I was part of selling 7 or 8 websites back in 2007 and 2008 when multiples were sky high and getting 2 or 3 years revenue was commonplace. In fact, I don’t think I ever received less than 2 years on any site I’ve ever sold. Over the last few weeks I’ve been watching Rick Latona and Flippa and trying to figure out what sites are going for in today’s market. There was also an article today on DNW that revived my curiosity . It was an interview with Ryan Moran discussing his experience with buying and selling sites. He says he generally pay 8 X 12 time MONTHLY revenue. My first impression was that this was extremely low so I went to gather some data.
First I put in a few of the sites that Latona had for sale and then I entered a few from Flippa’s recent sales
|Latona||Annual Revenue||Asking/Sold Price||Monthly Multiple|
|Google News Site||$600.00||$6,500.00||$130.00|
There are some very obvious discussion points that come up. The first being is that there is no doubt the revenue numbers being offered are inflated/made up. So far I have been in discussion with three potential web site buys this year and all three turned out to have considerably less income than in the very first discussion of numbers. I am certainly not calling Rick Latona a liar but with multiples of 36 to 60 months those numbers better be correct and have some history. In my opinion, three years revenue of a site with solid revenue history is acceptable. When you start getting into 5 years multiples then you really have become speculative. Even a brick in mortar business with constant revenue for 10 years has trouble getting more than 3 years revenue in good times. Add in this economy and revenue gets thrown out the window. It’s all profit dollars.
Now lets talk Flippa. Officially you’re supposed to be able to verify income but I have no reason to believe anyone is telling the truth over there. Potential? Absolutely. Many of these sites are worth a lot of money in the head start they give you alone. But look at the logo site that sold. $8000 per month and it sells for $4950? That’s either the best deal of the century or nobody believes they can achieve those revenues. There seems to not be many “in betweens” in the multiples. They are either going for 1 to 2 month revenue or multiples of 100 plus. Either way I think there really is no multiple being used when it comes to numbers over at Flippa. Only a person’s belief on what they can make out of the site up for sale. Hopes and dreams, not numbers and reality.
So what if you could get real numbers? That would make life much easier but I’m not sure how many people will give you that kind of data to come up with a current multiple. Which brings me back to Ryan Moran. He most likely does get real data in his private buys. In that case, 8 to 12 times monthly REVENUE is probably realistic in today’s market. Remember it’s not profit ,it’s revenue. I would imagine that a very very high margin site would sell for a higher multiple. The next question would be. Why would you sell something that is bringing in good annual revenue for just one year’s worth? Simple. You get an entire year of revenue for nothing and you can move on to another project. Site builders love to keep building. Cash in and move on. It also takes a lot of work off the table. You hear the words autopilot but there are very few sites that are autopilot. Taking the work off the table and still getting the money for the entire year appeals to a lot of people. And again this is average and is probably for an average site. He mentioned that his average payout is $1000 per site. Using his multiple that site is making $100-$150 a month. Would I take the $1000? All comes down to how long it’s been bringing in the revenue, how hard it is to do, and what I think the future holds. I probably wouldn’t because I don’t need $1000. I’d only sell it if it was a lot of daily work. I DO need the time.
So there’s your analysis. My conclusion is you can’t trust anyone’s revenue so I have no idea what the real revenue multiple sites are going for. Latona thinks it’s 3-5 years. People on Flippa think it’s 2 months or really don’t care. Ryan Moran thinks it is under a year. Me. I think it’s 2 to 3 years with good historic revenue.