How do You Determine Asking Price when You Sell a Website? :: Sell Websites Buy Web Sites

How do You Determine Asking Price when You Sell a Website? Reprinted with permission of VotanWeb.com When you have finally made the difficult decision to sell your website the first thing that needs to be established is the asking price. Setting the asking price is not an arbitrarily process. If a website is priced well below where it should be, two things will most likely happen: First, you will not sell the business for the profit you should and you and or your co-owners/shareholders have been poorly served at best. And second, you might find that you will have more trouble selling it than if priced appropriately higher. If your website is priced too low, it will appear to most buyers that the deal must be too good to be true. And we all know what we have been told about that. So beware, low pricing may actually scare away otherwise interested buyers. Of course, it goes without saying that if the website is priced too high then there will be little or no interest on the part of serious buyers. An irrational asking price is not going to help you achieve your goal of finding a buyer for your website. Now that we have discussed the importance of pricing and what not to do, let me next say there is no exact science for coming up with an exact asking price. We must deal with a strange mix of art and science. The best asking price is that which will attract the greatest number of potential buyers. In our effort to determine this optimal price, we must resort to guidelines and â€Å"rules of thumb.† One of the most popular â€Å"rules of thumb† being used today is the Cash-flow or Revenue Multiple Method. Essentially you multiply your annual pre-tax earnings by some multiple of x and you have your price range. When a website has little or no earnings, then a similar method is applied on the revenue number. Both buyers and sellers widely use this method because of the relative consistency and measurability. Also for buyers, they can easily determine their ROI (return on investment) as the multiple can be viewed as some number of years. For instance, XYC.com has annual net profits of $500,000 and they will use the range of for a low-end of two times (or â€Å"2 X† as you will often hear) and an upper range of six times.