re working each day, take detailed notes on what it is you’re doing so that someone else could easily pick it up and follow the instructions, regardless of their level of experience.

3.) Hire people! This isn’t always the answer, but it’s less scary than most people make it out to be. You probably CAN afford to do it. You just don’t think you can because you don’t know the value of your own time. Imagine if you weren’t spending 8 hours a day doing something that could be done by an employee? Are there more profitable tasks you could be focusing on in that time?

4.) Don’t be an expert on everything. It’s a great way to become a bottleneck. The guy I told you about above is a victim of this very thing. He’s SO knowledgeable in his field, that everyone asks him for answers to Google-able questions. Force people to know stuff. Make it a point to let others be experts about things you don’t need to be.

What are some other things you can do to make your website and business less dependent upon you? leave your thoughts in the comments below!

08 September, 2011 Posted by:
Chris Yates Filed under: Selling Websites Comments (2)

How Google’s +1 Could Increase Your Price When Selling Your Site

It seems as though the entire web has gone social. There are a ton of thoughts on this subject, and the purpose of this post isn’t to do an expose’ on the effects of Google +1 or facebook likes. However, one undeniable result of Google’s shift towards the social side of things is a crucial element for every marketer worth their weight in gold: Social PROOF.

There’s just something about our nature that is attracted to follow the crowd. Not only when it comes to making decisions, but when it comes to measuring the success of others. When it comes to making decisions (especially about a purchase), few selling tactics have as powerful of an effect as a long list of satisfied customer testimonials. But when it comes to measuring success and getting others to jump on your bandwagon, the tool of choice is social response in the form of a vote.

Take a look at some of the web’s top social bookmarking sites like Digg.com, or StumbleUpon.com. When something get’s voted for enough times, it gets picked up and syndicated all across the web. A post that experiences what some have called the “Digg effect” (server crushing traffic from reaching Digg’s first page), goes through a snow ball effect. The more people who Digg, the more people that see the story, which in turn leads to more Diggs…You get the point.

Then came the Facebook “Like”. The same snow ball principle is at play, it’s just a much steeper hill with more force pushing the ball. The viral effect of the Facebook “like” has made many people overnight internet celebrities, given YouTube videos millions of views, and increased online businesses overall fan bases (and value) by untold amounts.

The question everyone is asking, is how will the Google +1 button effect business owners and websites? Well, in an attempt to keep good on my promise to not discuss all the stuff you’ve probably read 1,000 blog posts about already (SERP changes, etc…), I’d like to point out the one change that could make you more money as a flipper: Social proof.

If success is measured by following the crowd, then having a high Google +1 count on your website’s content automatically infuses more perceived value into it. It tells potential buyers “people like my website.” Which gives them more confidence to make you an offer because the crowd is telling them it’s a good property to invest in.

#1 rankings are great…But being #5 with 10X as many +1′s as the guy who’s #1 in the SERPS tells potential buyers (and searchers) that your site is the site everyone likes the most.

So, the moral of the story is if you aren’t currently utilizing Google’s +1 button to add perceived value to your content, perhaps you should. You may even start seeing it in our posts here at FlipWebsites.com!

26 July, 2011 Posted by:
Chris Yates Filed under: Selling Websites Comments (6)

The Piece by Piece Website Flip

Have you ever seen the movie “Pretty Woman?” It’s the one with Julia Roberts and Richard Gear. My wife was watching it the other night and it got me thinking about website flipping.

If you’ve seen it, you’ll remember that Richard Gear plays a billionaire business takeover guy that preys upon struggling businesses, buys them out, and sells them off piece by piece to other companies.

In today’s post, I want to talk about doing the exact same thing when it comes to websites and group auctions. Let’s call this a Piece by Piece Website Flip.

One type of auction I see passed over by so many people in online marketplaces is the “group of 250 adsense sites” type auctions. Usually, there’s 1 or 2 sites in the bunch that make up the majority of the claimed income, and the owner is throwing in his collection to inflate the perceived value.

If you’re like most people, you don’t even give these auctions a serious look. I mean, who wants to pay to renew 250+ domains every year?! Who wants to go through with the hassle of transfering 250 sites to a different hosting account?

Sometimes, if you’re lucky, you can get the owner to sell you just one of the sites in the bunch, but more often than not they aren’t willing to separate the wheat from the chaff for fear of not being able to sell the chaff.

So, what’s a website flipper to do? Become Richard Gear!

