

Someone wants to buy my site, how can I value it? - anonymous42

In the interest of anonymity I would prefer not to reveal my real username.<p>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.<p>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.<p>It comes top of google for any keywords pertaining to the market it targets.<p>What do you think is a good price?
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Jasber
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
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.

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shimon
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.

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swombat
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.

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smoody
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
That emotional attachment exists, I made this from scratch, and watched it
grow over time.

~~~
tjic
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
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.

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blurry
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
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
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
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.

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wmeredith
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.

~~~
PStamatiou
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
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.

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mixmax
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.

~~~
dejb
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
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.

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pierrefar
"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.

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tortilla
With any situation, it depends, but great article here:

<http://www.wrevenue.com/2007/10/24/selling-a-web-business/>

~~~
anonymous42
Thanks, thats a good resource, though it seems more set on how to do the
transaction rather than offering advice on a valuation.

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steveplace
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
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
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.

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mdasen
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
_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.

~~~
mdasen
Nope. Let's say that it does need a full-time programmer. You pau $200,000 for
this site assuming it will pay for itself in 4 years. But, since it requires a
full-time programmer, you have to quit your job. Now you're just in debt. So,
for the first 4 years, you have no income as you pay off $50,000 of that
$200,000 each year. Well, that won't work. In fact, the government is going to
want some of that in taxes, so it will probably be 6 years where your income
is $0.

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.

~~~
edb
I hear what you're saying. There's just a key point that I would like your
opinion on:

 _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?

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wastedbrains
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.

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markessien
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.

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trickjarrett
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.

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dejb
Take a look at the sitepoint marketplace - <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.

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petervandijck
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
Are you sure? A 5% bank interest on a million dollars would be the same as the
50k it's making right now.

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petercooper
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.

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pjspereira
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
Although this was a start up, I think it has past that stage.

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socratees
I googled, and found this site. <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
I ran it for our two primary sites - one returned $5.5m, the other $500k -
only ~$800m short!!

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louislouis
just wondering, how old is the site? Is the income from membership sales?

~~~
anonymous42
Yes, and it's about 2 years old.

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helveticaman
Net present value.

<http://en.wikipedia.org/wiki/Net_present_value>

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curiousgeorge
Don't sell it. Move to Thailand and manage it from there. You'll save money
and have a better life. Seriously.

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petervandijck
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.

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epi0Bauqu
How much are they willing to pay? That's what you need to find out.

~~~
skmurphy
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.

