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
I like your decision Sunil, thats what i will do too if i were on your shoes because from your estimates, there is a bright future for the blog not withstanding google anaconda or google godzilla, so keep building it up man.
However, what i want to know is, what part of blog creation do you think is better to outsource? How long does it normally take you to create a niche blog and what is usually your first traffic formular?
Thanks and good luck friend.
the offer pertains to another web property, not this blog. I’d outsource the design aspect of a blog, but maybe nothing else. for other projects, it really comes down to your own preference and appetite. I like to write a lot of content for many of my projects, but I also outsource some of it. initially for traffic I bookmark my content and do some article marketing. you can find articles in the archives that talk about this. my free report also goes through some of these.
I think my problem is I get bored, even with topics I like. I probably would have sold just to move on to something new and fresh.
certainly a key consideration Tyler. but when you have a portfolio that is mainly for a “for profit” motive (no emotional attachment such as a topic you enjoy), do you think you’d still sell instead of maximizing the output/revenues over the long run?? on another note, is/are there a topic(s) you feel you are so passionate about that you could work on indefinitely?
I would have keep it as well. The website seems that will only improve with time and you could be netting easy 2k+ a month with it.
certainly appears so. definitely some risks involved but let’s see how it pans out. what are you working on now days Miki?
I’d rather live in regrets of failure than not trying at all… if i bring that quote into this, I will surely sell this website for that price. A typical adsense site sales should be as high as x24 of current monthly revenue. If you put it up for sale on flippa, you wont get up to that.
Consider not what the strategic buyer is buying for, consider your own business – the online business. You’ve got other income producing sites so why not let go?
Cash in the money even though adsense increases to $3000 per month, there might not be another strategic buyer out there.
Just an advice – hey, did you get yourself any stuffs from the shopping?
interesting perspective. so cash out and run you say? why not maximize the potential? the point here is that I don’t feel the site has reached nearly its potential
I wouldn’t say “cash out and run”, but I’d rather think along the lines of leaving something on the table for both the buyer and the seller.
Personally I probably would have sold at that point given what you’ve told us.
But we don’t know any more particulars of the deal and the site in question than you’ve given us, so there could certainly be more to it.
Interesting post all the same, not something you see every day!
trust me bud it wasn’t a quick decision. I’d be happy to answer any questions to shed more light (as much as I can at least) 🙂
Do you experience this kind of success with all of your niche sites? If not, what is your ratio of winners to failures?
not at all on the first question. on the second, “success” is relative. for me, anything that generates profits is successful, especially considering the cost structure (almost non existent for static sites other than sweat equity) and the nature by which the income is generated. I have fully abandoned sites for several reasons, including a few instances where no matter what I did I just couldn’t gain search engine traction.
Fascinating story Sunil. Definitely keep the website sales topics going, as this is something that I (and many of us) have zero or very little experience with. I foresee potentially selling sites in the future and the more I can learn ahead of time the better off I will be.
If I were in your shoes, I probably would have taken the money based on typical niche site multiples (monthly)on sales sites like Flippa. Interesting to learn why you didn’t take it.
my rationale is in the discussion Matt – basically I feel there is more to be made especially given some of the affiliate relationships I am working on right now. have you read about the sale of my ecommerce website? that one was a much larger sale and provides a different angle/perspective on this topic.
Man, you have really thought this out. And I think I agree with your final decision. The thought of $40K is mind blowing to me, but since you’ve already sold some sites, it seems like you already know what the site is worth. In my case, I might just jump at an offer, but being more thoughtful about it makes more sense!
I really feel there is more potential, and of course I could totally fail and end up with the same or lower income in the long run. what’s important is that one thinks through this type of decision very carefully and enter it consciously to mitigate regrets as much as possible. but, we are human! I am curious how I’d react to the outcome later on 🙂
Keep writing about these topics! I totally would have sold it. In a heartbeat. But you’re right, I’d have sold it for a lot less than 40K! I don’t value my time, I guess?
we all have to determine what our time is worth, but for me it was opportunity cost. let’s see what the future has in store
I would be interested in how you come up with the sites you sell. I am a relatively new blogger and often wonder if one day I should start a side site with that goal in mind.
I don’t Lance although one could. my sales have been unsolicited offers. if you create a useful site, you never know who is out there looking for something in your subject matter
That’s an incredible story and very inspiring for us budding website builders. I’m interested to learn more about what is evergreen content on a website and once you set it up you don’t have to keep adding posts. Is your Dubai site an example of that? Could you point me to examples of your own or even website you don’t own. I would like to learn more and actually visit a website like you describe in your post.
