Estimate Value Of Website
So today I messed around with trying to find a site to evaluate the true value of a website. I found several different tools to help calculate this value. What I found is that these tools are nice in theory, but there are just too many factors that are not being taken into consideration on each tool that I tried. This makes for a very bad or inaccurate estimate on the value of the site.
Other than the tools, I found a couple of formulas that seem to beat out each tool that I tried. The basic info that I found to be the most helpful and correct in determining value was to take an average of the last three years profit and multiply that number by 3. So for example, let's say your average profit for the past three years was $31,000 per year. Your business or website's potential value is $93,000. A potential investor could make their money back in about 3 years, or most likely sooner if the business is improved and 'tweaked' to perfection.
Another few sources use the average profit multiplied by 2.5, or even up to ten times (10X) the gross profit! Check out this site for a few examples: Entrepreneurs-Journey. This site contains a very good article, as well as several good points about before, during, and after the sale of your website. It talks about additional things to consider such as web hosting, training the new owners, the financial transaction ( I recommend Escrow.com), and other information about the website sale.
Evaluating the value of a website that actually makes profit is similar to evaluating the price of a brick and mortar business. Cash flow and profit are the most important things. Nobody wants to buy a business in debt or without positive cash-flow. People want to buy a business that works. Of course, who would want to buy a job?
I found myself determining the value of one of my websites today for a potential buyer and in the process discovered a few things. One of those things is that I found that I am more emotionally attached to that website than I ever realized. While the money is enticing, it is hard to put a monetary value on the blood, sweat, and tears put into something. But sometimes you have to know when to let go and the time seems right for me on this particular site that I'm talking about. Sorry for being so cryptic here, I just want to keep the identity of the site I'm referring to hush-hush for now.
Those so-called website evaluation tools that I found are mainly based on Alexa rank and back-links, but take into consideration sales from products or ebooks, or anything like ad revenue from Google Adsense. This flaw provides for huge discrepancies in either under-valuing or over-valuing websites. But, they can be fun tools to mess with.
If you are trying to discover the true value of a website, you need to crunch the numbers yourself and you need to cold hard facts to do so. Even that formula is slightly flawed, especially when using the prior two years numbers when the economy has gone down so much. I expect the sales for next few years to climb back up and beyond they were back in 2006 & 2007. If you need help determining the value of a website, feel free to contact us.
Scott
Pensacola Website Design
Other than the tools, I found a couple of formulas that seem to beat out each tool that I tried. The basic info that I found to be the most helpful and correct in determining value was to take an average of the last three years profit and multiply that number by 3. So for example, let's say your average profit for the past three years was $31,000 per year. Your business or website's potential value is $93,000. A potential investor could make their money back in about 3 years, or most likely sooner if the business is improved and 'tweaked' to perfection.
Another few sources use the average profit multiplied by 2.5, or even up to ten times (10X) the gross profit! Check out this site for a few examples: Entrepreneurs-Journey. This site contains a very good article, as well as several good points about before, during, and after the sale of your website. It talks about additional things to consider such as web hosting, training the new owners, the financial transaction ( I recommend Escrow.com), and other information about the website sale.
Evaluating the value of a website that actually makes profit is similar to evaluating the price of a brick and mortar business. Cash flow and profit are the most important things. Nobody wants to buy a business in debt or without positive cash-flow. People want to buy a business that works. Of course, who would want to buy a job?
I found myself determining the value of one of my websites today for a potential buyer and in the process discovered a few things. One of those things is that I found that I am more emotionally attached to that website than I ever realized. While the money is enticing, it is hard to put a monetary value on the blood, sweat, and tears put into something. But sometimes you have to know when to let go and the time seems right for me on this particular site that I'm talking about. Sorry for being so cryptic here, I just want to keep the identity of the site I'm referring to hush-hush for now.
Those so-called website evaluation tools that I found are mainly based on Alexa rank and back-links, but take into consideration sales from products or ebooks, or anything like ad revenue from Google Adsense. This flaw provides for huge discrepancies in either under-valuing or over-valuing websites. But, they can be fun tools to mess with.
If you are trying to discover the true value of a website, you need to crunch the numbers yourself and you need to cold hard facts to do so. Even that formula is slightly flawed, especially when using the prior two years numbers when the economy has gone down so much. I expect the sales for next few years to climb back up and beyond they were back in 2006 & 2007. If you need help determining the value of a website, feel free to contact us.
Scott
Pensacola Website Design
posted by Fritz and Scott at
8:44 PM
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