In September 2020 we announced a partnership with Flippa, and launched our website valuation tool. In most ways, it is really Flippa that is doing the heavy lifting here. But there are a few subtle differences from the Flippa’s website valuation tool that you can find on their website. I explained that thoroughly in the post linked above, so in case you are interested, you can read it there.
This post is not about our website valuation tool, it is about website valuation tools in general. Have in mind that this is my personal opinion, so you might not agree with everything, and since it is an opinion, it may change over time. Industry of website investing is fast growing and rapidly changing.
Multiples are growing
As much as I hate to admit, multiples are growing. Earlier you could have bought a website for 10x, 20x, and 30x to monthly profits. But, sellers are more and more looking for 40x. It’s becoming hard to justify this value, but nonetheless, it is happening.
I already mentioned on several, different, occasions that website valuation is a complex topic, both art and science. And I will have to tackle it in a separate article. Which kind of brings us to the most important question. If it’s hard to talk about website valuation, how can we build a tool that will evaluate a website?
Great question!
Website valuation tool’s biggest flaw
Here’s the biggest flaw with website valuation tools. They only take into account the website from a seller perspective. There’s just no way, a tool can know what buyers are willing to pay! This is not a website valuation tool problem, it’s a sales problem.
If you ever read any of my other articles like “How to get rich online” and “Can you get rich online? No problem.“, you know I love a great story. So here’s one that’s particularly relevant to the challenge we are facing.
A dying father called his son, as he wanted to present him with a legacy, his last 2 gifts. One was material, the other was advice that was worth even more.
Father called his son, to his bedside, and presented him with an old watch. It didn’t look special, and it looked scratched a bit.
Before giving it to him, he explained he wanted to teach him a valuable lesson.
He told his son, to take the watch to the pawnshop, and see how much he would get for it.
His son went to the pawnshop, and returned with a $20 offer for this old and used watch.
He was then instructed to go list the watch on a local website with used goods. After weeks passed by, nobody made any offers.
Then the dying father told his son it is time to learn the lesson. He gave him a piece of paper that contained the contact information of a professional evaluator, dealing specifically with old watches.
His son took the watch and went to him. When he came back, he was excited and exclaimed that the watch is worth 1 million dollars, and that he received an offer to sell it right there and then.
To which his father asked if the boy was sure he would like to do that after trying just 3 options to sell the website? I mean watch… Just checking if you are still following the story.
Anyway, he further explains how the right people in the right place will value you and the things and skills you bring, in the right way. Never sell yourself short.
Source: unknown
The same is true with website evaluation. A tool can evaluate the website, but it will not buy it! If you ever tried to sell anything, to anyone, you quickly realise that the moment money is about to exchange hands, something mysterious and miraculous is happening.
All of a suden, men have to call their wifes, consult their investors, ask their moms… Women start to plow through their purse, run to the ladies room, you name it.
Use website valuation tools as a starting point
Having said all that, some people are way off their mark. They have no idea what they are doing, and asking for $100,000 for a website that is making $1,000 per month, because _______ fill in the blank. It doesn’t matter the reason, they will probably not sell it.
Unless they really know what they are doing, and are looking for the right buyer to come along. It is one of those situations where the seller is either incredibly stup… inexperienced, or incredibly smart.
In this case, a website valuation tool can educate you, for free, and show you a ballpark value of your website. This can sometimes help you move the needle and actually sell the website.
Evaluating the website with a URL
The website valuation tools I am talking about are using as many numbers and information as possible! If you see something like a website calculator, and then you enter a URL (one single information), and you supposedly get the value of a website… that’s ridiculous. I am not talking about this.
These are mostly useles, and can’t give you an estimate. For a list of comprehensive and more accurate website valuation tools, scroll to the bottom.
I am writing here about website valuation tools that website investors can use to buy and sell websites! Not for a stranger to get an approximation if some unknown website is worth something or not.
Here’s the thing that frustrates me. If you Google “Website Valuation Tool”, first result for me is siteprice.org, and the tool is not even working. It is not even the type of tool I am writing about here. You are supposed to type in a URL, and get the value of a website, but nothing happens.
You can see from the screenshot above, they only want you to put their valuation on your website. To get a backlink back to their tool. It seems they got enough backlinks because they are ranking 1st for me. But let’s leave SEO out of this article.
How does webmaster.ninja website valuation tool work?
Usually, website valuation tools have different parameters they take into account, and then come up with a value. Some website valuation tools rely heavily on profits, and form their multiple on those. Flippa’s website valuation tool, and webmaster.ninja for that matter, rely on historical sales.
As I already mentioned this, but will repeat here. Flippa has more historical sales data than anyone else and is the largest marketplace globally for buying and selling sites, stores, apps and online businesses. Flippa uses your inputs and compares data to 1000’s of similar sites that have sold on Flippa.
So that’s how our website valuation tool is different. We also use Flippa’s historical sales data.
Ok, historical sales, what else?
