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Thread: What do you do when faced with sellers who believe website valuation tools are correct?

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    Lightbulb What do you do when faced with sellers who believe website valuation tools are correct?

    So I was pursuing a website owner today, who has no experience in buying/sell. When things got down to the nitty gritty he asked me how much I thought the site was worth. We have a discussion, and in the end hes dumbstruck by my valuation. He says according to "sloccount" the sites worth in excess of $180k. Sloccount being a "programming code valuation tool" while my valuation was on the other end of the spectrum in the low $x,xxx. Generally I feel like I provide fair valuations based on current market trends, and revenue and traffic projections.

    In all seriousness...Have any of you guys been faced with this problem? How did you go about tackling it? Did it work out in the end?

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    aka "meathead1234" Thomas is a Premium Member
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    All the time Generally speaking, if someone thinks their site is worth MUCH more than it is then there's usually nothing you can do to change their mind - so usually if they are adding at least one zero to what it's really worth I wouldn't even bother going further as it's not worth my time.

    If they are a little closer to what it's really worth, then you could try pointing them in the direction of past sales (Flippa or wherever) that are similar to their site so they can see for themselves. I have to say that I think even in the last few years since I've started online, people seem to have become more educated about what sites are worth and don't cite online valuation tools as often as I've seen in the past, but it does still happen.

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    I tell them to contact me if they can't find a seller at that price, and wish them luck.

    Nothing is going to educate them, besides failure.

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    Administrator Clinton is a Premium Member
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    Have any of you guys been faced with this problem?
    LOL

    Pointing them to examples of other sites that have sold is often a waste of time. If they're already convinced their site is worth a certain amount they'll find reasons to dismiss examples you provide - either those sites aren't as good as his or the seller didn't realise the true worth!

    I point them to Flippa, tell them to put it up for auction with whatever reserve they want and I leave it. I get back a year later to ask if they've sold the site and to point out that I'd still be interested. And then another year later.

    Be prepared for them to reply to the subsequent approaches to say that they do have a buyer in the wings - or several buyers - and asking you to come up with a figure!

    My next phase is to politely tell them I'm not going to compete with any other buyers. Good luck with the sale.

    Then write to them in another few months. You'll probably find that none of those buyers went ahead with the purchase.
    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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    I think we all get it, in fact someone here should create an auto tool that values all websites less than $10k and then we can point them to it for a valuation. Head>Brick wall with many but as Clinton says sometimes a bit of a break and coming back with real money can sober them up.

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    Quote Originally Posted by mpcovcd View Post
    In all seriousness...Have any of you guys been faced with this problem? How did you go about tackling it? Did it work out in the end?
    I tend to explain my valuation and just focus on what the site means to me. It might be worth more to someone else who can get more out of the site, but at the end of the day, I'm not them. I don't usually have much luck with webmasters who have sky high expectations, but then I don't try too hard to convert them.

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    Moderator Kay is a Premium Member
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    Some of these valuation toys (tools?) are quite funny. If I could sell my sites for the valuations given I would retire permanently this afternoon.

    According to one of them, my newest site (currently in sig) is work $7K+. I wish! Seriously, they can be a little bit of fun to play with but how can people really believe that this is what their site is worth?
    British Expat - helping people to live and work abroad since the year 2000.

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    Quote Originally Posted by ScottJ View Post
    I think we all get it, in fact someone here should create an auto tool that values all websites less than $10k and then we can point them to it for a valuation. Head>Brick wall with many but as Clinton says sometimes a bit of a break and coming back with real money can sober them up.
    Send me 50 and I'll make it happen

    It all goes back to the fact no one likes to hear bad news; if you go to a fortune teller and she tells you that you'll die someday, you'll never go back but if you're about to meet a tall dark handsome stranger...well...different story. Most of these tools throw out overly optimistic prices to make the user feel good and come back with other sites, giving them more indexed pages and visits.

    If the seller insists this price is right, ask them if they would value their car on the registration plate alone? If that doesn't work, send them here http://www.flipfilter.com/website-value-calculator. It's not 100% accurate, but a more realistic starting point as it uses live data.

    J

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    Administrator Clinton is a Premium Member
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    flipfilter, is there any way I can persuade you to invest the extra effort to base your valuation on net profit rather than revenue? A site making $10K a month spending $9K on marketing etc., is going to sell for a lot less money than a site making $10K a month with virtually no expenses.

    A 12x multiple in the first case makes for a sale price of $12,000 while in the second case it's $120,000 - a huge difference. In real life people don't do valuations based on turnover, it's P/E - the important figure is earnings, not activity.

    I appreciate it ain't easy doing the net profit calculations and this can't be done algorithmically.
    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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    Clinton,

    If you've ever looked at this practically you'll realise it's just not that simple but I think your missing the point. The tool isn't really a valuation - it's just an easy way to describe what it does. It is actually a straightline regression analysis based on a range created by the variables the user gives it.

    This tool is pitched at a specific part of the market, mostly sub $10,000 sites where there is usually insufficient data (present and historically) to perform a 'proper' valuation as you would do in an ideal world.

    If you look at the numbers, more than 80% of sites listed (only counting ones that sold) had a difference of less than 15% between net and gross. This means
    either

    1) Most of these sites were Adsense sites for example and had little fixed costs

    2) Sellers aren't being accurate in reporting their monthly costs (which I think is the most likely scenario)

    Given that a) everyone who lists some sort of revenue will at least list gross if not net and b) if I had to rely on one figure being accurate, I'd rely on gross it gives for a more accurate calculation to derive the average from gross not net. Remember all the computer is doing is looking for a correlation - in layman's terms, does a site with all other things being equal (traffic, domain, age etc) that earns x revenue (gross) sell for y times more than a site earning y revenue.

    I've tested this with ended auctions to see how accurate it is. In it's current state it hovers between 75 and 80% whilst using net this is down to approx 40% - the numbers speak for themselves.

    There's no argument over what figure should be used if you're doing a valuation, but this isn't technically a valuation - not in the typical sense anyway.

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