This week has been interesting. You may notice we haven’t blogged for nearly a month…we’re sorry! We had a dilemma and decided to focus all our time on getting the app ready for its beta launch. It’s amazing how software projects can often take on a life of their own, especially if you let “perfection disorder” rear its ugly head. Overall, we’ve decided that an 85% product with a 100% sincere explanation why it’s not perfect is always better than a 100% product launched two months too late.
The beta was launched earlier this week, and we’ve had some really useful feedback, especially regarding the user interface. Thanks to everyone who has contributed suggestions or even just comments so far. For readers who haven’t yet signed on, please do so whilst it’s free, using the box on the right hand side of this post.
We’ve also added a Website Value Calculator (http://flipfilter.com/site-valuation-tool.php) which is one of many modules we’ll be adding to the app over the next few weeks.
Prior to creating the tool, we did some research. There are two methods being used to value a website for sale:
By the perceived value of its domain
In my opinion, ignoring a website’s existing revenue and managing to create a ‘valuation’ is like plucking a number out of thin air. Kudos to companies like Website Outlook for a great script, but I doubt the numbers would stack up at an open auction for small or large sites alike.
Interestingly, our blog was valued at over $3,000 despite only being two months old and having nine blog posts. It also claims we’re making $4 daily from ad revenue despite having no ads … I’m yet to see this money and I’m now feeling hard done by
By financial analysis
The ‘correct’ way to value a site, or at least the only way a valuation would stand up on a company’s financial statement is through financial analysis usually centred on projected or historical earnings.
In valuing a site for accounting purposes, the term Fair Market Value comes into play which will take into account the site’s market and market positioning in addition to its internal factors.
There are however, practical problems in using this method:
- This is not incredible simple to do or to understand. Anyone who has read Sitepoint’s article on valuing a site, and fallen off their chair out of sheer confusion will be able to relate. There are a lot of variables to take into account and you will need to be extremely comfortable with numbers.There are professionals in management accountancy that specialise in Internet valuations and I would highly advise using one especially where numbers over $50,000 are concerned. I recently found some useful free content on www.nequityonline.com which should be valuable to our readers who work with larger site transactions.
- To conduct a complete valuation will require you to have information that you’re just unlikely to have for a website worth less than $10K. With sites like Digital Point often failing to get their sellers to even list the URL of the site they’re selling, getting the 3, 4, and 5 year revenue projections may be problematic!
- In some cases, you just don’t have the time. In valuing your own site, spending even 30 minutes to arrive at an accurate figure is great. On the flipside, trying to value a site that you intend to buy when you’re looking at maybe thirty sites in one day would take forever … or at least a very long time!
As site flippers ourselves, we often just want to know that worst case scenario, we could put a site we’ve bought back on the market, and it would sell for at least what we paid for it, should things not work out. We also often need justification that amount we’re about to bid, however small, is sensible and we’re not just getting caught up in a bidding frenzy.
We’ve created something that is admittedly crude, and nothing to plan a retirement on, but an ideal tool for getting an idea what a site will sell for based on current auction sale values. It creates a price after looking at traffic, revenue, PR, age and TLD (.com, .co.uk etc) and should theoretically get smarter, or rather more accurate, as we collect more data over time. There are some flaws
- It fails to account for factors like design, usability and content (original / plr) which can really only be assessed by a human.
- It will not account for trends or fads.
- At present, it ignores a site’s category, although we’ll update this in a couple of months when we have more categorised data to rely upon.
- Approximately 15% of sites, will completely throw the system of guard. We’re working to develop a way to solve this, but it will become self correcting as we collect more data.
With that said, it still tends to generate a more accurate valuation over a number of randomly picked sites than anything currently on the web – please let us know if we’re wrong, or if you feel there’s another tool that deserves a mention.
Give it a try at http://flipfilter.com/site-valuation-tool.php. Alternatively, the estimated auction value of any site that you view in detail is shown on the financial data tab within the app as shown below.