Your site is worth whatever someone is willing to pay.
This is because: a buyer estimates the worth of a website based on the income it will return.
Similarly, however, a site owner also values its website based on the income it currently returns.
Example: Let us consider a 5 year old website which nets a clear profit of $2,000 per year and targets a unique audience. At current interest rate levels, we find that 5 year CD's are yielding 2.00% per year. This means that the site owner has the equivilent of $100,000 invested in the CD which returns $2,000 per year. Thus, the owner correctly considers the value of his site to be worth $100,000. His risk, however, is interest rates. If the 5 year rate increases to 4.00%, then the value of the site will drop to $50,000.
Many authors cite a website's worth based on a fixed multiple of current income. The multiples range from 5 times earnings to 20 times earnings. This seems rather arbitrary, but from this, we can value the above site to be worth $10,000 to $40,000. Remember however, most of these multiples were established several years ago when interest rates were higher, and may have been in line at that time.
A person who purchases an emerging website is taking a risk, and therefore expects to earn a higher rate of return on his investment. Assuming an investor targets a 10% return, he is willing to spent $20,000 for a website that is returning $2,000 per year. The $20,000 value can be determined using a 10 times multiple.
However, there are many intangibles which can increase or decrease a sites value. For example, if the site is being developed on a part time basis, the full suite of its potential reach may not be acheived. A buyer may indeed see that by adding a bit more manpower resources, the site may grow exponentially. Conversely, a blog whose content is based solely on the author's experience or memoirs, may be of little or no value to a potential buyer.
If the income of a website has continually increased since the launch of the site, future income growth may also be anticipated. If this is the case, the the value of a website should increase. However, if newly launched competition hits the web arena and threatens to reduce a website's reach, then the value of a website would naturally decrease.
So, returning to our original example and utilizing all of this information, we could reasonably expect the 5 year old website profiting $2,000 per year to be conservatively valued at $100,000 to the owner, but only $20,000 (plus an intangible margin which could range anywhere from $0 to millions of dollars). Thus, I would set a minimum price of $50,000 for this particular website example but would push for its upside potential.
Remember: It's up to you to influence what a buyer is willing to pay in order for you to receive its full potential value.
Below is a summary of intangible items that can potentially increase your website's worth substantially:
- Content Uniqueness
- Cost to replicate
- Demand
- Potential earnings
- Branding
- Domain name desirability
- Income Diversification
- Traffic sources
- Visitor demographics
- Design
- Age of site
- Search Engine position
- Tax implications
You can learn more by reading the websites below.
- How to Value a Website (Will Edwards)
- Thinking of Selling Your Web Site? How to Determine Your Web Site’s Value
- How To Find Out How Much Your Website Is Worth!
- How Much Is My Website Worth?
- How Much Might Your Website Be Worth?
- How Much Is My Website Worth?
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