When I see these types of auctions, I like to take a look at each site to sniff out ANY potential value in them. Even if the sites have zero traffic or revenue, the domains, content, and designs may be worth something. Even if only $25-$50 each.

Lets use the above example. You go to Flippa.com, and come across a listing that says “Network of 250 Adsense Sites for Sale”. The network of sites collectively earn about $350 per month, and over $300 of that is from less than 5 sites that are the real winners in the group.

The BIN is $3,000.

Also, the seller is absolutely UNWILLING to sell you the 5 money makers by themselves. They want you to take the whole bunch of them, or nothing at all.

After browsing through the 245 duds, you see that most of them have 5-10 quality original articles on them. They each have a decent looking design with a unique header graphic. In fact, the only reason they don’t make any money, is lack of traffic and ad placements.

So, with the domain names, site designs, and original content, you figure each site is worth about $30 to you.

You quickly place the BIN for $3,000, (primarily for the $350/month in adsense income from the main 5 producing sites), and you devise a plan for extracting that $30 per site from the rest of them.

Instead of being blindly optimistic, we’ll assume that  we can only successfully extract that $30 per site from about 40% of them. So 40% of 245 sites = 98.

The plan is twofold:

1.) List the sites at eBay, digital point, and other cheap marketplaces where these types of sites will sell for $30 without much cost to you.

2.) Create a special offer at Warrior Forum or to your own marketing list to create “unique, high quality adsense sites with 5 + articles, graphics, & domains for $30 each”.

Between these two strategies, you successfully sell 98 sites times $30 for a cool profit of $2,940.

Your new income stream has paid for itself, and you still have 147 sites you can use for link building or whatever you want.

Perhaps this will give you a new perspective on monetizing auctions you normally wouldn’t give a second thought to.

Have you ever done a “piece by piece” flip? Have you ever broken down the assets of a larger site and sold them off piece by piece to other people? Better yet, have you ever bought a business and sold off chunks of ownership to 2 or more parties to recoup the initial spend?

Comment below with your thoughts on Richard Gear, piece by piece website flipping. We’d love to hear your thoughts.

23 June, 2011 Posted by:
Chris Yates Filed under: Buying Websites,Monetizing Websites,Selling Websites Comments (9)

How To Flip A Website

Before discussing the specifics on how to flip a website, let’s first define…

What It Really Means to Flip a Website

So many things have been lumped into the topic of “website flipping” that actually don’t belong there. Much of it has polluted the marketplaces, and that is largely due to the amount of guru products on the subject leading people astray.

Website flipping is not:

  • Creating sites from scratch to sell…Even if it’s down the road
  • Creating turnkey sites to sell with zero traffic or revenue

These activities are more accurately placed under the banner of “site selling”. And there’s nothing wrong with it. Lots of people add tremendous value to the marketplace by creating valuable sites to sell. It’s what they do for a living.

However, it’s not what I consider “website flipping”.

The phrase “website flipping” is borrowed from the concept of flipping houses. Consider the buy and renovate concept of flipping houses. When people invest in a house to flip, it’s usually because they recognize some things (like new paint and carpet) they can add or fix to immediately increase the value of that home for resale.

So, what about people who build houses to sell them? Are they considered “flippers”? I’d call them builders or contractors.

So, what is website flipping and how do you do it?

Flipping involves buying low, and selling high. Not buying and keeping. Not building to sell.

Buying low and selling high…FAST.

Now, you may buy a website and sell it several years down the road. That can be considered flipping, but REAL “flipping” involves turning properties over a little faster in my opinion.

This skill is more of an art than a science. It’s truly a beautiful art! Why?

For the very reason you’re reading this blog, and the reason our marketplace of buying low and selling high has become so popular:

BIG – MONEY – FAST

It’s not for everyone though. I’m seeing a trend amongst the savvy long term investors in our marketplace towards buying to hold.

That’s partly because many people struggle to find anything worth buying in online marketplaces anymore. When they do, they aren’t very keen on letting it go.

Honestly, buying to hold is a very wise model. If you’re looking for information about how to do this the smart way, I’d invite you to check out BuyingAndSellingWebsites.com.

For the sake of this conversation, let’s assume we’re defining flipping as buying with the intention to sell quickly. It’s what we teach in our course Killer Flipping Secrets and is where you have potential to make big money fast.

How to Flip a Website

To flip a website, you need a special set of skills. You’ve got to be able to do at least 1 of 2 things very well. They are:

1.) Spotting areas of underdeveloped monetization opportunities, or traffic generation.

