opinion

Putting a Dollar Figure on Your Website's Worth

Putting a Dollar Figure on Your Website's Worth
Bruce Friedman

Daily, I get asked the question, “what’s my website worth.” And it’s the hardest question for me to answer.

Someone will go to my website and fill out the contact form, put in their URL and say, “I want to sell my site, how much can you get for it,” or something like that. My answer is usually, “I don’t know.”

In today’s market, sellers will generally get between 1.5 to 3.5 times net revenue, depending on many factors.

That may sound funny, but without all the facts, I have no idea what a site or company is worth.

So, first I will ask them for their profits for the last three years. And in some instances, when the site is a free site, I will ask to see their traffic and its trends.

Often, I will get an answer like, “it’s only making $ … a year, but it’s got lots of potential.” Man, if I just had a dime for every website with “lots of potential” I would have long since retired.

Potential is great, but people pay for the here and now. You may have developed the greatest website or concept in the history of the adult industry, but unless it’s making money or generating tons of quality traffic, I’m afraid that I just can’t help you.

Putting “potential” aside for a moment, let’s talk about how myself and more importantly buyers valuate a website.

In the “good old days,” people would pay up to five times net revenue for a website. Unfortunately, I entered the industry after those days were long gone.

In today’s market, sellers will generally get between 1.5 to 3.5 times net revenue, depending on many factors.

This is what determines how much your website is worth:

  1. Is your profit going up, going down or is it staying steady?
  2. How new is your site?
  3. What does your site look like? (This is more of a minor factor. But if the design looks like it was done in 1978, this tends to turn off buyers).
  4. Does your content use current technology, or is the technology of the content old and tired?
  5. How unique is your site?
  6. How much is your type of site or company in demand?

Now let’s face it, if your site looks old and the content is dated, the site is probably not doing very well financially. But there are exceptions to that rule.

So back to the original question on how to valuate a website or company.

If profits are going steadily up, a site should get you between 3 and 3.5 times net revenue.

If profits are dropping like a rock, you are likely to get 1.5 times net and maybe as low as one time net, if you can sell it at all. If profits are steady, 2 to 3 times net profits are quite likely.

Now the other caveats I will throw in are these: 1) Not all sites and companies fit into these categories, and 2) heavy demand to a site makes a difference. These two factors can greatly sway the valuation.

So, a large part of this is being able to read the market.

Now this may sound like a shameless self-plug, but I’m going to say it anyway:

  • You are best served being in the hands of an experienced broker like myself.
  • An experienced broker can give you a good idea of what a company or site like yours will sell for. A broker can also tell you just how marketable your property is in the first place.
  • Brokers know the market, dealing with the ins and outs of it every day. Brokers are likely to save you from making huge mistakes, like the biggest one, overvaluing your property.

I can’t tell you how many times I’ve talked to a buyer, looked at his or her site or company and told them they need to get their house in order before selling. This can be because their site looks outdated, their business is dropping and they’d be better served trying to build it up some more before selling or any number of other factors.

Just the other day I heard from a young guy who has a site and has seen a good amount of success in a short period. But he had a couple of issues that would be a great determent to the sale of his website.

First, his site did twice the amount of business in 2015 than it did in 2016. Why? Because he lost his processing for six months. However, his traffic was consistent the entire time.

He had gotten his processing back the first of the year and based on the first three weeks of processing, his business was absolutely exploding, to the point where if things stayed consistent, he was looking at a 720 percent increase in revenues over 2016.

My message to him was simple, “hold onto your site, keep working on it and talk to me in six months.” Either that or instead of getting X now you could get X times six or seven then.

There are many other instances where I’ve given a buyer the advice to not sell now.

Unfortunately, I also often see the other situation. I talk to a seller a year prior and he is interested in selling. His business has dropped year over year and I advise him that it’s a great time to get out. He doesn’t.

A year later I hear from the same seller whose business is now worth a small percentage of what it was the last time we talked, because his revenues have dropped like a rock.

To wrap all this up, probably the hardest decision a company owner can make is when it’s time to sell. Owners put their heart and souls into their companies and they have a certain emotional attachment.

So, selling is a decision I can’t make for you. I can only advise. But when you do make that decision, do it with your head, not with your heart. If I can ever answer any questions for you, I’m always here to help.

Bruce Friedman is owner of Adult Site Broker, Adult B2B Marketing and Adult Business Consulting. He has been in the adult industry for more than 14 years and in the marketing businesses for more than 40 years. Adult Site Broker helps people sell and buy adult websites, companies and affiliate programs. Friedman can be reached at AdultSiteBroker.com/contact-us/.

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