How do you value a site that generates no income before it's sold?

[XSMedia]

Hi,

I'm currently creating a number of sites which target the wedding market. Each site is localized and specific to a niche within the wedding market.

The intention is to create the site, rank it in the top position of Google and then sell it to a local business within that niche and area.

The problem that i am having is that I don't know how to place a value on each site. I have factors taken from Google (using Market Samurai) so I know the broad and phrase match traffic details as well as the Google PPC average prices.

My initial thought was to use the Google PPC price and multiply that by the number of organic visitors the site would receive if it was ranked #1 on Google. I appreciate that the PPC figures may be higher than what an advertiser would actually pay per click so I conservatively halved the Google PPC figure given in Market Samurai.

Is this a good way of valuing the site or do I need to look at the value per customer to the business that I am trying to sell the site to and work from a conversion factor based on the number of visitors that the site would receive.

If the site received 500 visitors per month and 5% of those became customers multiplied by the average profit per customer - that would give a monthly value of the website.

I am very unsure as to what the best approach is here and look forward to hearing any advice and ideas from fellow members.

Thanks,

Michael

[XSMedia]

The traffic to the site will generate leads for the company who owns the site. If they already have a website that converts then they will know what content to put on this site to create that conversion rate.

The buyer is buying the site knowing the potential that the site will have when it comes to generating business for them.

I've looked at is as the first page results of Google are a line of shops. The shop at #1 is seen as the shop which gets the most visitors to it. Now imagine that shop is currently being refitted - people can still see the shop and what it sells but are unable to actually enter the shop to buy anything.

Now, the person who owns the shop further down the street (i.e is ranked #10 or #12 or #15 etc) - he really wants to own that shop which is being refitted and he knows how much that shop is worth to his business if he owned it after the refit is completed.

Although the site I have created is a basic canvas, all it needs is branding by the new owner and it will then perform as well as their current site when it comes to conversion rates.

Does that make sense with explaining the view point I am taking on this project ?

[EGOL]

"how to value organic traffic"

That's a different question than "how much can I get for a website?".

But getting to your real question of "how to value organic traffic".... that depends upon what you can do with the traffic (display adsense, sell merchandise, generate leads).

Although you can put a generalized number on that the bottom line for the buyer of your website depends upon how effective your website is at converting customers for a specific service provider.  The generic website that you have for sale has zero value for the service provider.

You are selling a sign post without a sign, not a money-making machine.

I think that you have a lot more money making potential selling SEO services than selling pre-ranked websites.

[XSMedia]

And again, the finer points of how to sell the site are something that i have covered from all angles. The part of making the sale and closing the sale isn't an issue.

I appreciate the feedback from everyone here but doubt I'm going to find someone who can actually answer the question of "how to value organic traffic". The matter of the niche or if the potential client already has a site or an SEO company is by the by and not part of the issue. I can deal with all of those parts.

Market Samurai makes a calculation for organic traffic value by taking the average PPC cost and multiplying it by the amount of traffic the site will receive if it was ranked number one on Google.

My question really should have just simply been asked as "How accurate is that figure" ? , <- that's all I needed answering.

[EGOL]

You get what you can convince someone its worth.

I agree.

I believe that most people who own wedding shops will be much more inclined to invest in having SEO done on their existing website or on a domain that matches the name of their business than they are to buy a website from a Joe Schmoe who is trying to sell them YourPodunkWedding.com.

If they already have a website they probably have a relationship with a local person or company who built the site for them.  They will call that person who they know and trust and say... some Joe Schmoe is trying to sell me YourPodunkWedding.com... and he will say.. "They are probably going to sell you the site and then pull the links as soon as they have your money."

[firstconversion]

" All I wanted to know is how a site would be valued when it comes to selling it."

There is no way to tell. You get what you can convince someone its worth. You can like that or not but it won't change it.

[knichol]

I feel like your question answers itself, a site that generates no income before it is sold doesn't really have any value to be completely honest. If the site is ranking, and generating leads, then it has an intrinsic value of potential income. I feel it is a gamble and as Ben said "[it] is worth what they buyer will pay for it."

I suppose, if you have qualified leads being generated, you could place a market value on each lead with a realistic conversion rate factored in to get a base sale value. Once you have a base, you could project what it is worth to a company that can build a reputation and stronger business with it.

Using the above example of 500 visitors, 5% to leads, and a 1.5% conversion rate (lets be realistic now) works out to 1 client. So for this venture to be profitiable, you would probably need to generate at least 1000 * 5000 visitors a month, and hope for 5-10 clients. Now if a business buys this and makes it successful, the conversion rate should increase due to reputation. You could build a projected sale price of the 1-2 year projection.

That all being said, you really will need to have a decent amount of traffic coming to the site in order for it to be salable, or follow the old adage 'a sucker is born every minute' and swindle someone into buying based on promised traffic and revenue that is in fact not there (not recommend: very unprofessional and possibly reputation damaging.)

-- edit --

• clearly my math was wrong, it should be 5000 visitors for 5-10 clients, not 1000.

[EGOL]

Why would they want to buy a website from you?  They probably already have a site, have spent a lot of money on it and want to continue using it.  Your site would not feature their store or their products or their staff or their salesmanship.  The site would need to be built over again.  A waste of your time or their money.

I think that you will get a better return selling SEO services to the biz owner who is currently in position #7 who would like to be in position #1.

If the site received 500 visitors per month and 5% of those became customers multiplied by the average profit per customer - that would give a monthly value of the website.

I think that your 5% is really high.  In a small town there might only be a few places to buy these products and the shoppers already know about them.  Where there is a larger market the buying decision is going to be based more on the products for sale and less on the rankings of a website.

Also, I think that your valuation is high.... why should they pay you the entire profit on the monthly sales?  They are in business to make money for themselves - not to give all of their profits to you.

[XSMedia]

Oh I did my research on this and looked at the service providers who already have website ranked in the top 30 as well as all those who are currently using Google AdWords.  The service providers already understand the value of an online presence, I'm just trying to work out what that value is.

[firstconversion]

there is no calculation that will tell you this. Anything that professes to be an indystry standard or generic answer will be out as your buyers will not be conforming to any standard

Wedding businesses that dont know about the internet are sure as hell not going to know how to value a website, its worth whatever you can get for it as a salesman

Btw, Id suggest finding a market first and then building sites for it

[XSMedia]

Thanks Ben, thanks for your answer.  I have thought about different payment options from a "one off - hand it all over" option to a "monthly payment" where they 'rent' the site. Or even break the cost down in to a deposit payment followed by monthly payments until the full amount is paid. Once it's paid I would then sign over the domain ownership.

The main sticking point is calculating a price for the site in the first place.

[totalseo-155734]

Everything is worth what the buyer will pay for it.  Since organic search traffic ebbs and flows, a simple traffic times conversion equals monthly price may to be reflective of what someone will pay for it.   You might want to think about offering a lump sum payment where the customer takes control of the domain and a monthly fee where you retain control, but re brand the site for the client.

Good luck