A Practical Strategy to Increase the Value of Your Blog

This guest post is by Sunil of the Extra Money Blog.

Not long ago I wrote about determining the value of your website or blog here on problogger.net. Now that you know how a web property is or can be valued in the free market, in this article I want to discuss a practical strategy you can apply to increase the valuation of your web property.

The value of a website or blog, or any other business for that matter, is derived from its earnings or free cash flows before interest, taxes, depreciation and amortization—a term referred to as EBITDA in the professional sector.

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Therefore a web property’s value is predicated on its earnings, multiplied by a factor X called an earnings multiplier that is derived from similar transactions in the recent past. 

For example, if a similar blog sold for four times its earnings couple months ago, there is a good chance you can count on a similar multiple when putting a value on your web property.

What do I know about website valuations? For starters, I sold an ecommerce website in 2007 for $250,000 to one of the top power sellers on Ebay at the time. Since then I have sold several niche websites for five figure cash out deals.

If valuations are based on earnings, it is obvious that earnings must increase if the value of your web property is to increase. Many online entrepreneurs take their time growing their web property organically, often on their own due to funding restrictions.

However, once the web property starts generating a little bit of money, one of the best investments you can make to increase its value is by reinvesting those earnings right back into the business.

For example, let’s assume you have a niche website that has 30 pages, each of which brings in $1 a day, roughly on average, from Google Adsense. If you took your earnings and invested in 30 freelance articles, you can hypothetically double the earnings from your website.

Let’s walk through this example with numbers. A 30-page website generating a dollar per page per day generates a total of $30 per page per month. $30 per page per month multiplied by 30 pages gives you a monthly income of $900.  If you took the $900, or one month’s earnings, and invested it in 30 high-quality articles at $30 each, you would now have a total of 60 articles. 60 articles generating $1 each per day equates to an income of $60 per day, or $1,800 per month, which is double of the initial $900 you were making.

Now here is a question: since your income has now increased by $900 per month, or $10,800 per year, has the value of your web property also increased by that amount as well?

No it has not.

It has increased even more.

Let’s have a look at the reasons why. $900 generated per month equates to $10,800 per year. If you were to sell this web property at an earnings multiple of four, you could expect to get $43,200 for it. However, your web property now generates $1,800 per month, or $21,600 per year. At the same earnings multiple of four, we are looking at a valuation of $86,400, which is not just $10,800 more, but double the initial $43,200 valuation.

The math reads pretty simply. Assuming the same multiple is in place, double your earnings and it will double your valuation. This example is very simplistic in that it assumes no operating expenses, stable multiples, certain Adsense earnings correlations, etc.

Even though it’s not always quite this easy, or simplistic in nature, don’t get fixated on the facts. Instead, keep the general concept in mind. 

A web property may never grow, or may grow slowly if you were to work on it on your own, but hiring outside help can boost your earnings in the short-term and pay large dividends down the road if and when you sell your web property.

What do you think of this method of increasing the valuation of your business? Do you have additional tips or strategies that you can share with us?

Sunil owns over a dozen profitable niche websites and is the author of “How to Go from $0 to $1,000 a month in Passive and Residual Income in Under 180 Days All in Your Spare Time“, a FREE report you can download instantly from his Extra Money Blog, where he discusses how to create multiple streams of passive and residual income, entrepreneurship, internet marketing, blogging and personal finance.

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What is your Blog worth? How to set the properties of the Web of the value

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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