Selling a small project that got big
I have a possible opportunity to sell a small web application that started as a personal project and got a significant amount of press. The company that may buy it would benefit from owning the site because it brings many users to their site already. The site does not have advertising and does not generate a profit. It gets somewhere around 100k unique visitors a month. Though it doesn't have registered users, the site has about 77k unique emails entered by users.
I did not create this project as a startup or with a plan to sell it. It is only now that I am paying much attention to the stats.
In what range would you price this site? My first thought was $10k. I have no idea if that's too high or too low. I'm concerned that if I start too high, they'll balk.
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What is the value of your site to the company that might buy it? How much annual revenue could they generate from it, perhaps by adding advertising, or by selling paid access/subscriptions? – Bneely 12 years ago
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Very good question, and what I am struggling to figure out. Users are directed to the company's site from my site, where they have the potential of registering for the company's service, which has both a paid and a free version. I'm stumped on how to calculate that potential. – Fred 12 years ago
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I know this isn't an answer to your question exactly, but does the company you are redirecting users to have an affiliate program? If so, it may be worth keeping the site and becoming an affiliate so that you make a percentage of the money from each user who signs up on the other company's site. Just a thought... – Jim 12 years ago
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I was taught to go off of valuation based on revenue but I was just presented with a real world example that didn't follow this paradigm in that the corporate buyer wanted this other company's software so badly that they paid 30 mil for the company who had 1 client and not making revenue anywhere close to support that price. So, maybe the lesson to be learned is that it's all subjective and value to the buyer is more than just revenue. Let them name the first price and take it from there but it would be nice to know what the value of your product is to them. – Tim 12 years ago
4 Answers
I'd look at values on Flippa -- it's the most established and active marketplace for website sales. Particularly looking at the values of sites that have sold, you'll have a better idea of what a reasonable valuation range is.
Keep in mind that without having monetized at all, potential buyers will view your site as a much riskier investment than one that has at least proven it can generate revenue.
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Thank you Jay. I have looked at Flippa a bit. The thing that seems different IMO is that this is not any potential buyer, but a buyer whose site has already benefited through my project's use of their API. I do understand what you're saying about monetization, but my users would feed directly into their service. FWIW. – Fred 12 years ago
Things to consider
- How much money it would take them to reproduce the site and community
- How much revenue/marketing/interest does it drive to their business
- What other competitors might be interested in it (at all)
- How much you want to continue working on it/with it
Congrats on your successful non-startup! Valuation of this kind of this kind of thing is difficult because it is very fact specific and every situation is different.
The fact that they approached you and are interested in buying your site suggests that it may be worth significantly more than $10k. The transaction costs (attorneys etc.) alone for this kind of purchase are probably around $10k.
Insist that the buying company make the first offer. That will at least give you a ball park amount. Then counter offer with something higher. Don't be afraid to name a high figure as they probably started with a really low figure. Then you can start negotiating. :) Feel free to have some fun with it as negotiation is what business is about and it is ok to drive a hard bargain. Just keep it friendly.
The primary rule of negotiating for a seller is to start high and then keep lowering your price until you can make a deal. You NEVER want to name a price, have them agree to it, and then raise your price. That makes negotiations turn ugly.
Selling your services to big corporations is an attractive proposition. The contracts are larger than with small businesses and individuals, and often longer-term. There's the possibility of repeat business worth many billable hours at respectable rates.
