As far as evaluating a site goes, I wouldn't SELL for less than 3x annual, otherwise it's a why bother as I can keep it and the cash flow continues. My biggest fear is what if I can't reproduce that cash flow and that 3x sale cash has run out in year 4, yuk.

Hmm. We're talking businesses here! So what have done with the money you got three years ago? Put it under the mattress? No, you'd have bought other sites that were selling for 12x (one year's income). And today you'd be making three times your previous earnings!

I've said this before: I never cease to be amazed by how people who decry the 12x as being too low aren't active buyers at those rates. Or is it a case of my site is worth/will attract 12x (market rate) but I won't sell till I get 1,000,000x? ;)

You are way low when you refer to 3 yrs income, or worse yet 1 yr (or less). Also, 10-12 mos is not at all standard as someone said earlier. He should send me a sticky mail and I may very well buy his sites for such a low ratio to income.

Some of the big portfolio buyers are routinely paying 8 to 10 years income on average (perhaps more).

Some of the big portfolio buyers are routinely paying 8 to 10 years income on average (perhaps more).

that's why i related the potential price to the number of marketable unique visitors to obtain a reasonable figure.
it is my belief that the raw material of attracted and attentive eyeballs will be of increasing relevance in the years to come.
so in my case the number of uniques/month matches exactly the abovementioned site valuation principle.

[edited by: moTi at 6:11 am (utc) on Nov. 12, 2006]

I never cease to be amazed by how people who decry the 12x as being too low aren't active buyers at those rates

I never said I wouldn't BUY at that rate, I just wouldn't SELL at that rate.

So far my income from the site has increased substantially every year so 12x doesn't cut it for me as a seller, but as a buyer, it's another story.

I never said I wouldn't BUY at that rate

So, how many sites have you bought recently?

I often hear on WW how 12x is too little etc., etc., but everybody who says that seems to be more on the "holding" or "selling" side, never actively "buying". And, of course, it's in their interest to talk prices up, not down.

And it's in buyers' interests to talk things down, so let's look at the market itself...

12x is reasonable for most web businesses because of the higher risk vis-a-vis the average B&M. That factors into the price. If 12x really was unreasonably low then laws of supply and demand would ensure prices were pushed up because people like you would be flooding the fora with WTB posts.

He should send me a sticky mail

He may well do but Christmas has come early for you :): I can disclose that there are many sites going at that kind of multiple. If you wish a list of locations where you can find them, sticky me (as mods may not like a public link to the list).

Every website is different, you can't use the same rule to price them all.

A spammy website that someone has just switched a few graphics on and and put a new domain name on top may only be worth a years earnings if that. A website that has taken 10-20,000 hours to build has rock solid traffic is not going to sell for a years earnings.

Pricing standard for businesses(not Website) is I believe 7x yearly earnings. Allowing for a higher volatility on the internet may reduce this a little to say 5x.

He may well do but Christmas has come early for you :): I can disclose that there are many sites going at that kind of multiple. If you wish a list of locations where you can find them, sticky me (as mods may not like a public link to the list).

OK, please send me the list of sites listed for sale as I would like to buy such websites. However, in addition to paying 12x income or less, I also require the domain name to be non-brandable and be an actual term containing known keywords and also get a good degree of direct navigation traffic.

I'll sell everything for 5x yearly. Anyone buying?

Well, I've been in this type of field and really, not much of what's been discussed so far covers all the significant factors when buying a business.
Firstly, it is gross income, expense and net profit that are the headline numbers to look at. Then you run an analysis on the expected numbers over coming months/years. This is not just income, but your expenses as business owner, growth and risks.
Anyone who values a business at 12 months profit expects that within about 18 months, there will be NO profit, no value in the buinsess and no growth potential. Or they think you are stupid/desperate.
OK, if your site is only earning $10 a month profit then, well take whatever. $100 bucks may seem good. But heed this warning: a friend owns a site that was earning $10 a month a few years ago - now it earns about $300 a day.

To the original question.
1. If they are serious, they will ask to talk about it not email (this is a sign of someone more serious, but wait for them to offer first)
2. They would already know a price to pay, so say to them: make me a starting offer and add this will tell me how serious you are. Also ask them how they decided your site was worth buying.

