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!
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 and what are the prospects for the future
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… that’s not good!
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 bring you less than 10,000 visitors on a website that sells luxury watches).
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.
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 at least 3 months – but the more, the better.
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 does not include too much 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.
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.
OK, 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 this website if I had all the money in the world? Think like a business man and consider it an investment. Here are the numbers:
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 $24,000
This is the “industry’s standard” right now: about 24 months of average income, although this can go as low as 12 months. In some particular cases, you could get more too, but don’t get too greedy.
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.
Value of this website? Around $24,000
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.
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.
Value of this website? Between $9,000 – $18,000 (and you can consider yourself lucky if you get those 18,000!)
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.
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 24. However, people now are less and less willing to block a large chunk of money for 2 years (or more) unless the website in question is really good. So unless you have a brandable (or already a brand) website with solid stats, I would say to set the minimum value you’d accept for your website at 10 times the average income of the past 3 months (3, not 6!). Ideally, you will want to sell for at least 20x the profits, but that might not happen. Just decide if you’re ready to wait for the right amount (which is never guaranteed that you’ll get).
In my case, I sold the website for the earnings I estimated it would’ve brought me 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.
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?