Lately it seems at least once a day someone emails or contacts us saying they just received an offer on their website and wonder if they should sell it or not.
Now many people will tell you its a simple as adding up its annual revenue and multiplying it by an amount. But I throw that to the wind. The asset has a value and depending on which side you are on it has quite a different value.
Let me explain.
On the buying end.
If I am buying something then I have a set price that its worth to me. I wont pay a penny more during the first negotiation. Usually I will pay less. I don’t care what people think the asset is worth to them.
The most money I ever paid for a domain was for Fighters.com. The domain broker originally was asking $250,000. I ended up paying $60,000 for it.(I had 75,000 in mind).
But more recently I purchased the domain freeseoreport.com for $250. The owner originally as asking $6500 for it. (I had $1200 in mind).
Linkcontrol.com was owned by buydomains.com and wanted $5200 for it. I negotiated it down to $1,000
Now some people will look at some of these purchases and say that I got ripped off. Some might say that I got a good deal. The bottom line is that I got it for what I planned to buy it for. The value I had placed on it (or less). and thats what this is all about.
Domains are pretty easy because you can do all the research yourself. Complete websites are totally different ballgame. Until you can get actual figures and stats from the seller its pretty much impossible to put a valuation on it.
On the selling end
On the selling side I look at things a little bit differently then most people do. I don’t really care about cash. In fact I view cash as a liability. I am not good investing money and I know that if I just put money away in a 2% savings account I am losing at least 6% on my money annually because the U.S. dollar is depreciating at a rate of 8% a year and I don’t see inflation going down anytime soon.
So now we go back to the original question – Should you sell your website for X amount?
I remember the first time I got offered a million dollars for a website. I could not believe it and wanted to sell it right away. But then after talking to a wealthy friend he said to me, “Why 1 million dollars?”. I had a hard time answering it other then saying, “But its a million dollars!”. That is not a good reason.
My answer is filled with questions. But it boils down to a simple answer.
Do you have an asset that is appreciating at the rate of the one you want to sell? If yes then sell it right away and focus on the up and coming asset. For those who do not know what an asset is it could be anything that is making you money. It could be another website, or it could be farmland. It could be a local business.
The point is don’t sell just to get money. Having money with no plan other then to say you are now a millionaire is stupid.
I know what your thinking…. Why did I sell AuctionAds.com 3 years ago when it was clearly a rising asset.
That is a good point. The company was only 4 months old and revenue was climbing at an unbelievable rate but there was 3 reasons why I sold that property.
- I was way over my head. At the time my company consisted of 2 employees. We were doing all marketing and all technical work. Nobody was doing customer service.
- We were floating millions of dollars a month and paying people all over the world. We now had to worry about things like currency hedging and shit like that. Shit I knew nothing about.
- The whole company was a house of cards that was riding on one card. eBay. If eBay were to ever shut down its affiliate program then AuctionAds was f’d. While I had no idea at the time that eBay would close down their affiliate program less than a year later… I didn’t like being so reliant on one company.
Recently we were offered over $250,000 for a website that is making less than 1k a month. I turned it down. While the site does not have a run rate of 10% of that valuation, it is growing like crazy and its less than 1 month old. I know a lot of people would have jumped in a minute to take that cash but this asset is appreciating much faster than what cash would.
So that was a long drawn out answer to a simple question. Hopefully it makes sense