Value Websites are sometimes approached to value a website. Websites are often a valuable part of the assets of a business. Sometimes a website may be offered for sale as part of a business sale, or independently of the wider business.
How to value a website?
The theoreticians suggest various approaches. One uses the typical business valuation method of isolating and assessing the net annual revenue generated by the website and multiplying this by a factor - usually between 0.8 and 1.6 or more, in the case of websites. The multiplier chosen will reflect the quality of the website against factors like age, usability, search engine optimisation, copy writing and other design factors.
Another methodology considers the value over time of the key words and phrases that generate 90% of website hits. It may be that there are only 3-5 of these that produce most hits. These key words and phrases are then assessed for value using Google Adwords keyword tool. The valuation continues from there and makes adjustments if traffic is being generated via Adwords rather than organic SE listings. Other expenses need to be assessed before a multiplier as in the first method above is used to determine final valuation.
Value Websites' Approach
As website designers with SEO skills, Value Websites will generally use a third methodology when valuing a website....
In essence, this involves assessing how much it would cost to replicate (professionally) the website being valued, and then adding amounts to account for the value of the search engine optimisation done to achieve the traffic flow of the website at the time of valuation. Usually there will be a time lag to achieve this website performance. The value of this (in terms of lost sales) needs to be factored in, alongside an assessment of the value of the time and resources contributed by the owner or their agents to complete the website project.
The formula to complete a valuation using this method may look like this:
Website Value = professional website design & development replication fee + additional SEO work fee (as required) + lost sales during design and traffic generation period + owner expenses from project conception to equivalent traffic flow point.
E.g. The Value of an eCommerce website with 20 products having colour and size variations and linked to PayPal payment processor with 15 web pages, plus product pages making $1,000 net sales each month may be valued thus:
Website Replication = $2,500
SEO = $1,000
Lost Sales (4 months) = $4,000
Owner Costs = $1,000
Website Valuation = $8,500
P.S. An alternative way to assess the Lost Sales component of the valuation is to assess the cost of purchased Adwords for the design and traffic generation period.
Do you have experience or knowledge of valuing websites?
We'd love you to comment on this News post.
Terry - Value Websites, Wellington, NZ.
Terry Alve - Value Websites Limited