Website Business Tips

A couple weeks ago I told you how to start from zero and have $100,000 in the bank 15 months later.

As proven in my example, all you really need to do is start a website that makes $86 per day to achieve this goal.

So, in this article, I’m going to show you how easy it is to make $86 per day with a website.

There are lots of ways to monetize a website (have it make money).

- You can put Google Adsense ads on your site and earn money when those ads are clicked.

- You can sell advertising directly to companies who want to reach your audience.

- You can sell your own physical products, services, ebooks, training guides, etc.

- You can promote other people’s products and services as an affiliate (and earn a commission on any sales you refer).

- You can generate leads for companies and earn money for each lead generated.

As you can see, there are literally hundreds of ways to make money from a website. The one’s I listed above are the most common.

There are really ony two things involved with making money online.  One is you must have traffic to your site. If nobody visits your site, you can’t make money. The other is getting those visitors to do something that earns you money (such as the things I listed above).

To make it easier, all you need are visitors and visitor value.

A visitor value is basically just an average amount of money each visitor to your website generates for you. To calculate a visitor value, you simply take the total income your website makes per day and divide it by how many visitors you received.

If you site makes $10 per day and you get 200 visitors per day, you have a visitor value of $0.05.  Each person that views your website is worth $0.05 to you in this example.

Your exact visitor value will vary based on which topic your website is about. Websites in competitive markets can have visitor values in the $1.00 range or more.  Smaller, hobby type websites can typically see visitor values of about $0.20.

When you are trying to make money from your website, it’s important to test various revenue generating ideas and then look at your average visitor value while these tests where running.

For example, if you have google adsense ads on your website and you generate $8 from 200 visitors, your visitor value that day is $0.04.

The next week, maybe you text promoting a product as an affiliate instead of using adsense. During this test you get 200 visitors to your site again, but this time you make an affiliate commission of $19 because you sold one product.

Your visitor value that week is $0.09. Using common sense, making nine cents per visitor is more than four cents per visitor, so you decide to keep the affiliate promotion on your website and you dump the adsense ads. The next week you test something else and see if you can beat your previous visitor value test.

If you sell your own products and you sell one product at $40 for every 100 visitors to your site, your visitor value would be $0.40. (one sale per 100 visitors is pretty typical for a website by the way)

Anyway, getting back to the $86 per day…

If you have been testing various revenue generating methods, you should be able to get your visitor value up to around $0.40 per visitor.  When you get to that point, it then just comes down to a numbers game.  If each visitor is worth $0.40, then you just need 215 visitors per day and you will make $86. This doesn’t take into consideration the cost of getting these visitors to your site however.  Unless the visitors are coming from free sources such as organic search engine rankings, articles you’ve submitted to directories, etc, then you are going to have to pay for this traffic.

That’s another good reason to always know your visitor value.

If you know that your visitor value is $0.40 per visitor, then technically you can spend up to $0.39 per visitor and still make a profit (although not much of one).

I typically use a budget of about 25-35% of my visitor value to buy traffic.  If my website’s visitor value is $0.40, I like to spend no more than $0.10 to $0.15 per visitor.

Going back to the example, let’s buy traffic from google adwords and spend $0.15 per click.

To reach our $86 per day goal, we would need to buy 344 clicks from google at $0.15 per click.

The Math:
344 clicks x $0.15 = $51.60 (cost for advertising in google)
344 clicks x $0.40 visitor value =  $137.60 (gross income made by the website)
$137.60 - $51.60 = $86.00 (profit per day we need to meet our goal)

As you can see, making money online is just a numbers game.

Don’t get overwhelmed and you’ll see just how easy it is to make a good living online.

How much money do you have in the bank right now? I read a sad statistic the other day that said the average US family has less than $3,500 in savings.

It just blew my mind!

How can a family work every single day at a job for 15 years and only have $3500 in the bank to show for it?

There are a few problems with our society. One is overspending and the other is people working for low wages.

My solution to this problem is, start an internet business.

I think everyone should start a web based business. They really aren’t that difficult to do. And, by starting a real company (an LLC can be formed for about $200), you can get some GREAT tax advantages and write offs for your new business.

When I was thinking about writing this article, I thought a magic number people would like to see in their bank account would be $100,000. Wouldn’t it be nice to see six figures sitting in your savings account?

Then I was thinking about the fastest way to get there. Here’s what I came up with…

- Start a website
- Run the website for 15 months
- Sell the website

The reason I chose this path is because it’s proven to be successful. I’ve followed this exact process myself several times and it works great.

Now, let me show you exactly how easy this is.

What I typically do is think of the end result that I want to achieve and work backwards.

So, if you want to have $100,000 in the bank 15 months from now, here’s what you need to do.

Multiply your desired amount of money by 2.60%. In our example, that’s $100,000 x 0.026 = $2,600

To have $100k in the bank 15 months from now, you need to make an average of $2,600 per month from your website (or $31,200 per year). That might sound like a difficult task, so let’s break that down again.

Divide the $31,200 per year by 365 days and you will find that you need to make just $85.48 per day with your website.

So, if you can make just $85.48 per day, you will have $100,000 in the bank after 15 months! That’s really not that hard to do.

Based on $85.48 in profit per day from your website, here’s how you will get to the $100,000.

$85.48 per day x 15 months comes out to $38,978 over the next 15 months. That’s how much money you will have made while running your website.

Then you sell your website for 2 times its annual profits (Annual profit of $31,200 as explained above x two = $62,400 - website sales price).

That’s all there is to it. After 15 months, the website will have generated $38,978 and you will have sold the website for $62,400 giving you a total of $101,378 in the bank.

