Selling a website: What is the going % rate and sale etiquette

[clearvision]

I've discussed with a broker the sale of our web asset and was given a number that seemed rather low. He said a good starting price would be 2-3 times last years revenue...negotiations can only go lower...not usually higher right?

Are these really the going rates now? It's not just a generic domain name sale, it's going to be for a fully established, highly indexed & aged website & its assets.

My concern is if I start out too low I'll be just giving it away, at the same time if it's too high a good buyer may not even take a look. The broker may want a quick sale over a higher $$ amount, but to be honest, this is my baby (if you will) and it's not likely I'll make another one like it again.

I know it has great potential past my current knowledge, but don't want to be living in a pipe dream either. When looking at the current facts/stats I feel my concerns over a price set too low could be well founded.

Thoughts and suggestions are appreciated!

[edited by: clearvision at 3:38 pm (utc) on Feb. 11, 2008]

[Quadrille]

A good starting point would be 5-10 TIMES last years revenue, unless you propose to make him rich as an act of charity.

Why would you even talk to someone offering less that one year's revenue?

You could do nothing for a year, pick up almost as much, then start work again!

Your 'buyer' is a chancer who is taking the proverbial p*ss.

Move correspondence to spam folder and ignore.

[clearvision]

Oh my, I typed that wrong! I meant 2-3x not percent...sorry! I fixed it.

So are you saying 5X is a better place to start?

[Quadrille]

I think so.

I'd work on the basis that 1x revenue is a joke, so you'd *start* higher.

But remember that there's no 'rules' - your website is worth what a buyer is willing to pay, not a penny more. And while you may put a high value on 'future prospects', a buyer may not (And if he does, he ain't about to tell you!).

Unless you are in a hurry to sell, you CAN think a lot about prospects, and weigh that against what you might do with the cash :)

Good Luck!

[Jack_Hughes]

I'd say 5-10x is way too high unless you are manufacturing the stuff yourself and own the brand and patents and the like. I think your broker is giving you sound advice.

[dbdev]

This has always been a difficult one for me.

I disagree with the 2-3% of revenue model way of putting a value on a domain name and respective website.

It's difficult because the internet and SERPs are way to volitile and unpredictable. In an "internet only" based business you could be worth a million one day and nothing the next. There is nothing that can guarantee the day after the sale, the site will not drop out of SERPs all together. On the other side the site could explode at any second.

I take the time and resources that it took to develop the site (hourly rate X hours to deploy) + ongoing costs of marketing and maintaining the site to date. Usability test models and results should also acommpany the rest of the documentation. That at a minimum should be covered off.

Then add the past n years revenue (you will have to prove this on paper) and add 2-3% or 5% in your case.

Now you have a base price.

Apply a multiplier for the predicted/forcasted revenue based on current site conversion trends and analytics.

Then a second multiplier is applied that takes SEO & usability (site quality) into account. This includes items such as age of the domain and length of site inclusion in major indicies (G, Y, M). Directory inclusions (dmoz, yahoo). Inbound links plays a factor as well. A trend of SERP positioning for target kephrases. For dummy reasons I'll use 25% as a multiplier for solid SEO. This will vary largely from site to site depending on competion and market share which is ultimately SERP positioning.

Start there.

So to break down the math for a dummy site...

1. Site cost you $1000 to develop and maintain (usability, design, graphics, copy, hosting) to date.
2. Revenue figures 2005=$250; 2006=$750; 2007=$1000 (Total Sales To Date = $2000)
3. Total Sales + Site Cost = $3000 X 1.05 = $3150 (Base Price)

4. Forcasted Revenue 2008=$1200; 2009=$1400; 2010=$1600 = Average Yearly Sales Growth: 16%

5. Base Price + 16% = $3654

6. SEO multiplier = $3654 + 25% = $4568

Domain & Website Sale Price = $4568

[edited by: dbdev at 6:39 pm (utc) on Feb. 11, 2008]

[clearvision]

Thank you so much! This is great information.

add the last n years and then multiply?

Just to clarify, you mean 3 years right?

Cost to develop
That is a difficult one because what if there aren't exact time figures. The maintenance is minimal now, but in the beginning I pulled alot of all nighters:) Since the site is 8 years old I don't have a clue how much time has been spent in all, should I just use the numbers from the last 3 years as well?

Thanks again for your help!

[dbdev]

Yes. The last 3 years in place of n.

You will have to take a best guess at the time and resources it took to create the site.

You also have to put in perspective the work being completed by a professional development firm... not just a pile of all nighters for a number of weeks.

Something to consider when putting a value on your time is the cost of having someone else develop your site.

If I knew the URL I would be able to tell you how much the site would cost for my firm to build it.

You could easily ask web design companies to quote a clone of the site to get a better idea of what the figures/quotes come in at.

With 3-5 companies quoting, it won't be bang on but will give you a fair idea of what the site "should" cost to develop.