There have been a lot of high profile blogs sold in the past few weeks. One of the biggest was CashQuests.com which sold recently at Sitepoint for $15,000.

This lead Courtney to write a blog post entitled before you sell your blog.

As someone who has bought and sold many blogs, and is part of a team that spends 6 figures per year buying sites, I thought I may as well add my 2c to the frame.

Now, despite the headline of this article, there are some very valid points that Courtney makes, and he states that: “Kumiko sold CashQuests because she didn’t have the time to dedicate anymore. I’m ok with that. If she had sold it just for the money, I would have been upset.”

However, I believe there are a few areas that Courtney has missed out on:

Earnings of x2 - x5 years are pretty much a fantasy in “blog” sales.

Sure, we would all like to think our blog will fetch x5 years revenue, and perhaps Courtney won’t settle for less than x5 years, but that doesn’t mean it is worth it. I wouldn’t accept less than $1 million for my DeanHunt.com site, but it is not worth that much, and I doubt there is anyone mad enough to pay that for it.

From my experience of having negotiations with over 860 blog and website owners in 2007, anything above x18 months for a blog is very much the exception. You only need to go through Sitepoint to see this for yourself.

Again, I must stress, this refers only to blogs.

I actually feel $20,000 would have been achievable for CashQuests, and I would personally have offered that amount if I had seen the auction in time, but there are a few reasons that blogs are NOT and have never been valued at x5 years.

The value is in the blogger

When a blog is sold, so is it’s soul and character. I have seen cases where a blog has lost 10% of it’s RSS readers on the day the new owner introduced himself. You have to account for this when valuing a blog.

Blogs are VERY high maintenance

I should know, I write for 10 of them. 9 times out of 10 the blog seller is selling because they don’t have the time anymore. This HAS to be factored into the valuation.

For example, Courtney finished his article by saying: “Time is your friend. Starting over is your enemy.”, yet he forgets to factor time into her calculations/argument.

For example, he believes that CashQuests could be sold for $35,000 in two years time. Whilst I don’t doubt this is a possibility, he forgot to factor in the time and effort of achieving this figure.

For a start you are going to have to fill some VERY big shoes, so it will be an uphill climb from day one. Secondly, you are going to have to work very hard in what is such a competitive industry. We all know that “make money” blogs are a dime a dozen. There are thousands being created each month, and it only takes a personal incident or brief lack of focus to wipe out 6 months of hard work.

So let’s presume that the new owner would have to put in an average of 3 hours per day, 5 days a week. This includes emails, list building, joint ventures, checking stats, reading other blogs for research, writing blog posts, editing, finding images, dealing with advertisers etc…

All of the above is vital in such an industry, and getting to a $35,000 valuation in two years means we will probably have to work EVEN HARDER than the previous owner, so 15 hours a week is pretty accurate in my opinion.

Now, we are not clones, so this is 15 hours where we could be doing something else.

Personally I have an exact figure that I use to value my time, but if someone is being successful in this industry, then I think $50 per hour should be the absolute minimum value of our hourly time. Mine is a lot higher, I am sure yours is as well, but let’s use it for the sake of accuracy.

* So, each hour of our time is $50 that we could be making elsewhere.
* We do 3 hours per day.
* We do 5 days a week (most bloggers do 6 or 7, especially in such a cut throat industry, but again, let’s keep it simple).
* $50 x 3 x 5 = $750 per week
* If we multiply this by a 52 week year, we have a grand total of $39,000

So in other words, we are losing $39,000 that we could/should be making from our time, and investing this $39,000 into our new blog. If we use Courtney’s two year timescale we get $78,000 of our own personal time invested into the project.

So if we do manage to hit our goal, and we do make the $35,000 blog sale after two years, then we would be at a two year loss of $43,000

However, the site was making $1400 per month (revenue, not profit), and we should include this into our calculation as well.

In fact, let’s go as far as to say that after hosting, ads, and any other expenses, we are able to raise the monthly average over a two year period to a whopping $1700 PROFIT per month. We multiply by two years = $40,800 in profit.

So,

$40,800 profit
+
$35,000 blog sale
= $75,800

Now we deduct our own investment of $78,000 and we make a LOSS of $2,200 for the two years.

This is why revenue figures of x2 and x5 years simply don’t stack up for blogs. People are using multiples from brick and mortar businesses from the 90’s and applying them to what is essentially an online diary without an author. The numbers just don’t stack up!

Unfortunately most blog owners feel the same as Courtney, and 9 times out of 10 I get given the x2 or x5 year multiples as “industry standards”, when the reality is that x10 - x12 months are a lot closer to the actual industry standards.

It was a little ironic that Courtney closed his blog post by reminding us that time is our friend, yet he forgot to include it in her argument. All entrepreneurs know that time is the single most important thing we posses, and if you are going to value your own time at zero, then you are simply not going to succeed in business.

Disclaimer: I really like Courtney, and many of the points he made were very accurate, but as long as articles and multiples of x2 and x5 are spread around the net, it will continue to make blog buying and selling a very frustrating process for all involved.

I would welcome Courtney’s feedback on this.