4 Ways to Value a Website ( before you buy or sell it)

There are many ways to make money using the internet technology. You can sell products or offer services, put adds on your blog/webpage or you can be a reseller hosting. Another way to make money online is by buying and selling websites. Like any other buying and selling business, you have to acknowledge the worth of the website you would like to buy or sell.

How to Value a Website

There are four ways to value an existing web site:

1. You can use a computer program to find the value of a website. These results are not dependable and few people use them. Beware of a seller who claims value for his website based only a computer program’s values.
2. Comparison with a similar website. This is similar to what is done in real estate. What have comparable sites sold for?
3. Intrinsic value. This is the least understood method. If you broke a website down into core components, how much value are the parts worth? What are the site’s key traits?
4. Multiple x numbers of unique visitors

Valuing a Web Site by Comparison with a Similar Site

Buying a website has many parallels with buying a piece of real estate. If someone has a piece of property to sell, the appraiser would look at other properties of similar size, in similar locations, and with similar improvements. Websites can be valued using a similar method.

Valuing a Website by Its Intrinsic Value

Basically you should break your site down into its component parts and figure out which bits have value. There are no set rules for how you should do this, just be as reasonable as you can and as detailed as you desire. Do you have extensive technical plans already written? These have value. Do you have patents filed for your technologies? These (might) have value. Do you have ideas that you are willing to throw into the business wholeheartedly? These too can be valued.

The more detailed you get, the further you get away from a ‘rule of thumb’. If you do get highly detailed with your valuation you should be prepared to tone down on ‘rule of thumb’ multiples to compensate.

Multiple x numbers of unique visitors

It is also worth mentioning that the buyer of the site will have to make sure that if the sale is completed that they are protected from you going out and starting another website immediately and bringing your users over there.

One approach that is becoming increasingly popular is to use a multiple x number of users approach. Here you basically assign a value for each unique user that you have to your site.

Depending on the type of website, this might be the number of registered members, the number of active users, or the number of unique visitors who visit the site in a month. This last approach is becoming increasingly popular among venture capitalists and angel investors.

It’s important to distinguish unique visitors from other web statistics such as page views and hits, as these are very different numbers. Anyone who talks to you these days about ‘hits’ should be viewed with some concern.

In Google Analytics for instance, a free service which I recommend for any site owner, this figure is known as Absolute Unique Visitors. For the current crop of web 2.0 websites, the kind of multiples being paid to buy companies is around $30-40 per unique visitor. (Note that unique visitors should be counted over a period of one month, usually the most recent).

Another factors to value a website are revenue stream and the amount of hours required for the site to be successful. If you are making a lot of money from the site but it requires you put in a lot of hours per week to maintain that level of success, it may potentially lower the price of the site depending on the buyer.

Another major contributing factor is if the site is tied to a personality. If the person who owned the site previously is no longer associated with the site, it will decrease the value immensely and will greatly increase the chance people will leave once the sale is made. That needs to be considered as well and factored in accordingly.

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