BizBroker24 Analyzes How to Calculate the Value of a Website

To calculate the value of a website, website brokers usually multiply the site’s net monthly by a multiple, which ranges anywhere from 24 to 36. Using this formula, a website that makes $5,000 would be worth anything from $120,000 to $180,000. However, it is important to note that not all websites are created equal. More specifically, subscription-based websites, such as membership-based sites and software-as-a-service (SaaS) sites, generally fetch a higher valuation because of their revenue model (recurring payments). On the other hand, sites that depend primarily on organic traffic from social media and search engines tend to fetch lower valuations. Examples of such sites include content-based and affiliate sites. Some of the other factors that determine a website’s worth include, among others, the age of the domain, traffic trend, source, and revenue trend.

How to Calculate the Value of a Website

There are various ways of determining how much a website is worth. The most common valuation methods include:

Comparable Sales

This entails using the average value of several comparable sites to calculate the value of the website in question. To put it another way, all the websites in this equation must have almost similar revenue and traffic numbers. Additionally, the domains must be of similar age. For example, to calculate a comparable valuation of a site generation $5,000 in monthly revenue from Adsense, with 10,000 unique visitors every month and a PR of 1, the first step is to visit digital assets marketplaces such as Flippa.com to find out the price of comparable sites. The comparable valuation is calculated by adding up the selling prices of several comparable sites and then dividing the result by the number of sites in question. For example, if the four comparable were sold for $300,000, 300,500, 500,000, and $700,200, the comparable valuation would be ($300,000+$300,500+500,000+700,200) divided by 4 (number of sites) = $450,175.

Revenue Multiple

This is probably the most popular method. It involves dividing the monthly or annual net profit by the sales price in order to determine how long it would take for a buyer to recoup his/her investment without introducing new revenue streams. This method places greater emphasis on the age of a domain. This means that older sites get a higher multiple compared to newer sites.

Traffic Value

This method is particularly ideal for sites that have traffic, but no revenue. It entails determining the keyword phrase that drive the most traffic to a website and then finding out the Cost-Per-Click value of those phrases using tools such as Google Adword’s keyword tool. For example, if a phrase that costs $11.44 attracts 1000,000 visitors to the websites, accounting for 90% of the website’s traffic, the value of the traffic is calculated by multiplying the cost-per-click value of the keyword phrase by the number of monthly unique visitors from the phrase ($11.44 x 100,000= $1,144,000). However, because not all visitors would pay the $11.44, the rule of thumb is to multiply traffic value ($1,144,000) with a realistic percentage, say, 45%. In this particular example, the realistic traffic value would be  $1,144,000 x 0.45 = $514,800/month.

Why someone Should Sell Your Website?

Selling a website though a reputable broker, such as BizBroker24, has myriad benefits. Specifically, BizBroker24 has access to many buyers. Additionally, selling a website through BizBroker24 reduces the risk for both the buyer and the seller. In addition to online business sales, BizBroker24 also specializes in mergers, acquisitions and valuations for privately-owned companies. BizBroker24’s transaction focus is on mid-market businesses with an EBITDA of between $1 million and $5 million, or digital companies with an annual turnover of between $5 million and 50 million.

Conclusion

Some of the factors that determine the value of a website include it’s age, revenue and traffic. The best way to sell a website is through a website broker.