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How to measure the value of a website

August 9, 2021 - Fifteen

There are numerous reasons you might be interested in determining the value of your website, and it can be tough to know where to begin.

And, while the ultimate value of a website is determined by what someone is prepared to pay for it, you can surely get a sense of how much money you should earn if you sell your site.

Measure the Value of Your Website

Now that you have a buyer’s perspective, you can determine the value of your website.

Bear in mind that a valuation is merely an estimate of a potential buyer’s price. The true value of your website is determined by the amount of money in your bank account after the transaction is completed.

To begin, you must ascertain your net profit. This is calculated by adding up all of your sales/earnings and subtracting all of your expenses, which results in your net profit. Carry out this procedure for the preceding twelve months’ earnings, referred to as trailing twelve months’ earnings (TTM).

Then you must multiply your TTM earnings by a multiplier.

In general, newer websites sell for 1-1.5X their earnings. Sites with a longer track record make 1.5-2.5X the earnings. Additionally, high-risk sites make 0.5-1X earnings. Although websites can sell for prices outside those ranges, they are typically the exception rather than the rule.

This information is based on over $1 million in transactions over the last few years.

Value of a Website

To estimate the value of a website, it is critical first to define what a ‘website’ is.

In this article, we’ll refer to a website as a digital business — one in which the website serves as the business itself rather than serving as a component of an offline firm. Read more on the importance of a website here.

Thus, how do you determine the worth of a website?

Calculation of the Earnings Multiplier

As a rough estimate, the value of a website is sometimes estimated to be between 24 and 36 times your monthly revenue; a figure referred to as an earnings multiplier.

That means that if your website generates $10,000 in monthly revenue, you may anticipate selling it for between $240,000 and $360,000.

Of course, this does not consider your net profit, the time investment required, the structure and setup of the business, or the breakdown of visitor sources, among other factors, but you may get a sense of how much your website might be worth.

For instance, a website that receives most of its traffic organically rather than through paid advertising will nearly always have a higher valuation due to the costs associated with client acquisition.

We’ll look at the aspects that influence a website’s value and how you might have a positive impact on how much it might be worth.

Competition in the Future

To ensure that your website retains its worth, you may be required to sign a non-compete agreement. This is an agreement between buyer and seller that the seller will not start a new business or website that directly competes with the one they have sold. It shields the buyer from competition from someone intimately familiar with their new acquisition.

Of course, these are rarely fixed in perpetuity and are quite negotiable; just keep in mind that you must be willing to enter such an arrangement to command the highest value for your site.

After all, the purchaser wishes to safeguard their investment.

Methods of Monetization

The way you monetize your website can influence its ultimate value.

Reliance on a single approach can be viewed as high risk due to the possibility of unanticipated changes. Last month, Amazon lowered affiliate compensation rates, resulting in major revenue decreases for many businesses that rely heavily on the site.

A site with several revenue streams is a safer bet and may frequently attract a higher asking price.

What Factors Affect the Value of a Website?

You may be surprised to learn that most websites sell for under $100,000.

A variety of factors contribute to the final sale price, not the least of which is that, as previously stated, a website is only worth what someone is willing to pay.

Yes, there are tools available that will help you grasp a rough estimate of the value using basic formulas such as the ones mentioned above. However, the true test is whether a prospective buyer is prepared to make that investment and whether the website owner is willing to sell at market value.

Often, it makes more sense for the owner of a website to retain their assets and earn monthly revenue rather than sell today, that is, unless they obtain a higher price than market worth.

A website’s sale price typically falls between the market value and the seller’s projected value (how much they are prepared to sell for).

Competition in the Future

To ensure that your website retains its worth, you may be required to sign a non-compete agreement. This is an agreement between buyer and seller that the seller will not start a new business or website that directly competes with the one they have sold. It shields the buyer from competition from someone intimately familiar with their new acquisition.

Of course, these are rarely fixed in perpetuity and are quite negotiable; just keep in mind that you must be willing to enter such an arrangement to command the highest value for your site.

After all, the purchaser wishes to safeguard their investment.

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