You always hear crazy things on the Internet. Some guy in Texas who can eat his own weight in food, or a french women who can bend her body like there’s no tomorrow. Well, none of that is nearly as crazy as when I hear people making valuations of there site, and use a silly 10x monthly revenue model in order to do so. It’s absolute stupidity. Webmasters and the like nowadays don’t even think that a site has potential to grow, or that it’s actual code and design cost a pretty penny to develop! It’s just 10x monthly revenue!

Say if I had a site that cost me $800 to develop. That’s including design, and PHP/SQL coding. Now this site had a very eye-catching and well thought out design, and a small, unique script running. The owner had put adsense up on it the other day, and at the point of sale is making around $1 a day off adsense. The site was receiving about 100 unique visitors a day.

Now, I bet you, using that case study, that a load of people would estimate the sale price at around $300. Why is that? Why, 10x monthly revenue of course! I’ve never heard a more idiotic thing in my life…seriously. It’s like saying, a house sells for 10x monthly rent!

The script and site itself cost $800 to develop, and so you have to include how good the design and script is. What is does, how it can grow etc. I would valuate it using the following:

$800 (develop costs) + $200 (profit on development) + $365 (year of revenue) + $365 (potential growth) = $1730.

That leaves the valuation at $1730. Much more than the $300 that most people would try and offer.

This silly 10x monthly revenue rampage has got to stop, or sites would be devaluing everywhere.