Forum Moderators: phranque
[edited by: trillianjedi at 11:30 am (utc) on Jan. 25, 2006]
[edit reason] Examplified and URL's removed (please see TOS #13) [/edit]
Please take a moment to review our TOS - site reviews and promotional URL's are not allowed here.
The general rule of thumb is a site is valued by a multiple of its profits. That multiple can vary depending on the market and your sites positioning. 6 months is not unheard of, and nor is 3 years.
Ultimately it's worth what someone is prepared to pay for it. You need to decide what you're prepared to sell it for.
Or, if I keep it, how can I make more profit from it.
You want to get your profits up as high as possible even if you do want to sell, as that will affect overall valuation.
I am considering adding a widgets for sale section to it also
Bear in mind the competition there is tough. An empty for sale section could actually have a negative effect on the reputation of your site.
If you can pull it off though, and get a commission on sales, it could be a lucrative move.
TJ
Time costs are an overhead, and therefore not profit, unless the salaries are "loaded" for tax purposes.
I saw a post once saying that if all the profits went into salary, the site had no value, that a site's value could only be figured on profits above and beyond salaries. Is that so?
Yes.
What would you pay for a business with a turnover of $100,000 p.a. that has to employ 4 people at a cost of $25,000 p.a. each to run that business?
There are exceptions. If you're one of the "employees", then there is some value to a buyer (although it's generally low, as this is akin to "buying a job"). If the owners salary is loaded, and not a true reflection of value, then that also would need to be taken into consideration. For example, if I paid myself $50,000 a year for one hours work per week, I could probably argue that a fair element of that is actually profit, it's just reflected in the accounts as a salary for tax purposes.
TJ
How does that affect the valuation of the site?
If you're only selling the site, salaries don't come into play. The buyer figures out what continuing to maintain the site will cost him with his current staff. His salary costs may have no similarity to yours. Especially since your salaries are mostly based on minimizing corporate profits.
If you're selling the entire business, then salaries MAY come into play. If none of the employees are key employees and can easily be replaced or even done without, the it's not a factor. For the key employees, maintaining a high salary to keep them aboard WILL come into play obviously and lower the valuation.
