Building my website and making it profitable took years of hard work, so it’s difficult for me to put a price on all the effort I’ve invested into getting my brainchild off the ground.
I realize the potential dangers of being overly attached to the business I’ve built because I might miss the perfect opportunity to cash in on it.
That’s why I occasionally estimate my website’s worth to determine its current market value and reconsider my position on selling it.
Going through this process gives me a feel for the market conditions and lets me know my business’ approximate value.
In this guide to website valuation calculation, I’ll point out the factors that might affect your site’s worth and advise you on how to boost its market value.
Choosing the Right Time to Sell a Website
In life and business, timing is everything. So, knowing when to sell is often as important as what you’re selling.
Building a blog with a sizeable following takes two to four years, so you probably won’t gain much by putting it on the market during that time. On the other hand, an e-commerce site needs between 18 and 24 months to start turning a profit.
Entrepreneurs usually have similar motives to explore the offers they can get for their online businesses. Here are some of the most common reasons why owners sell their websites:
- Declining revenue streams – Selling a website while still profitable can help protect the investment.
- Pursuing other business ventures – Investment prospects might open up as your business grows, and your website could be the source of capital you can use to pursue those opportunities.
- Failed Partnership – Being entrenched in a legal battle for too long can only hurt your business’ long-term value, which is why selling it is often the most sensible option.
- Lack of Human Resources – It takes a team to run a website because coming up with ideas for fresh content or discovering new ways to drive traffic is too much work for just one person. The costs of hiring a team are often too high to justify keeping the website ownership.
Estimating a Website’s Market Value
Knowing your website’s worth is useful even if you don’t plan to sell it.
However, the best you can get is an estimate because the website’s value ultimately depends on what a buyer is prepared to offer.
You can use two valuation methods to get an approximation of your site’s market price.
- Formal Valuation – This method prioritizes the website’s current value. It allows you to estimate the website’s worth based on its net value, funds you’ve already invested, or the cost of daily website upkeep. You’ll have to go through the formal valuation process if you want to apply for a bank loan or resolve an ownership dispute with a partner.
- Thumbnail valuation – Unlike the formal valuation, the informal or thumbnail valuation gives you an estimate of what a website might be worth in the future. Thumbnail valuation is based on the website’s metrics and doesn’t reflect its absolute value.
What is the Earnings Multiplier Calculation?
A website’s value can range between 24 to 36+ times higher than its monthly revenue.
To get a vague estimate of your site’s worth, you must multiply the gross amount you earn in a month by the so-called multiple.
So, your website’s maximum worth will be $180,000 if you make $5,000 per month.
Although it might seem simple, the earning multiplier calculation is quite complex because a broad range of factors can affect the multiple.
The multiple is a combination of the ROI a business can offer to a potential buyer, the risks a purchase involves, and the opportunity.
Each of these factors depends on how well the website performs compared to its competitors and current market conditions. Consequently, a wide array of context-dependent factors determine where your site falls within the multiple ranges.
The multiple’s values aren’t constant and can change within a few months.
The Difference between the Market Value and Perceived Value
One of my first business lessons is that value isn’t absolute. Hence, your perception of a website’s value differs from the buyer’s.
This means that the offer you’ll receive for a website can be considerably lower than your asking price. As a result, the website’s price will most likely be at an intersection of its market value and your asking price.
Understanding the Net Value
Overall revenue doesn’t give a potential buyer a realistic estimate of the website’s value because it only shows the total amount of money the site is making.
However, it doesn’t indicate the costs of running a website or the monthly net earnings.
The net margin is a much more informative metric because it gives buyers an idea of how much they can make on their investment.
Net margins are calculated by dividing the net profit by revenue and depend on the website’s monetization method. So, an affiliate market website will have a higher net margin than an e-commerce store.
Boosting a Website’s value
Knowing an estimate of your website’s worth can also show you what you can do to increase its value.
Every detail, from the website’s backend functionality to interface intuitiveness, is important and can decrease or increase its value. Let’s go through some aspects buyers consider when determining what a website is worth.
