Web Site Valuation
How Much Is My Website Worth?
Website valuation models are a hot topic with website owners. So, how much is a website worth anyway? We've got the answer.
How much is a website worth? What's the state-of-the-art in website valuation?
Valuing a website is never easy, but there are a growing number of web site owners wondering "How much is my website worth?"
For example, I have a friend who has a website that makes $6,000 per month in advertising revenues.
He indicates that he spends about $6,000 per year on the site in expenses, which primarily involves buying articles written by freelance writers.
He's got about 2,000 articles on his site right now.
He spends about 2 hours per week maintain his site and he values his time at about $100 per hour.
It's his sense that any smart entrepreneur with a little bit of web savvy could buy his site from him and at least maintain the revenue levels that he's currently established. It's also possible that they could ramp up revenues over time. In fact, he thinks he could get the site to $10,000 per month within two years if he continued what he's doing now and just kept adding new content to his site.
Given all of the above he asked me what I thought the valuation of his website was. I'm no expert in website valuation so it was tempting to just say "It's worth whatever somebody will pay for it." and leave it at that.
But as I thought about it, his question reminded me of one of those MBA finance test questions that I used to be able to do. Isn't the website value just the net present value of future cash flows? Don't I need to figure out the cost of capital for this venture and do the discounted cash flows?
The methodology to value the website was too hazy for me to figure it out. It was like being asked a trigonometry question and you can't quite remember the difference between sine and cosine. I was stumped.
So, I decided to ask a few finance experts and see what they thought the site was worth based on all the information above.
Here's the back-of-the-envelope website valuation from one really smart finance guru:
[Hang tight --- I'm still waiting to get the answer from a finance professor I contacted. If you have a web valuation that you think is right for this or have a comment, please contact us with your thoughts. Thanks!]
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