Re: What is fair market value for a website?
"Jim Stroud" <jim.stroud_at_siemens.com> wrote:
> I was approached by someone who wanted to purchase one of my websites.
>
> The Jada Pages
> Fansite dedicated to Jada Pinkett Smith
> http://thejadapages.8m.com
>
> The offer made to me was $2,000.00. I doubt that such is a fair offer in
> light of the search engine rankings. However, beyond knowing $2,000.00 is
> too low, what would be a fair market value for my website? Are search
> engine rankings the best method for gauging a website's perceived value?
Is your web site making money? Can it make money after deducting all costs,
including value of sweat equity?
Fair market value means the price that the market will pay, which is usually
not the same as the financial value of a business. The "market" pays a
price that is equivalent to a popularity contest. The financial value of a
business depends on the net amount of money it is expected to bring in after
all costs are fully deducted, including for example, the value of the "sweat
equity" that is invested.
Hobbyists and speculators may pay a market value that has little or nothing
to do with business value. That is where a lot of negotiations becomes
mystical with minimal financial basis.
For more details you might be interested in my working papers "What
Entrepreneurs and Investors Should Know about Venture Investment" and "How
to Make Sense of Venture Investment Returns" at the following link
http://www.netpartners-marketing.com/investrs/vinvstr.html
[This link will only be up for a little while longer as the papers will
not be available for free anymore and the web site will be redone.]
Most web sites actually have a negative financial value because they require
continuing sweat input without good prospects of future profits.
In your case I would "test the market" by contacting fans and seeing what
their hobbyist valuation is. Simply ask if they are interested in buying
the web site and what they are willing to pay.
Jim Namaste
Growth Business Development
Author, "Independent Investor's Advantage"
jim.namaste_at_netpartners-marketing.com
Received on Mon Feb 09 2004 - 11:57:53 CST
