For the going market value, it's ranging between 1.5 to 3 years revenue.

Sometimes you can get more. Depends on the broker, buyer and seller ability to negotiate.

That 1.5 to 3 years I think is from the oldschool market value of bricks and mortar. I've seen it put forth before, I don't think it applies.

The value of a website is more like 'whatever you can get for it'. There's too many intangibles that don't translate into a regular formula like a bricks and mortar - like for example where your traffic comes from. Are you going to sell your rankings for 5 years in the future? no way.

I've sold websites in a competitive niche for 6 months revenue, and been lucky to get that (that was in a bidding war too). And I've sold a forum in an non-competitive environment for 40 times annual revenue.

In the first one, the industry was full of notoriously 'thrifty' individuals. In the second, they were buying the community and they couldn't have replaced it and any price. How much would it cost to rebuild webmaster world? You'd have to buy it because it'd be virtually impossible to rebuild it. If someone wanted to own the WebmasterWorld community, they'd have to buy it at some cost, they really can't rebuild it. And 2X revenue isn't likely going to do it.

On a smaller scale, about 2 years ago I turned down an offer of $2k for a generic keyword domain I owned - it was {niche}guide.com and someone foolishly went and wrote a book called {niche}guide. I asked for $5k. He's now on the .org (and not ranking) and my well backlinked .com ranks well - even though it's never made a $1. I don't care, the domain just sits there, I don't need to give it away for cheap, ever. Frankly the author'd have made his $3k back in booksales easily if he'd have bought my domain. See? Sometimes both the buyer and the seller act stupid. :)

So if you're looking for a formula, I don't think you'll find one that's reasonable. I try and best to determine a) what's my lowest selling price - if I'm interested at all and b) what's their maximum purchase price. Use that, not a formula.

You're right, I should include more details. The traffic comes 55% from other websites, and this is all organic. I did not spend $1 on getting the traffic, only in content creation. Good content created a lot of good links and a lot of people come to the site. Content is updated daily so I assume this stream would never end unless a very serious competitor shows up in this space. 35% traffic comes from search engines and rest %10 are repeat users coming back to the site.

Financing is about 20% from advertisements and 80% from users paying for various additional content - site is using a "freemium" model - users get something 90% stuff for free and 10% is payed for.

My estimate is that in the next 5 years, number of visitors can only grow. Some very rough estimates say that we have covered only 15% of the total market, i.e. some 85% of future users are yet to discover we exist.

Thanks for all the comments so far. Maybe I should just think about how much money I would want from this and not try to calculate anything.

My reaction to that is that it looks like a stable, cash cow business - not the norm online. I'd not let it go cheap, if it all - I'd want on the high end.

Think of it as an annuity. How much do they have to pay you so that if you bought an annuity or invested, you'd have the same revenue stream. If your site earns $50K per year, and you figure you can earn 10% on investments, then you'd need $500,000 for the site. And that's at 10% which is likely a lot riskier than what you currently have. So if you're making $50,000, why would you let it go at $500,000? Well, if you had a site that was primarily dependent on teh search engines, it might be less risky to have $500K in hand than the site. But in your case, having the $500K in hands sounds like it's more risky for you. Plus if you keep it in a growth market you'll have that $500K in 5-6 years anyway. Take the $500K and in 5 years you've got whatevers left. Keep the site and in 5-6 years you've earned the same $500K and still have the website.

Balance that against how much it will cost someone else to rebuild the site. Can they take your clients if they spend $500K?

Any time I've negotiated a site sale, I've done one of two things. If I thought they weren't serious, I would not give them a number - make them give you a number. It'll be a lowball, and you can just say 'thanks, not interested, we're not even close'. If you think they're serious, I'd still try and get a number out of them - but I will sometimes provide a drop-dead number. Here's what it's worth to me to sell. In order to avoid hard feelings, I will also tell them that I appreciate that this may not be worth it to them at that price, but nevertheless, that's my bottom line.

In short, the right answer is whatever you can negotiate :)

Also, just to muddy the waters, let me recount another tale. I had a client who was offered in the low-mid six figures for their site by Yahoo about a decade ago (might've been more). Nice keyword rich domain. They declined, with stars in their eyes.

Today, the site earns a small living, primarily because I've pushed and guided them through the years. Without substantial effort on their part they'd be lucky to see high 5 figures for the domain today.

Good points. Well, if a potential competitor spends something like $30k in the first year, I assume he could get about 30-40% of users to switch or perhaps use both websites. He'd need at least 4-5 years to get that money back. However, there are some tricky bits that are specific to this site that make it somewhat defensible, and I doubt anyone would invest just to get a part of the market. I investigated a little about this buyer, he is definitely not a builder type, so he'll probably buy or skip - he has many websites in portfolio and all were acquired.

Thanks for all the ideas, I guess I will go with drop-dead number first and see what's the reply :)

Good luck!

don't quote - he contacted you, tell him to make an offer.

Thanks, but too late. I already sent an e-mail with my (overestimated) offer.

Of course, he refused. Then I had to beg to get some figure, as he kept saying that this is way more that he anticipated and doesn't want to be embarrassed. Finally, he gave an offer: about 25% of what I asked for. Although this is still a nice figure, I will probably not sell. I would for 50% of what I asked for, but this is not enough.

Oh well, this is the first time I got some offer to sell a website, and I learned a lot. I guess topr8 is right, I should have told him to make an offer and then ask for more. Perhaps this way I would get close to the desired price. If I agree now, it would look like I'm not a serious business person - trying to rip him off first and then selling for 25% of the asked price.

Thanks for all the replies, this has been a great experience for me.

