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This has got me thinking, how does one determine the fair market value for a website? Page count, PR, market... Are there other tangables that need to be considered?
I've got a PR7 and expect about 90,000 visitors this month. I'm in a tough market and know that my three years of hard work is not what most folks are willing to commit to for traffic.
Any thoughts on this?
It also depends on what type of site it is. Ecom, information, subscriber based, etc... Check out Techdealnet [techdealnet.com] to get an idea of what businesses like yours are priced at.
That indicates that most online business should have a P/E ratio of 11 to 14. But, Yahoo has a P/E ratio of 97 (used them as they actually have a positive P/E), so do the old rules apply or are the dot coms still overvalued?
Personally I would never sell any site I own for less than 10 times annual profit (most have no tangible assets).
The one issue that is important here, but difficult to quantify, is search engine positions. I have had sites that have gone from producing $50K per month to $5K per month and back again, purely because of changes in the SE market place. Any site that relies on SE positions for the majority of its revenue has to be valued differently.....How?, I would love to know the answer myself:)
to compare, look at US equity markets, the S&P 500 sells for about 18 times after tax profit. This comes to about 12 times pre tax profit - obviously dell and ge are worth more than most of our endeavors, so 3 x sounds about right to me. a big factor is whether you account for the seller's time as an expense - you can end up buying a job...
We countered with a price that would be about 10 times profits. This was based on the growth trend of the business and an estimate of what we thought profits would be in a few years. The price we asked was 3 times our forcast profits at a time two years in the future. We were enjoying the work and able to stay at it a couple more years.
The deal did not happen. We are happy, because revenues have continued to climb as we expected. That same price we were offered six months ago, now equals six times todays profits. I expect that we will meet or exceed our projected profits.
My point is, that simple ratios are not the whole story.