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What’s Your Blog Worth? How to Value Web Properties

This guest post is by Sunil of Extra Money Blog.

I have sold an ecommerce website for $250,000 and several other niche websites for a five-figure price tag. I want to share with you one valuation method you can use to put a price on your web property today.

Whether a website owner or a blogger starts with the initial goal of selling their site one day, it is my belief that every successful blog owner has at some point thought about the potential of selling their web property. At least they will have wondered how much their web property is worth—especially when it begins to generate a decent amount of money.

valuing blogs

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In fact, I think almost no one thinks about a sale as an exit strategy when they first start. It’s usually a passion, hobby, or something other than a potential sale that motivates a person to get started making money online—unless of course they run an online business, such as an ecommerce website, from day one.

When a website becomes profitable, it has the potential to become saleable. You may deliberately be contemplating selling either because of boredom, because you’ve found a better alternative use of your time, because of a potential use of the financial proceeds, or any of several other reasons.

If so, do you know what your website is worth?

When a web property starts to generate profits, it becomes an income-producing asset, much like a rental property or a small business. Just like property and businesses are valued and sold in the open market, a website or blog can be too. Therefore, valuing a web property is not much different from valuing any other income-producing asset.

The quantitative aspect of web property valuation

The quantitative aspect of valuation is not rocket science, in my opinion.  You take a site’s current earnings and expenses, figure out what the net cash flows are, and then project a value based on an earnings multiplier.

The net earnings, or cash flows, is commonly referred to as EBITDA in the business world. That means: earnings before interest, taxes, depreciation, and amortization.  The multiplier is applied to this number to come up with a value, or price, for the property.

Earnings and expenses are what they are: they are not subjective by any means. But where do you get an earnings multiplier from? Evaluate recent sales of websites that are similar to yours to get an idea of what kind of multiplier was paid for each one. This number will be larger in stronger economic times, and smaller in weaker economic times like those we’re in today.

There is no standard multiplier, however. Similar to real estate, if figures are available from recent blog sales, great. But if not, your website’s value is only as much as someone else is willing to bid for it. Obviously you have the option not to sell for what you might feel is a low-ball offer.

One more thing to consider is whether the website is as monetized as it can be today. Is there opportunity to add more private ads to the sidebar, and generate more profits on a residual basis, for example?  A buyer would definitely evaluate this monetization potential and factor it into their purchase decision.

The qualitative aspect of web property valuation

Here is where the subjectivity in blog valuation comes into play.  An active business sold at an earnings multiplier of two may not be comparable with a same-size passive business, because a passive business requires a lot less effort to manage and sustain. Consider how much cost and effort the owner of the web property will have to invest in the passive business to generate a dollar in profits. Then ask how this compares with an active business.

Factors such as effort, operating cost structure, sustainability, long-term relevancy, and prospects all play an important part in determining what the reasonable value of a particular web property should be. At the end of the day, none of this is exact science, but these are some ways to arrive at a justifiable or rational price.

For example, no one knew the long-term scalability of Google or LinkedIn. In fact, no one knows today.  The market had a certain estimate (multiplier) set at the time each company went public, and has a different one today. It will likely have another one by the time you are done reading and commenting on this post. Expect the multiplier to evolve, especially in an ever-changing and dynamic industry like this one.

A practical example

When I was initially solicited by an Ebay power seller to potentially sell my ecommerce business, the business was generating roughly $60,000 annually in profits. After weeks of discussion back and forth, we settled at a sale price of just under $250,000, or roughly four times the annual earnings of $60,000.

The quantitative piece of the deal was straightforward. The qualitative piece is what dragged out the negotiation.  The power seller had previously purchased a similar ecommerce business at an earnings multiple of three.  They had paid $90,000 for a business that was generating $30,000 in annual profits.  However, I was not willing to accept a price of $180,000, which was three times the annual earnings of my site.  Further, my business showed a consistent rising trend in terms of web traffic, customer acquisition, sales, and profits.  These qualitative measures needed to be “baked” in to the deal for it to be viable for me.  I was able to persuade the buyer of that, and we sealed the deal at four times the annual earnings.

The key lesson here is that although acquisitions based strictly on earnings multiples sound good in theory, they rarely work out practically, whether at my level or at the Fortune 500 level.  Our repeated attempts to narrow the nature of deal making to a pure science have never worked, and likely won’t in future.  Valuations, although driven mostly by the underlying financials, rely heavily on qualitative aspects that are subjective and unique to each buyer and seller.

What do you think of this valuation method? Do you have any alternatives to share? Is this a fair way to value your web property? I’d love to hear your thoughts in the comments.

If you want to be brave and bold and open your kimono to me and fellow readers: what do you believe your web property worth is today in the open market, if you use this valuation method?

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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Comments

  1. I recently went through this process putting my site, https://flippa.com/2640812-4000-minimum-every-month-for-3-yrs-established-pr4-gaming-business-in-a-box , on sale with Flippa.

