So, how much is your website worth?
Evaluating one’s website is crucial because you want to measure the value of building a high-quality and functional site. After all, it’s not an easy job developing a groundbreaking website.
A business website is an excellent digital asset, especially when you use the site as an online extension to your physical business. If you ever wanted to exit, you might have to sell the business website too. Therefore, it is essential to price the website appropriately. Don’t sweat it. It’s isn’t difficult to evaluate a business website. Just stay with us till the very end, and we’ll take care of the process. Let’s get started!
Factors that determine your website’s worth
Here are some of the major factors that determine the value of your business website. Let’s discuss them in detail.
Adsense revenue (primary revenue source)
Although there are many ways you can monetize a website, one common method that many website owners rely on is Adsense. After all, it generates the majority of their revenue.
If you have a website that relies heavily on Adsense, you should consider using SEMRush’s AdSense Benchmark Tool to evaluate the site’s potential earnings. The tool is quite simple to use.
Just enter the domain, and it will show you the estimated monthly Adsense revenue. Once you have that information, figure out a multiplier to find the potential sale worth. We will discuss the revenue multiplier later in the post.
Net profit (not revenue)
If you ask us, we will always prioritize a website’s net profit while purchasing it. It is the key driver of a website’s overall value. You should, therefore, calculate the net margins of your site. How do you do it?
The formula to calculate the net margin is simple as well :
(Net Profit)/(Revenue) = Net Margins
We suggest you never rely on revenue when determining the site’s value. This is because it can be misleading. Revenue only shows how much the website makes for a business, while Net Margins help calculate the amount of money the business is left with after bearing the overhead costs.
If you are purchasing a website, you should approach it as an investment instead of a one-time purchase. Your focus should be on the site’s potential to make money for you. Therefore, go with a site that has a higher net profit. If your site has a higher net profit, you can sell it for a high value as well.
Determine traffic sources (paid and organic)
Website evaluation gets a little tricky when you factor in the traffic sources. There can be many traffic sources for a business website. And the impact of each traffic source is different on the net margin as well.
Of any two websites that generate equal traffic, would you choose the one that relies on organic traffic or one that uses paid advertisements?
The website that generates the majority of the traffic from organic search will have lower expenses than the one that shells out money to get recognized. In other words, the former will have a higher net margin.
Smart website buyers will always ask for your Google Analytics insights to get a clear picture of your traffic sources. You can also measure the traffic split through SEMrush. So, make sure you determine the traffic split while evaluating your business site.
Evaluate traffic value
Once we have determined the traffic split, you can evaluate each traffic source’s value. You have to check the level and value of a website’s organic and paid traffic in this.
To figure out the organic traffic, you can use the Organic Research tool. Just enter the domain name, and the tool will show you several statistics related to the organic traffic on the website.
Now that you know the potential value of your website’s organic traffic jump onto paid traffic evaluation. Since you have to balance the acquisition cost for organic and paid traffic, it is crucial that you determine the statistics related to paid channels.
Advertising Research is a great online tool to estimate the site’s advertising spend every month. There is no problem if a website relies on paid traffic if the site can drive a solid ROI.
Ease of transfer
Ask yourself a question. How easy is it to transfer the business and website rights to a buyer? This is a real-life challenge that you have to overcome to increase your website’s worth. Of course, as a seller, you will want the transaction to be as smooth as possible.
Complications with the website transfer will always end up with the seller earning way less than it expects. So, how can you ensure the smooth transferability of your site? Consider a few easy-to-implement tactics.
Make it straightforward for the customer to take control of your website. Ensure that all the systems that run the site are easy to transfer as well. Try to build the website using an open-source CMS so that it can be easily developed at the customers’ end.
Developing a site on a custom platform might make migration a little complicated and expensive. Remember that the easier it is to transfer the website to the new owners, the easier it will be to command a higher asking price.
