This guest post is by Jock Purtle of brokercorp.com.
If you are selling your blog, the first thing you will want to know is how much it is worth. You type into Google is something like “what is my website worth?” What you will get is a whole lot of free website valuation tools. If you use something like www.mywebsiteworth.com and type in “google.com” you get an arbitrary value of 1 billion dollars.
Now we all know these tools are can’t be right. So we might then type into Google “what factors determine a website’s value?” and when we collate all the information. we are going to get a long list of different things to look for when valuing a website. Things like domain age, PageRank, Google rankings, and so on.
But what these articles fail to identify is the single most important factor in valuing a website, and that is the future maintainable earnings of the site.
What needs to be understood is that the assets of the business are only indicators of future maintainable earnings, and do not add any extra value to the site. Value is determined by whether the site will make money in the future, and what level of risk the potential buyer is willing to take.
Let’s take the example of company A and company B. Each company has the same income and same net profit for the year. However, as we will find, their value differs completely.
The market has a strong opinion on what a site is worth. Buyers are looking for a good return on investment and the value is based on what they are willing to pay. That is why valuation is really only educated guess-work about what a site will sell for.
From the above example you may think that your blog meets all the criteria of company B, but that doesn’t mean that you are going to sell it for that amount.
The reason company B is deemed more valuable is because, from the information available, the site looks like it will continue to increase in revenue every year and there is a lower risk that the site will fail. Thus there is less risk for a potential buyer, and they would be willing to pay more to acquire it.
The table represents a rule of thumb that you can apply to any website. The factors listed represent the variables that should be considered in any valuation. There may be some outlying factors that skew the data if either site were to be purchased and that is why true valuation is only represented by the final sale price and the money has been exchanged.
The risk a buyer is willing to take in purchasing a website will determine the multiple of earnings that they’re willing to pay.
The general rule you will find in valuation follows something like this:
Net Income x Some Multiplier = Your Website Value
Here is a breakdown of those two factors.
Net income is represented by a company’s total profit for the year and is calculated by taking revenues and adjusting for the cost of doing business, depreciation, interest, taxes and other expenses, or in accounting speak, EBITDA (earning before interest tax, depreciation, and amortization).
A web business normally doesn’t have the usual expenses that an offline business has, like rent, office space, and so on, and this is reflected in the financials.
A simple multiplier will be based on an expected Rate of Return. This is used to calculate the final sale price and is reflective of the risk that the purchaser is willing to take.
Consider these multipliers:
12 times Monthly Multiple = 100% return (your money back in one year)24 time Monthly Multiple = 50% return (your money back in two years)36 times Monthly Multiple = 33% return (your money back in three years).You are beginning to see why Internet businesses are a good investment. With low staff and expenses and less hassle than a traditional business, they can offer much better value than putting your money in the bank and getting 1-5% interest.
“But what about the value of my domain, and the rankings in Google, and the cost of the web development? Why isn’t that included in the site?” you may be thinking.
Unfortunately, the market doesn’t look at your site as a sum of all its parts. So even if you site cost you $15k to develop, and the domain cost $12k, if it only makes $10k per year, you are only likely to get $10k—$30k for the site, even though it cost you $27k to develop.
The assets of the business (content, rankings, domain, and so on) add no more value than what has already been calculated. The assets of the business simply form the structure for its revenue-generating capabilities.
It is important to understand this principle when valuing your site. Even though it might have cost you $27k to get the site up and running, your blog is no more valuable than the income a potential buyer can see the site making in the future.
Have you had your blog valued? Tell us about your experiences in the comments.
Jock Purtle is a Senior Broker at Brokercorp.com. They are a full-service website brokerage specializing in website sales and acquisitions. Jock is currently offering a free website valuation at http://brokercorp.com/sell/.









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As part of my weekly contribution here, I will be starting a series where I will be reviewing some great tools I think bloggers should use every once in a while. Every resource I review will be free, and will also be something I personally like and think deserves a review.




In order to find the latest and great themes and plugins for my blog
Use Twitter blog search tools to find people who are talking about topics related to your blog. Though the content doesn’t have to be “new” to be worth commenting on, new posts are usually better to target as comments on such posts are more likely to be read, both by the site’s owner and by its readers.
Wall Street Journal is saying that Google might have a part to play in an emerging takeover bid for Yahoo.
the Washington Post talks about inappropriate content finding its way into mobile apps that are geared towards children. Violent and suggestive content are the culprits here and parents are complaining they don’t have any real way to monitor what their kids are exposed to.





