Whether you're just starting with your very first blog, considering getting started with your first blog, or you've been building a website for a long time; It can be incredibly valuable to know how valuable that website is. So in this article, we are sharing the best way to help you figure out exactly how valuable your site is, or at least how valuable it can be according to Ricky Kesler of Income School.
The reason you’d like to know how much your website is worth is that it gives you a different perspective on the website. Webmasters often talk about how much their websites earn which is great but what they don't always talk about is how much they can be worth if at some point they decide to sell them, cash out, and use that money for the future projects.
It's also really helpful when you're starting a website and you're afraid that at some point down the road, this topic or this website may not be the thing you're passionate about and you're going to want to start a different one.
Your first site may have considerable value and selling it may give you a head start financially when you start the next one. So let's dive into the ways to find out the value of your site.
How to Find the Value of Your Website
To figure out exactly what your website is worth, you may be surprised by just how much you can get from your blog. When it comes to valuing websites, there are 2 important components to evaluate, which are
- The profit
- The multiplier
Component 1: Profit
Profit is basically how much money is your website making after deducting all expenses. Calculating the profit is straightforward, what you have to do is to add every single month for at least the last 12 months typically. When you sell a website the buyer is going to want to see as much history as you're able to provide them, but at least 6 to 12 months is going to go into play when valuing the website.
You need to list out all of the income streams that you have and mark how much income came in from each stream every month and then total that up. That's the total revenue for that period.
So if you're making money from ads, like from Ezoic, Mediavine, or Adsense. You have to sum up the money that they pay you every month. You can find this easily in your revenue reports from the platforms. The same case for money earned from affiliate commissions.
You should also keep track every month of your actual bank statements and all of the transactions to make sure those things match up, especially if you're ever going to consider selling. Ensure that you track all those things and when you add all of those up, for every single month, you are going to have a monthly revenue number.
Next, we need to find the monthly expenses. Expenses can be broken down into two categories:
- Regular Ongoing Expenses
These are the things that are still going to have to be done when the buyer takes over the website. This is like hosting for your actual website, domain registration, or registrations that are involved with owning this website. This could potentially include some other things, but at the very basic level, it's going to be those. You then need to list the regular ongoing expenses in one column of the excel sheet.
- Other One-time Expenses
In the next column, we're going to list out all of the costs each month that are not necessarily ongoing. For example, if you bought some content or a bunch of stock images, well that content is already on the site and it's already paid for. The buyer of the website would not need to necessarily pay for those anymore since they were one-time expenses for you.
After creating this spreadsheet, you need to total it up and find the net income/profit. It's the number you have to look for.
Average profit for the last 12 months
Next, you have to find the average profit for the previous 12 months or more. You can do whatever makes the most sense on your website but again people are often going to want to look at 12 months so that they can see if there's seasonality to your website. If you only show the last 6 months, but those last 6 months were a high season, buyers are going to think that you're trying to base the valuation of your website only on the high season and it's not going to work out well for you.
For example, if you have an outdoor sport-based website and you just show months from March to August, a buyer is going to realize that you're not showing them the off-season months. They're going to want to know what those numbers look like in the 6 months of the off-season. So you have to include the total months for the whole year, for on and off seasons, and find the average monthly profit.
Component 2: the Multiplier
This one can be a little harder to figure out because there are a lot of factors that go into it. The best way to find a multiplier four website’s valuation is by going through some online marketplaces where people buy and sell websites. A common one to go through is Motion Invest. If you sign up, you can see all the details of the websites that are being listed for sale.
You can see here their niches, their sources of traffic and income, if they are selling an info product, and more. You can also their monthly revenue and the multiple or multiplier that's being used to come up with the actual selling price.
What you have to do is look at sites that are similar to yours not in terms of niche but terms of income.
You wouldn't want to compare the multiple of your website if it’s making $1 000 a month to a website that's making $20 000 a month. There are so many differences in the way those 2 websites are working and they're going to have very different multiples.
So look for sites that are going to be similar to yours in terms of income. These will therefore be probably priced similarly to yours. After finding these similar sites, you have to take an average of their multiples, apply it to your site, and that's going to give you a good starting point for your website.
