What is the standard ratio of valuation?

[mshel]

What is the standard ratio of valuation (if there is one) between a site's monthly revenue and the amount that the domain/site is valued for sale?

For example, if xyzsite.com is bringing in $1,000 a month in revenue,

what is the calculation for the sites' for-sale value
(besides the value of the domain name itself):
$1,000 x 12?
$1,000 x 24?
$1,000 x 36?

Also:

How many months does the site need to show that level of revenue before the calculation can be used?

If the site is clearly showing a strong trend toward increasing monthly revenue, how is that weighed into the price?

Thanks so much for your help!

 

[bmugford]

I am not an expert at revenue multiples, but in general there are many underlying factors.

1.) The Domain Value itself. Is the domain built on a domain like Mortgage.com or something like MyMortgageRateFinderDirect.net
2.) The steadiness of the income, and can the income be easily projected into the future.
3.) How the income is made. Traffic stats, CTR, etc.

 

[nielsencl]

You should look into how the value of an actual business that is for sale is determined. Much of what is used should apply to domains/sites. There are a number of factors including inventory (traffic), net profit, expenses, customer list, employees, and things like brandname/trademarks.

In general, a business will sell for 6 months to 24 months of the net profit, but that is just an average. Many domain and web site sales that I see here are at the high end or got to 36 months income. I think that is pretty crazy, to buy a business that may not break even for 3 years. That's a lot of risk that the business won't decline for some reason in the future. Since you are breaking even you have no profit to invest in the business or to save for emergencies.

At least with a domain name or web site your expenses are pretty low.

I think, and I am not sure, that it's best to have a year's record of income history, but that 3 months is pretty good. The problem with a shorter length of time is you amy not be able to tell if the income is coming from something the owner is doing, like sending traffic to the domain or site. Most people that do that are stupid and easily detected, but smart ones may be able to hide that until you buy the doain and the traffic goes away.

And increasing monthly income would be very nice to see, but again where is it coming from and is it going to last? Maybe the owner is paying for advertising that will stop when you buy the domain. If it is a web site you should ask for access to the stats for the past year. If they say they are not available that's a bad sign. If you get the stats you can see a lot of information about where the traffic is coming from and what that traffic does on the site. Do they just leave after seeing the home page, or do they spend some time looking around?

Good Luck!

 

[Dean]

Another thing to consider about websites is unique content. A lot of people on here for example just make proxies, directories, arcades, etc. which dont take any real effort. Unique content on the other hand is more valuable as it gives the site more potential IMO. Its not just another 1 in a million of identical sites.

 

[Marck]

The true quality sites that earn reliably year after year almost never go on the market because no one will pay amounts like 5+ years rev.