Four ways to estimate a website’s value
Different people indeed come up with different evaluations when it comes to determining the website’s actual cost. Therefore, you must use reliable methods of website evaluation. Here are four website evaluation methods you can use in 2021.
COMPS or Comparable Sales
Comparable Sales or COMPS is a website evaluation method that involves searching for related sites in your niche.
The websites you shortlist should be similar in terms of age, traffic, and revenue generated. Ensure these numbers are closer to that of your site to make a successful comparison. Once you figure out the domains closer to your site, compare their monthly profits and unique visitors. Find out the average price of your website by dividing the total profits earned by the number of shortlisted sites.
We addressed the revenue multiplier earlier in the post. Let’s discuss it in detail.
You will always find buyers using the revenue multiple valuation methods. It involves dividing the monthly profit by the sales prices. However, this method can be a little tricky if you also consider the website’s age. Let’s assume that two websites earn $4,000 per month through the same revenue sources. Now, if one of the sites has reached that value for the last three months, and the other has generated this revenue for three straight years, the latter will have a higher evaluation. To find your revenue multiple, just divide the annual revenue by the sale price.
The Traffic Value Evaluation Method is generally used for sites that have significant traffic but are not monetized yet.
This method involves researching the keywords that are responsible for driving the majority of the traffic. Further, figure out the cost per click value of these high-performance keywords. Now multiply the cost per click value by the number of unique visitors for each keyword. You will end up with the traffic value for each month, provided that you are driving each visitor using services like Google Ads. To figure out the amount you will pay to generate such traffic, multiply the amount by 45%. The final amount will be the cost you will have to pay to retain the current unique visits.
Reverse Engineering Cost method
Another way to calculate the price of a website is to consider the cost of building it.
The idea is to check whether or not the selling price matches the price of building the website. In this, you are reverse-engineering the final value of the website by considering building costs, the cost to drive traffic, as well as time. The time factor includes the hours it took for the seller to build the site and the opportunity cost, i.e., the amount of money the site will make in the time it would take to build a new website.
Tips to improve your website’s worth
How to improve your website’s worth? That’s right. You can follow a few tactics to increase the site’s value before you put it for sale. Here are some that you should consider.
Build a brand
Build a brand around your website. This way, you will not just sell a website. You will be selling a brand.
If you happen to generate a solid reputation for the brand, you can ask for a higher price. Put time and effort into building a helpful website. Post content that your visitors might want to keep coming back for. Demonstrate how the website is a brand in itself and put yourself in a better position to spike the site’s selling price.
Secure online real estate
You don’t just have to create a brand; you will also have to keep it safe.
How can you do that? Well, begin by owning all the potential domain variations. Create a list of domain variations and make a goal to purchase them. Once you do that, switch to social media. Secure the social media pages with usernames that match your site’s domain name. In this way, you will be offering a complete package to the seller, not just a website.
Generate multiple monetization streams
We have discussed several traffic sources and how to evaluate them. The traffic sources are synonymous with monetization streams, especially if you own an eCommerce website. However, you should always look forward to generating multiple monetization streams for your site. For example, consider affiliate revenue, eCommerce sales, Adsense, and other streams. The more monetization streams your site has, the less risky the purchasing decision.
Build more traffic sources
Lastly, diversify your site’s traffic sources.
Purchasing a website that relies on just one traffic source isn’t a safe investment. Show how strong your traffic generation game is by involving organic and paid traffic sources. At the same time, figure out ways to get more customers through organic traffic. Hire SEO professionals to develop a solid Search Engine Optimization strategy and increase your organic traffic.
Use your calculator smartly !
We understand your excitement to find out how much your website is worth.
But, we suggest you never rush through the process. Take time to come up with an accurate evaluation of your site. Moreover, figure out whether or not you want to sell the site for the estimated value. If the estimation is way beyond your expectation, maybe you should think again about selling the site. Find out if you can turn your highly valuable site into something that can help you make more money.