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  1. #1
    SitePoint Enthusiast astereo's Avatar
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    How Much is this Currently Worth?

    I may be in the near future (couple months down the road) selling an asset of mine, but I'm trying to figure out what a reasonable price would be. This is a lot more difficult then in the Devlounge sale because Devlounge revolved around site traffic while this item / site revolves around sales revenue.

    I've been running a site for about 2 1/2 full months where I sell a premium Wordpress theme for $55 for a standard license and $150 for a developers license. The site / theme is at http://www.markettheme.com. Anyway, traffic has been average so far, and the site has a PR of 2 at the moment because it is still very new.

    Revenue for the first 2 full months look like this:

    February (3 days) - $100.25
    March - $2,034.67
    April - $3,065.93

    I've done some advertising, with an ad on Logopond (expired May 1st) and SmashingMagazine (expired last week).

    Assume that I hold onto the theme for month or two and that the revenue for these months hold around what it currently is (we'll just say $2,500/mo to be on the safe side). If a sales package included: site design, domain, full rights to theme (besides letting me keep it in my portfolio), what would you estimate it going for?

    Important to note: A new version of the theme (v3) is releasing in about a week or two along with a backend plugin which will make adding products much easier, which should lead to a flurry of new sales.

    Thanks in advance!

  2. #2
    Intoxicated with the madness petertdavis's Avatar
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    I'd actually think this would be easier to value, not more difficult. It's a straight up financial calculation. But, the details you're missing are how much it cost to develop and continue to develop the product, and how much you're spending on advertising to keep up the sales volume, and any other expenses. Once you get that stuff out, your goal would be to find the buyer who's willing to pay the highest multiple of profits.
    Peter T Davis

    I buy forums - PM me if you're selling.

  3. #3
    SitePoint Enthusiast astereo's Avatar
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    Well at the moment, I've spent roughly $150 to have the plugin / backend developed thats going to be released with V3. Everything else I've done myself. Total advertising costs have been $1,050. With any advertising I purchase it is always going to paid upfront, it will not be an ongoing expense that a new owner would have to continue to pay for. It would be up to them on how / where to advertise if they wish to do so. With V3, the theme should be finalized for quite some time - it should not really need any maintaining or anything like that. A new owner would need to find a new host, and that's about it.

    Edit: And $5/month for E-Junkie to send download information instantly.
    Last edited by astereo; May 14, 2008 at 14:45.

  4. #4
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    OK, well, first of all, if you're trying to fetch the highest possible multiple, you should look into things that would show stability. Since you're only running for a few months, you need to ensure that this is going to continue running for ages to come. Sentences like this ring alarm bells:

    Everything else I've done myself.
    This means that now I'd have to do everything else myself, and like hell I'm doing that. Most investors don't have the time or experience necessary to do things themselves, or they just plain simple don't care. Having to do stuff yourself is a big turnoff.

    Instead, put a fair value on your work. It cost me $1000 to develop this, and you can mention that you did it yourself, if something new needs to be developed that would be the approx. cost to the new owner. You say "the theme should be finalized for quite some time"... but what is "quite some time"? Five months? Three years? The new owner would have to know the time point and the size of these upcoming development costs, as he more than likely cannot do it himself.

    You don't need to include pre-launch development costs in your month to month revenue / expenses breakdown, but you can mention them as pre-launch costs. Instead of saying what the total advertising costs where, you need to break them down month-by-month, just like you did with profit, and your costs need to include a breakdown of how much time you spend doing work.

    With any advertising I purchase it is always going to paid upfront, it will not be an ongoing expense that a new owner would have to continue to pay for. It would be up to them on how / where to advertise if they wish to do so.
    You need to make sure this advertising deal is lasting and more permanent than it sounds. Nobody wants it to be up to them to find how or where to advertise.

  5. #5
    SitePoint Enthusiast astereo's Avatar
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    All good points Edman. Obviously, an actual sale post would be much more detailed and sound a lot better than this post did. My question is what is the general formula most investors go by with a revenue based site? I think when I was selling Devlounge people used to tell me they would look at the last 3 months revenue and multiply it by something, but I'm not sure what.

  6. #6
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    For a site with net profit of $2k/mo running for 4 months you can expect anywhere from $30k to $50k... it all depends on how well you can make sure that profits will keep on coming in and how strong of a case you can make, as stability is going to be the main issue with sites running for a short time.

