Pricing Websites For Sale :: Sell Websites Buy Websites

Pricing Websites For Sale Reprinted with permission of VotanWeb.com As a market leader in existing website sales, VontanWeb receives many questions about valuing websites. It always amazes me how some website owners come up with the value of a website being sold. No wonder many websites never sell. In many instances no consideration is given to the total picture. Will the available cash flow of the website be able to pay the debt of a loan to purchase the website? Will the website as priced be attractive to financing sources? I have seen many â€Å"professional website valuations† where the price just doesn’t make sense – and sellers wonder why buyers are not standing in line to purchase their website. Market Approach There is a solution that is grounded in the fundamentals of economics, and time tested in the marketplace, where the influences of supply and demand ultimately determine where a website belongs on the price scale. One economist explains this market approach by comparing a business to a machine which has the purpose of making money: The more money it makes, the more it is worth. This is why there is greater demand for very small and profitable websites with few hard assets, than there is for large, popular and high maintenance websites that generate a huge cash flow, but can’t make a living for its owner. Adjusted Net Income The first category of information needed is called adjusted net income, and is the total amount of cash produced by the â€Å"money machine.† Of course, this figure includes the website profits and the owner’s salary. It’s important to remember that the adjusted net income should also include all of the many cash-related benefits which are enjoyed by the website owners. Those benefits may include the use of a car owned by the website, the website-paid premiums for health, life and auto insurance, website paid memberships to country clubs and spas, travel and entertainment expenses that are actually vacation and taking the wife out to eat expenses. Don’t forget expenses for high speed internet and cable TV that are needed for the website but also provide entertainment for the whole family. There are many, many other hidden personal expenditures in any typical website business, subscriptions to magazines, gifts for your wife and girlfriend and similar †Å"business expense† categories. Interest expense should also be added to adjusted net income, along with accounting entries—such as depreciation and amortization—that can divert money to the owner’s pocket so that it never appears on the bottom line of the P & L.