    What it comes down to is your site is worth whatever someone is willing to pay based on current and potential earnings.

    • very true. we can sit here and run all kinds of hypothetical numbers based on various valuation methods, but a big variable to consider is the perceived value of your business to the acquirer. there are strategic buyers, then there are financial buyers with purely a dollars and cents perspective

  2. I’ve often read online that a websites value is often the same as 12 months revenue or 24 months for really profitable, branded sites.

  3. Rahul says:

    What can be expected for my site. Its a straight forward blog and I really want someone to pay 1000 dollars straight forward. The domain name is pretty sick and there are two highly searched keywords “price” and “fees” My blog is at: http://pricenfees.com to be spelled as “Price and Fees”.

  4. Thanks for sharing your experience Sunil, how much you think your site Extra Money Blog would fetch?

    Like Chris said, it’s all about what someone will pay for something, I used to deal in hockey cards on the internet, and even if a card was listed as worth $10 it didn’t mean it would sell for even half of that, but it worked both ways since sometimes a card worth that same amount could go for 2-3 times the book value.

  5. Nasrul Hanis says:

    Great point. I always compare website to “real estate” as they are the virtual estate which can have their own income and worth value.

    I would like to say your valuation method is a clear and comprehensive one. Nice!

  6. Chris – yes the willingness of players to offer a certain amount can throw all kinds of curve balls into the equation which can skew multiples all over the place. each player has a different motive / reason, which typically drives the purchase multiple

  7. Joan says:

    Great article – I never thought about blogging and selling it. Thanks for the info!

    • not saying that should be the primary goal, but definitely a possibility for a smooth exit down the road. i’d guess an authority blog with the author as the main voice would be tougher to sell. think from a continuity perspective…

  8. Mike Avon says:

    I haven’t thought to sell one of my blogs. But, if I get good offering I will consider it. Thanks for your sharing.

  9. James Greg says:

    Putting a price tag on a website can be difficult. A website is like any other asset which can provide potential earnings hence it can become priceless. Good article but it was a little hard for me to digest.

    • How can a website, or any asset be priceless?

      • James Greg says:

        It’s just a mind set of course there’s nothing priceless everything has a price but somethings are too much in demand and they are termed as priceless. There are some cars, vintage models termed as priceless and mona lisa a priceless work of art similarly modern day priceless websites are Google, Facebook. Well actually every thing has a price but somethings are priceless.

      • Dilanka says:

        Well,

        Let’s say you have a five-figure subscriber/audience/fan-base that originally signed up for the site because of YOU (or “your work” — which is also a derivative of “you”). Now, can you valuate this site and come up with a accurate price tag based on subscribers, traffic, content, earnings ? Sure.

        Fast forward a little.

        Let’s say the website is sold. Now, you have to spend another 2-3 years building another audience (which is not guaranteed by the way) and the original subscribers might even feel betrayed. Also, I think what James is trying to address is that, how exactly would one know whether they have reached the absolute LIMIT when it comes to a web property? You don’t. Hence, the “priceless” argument.

        Thanks Sunil.
        Dilanka

        • In terms of niche websites, one can reasonably estimate what the limit would be. This is predicated on the terms you target, the search demand for each and the ad payouts. sophisticated tools today eliminate the guessing game for us, allowing us to scientifically estimate a reasonable number. this approach has worked very well for me.

  10. rakesh kumar says:

    This is a useful information, as i always wants to know the exact value of my website/blog. The website which claim to evaluate your website, shows such an amount which does not seems to be realistic.

  11. Holloway says:

    Thanks for the good article.

    I have a website I want to sell and I’m really struggling with pricing it. I started at twice EBITDA, advertised it at that price for about a month, with no offers at all.

    I worked out how much I need to get to move on and it is just less than HALF of EBITDA which seems on the low side. However, my site requires a fair amount of work to produce the profit and this work is done by two contractors who must be paid. Thus, it is profitable but there are costs which reduce the profit. Still, at just under half EBITDA I still have no offers!

    I’m getting pretty demoralised and I just want out. But I’m not willing to sell it for a song after all the hard work I’ve put in.

    Putting a correct price on it has been the hardest thing to do.

  12. Dilanka says:

    This is a beneficial post — obviously if you are in a position to even valuate your web property.

    I think this most can and will have a negative side-effect because: most people who are starting out (with either blogging, ecommerce, whatever.) will keep “valuation” and “revenue” in mind instead of thinking about the reader, customer, etc.

    Possibly a good idea to address this issue in detail on the post.

    Dilanka

  13. Good post. What about sites that give a ballpark of your site’s worth?

  14. Nothing is as valuable as happiness, so my site need not ever be sold if it is read.

    I did always wonder how businesses valued themselves; and it’s logical to say that if a business generates income fairly passively then it should sell for more than an active business.

    Many people make a living by building up blogs just to the point where they sell them. Often it goes with buying and selling domain names.