6 ms·

Someone wants to buy my site, how can I value it?

51 points by anonymous42 18y ago

In the interest of anonymity I would prefer not to reveal my real username. I have a site that does about a 150,000 pageviews and 5,000 uniques a day. It is profitable, making about $50,000 a year, not from adverts. The average pageviews per visit is over 30. At the current growth trend I would expect it to be making over $150,000 in a couple years. It is also an influential site for its niche, market leader in its own right. It comes top of google for any keywords pertaining to the market it targets. What do you think is a good price?

smoody 18y ago
I can't give you a figure, but I do encourage you to consider not only your current traffic figures, but also potential traffic figures that will result from your site being introduced to the acquirer's user base, if that makes sense in your scenario. If they get 10x more pageviews and uniques a day and they give you a prominent position on their site, your traffic could instantly double. I guess what I'm saying is that the synergy that comes from an acquisition (or any strategic relationship) can sometimes have a value all its own. And there's almost always an emotional component to consider that supersedes spreadsheet models. If you enjoy running the site, then it might be worth more to you than if you don't. Best of luck!
- anonymous42 18y ago
  That emotional attachment exists, I made this from scratch, and watched it grow over time.
  - tjic 18y ago
    Irrelevant. The site is worth whatever it is worth to the acquirer. Once you figure out that number, you decide if you want to sell it at that price or not. Until you get to that point, don't bother thinking about the emotional attachment. Also, if you get a pile of money, you'll go on and do something fun with it (a whole new project?). You'll establish an emotional attachment to that project too.
    - MoeDrippins 18y ago
      Exactly. It's worth only what someone is willing to pay. It might be worth more to you, but if it is, you simply don't sell it.
steveplace 18y ago
Since you do have money coming in and an expectation of what your growth will be, you can run a discounted cash flow model to get a price.
- rshao 18y ago
  This is as much for my knowledge as the original poster, but what discount rate would you use? He doesn't exactly have a beta to do Weighted Average Cost of Capital with, or am I totally missing something?
  - incomethax 18y ago
    I've always estimated the discount rate based on the expectations for growth from the buyer. At the end of the day, the valuation on a site or business is simply whatever you can get for it. A site might be worth more to a buyer who sells a similar product whereas it might have less value to someone in another industry.
  - steveplace 18y ago
    Dunno. I'm pretty sure there's some magic numbers out there for certain industries. I think it's one of those variables you argue about during negotiations.
swombat 18y ago
Do you want to sell it? If you're passionate about it, which I imagine you are, to get that successful, then perhaps not... If you don't want to sell it, I would do one of two things: a) Start with a very high estimate and work your way down from there. Who knows, maybe they'll bite, in which case you can take a long holiday in the middle of this recession. b) Let them come up with a figure, then ask them for double that. After all, they approached you, so you can apply a bit of pressure.
blurry 18y ago
I am in a similar situation right now, and one of the things that we came up with is an upfront payment with additional dollars down the road pegged to revenue growth. To clarify, I am not suggesting lowering your sell price but rather getting the buyer to commit to more dollars on top of your discounted cash flow figure. One more minor advice is to negotiate a consulting fee for yourself. Clearly, you've been doing something right and the buyer will want that. I've heard of people getting significant ongoing $$ that way. Best of luck and congrats.
- chmike 18y ago
  Be careful with this method. I've heard a story of a German entrepreneur who built a valuable business around a web service and was bought. He wanted more money than the buyer could give so they agree that he would get a significant amount of the value as shares. There was much more share value than money because the seller was confident in the business model. Then the bubble 2000 exploded and the shares lost all their value. But wait, the worst is yet to come. The next year the IRS claimed the taxes on the transaction and refused to take in account the loss of share value. SOo the seller had to borrow to pay the IRS and pays it back by working for the buyer ! The lesson I learned is to think twice in getting payed with shares or revenue promise. Today the economy is really uncertain, so watch out for this kind of accident. It also depends on the business and the expected long term stability of your business. Today I would prefer a sound business instead of a big pack of money. I wouldn't know how to secure it.
  - blurry 18y ago
    Dude, have you read my comment at all before posting your random story of the day? I made sure to stress I mean dollars. I made sure to stress I mean dollars on top of a firm sale price. Seriously, which part of my post said shares to you?
    - chmike 18y ago
      It is not a random comment and I did read your comment. You wrote "additional dollars down the road pegged to revenue growth" and I referred to revenue promises. If it doesn't correspond to the plan you exposed, it is along the line, just a bit further away with the same logic. Ok, I shouldn't have post it as a reply to your comment. Sorry.
tortilla 18y ago
With any situation, it depends, but great article here: http://www.wrevenue.com/2007/10/24/selling-a-web-business/ http://www.wrevenue.com/2007/10/24/selling-a-web-business/
- anonymous42 18y ago
  Thanks, thats a good resource, though it seems more set on how to do the transaction rather than offering advice on a valuation.