Age, traffic, revenue, monetization
Some of the more important metrics that impact the way a tool would evaluate a website would definitely be revenue, website traffic, age, monetization methods, business model, and others which we will cover in a separate post on evaluating a website.
It’s always a good idea to try to involve risk factors into the algorythm. So, if the website is 1 year old, it’s definitely a risk factor. If there’s staggering growth in the last month, it’s a risk factor. Don’t get me wrong, it’s also an opportunity. If the seller is basing his multiple on this last month growth, than you could be paying for value that’s not there.
It’s hard for a website tool algorithm to spot that risk.
How do other website valuation tools work?
Well if you see the questions they are asking you when you are filling out the form, you can conclude where they are drawing their valuation from. Usually, it’s website age, revenue, profit, number of clients… Some website valuation tools try to factor in how dependent the business is.
If the owner has to work 8 hours per day to achieve that amount of revenue, it will be worthless if the owner can work only 1 hour per day to achieve that revenue. How much this, and every other characteristic influence the algorithm and the valuation in the end… Well, there’s no way of knowing, unless you are the creator of that website valuation tool in particular.
I have my opinion on what’s important, but that’s just me. These characteristics are important to me. I am a different website investor from Bob or Lucy.
Can I use the tool, if I don’t understand website valuation?
I think this is a great question, and I think you can use it. Like I said earlier, website valuation tools are a great starting point. Especially if they are based on historical sales data. This means that someone was actually wiling to give real money in exchange for a website.
But this doesn’t mean you should only look at what the tool says, and nothing else. You need to be able to understand the numbers that the tool produced, and then use it as a one piece of the puzzle!
What about multiples?
Website valuation tools can’t use just multiples because there are other intangible assets. I know for a fact that many website investors and website valuation tools don’t include the value of a domain name.
If the website is built on a great domain name, that’s worth at least $1000, but the website is making only $10 per month, should the website be evaluated at $400 ($10 x 40 months)?
Anyway, I am leaving this for another time, when I will dive deeper into website valuation.
In case you need help with domain name evaluation, you might want to check our interview with DNAcademy founder, Michael Cyger. I paid and went through this program, even though I am involved with the domain industry for a decade. It was well worth the money, and it more than paid for itself.
In closing
I think that website valuation tools are a great weapon that a website investor can incorporate in their arsenal. It is a piece of the puzzle. It keeps you in reality when you are buying and selling.
Here are a few website valuation tools I am farmiliar with:
Amazon FBA business valuation tool
Bryan O’Neil is behind the Amazon FBA business valuation tool, and here’s what he has to say about it.
In short, the FBA Guys’ valuation tool has proven an immensely valuable resource for the owners of FBA businesses who are either planning to sell the business or are just curious how much it may be worth, as it’s capable of constantly delivering highly accurate valuations, based on the proprietary algorithm that takes into account hundreds of real-life transactions, as well as a machine learning elements that adjusts the tool’s approach based on changing market conditions.
Bryan O’Neil was one of the original co-founders of Centurica, as well as FE International (then Flipping Enterprises), as well as a number of businesses outside of the online M&A world. Currently, he brokers online businesses with Quiet Light and takes care of his numerous other businesses while traveling the world.
Check Amazon FBA business valuation tool here.
Empire Flippers website valuation tool
I’ve asked Greg to tell us what makes Empire Flippers’ website valuation tool so special.
“Our tool is based on hundreds of actual business transactions sold on our marketplace. We use our sales data to help create as reliable as possible valuation for people using our tool. It’s never going be as accurate as a full-on valuation, but as far as automatic valuations go this tool can help get you into the rough ballpark of what your business is worth.”
Gregory joined Empire Flippers in April 2016 originally as our Content Manager. Now, as our Director of Marketing, he manages everything from the content to the marketing automation, to vision and goal setting, all the way down to the implementation. His big goal is to take Empire Flippers more mainstream as a M&A brand, and to help investors see the power of digital assets.
Check Empire Flippers website valuation tool here
Investors Club website valuation tool
Here’s what CMO of Investors.club has to say about their website valuation tool.
“The Investors Club valuation tool was built on a variety of factors that include traffic and earning stability, business type, traffic diversity, niche, revenue diversity, age, sales data, and much more. The tool has been a game-changer for providing a fair but highly-rewarding valuation for prospective sellers of content-based websites. Unlike most other valuation tools out there who build their valuation tools to generate leads, we don’t ask for email addresses before we publish your results. We let our industry-lowest success fees do the converting”.
Chaz joined Investors Club as a Marketing Director having been directly involved in high-growth startups since 2010 as well as being an investor himself. While the company only launched in Jan of 2020, he has been an integral part of an awesome management team that further cemented IC’s position as one of the leading go-to marketplaces in the industry over a short period.
Check Investors Club website valuation tool here
I’ve been an online entrepreneur for more than a decade. Back in 2011, I sold my first small business. 500 Startups alumni. I love to read and write in every shape or form. Founder of WhoAPI and webmaster.ninja and website investor.