For a buyer or seller, determining the value of his or her website and online business is a very difficult task. The owner can try some calculations to figure out the value themselves. However when you try to figure out the value it isn’t an easy task. The questions remain, how do you find the value of an existing business?
So here are some tips on how you can successfully value and sell your website.
This method uses the sales figure as a way to value the business. There are business specific multipliers that you can use to multiply with the annual sales figure that can get you to a selling price.
In this method the sale price of the business can be found by how the business can generate a stream of cash flow or profit. Projecting the revenue over 5 years or longer a business evaluator can use this figure to find the net worth of the business. Interest rates will also be a part of this because the profits are projected.
Most buyers consider the net revenue made by the website annually plus some percentage higher than this amount. At the core of the valuation process, the seller needs to determine the net revenue of the website. To arrive at the net profit of the online business requires subtracting all the expenses incurred in the course of running the business (like hosting, marketing, banners, affiliation system, etc.) from the total revenues made.
It is recommended that this calculation is based on a 12-month period. After determining the net revenue per year, the seller may select a multiplier value. For well-established websites, the value may be between 1.5x to 3x. Suppose for example a website’s annual net revenue amounts to $50,000; a buyer may multiply with 2x and give an offer of $100,000 as the buying price for the online business. In addition there are several other issues that the buyer may consider such as any risks that the website maybe facing. In order to ascertain the risks faced by a website, a number of factors are considered such as: increasing growth, stable incomes, automated system, traffic streams and quality, diversified revenue streams.
Generally speaking, there are many different ways in which online businesses can be valued. For some businesses, the assets the websites own such as a rich customer list (database) may be appealing to potential buyers who may have innovative ways of using this asset, and therefore may value the website based on these assets. Other buyers could employ a comparable sales method to value the website or they should consider the revenues of the website and identify a multiple based on strengths and weaknesses of the website.
- Sales and Profit numbers and trends
- Traffic numbers and trends
- Age of the business
- Domain name value
- Industry sector trends and outlook
- Business growth potential
- Proprietary or non-proprietary products
- Unique content
- Inventory count (if applicable)
- Advertising methods and costs
- Personnel expertise needed to operate the business
- Seller financing
- Non-compete terms
For those who think that you cannot make money online or much money from selling websites, here is a list of websites that where successfully sold and for a large sum of value:
Bought by Microsoft for $6,333,000,000
Bought by Yahoo! for $5,700,000,000
Bought by Yahoo! for $3,600,000,000
Bought by Google for $1,650,000,000
Bought by Yahoo! for $1,630,000,000
Bought by AOL for $850,000,000
Bought by Microsoft for $800,000,000
Bought by Disney for $700,000,000
Bought by Yahoo! for $680,000,000
Bought by WPP for $649,000,000
Bought by Google for $625,000,000
Bought by News Corp for $580,000,000
Bought by Penthouse Media Group for $500,000,000
Bought by ValueClick for $352,000,000
Bought by Yahoo! for $350,000,000
Bought by R.H. Donnelley for $345,000,000
Bought by Yahoo! for $300,000,000
Bought by Amazon for $300,000,000
Bought by CBS for $280,000,000
Bought by AOL for $275,000,000
After you have determined the value of your online business, you may want to know “how can I sell my website or online business?”
It’s important to find a reputable company that is professional.
Joel Brown is the CEO and Founder of Addicted2Success.com. With a long time passion for Entrepreneurship, Self development & Success, Joel started his website with the intention of educating and inspiring likeminded people all over the world to always strive for success no matter what their circumstances. Joel’s passion for what he does shows through the continual growth of Addicted2Success.com's online community. Follow Joel Brown on Twitter or keep upto date with him on Facebook: https://www.facebook.com/joelbrownA2S
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