1) Website Category
What’s your niche, and more importantly, what is its growth potential? The answers to these questions should be the starting point of your website’s valuation.
Let’s say you run a fashion e-store. The stats suggest that the e-commerce fashion industry is trending upwards, as worldwide sales are expected to reach $1 trillion by 2026.
Buyers might be eager to purchase your business because of the potential expansion opportunities and high ROI. Still, if such a website has passed the expansion peak, buyers might be hesitant to acquire it.
So, choosing a profitable category when launching a website will affect its maximum value down the line.
2) Traffic Sources
Extensive reliance on paid advertising can lower the website’s market price because most buyers don’t want to spend money to generate leads.
You shouldn’t abandon paid advertising if its cost justifies the expenditure. Instead, you should utilize it to support your efforts to generate traffic organically.
Algorithm updates and various other factors can affect the website’s organic traffic, which is why paid advertising can help compensate for potential traffic fluctuations.
Diversifying traffic sources will make your website more valuable because it will reassure a buyer the revenue won’t go down due to a traffic decrease.
I love the Jerry Maguire movie and the scene where Cuba Gooding Jr. screams, ‘Show me the money over the phone to Tom Cruise, his agent.
This scene summarizes what buyers will ask you about your website. So, they’ll first want to know how the website makes money. Developing an advanced monetization strategy will increase the website’s value in the buyer’s eyes.
Reliance on a single revenue source is perceived as dangerous, which is why websites that employ several monetization methods are viewed as more valuable.
4) Domain Value
Aged domains are more valuable than new ones, so selling a website launched in the early 2000s is easier than selling a site you registered a year ago.
Besides age, the domain name also adds to its value because finding a buyer with a website with a long domain name can be difficult.
The .com extension improves your chances of selling a website at a reasonable price since websites with .org or .net extensions are considered less professional and profitable.
Failing to secure domain variations can make your business look less professional and shrink its value.
Use domain registrars to find out if any domain variations are taken and register the available ones before putting your website on the market.
5) Social Media Presence
The real question is whether developing a website to the point where it’s marketable is possible without a strong Facebook, Instagram, or Twitter presence.
Aside from being an almost mandatory aspect of developing a successful website, connecting social media accounts to your website will allow you to set a higher price.
It will also signal to the new owner that they don’t have to grow the site’s social media following from the ground up. I’d like to remind you that the size of your mailing list might also be a factor potential buyers will consider.
Transferability as a Driver of Value
A new owner of your online business will look to take over as fast as possible, but the transfer can take weeks if you’re not prepared for it. Hence, the website’s transferability can increase or decrease its perceived value.
This umbrella term refers to a series of actions the website’s owner needs to take before finalizing the purchase.
Some buyers might ask you to sign a non-compete agreement that ensures you won’t launch a website in the same niche that utilizes an identical business model like the one you’re selling. Here are the key elements of website transferability.
1) Website Management and Development
Fixing bugs, ensuring the new administrator won’t have problems accessing the website’s backend, and checking if the content is displayed correctly on all devices are among the steps you can take to increase the website’s value and make its transfer easier.
Consequently, rushing through the website design stage can prevent you from selling it at a good price.
A website’s scalability and development potential are essential for most buyers as they often want to add new functionalities to a site and develop it as the business grows.
2) Standard Operating Procedures
Creating detailed guidelines for each task makes training new employees easier and enables you to develop a website faster.
SOPs also speed up website transfers because they eliminate the need to walk the new owner through all aspects of your business.
So, selling a website will be easier if you already have the documentation that outlines the best practices for different tasks.
3) Providing the Key Website Metrics
The lack of transparency might look like you have something to hide, which can seem like purchasing your website is a risk in the buyer’s eyes.
That’s why you should be upfront about the website’s metrics and allow anyone interested to see them.
Not knowing the website’s bounce rates, average time on page, or domain authority can create problems for the owner, which is why they’re unlikely to proceed with the purchase before checking these metrics.
