How Much is Your Online Business Worth? (And How to Increase Its Sales Price!)

How Much is Your Online Business Worth? (And How to Increase Its Sales Price!) 

You might have started your site as a side hustle or to replace your main source of income.
But have you ever wondered how much your site is actually worth? A lot of entrepreneurs with monetized content sites don’t realize they can actually sell their business for a profitable sum.

Inbound traffic is one of the best traffic sources.

It’s a great lead generation tool and arguably the lifeblood of online businesses, since the quality of your SEO affects how easy it is to find your content.

A well-optimized site can drive tens of thousands of views each month from just a few articles.
As you’re reading this, you’re probably generating revenue from your site through affiliate links or display advertising.

The great news is that sites with optimized SEO are lucrative assets for savvy buyers.

Over the last three years, content sites sold for an average of $94,419, increasing year-on-year in value by 23%.

Sellers who made a profitable exit realized they could pass their business on to someone else so that they could explore other ventures or tend to personal matters while raising a large amount of capital. Yet, many online business owners never even realize that selling their business is an option.

We’ve seen great content sites slump into a former shell of what they were because the site owners didn’t have time to keep up with the latest keywords, update their content with relevant topics, or they just lost interest in the side project altogether.

To help you understand what selling your business looks like, and what you should consider when preparing your business to sell if and when it’s time, we’ll break down how your site is valued and what factors influence the price, as well as talk about how you might increase your asset’s value if and when you decide to sell.

How Online Businesses Are Valued

Our valuation formula is as follows:

We use a monthly average net profit as opposed to an annual profit figure because we feel it gives a closer look at a business’s performance. It’s easy enough to calculate the first half of the formula; just add up the combined net profit from the past 12 months and divide by 12.

Working out the multiple is a more complex step. It takes many factors into account, such as pricing windows, the domain age, traffic diversity, and others. Let’s dive into these factors in more detail.

Pricing Windows

When checking how an online business is performing, the monthly revenue and profit figures are analyzed over a trailing 12month (TTM) period.

The TTM period is a gold standard and usually recommended for all businesses to use for two reasons. First, it accounts for seasonality. Depending on your niche, traffic may be amplified or slower during certain times of the year. Using a shorter time period may exaggerate a business’s performance to be much better or worse than it is across a whole year.

The second reason follows from the first: more data will instill more trust in buyers who are looking at your business.

It’s possible to choose a six-month pricing window if your site has just started earning profit and it’s the earliest period of time you measured any revenue that was generated. It’s not advisable to use such a short pricing window if you’re selling for the first time, especially if it’s because your site started making money recently.

If you’re not in a hurry to sell your content site, we recommend that you wait until you build your online business more and it generates more consistent profit before submitting it for a sale. That way, you can receive a higher valuation.

Domain Age

As a reader or customer of The HOTH, you’ll know that inbound traffic takes time and dedication to build.

The older the domain, the more likely the multiple will increase for a couple of reasons.
Some SEOs believe that Google’s sandbox effect means that newer sites take between three to six months before that site’s content will start to rank.

Once your articles start ranking higher in search pages, your chance to increase revenue improves.

The other reason domain age plays a significant role in the multiple is because an older domain indicates the site is resilient against search engine algorithm updates. We’ve seen many businesses hit hard by a change in Google’s algorithm, with revenue and traffic dropping by half.

A profitable content business that’s been around for several years implies that the content is good quality and optimized for SEO without being dependent on black hat techniques.

Traffic Diversity

Increasing the diversity of traffic across your site improves your content business’s valuation, because it lowers the risk of a drop in performance if any of the ranks of your top pages are affected by algorithm changes.

Another way to lower the risk of being overly reliant on one source of traffic is by having multiple traffic channels.

While organic search is a popular way to attract visitors, you could also influence the multiple needle by nurturing other channels such as social media and referral through content partnerships with other blogs in shoulder niches.

Revenue Income

Most content sites are monetized through commissions from sales after clicking affiliate links, or by revenue generated from how many display ads are clicked.

Spreading out the number of ways your site is monetized not only increases your total monthly revenue, but also helps mitigate the risk if a primary monetization channel is shut down due to a breach in terms of services.

Building different income streams gives you a chance to pivot as you scale your site. For example, as you develop other ways to generate revenue, you might find that your viewers are more likely to click on affiliate links instead of ad banners.

