One Million Dollar Site for Sale on Sitepoint
I don’t think I’ve seen a site for sale on Sitepoint for $1,000,000 before. I can’t imagine this site is actually worth that unless you have other gaming sites to tie into.
The Value of Consistent Earnings
One of the things I see quite a bit is people complaining about low website valuations. The quick and dirty rule of thumb is 10-12x monthly earnings, and many people think their sites should be worth more. Well, plenty of sites do sell for more. Good quality earnings sites sell for 3x yearly income.
What you need to remember is that the price you should pay is ultimately dependent on how much money cash you can pull out of the business, discounted for your cost of capital. You wouldn’t pay $5000 for a site that only brought you $2000 in revenue over the next 5 years. You probably wouldn’t pay $5000 for a site that brought you $6000 over the next 5 years, because you could earn a better return on your money somewhere else. So when you look at a website, you have to figure out how much cash it will throw off, and how long it is likely to do so.
The problem, as any website owner knows, is that web earnings can fluctuate dramatically. You could rank #3 for your keywords in Google and make $2000 a month, then Google decides to change an algorithm and suddenly you rank #15 and make $800 a month. Of course, the reverse could happen as well.
The point is that web earnings are not as predictable as earnings for other businesses, in part because they rely so much on search engines to send visitors. Because they are riskier, you should pay less for $1 of projected earnings than you would for a more steady business, because that $1 is not guaranteed. If you look at sites that have sold for more than 10-12x earnings, one of the most common reasons is that the earnings were steady and predictable.