How to estimate the worth of a website?

The value of a company is based on the demand and sale of its product and in the same way the value of a website is related to the number of visitors it has as well as the revenue generated from that. Now the revenue can be generated through online sales, online services, online consulting, and online advertising. In a big site where different functionalities are embedded in its structure different number of visitors would come for different purposes and a particular category of visitors would be adding some amount of revenue while other category would be adding some other amount of revenue. So, websites keep a track of all these things and when they see that revenue from a particular earning area is more, they can think to increase the activities there or start attracting people with some special coupons or benefits etc to motivate and inspire the visitors for enhancing their revenue increasing actions as well as to attract more customers when the information about coupons and discounts spread around through mostly digital marketing path.

There are many ways a website value can be evaluated but the most common way is to find the revenue earned per visitor and if it is impressive then we can say that the site has more value. For example if a site say 'A' has 30000 visitors in a month and from them it earns a total of $800 then the revenue per visitor is 800/30000 = $ 0.026
Let us compare it with other site 'B' which has got 50000 visitors in a month but earning is only $300 and the revenue per visitor accordingly is only 300/50000 = $ 0.006

From above example it is clear that in terms of revenue per visitor the website A is almost four times valuable then website B. So if someone is buying company A in $15000 then he would offer only $ 3000 to $ 4000 for B in case he is interested to buy B also.

This is a simple way of calculating the value of a website but when doing it for a particular website then we have to see the contribution to revenue from each category of the visitors and give them cognisance as per the prevailing situation as which activity is being undertaken by the people more. So that the visitors in that area would increase and the website which has that activity in its structure would earn more and become more valuable from that point of view.

It is true that when you visit different websites and try to estimate the cost of your website, you're likely to get different answers. They may be using a different method for creating the valuation. There are so many factors involved in determining the value of a website. There are many methods but the Reverse Engineering Cost method appears to be the best formula. It will calculate the price to build a site from the word go to match the site being sold.
The formula is: Cost to Build Site + Cost to Drive the Same Amount of Traffic + Time Factors = Value.
The cost to build a site can be determined by going to web developers and ask them to look at a site and ask them to give a quote for the cost of creating the same type of site with the latest content.
The cost of attracting traffic to a site is not very easy to decide. But we can approach an SEO company for a quote. They will come out with some reasonable valuations.
The time factor includes the number of hours for the buyer to get the site built and then the hours are taken to get the same amount of traffic, the time factor will also include the opportunity cost. When you want to build your own website and get traffic, you have to spend some time. But you are going for a readymade one, you can save that building time. Because of additional time how much money the site will be making is taken as the opportunity cost.in the time frame, it would take to build a new one?
To have better clarity, you can take the following example.
You want to buy a website. You can get the quotation from a web builder by showing this and let us say he has given a quotation for building a similar website as Rs,1,00.000/-.
Then you approached an SEO and asked for the cost to build the same amount of traffic and say he has given a cost Rs,3,00.000/-
Then time cost can be calculated on the basis of manhours for the activities mentioned. Let us say the value is about 1,50.000/.
Then the value of the website can be taken as.
Rs1,00.000/- + Rs.3,00.000 + Rs. 1,50,000/- = Rs.5,50.000/- can be value of the site and seller may add something for his profit.

It is all depend on the demand of the buyer vs domain or website seller. For example, if you would like to buy a parking domain or website with an attractive name (depend on business or individual requirement) that has not yet used by anyone would get for little higher price than normal, and, even used domain or website can be bought in a higher price as the seller / owner wish and will to sell it.

There are many factors, few buyer consider domain, few consider its design, few consider its content overall and few consider other matrix like site worth traffic analysis or alexa, PR status etc.

In general, the new domain (where one hard to get the exact word or company name domain) will be in lesser price compare to the popular one. The new parked domain will be three or four times higher price in general than the actual invested for. The popular one (only few sell them) will be obviously very higher than its price shown online, as it could be golden egg type.

A website is a kind of digital bussiness rather than being it just one offline bussiness. The value of website can be considered as being 25 - 35 times of your monthly revenue and this component is known as earning multiplier. This can be better understood with an example. Suppose the website brings £ 10000 per month, you could go in selling for £ 240000 and £ 360000.
It does not take into consideration of your net profit, the total duration of the time, the structure of the bussiness and set up of your traffic sources and so on, but you could find some ways to figure out how much would be the worth of the website.
There are some factors affecting the website values given below -
Net Profit and Net Margin - Net Profit of a website is determined upon the actual earning after the deduction of the prevailing taxes. Buyers are more interested in the Net Margin which can be calculated by the formula, Net Margin = Net Profit/ Revenue.
Websites are usually bought as the source of investment and hence the buyer would need to know that there is the potential of its growth.
You may apply the following tips for enhancing the value of the website -
1) Diversify the traffic source - If you are able to show your presence of heavy traffic of the website being negotiated for sales, it would fetch you an attractive amount in the process of sales.
2) Establish a brand - If you could build a brand alongside the reputation, you would be able to secure higher prices of the website.
3) Look for a Premium/ Brandable domain - Your website must be known to the larger section of the customers and to make your domain brandade, the words chosen should not be lengthy but must be precise such as Wallet.com, Reward.com and in that way, it will attract the crowd.
4) Diversify the monetisation method - With the use of multiple monetisation stream attached to the site, the risk can be minimised while doing transactionwith the buyers and in that way, you can enhance the asking price of the buyer.
5) Be responsive - You must be aware of the sentiments of the buyers, they may differ from your sales programme if they are not properly attended to. Hence you should make every effort to hear them genuinely and in case of any confusion of the buyer, this needs to be addressed immediately.
6) Fix your target in respect of sales price - You should have a predetermined price band within your mind and let it be known to the buyer that the price quoted by you is the minimum price beyond which the negotiations cannot be considered.