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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?“.

 

About Chris Yates

Chris Yates is an entrepreneur who actively buys, sells, and flips websites. In addition to buying and selling internet businesses, he also educates and coaches others to make money buying, selling and flipping websites.

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  • Kevin Rands

    I posted something but I dont want my first and last name showing with it. hate these weird social networking logins …. you cant control what shows…

  • Clinton

    Nice article, Chris :)