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Thread: Valuating at the Macro level...

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    Valuating at the Macro level...

    Hi All,
    I'm considering buying a website for around the <10k realm, and was wondering a few things:

    1. What're some good statistical/ quantitative rules of thumb(s) for the earnings multiplier method for sites that’s selling for less than $10k, ASSUMING that the investment is 100% passive.
    2. How do you factor in "risk” to these estimates. Obviously, riskier sites have lower earnings multipliers, but to what degree?

    3. Might y'all be able to provide some links to some guides on this topic.

    Best!,
    Anoninnyc

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    aka "meathead1234" Thomas is a Premium Member
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    1) No such thing as 100% passive. It's a myth spread by the MMO crowd. In the sub $10k range, there is a very large amount of poor quality sites and as a %, the number of legitimate sites with income is extremely small. As a very approximate rule of thumb, 2x yearly net income wouldn't be the worst place to start.

    2) Significant. A "risky" site might go for 3x monthly net, and at the opposite end of the scale, something more stable might go for 36x monthly net. Risk is subjective and will depend on your own skill set - if you're great at SEO you might not mind that a site has just been hit by the latest Google update... but to the person who knows nothing about SEO it's far more risky.

    3) Read the forum. There's plenty of good information here and from Flipping Planet (which merged with EP a few years ago).

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    Administrator Clinton is a Premium Member
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    I agree with what Thomas has said but will add one note: If the risk is that the site is largely reliant on Google then it doesn't matter how much you fancy your SEO skills - lower the multiple SEVERAL notches.

    If you have the choice avoid buying a site reliant on a whimsical third party, even if that party is Google. Especially if that party is Google. The MMO crowd Thomas talks about will usually say exactly the opposite of what I just said because many of them have the ability to manipulate short term better SERPs for their site (to last at least till the site has been sold).

    If you actually did believe that there are 100% passive sites out there you are likely very influenced by the above wrong type of people.
    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
    I agree with what Thomas has said but will add one note: If the risk is that the site is largely reliant on Google then it doesn't matter how much you fancy your SEO skills - lower the multiple SEVERAL notches.

    If you have the choice avoid buying a site reliant on a whimsical third party, even if that party is Google. Especially if that party is Google. The MMO crowd Thomas talks about will usually say exactly the opposite of what I just said because many of them have the ability to manipulate short term better SERPs for their site (to last at least till the site has been sold).

    If you actually did believe that there are 100% passive sites out there you are likely very influenced by the above wrong type of people.
    Surely it depends on how stable the rankings are and how they have been achieved?

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    Administrator Clinton is a Premium Member
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    Past stability of rankings is no guarantee of future stability. There have been numerous big algo changes over the years that have dealt painful lessons to webmasters who did not recognise this.

    What is white hat SEO today is not necessarily going to be considered white hat tomorrow.

    Be influenced not by the size and clout of the party whose pocket you're in, but by the risk and consequences of that party deciding it no longer wants you in its pocket.
    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 dymockpoet View Post
    Surely it depends on how stable the rankings are and how they have been achieved?
    I know quite a few well known and respected SEO's who were not immune to the Google updates over the past couple of years. I would recommend everyone take a look at a history of the past updates (moz.com has a great list here: http://moz.com/google-algorithm-change). Most of these changes impact 1-3% of rankings with the major updates being much more significant. Additionally, some people become 'collateral' damage.

    One of the problems with relying on Google rankings alone is that you may have built your rankings using legitimate means. However, if shady SEO's use those same methods in illegitimate ways, the result is often that you look like a gray-hat SEO. That's not the territory you want to be in.

    Solid SEO rankings are nice, but if it is all you have, that is worrisome. If the site has only been established for a short amount of time, I would be cautious about paying a multiple on them.

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    Top Contributor crabfoot is a Premium Member
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    Quote Originally Posted by Clinton View Post
    I agree with what Thomas has said but will add one note: If the risk is that the site is largely reliant on Google then it doesn't matter how much you fancy your SEO skills - lower the multiple SEVERAL notches.

    If you have the choice avoid buying a site reliant on a whimsical third party, even if that party is Google. Especially if that party is Google. The MMO crowd Thomas talks about will usually say exactly the opposite of what I just said because many of them have the ability to manipulate short term better SERPs for their site (to last at least till the site has been sold).

    If you actually did believe that there are 100% passive sites out there you are likely very influenced by the above wrong type of people.
     
    Quote Originally Posted by dymockpoet View Post
    Surely it depends on how stable the rankings are and how they have been achieved?

    So once again I sound like the prophet of doom - but somebody has to say it.
    There are sites out there which, while they are a shadow of their former selves, still generate some passive income from their residual traffic and advertising - very close to a true passive income.
    On November 11th Gargyl's new unified T&C come fully into force. This could be a real PITA for a lot of people. Gargyl's ambition is to use any info they can get from any legitimate source to get sites they like high in their search results, and if they don't like sites they will probably de-index them, while giving the site owner the option to have the site evaluated by a human being in case they made a mistake.
    The T&C changes mean that they will take info from any of their services a site owner is using. So don't think Analytics, Webmasters, or Adsense are harmless adjuncts to your activities, like they were in the past. Just submitting a poor site to Webmasters is enough to get it de-indexed. A small change to a site using Adsense could be enough to prompt Gargyl to re-evaluate it, then give it a lower rating or de-index it.
    I wouldn't buy anything dependent on Gargyl traffic until after the next "dance" - then I would tread cautiously. There's no telling how they will bring their ratings into line with their concepts of what constitutes a good site. When they started into the Panda thing, it took three "dances" before we got the full idea of what they were up to, and then they hadn't finished.
    Someone who thinks Gargyl is their friend is under a sad misapprehension, unless that person is a US citizen who believes Gargyl is helping the US economy whilst helping themselves and their shareholders. A webmaster may structure his site and add content in such a way as to please Gargyl, but that is a symbiosis. Nothing to stop the hungry shark from eating the pilot fish ...

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