So, you think that your website is probably worth a little over $1 Million, right? Unfortunately, that’s probably not true (but, hey, maybe it will someday!) Until you get there though, I say we should first learn how to honestly calculate the true worth of your website, if you’re planning to sell it!
In case you’re not a regular here at Romania Experience, you should know that I recently sold an authority website for five figures. When I told some people that I trust how much I got for the site, they said I sold it for way too little, which was not true.
See, the fact is that people tend to get really attached to their blogs or websites and therefore they find it difficult to objectively calculate its real worth as a business. Even if you spent 1,000 hours writing all that beautiful content and put all your heart in it, your website might not worth a cent. Sad but true!
Important factors that influence your website’s valuation
When a person wants to calculate the value of a website he or she must pay attention to a few important aspects:
1. How much money does the website make
This is by far the most important factor when evaluating your website: how much money does it bring in. More importantly, how much money did it bring, on average, for the past 6-12 months? And even more important, how much time and/or money should the new owner invest in the website to generate that income.
Most of the buyers are lazy folks who don’t want to write a single article (or they want to outsource everything). This means that they will cut from the profits writing costs – and these can get pretty big. In the end, if your blog is making $5,000 per month but running costs and writing costs are $6,000… you’re probably not going to make a lot of money from a sale!
2. How many people visit the website?
Generally, the more traffic a website gets, the better. If your unique visitors number is impressive, you can ask for a big chunk of money because 1 million people have the potential of bringing in a lot more money than 10,000.
Of course, these numbers go well hand in hand with the niche of the site (1 million visitors from a website with funny photos could make less than 10,000 visitors on a website that sells luxury watches, for example).
But in most cases, when buyers see loads of traffic, they see more money thinking that they can optimize revenue more than you did. And that is a great thing as it allows you to ask for more.
3. How old is the website and how stable is income/traffic
If one of your posts just went viral, it doesn’t mean that you constantly get a lot of visitors from that moment onward.
People who buy websites for a lot of money want some sort of guarantee that traffic won’t drop as soon as they get that site, and that guarantee is offered by having stable income and traffic for some months already – the more, the better.
Even better is an upward trend, showing some sort of growth (even if minimal) on a month-to-moth basis.
4. How difficult it is to run the site and what are the costs of running it
The website I sold required quite some maintenance with a minimum of 30-45 minutes per day to manage it (and this did not include content writing!)
Buyers usually pay more for a website that works on auto pilot or requires little work or fewer costs. The more work is required to maintain the website, the less people will be interested or the lower its value will be.
Of course, little work can mean that you’re already outsourcing content or other things required for running the blog – and these are accepted as well.
5. How authoritative the website is
If you managed to build a highly authoritative website, with many backlinks from other high quality websites and you’re in good standing with Google, then your site automatically is worth more.
Rarely will somebody spend a lot of money on something that has “potential” and no real, actual value, meaning that established sites (which are at least 1 year old) will be looked at with greedier eyes. The older the website, the better – as long as it is a good one.
So how to calculate the worth of the website?
The question I always ask before deciding upon a price is: How much would I be willing to pay for my website if I had all the money in the world?
I try to detach myself away from the site and ignore any personal connection that I have with it (like time spent building it and creating it, the sweat and tears that went into making it so goo, the personal touches and everything else). I try to think like a business man and consider it as an investment.
Here is what I look at:
Let’s say that my website is making on average $1,000 per month over the past six months now and traffic is about the same for the same period. I anticipate that traffic and income will remain about the same for the foreseeable future and I only have to post once per week in order to keep the website running. I only pay for hosting $6 per month and that is it!
Value of this website? Around $30,000
This is the “industry’s standard” right now: about 30 months of average income, although this can go as low as 12 months. In most cases though, it is something around 24 months of income, but for a website that is showing serious consistency and is well built, you can go up to 30x of its profits.
Let’s change things a bit here and let’s say that we have the signs (or gut feeling) that the same website’s traffic will grow in the near future and the income could be $2,000 by the end of the year. We anticipate that, with the proper work put into it, the website will actually end up generating $5,000 per month in 12 months or so.
