Someone wants to buy my site, how can I value it?
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?
50 comments
[ 4.1 ms ] story [ 92.5 ms ] threadI 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!
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.
It might be worth more to you, but if it is, you simply don't sell it.
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.
http://www.wrevenue.com/2007/10/24/selling-a-web-business/
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.
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.
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.
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.
I don't think it's a stretch to say that a decade is a long time for a site to stay relevant and in a good position. As such, if 80% of the money from the site goes to paying off the site, it isn't worth much. If it requires you to work on the site full-time, it's worth nothing since you'd be loosing the income you could get at another job.
Whether you're doing the work or someone else is doing the work, if you have to quit your job, then the site must be able to satisfy your income PLUS profits that make the investment worthwhile. You've said that the income is a reward. So, would you pay me $200,000 and work for me full-time for 10 years for me to give you $50,000 per year for those 10 years? No! You could get a job paying $50,000 without paying someone $200,000. Now, let's say that you only had to work 3-4 hours a week. That's a VERY different story.
Do you see where I'm going there? A site like the one described is a good investment if it can be a little site project that doesn't take much time. If it requires you to work full-time on it, $50,000 will cut it IF you don't have to buy it in the first place. If you have to pay $200,000, you might as well just get a traditional job paying $50,000 and not have to pay the $200,000.
So, for the first 4 years, you have no income as you pay off $50,000 of that $200,000 each year.
The assumption though is that it's a healthy company and will continue to grow, if not hold its revenue, otherwise the annual multiplier shouldn't be 4 and you shouldn't be buying it. However, for the sake of argument, let's assume that the above is true. Yes, you're not making an obvious income, but you are earning 50,000$ worth of a company at the end of each year with 0 investment from your pocket. Isn't that a good reward for your efforts? PLUS if the company grows, you keep the surplus in profits.
What I'm saying is it's subjective/relative. If you're a person who's making 30,000$ per year and you want to make 50,000$ per year, then it's worth it to buy this company at 200,000$ since you will increase your yearly earnings, even if the first 4 years you're paying off the worth of the company. It's an investment, like a house. At the end of 4 years, you own a company that's worth 200,000$ or more, if you run it well, PLUS you have a salary of 50,000. That's not bad, and I think you could find someone who'd be interested in that, no?
That's why I say pick your buyers. If you try to sell to someone who wants to buy the company and then sit on their couch while the company rakes in 50,000$ per year, then no, you won't be able to sell it for 200,000$. If you have someone who's looking for a new job and sees future growth potential in your company, then yes, 200,000$ is a good price.
Does that make sense?
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.
The historical average is about 20. Growth companies (like Apple) were at 30-40+ recently.
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.
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.
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.
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.
Ok, I shouldn't have post it as a reply to your comment. Sorry.
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.
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!
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.
But.. based on the profit alone (assuming that profit takes into account the costs of continual content development - if required) $150k would be a bare minimum IMHO. Since the "growth trend" probably relies on you and your plan somewhat, a purchaser is not going to be so interested in those speculative numbers.
There should some comparable sites that have sold there. Remember also that the people who want to buy your site approached you so they obviously have a plan that should make it worth more to them than the typical marketplace buyer. The probably believe they could triple your earnings easily.
If in the course of negotiations you find things aren't going well you can suggest that it might be better for you to put the site on the open marketplace. If they baulk at that then they are obviously pretty keen.
http://en.wikipedia.org/wiki/Net_present_value
If you have income coming in with little work, and it's growing, WHY would you ever want to sell it?
If you do have a good reason to sell, figure out you minimum (say, 250,000$), 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.
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.