Ask questions like, “Can I add an up-sell to this site’s sales process?”, or “Can I raise the price of this product?”, or “Could I increase the targeted traffic to this site by creating a PPC campaign, or doing some SEO?”

In other words, look for areas that require little work to achieve huge potential results on the bottom line of that business you’re about to buy.

Know what you’re good at or what you’re able to outsource, and try spotting opportunities to apply those skill sets.

2.) Arbitrage.

Buy low, sell high, immediately. That’s what arbitrage is all about.

Here’s the money question when it comes to selling an online business…

“Who stands to make the most money from owning this site?”

Answer that question and you’ll know who is also most likely willing to pay a lot more money to own it than what you can acquire it for.

This can also be done between marketplaces. Sometimes a site you find over at ebay.com can be sold for a lot more at Flippa.com.

Get familiar with the types of sites that sell well on the various marketplaces so when you find one listed lower than you’re used to seeing it listed for on another, you can scoop it up and sell it on the other site for a quick profit.

Fast Profits With Website Flipping

There’s so much stuff out there that people are teaching in forums and in ebooks that isn’t really geared towards the fast profits that can be generated using the above 2 concepts.

The entire appeal of flipping websites is fast profits. Don’t get me wrong, please. There’s nothing bad about buying to hold, or starting sites to sell. Those are good business models when done right, but they are not the same thing as flipping.

When I buy a site to flip, my goal is to get it renovated and sold inside 6 months. The time frame will depend on how much value I believe can be added fairly quickly and what’s involved in that process.

It’s only something I’d do if the potential upside of the flip is a large enough amount of money to justify the amount of time and work I’m going to put into the project.

If it takes longer than 6 months, or the potential margin of increase isn’t large enough to justify selling it again that fast, I wouldn’t take it on as a flip project.

That doesn’t mean I wouldn’t buy it to hold. That’s just a different conversation.

For those who are new to FlipWebsites.com, this should serve as a clear definition and brief introduction to answering the question “how to flip a website.”

For the faithful readers, and seasoned website flippers, perhaps this will serve as a reminder to get back to the basics of pure “flipping”.

Remember what flipping is about…

BIG – MONEY – FAST

Perhaps it’ll get you back on track if you’ve strayed the course or lost focus.

What do you think? Am I being too rigid with my definition of website flipping? Comment below and let me know.

14 June, 2011 Posted by:
Chris Yates Filed under: Buying Websites,Selling Websites Comments (5)

How I Left $8k On the Table When Selling BetterParenting.com

So, it’s time to swallow my pride a bit and own up to a HUGE mistake I made on a flip that cost me at least $8,000 — maybe a lot more. Believe me, it sucks knowing I left a bunch of money on the table, and I take no pleasure in sharing this story, but if it helps somebody out, it’s worth it.

Back when I sold BetterParenting.com, a lot of people were interested in the auction. Let’s be honest, there’s a lot of crap sold on Flippa, so when a PR4 site with a nice design and good content, built on a premium brandable domain comes up for sale, people take notice.

The site wasn’t earning much — enough to cover any content I paid for (which was fairly minimal, since I was getting a bunch of content for free). In fact, the numbers were so mediocre that I listed the site with no revenue claimed.

Despite that fact, the auction was going great — I had lots of bidders and even more people watching the auction. During the last two days, the private messages started pouring in with higher frequency.

One message was from a guy who had been bidding — he was really interested in the site and he wanted to talk to me about it. The auction still had about a day and a half left when we spoke. Bidding on the site was around $4,200 and he offered me $8,000 to end the auction early. I said I’d need at least $10,000 to do the deal and he quickly replied that he’d take it. What I did next was smart.

I told him that I first wanted to contact the existing bidders to let them know that I had an offer on the table to end the auction early. I proceeded to send out the note to the existing bidders, and when I hadn’t heard anything back from them, we closed the deal.

Seems like I did everything right, doesn’t it? Except I screwed up. Within an hour after we closed the deal with a “Buy It Now” price on Flippa, I got a message from a guy who wanted to know what happened to my auction. He was waiting until the last day to place a bid and he was prepared to spend up to $18,000 on the site. I almost threw up all over myself when I read it. No lie.

Worse still — earlier in the week, I had received a message from a guy who hadn’t placed a bid in the auction but told me to contact him before I sold to anyone else. When I sent out the messages to all the bidders, guess who I forgot about? Yep, that guy. A few months later, I found out that he had real deep pockets and probably would have gone above the other guy’s $18k max.