Value of this website? Around $30,000
Why is that? Simply because you will rarely find people silly enough to buy for the potential or your gut feeling. As long as you don’t have any actual proof that income will indeed increase, the value of your website is given by your current revenue and all the other factors considered.
Let’s change things a bit more: let’s say that in order to run your website, you have to spend about 4 hours per day writing articles, networking and answering e-mails. You also have one staff writer that gets $200 per month and your other expenses rack up to $50. So even though you’re making $1,000 per month, your actual profit is $750.
Value of this website? Between $9,000 – $20,000 (and you can consider yourself lucky if you get those $20k!)
Why is that? The more work the owner has to invest in keeping the current levels of income, the more the value of the website drops. Even more, since you are so much involved in the actual content creation, chances are that a future owner will not be able to replicate your success and writing style. In other words, there are more risks involved.
The Bottom Line
People usually say that the easiest way to calculate a website’s worth is to find the average earnings for the past 6 months and multiply by 12 to 30, with 24 months of profits being considered a fair price in most cases.
However, I recommend to always try to ask for a bit more than what you’re willing to spend. Most likely, potential buyers will haggle a little bit and no matter how you put it, from a buyer’s perspective, getting a discount sounds good.
Now don’t price your blog at $100,000 if you consider that its real value is $20,000 as nobody will bid. But if you would accept selling your blog for $20k and you consider that a fair price, all things considered, you could definitely ask anything between $23,000 to $25,000.
I recently bought a website for $2,000 – and its asking price was $3,000. The seller didn’t really try to counter my offer too hard when I told him that this was the maximum I was going to spend, so always have this in mind: set your price a bit higher than your expectations. I ended up buying the blog with a “discount” of over 30%, but later on I realized that I actually overpaid, as the blog was only worth around $1,500. Lesson learned!
In the case of the website that sold, I priced it for the profits I estimated it would bring in 12 months if I kept working hard (meaning around 4 hours per day). This freed up some time for other projects and put some safe money in my pockets so I am really happy with the deal! Maybe I would’ve been able to get even more for it, but I wanted a guaranteed sale – and a fast one. You can always ask for more if you are not in a hurry.
So what do you think now? Is the value of your website close to what you were initially having in mind and do you agree with how I evaluate one, or you have a different system?
11 thoughts on “How to Calculate Your Website’s Worth When Selling”
As my site isn’t monetized, it’s hard to put a value on it. But I really enjoyed learning a bit about the methodology of valuing a website. The methodology seems similar to how you’d assign a price to a business, but with slightly different timeframes for multiplying the earnings.
I agree the real money makers don’t really look at PR. Its just a number and since they don’t know or cant check other metrics they go with something that they can find out. People want something they don’t have to worry about doing up keep which is why in some cases they the blog/site owner around for a few months or so. Also depends on the niche. Volume is only good if the people visiting can actually be sold something.
Yup, that is true – revenue (or, better said, profit) is the thing that matters the most in this situation.
Where did you sell it? Was there a directory online or a broker or other?
Nick, I took care of everything and had it listed over at Flippa.com, the biggest marketplace for selling and buying websites. I often check out the big blogs over there for inspiration, but many of the listings don’t tell the whole story so it’s best to really consider everything before making a purchase.
Gotcha, that was my best guess. I guess you’ve gotta list where people are looking. Do they have some sort of escrow system to protect both sides in the transaction?
They don’t have one, but they encourage people to use Escrow.com – this is the website that I have used without problems for the transaction. However, small websites (I also sold a couple for $500 and $1400) can be automatically paid for via PayPal. It depends on your agreement with the seller/buyer.
I have had a total of one person contact me about selling my website and I didn’t really look into it much since I didn’t want to sell in the first place.
You never know what could happen though!
Yes, I agree that selling should only happen if you no longer want to / have time to / can work on your blog. Otherwise, the offer has to be mind blowing to make me even consider it.
Hey C., I am just curious but how long does it usually take to sell on Flippa? I am not trying to sell, but just for future reference.
The best bet in my opinion, when selling larger websites, is to go for a listing that lasts at least 20 days so it gets enough exposure. There are all sorts of strategies that you can use here, but generally I saw that people are waiting for the last moment to post a bid: it’s an auction, in the end, so they too want to get the lowest price.