Forum Price Check

[woostar]

Always hate it when someone says 'make me an offer' rather than naming a price.

How much would you offer (without being insulting) for a Womens Health related forum with 1.6 million post, 15,000 uniques a day, 150,000 page views a day, 6,000 posts a day, $2700 a month on adsense (not currently using any other ad networks).

Any ideas on what it is worth?

[Joe Ward]

Forum valuation - AdminFusion

They say 10-12 months of revenue. I think that would probably be a significant loss for you.

In business valuation, there are many methods of determining price. As a part of your sale, you offer (1) income, (2) assets, and (3) a marketing opportunity.

Income is obvious. Assets boils down to what you've put into the site including software licensing, custom designs, other commercial applications, etc. It should also include fair market value for your domain which could be significant. The marketing opportunity relates to how well you've established your brand, and whether or not a new owner can continue to operate and continue to improve the business for growth in revenue/net profits, and perhaps even move into new markets.

I think many of the forum purchasers who are grabbing large forums are getting them at an amazing discount. Big factors that help decide this are (1) operating costs, and (2) stability of traffic/revenue.

• What are your operating costs?
• After all expenses each month, how much are you left with in profits?
• How long has your traffic been stable?
• Your revenue?
• Has it been on a growing trend, or a declining trend for the last 6 to 12 months?
• What rate?

Business valuation experts often use a base price estimator which is "applying a capitalization rate on reconstructed earnings". In other words they take a %-age selected based on industry or comps (sale price of other businesses like yours that have sold in the past), figure out exactly how much revenue your business earns as profit for a year, and then apply the rate.

• $10,000 per year at a 10% capitalization rate would yield you $100,000 as a base price ($10,000 / 0.10).
• A 20% capitalization rate would yield you $50,000 as a base price.

So it appears that capitalization rates for forums (at 10-12 months income) seem *very high* (which is bad for sellers). And I'm certain this reflects the volatility of a business whose revenue relies almost entirely on search traffic, which can change at a moment's notice.

The key is to demonstrate stability. And keep in mind that capitalization rates are only guidelines. The actual rate should be negotiated.

[woostar]

Thank you Joe. I really appreciate you taking the time to answer.

Very helpful indeed

[Joe Ward]

I think someone out there created a tool for pricing forums. I cannot find the link right now.

Also: You might want to PM some of the users here who have posted requests to buy forums (or at other locations, with the same requests). These guys will generally be able to give you precise input on how to value your forum.

Since you have a high value forum, you might even consider offering these guys a fee to evaluate the market value of your forum. Think of it similar to a home appraisal fee, except its for your forum instead, and I would go so far as to get multiple contacts to do the same so you can a good sense of how much variation comes in their estimates.

You can also check out Sitepoint auctions to check out the descriptions of some of the higher value businesses that are moving over there.

[briansol]

$3 per active member (within last 6 months) is my new judge for pricing. It probably isn't standard, but to me, that's what important.

I can't trust their adsense skills/marketing/advertising to be a solid rev proof.
I can't trust that uniques will stay the same or go up.

but i can count on X members being active.

[Joe Ward]

How does that end up comparing in practice to the 10-12 months of revenue model?

[briansol]

SELECT count(*) FROM `user`
where lastactivity > (UNIX_TIMESTAMP(now()) - (60*60*24*180))

gives me roughly 10k

i made about 30k last year.

so its pretty close at 3$ a member

along the same note, theres no way i'd sell it for less than 75k

[Joe Ward]

I would not sell it for 75k either. Say you did sell it for 75k, while it's making 30k per year.

You would have to invest your 75k received and make a 40% return on that investment, and then do it in consecutive years just to match the income stream you already have.

One the other hand, the *buyer* gets an almost guaranteed 40% investment on his money within the first year! That is huge. Way too generous for you to give away for 75k. So if those buyers who say 10-12 months income are not willing to adjust that number way upwards, I would just keep the investment on my books and keep harvesting that revenue stream.

By the way, ignoring net profit stats for now, that's a horrible 40% capitalization rate.

[woostar]

SELECT count(*) FROM `user`
where lastactivity > (UNIX_TIMESTAMP(now()) - (60*60*24*180))

gives me roughly 10k

i made about 30k last year.

so its pretty close at 3$ a member

along the same note, theres no way i'd sell it for less than 75k

Based on that (using your query) it would be 7122*3 = $21366, where as the current revenue is $2700 a month and has been growing steadily by 10% (avarage) a month.

If you were to do it the other way and take 10 - 12 months rev, would that be pass months or predicted revenue (as the minimum monthly increase in the last year is 6%)?

[Joe Ward]

I would argue a price that took into account the growth trend. There are many methods. the past is fixed, and the future can be uncertain.

One way to account for that is a weighted average. You could take 2 times each month, for 6 months past, and then 1 times each *predicted* future month for 6 months.

That would give you can average weighted towards the past 6 months, but also taking into account the growth trend. And then you could apply the 10-12 times the average, if you choose to go with that valuation method, which I am not a big fan of.

[gedsta]

At the end of the day, a forum is worth as much as someone would pay for it.

Ours is worth £2 million GBP, because we would never sell it for a penny less. If we don't sell it, we are no worse off, as we know our price is unachievable. We intend to grow ours and stay as we are.

Its not what its worth, its what you want to sell or buy it for.

[Joe Ward]

That is true, but having a good sense of marketing value arms both buyers and sellers with valuable information during negotiations. I would never sell a project for less than fair market value, and I would never pay more than fair market value for an acquisition. But first you have to have insights into how much that is.

[hornstar6969]

SELECT count(*) FROM `user`
where lastactivity > (UNIX_TIMESTAMP(now()) - (60*60*24*180))

gives me roughly 10k

i made about 30k last year.

so its pretty close at 3$ a member

along the same note, theres no way i'd sell it for less than 75k

Running that gave me 98942 so on that method my forum is worth $296 826

Do you want to buy it? ^^

[Joe Ward]

How does that compare with a 10% capitalization rate on your annual net profit?

[hornstar6969]

My income from ad revenue is minimal. I wonder if I had the know how if I could increase my profits by x24 each month, then I may be on par to that figure.