4) Maintaining Relationships with Suppliers
Before considering offers for your website, you must be sure you can transfer the supplier network to a new owner. Contacting each supplier and discussing your plan will ensure the transfer can go smoothly.
Negotiating better commission rates with affiliates and exploring other opportunities to increase website revenue will help you prepare for the sale.
5) Sorting Out the Financials
Most buyers will ask for proof of your website’s revenue, net worth, and ad spending. In addition, you’ll likely have to provide a traffic report that shows how many visitors the website attracts.
The easiest way to create financial and traffic reports is to use the tools provided by the website builder you used to host and build the site. Integrating Google Analytics with the website will help you create extensive reports that give brokers all the necessary information.
6) Team Handover
The new owner might bring a new team that will create content, pursue new partnerships and manage every other website segment.
You have to prepare the members of your team for the handover, even if the broker decides to keep the entire staff, in order to speed up the transfer.
How Do Search Engine Rankings Affect the Website’s Value?
I mentioned that building a successful website takes years.
The work on the website starts long before its launch date. The approach you take during the early stages of development will be vital for the website’s value if you ever decide to sell it.
The UX design elements, such as the website speed, navigation permalink structure, and user engagement, enable the search engine algorithm to recognize the site and push it up in the rankings.
Ensuring all segments of the website’s UX meet the highest industry standards will increase its worth from the get-going.
Furthermore, uploading SEO-optimized content, improving the backlink score, and employing efficient off-page SEO practices will ensure your site has a high ranking on Google and other search engines.
Relying on ‘black hat’ SEO practices can result in algorithmic penalties and limit the website’s ability to generate revenue through organic traffic. Consequently, brokers are less likely to purchase a site with a history of algorithmic penalties.
Website Value Calculators
Using a website value calculator is the quickest, but not the most reliable, way to estimate what your website is worth. Most of these apps are free, and you won’t have to create an account to get an assessment of your website’s worth.
The only problem is that the results vary from platform to platform, making it difficult to determine which app you should trust.
Value calculators like Flippa base their valuation on parameters like the website’s annual revenue, monthly visitors, and domain age. However, in most cases, the app uses the website’s URL to generate the report.
Let’s look at a few website value calculators that can help determine the website’s approximate worth.
Worth of Web
Checking the website’s value with Worth of Web takes a few seconds. The app’s Website Analysis tool generates a report that estimates the site’s current and future value.
The report also outlines the site’s traffic, social media performance, and other factors. The tool uses public ranking systems which is why its valuations aren’t entirely accurate.
The Worth of Web can be a valuable source of information if you’re looking for ways to increase affiliate revenue or find out how effective your SEM and SEO strategies are.
Besides website value estimates, Siteprice also gives you insight into the traffic and search engine ranking statistics. The app utilizes a unique algorithm to gather and process website data.
The free report the tool generates contains information about the site’s social media visibility, the quality of its backlinks, and search engine rankings.
Still, the accuracy of these stats can be off, which is why I don’t recommend using this platform as your only source of information.
Siteprice is also a marketplace where you can find potential buyers for a website you want to sell.
Domain authority, a list of organic competitors, and social popularity rankings are among the information you can obtain from the Website Outlook value calculator.
The report includes keyword and backlink analysis, which can help you improve your website’s performance before putting it on the market.
Website Outlook only estimates the website’s current value, and its report doesn’t indicate its potential worth.
Don’t trust the report you generated with this website value calculator too much when setting your site’s price because some of the information it provides might be unreliable.
Scouting the Market
The price you can get for a website will depend on the current market conditions. So, instead of rushing to sell your online business, you should keep an eye on the market and wait for the right moment.
The market climate, the number of buyers looking to invest in an online business, and the amount of risk associated with different niches fluctuate.
This means your website’s value could be temporarily low because buyers think investing in a certain niche is risky. The website’s worth can increase exponentially if the market conditions change.
