This guest post is by Extra money-Blogof Sunil.
I have an e-commerce Web site sold for $ 250,000 and several other niche websites for a five-figure price tag. I want to share with you a valuation method that you can use to put a price on your Web property today.
Or a website owner or a blogger starts with the original purpose of the sale of their site on a day, it is my belief that every successful blog owner at some point has been thinking about the potential of selling their web real estate. At least they will have wondered how much their web property is worth — especially when it starts to generate a decent amount of money.
Copyright Jakub Krechowicz-Fotolia, I think almost no one fact comIn. think about a sale if an exit strategy when they first start. It is usually a passion, hobby, or anything other than a potential sale that motivates a person getting started making money online — unless of course they have an online business from day one, such as an e-commerce Web site, run.When a Web site is profitable, it has the potential to be marketable. You can intentionally sell considering either due to boredom, because you have found a better alternative use of your time, because of the potential use of the financial income, or various other reasons.
If so, do you know what your website is worth?
When a Web property starts to generate profit, income-producing asset, is a like a rental property or a small business. Just as a property and businesses are valued and sold on the open market, can also be a website or blog. Therefore, it is not much different from the measurement of other assets income-producing appreciation a Web property.
The quantitative aspect of appreciation is not rocket science, in my opinion. You take a site's current revenue and expenditure, find out what the net cash flows are, and then a value based on a profit-multiplier project.
The net profit, or cash flows, is often called EBITDA in the corporate world. That means: profit before interest, taxes, depreciation and amortization. The multiplier is applied to this number to come up with a value, or a price, for the property.
Income and expenditure are what they are: they are not in no way subjective. But where do you get a profit multiplier of? Recent sales of similar websites with you to get an idea of what sort of multiplier was paid for each evaluation. This number is larger in stronger economic times, and smaller in weaker economic times such as we in today.
There is no default multiplier, however. Similar to real estate, and figures for sales, large hands of recent blog. But if not, the value of your website is only as much as someone else is willing to offer for it. Of course you have the option not to sell for what you would feel a low-ball offer is.
One more thing to consider is whether the Web site is monetized as it can today. Is there opportunity to add more private ads to the sidebar, and more profit based on residual, for example? A buyer would definitely evaluate this potential monetization and the factor in their purchase decision.
Here is where the subjectivity in blog appreciation comes into play. An active business sold at a profit multiplier of two may not be similar to a passive holding of the same size, because a passive company much less effort to manage and support. Consider how much cost and effort the owner of the web property to invest in the business will have to generate a dollar in profit passive. Then ask how this compares with an active business.
Factors such as effort, operational cost structure, long-term sustainability by relevance and prospects all play an important role in determining what the reasonable value of a property of certain web should be. At the end of the day, none of this exact science, but these are a number of ways to achieve a legitimate or rational price.
For example, nobody knew the scalability of Google or LinkedIn in the long term. In fact, no one knows today. The market had a certain estimate (multiplier) is set to the time that any company that went public, and has another one of today. There is probably still a by the time you finish reading and commenting on this post. Expect the multiplier in order to evolve, especially in an ever-changing and dynamic industry such as this.
When I was initially asked to a Ebay PowerSeller potential sell my e-commerce company, the company was generating about $ 60,000 annually in profit. After weeks of discussion back and forth, we settled on a retail price of just under $ 250,000, or about four times the annual profit of $ 60,000.
The quantitative part of the deal was simple. The qualitative piece is what dragged from the negotiations. The seller of the power had previously purchased a similar e-commerce company profit on a multiple of three. She had paid $ 90,000 for a company that is generating $ 30,000 in annual profit. However, I was not willing to accept a price of $ 180,000, which was three times the annual profit of my site. Further, my company showed a consistent upward trend in terms of Web traffic, customer acquisition, sales and profits. This qualitative measures needed to be "fried" in on the deal for the viable for me. I was able to convince the purchaser of that, and we sealed the deal on four times the annual profits.
The most important lesson here is that although acquisitions strictly based on profit multiples sound good in theory, they rarely works from practical, or on my level and at the level of the Fortune 500. Our repeated attempts to narrow down the nature of deal to a pure science have never worked, and probably not in the future. Valuations, dependent although driven mostly by the underlying strong financials, of qualitative aspects that subjective and unique for each buyer and seller.
What do you think of this valuation method? You have no alternatives to share? This Is a fair way to the value of your Web property? I'd love to hear your thoughts in the comments.
If you want to be brave bold and open your kimono for me and fellow readers: what do you think is worth your web property in the open market, today this costing method used?
Sunil holds more than a dozen profitable niche websites and is the author of How to Go from $ 0 to $ 1,000 a month in passive residual income in under 180 days all in your free time, a free report you are directly Extra money Blog can download's, where he discusses creating multiple streams of passive and residual income, entrepreneurship, internet marketing, blogging and personal finance.
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