Valuing a Web Site
February 26, 2004 1:30 PM   Subscribe

Someone has expressed interest in buying my web site. How do I assess its value? How do I know what to ask for it? The company in question is rather large, so it could be a considerable amount of money. How do I know if I am getting a good deal? I have 4+ years into it, and a full back-end administrative system. I get moderate traffic and little ad revenue. Has anyone ever sold an entire site?
posted by quibx to Computers & Internet (7 answers total)
If you're ready to part with it, more power to you. Personally, this is how I would think about it:

I would ignore the 4+ years factor and think about how to price the unique object they're buying -- ie, content, admin tools, client and server side code. Then I would add a bit of a premium for two reaons:

1. The site is obviously relatively successful or they wouldn't want it.

2. You're giving up a bunch of (what I assume is) relatively passive income, which as any rich guy will tell you, is the key to staying rich.

IANABusinessman, so there may be better ways to think about it, but that's where I would start, were it me.
posted by o2b at 1:40 PM on February 26, 2004

well, the numbers i've allways heard is 10 times your yearly revenue, but it doesnt sound like that's right for you.

talk to a IP lawyer/economist

be clear on weither they want to buy the content or the software, if you can keep rights to the administration system, you can use it again, and save yourself some work later.(assuming you make another site)
posted by Davidicus at 1:51 PM on February 26, 2004

I would put a pretty big premium on it. After all, you've built a community (apparently), and that's a difficult thing to do.

Also, get them to offer you a number first.
posted by bshort at 1:59 PM on February 26, 2004

Yeah, I'd follow bshort's suggestion. Come up with a number in your head that feels "fair" in the sense that you did a lot of work and you'll probably never get to do a site like it again (it's usually a non-compete clause in contracts), but then ask them to make the first offer and respond accordingly.

Whether the number in your head is $100 or $100k, it doesn't really make sense to tell them what your selling price is upfront.
posted by mathowie at 2:16 PM on February 26, 2004

Start here.

basically you have three methods:
- net present value: discounted stream of revenues (10x revenues means required rate of return = 10%, assuming constant revenues forever)
- replacement cost: how much a firm should spend in order to "replace" your business (not only the web pages).
- market value: you will need info about similar transactions (you need a lot of data here)

If the numbers are close to each other, it's nice. Use them to determine a range of "fair values" for you.
posted by MzB at 2:43 PM on February 26, 2004

Here's my formula:

1. Take all revenue for the past 3 years and get an average number. Multiply that by 5 (10 years is better suited to real estate and other less volatile industries)

2. Take your total user count and multiply by 10-25 cents, depending on the 'quality' of your user base (activity levels, age, income, etc)

3. Total up the total amount of time you've spent creating the site and place a dollar figure on it. You might also include the time you've spent maintaining the site, but don't go crazy with that figure.

Add those three numbers together and sit on it. Use it as your personal number, don't give it away, just hold tight and see how close their first offer is to that value. Remember that their first offer is presumably the lowest amount they will pay for the site...

Good luck! Other advice is be super professional, always return every phone call and email promptly. Sometimes people think if they play hard to get, it will raise the price but this is not the case. Being upfront and yet steely in your negotiation is better than pretending to be busy with other things, etc.
posted by cell divide at 3:23 PM on February 26, 2004

Aim high. You can always come down if necessary. But if you aim "low," you almost certainly won't get anything more.
posted by davidmsc at 8:35 PM on February 26, 2004

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