Domain names · Valuation

What is the right multiplier to value a domain name?

Anonymous

January 3rd, 2016

I have a domain name which makes me about $500 per year and I recently received an offer to buy the domain. How much should I sell it for ? I think the valuation has to be the revenue times a multiplier. What is considered a good range for that multiplier ?

Anonymous

January 3rd, 2016

In the USA, we have an expression: "What the market will bear."

I like Brent's 1.4X based on revenue, but that is just one tool. The industry is a factor. I sold a domain name without revenue for $3K because it was a great name for a product outside my core focus. 

Bottom line: your mileage will vary.

Neil Gordon Board Member, Corporate Finance Advisor and Strategy Consultant

January 3rd, 2016

If the buyer reached out to you, odds are they're not interested in what you've been doing with the domain. Rather, it's a name they feel they need. They'll pay what it's worth to them, not what it's worth to you or some hypothetical buyer.

Mark Soane Venture Investor and Board Member

January 6th, 2016

Not sure I agree with the comment about going "outrageous" as that often just leads them to look harder at their alternatives.  You might be able to get there however if you find out more about why they want to purchase it.  Seems to me you have two types of buyers:  economic buyers and strategic buyers.  An economic buyer cares about the traffic and revenues the domain name gets now and they will purchase this based on its income stream.  A strategic buyer cares about how it might drive value for their product or service.  If it is going to help drive millions of dollars in sales for them (which won't show up in the revenues you got), then they will pay something much higher.  A lot of marketing dollars get wasted on naming things so you probably get $10k if they've invested the time in a product management session to identify the need to own the name.  You'll have to figure out how good a fit it is for them and what size opportunity it is linked  to.  Then play your hand.

Stephen Mitchell

January 3rd, 2016

Also depends on what exactly the revenue generated is from - if it's simple adwords (example) and no maintenance, then a multiplier is pretty easy to apply. If it is a piece of a larger puzzle, it may have no value at all. A great domain name that someone simply wants? Revenue doesn't really matter - it's whatever they are willing to pay for it.

Anita Cohen-Williams Experienced in SEO and Social Media Management since 1994

January 6th, 2016

I suggest going with Estibot.com to appraise a domain name. It is used in the domaining industry as a standard.

Brent Laminack Principal at OpenFace Systems, Inc.

January 3rd, 2016

A good start for talking is 1.4x trailing 12 months revenue.

Achim Drescher Senior IT & Software Specialist

January 5th, 2016

I agree with Neil. As a good sales person you ask questions and find out more about the buyer. What do they need it for? 
If not sure go outrageous and negotiate with them.

Aldo Pahor .NET/SQL Developer at Barclays Capital

January 6th, 2016

rather than multiplier I would go for a Discount Cash Flow.

You need:
Cash Flow to Equity over last year. This is Investor's bank account increment over 12 months
Discount Rate: this is the return on investment which reflects the risk of the CF
Period in years where the above holds true

Ex: Unrealistic: CF Period and return/risk of CF equal to TBond 30y
CFE 12m = 400 USD ( this is after costs and taxes)
DR = 3% (per year return of the US Bond 30 years. Clearly unrealistic as the risk is much higher)
Period = forever (unrealistic)

Value = 400/3% =  13,333 USD

Ex: More Realistic?
CFE 12m = 400 USD 
DR = 25% (20% more than investing in SP500)
Period = 10 years ( after 10 years non CF provided. Domain has lost all the value)

Value = 400/(1,25) + 400/(1,25)^2 + ... +  400/(1,25)^10 = 1428

You can than infer the multiplier
Revenue * Rev.Multi = 1428 
Rev.Multi = 1428/500 = 2.8

In essence, you need to think abt how long the domain will provide the CF and what is the risk of this CF. More negotiation than sceince indeed.

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