Owner at Head Higher
06 June 2008 09:16am
Hello,has anyone got any suggestions/experience in putting a value on a website based business idea that is not yet "live"?
The plan(s) I have has a whole variety of revenue projections - all based upon varying traffic levels - but until the site goes live I cannot really put an accurate number on which version is the nearest to reality.
I am talking with people who will possibly invest/work for equity - but how to put a relative measure on the invest/equity is proving challenging.
Has anyone done this before or got some suggestions as to making a stab at the valuation please?
Consultant at The Ecommerce Consultant
06 June 2008 15:36pm
This is probably one of the hardest things to work out, before the dot bomb you could stick your finger in the air and come up with a figure. Now ofcourse it is very different.
Normally you would work out a cash flow forecast over three years giving worst, expected, best case turnover and come up with a figure from there. N x profit.
But if you have a social media site you would cost it on the value of your signups, 1 million signup worth x , 100 million signups worth y, see howmuch people have paid for u-tube etc to see the value.
Perhaps look at it a different way for the percentages, you have the idea so you want to retain control, so give yourself a figure that you are comfortable with say 70% then you have 30% to share out amongst the developers. Saying my company is going to worth millions based on an idea is wasting everyones time, just give a percentage and if they are happy then go for it.
Make sure you have everything in writing, work out what happens if at a later stage go for venture capital, write in that everyone takes and equal share drop.
Seek professional advice if you are serious, the above are just ideas.
Marketing Executive at BSI Management Systems
10 June 2008 11:48am
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11 June 2008 08:58am
Thanks EcommConsultant - have worked up those models using different "average cost per acquisition" of Users. A question: is there an "industry average" for cpa? (digital industry).
Or are there some "typical" cpa costs for various sectors? Social networking and gaming/gambling being the most relevant to my plan.
I know there are headline deals for "sale" prices too (the famous ones such as myspace etc) but again i wondered if there are any yardsticks that are used for "buying company" metrics related to the user base?
Comments welocmed thaks
11 June 2008 10:46am
This would take reasearch to find out exactly what the proposition is and what the market is currently paying for a comparitive site.
I mainly deal with getting sites off the ground, information flow and marketing, at this point you would need a financial expert who deals in this. My advice would be find a comparison and see how much it is worth. The biggest problem is it is only worth what someone is prepared to pay.
At this point in time it's worth should be irrelevant, if it is a really good unique idea that flies then it is worth anything. But until you get the site up and running with people using it then it is worthless.
Good ideas with strong people behind them will always make money, it is just the risk you take being an entrepreneur.
Hope that in some way helps.
11 June 2008 17:37pm
thanks for your replies - it is an interesting arena. I have pitched my idea to a few people who may wnat to invest (tim, money or both) but am struggling on the how much gets what!! I am not sure there is an exact comparative site - my idea is more a niche of a market....either way as Alec Baldwin says in Glengarry Glenross - "i am going anyway!.
Appreciate your common sense replies,
12 June 2008 09:36am
No problem hope some if it helps even if it is more devils advocate rather than acutual fact.
Ok so you have an idea, you have investment offers of time / money. But you are trying to put a cash value to an idea which is just about impossible to do especially if you are forging new ground in a niche market. So how about looking at it like this.
You have a cash in jection of 84K and the project is going to take the programmer 30 days to code up at 400 per day a designer 10 days we will use the same rate. And of course you want to retain ownership. So the total investment in is 100k of time and money.
You keep 60% the final 40% is worth 100k
Invester gets 33.6% designer gets 1.6% developer gets 4.8%
At this stage does it matter if the company is worth 1mio or 100mio? you are working out what percentage to give away to people who are prepared to take a risk on your project. The only valuation you are likely to get is what the cash injection and a cost of the time put in.
Again not sure if that is of real help just some ideas to help you move it forward.
Best of luck with it, when you can keep me posted on the idea.
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