The core fundamental of determining the value of an internet business is determining an accurate and true market valuation of a website. Business requires a clear knowledge of the attributes of core fundamentals beyond the financial condition of the business.
Particularly if you want to sell your online business, the hardest part would be to value the worth of your website. You might have been building your business for many years and the website of your business would also have been evolved over the period. At the time of sale, you would want to pass your most nurtured baby to those who actually know its worth.
The following list encompasses the most relevant and important attributes that pinpoint the worth of a website of an online business:
A great domain name can add a lot of extra value to an online business. It can provide direct traffic searches, SEO dominance, brand identity and goodwill. A rare domain name especially “.com” that are generic to a specific niche can bring great value to your website and ultimately to your business.
Organic search engine positioning
Natural rankings for major and tertiary keywords & phrases in Google as well as in Yahoo provide greater stability, presence, traffic and sales. It also means lower advertising expenses and greater profitability in most cases as well.
Unique monthly visitor traffic and pageviews
The greater the traffic volume to the website, the more potential for sales and profits. A site with a large and stable or growing traffic is going to be attractive and safer to purchase. Traffic from the US or major Western countries is going to be more valuable than developing countries. In addition, the sources of the traffic (known as referral traffic) should be from reputable and real websites.
Agent history of a website business
Usually the older the site, the more stable it is going to be. With more pages of the website indexed in the search engines can potentially be considered the best and rank higher in the search results. Often adding new products or content on specific topics can be picked up quickly in the search results and rise to the top for older established sites.
Unique and/or private area
Businesses having a unique product line that is exclusive to the site is a huge advantage and can offer many sales and profit opportunities. Unique content along with proprietary products or information will provide a competitive edge and potential dominance over the others.
A large loyal customer base that contributes to a decent percentage of repeat sales, recurring billing such as monthly membership will provide long-term sales, stability and growth. This definitely enhances the worth of your website and in turn value of your overall business.
What is the historical trend of sales, profits, profit margins and unique visitor traffic? Is it trending up consistently year over year? Is it flat yet stable or is it dropping like a sack of hammers? A rapidly growing business with strong and consistent growth year over year is going to influence the overall brand value and goodwill of the website.
How many vendors supply the site? If it is product driven and what is the quality of the product range? Are there low barriers to entry for competition? Are the products more exclusive and hard to get because of the proprietary relationships? Are the products impossible to import or website has sole distribution rights for a country or region like North America?
Dropship or inventory
Can the website business be home-based or a warehouse needed because inventory needs to be held? Home-based or drop ship models can often operate much leaner and efficiently with lower overhead and potentially larger profits. The other considerations are the speed of shipping, customer service experience and extra fees.
Does the business partner with large retailers like amazon.com, shop.com, etc.? Does it offer wholesale? Does it have any government contracts? Websites with multiple developed sales channels typically reflect a more stable revenue opportunity and growth.
If all of these main fundamentals are present in a website, it can compel buyers to make better offers, potentially well above the average market, because the business has a greater probability of creating a stronger and quicker return on investment than online businesses without similar fundamentals.
If you are a buyer seeking a website for sale, be sure to look at these elements closely along with the basic financial reports to determine if the site has the core fundamentals that create a solid and secure foundation that leads to long-term stability, growth and profits.