Range of Website Valuation Multipliers in 2022
With the experience of selling websites that Ricky has, he identified the range 20x-30x as the common multiplier range for sites pre-covid. After the pandemic, the valuation of websites has risen to 30x-50x, and that range can be proved on website market places like Motion Invest and Empire Flippers.
Ricky suggests that currently, a number that’s in the upper 30s is a good valuation multiple, perhaps 38x.
Factors that Affect the Multiplier of Your Website
Remember that the amount that you will get for your website is going to depend on who's interested in buying it at the time, and how they value the website too. However, there are also some other key factors that will help you determine what somebody's going to be willing to pay for your site, and they include:
- Seasonality
We've already taken seasonality into account on the net profit part and so we don't necessarily have to adjust it substantially. However, when it comes to the multiplier, people tend to prefer a site that's going to be more stable with fewer ups and downs. If your site is seasonal, then you must show them its performance trajectory over a couple of years.
- Trajectory
Having a long upwards trajectory over time is something that every buyer would want to see. Buyers would value highly a website with a natural organic growth curve that is continuing to go up. Some trajectories might be leveling and that’s still okay. However, if your site is plateauing, buyers may not value it highly because its growth isn’t continuous and they might need to put in a lot of work on it. So they might go with the average multiplier rate.
On the other hand, if you're on a downward trajectory, fully expect to knock several points off that multiplier.
- Opportunity
The opportunity here refers to if the website still has other monetization opportunities that haven't been exploited by the seller and can immediately be executed by the buyer — making the site more valuable. If your site has been monetized with ads and hasn’t been monetized with affiliate marketing, this is an opportunity for the buyer.
The buyer could potentially add up to 200% to the revenue and the income of the site by doing just a little work on the affiliate marketing side of it. So that makes it more valuable hence having a higher multiple.
If you know that there are opportunities on your website that you're just never going to get to, then you can add up your multiplier. On the other hand, if you've just kind of maxed out, there are fewer opportunities to grow. The basic thing the buyer will have to do to grow that site further is mainly growing the content on the site and maybe establishing a little bit more authority.
- Risks
You have to analyze if there are substantial risks to this website or the website’s niche. There are many questions that the buyer has to assess to evaluate the risks of buying your site.
- Is this in a niche that is fairly controversial and could potentially get sort of out of vogue in the next couple of years?
- Has there been a substantial amount of active link building used? Were PBNs used to build up the traffic?
- Did you get a sudden jolt of traffic because of some social media profile that existed but that the buyer won't have control over?
- Were any manipulative tactics used in the building up of the traffic on this website? If so, there are substantial risks to the site and it could receive manual penalties from Google it could just get hit by an algorithm update these risks can cause your multiple to drop substantially or make your site unsellable
So all those are things to consider as you build up your site. We all want to make a good income from our websites, but if there's even an idea that you might want to sell this website in the future, building it up in a natural organic way and showing that's how it was built over time is going to command a higher multiple.
It's going to make your site worth so much more and it's going to make it sell much easier and faster.
Finding the Website’s Monetary Value
To find your website's exact valuation, you need to multiply the profit and multiplier. So let's say that we landed on a multiple of about 36x and our website generates $235 per month on average. When we multiply those together, we shall get the value for this website which will be $8 460. That is pretty good for a website that makes only a couple hundred dollars a month.
Imagine what this looks like when you build up your blog to make for example $2 000 a month. All of a sudden, you have a website that you could sell for over $84 600. Not bad if it's a website that you decide you're not really into and want to sell it so you can move on to something else.
But remember that when we listed our expenses for this website, some expenses were one-off type expenses. For example, buying content and some stock photos, or whatever that is not recurring and the buyer won’t have to do in the future. So if you take away those one-off expenses and just assume that the site would continue making the same amount of money, now the value of the website will jump from $8 460 to $21 060, which is a huge jump.
To attain this increment, what you would probably need to do is continue to operate this website at a regular low cost using just those ongoing costs not paying for new stuff. Let it ride until you have about 12 months of history without those one-off expenses, and then sell it.
Conclusion
There are several advantages to selling your website, but you should weigh your alternatives carefully before making a decision. Hopefully, you now have a better understanding of when you should sell your website, how to calculate its value, and where you should post it for sale.
