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Price expectations if selling domain/website generating High £xx,xxx profits

Discussion in 'Selling Domain Names' started by mart1n19, Sep 17, 2014.

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  1. mart1n19 United Kingdom

    mart1n19 Active Member

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    Hi folks,

    interested in finding out how you would judge what to expect when selling a website/domain.

    Would you base on xx months earnings, domain value or both added together?

    Reason for me asking, Is that I constantly get such different opinions on this.

    I've had some offers recently for a premium domain
    (one of the best .co.uk gambling domains ) which lets say generates high end £xx,xxx profits each year.

    I know there's not such a thing as a "Right" answer but let's just say if you had one of your own websites generating high £xx,xxx profits each year, what would be your tempting end-user figure to sell for if the offer come along?


    Cheers!
     
  2. Domain Forum

    Acorn Domains Elite Member

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  3. newguy United Kingdom

    newguy Well-Known Member

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    2 or 3 times yearly income maybe, though it would depend on how stable the income is. If it's been a successful site for several years maybe more?
     
  4. mart1n19 United Kingdom

    mart1n19 Active Member

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    Very true that's a good point. Thanks for the comments.
     
  5. SF

    SF Well-Known Member

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    Yes thats normally how it works
     
  6. bensd United Kingdom

    bensd Well-Known Member

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    Surely at this level it would depend on profit as well, not just turnover?
     
  7. mart1n19 United Kingdom

    mart1n19 Active Member

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    Thanks yes I agree. Before I sell anything I would be taking profit levels into account. Crazy to think people wouldn't, but I know all buyers don't see it this way when making offers.


    Cheers
     
  8. Retired_Member38

    Retired_Member38 Banned

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    Yes of course, it would be silly to value something based on turnover. If anyone wants to buy a massive turnover business I have a huge one for sale - turnover £200m a year. I'm not quite sure on its long term viability though as I'm selling £10 notes for £9....


    This is by no means an exhaustive list but some points off the top of my head that could influence price:

    • What does the future hold for the niche? cdplayers.co.uk and dvdplayers.co.uk ended up obsolete. Is this a risk here?
    • Legislation. Self cert mortgages were banned, instantly making a lot of websites worthless overnight. Is this a concern?
    • Is the site making heavy use of a tactic that is likely to cause problems later? ie guest posting in bulk, spam links, etc. If you've used these tactics too much to create a 5 or 6 figure income then your site very well could be worthless as a purchase option as its just too much risk to take on.
    • sort of related to the point above. How clean is your link profile? Something with dozens of links from university sites, newspapers, BBC, etc etc is far more interesting than something you created solely from buying links on Acorn.
    • Is your site cloneable? Many times I've been offered sites for sale that make say £2000 a month. But the website is a free template, the content would take 2 days to make something better, and the back links are copyable and would maybe cost a few thousand £ to do. Why would I possibly buy your site, I could make my own better one for less and likely outrank you. (on the flip side of this, if you're the seller then you need to seriously consider whether you want to list it / disclose income / disclose backlinks etc
    • Can the site be sold further up the food chain? If you're making £1000 a month but this comes from selling leads to someone else making £2000 a month from the same leads... then you're far more likely to get the multiple you want buy selling upwards rather than to someone doing the same as you. your 24x profit is only 12x profit for them...
    • How fluid is the market? If you rank for generic phrases and there are 10 different companies you can sell the product to, then thats good. If you're selling a specific item like a specific football teams tickets.... if they cut you off then your site is finished. If they choose to pay you less then your income takes a nosedive overnight as you have nowhere else to go.
    • How much room is there for improvement? If you're asking for 24x profit and you're 1st for every industry term, how am I going to accelerate getting my cash back? I don't actually want to buy a webs tie 1st for everything here... I want to buy one that I can improve some of the key phrases and quickly drop that to 12 months or whatever.
    • How much reliance do you have on one or two keywords? How defendable are these rankings? If 50%+ of your income comes a small number of keywords, how likely are you to be able to hold these positions? If an industry leader realises how valuable they are, can they take those rankings from you easily?
    • spam/negative seo. Are you running a risk of just being burnt completely? If there are lots of spammy affiliates/criminal hacking etc going on in your niche, then the answer is almost certainly yes.
     