    If the buyer can find room for improvement somewhere, you may be able to fetch the full $50k. There is opportunity to sell high right now, as atm most sites for sale are:
    1. Earning less than $1k/mo OR
    2. Require owner to work OR
    3. Cost a bloody lot of money
    So if you can put something up for sale for with start bid of $20k and BIN of $40-50k that makes $2k/mo with no work you may get BIN'ed even with very little history to show for.

  7. #7
    Intoxicated with the madness petertdavis's Avatar
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    Edman, I'd actually recommend him to include the pre-launch dev costs. Also, I'd recommend that he include the contact info of the developer as well. He doesn't necessarily need to connect the dots, but I think that a potential buyer might find some added value in that information.
    Peter T Davis

    I buy forums - PM me if you're selling.

  8. #8
    SitePoint Enthusiast astereo's Avatar
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    Thanks for all the suggestions guys! I'm hoping (and expecting) v3 to really bring in substantial profit increases. June (as the first full month with V3 released) should do very well and I may consider selling it in July or August.

  9. #9
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    Quote Originally Posted by petertdavis View Post
    Edman, I'd actually recommend him to include the pre-launch dev costs. Also, I'd recommend that he include the contact info of the developer as well. He doesn't necessarily need to connect the dots, but I think that a potential buyer might find some added value in that information.
    Yeah, I agree, it never hurts to include this information. But if there are no expected development costs, it may not really be too relevant, though.

    The contact info of the developer could be included and could be considered a good bonus.

  10. #10
    SitePoint Enthusiast astereo's Avatar
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    Thought I would update this to see if some of your original quotes for this site are still holding true or not.

    Here is the income for the month of May...

    May - $1,836.16
    June (to date) - $1,097.85

    I just purchased some more advertising on Weblogtoolscollection and CSSRemix, so things are still growing steadily. The site is still a PR2. Would the original estimates above (30-50k) still hold true?

    Thanks in advance!

  11. #11
    Intoxicated with the madness petertdavis's Avatar
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    Declining income isn't going to make buyers want to open their wallets very wide.
    Peter T Davis

    I buy forums - PM me if you're selling.

  12. #12
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    My question is what is the general formula most investors go by with a revenue based site?
    There is no "general" formula. It depends on the type of site, how long it's been making a profit, how it makes its profit etc.

    I would value it far less than Edman. First, do note his mention of net profit. And his basis for calculation of $2K net pm. If net profit is less than $2K then obviously he's not suggesting you could get $30K-$50K.

    And I would put net profit at less than $2K.

    Also, I wouldn't pay the 15x-25x for this business model with barely any history behind it. Sorry, but you did ask for opinions.

    Now that your income has dropped it's clear that any early spike was just that - a spike. Possibly achieved by you trying very hard. And paying yourself $0 for all that time you invested.

    Would the original estimates above (30-50k) still hold true?
    Why would it? Are you saying that the multiple should rise to 40x just because you bought some advertising?

  13. #13
    SitePoint Enthusiast astereo's Avatar
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    Why would it? Are you saying that the multiple should rise to 40x just because you bought some advertising?
    No, I am not. I was asking whether or not the estimation would be around the same or if it had slipped what a valid and current estimation would be. I am not expecting it to rise.

  14. #14
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    When earnings drop the multiple has to rise to maintain the same $ price range quoted earlier.

  15. #15
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    The fact that you purchased advertising is a big turnoff, at least for me personally. It means I'd have to purchase advertising after buying it as well. The overhead of doing that is simply not worth the profit it makes.

  16. #16
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    I agree... we buy a lot of sites in the $xx,xxx range and one of the big turn off for us is advertising... at least for us it makes sense to go after sites that make sales or earnings organically... thanks

    Quote Originally Posted by Edman View Post
    The fact that you purchased advertising is a big turnoff, at least for me personally. It means I'd have to purchase advertising after buying it as well. The overhead of doing that is simply not worth the profit it makes.

  17. #17
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    Is it your own script?

    Have you been advertising anywhere specific and if so where?

  18. #18
    SitePoint Enthusiast astereo's Avatar
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    The site is now for sale here: http://marketplace.sitepoint.com/auctions/39340

    How is advertising a turn off? It's exposure. You don't have to do anything - advertising it not required and you are not going to make no sales if you don't advertise. For a product like this I wanted to jumpstart its recognition so I chose to advertise, plus I had the funds available to do it. Thanks to some of the advertising I've done, a new owner wouldn't have to worry so much about getting more exposure to the site and product.


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