The Asset Value Factor of Working Online

By Daniel Scocco

People who want to start making money online are always wondering how much it is really possible to earn with a website, how long it takes and so on.

They are basically trying to evaluate when it would be wise to ditch their regular 9 to 5 job in favor of working full time on the Internet.

One mistake that most people make when trying to find this answer is to neglect the asset value factor. That is, when you build a blog or website, apart from the monthly revenues, you will also be gaining asset value, because your blog or website is an asset that can be sold later on.

The same is not true with a salary that comes from a 9 to 5 job. You receive a sum of money monthly and some fringe benefits, but that is it.

Let’s use some numbers to illustrate the concept.

Suppose you have a person that has a 9 to 5 job that pays $1,500 monthly. That same person started developing a website a while ago, and if she was able to dedicate herself full time to the website, it would earn $1,000 monthly.

Doing both things at the same time is not possible, because each requires full time attention.

Which one should her choose?

Most people would say the 9 to 5 job, because it pays 50% more. After one year, the 9 to 5 job would yield $18,000 while the website would yield only $12,000.

The problem with this reasoning is the fact that it neglects the asset value of the website.

A website that earns money is just like a small company. It has a value, which is proportional to the amount of money that such website is expected to earn in the coming years. The right valuation is done with a method called Discounted Cash Flow, but for the sake of simplicity you can just use a multiple combined with the monthly revenues.

Low end websites tend to sell for 12 times their monthly revenues, while premium websites sell for as much as 48 times their monthly revenues. Even if we consider the lowest multiple, therefore, the website in our previous example should be worth $12,000.

If the person decides to sell the website, after one year her total revenues would be $24,000, which is 33,33% higher than what she would have earned with a 9 to 5 job.

Whenever you consider working with blogs or websites, therefore, remember that apart from the monthly revenues, you would also be gaining asset value.




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31 Responses to “The Asset Value Factor of Working Online”

  • SATISH — Technotip.org

    Great point Daniel..Will keep in mind, so that I can explain my parents when I am quieting my 9 to 5 job 🙂

  • Satish Gandham

    How do we exactly evaluate a website??
    and What is a premium website??

  • Satish Gandham

    Hello Daniel,
    How do we exactly evaluate a website??
    and What is a premium website??

  • eGruve.com

    Thanks for this information, I have a premium website that generates $16,000.00 per month average any ideas how I can put my website on the market and how can I put a value to my website.

    Thanks

  • Daniel Scocco

    @Satish Gandham, valuating a website is not an easy task. You need to consider the monthly revenues, the costs, the time required for management, the brand and so on.

    Premium websites are those that are well established (i.e active for 2 years or more) and that have powerful brands.

    @eGruve.com, you can put it on the market at http://www.sitepoint.com

  • bansama

    Very interesting information and something worth considering. Of course you still need to worry about attracting and building up a readership — something you usually don’t have to worry too much about with the 9-5 job (depending on the job of course).

    And for me at least, it’s finding the readers that’s proving the hard part.

  • James Chartrand – Men with Pens

    Hey Daniel,

    That’s very true. Websites and blogs are business assets that can be bought and sold, or built and sold.

    However, there’s a caution here. A site or business that has been personally branded throughout building cannot be sold with the same potential returns as one that has been business branded along the way.

    For example, someone might want to buy Men with Pens – great business, good client base, nice reputation… But a site called JamesChartrand.ca wouldn’t come near to getting the same sale price.

    Make sense?

  • Daniel Scocco

    @James, yeah I agree. In fact I don’t recommending building a business website around your person or name 🙂 .

  • James Chartrand – Men with Pens

    @ Daniel – Ahh, good good. I thought for a minute I might have to come after you with guns blazing 😉

  • SEO Tips

    Excellent point to make Daniel I think a lot of people don’t pick up on this from the start.

    If you dont mind, I’d like to point out some mistakes in your grammer (I hope you don’t take offense).

    “People that want to start making money online are always wondering how much it is really possible to earn with a website, how long it takes and so on.”

    Change to:

    People that want to start making money online are always wondering how possible it really is to earn with a website, how long it takes and so on.

    “to 5 job in favor or working full time on the Internet.”

    change to

    to 5 job in favor of working full time on the Internet.

    “monthly revenues, your will also be gaining asset value, because your blog or ”

    change to

    monthly revenues, you will also be gaining asset value, because your blog or

    Hope you dont mind. Good article

    Will.

  • James Chartrand – Men with Pens

    @ Will – Well, had I been on the receiving end of that comment, I would’ve asked if you wouldn’t mind me screaming out before a crowd that your fly’s down… Of course, after I’ve screamed it out. An email could’ve done the trick just as nicely. And does it really matter?

  • seth

    Great concept. I have never thought of it that way. It is not just about what your blog makes monthly, but what it can be sold for… Thanks for the information and what an interesting concept it is….

  • Daniel Scocco

    @Will, I don’t mind when people give me a heads up on some typos. In fact I appreciate it.

    As James pointed out, though, there are different ways to do it.

    Yours was a bit pompous to my taste, especially because you start it out saying you want to correct some of my “grammer” mistakes….

    But thanks for the comment anyway, I am always thankful when people take the time to read my stuff, let alone to comment on it.

  • Cananito

    I actually never tought of that, so true.

  • Hisham

    I agree with your post, thank you for the nice information.