Hence, monitoring the market and understanding what buyers are looking for can help you sell a website at a good price. Researching the worth of sites in your niche will give you an idea of how much your website might be worth at the moment.
Preparing to Sell a Website
Estimating how quickly you’ll find a buyer for a website is difficult. In the best-case scenario, you’ll be able to sell a website two weeks after listing it.
Still, listing periods on most website marketplaces last between one and six months, and there’s no guarantee you’ll receive the right offer within this time frame.
The best you can do is be prepared to transfer a website to its new owner when the right offer comes in.
I’ve outlined several things you can do to sell a site relatively quickly.
Set a Price Range
I think online website value calculators can give you a ballpark figure you can use to determine your website’s price range. The earnings multiplier calculation will help you set the highest and lowest asking prices.
Don’t hesitate to hire a professional to audit the website or contact a website broker that can determine the multiple for you if you’re unfamiliar with the earning multiplier calculation formula.
Study Potential Buyers
Give buyers what they want, study their buying patterns, and do your best to understand their priorities. The best way to do this is to monitor the latest acquisitions on online website marketplaces because you can see which niches are in demand.
In addition, you can use different marketplaces to check which website metrics buyers value the most.
Don’t Underestimate the Importance of Networking
Inform your contacts and competitors about the plan to sell your website. Relying exclusively on platforms where you listed a website can limit your options and reduce your chances of getting a good offer.
Announcing the website sale on social media might be helpful since some of your followers could be interested in purchasing it.
Fix All Issues That Could Drive the Website’s Price Down
The promise of long-term value is often the critical factor that prompts a buyer to purchase a website. Most buyers want to acquire developed websites with stable revenues and high net margins.
Unresolved technical issues, lack of documentation, or advanced CMS functionalities could be why buyers don’t think your website could be a valuable asset.
Where to Sell a Website?
Testing the waters by listing a website on an online platform will give you a good idea of its perceived value. After all, you don’t have to accept the offers you receive through online channels if they fall short of your price range.
Fees range from 5% to 15% of the website’s selling price, but opting for the platform with the lowest commission fees isn’t always the best option. Here are some of the best services you can use to sell a website.
1) Empire Flippers
Listing a website on Empire Flippers gives you access to a vast marketplace with more than 100,000 potential buyers. The platform has a 73% sales success rate and focuses on attracting trustworthy buyers.
Although listing the website on the platform is free, commission fees range from 2.5% to 15% of the site’s final price.
2) FE International
Going through the free valuation process is the mandatory step you have to complete before listing a SaaS, e-Commerce, content, or tech business on FE International.
Joining the platform means you won’t be able to list the website on other marketplaces for several months.
FE International sells over 90% of online businesses on its marketplace, so the exclusivity clause shouldn’t worry you.
3) Website Properties
I think Website Properties is one of the best website marketplaces because it supports sellers at each step of the way. Their valuation process is free, and you don’t have to list the website on the platform if you don’t like the offer.
Website Properties will introduce your business to more than 30,000 buyers and guide you through the sales process if you decide to opt-in.
Frequently Asked Questions about Website Valuation Calculation
What is the Average Value of a Website?
Even though some websites are worth mover than $1 million, most sites sell for less than $100,000.
Does the Business Model Affect the Website’s Price?
Yes, it does, and selling a website that utilizes an innovative business model is easier than finding a buyer for a site that relies on traditional business models.
Final Thoughts – Is Selling a Website Worth the Trouble?
My conventional wisdom tells me that keeping a business is usually more profitable than selling it.
Nobody knows the website you spent years developing better than you, so you can still turn things around even if your revenues stagnate for a while.
On the other hand, putting an online business on the market once it has passed its peak will bring you only a fraction of its actual worth.
I don’t advocate keeping a website at all costs.
After all, it isn’t always the most sensible thing to do since you might be tired of working in the same niche or finding it difficult to prolong collaboration with your partners. Hence, occasionally evaluating the website’s worth can help you choose the right moment to sell it. Companies like FE International or Empire Flippers can provide you with an accurate estimate of your website’s value.