There is no precise technique for determining exactly how much you can earn for selling your blog. Set the price too high, and you’ll scare off buyers. Too low, and you’re short-changing yourself. So, where is that ‘sweet spot,’ and how do we get there?
Let’s check out some of the blog valuation methods used by bloggers to determine a blog sales price.
Average profit = (Total Annual Blog Revenue – Fixed Costs) / 12 months
A blogger’s profit or ‘discretionary earnings’ are the total profit the blog makes for its owner, averaged out per month. Since the new owner will be responsible for running the blog, the existing blogger will ignore their associated discretionary expenses (like hardware costs, tools, and utilities) and only include the costs of selling a blog itself.
Start by looking at your blog’s average monthly revenue, say, over the past six or 12 months. Deduct the total day-to-day costs of running the blog, and you’re left with your profit – or discretionary earnings.
The Multiple = Ranges Between 20x to 40x (up to 80x)
Determined based on variables like your blog’s current revenue potential, market demand, and niche performance, multiples are used to establish the market value of something based on a ratio of one or more known metrics. In the case of blogs, many factors can influence your multiple, including the blog’s growth potential, how easy transferring ownership will be, the risks in selling a blog, and the blog’s performance history.
The multiple can range anywhere from 20 to 40 and even 80 times, depending on many factors, including the market’s demand for blogs and your own blog’s appeal. Remember, though, that the multiple is only used to estimate the prospective price for a blog and is a very subjective number. The better the blog, the higher the multiple.
The Formula = Average monthly Profit X The Multiple
Once you’ve got your average monthly profit (or discretionary earnings) and a multiple, you can apply it to a formula that looks a little something like this:
Average monthly profit (over 6 or 12 months) X The multiple (ranging from 20x to 40x) = Your blog’s valuation
For example, a blogger looking to sell their two-year-old blog in the ‘pet care’ niche, which earned $16,000 last year, will end up with:
- $16,000 / 12 months = $2,000 average monthly income
- $2,000 monthly income – $400 monthly expenses = $1,600 average monthly profit
- $1,600 average monthly profit X a 30-multiple (determined by a broker) = $48,000 blog valuation
The seller knows now that a $48,000 asking price is a great starting point for their blog. Whether they’ll get more or less than what they’re asking depends on the methods they use to get a more accurate estimate and expectation. This includes:
- Market comparisons – Looking at other blog sales prices and using that as a baseline. This can be tricky since many transaction amounts are kept secret. You’ll need to find blogs being sold which are very similar to yours.
- The cost of production method – This is a more straightforward method used by some bloggers (often in their early days) simply looking to break even. Look at how much you invested in your blog, add it up, and offer your blog for that price. Don’t expect any profit here.