Dave, evergreen would be information that is factual/accurate at any time. for example, a website on spirituality could be evergreen for the more part. of course there are break through theories and new point of views that can be added with time, but for the most part the topic is stable. another one is self development, or confidence. make sense?
Congratulations on being able to stand up against the quick win of cashing out now. I’m not sure I would have been able to turn down an offer like that, especially as it’s more than I make in my day job!
you add an interesting component to the discussion Edward – relativity. from your perspective I completely agree, and my decision (or at least my rationale) would’ve been drastically different if that were the case. thank you
Obviously, it’s hard for me or anyone else to put ourselves in your shoes without knowing the specifics of the site. However, it may just be my starting to fear Google more and more after being hit by Penguin and having my AdSense account randomly banned, but if most of your traffic to that site was coming from search, I would have taken the $40,000 (or at least negotiated to maybe $50,000). You never know what could happen – I’ve heard stories of awesome authority sites getting hit accidentally by Google updates.
While I’m sure you could improve the income of the site, now that you know exactly the process to take in building a site like that, I’m sure you could replicate it (even numerous times over using outsourcers) and $40,000 sure could buy you a lot of outsourcers 😉
Like I said, it all depends on the specifics of the site and of course somewhat of a judgement call on your part. Who knows though? You may just get an offer you can’t refuse in the near future!
some excellent points Thomas and I agree with you. that was exactly the number one factor that kept me flipping back and forth for some time. I am seeing some good results with affiliate marketing in a similar niche, so I want to at least try at it with this site. what is also interesting is that even after having built a “successful” site, the next one isn’t a guarantee. I have had to abandon several sites because they just didn’t take off and I couldn’t figure out why (trapped in the Google sandbox).
great post. Curious how many pieces of content do you produce for a site usually to get to this type of level. Do you write all your content ?
Also, Do you have a post that discusses how you decide on a niche(I mean finance niches are so competitive especially if they have high adsense CPC. I steered away from SEO after a while because of the moving google target and only 2organic search results showing above the fold now on average.
Brian, my semi authority sites have over 100 content pages. I also have a couple sites in the 300+ page range. I do have profitable niche sites in the 15 page range as well. the point is that it varies, but generally the more the better. search engines love content, and large sites. I have talked about deciding on a niche several times but scattered throughout various posts. seems like it would be helpful to consolidate the various thoughts??
New to your site, i followed you from SPI. I really enjoyed this article, it rekindled my interest to start-up niche sites again. My Adsense sites were killed by the Peguin, so i kinda quit.
Congratulations on receiving such an offer.
welcome Moe. it’s a tough one out there. I am shifting focus more to larger, authority sites
excellent post, love reading it please keep up the good work and I sure be back again I’ll pass this on to my own network.
anytime Nick. let me know what else you’d like to read more about
Wise decision! i would have done the same if I were at your place. Time and hard work are two factors that you have considered and that is heartening to read!
Just came across this post.
I think from a pure financial standpoint, once the website is generating a stable income- say 3-4 month average, then looking at a 20X multiple of a single month as your sale price should be the bare minimum.This is based on pure Adsense income.
But since i your case its a financial niche and the likelihood of CPC to increase over time it would be most prudent to hold onto the same. For a strategic buyer there are several considerations when they buy assets(like the website in your case) and based on that multiple is determined. Again, a low ball offer is a standard negotiation ploy which i would use coupled with and indifferent attitude 🙂
Thanks and Regards,
20x on monthly is like saying almost 2x EBITDA annually. I personally haven’t heard of such numbers as they are unusually high and risky for a financial buyer. that said, your site is worth whatever someone is willing to pay for it.
If you take a look at the site sales on Flippa for relatively newer niche sites with pure Adsense income, then 20X is what most sellers offer. Again, we will have to check transactions over a period of time to really put it in stone whether thats the average/median.
One can argue both ways that a more mature site doesn’t or does deem a 2X EBITDA based on market saturation or potential for more upside/strategic reasons.
interesting. have you personally witnessed / experienced a sale at those multiples?
Yeah, witnessed more than a couple.
Infact have a couple of friends who are in the website brokering business who look at deals > 15K$, mostly private sales.
In addition, folks who do it regularly in Flippa and Sitepoint.
Give me a shout on my email and i can link u up for more info incase u are interested.
always good to get connected with such resources. with a big portfolio of websites like mine, at some point I’d probably like to cut back. thanks for reaching out – I’ll be in touch