But first, a legal disclaimer:
⚖️ I am a writer, not a website broker, financial expert, or legal expert. This article is meant to give you a rough idea of the process you’re looking at, not to replace professional legal or financial advice.
With that out of the way, let’s talk about website values!
What impacts a website’s value? ?
There are many different factors that influence a website’s value, but before we dive into those, it’s important to note that we’re talking about market value. This doesn’t necessarily mean it’s the amount you’ll make when you sell your site; that number is determined by what your buyer is willing to pay. Sometimes it might be more than market value, other times it will be less.
Still, knowing the market value of your site gives you a number to aim for. So let’s take a look at what you’ll use to calculate it.
You might assume that the total number of visitors to your site each month/year is what determines the value, but not all traffic is of equal value.
There are two types of website traffic: organic traffic and paid traffic.
Organic traffic is the term used for visitors who find your site through search engines, like Google, Yahoo, and Bing. This is the most valuable type of traffic because it requires little ongoing investment, creating a wider profit margin.
You can figure out how much organic traffic you’re getting by looking at your analytics. You can also see how the amount of organic reach you’re getting compares to similar sites by using an SEO tool, like Organic Research by Semrush. This can help you understand where your site fits into the market.
Paid traffic is any traffic brought to your site through paid advertisements. This type of traffic requires more funding to maintain, reducing the profit margin, making paid traffic less valuable.
Luckily, if you’ve been properly tracking your ads with UTM parameters, it’s easy to figure out the percentage of traffic you’re getting from paid ads.
The ideal split
There is no universal standard for an “ideal” split of organic vs paid traffic, and most investors will expect to spend some amount of money on advertisements to maintain a site’s popularity. However, you want to have more organic traffic than paid traffic, ideally a lot more. Personally, I think it’s good to aim for at least 70% organic traffic.
Total revenue can be misleading if a company spends a lot of money on basic business upkeep. This makes it important to calculate the net profit, which is the amount of money your business earns after expenses. You can figure this out in two steps:
- Subtract your operating costs from your total income – this reveals your gross profit
- Subtract the amount of taxes paid from your gross profit – this reveals your net profit
A high net profit shows that your website is efficient at turning products/services into money, and every year you sustain a high net profit increases your site’s value.
Potential buyers will also want to know how your website makes money. Specifically, they’ll be looking at two things: the number of income streams and the quality/reliability of those income streams.
Number of income streams
A website with only one income stream is vulnerable; a major market change can come along at any time and destroy that income, making the site unprofitable.
Sites with several sources of income, on the other hand, can survive if one or even two of those sources disappear. For this reason, sites with diverse income streams are generally going to be more valuable.
Quality/reliability of income streams
The other factor to consider is how reasonable it is to expect that those income streams will continue turning a profit and/or increase that profit. There are two main factors to consider here:
- Ownership. A program like Amazon Affiliates can change the profit sharing model or even disappear entirely at any time. On the other hand, if you allow companies to buy ads directly from your site, you control how much each ad costs, how long each one runs for, and how long the entire program runs for.
- Past revenue. A buyer is more likely to believe that an income stream is stable if you can provide records of steady income or income growth over a period of multiple years.
The split of these income sources can also be important. For example, if you do run your own advertising program on your site, but the bulk of your money still comes from affiliate links, that might lead to a lower overall value.
Domain “Indexed” age
This is how long the website has actively been indexed on Google and other search engines. An older site is more valuable because it has had more time to earn quality backlinks. Older sites typically also have a longer revenue history to prove that their earnings are reliable.
Another thing to consider is the number of quality backlinks there are to your site.
There are two types of sites you want to have backlinks from:
- Editorial sites. These are links from established news sources, like CNN or Forbes.
- High-traffic niche sites. These are sites in your niche that receive a lot of organic traffic.
Since these sites are considered authorities on certain topics, them linking to your site makes you look more trustworthy to Google. This can help you withstand algorithmic updates.
Upward traffic and revenue trends
The only thing better for a buyer than a steady source of income is a steadily increasing source of income. If you can show that you’ve had significant gains in traffic and/or revenue, this might increase the value of your site.
External factors are other assets sold with the site that increase its reach and profitability. Common external factors are email lists and social media accounts. If you can prove that you have a highly engaged audience in these places, or better yet, figure out your actual conversion rate, this may increase your site’s value.
The final thing to consider is that the person buying your site won’t have it for just one month or one year, but for several. Your site will continue earning money for them over all of those months/years, which means its value is greater than what it earns in one month/year.
Unfortunately, there is no one-size-fits-all multiplier. Some sites recommend a multiplier of 36 months, which is in line with the commonly recommended multiplier of three to five years. Other sites recommend a multiplier of six or more years. And what they want you to multiply varies too: some people suggest you base it off of gross income, while others suggest you base it off of net income. In the end, you need to choose what seems reasonable to you (or seek out a financial advisor to help you figure it out).
How much is my website worth? Two ways to find out ?
Use an online website valuation calculator
The easiest way to get an estimate of what your website is worth is to use a website valuation calculator. These are free online tools that analyze various aspects of your domain to determine the value of your website.
Every website valuation calculator uses a slightly different formula, but generally you can expect them to look at some of the key factors we discussed earlier:
- Overall traffic
- Ranking on Google and other search engines
- Domain age
- Social media visibility (number of shares on site content)
- Quality backlinks
- Income estimates
Some valuation calculators may also offer estimates for things like advertising expenses/revenue or the cost of hosting and the domain.
Pros and cons of using a website valuation calculator
Keep reading the article at CodeinWP. The article was originally written by Dianna Gunn on 2022-05-13 04:02:05.
The article was hand-picked and curated for you by the Editorial Team of WP Archives.