Not long ago I received an unsolicited offer for one of my websites in the financial services niche and I declined it. Just a few days back I was at the mall with my wife and while she was trying on some dresses I was checking email on my phone while sitting on the couch waiting for her.
To my surprise there was an email from an Chief Operating Officer of a company expressing interest in buying the same website. I responded back positively and the next day we were on a conference call to discuss the potential deal. The call went well and the very next day I received a formal offer from the company this individual was employed with.
The offer was just under $40,000 and I eventually, politely declined it. While all this is still fresh in my mind, I want to discuss how much time and resources I invested in building this website, as well as why I decided not to sell it. With that said, you likely have read me previously write about how I’ve sold several websites in the past, a couple of which have been niche websites.
There is a right time and offer price for every income producing asset. For me, the timing of this particular offer was premature and therefore the price well under what I would happily accept given the website’s potential. Let’s go through some details.
The website is approaching its second birthday, but it really only took 5 months to plan, build, market and initially monetize the website. My involvement was heaviest in the first month when researching the topic, conducting keyword research and laying out the website structure.
With the exception of the content, Everything after that was outsourced to a team of Internet marketers who help me with SEO for my clients. This is how I launch most niche sites I develop. Although each one is on a fixed salary, I will extrapolate or allocate the cost I feel was attributed to this project in the breakdown below.
While my involvement may appear minimal, a significant amount of resources (money) were spent in outsourcing the marketing of the site. In addition, I spent a lot of time on content creation. Though I work with individuals who understand my approach and can execute it, as the project owner or manager, I was also facilitating the entire process to ensure it keeps moving timely and effectively.
I haven’t kept track of my time facilitating the project since the website’s inception but I am estimating a total of 20 hours tops to be conservative (on the higher end). In addition to the 20 hours, below is a breakdown of cost incurred to build and market the website (outsourced dollars):
Hosting & Other development tools: I already had
Website development: $125 (cheap because I use a cookie cutter template and provide the sources files)
Directory Submissions: $168
Article Marketing: $408
Link Wheeling: $510
Private Ads: $180
EBook Development: $250
EBook inclusion fees: $29 (Clickbank)
Total Cost: $1,670
The first month was spent conceptualizing and building the website, while the next four were spent gradually marketing the website. As a personal rule, I typically do not monetize my websites until it starts to get around 300 daily unique visitors.
I first monetized the website in month 6 by incorporating Google Adsense ads, followed by some affiliate links and then an eBook, which I also submitted to Amazon Kindle, Google Books and Barnes and Noble for sale. In months 9 and 10, I received my first few private advertising inquiries and I sold a few spots for a 3 month contract. Several have come in since then.
All in all, from month 6 to date (nearing end of month 12), the website has generated a total of $4,872, recovering its total cost of establishment and then some. There are three key things to note:
Highest Earner: Google Adsense
Highest Month: This month ($1,121)
Monthly Average: $812
These three factors are most important because they predominantly drove my decision not to sell my website. Here is why. . .
When I look at the traffic and profit trajectory of this website, I see a steady increase upward with a growing number of keywords that the website is being found for. Based on the initial keyword research I conducted, I know that my traffic has not hit anywhere near its full potential.
While traffic and profitability are directly correlated, it’s hard to pinpoint exactly what that correlation factor is. Suffice it to say that profits will increase as traffic increases. So while I know my profits will go up, I don’t know exactly how much. But just for the sake of discussion, let’s say that profits don’t go any higher than the last and highest month of $1,121. Based on this, the annualized profits equate to $13,452.
Is it likely that profits will not increase beyond $1,121 a month? No way. Not based on the keyword research and the Adsense payout for the terms I am targeting, which by the way is very high well into the double digits per click. But let’s just say that the income stops growing at 1,121, at an annualized amount of $13,452 and a $40,000 sale price, we are talking about a sales multiple of 2.97, or almost 3.
Basically, this means that assuming the website makes $13,452 a year consistently, the buyer will recover their investment in 3 years or less, with each subsequent year resulting in pure profits assuming the site doesn’t drop off cyberspace.
