lammert - 11:24 am on Mar 14, 2010 (gmt 0)
the amount of cash flow that the site will generate is key (what comes in minus what goes out)
That's not cash flow but profit. Cash flow is often only a measurement of liquidity, not of profitability of a business. Banks like cash-flow because if the business fails, intercepting the cash-flow is a method of them to pay of debts. Entrepreneurs should be more concerned with profitability in the long run.
Selling a working website is not much different from selling a normal business. The main thing the buyer looks at is ROI, but from a different perspective than the seller. The buyer my have plans for a site which the seller may not have thought of, and be therefore willing to offer more money than the seller expected, but it may also be that the buyer is only interested in 10 or 20% of the site (for example a large database with email addresses) and accepts that he has to buy the other 80% just to obtain the thing he wants.
Then there is the problem of costs. As a one-man band with a part-time website and other sources of income, there are almost no direct costs involved other than the costs for hosting and bandwidth. Spare time in the evening or weekends is invested in a site and more often than not that time is not counted as business expenses. But if a site is run by a professional company, many other costs are involved. Parts of the maintenance work may have to be outsourced, and all work is done by paid employees, totally changing the earnings/expenses ratio.
Therefore there can not be a uniform valuation of a website, especially not because a seller will always leave things out of the calculation--often just because he doesn't recognize them as costs--and a buyer will see more costs because he may have to use expensive labor to the things done, or because he has to pay for parts of the site he doesn't really need or want.