For the going market value, it's ranging between 1.5 to 3 years revenue.

absolutely wrong based on deals read here.

absolutely wrong based on deals read here.

That was helpful...

I'd be very wary of providing anyone with a quote unless you know exactly who they are, their company name, and that company is in the busness of buying up websites. I supect a lot of competing webmasters phish for information using this type of tactic. That is to say, they are trying to figure out how profitable a website is...

Thanks, but too late. I already sent an e-mail with my (overestimated) offer.

Of course, he refused.

Not of course :). That's what I mean, there's no formula.

In the case above, where I said I sold a website for 40X earnings? I made one phone call, told them I was selling the site for $X and we weren't going to negotiate - it was a special deal for them. If they didn't take it at that price, I assured them that the site was going to go to auction.

They didn't negotiate, they bought :).

The tricky part isn't finding the forumula. The tricky part is realizing there's two values - the buyer's value and the sellers value and they are working from two different sets of assumptions. And in the middle, everyone's greedy - sellers demand more than the site's worth, buyers want a steal. (Like 'potential'. Sellers all want that worked into the price. It's not for the seller, future potential is for the buyer, not the seller).

Well, one learns something new each day. To add more info, I asked for $200k (based on $25k revenue stream it's 8 years). He offered $45k, but I believe the site is worth at least $100k in the long run. If I got $90k I would agree to the offer. But the last sentence you just wrote makes me think... if $100k is the real potential for this website in the long run, is it really o.k. to ask for $90k when the buyer takes all the risk? Maybe somewhere, deep inside, I don't really want to sell it as this is the biggest and most profitable site I built so far ;)

As for the calcs offered, some are valid, most won't fly, but then again it's not a seller's market these days. Wrong time to sell "everyone is broke"! so don't expect much.

More accurate "offer" is how much it will save you to get rid of the website starting with server/host costs for two years, add personnel hours/cost of operations to maintain, and all expected losses in returns (if product based), times 10----and then GRAB AND RUN if they say yes!

>> For the going market value, it's ranging between 1.5 to 3 years revenue.

absolutely wrong based on deals read here.

read "here" - where?

OP states: To add more info, I asked for $200k (based on $25k revenue stream it's 8 years). He offered $45k... If I agree now, it would look like I'm not a serious business person - trying to rip him off first and then selling for 25% of the asked price.

So the only reason here is that he needs to seem serious. Otherwise, the going price would be 25% of the asked price - which is about 2 x revenue.

DISCLAIMER Follows:

Sometimes you can get more. Depends on the broker, buyer and seller ability to negotiate.

I supect a lot of competing webmasters phish for information using this type of tactic. That is to say, they are trying to figure out how profitable a website is...

Might be, but currently many online tools would provide site traffic date and keyword domination figures, which can easily be translated to a rough estimate value.

By contacting the site owner you also not always get to know the truth. See wheels response #:4273594

While selling a site I would ask myself Why I created the site?

1.If it was for long-term gains (pension plan sort of), then I might sell it for 25-50 times the revenue I did expect in a year's time. And yes will negotiate hard even for a higher value....

2.If I created it just to improve my portfolio(or any other non-serious reasons) with no definitive plans for the future growth, I might sell it 5-10 times of actual cost of creation and maintenance. And again as @wheel said - will negotiate...:)

Might be, but currently many online tools would provide site traffic date and keyword domination figures, which can easily be translated to a rough estimate value.

Do find those to be anywhere close to an accurate estimate? We earn in a day what some of those websites say we're worth...

So the only reason here is that he needs to seem serious. Otherwise, the going price would be 25% of the asked price - which is about 2 x revenue.

And you'll notice it didn't sell for that :). In other words, websites don't sell for 2X revenue.

In this case likely too much emotion going on.

One consideration not mentioned here is what you will do with the sales proceeds. It's very important.

For example, if you reckon that a price of 2x annual income can provide you with enough money to create a far more successful site earning 10X in two years then that should alter your view. Don't concentrate too much on what the buyer is getting, consider more what you can do with the money. Obviously, also try to get the best price.

Might be, but currently many online tools would provide site traffic date and keyword domination figures, which can easily be translated to a rough estimate value.

Do [you] find those to be anywhere close to an accurate estimate? We earn in a day what some of those websites say we're worth...

I did not mean the "site is worth" guesswork stuff.

I meant traffic stats like alexa, compete etc. Additionally, there are many online tools that would provide data on keyword domination.

One of these may be wrong. Two can also be mistaken. But when all suggest your site gets 1 hit per day, I won't believe your inhouse stats that it's 1000 per day.

Repeat: these figures can easily be translated to a rough estimate value.

Do find those to be anywhere close to an accurate estimate? We earn in a day what some of those websites say we're worth...

Most of those websites are way off the mark. The have some simple math behind like visitors*links*whatever, which makes almost no sense. I say this because it's usual that some of my websites are given 1000 times their revenue and some sites are given 1/1000 their revenue. Visitors and links cannot be computed into revenue directly. You can have a highly profitable niche website with not so many visitors, but being a niche you can attract companies to sell relevant ads directly and earn much more than on general-public website with GoogleAds od similar program.

Sometimes I'd really like to contact some of those websites' owners and say something like: You think my website is worth $2000. Ok, give me $1000 and site is yours. :)

But when all suggest your site gets 1 hit per day, I won't believe your inhouse stats that it's 1000 per day.

This is exactly why I only trust 3rd party statistics like Google Analytics. This makes me wonder if GA is becoming the standard to compare website these days. I'll start a new thread about that.

Don't concentrate too much on what the buyer is getting, consider more what you can do with the money.

Very important point. You have to pay taxes on it.
Go and seek some advice from an tax advisor before you sell.