SEO

Naturally, SEO plays a huge role in your site’s valuation!

We can all agree that inbound traffic is a powerful way to create a hands-off business. How optimized your site is for both on-page and off-page SEO plays a large part when considering SEO.

When looking at on-page SEO, we’ll see how many keywords the site ranks for, how diversified the page views are across the top-performing pages, and loading speeds. Tools like The HOTH X Managed SEO all-in-one service is a great way to extend your organic reach while improving your existing content so your articles rank on the desired first page of the SERP results.

Domain Ranking

Domain ranking (DR) can be hard to influence, but it’s important to a site’s valuation nonetheless.

Off-page SEO factors can improve DR by how many backlinks the site has, if any PBNs were used, and whether the site has been affected by previous Google updates.

Tools like Moz, SEMRush, and Ahrefs are really useful in giving you a rough idea of what your DR is. However, each of these tools has a different way to calculate your site’s DR, so take each measure with a grain of salt.

Ultimately, they provide a glance at how reputable your site is according to search engines.

Content Quality

There’s a reason why “content is king” is still true even in today’s era of SEO.

It’s tough to explain in a few words what high quality content looks like. A couple of things we look for is how readable the content is, whether it’s evergreen, and if it provides a lot of value to readers.

Longform articles that are well written tend to perform better than shorter articles. Evergreen content requires fewer updates since they’ll be relevant over a longer period of time, unless the blog owner wants to update affiliate offers or further optimize for SEO.

Fewer updates also means it takes less time to maintain the business, which makes a site more attractive to a wider pool of buyers who want to invest in an online business that needs little owner involvement.

Naturally, plagiarized content doesn’t sit well with search engines or with brokers. Sites are run through Copyscape to check if any content is copied from other blogs.

If writing isn’t your strength, or you’d prefer to spend your time growing the business in other ways, consider hiring a freelancer to produce original content.

Where You Can Sell Your Site

Now that you’ve got an idea of what goes into a site’s valuation, you might be wondering where you can sell your online business.

There are two main options: a private sale or use a broker.

If you’re considering selling a content site for the first time, we strongly recommend that you go through a broker.

It’s not as simple as negotiating a fee, signing a contract, shaking hands, handing over the digital keys (or logins), and walking away. Brokers that act as a curated marketplace will have systems in place to protect both the sellers and buyers.

There is a lot to consider when selling your site. When you use a service like Empire Flippers, a broker will help turn your finances into a profit and loss (P&L) statement.

A P&L statement acts like an Instagram highlight reel of your business so that qualified buyers can check what your site’s financial performance is like.

Once you’re listed for sale, buyers will be competing to acquire your business. With a private sale, it’s hard to generate the same amount of interest for your business.

We often see FOMO kicking in for private sales, which is why sellers tend to agree to the first deal that comes along even when it’s far below what they were hoping to get out of a deal.

Attracting Qualified Buyers

A broker will help circulate your business to the right types of buyers who will have the right skillset to continue running it after you part ways. More importantly, buyers will need to prove that they can afford the business by verifying their liquidity, or proof of funds.

Private sales are notorious for attracting tire kickers. These are people who waste your time by making non-serious inquiries and offers for your business since they’re spending most of their time window shopping.

While brokers will ask for a commission of the sale (ranging from 2% to 15%, depending on the size of the deal), it’ll be worth your time as they’ll provide you with the platform and tools to streamline the transaction process. You can focus on weighing which offers are best and speaking with buyers to work out a great deal instead of worrying about how to sell your business.

Use SEO as Leverage to Sell

Content sites with optimized SEO and built-up traffic channels are highly sought-after assets for buyers.

The nature of inbound traffic means these types of online businesses are one of the most hands-off operations to run. A buyer will want to invest in a business that’s making money from day one and needs only a few hours each week to maintain.

Since SEO and DR take time to develop, buyers will want to save time and money from starting their own. Whether it’s a lead generation or a monetized content site, buyers want to skip the hard phase of building up momentum.

If you’re thinking about selling or wonder how much your site is worth, consider speaking to our team to start planning your exit strategy.

Even if you don’t sell now, you can think about when you want to make your exit in the future. In the meantime, continue building your site and use services like The HOTH to grow your business. When it’s time to exit, you could raise the most capital you’ve ever received through one single sale.

The post How Much is Your Online Business Worth? (And How to Increase Its Sales Price!) appeared first on The HOTH.