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Thread: News: Flippa recommends article that says you should NOT value sites on potential :)

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    News: Flippa recommends article that says you should NOT value sites on potential :)

    Found a link on the Flippa blog to an article at stuntdubl about valuation.

    Stuntdubl is a well known SEO. I first approached him for SEO advice a decade (or more) ago. This article on valuation is pretty sound and worth reading even if you've been in the game a while.

    Rule #1 Ė You canít sell potential. Take the word out of your vocabulary. Cringe when you hear it from others.
    Find the right business brokers to maximise the value you extract from your business and improve the chances of selling your business.

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    Quote Originally Posted by Clinton View Post
    Found a link on the Flippa blog to an article at stuntdubl about valuation.

    Stuntdubl is a well known SEO. I first approached him for SEO advice a decade (or more) ago. This article on valuation is pretty sound and worth reading even if you've been in the game a while.
    That was a great article Clinton. I would say there is one exception where valuing sites, or any business, on potential, could be valid. If the buyer truly believes in the success of the business concept, and lacks the time or expertise to replicate the platform. In this case, if the seller would be prepared to defer the portion of the purchase price based on potential, and make payment contingent on that potential being realized, this could be reasonable. In doing this, the buyer must keep in mind how much investment of their time will be required to reach this "potential" vs. growth beyond it. If they are agreeing to compensate the vendor for the potential when achieved, it can be argued that potential will be realized mainly as a result of the efforts of the seller, pre-closing. This is a rare scenario and I would only advise it to a purchaser who is an expert in the business they are buying.

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    So glad to hear since I already cringe when I read "potential". My simple answer to sellers - every site has potential, if it didn't, why would anyone buy it.

    Put another way, realizing that potential takes time and/or money. If the potential is so simple to achieve, the seller should realize it themselves and then sell at a higher price based on actuals, not potentials.

    I say it more nicely than that =) and reasonable sellers get it. Others, well, they weren't going to sell in a price range I was interested in anyway =).

    I do feel for those who are suckered in by believing there is low hanging fruit that only they will get to. Sadly, though, fools and their money...However, the way I learned the most in this business was by being suckered in on potential 6 years ago on my first site. Nothing teaches you a lesson like losing money!

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    There was once a domain that had a lot of potential. Nobody wanted it because, well, it didn't really spell anything useful. It was a bit of a dumb domain, TBH. Two kids from the US took that domain and made google.com a household name. There are a trillion such domains with potential still available for less than $10 ... so why bother ever paying more than that for potential?
    Find the right business brokers to maximise the value you extract from your business and improve the chances of selling your business.

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    This is the internet. It's a very wide open space. Great 'Potential' websites exist and I've learned this from matching some 'web MASTERS' slay this market over and over again.

    If your level of expertise with a website is greater than another's, there is immediately gained potential from a brand.

    If someone has a project they know they've been lazy on or haven't been able to fund/fuel necessary changes in a timely manor, they shouldn't be immediately disregarded because they want a piece of an exceptional future. Can they get it all? No. Do you have to understand that 'potential' ? Absolutely.

    I see this sort of comment all the time and I understand the rule... "avoid potential and stick to credentials"... but you can lose opportunity just as much you can lose investment with a closed mind.

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