Typically for a website like this, an earnings multiple of 3 is not a bad one to sell at. I have heard a multiple of one a lot, or a full years’ profits. I personally think sellers are way short selling their assets. I would never do that personally.
For this website, I’d like to wait it out to see how high the monthly income levels can reach. For each dollar in profit the site goes up in, I can demand $3 when it comes time to selling it assuming a buyer is willing to pay an earnings multiple of 3.
Another important thing to note is that the main revenue driver of the site is Google Adsense ads. It’s hard to get more passive than that. Whoever acquires this website has to do very minimal work, if any at all. But then again, that’s assuming they are a financial buyer who would buy for the sake of monetary profits (we have no control over Adsense and anything can happen at any time).
The buyer that contacted me however is a strategic buyer. This means that they have an existing platform (business) and they likely plan on using my traffic to benefit an existing business. This is one reason why they are willing to pay a good price multiple. Why? Because the bottom line impact to them is way more than Google Adsense can deliver.
Based on the traffic trajectory and profitability research, also keeping in mind the recent advertising inquiries that have come in, I can easily estimate this site to be bringing in $2,500 a month on the conservative side, which equates to an annualized $30,000 in profits.
I think I can do better if I hung on to this site and worked on it a bit more. I’d like to see where it plateus before considering selling it. Nonetheless it’s nice to know that I was offered $40,000 to sell my website. Such flattery only makes me work on it more to see how much I can grow it.
I know what you are thinking. Cash out Sunil and run. I know I know – anything can happen. I escaped Pandaguin with this particular site but a future Google Anaconda or whatever they decide to call it algorithm update may get me. Even worst, I may get my Adsense account suspended. I am taking a calculated risk here and I’d love to be able to see through the fate of this site.
A major factor in not selling? This industry has a LOT of cash flowing through it and I am working on a few affiliate relationships right now. I will show you what some of my other financial websites are generating in affiliate income in my next post. This post will likely make a lot more sense after that.
Also worth discussing is the point that this niche is in an evergreen area of personal finance, which means the information was accurate and relevant yesterday, today and likely tomorrow. While the decision not to sell was mainly driven by the numbers, this qualitative factor plays a huge role.
I may have decided otherwise if my website was about the most recent tax law, a topic that will likely change or become irrelevant over time. But then again, I am not sure if anyone would be willing to pay $40,000 for a website with limited shelf life.
I was also encouraged to see the private ad inquiries come in and at the rate at which I was able to secure them. Private ads certainly ad more certainty to the site’s cash flows, as well as further diversifies its income streams.
Overall, there were minimal costs involved to set up the website. Although I did not track, I would conservatively estimate roughly 20 hours of my own time spent researching the concept and facilitating the development and marketing efforts. However, countless hours were invested in content creation. I know this topic very well so there wasn’t much research time involved, but creating quality content in a coherent and cohesive manner takes a lot of time and effort.
While I disclose many of my niche sites on this blog, there are some websites I cannot disclose. I am sure you understand and can appreciate the reasons.
Looking back at the recent experience I can’t say that I regret my decision. Time will tell whether I should have taken the offer. The key take away from this experience is that an income producing website is an income producing asset much like any other asset. If it makes money, there is likely someone interested in owning it.
The beauty of niche websites (not micro niche sites) is that once established, they generate passive and residual income month over month with very little ongoing effort, and some none. This makes them even more attractive to own from a financial buyer’s perspective, especially if the buyer has ideas that can increase the site’s earnings. For a strategic buyer, it’s all about the synergies that can be gained from the transaction.
I’ve written about website valuation methods on ProBlogger. I have also written about a practical way to increase your website’s valuation significantly. Read these if you are interested in selling your income producing asset at some point.
I’d love to write more about buying and selling websites if the readership community is interested in this type of material. Is this something you want to hear more about? If so, please be very specific about what you’d like to read more about and why? I am all ears.
Have you bought or sold a web property before? How did you decide on its valuation? What was the main driving factor behind your decision? How has the overall experience been? Any regrets? What would you do different today if you were to do it all over again?Previous: How to Manage Multiple Online Businesses: Streamlining Your Accounting