While I am about it, revenue multiples are not important: profit multiples, after deducting the value of the proprietor's unpaid work, adjusting for risk and growth (like proper investment appraisal), are the right way to do it.

It's fools and amateurs who don't account for their own time. You seem to be in completely agreement with my position from earlier.

but, in general, people do not sell good sites.

That's where we do differ. Not only do they sell but I also get to buy. Regularly. I will admit that it's not easy for the average person to find a good site to buy - and that's exactly how it should be. Before the internet I would spend 200-500 hours looking at opportunities without finding a business worth buying/taking a large equity stake in. Why should finding a good online business be any different? I've got tools I've developed, tricks I've learnt, and systems I've put in place over the years. Contacts play a big part too. For example, there's a UK BusinessForSale magazine - the biggest and best known - and they have a website which lists thousands of cafes, pubs, newsagents ... that sort of thing. They've got a new sector they're targeting - online businesses. I'm writing their foreword, I'm behind the first newsletter they're sending to a very large existing database, I'm advising them on their launch and how to appeal to the new marketplace etc. I'm not taking a penny in fees. Guess what I'm getting out of it ;). I own or have arrangements with online valuation tools and get private notifications when sites meeting certain criteria are valued, giving me a head start over other buyers (and a chance for an exclusive). etc.

You don't just walk into Sitepoint and expect to pick something up. I've written Sitepoint's Ultimate Web Site Valuation Guide (which is responsible for generating its own PM enquiries from people seeking advice/valuation/help with selling), and I have bought the occasional site from Sitepoint. But you have to think out of the box if you're serious about buying. Otherwise it takes much longer per purchase.

If you don't see a lot of good sites coming up for sale in public it's because there are people like me working in the background to reduce the number. :)

Not that others don't get to make some great buys. If you're using SP, just have a browse through the sites that did sell. Thousands of sites sell there every year and that's just one of the many places where business is done. I've got a list of other places on one of my sites that talks about these things but I don't think the mods would appreciate a link.

Ultimate Web Site Valuation Guide

That's a great resource. I must have read it over four or five times.

I will admit that it's not easy for the average person to find a good site to buy - and that's exactly how it should be.

We do not differ here. What I am saying that the bulk of what is available, and even what is sold, are sites that are past their best, and are not really sustainable businesses.

It seems to me that you are applying a lot of skill and hard work to finding the right sites to buy.

Before the internet I would spend 200-500 hours looking at opportunities without finding a business worth buying/taking a large equity stake in. Why should finding a good online business be any different?

You would expect online to be a bit more efficient - the point of the technology is to exchange information better.....

I had a look at the Sitepoint sold sites as you suggested - both "established" and "premium". The numbers were interesting, but hard to assess without profit numbers. The range of revenue multiples is actually very broad (as they should be).

It still seems to me that the proportion of businesses in decline, or that I doubt are sustainable, is higher. Not that they might not be worth buying at a low multiple.....

Thanks, Atomic.

The bulk is junk, always has been junk. I went to a boot sale (yard sale) and though 99% was junk I bought one item. When you went earlier you thought 99% was junk but you bought a different item. Once you've removed all the horses for all the courses, there'll still be junk. But the antiques expert who picked up the painting we both sniffed at made a couple of million dollars.

Online is more efficient in some ways but less efficient in others. Almost no websites coming up for sale have an auditor I can go to for answers. Unlike the local hair salon for sale, I can't drop in and have a chat with the punters. Websites have risks that offline businesses don't and require a completely different set of due diligence (which I've covered quite extensively on my site). You don't get sellers giving you their profit figures in SP. You get sellers giving you some figures. You've got to work out yourself what you think the profit is!

But there are some great deals around even if you are jumping in today with no prior experience in buying websites.

As you say, the multiples are quite broad. You can't expect a proxy to sell for the same kind of multiple as a blog which again goes for a lower multiple than a comparable content site. That's why when I put together the graphs for the SP article I divided all the sample sites into various categories to show current going multiples.

