I've got a website that has been making a steady $200 per month over the past 6 months. How much is a reasonable price to ask if I want to flip it relatively quickly?
Here are some factors (a few of many) to consider that could justify a lower or higher multiplier when valuing the site:
How secure is the revenue? Are there any risks (i.e. it's dependant on one affiliate program).
How difficult would it be for a buyer to simply duplicate what you've done instead of buying the site? If they can put in a little effort and in a year have the same thing, they're not likely to pay 3 years profit for it.
How easily can the buyer increase the revenue? People usually only pay 36x monthly profits if they think they can increase profits and earn their money back faster than 3 years.
Is there significant value outside of the revenue? High Search Engine Optimization (SEO) authority, attractive domain name, etc.
Could the site be plugged into an existing business to drive a lot more revenue? Example: you have a website answering tax questions, a Certified Public Accountant (CPA) could buy it and use it for lead generation.
How secure is the traffic? What happens if the site gets hit by Google's next update and the rankings drop?
Keep in mind a lot of websites are "stable revenue with no work needed" until they aren't. Google update, affiliate program change, whatever…and suddenly the buyer needs to invest time and money. A savvy buyer will try to estimate the risk of that happening.
Thompson excellent points
It's often a negotiation with factors involved including how, where, and who you sell it to.
IMO 24x the average monthly profit is a good deal for the buyer, and 36x is a good deal for the seller.
If possible, and you know who the buyer is (or can find out), do as much research on them as possible. (Obviously this doesn't apply to Empire Flippers or Flippa.) It's possible they are in the vertical you're getting commissions on and they just want to refer all that traffic to their site. Then it's a whole other ballgame and you have a lot more negotiating power, and can start to frame it as 24-26x *their* profit.
I recently sold an affiliate site with my partner to our affiliate partner. We used that strategy and ended up getting a lot more than 24-36x.
Wow great info. Thanks Ben
It really depends on the type of product/ service/ affiliates that are generating the income. Is it/ they seasonal? What were the previous 6 months of sales? How old is the site? Is it scalable? On the low side you could be looking at $2-4k offers… on the high side you could be looking at $6-8K offers. Obviously, you want it to be as high as possible. And put yourself into the shoes of the buyer and objectively ask yourself how much you'd be personally willing to pay for it. There are tons of factors… and as Ben said, if it's a competitor, you've got some serious negotiating power.
This is *generally* calculated in a similar way to any other business venture for sale, and thus the baseline for a 'service' based business applies, of one year turnover, adjusted for any additional capital in investments, intellectual property, extensive client list, etc.
In other words, it is always custom, but the place one starts from on a business that has low barrier to entry is one year turnover.
Technology businesses, the kind where the initial investment is a huge barrier to entry, making the new competitor risk smaller, can be 5 times that baseline, especially if there are patents involved.
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