Flippa Valuation Tool

[Clinton]

daveslutzkin, the average user of estibot type tools may use the Flippa tool and attach some credibility to the results. There might even be some chatter like "Wow, see how much my site is worth!"

But without disclosing the methodology/calculation behind the valuations the tool won't cut it for experienced users. For all they know, you could be basing results on something simplistic like PR or Alexa rank, or backlinks or number of letters in the domain name or a random number generator. Telling us there's a complex calculation happening in the background without telling us what that calculation is would leave suspicious buyers (and sellers) with more questions than answers - questions about your methods and questions about your intentions.

On a more cynical note, I'd imagine if it gave a default range of $0-200 for every site entered, then that probably would be 90% accurate for sites that are listed on Flippa

That's true. That's why it's important to be open with the users of the tool and tell them how the calculation is being done so they can make allowances for areas where the tool has flaws. It would also fuel suggestions from knowledgeable users on improvements that could be made.

Well, maybe, if the listing fee is all that Flippa cares about. However, our fee structure includes a success fee, and the best way for us to miss out on a success fee is to give a site a ridiculous valuation which then anchors the seller's expectations to an unrealistic level.

You'll miss out on a success fee but you'll clean up if thousands and thousands of people paid just listing fees and upgrade fees surely

[Matt Mickiewicz]

The data is based on historical sales... not many 9-figure sales happening on Flippa, therefore throwing those type of sites at the valuation tool won't work.

[Clinton]

Hi Matt, I appreciate that there aren't many sales of six figure sites on Flippa and the average price sites sold for at Flippa last year was around $1100. It sounds like you're saying this tool is best used on sites like these - the near template, $1000 sites.

[flipfilter]

That's the problem with all valuation tools.

Net profit is the number one decider of value and is the one input those valuation tools don't have. So they base their calculations on whatever turnover the seller claims or, in Flippa's case, based on PR/Alexa/something else. Even flipfilter tries to argue that there is possibly a correlation between claimed gross profit and the final sale price.

Not exactly.

Either you've took what I said out of context or I failed to explain myself correctly.

Sites have changed since 6 or so years ago when the majority of sites for sale were adsense sites and basic affiliate ones. They didn't pay for traffic so their costs to operate were almost nil - this meant little difference between gross and net in most cases, and the costs we're often 'user dependant' (for example sticking it on a VPS you already own would rapidly reduce the hosting cost). I guess this is why someone would pay the same for an adsense site that reported $1,000 gross and $960 net as they would for one which reported $1,000 gross and $1,000 net.

My point wasn't that you should do a valuation on gross profit. My point was based on this type of site, there's more correlation between sale price and gross than sale price and net - although today with the landscape being more complex, this has probably changed (even in the space of 18 months).

There wasn't a 'possible' correlation - there was an actual correlation - I wasn't commenting on whether that right or wrong. This is just what the numbers happened to do.

With today's 'average' site, that probably wouldn't work; even small sites have many costs outside of hosting - for example, Mailchimp / Aweber, Paypal Fees, Software Tools and renewals, SEO bits, writer costs etc. Without knowing net, you couldn't come to a realistic valuation.

[Clinton]

Hi flipfilter, I agree that for sites where gross is roughly equal to net there would be the correlation you describe. But six years ago is a long time in this business and way, way before Flippa was even conceived. As far as sites on Flippa are concerned, there's always been a mix of sites, however the large majority has been "site flipper" sites - templates, "hugely profitable" sites that have been around for only two months - and other sub $1,000 sites. In that territory, financial and economic rules break down. Bidders are often novices with dreams and the prices are determined by factors such as the quality of the sales pitch, the after sale "freebies" on offer, the prettiness of the site design, the PR of the homepage (sites created on drop catch domains) and other considerations quite outside of monetary ones.

With the collapse of that whole template model and the increasing paucity of buyers clueless enough to buy into the big bluff of easy money from websites, career site sellers have moved to trying to demonstrate some sliver of profitability hence the costs such as aweber, software tools, writer costs etc., that you talk about. That's a good move - there's now focus on money, not background colour. But this makes derivation of net profit impossible for a software tool that is unable to make subjective judgments such as on the time really required to run the site.

On a separate note, thanks for the latest edition of your A-list newsletter. It was interesting that you too noticed that there's a reduction in the higher end sites selling on Flippa and that there are far fewer listings selling for the $100K+ prices we've seen in the past. I've also found that these seem to be going more and more to brokers, and I've been advising posters here that brokers may be the better option for the quality properties. Finding a good broker of course is another matter as my recent experiences with brokers suggest that many are giving their clients a very poor service, but that's a story for another post.

[flipfilter]

On a separate note, thanks for the latest edition of your A-list newsletter. It was interesting that you too noticed that there's a reduction in the higher end sites selling on Flippa and that there are far fewer listings selling for the $100K+ prices we've seen in the past. I've also found that these seem to be going more and more to brokers, and I've been advising posters here that brokers may be the better option for the quality properties. Finding a good broker of course is another matter as my recent experiences with brokers suggest that many are giving their clients a very poor service, but that's a story for another post.

Thanks for the feedback - without comments, It's difficult to gauge at times so it's nice to know.

Personally, I would have thought the recent(ish) initiative to make Flippa more broker friendly would have meant more sites in the + $100K bracket, but I guess not. Or, the initiative worked and there are more +$100K listings, but they're not selling which means brokers are simply using Flippa not as a sales channel but as a relatively cheap form of exposure / lead generation or a value add for their clients.

Fancy spilling the beans on your bad experience?

[Clinton]

Fancy spilling the beans on your bad experience?

I was going to start a thread about it, but I am conscious that there are a fair few brokers on these forums - every major website broker, in fact - so was mulling over how best to present my experience, especially what I've had over the last week. I did not want to be unfair to the good brokers. Even if I did not mention any names, my post might attract a few brokers replying to "exclude themselves" from the criticisms - fair enough - or to chime in to say how they do things differently. Sometimes being anonymous makes it easier to post

We've got an interesting thread in the VIP Lounge that covers what information a broker should be providing to buyers. Their responsibility goes further than that though. I believe a website broker has a responsibility to the client, like business brokers do, to advise the client and guide them through the process, to help the client with the presentation of facts and figures, protect the client from looking like a fool, vet prospective buyers etc etc. Let's just say that what some brokers do is a far cry from that!