There've are some very good threads here on the issue of Web Site Valuation, Sale, Buying etc. And they're good not just because I've commented in them :)

How Much Is My Website Worth [webmasterworld.com]
Selling Your Website For a Decent Multiple [webmasterworld.com]
What Is A Site Worth [webmasterworld.com]
How Much Is My Adsense Website Worth [webmasterworld.com]
Where To Sell a Website? How To Go About Selling It? [webmasterworld.com]
I'd Like To Buy Your Site [webmasterworld.com]

Thanks for the reply oddsod. It is interesting to get the viewpoint of someone who has experience of buying other small business (listed companies, which I do have experience of, are very different.).

I have seen your site before, but I took another look at it, and found a quote that comes close to agreeing with what I have been saying:

Truth: If as seller you could really see potential you wouldn't be selling the site.

Of course this has a lot to do with the lack of information and difficulty of due diligence. You can get a high valuation for the IPO of a fast growing business because buyers can verify its performance and potential. If due diligence is limited, you have to be more conservative in what you pay - but that means that someone who has a really good site will not sell.

Well the point behind the quoted text is that buyers need to discover the potential themselves. Trying to ram "potential" down a buyer's throat is counter productive.

There are some cool ways to do due diligence on websites. For example, when you don't trust server stats you ask for Google Analytics access (as javascript logs are more accurate). What if he doesn't have GA? You can still get js level of accuracy as many sites have other js on the page - like counters, Adsense etc which can be combined with data from elsewhere, even Alexa!

You'd be surprised at how much you can learn about a site with just a little digging. One day I'll write a long post here on DD.

Well said oddsod. You've got some good posts in this thread. Nicely done....

would I sell for that much? yes
would I buy? no.

If you have only ONE site valued at 85k per year, selling it for 285k is not always the best idea, depending on your situation.

But, if you have only one such site, you may wish to diversify and build your portfolio so your sole income doesn't depend on just one supplier, Google.

Hey, you never know... Although it doesn't seem, Google might one day have the same face value as altavista.

Hey, you never know... Although it doesn't seem, Google might one day have the same face value as altavista.

With making a live on the web, your "cheese stations" can get shut down or moved around all of the time.

I just read through the entire thread and the comments all seem to assume the new buyer will be able to continue the site with AdSense ads without difficulty. Is that a safe assumption?

What exactly is meant by "AdSense website?"

Is it a site that exists solely to display AdSense ads. Is it a site that would have a much lower value if AdSense were not on the site?

I don't know if they still do, but a site created for AdSense was specifically prohibited in the AdSense TOS at one time. We've heard recently of delays in getting new accounts established. Or someone calling attention to a site for some reason and getting one of those "we don't like your business model, goodbye" messages from Google. Add something like this to your account and all your stats increase overnight and that could be the thing that calls attention to your account and causes Google to take a look.

I think there are some factors that would help to determine the value that haven't been mentioned yet. For example, will it pass AdSense muster if given an individual review?

Are there a lot of "articles" on the site? The potential buyer better spend a lot of time checking a number of those articles to make sure they weren't "borrowed" from somewhere else. The value about disappears if you get a DMCA notice a week or two after you become the new owner.

Or for that matter, maybe the seller is trying to sell fast because there are already DMCA notices pending.

Is the site depending on some type of feeds that aren't supposed to be used for commercial purposes?

Does it have a forum that has topics in violation of AdSense TOS that just haven't been caught yet?

I think a careful evaluation is needed to determine if the site is on solid ground or on sand that's about to shift.

FarmBoy

Agree with Farmboy. I have bought a few websites and it has not been easy. Some had hidden code lurking that took weeks to detect and was designed to provide links to spam websites. Another was hosted on Yahoo and it was nearly impossible to transfer it to another host.

I've been buying and selling web sites (mostly selling) for years, totaling about $500,000 worth of transactions.

The only thing I have to add is that out of all the sites I've sold, only two are still in operation, and only one is profitable (They were very profitable when I sold them.) I didn't pull any tricks and I truly wanted the new owners to succeed, but few people have what it takes to run a web business even if a great one is handed to them.

I think it probably takes a team of specialists to take over a large & profitable web site successfully these days.