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Say you had a geography specific (one part of the world) travel site. If you thought the big fish were ready to bite, how would you put a valuation on it?
1.) number of users and/or page views
2.) gross sales
3.) net sales
4.) potential sales
5.) search engine placements and links in
(Sales = travel, merchandise, adverts and affiations)
Travel is a legitimate and growing sector of the web economy. This question is hard and I have seen a lot of different numbers/theories/methods out there ($100 per monthly user, 3 to 5 times gross revenue, etc.). Any informed opinions welcome!
I think the most important bottom line is how much money you make, and that number alone should be the primary factor in your selling price. Add in the cost of building the site and the value of the domain as inventory since it is valid business real estate, just not a brick and mortal building. Use the "potential" to make it look more attractive, but base the price on earnings.
Just my opinion... I am not an expert... but I hope this helps.
Well that is what I was wondering - I am sort of thinking a potential buyer would be willing to pay more for the site's potential - i.e. what they could do with the traffic, especially in the travel category.
I buy sites (not travel related).
If a site doesn't have potential I don't buy it.
If a site has potential I invest time, effort, skill and money to realise that potential. If I then make more profit why should that profit go to the previous owner (by being included in the sale price)?
If the valuation of sites is a highly subjective affair then the valuation of potential is even trickier. Sellers, invariably, think it's worth a lot more than a prudent buyer who does his due diligence ever thinks. I've seen sites with a 100K uniques a month struggle to make $100 - even in the best of hands.
One can dream, yes. But, if you've allocated an arbitary value for "potential" you'll likely not achieve a sale. Get a neutral third party's opinion and you may be shocked. Try an accountant who specialises in valuing businesses and their assets (with experience in handling dot com deals). Tell him you are looking to buy this site, what you think you can do with it, and pay him to carry out the due diligence and come up with a figure.
$100 per monthly user, 3 to 5 times gross revenue, etc.
You may have been misled as to what sites really sell for.
I believe you have very, very high expectations. I get about 250K uniques p.m. on one of my UK sites (not travel, but a lucrative market nonetheless). It sells over a million dollars worth of widgets p.a. with NO advertising (on about 10% margins). Has been doing so for the last several years. I'd sell the site in a heartbeat if someone offered me half a million (circa £250K).
joined:Dec 29, 2003
Second, what happens if Google, Y! or MSN drop you for a reason or another? That's why the 3-5 times valuation thing doesn't apply to the internet. Too many things you can't control.
"Well that is what I was wondering - I am sort of thinking a potential buyer would be willing to pay more for the site's potential - i.e. what they could do with the traffic, especially in the travel category."
That doesn't matter much IMO. There's huge potential for everything. Real estate, finance, healthcare, and saying it's a $2.4 trillion industry is not going to impress anyone. It atually might work against you. Those people who sell "get rich quick" schemes use this.
"($100 per monthly user, 3 to 5 times gross revenue, etc.)"
I'll sell you a site RIGHT NOW for $1 a monthly user. Have a $300K bank check ready....
Seriously, consider the earlier suggestion to get an accountant to look at the figures. But, even that is meaningless to a certain extent. As they say in the business - a site is worth only what someone is willing to pay for it. And the only way you'll know what you're likely to get is to test the waters and put it up for sale.
I will agree! Yes - the idea of professional help is a good one. I am not trying to sell a site though actually, I am just trying to understand how a site in a certain category could be valued. This information is not dispensed so readily.
And I totally agree that anything is only worth what someone is willing to pay for it .
Thanks for your comments, I had some good laughs from this thread.