Website Valuation

[SumYungGuy]

I have a website and I'd like to know if anyone has an idea of how much it would be worth, how easy or difficult it would be to sell and any other pertinent info from webmasters....

site details:

it's 2 1/2 years old. it is a very unique type of content site. last year it earned approximately 40k from adsense and 110k from affiliate networks (cj et al). traffic is still growing. i expect traffic to double again this year. it has between 100,000 and 200,000 pages of content. they all rank well in google for their content.

the site has almost 1000 facebook likes - every single one 'natural' and unsolicited. this is because it is a quality site that people find useful.

i have never professionally seo'd the site or solicited a link. page rank is actually pretty low because all of the links it has are from real people who linked to it because they liked it. there are a few hundred links in.

i spend pretty much zero time working on the site. once in awhile i have to change an affiliate link or answwer an email (about 2 emails per year with questions). other than that it requires zero maintenance and the content stays fresh and useful to visitors.

i do not advertise the site. the only expenses related to the site are hosting and domain renewal.

anyway....no scams, no gimmicks - just a site that people find useful because i found a need and filled it.

so my questions are.....

what could be a value for a site like this?
how easy or difficult is it to find cash buyers?
where would i go about looking for a real cash buyer?

if anyone has any real experience buying and selling websites like this i'd like to hear comments.

not to be rude, but i'm really not interested in armchair quarterbacks who read a book or have a degree or some other tripe....i would prefer to hear from anyone who has real experience in transactions like this..

thanks in advance.

[SumYungGuy]

i have another question....

i would prefer to not tell any buyer of the domain until necessary. this is because it's a pretty easy site to make. the value is in the unfound niche.

is it possible to sell a website subject to all the statements about the site being true with the cash held in escrow or something like that?

[LifeinAsia]

Short answer: "It depends."

Long answer: "The value is the actual amount that you can get someone to pay for it."

Some people will tell you 1x annual revenue. Others 2x or 5x, or even 10x. Others will tell you to be happy for .5x. But none of those matter unless you find someone who will actually give you those numbers.

One question I have is why would you want to sell it if it's such a cash cow? This is not being sarcastic- that is a legitimate question that a serious buyer would ask. Not many people would be willing to sell in a situation like this, so it raises a big red flag and you'll need to have an answer that satisfies potential buyers.

because it's a pretty easy site to make.

That in itself sounds like a huge devaluation.

is it possible to sell a website subject to all the statements about the site being true with the cash held in escrow or something like that?

What are the conditions of the escrow- can the person back out once he finds out what the site actually is? If not, would YOU buy something with conditions like that? (I know I certainly wouldn't.) If so, then coupled with the previous quote, it seems like a smart would-be buyer could back out as soon as he finds out the domain name and do it himself.

Disclaimer: I have not personally been involved in the selling of a web site, but I have been in business for 15+ years and have been involved with the valuations of businesses (or portions of a business), which is really what this is. The ridiculous valuations that people have bought into usually result from investors that get snookered into thinking they're going to get an easy return on their money, when they didn't really understand the business. For people who have to actually take over the business and do the work, the valuations are more realistic because they understand (or they should understand) what's required to keep the venture going (and growing).

[SumYungGuy]

yeah, ok i understand it's worth what someone will pay for it.

i guess the question is, are there real people out there who purchase websites that produce income?

as for, 'it's an easy site to make'...

expedia was an easy site to make also...so that's not really an issue. the value is that they were selling hotel reservations FIRST.

honestly, i wouldn't pay 7x or 10x earnings for an established website at all. i've always been a 'build it myself' guy.

but, that's why i'm asking here...are there really people that buy websites as investments? 7x or 10x or whatever?

as for 'why' i'm selling...that doesn't matter. it has nothing at all to do with the site itself or the future expectations of the site. everything i stated about the site is fact and my reasons for selling this 'cash cow' (if i decide to sell it) are my own.

but, then again...i did ask for opinions of actual webmasters who have actual experience buying and selling websites and that isn't you.

so, is there anyone out there that actually knows about this stuff?

i'll wait patiently for a reply for someone who has experience in these matters...

thanks.

[SumYungGuy]

and...to be honest...

i would completely understand if someone said that the site itself would remain confidential and the sale being subject to the facts being verified as true.

i was offered 12 million for website and business once....they went through everything, saw how much we were making and how we were making it...etc.

then, they reneged on the offer and 'did it themselves' using my business model. so, i'm pretty sure an honest purchaser would understand that condition.

[buckworks]

A few years ago I sold a website with an income in the range you're describing. The site itself would have been easy to duplicate. What the buyer wanted was its strong organic traffic ... much harder to duplicate.

FWIW, I did not put my site up for sale ... people in the niche noticed it and I started getting offers. The ultimate buyer was one of my affiliate merchants.

are there really people that buy websites as investments? 7x or 10x or whatever?

