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April 1st, 2005, 08:19 PM #1Need Site Valuation Advice... Help!
Once again, I must call on the wisom of the ABW community for advice.
Someone wants to buy one of my sites. I hadn't planned on ever selling the site, but for the right price I am open minded. I need to figure out what that right price should be.
If I had a solid long-term track record, I could do a simple present value calculation with my favorite spreadsheet. Unfortunately, the site was launched last May, and the monthly gross profits (commissions booked minus adwords expenses) have grown from $x to $154x (sorry for the Xs, but you know how it is). Much of that growth has happened in 2005 since I overhauled the site and made some fundamental changed in my Adwords advertising. The actual curve has been (x, 13x, 13x, 16x, 35x, 57x, 46x, 72x, 41x, 114x, 154x), so it has been a pretty nice ramp up.
So, that leaves me in a quandry about how to do the pv calculation. Do I use March? Do I average (not appealing)? Do I try to plot a curve of what the gross profits would be each month before plugging those numbers into the pv calculation? None seems right.
In addition, I have some sizeable advertising expenditures each month. I believe (and I believe my data shows with an over 300% ROI) that the advertising is well worth it, which is why I have been doing my calculations based on expected profits given those expenditures. Does this sound right?
Another factor is that this is my main site. I should probably say MAIN site. It currently accounts for 99.9%+ of my revenue. I have some other things coming online over the next few months, but no guarantees that I'll be able to work the same magic on those as on site numero uno. This probably should not be a factor, but it is, at least psychologically. Even if the site in question only technically has a value of y, it is generating over half of what I need to be fully self-sufficient at this. If I can keep it going and growing and get the other things up and running, I am hoping to be independent by the end of 2005.
My best guess value-wise right now is to use the 154x, plug it in at a conservative discount rate of like 5% over 24 months, and get a value of something like 3500x. Not even sure if the potential buyer would consider something that high, ut that's what the math seems to say right now.
Oh, one other question. I started working on the site last April, but it didn't go live until May 18th (which I can show from Adwords records). For tax purposes, if I end up selling the site, should I put off closing of the deal until the site is over a year old for capital gains reasons? Or does this not come under capital gains? (I'd ask my accountant, but (a) he is is bunker mode right now and (b) I don't have all my tax stuff together and he will kill me if I tell him that.)
Any advice from the ABW sages would be appreciated beyond words.
-John, still somewhat stunned by this development.There's a reason army's wear uniforms even though it makes them easier to spot. Sometimes that's what you want. Uniforms suggest organization, power, and numbers. These, in turn, inspire fear. And, as any good operative knows, there is no more effective weapon than fear.
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April 2nd, 2005, 07:31 AM #2
Which site is it?
- Join Date
- March 31st, 2005
Which site is it that you are considering selling?
3500x sounds right. It's a tricky matter, but all in all, I think 3500x is good estimate.
April 2nd, 2005, 02:24 PM #3
Capital gains tax unfortunately may apply here (it did for me). I would certainly wait a month if your deal is 6-figures or more. If it is a small amount then obviously it wouldn't matter.
Regarding profits, your 3500X sounds about right for a "stable" business. However, I would also take into account a risk/rewards ratio. For example, if you feel that your business model is temporary, then I would say go for less. On the other hand, if you feel there is plenty of room for growth with more aggressive advertising endeavours, then 3500X might be a bargain.