shimon 18y ago
You should probably try to get some competitive bids. If you have trustworthy contacts with any of your potential acquirer's competitors, call them and say "hey, I got this offer from FooCorp and I haven't really thought much about selling the site, but it's not a bad offer and I'm wondering if you guys might be interested" and see what they say. Don't expect a binding offer right away, but see if you can get some idea of what a few other potential acquirers might be able to pay, or if they make jokes like "I couldn't acquire a pair of shoes right now." Consider seriously that this is not a great time for acquisitions. Companies want to reassure investors and lenders that they have a safe amount of operating cash on hand, and any significant expenditures will be scrutinized today in a way that they would not have been a year ago. One guy I know who sold a moderately sized website a year ago at a price that made him quite happy thinks he'd only be able to get one sixth of that price today, if he could find a buyer at all. If you are happy continuing to work on the site for a few years, and your revenue projections are reasonable, you might want to hold on to it and see if things improve.
trickjarrett 18y ago
Your website is a business. While most business brokers are focused in physical assets you should be able to find ones which can evaluate your business and give you a value for it. If you want to, they can even handle the sale, to protect you and help the sale along. The negative is of course that they take a share of the transaction, and the other buyer may hire his own broker.
mdasen 18y ago
So, there are a few things to consider. First, how much work will the new owner need to put into it? $15,000 worth of work per year? Remember $10k only pays for about 5-6 hours of work per week. Second, how likely is it that someone can de-seat your site? That makes it much less likely that the site is worth so much. Third, would a competitor, given a decade, be able to build what you have built with relative ease? This is key to how long you would run a regression. So, if you assume that the site is good for 12 years, a simple regression would give you about $200k as a valuation. BUT, that assumes they won't need more than 5 or 6 hours a week of work on the site. AND it assumes that it can't be easily built by a competitor. AND it assumes your site will stay that profitable (which is usually true in something like real estate, but not in technology which is constantly changing). Even if you think the site will stay relative for the next 25 years, it's value wouldn't top $300k simply because future dollars aren't worth as much as present dollars in a net present value calculation since there is an opportunity cost to tieing up your money. However, your site may be growing. In that case, it might be worth more. So, if your site needs a full-time programmer, it's worthless. I mean, it's worth something to you because it can be your income. However, it's not worth anything to an owner since they'd be paying all of the income to a programmer (yes, even if that's themselves since they aren't getting the site for free). So, it's really dependent on how much work goes into keeping it alive/competitive. This might be your job/income. That's good for you, but worthless to an owner purchasing it. If it requires about an hour of work a week to keep it competitive and it will be that way for a decade, it's probably worth north of $200k.
- edb 18y ago
  So, if your site needs a full-time programmer, it's worthless. I mean, it's worth something to you because it can be your income. However, it's not worth anything to an owner since they'd be paying all of the income to a programmer (yes, even if that's themselves since they aren't getting the site for free). I think this is false. If the buyer is able to run the site without hiring a programmer then the site provides a valuable income for the buyer. That income is a reward that could make the buy price worth it for the buyer, since the buyer will save the salary of the employee, no? I think when selling a web site or web application, it's important to choose a buyer that will know how to draw value from it, instead of squander its profits on employees that will do the work that the owner should be doing.
wmeredith 18y ago
I sold a blog with about 1 million pageviews per month and a monthly income of about $1100/month. I valued it at two years income + 1/2 of projected growth income over the same two year period.
- matt1 18y ago
  What type of business entity (LLC, S Corp, etc) was your company when you were approched, if anything?
- PStamatiou 18y ago
  wow that seems pretty cheap actually. As an example, unnamed friend got a $40k offer on his blog that had 100k pviews/month and very little monthly income. He just had a passionate following and a decent pagerank.
  - electromagnetic 18y ago
    A passionate following is much more important than a high unique visitor count. I mean look at yahoo, it has (had?) the highest unique visitor count on the entire internet, didn't stop them sacking 1500 workers.
mixmax 18y ago
You could try to look at some of the often cited terms from public companies and try to see how you compare. For instance, a publicly traded company in your sector might be valued at a p/e ratio of 10 ( p= price, e = earnings). If your yearly earnings are $50.000 then your company would have a valuation of $500.000.
- laut 18y ago
  Apple, a growth company, is at a P/E of about 18. The historical average is about 20. Growth companies (like Apple) were at 30-40+ recently.
- dejb 18y ago
  Remember that earnings is income minus expenses. So this includes the cost of maintaining the site. If it is a full time job then the buyer would be purchasing a 50K job. Also generally smaller companies go for lesser multiples than larger companies. It really depends on how much time and attention the owner has to put into it. In the case of a publicly traded company that is close to zero for shareholders (unless you own Yahoo). But for a small business you'll have to keep an eye on things even if you do hire a general manager.
  - anonymous42 18y ago
    It's a one man show at the moment, and I only need 10 minutes a day for administration. There is programming involved, but the app has a lot of features and is bug free, just sometimes I will add an extra feature or two when I'm bored.
pierrefar 18y ago
"What do you think is a good price?" How much is the buyer willing to pay? To rephrase, what value is the site to them? Will your site solve a real problem for them or not? And once you find out their valuation, what value is the site to you? Is your personal valuation higher than theirs? Don't sell. If your valuation is lower, then sell.
deleted 18y ago
[deleted]
epi0Bauqu 18y ago
How much are they willing to pay? That's what you need to find out.