Such people do exist but they are very, very rare. Because the deals that would justify such a multiple are very, very rare.

I can't imagine any savvy investor being willing to purchase a pig-in-a-poke unnamed site for the kind of money you'd be hoping for. Even if you could prove the claims about past income, a potential buyer would need a high degree of confidence that the income would continue into the future. They'd want to investigate and judge every aspect of the site's web presence, and I don't see how that could be achieved without knowing what it is.

an honest purchaser would understand that condition

Yes, they'd understand but the very fact that you'd want such a condition would highlight the vulnerability of this investment and reduce what they'd be willing to pay.

If the site and business idea would really be so easy to duplicate as you fear, it's only a matter of time until someone tries. What are you doing to defend against that day? The site would be of more interest to potential buyers if you have a strong answer to that question.

[buckworks]

BTW SumYungGuy, welcome to Webmaster World! :)

[guggi2000]

@Buckworks which multiple did you get? Is it fair to assume an ROI of 4 years for organic traffic? How long was transition phase ?

[tangor]

There are folks who buy and sell anything. But most require a look at the horse first before putting any offers on the table. As outlined above, I doubt you'll find much interest.

What you ARE facing is the possibility that someone else will stumble on this same idea/niche and run with it before you have a chance to sell it by coy method instead of full presentation.

More importantly, have you copyrighted, trademarked, registered, or otherwise PROTECTED this site for whatever makes it special from infringers? Have you, or can you show,that you have successfully protected the property in the past?

Any site performing as indicated which has not taken those steps listed above is not serious (YMMV), but if those steps have been taken and are in the site portfolio then the selling points have advanced that much higher.

And yes, I've sold a few sites over the years, usually at 4.5 the documented last 24 month performance.

[guggi2000]

@tangor What means 4.5? Yearly income multiplied by 4.5?

[SumYungGuy]

@buckworks...

thanks for the reply.

i've been thinking that perhaps the companies making money on the other side of the affiliate links might be interested in it. they can't really duplicate it because they wouldn't have affiliates very long if they started doing that.

anyway....

do you mind if i ask what kind of a price you got for the site you sold?

[buckworks]

I'm not at liberty to discuss the price (non-disclosure agreement). I'll just have to smile mysteriously.

Yes, the people paying your commissions now might be some of your better prospects.

Being able to cut out your commissions might be very attractive to them. However, it might be hard for them to come up with a lump sum for the purchase. You might need to be wiling to negotiate some sort of installment arrangement. On the other hand, if you're taking payments over an extended time, you'd have to consider how that would compare with collecting income over time from just keeping the site.

Be sure you'd be making any such comparisons on the basis of after-tax dollars. Depending on the rules where you live, income from a sale might get different tax treatment than income from commissions.

My motivation for selling my cash cow was that if something happened to me, no one else in my family would know how to run the site. I used the proceeds to make other investments which they'd know what to do with.

[guggi2000]

@buckworks couldn't agree more.

However, in this case, selling a "cash cow" means an income of more than 4-5 years. No one would sell for a yearly income because something may happen. And if you add tax, it is usually better not to receive a large amout of money at once, but to spread it...

[tangor]

@tangor What means 4.5? Yearly income multiplied by 4.5?

The average of two years documented times 4.5

One site went for a bit more as there were copyrights/trademarks involved and those calculations were extended to the life of the trademark (another fifteen years) and signing over the trademark. Obviously a significant consideration was involved in that case.

[guggi2000]

@tangor Not entirely clear what "Average of two years" means.

Did you mean:
1. "yearly average" (total of 2 years divided by 2)
2. "total of two years" documented (and the word "average" referring to a longer period)

[SumYungGuy]

@buckworks...

thanks again for the reply.

your answer helped a lot.

[buckworks]

I'm glad to be of use!

If you haven't already, I'd strongly urge you to discuss this with your accountant. Get some professional analysis about what factors would make it a better deal for you (or not) to sell the site versus keeping it. Discuss the business risks both ways (especially those risks that would be internet-specific), the tax implications, what else you could do with the proceeds, inheritance issues, etc. etc..

If you decide to put out feelers with any of your affiliate merchants, your affiliate manager is probably not the place to start. Depending on how that person gets paid, he/she might be highly allergic to the idea of cutting out your commissions! Get contact info for the CEO or a senior executive who would (1) be motivated to consider a purchase, and (2) have decision-making power.

In the meantime, take Tangor's advice about making sure any and all trademarks are in good order. And think about a succession plan for what should happen to the site if something happened to you.

[SumYungGuy]

nope....no trademarks. i don't have any trademarks so i don't have to worry about that.

anyway - thanks.

[buckworks]

Best of luck! We'd love an update sometime down the road.