Moral of the story? If you have an auction that’s generating a lot of interest, the “Buy It Now” option could cost you thousands. Also, be VERY diligent in your note keeping. It was my own disorganization that caused me to not email a bidder who was very interested in the site.

Anyway, I hope you can learn from my mistake.

18 May, 2011 Posted by:
Eppie Vojt Filed under: Selling Websites Comments (7)

10 Website Selling Mistakes You NEED to Avoid

Some sites with no revenue can sell for 5 figures while others (with a strong revenue history) can’t even get 2x their monthly net earnings.  So what’s the difference?  Why do some sites kill it and others struggle to pull in a solid sales figure?

The answer — website selling mistakes.

The information you provide in your listing, and the way you present that information can have an enormous impact on how much potential buyers trust you… and how much they’re willing to pay for your site.

Here’s a list of some of the major mistakes I’ve observed in some recent listings on Flippa that have caused sites to sell for way below their real value, or not sell at all because they stayed below reserve.

Continue reading

06 March, 2011 Posted by:
Eppie Vojt Filed under: Selling Websites Comments (10)

Flippa Introduces Confidential Listings

Two weeks ago, I posted about the importance of not devaluing a site in an undiscovered niche by avoiding marketplaces like Flippa.  There are a ton of people who visit these sites to mine niches, not to buy websites.  The danger for you, as a seller, is that you can end up introducing more competition into your marketplace — especially bad news if you can’t get a good offer for the site you’re selling.

Maybe the folks at Flippa were listening because today they announced a new way to sell websites online via their marketplace: confidential listings.

As of today, a website seller can choose to make their new listing confidential. This will result in the URL being hidden from buyers until the seller has approved the buyer’s signed NDA.

The announcement further details the information that will be hidden until a signed NDA is produced from the potential buyer and approved by the seller:

This will hide the URL and other site-revealing information such as the WHOIS, Ranking Keywords, Hosting and Wayback Machine details from everyone apart from the seller and approved buyers.

A New Revenue Stream for Flippa

Flippa is smartly offering this feature as a premium option, which has a charge of $100.  This fee ensures that the feature won’t be overused and means that the confidential listing feed will likely be of increased quality.

It’s a good business move for Flippa in that it adds a new revenue stream, but it also appeals to a class of sellers who previously feared using the marketplace.  I, for one, am pretty excited to see this put into action.

Sadly, enforcement of the NDAs falls entirely upon the seller, and with the ability to use private registration on domain names, there’s still serious potential for abuse in the way of niche mining.

What are your thoughts on this — is it a good move for Flippa?  Is $100 to high of a price for this feature?

01 March, 2011 Posted by:
Eppie Vojt Filed under: Selling Websites Comments (4)

When Less is More — Auctioning a Site in an Undiscovered Niche

In most cases, when you’re selling a website, you want to include a lot of data. Flippa’s sales statistics have already proven that more attachments = more $ for the seller, but there are some specific instances where it’s wise to hold back on some of this data, or to consider a completely different sales platform than Flippa and other large marketplaces.

If You Found a Gold Mine, You Wouldn’t Publish a Map to It

Frequently, when we sell websites, we’re really selling execution — good unique content, proper implementation of an SEO and link-building campaign, and conversion optimization.  Sites that get traffic and turn it into money.

For most of these sites, the market is well-known.  There’s no intellectual advantage owned by the site — it’s not in a brand new, untapped market.  It’s just been executed better than most of its competitors.

Sometimes, however, you find a keyword that’s basically untargeted organically.  It’s a profitable keyword (has advertiser competition if you’re an AdSense builder, or is a buying term in e-commerce sites), but you’re the only one who really knows it.  How you handle that situation is completely different from “regular” websites.

Continue reading

13 February, 2011 Posted by:
Eppie Vojt Filed under: Selling Websites Comments (3)

Tips for Maximizing Your Sales Price: Gather the Right Details

I have looked at thousands upon thousands of websites that owners want to sell. If you can think of it, I have likely seen it. As an internet business broker, evaluating thousands of websites, preparing them for sale, and matching them up with qualified buyers simply comes with the territory. When we run an advertisement to bring in new listings, we can easily net 700+ websites that are requesting our professional valuations. As I said, I have looked at thousands of websites.

After looking at all this data and after helping over 200 website owners sell their online businesses, one simple truth seems to be clear: most website owners have no idea what they need to do to maximize their sales price.

Continue reading

08 February, 2011 Posted by:
Mark Daoust Filed under: Selling Websites Comments (1)