The Complete Guide To Website Valuation

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If you are looking to sell your website, the good news is that website valuation is really simple. Almost like child’s play. But the real task is in making sure that you sell your website for at least its minimum valuation. Even better if you can get the maximum fee or more.

Before we delve into the dynamics that are at play in making a killing selling a website (or websites), it is important to first understand the three basic website valuation methods. Once you get to grips with this, you’ll know how you can optimize for maximum profits. Let’s check out the methods.

Table of Contents

1. Asset Value

This approach is based on the premise that your website’s assets are, well, the real assets. Even if you are not generating much revenue, a buyer would still acquire your website because of the value of assets in the web business as a whole.
So which assets am I talking about? Website traffic, your mailing list, a community, even product inventory such as eBooks – these are things that can be leveraged to maximize earnings. Perhaps you are not using your assets to the maximal potential and someone else would be willing to take it to the next level. So through this method, your assets take precedence over earnings. That’s not to say that your earnings will be irrelevant – if anything, they’ll be an indication of your site’s potential.

2. Comparable sales

When selling your website, you and buyer may decide to base pricing on the sales data of similar websites. If you can find records of websites sold in the past, websites that in many ways are similar to yours, then you can use that as a pricing guide.
Through this method, you can be pretty sure that you’re not getting a raw deal, while the buyer would be safe in the knowledge that they are investing the right kind of money in your website.

3. Revenue multiple

This is by far the most common and probably most accurate way of valuing a website. The math is simple: the value of your website is 12 to 36 times its monthly earnings, or 1 to 3 times its annual earnings.
For instance, a website that turns in $5,000 a month in profits (profits, mark you; not revenue) will be valued at $60,000 to $180,000. That looks like a tidy sum, doesn’t it? Well the truth is, without the right selling strategy, you could still get far less than that. Or, you can get the whole round figure of $180,000 – it all depends on how much the buyer is willing to pay. That in turn depends on how much growth potential your site’s got, along with many other factors.

What factors determine the value of a website?

As we’ve just pointed out, your site has to have great potential for growth if you are to get the maximum price for it. And its income must be steady of course.

Here’s the whole list of things that are involved in website valuation:

Traffic – it’s really a no-brainer: the more traffic your website receives, the higher your income potential. For traffic, you must invest a significant amount of effort in website promotional activities, then over time, rank well in the search engines.

Earnings – many buyers value your website purely on its earnings. So it would be a nice idea to concentrate on increasing your earnings over time so that its valuation goes up.

Revenue models – more revenue models means more income streams flowing into your account. If you’re into a combination of affiliate marketing, advertising, lead generation, product sales and more, then your income must be really good.

Brand – you can create a strong brand value if you really dedicate your time and effort. A strong brand value can be the difference between a big-time deal and a modest deal.

Systems – if your site has automated systems in place, then it becomes more appealing for buyers. For instance, there should be less administrative work involved, and even better if the effort needed to maintain income is minimal.

A USP – what sets your site apart? Is it another run-of-the mill content mill, without a unique selling proposition?

In the end, website valuation boils down to two things – profits and assets. The higher and steadier the income, and the higher the value of your assets, the more money you can expect. When you decide to sell your website, just remember all those things you can do to dramatically increase its value.

Joseph writes for valuator.com.au– click here to get more info from their complete guide to web business valuations.

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