- skmurphy 18y ago
  And what is their motivation--their theory of value? Is there synergy that they can exploit with other products or web properties? You can set a price you want because you can manage the property as is from your description of the situation. So you can be patient. If there isn't synergy and you have determined you want to sell I would pro-actively approach other firms that might be willing to pay more than a pure discounted cash flow model valuation based on synergy. For example, if you have a community of chocolate lovers, Hersheys or Mars might be willing to pay more than a media company that would just see incremental revenue.
Jasber 18y ago
First and foremost 30 pageviews per visit is amazing. That's a bounce rate of about 3% which is nearly unheard of (porn site? :)). Asking for 2 years of income is a good general rule. Also factor in growth rates over the next 2 years. Estimate growth based on past growth, not on "well I have this new feature that should double traffic. Factor in any assets you may have, this includes but is not limited to: - Newsletter subscribers - RSS Subscribers - High search engine rankings - Good domain name - Industry leader Think about the sentimental attachment. This is worth something, figure out your price. Finally forget about the lump sum of money. Its sexy to think about a big pile of cash, but you have something in your hands that is making a consistent profit. Think in 2 years if you'll still be happy with this decision. Take this advice from someone whose sold a website that has seen enormous growth since I sold it. Its amazing to see something you've made become huge, but also a little sad thinking it could still be yours. Good luck, you're in a good position. A buyer approaching you means you have something they really want. Don't forget that!
- anonymous42 18y ago
  No it's not a porn site :) These are the google analytics stats: 33.80 Pages/Visit 12.81% Bounce Rate 00:14:12 Avg. Time on Site 22.26% % New Visits 77% Returning visits From your asset list, the last three (High search engine rankings - Good domain name - Industry leader) are true, the first two (RSS/newsletter) don't really apply.
socratees 18y ago
I googled, and found this site. http://www.websiteoutlook.com/ http://www.websiteoutlook.com/ It has pretty interesting information about any site that you want to check. It gives information such as daily page views, and avg daily revenue. Should be atleast helpful.
- astrec 18y ago
  I ran it for our two primary sites - one returned $5.5m, the other $500k - only ~$800m short!!
petercooper 18y ago
It's next to impossible to be anywhere near accurate without knowing the topic of the site, its niche in the topic, etc. But.. based on the profit alone (assuming that profit takes into account the costs of continual content development - if required) $150k would be a bare minimum IMHO. Since the "growth trend" probably relies on you and your plan somewhat, a purchaser is not going to be so interested in those speculative numbers.
wastedbrains 18y ago
I sold a site doing 4,500 uniques a day, but a much lower page views and incoming profit for about 2.25 X yearly revenue. It was a good call on selling as the sites growth was starting to stall.
curiousgeorge 18y ago
Don't sell it. Move to Thailand and manage it from there. You'll save money and have a better life. Seriously.
louislouis 18y ago
just wondering, how old is the site? Is the income from membership sales?
- anonymous42 18y ago
  Yes, and it's about 2 years old.
markessien 18y ago
Be careful - sometimes people make offers to find out how viable your niche is as a business, get some inside numbers as part of their competition analysis.
dejb 18y ago
Take a look at the sitepoint marketplace - http://marketplace.sitepoint.com/ http://marketplace.sitepoint.com/ There should some comparable sites that have sold there. Remember also that the people who want to buy your site approached you so they obviously have a plan that should make it worth more to them than the typical marketplace buyer. The probably believe they could triple your earnings easily. If in the course of negotiations you find things aren't going well you can suggest that it might be better for you to put the site on the open marketplace. If they baulk at that then they are obviously pretty keen.
pjspereira 18y ago
I've heard two independent VCs mention 3-5 times current revenue as a reasonable figure for start-ups, but with this bleak economic outlook, who knows.
- anonymous42 18y ago
  Although this was a start up, I think it has past that stage.
helveticaman 18y ago
Net present value. http://en.wikipedia.org/wiki/Net_present_value http://en.wikipedia.org/wiki/Net_present_value
petervandijck 18y ago
Don't sell it. If you have income coming in with little work, and it's growing, WHY would you ever want to sell it? If you do have a good reason to sell, figure out you minimum (say, 250,000$), and ask for triple that. Also remember you'll be paying lots of taxes on whatever you get. So again, if it's really that easy to run, and it makes that money, just keep it. You can retire then, not even 1,000,000$ can compete with that.
- anonymous42 18y ago
  Are you sure? A 5% bank interest on a million dollars would be the same as the 50k it's making right now.
petervandijck 18y ago
Oh, and also: do NOT give them a price. Ask them: what are you willing to pay (after you figure out your price in your own head). NEVER give them a price. Once they say: "We'll pay 100,000" (let's say your minimum is 200,000), just play it hard and say no. And then argue your case.