Just like starting, building, and maintaining a blog, putting a price on a blog is not always an easy task. Sure, you think you have a good idea about the value of your original ideas, sleepless nights and all the time and effort it took to get the blog rolling. (And with all of the blogging success stories that you’ve heard, it really can’t be too difficult, right?) But while these things may seem enough to put a value on your blog, there are actually a number of different factors that affect the value of blog. In this article, we’ll explore the nuances and intricacies of these factors in order to help you, the blogger, get the most accurate assessment of the value of your blog.
Value of Blog – Factors That Buyers Consider
1. Profits and Profitability
The first thing that you have to ask yourself when valuing your blog is, “What does the buyer want from my blog?” The answer is simple: the buyer wants a return on her investment. For example, if a buyer purchases your blog for $10,000, her goal is to make $10,001 from your blog as soon as possible. As a result, the value of blog is directly related to its ability to continue earning money without much risk. This is the profitability of your blog.
Before a buyer considers purchasing your blog, she will run a risk assessment on the venture. Profitability is the number one thing that buyers take into consideration during risk assessment, and based on this assessment, a buyer will usually assign a sales multiple to your blog. The sales multiple is a ratio that describes how much of the annual profit of your blog the buyer is willing to put up to purchase your blog outright. Most sales multiples fall between 1 and 3. The final sales price is determined by multiplying the annual profit of your blog times the sales multiple assigned by the buyer.
For example, if your blog is making an annual profit of $20,000 and the buyer offers you a sales multiple of 1.5, the final sales price of the blog would be $20,000 x 1.5, or $30,000. Blogs that are less risky in terms of earning a steady profit will fetch a higher sales multiple and will consequently sell for a higher price. In this system, the best way to ensure a higher final sales price is to drive up your profits while driving down the risks associated with buying your blog.
Before you try to sell your blog, make sure that you’ve done everything that you can to widen your profit margin. This could include taking on an extra advertiser or two, making sure that clients pay on time and in full, or driving down your operating costs however you can. You’ll be surprised to see how even small changes can boost your profits immediately and contribute to a higher sales price in the long-run!
2. History of Growth
The history of your blog means so much more than your “most popular articles” archive! In this case, the history of your blog refers to the development and growth of the blog since its very inception. The easiest way to get a glimpse of this history of growth is to take a look in your own role in the management of the blog.
In any business venture, your blog included, there are four important stages that happen throughout the course of the venture’s lifetime: start-up (sometimes called development), growth, maturity and, eventually, decline. In each of these stages, your role has probably changed. In the start-up phase, you were likely the main worker and profits were marginal. During the stage of growth, you may have started delegating work to employees and taking on a more managerial or administrative role in the blogging process while others take on the more tedious roles.
Buyers will look at this growth stage, and they’ll look specifically for the ways in which you were able to automate processes associated with your blog. Automation increases the profit margin of your blog while also establishing a lasting system for maintaining the blog. This increases both the profit and profitability of your blog, which is a double-whammy in terms of increasing the final sales price i.e. value of blog.
The next stage of your blog’s history, maturity, is also important. The most important part of this phase is being able to identify exactly when your blog has reached maturity. At this point, you should have a well-established niche in the blogosphere with dedicated readers, advertisers and contributors. It is imperative to know when you reach this phase, because this is the time that you should sell your blog!
As you can see in the figure above, your blog is worth the most in this stage of maturity. If you wait too long to sell your blog, it will inevitably go into decline and be worth less and less with each passing day. You’ll know when you’re in the maturity phase with your blog, because you will be continuing to earn profits without the perceived risks that you experienced during the start-up and growth phases. As we discussed above, this is exactly what buyers are looking for!
Buyers are also looking for other things in terms of your history. For example, buyers love to see well-kept and accurate records that go all the way back to the first phase of your venture. These records include everything from yearly tax reports to itemized payments from all of your advertisers. With all of the records, the buyer knows that the business is clean and consistent; it’s just another way to keep the risk factor at bay.
3. Ease of Transfer
The ease of transfer refers to how difficult (or easy, in the best case) it will be to transfer the responsibilities of maintaining the blog from your shoulders to those of the buyer. If you were able to successfully automate most of the big processes associated with maintaining your blog, then transferring the reins should be a simple matter of teaching the buyer how to oversee the automated processes. Well-automated processes not only contribute to the ease of transfer, but also contribute to lower risks associated with taking on the blog. You can see now how all of these factors are closely tied together in terms of value of blog!
The ease of transfer is also impacted by the primary writer of the blog. You should have a plan in place before you even approach a potential buyer that lays out your strategy for maintaining high-quality content on your blog after the transfer of leadership. This is especially true if you are the primary content contributor (or writer) for the blog. Will you continue to be the main writer? Will you be paid for each article? Will you have a salary with an expectation as to how much you’ll write in a given time? Or maybe you’ll take a cut of the profits in exchange for keeping the content up to date? Whatever your plan, you need to spell it out clearly for any potential buyer before you agree to sell!
One thing that interferes with an easy transfer is brand reliance. Blogs are a great way for readers all over the world to come together to discuss common interests and niche topics. However, since your blog likely features your writing and your ideas with your voice and your personal flair, the blog may run the risk of being too heavily reliant on you. Your readers have come to know and expect a certain “face” of your blog, and while this does keep readers and advertisers coming back, it can also cause a rut that is hard for your buyer to get out of. This rut is called brand reliance, and brand reliance hurts the ease of transfer.
Buyers see brand reliance as a risk, because if the readers and advertisers rely too heavily on the “you” aspect of your blog, they might leave when you stop being the owner of the blog. Buyers also don’t want to assume the cost of rebranding the entire blog. For these reasons, it’s wise to start dialing back that “you” factor on the blog well before you take the blog to any prospective buyer.
Factors That Buyers Don’t Consider
Now that we’ve explored the things that make your blog valuable to buyers, let’s take a look at things that don’t factor in. Unfortunately, since buyers are primarily interested in earning a return on their investment as soon as possible, they don’t often look too far into factors such as “potential” or how much money you put up yourself to start up the blog. You might think that any money that you invested in the startup of your blog, such as purchasing a domain name, the creating the web page or marketing the blog would be taken into account when determining the value of your blog.
However, since all of these things were purchased to generate or increase the circulation or profit of the blog, they only contribute to the value of blog insofar as they contribute to the profitability of the blog. This means that even if you paid upfront for these assets, they more than likely will not be purchased outright by the buyer. Their value lies only in their ability to boost the sales multiple by contributing to the profitability of the blog.
Hopefully, you’ve changed your thinking about how to put an accurate value on your blog. Remember, the most important factor that contributes to value of blog is its ability to make money and then continue to make money! Best of luck in the blogosphere!