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  9. mojoco United Kingdom

    mojoco Well-Known Member

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    In addition to Monkey's points there is always personal circumstance and opportunity cost along with how much you ma need the revenue.

    For example lets say you can sell at 3 years revenue which is equal to £300k

    Some would rather continue taking the regular income, it may continue for many more years, likewise it could come crashing to a halt rapidly.
    Some people will jump at the opportunity to bank £300k.

    Does the seller have a chunk of money sitting on deposit, or broke with a stack of bills to pay.

    Will the money be used to buy a property for family security, invested into a once in a lifetime business opportunity, or squandered on cars and holidays. There are far too many variables, but largely I would say that it it depends on the sellers circumstance.
     
    Last edited: Sep 17, 2014
  10. mart1n19 United Kingdom

    mart1n19 Active Member

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    All very good points, a lot will depend on the product/service & it's long term future. Likewise it the sellers desire aswell. Many different factors in what to be looking for.

    Interesting reading, thanks for the comments people.
     
  11. julian United Kingdom

    julian Banned

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    For me 2.5 x profit

    Personally it depends a lot on whether revenue is generated via adwords, organic, a mix of both - or some other way in final valuation factor.

    + all the other factors mentioned.
     
  12. namealot United Kingdom

    namealot Well-Known Member

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    So many variables it’s not possible to accurately define but if buyers approach you to sell they tend have a firm figure in mind and it’s pretty hard to convince them it’s worth more? If there using there funds to purchase risk/return trade off is often lower than with others hard earned :)
     
  13. mif

    mif Member

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    (Yep, some multiple of earnings / profit.)

    What about the value of the name. As in a 'high quality generic'. Have people found that the coolness of the name itself has significant value, over and above some 3 x profit calculation?

    I don't mean between Domainers and SEO-tarts, I mean selling to end users.
     
  14. Aegean

    Aegean Active Member

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    Theres no way my client would wait 3 years before any ROI. He just wouldn't.
     
  15. mif

    mif Member

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    Then he is expecting the internet to work differently from the real world.

    If you wanted to buy a corner shop making profit of £20,000 a year - it will be valued at 3 x profit. You can argue whether it should be 3, or 2, or 2.5. But it ain't going to be £10,000.
     
  16. Aegean

    Aegean Active Member

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  17. Brassneck United Kingdom

    Brassneck Well-Known Member

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  18. Aegean

    Aegean Active Member

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    Normally here in Scotland its 12-14 months + goodwill if applicable. Thats been the case for my friends that own businesses, such as hotels, a garage, shops & a hostel.

    I can't speak for down south, but I certainly wouldnt wait 3 years before I started making money.

    In regard to Martins domain, I have a client at the top of his game in that very industry, i wouldn't even need to ask him that question. Thats all I mean.
     
  19. mif

    mif Member

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    3 x, 1x, current economic climate, whatever...

    I think the point is, with a bricks&mortar business, you expect sell it again in 3 years, and expect to get your investment back. So it costs you £60,000, you make a living for 3 years, you sell it again for £60,000.

    And why does that model not hold with web sites ? !
     
  20. Retired_Member38

    Retired_Member38 Banned

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    For all the reasons that I posted in my bullet points on page 1 of this thread.
     
  21. Aegean

    Aegean Active Member

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    Its only my opinion, but I think websites are far more volatile than any bricks and mortar business. A website can be killed off in one stroke, just by a technology change, a change in the law or a bigger player coming into the market. In many ways the site itself a non-tangible asset.

    For example, with the advent of Zoopla, about 20 fairly sizable UK property websites went out of business within one year. Even some of the bigger players that survived are at 10% of their former visitor rate. Zoopla had major backing, aggregated data better and concentrated on a better user experience, rather than trying to force users to do what they wanted (which was the model for a few other bigger property sites).

    Therefore if I bought your £60K website, I have to sit there with my fingers crossed for three years hoping I can sell it for the same in 3 years time. If I can't, I've lost money. Almost every client I know would be looking for a much more rapid ROI than that with less risk.

    I'm not saying it can never happen as you suggest, thats just based on my own client's experiences. They wouldn't take the risk.
     
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