  • SEO Tips

    @ Daniel I was considering E-mailing you but to be honest I was a little rushed and I wouldn’t of even changed the grammar if you hadn’t of helped me out in the past.

    It wasn’t meant to be pompous or anything like that, just I felt the need to correct you on it.
    Sorry, next time I wont.

    @James the point is, its being helpful. Although it may of looked like I was being pompous.

    Also Daniel’s blog as you will already know gets thousands and thousand of views if I had that many views I would want to keep the quality of my posts as high as Daniel does as well as the grammar.

    I decided to correct his grammer because I’ve done it before and he didn’t mind. Usually it isn’t as large as a comment, sorry about that only noticed after I had added the comment.

    Also I respect Daniel considering this isn’t his first language (I am pretty sure)

    Anyways again my apologies.

  • SATISH — Technotip.org

    Btw I read Daniel’s Daily Writing Tips blog daily and have improved a lot. And I am still improving, Thanks to Daniel.

  • Pinaki Ghosh

    Satish; this is a simplified version of how you evaluate your website:
    Deduct your monthly expenditure (for the website/business) from your total monthly gross earnings from the website, to get your net profit per month. Now multiply this my 20 (20 months). This is the value of your website. If it is older than 2 years, you can multiply by upto 24. If it is a young site; say 1 year and a few months, multiply by 15 or 18. Add the price of your domain name and the price of any product (software, ebooks, etc.) that will be sold with the website. This grand total is the worth of your website. You can negotiate to get this price.

  • Allan Ward

    Good article Daniel,

    In some respects, building a blog is no different to building a traditional business. To obtain the best sale price, you need to build something that is not dependant on the owner, has a good client base (subscribers) and has steady, predictible recurring revenue.

    Of course the problem of selling a web site is that your source of revenue stops and you need to start again. For many bloggers the sale of their site may be a long term goal rather than a short term strategy to gain extra cashflow.

    Ultimately, it comes back to having some goals for your life and designing a web site that allows you to achieve those goals.

  • Sheila Atwood

    http://Bankaholic.com written by Johns Wu was sold in October 2008 for $15 million. The Domain was first registered in 2006.

    Yes, this could be big business.

  • Vamsi

    Daniel,

    Very well said. Apart from the asset value, there is a kind of satisfaction and self responsibility and ofcourse happyness to see the website/blog doing well that is well beyond the levels of what one feels at a 9to5 job.

    Being your own boss is cool.

  • Daphne

    Hi Daniel,

    I reminded myself that my blog was an asset just a few weeks ago when I wondered if I should continue. Thanks for confirming this. I don’t often comment here because I have little to add on the subject of blogging per se, but I read and learn a lot from your posts. Thank you!

  • taloola

    @seo – btw it’s wouldn’t HAVE …. hadn’t HAVE not ‘of’.
    Perhaps one of the most annoying grammatical errors of our time :p
    😉

  • Johnny

    I had read that the multiples were coming down along with the rest of the economy. PaidContent has a couple articles on this and lowers multiples into the 8x – 12x range or lower I believe.

    I think I would be happy with a 1 years revenue multiple in general. You better have a darn premium site to command 4 times a yearly revenue number.

    Not discounting that yes the site has value, and that value is some multiple.

    A second point is that if she does sell the site at the end of the year, then she is essentially out of a job. So, yes she is 6,000 ahead at the end of the year, she now has to either go find a job or start another site (since it takes a while to rebuild the income stream). Each month she is not making 1,500 is a month where money is essentially deducted from that extra 6k.

    Of course at some point the value of the site and the income stream will make everything wash and would be “even” with a 9 to 5. The question would become – can she get to that point in that amount of time.

  • diabetes man

    Well…..most people do activity online for getting money as other source income…..and I agree with your opinion

  • BLOGBOOZE

    Daniel I was very amazed by reading this post. The asset thing is something that people are not considering much.

    Thanks for bringing that in to a debate.

  • Earning Income Online

    Micro niche websites are the current trend. You have to market something. Blogging won’t cut it in the real world.

  • Cindy

    This does make some sense, and is something not often considered. However, I think you’ve missed a more important issue when comparing a 9 to 5 job with self-employment: benefits.

    I’m not just talking about health insurance and company cars, though they are certainly important. In the United States, you also have to consider taxes, which you will have to pay when you become self employed, and social security, which you will also become responsible for (your 9 to 5 employer currently covers half of that bill).

    In your hypothetical example, I would say not to quit your day job until your blog is earning at least $3000 per month.

  • Tyrone

    Yeah I agree with the article….. People often neglect the asset value of the website. It will definitely help the people to shift from 5 to 9 jobs to making money online.

  • webfool

    Asset value of a site is very important, when valuing any business ( and web sites are really no different) there is the tangible value which is the real monthly income – less ops costs and the intangible assets which as mentioned is usually the potential future earnings the site aka the Goodwill.

    We use a similar methodology for site valuations at Web Site valuations . It’s also always interesting to think just how much you could walk away with when the time is right.

  • Dan – BankVibe

    The asset value of a site is definitely a crucial aspect that tends to get overlooked. And I think the valuations you mentioned could be significantly higher than 12 – 48x monthly revenue. If you’re talking about JUST adsense revenue than, yes, that number is probably fairly accurate, but if you have multiple sources of income for the site (ie your site is more diversified) you stand to demand a higher valuation than the 12-48x monthly rev…

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