Now. Here is what you need to look for:
-Did they supply meaningful contact details in the email? Eg, a URL to a decent site, proper email domain (not Hotmail/Gmail). No? Delete email
-Are they asking too many confidentail questions up front? Yes? Delete email
-Did they address you by name? No? Delete. But yes doesn't mean throw caution to the wind.

Personally I think it is just scam central.

Then you run an analysis on the expected numbers over coming months/years.

good luck with that!

There are several factors to consider when buying a website:

- the traffic development within the last 5 years.
Only buy websites with a constant growth without any hectic
movements. Manye sell website with a huge and sudden traffic spike
or that gradually decrease in traffic. Some people spend money on
advertising to get a traffic spike and then they sell it.

- the number of competitive websites. The more the better. If there is none - the likelyhood of someone suddently appearing is high. If there are already lots of competitors and the traffic is still growing, the website is doing something right.

- the growth potential. some sites havent reached their potential yet...some are already at the maximum.

- the software and how much additional programming it would require

- the legal things....whether it is safe or not..sometimes people sell it when they are being sued.

OK, please send me the list of sites listed for sale as I would like to buy such websites

If you really wanted to buy you're more likely to have stickied me (see my offer) than posted in the thread to make a point ;)

I'll sell everything for 5x yearly. Anyone buying?

No, not based on that information they aren't ;) However, if you provided more elaborate information including quality domains; vast volumes of quality, non-monetised content; a near monopoly position in your field; exclusive advertising contracts; vast and rarely used opt-in list of top professionals; and .... other assets you may well get 5x. But it's rare; you'll likely need a buyer who's convinced he can make that amount back in the next 12 months.

not much of what's been discussed so far covers all the significant factors when buying a business. Firstly, it is gross income, expense and net profit that are the headline numbers to look at.

Gross income and expenses are rarely important unless, for example, there's substantial opportunity for cost cutting. Net profit is what the multiple is about (and cash flow, which is not the same thing as NP).
As with offline businesses there are sometimes opportunities and tax advantages buying going concerns with large book losses... but that's a digression

This is not just income, but your expenses as business owner, growth and risks.

That seems to miss one major factor: the umbrella term "expenses" is often understood to exclude owner time. Net profit isn't net profit unless a true value is put on the time spent on the site and that is deducted from the gross profit.

proper email domain (not Hotmail/Gmail). No? Delete email

Owners of the better properties, expecially communities, won't always give you an email address at their main domain. Ignore them at your peril. It sounds like you get a lot of scam mail offering to buy your site. Site buying is not usually the subject of SPAM and phishing mail so maybe you could lift your guard a bit.

Every website is different, you can't use the same rule to price them all.

I agree.

Pricing standard for businesses(not Website) is I believe 7x yearly earnings. Allowing for a higher volatility on the internet may reduce this a little to say 5x.

That's a guess that's not borne out by the facts; ask those who are buying/selling/brokering web businesses on a regular basis. I'd be interested if you have a few examples of sites selling for even half that (and costing under $250K).

...Here is what you need to look for:
-Did they supply meaningful contact details in the email? Eg, a URL to a decent site, proper email domain (not Hotmail/Gmail). No? Delete email

Do not agree with that being correct all the time. I have received some legitimate offers to buy domains from people who use free email accts such as Gmail and Yahoo and little in the way of identification, some of which turned-out to be substantial offers. What harm does it do to at least reply?

Some big firms have an employee, agent or advisor send out email offers from personal email addresses as they do not want their identity revealed right away. In addition, others use free email accounts for other reasons.

For example, if I send an email using my domain based address then right away the recipient looks at the website in the email address and starts wondering if I have money or not, and things like why would a financial website owner want to buy a domain involving say a medical term or whatever?

I use my Gmail address (and first name only) and never a URL or personal information to make offers on a regular basis and almost always get a response, and sometimes a good transaction. In fact, one very nice person recently sold their domain from my semi-blind email and said I could have it for $50 less than my offer price!