See how easy it is?

The key is to break down the numbers so it’s not so overwhelming. Making $86 per day doesn’t sound nearly as hard as making $100,000 from your website.

As I stated before, selling your website is always a good idea in my opinion. But, how much is your website worth if you do decide to sell it?

Based on my experience of selling many websites over the last few years, this is what you can expect…

There are a few things that determine the value of your website. These are:

1) Age of the website (the older, the better - also, how long it has been generating revenue vs existing without revenue)

2) Net profits of the website per year (nobody cares if your website grosses $1 million per year if it only profits $5,000 per year after expenses).

3) Any assets the website has including a subscriber list, customer database, organic search rankings, exclusivity of products sold, and brand recognition to name a few.
The MAIN thing buyers look for is the net profits. Buyers are typically looking for a return on investment (ROI). If they spend $100,000 on your website, they want to see how much money they will likely get back from the profits of the business each year (ie - their return).

Since net annual profits are the main pricing criteria most buyers use, I’ll expand on this a bit…

A “rule of thumb” for pricing based on profits is 24 months worth of net profits = selling price for a website. Brick & Mortar businesses typically average 30 months net profits when sold. The difference mostly being the fact that websites typically have few physical assets to them. They are just a bunch of invisible files floating around in cyberspace.

Some people will argue that websites can only be sold for 12 months worth of profits.  This can be true if you don’t know how/where to sell your website, but I almost always get 24 months revenue as a sale price.

A 24 month profit example would be if you have a website that makes $1500 per month in net profit after all expenses. You could likely sell your website for:

$1500 x 24 = $30,000 to $38,000

Now, getting the 24 months net profit price is not always guaranteed. The longer history you have of earning the net profits the better.

For example, if your site has been earning $800 per month every single month for 3 years, you will likely get more than 24 month’s worth of profits by selling it. This is seen as a less risky investment for the buyer of your website.

If your site has been making $800 per month and the site is only 4 months old, you will likely only get 10-14 month’s worth of net profits in a sale. It doesn’t have the history associated with it, and it hasn’t proven itself to be a solid business to buy just yet.

Same goes for a website that makes $100 one month, then $2500 the next, then $800, then $50, etc. It’s harder to sell those types of websites for a premium price because they are so erratic.

Below is a “real life” example of a website business progressing towards being sold. This is a brand new website you can started from scratch. Your “exit strategy” is to sell the website after 18 months. Let’s see how much money you will make after 18 short months.

Month 1 - $50 profit (new site, starting very slowly)
Month 2 - $50 profit
Month 3 - $150 profit
Month 4 - $250 profit
Month 5 - $550 profit
Month 6 - $800 profit (starting to get some traffic and income picking up)
Month 7 - $1000 profit
Month 8 - $1400 profit
Month 9 - $1900 profit
Month 10 - $2000 profit
Month 11 - $3300 profit
Month 12 - $4000 profit
Month 13 - $3100 profit (Slight drop in revenue is very normal)
Month 14 - $4600 profit
Month 15 - $5000 profit
Month 16 - $4800 profit
Month 17 - $6000 profit
Month 18 - $5000 profit

So, after 18 months, your internet business has generated $43,950 in profits for you. That doesn’t seem to difficult to do does it? Not a very scary number to shoot for…

Now, what most people do is hang on to these websites that are now making about $5,000 per month. The income eventually levels out and holds steady for a while until the owner gets tired or bored. Maybe the search engines change an algorithm or there is a trend change and your product is no longer “cool”.  The revenue then starts to dip into a downward spiral until the business is only making $500 per month again. This is when most website owners decide they want to sell their site.

Well guess what, it’s too late!

As a buyer of a business, all they see is the business is steadily declining and they want nothing to do with a failing business. All that time you spent building your business is now worthless.

BUT, IF YOU WERE SMART you would have sold the site after 18 months like you originally planned.

So, by putting the growing, thriving business up for sale on the 18th month, let’s calculate the asking price…

To get an “average net monthly profit figure”, common practice is to use the last 12 month’s worth of profit figures and average them. This is done so a buyer can see if there are any sales are steady year round or if there are seasonal spikes in sales.

In our example, the last 12 months’s profts were $42,100 in profits / 12 months = $3,508 average net profit per month.

Since your business has been around for over a year and is showing steady growth, you can command a premium price. Probably in the range of 24-30 month’s net profits.

Your selling price would be $85,000 - $100,000 as a lump sum cash payment (and your chances of getting that are very good right now).

Assuming you sell the business at a low range of $90,000, plus the $42,100 the business made over the last 12 months, you will have made $132,100 in one year!

Don’t let the numbers throw you off. My point is, you can start a simple website business, have it grow slowly, and have over $130,000 in the bank in less than 2 years from right now!

The example I gave above is very realistic and doable. Depending on how much effort you put into building your web business, you may be able to grow it even faster than the example above.

I’ve had businesses virtually double every month for the first 12 months and hit $50,000 per month within 7 months of starting them (I also had no life and worked 18 hours per day during that time as well!). It simply depends on your motivation…

Have you ever considered selling your website? You need to, and here’s why…

Of all the businesses I’ve started over the last 6 years, the MOST MONEY I’ve ever made is when I SOLD the website businesses!

There are many reasons why selling your site just makes sense. Here are the big ones…

1) You get a larger lump sum cash payment NOW vs future “potential” profits.

Let’s face it, the internet changes faster than ever before. Your website that is currently making $500 per month with adsense will not likely be making $500 per month forever. What happens if your traffic slows down? What if google changes the percentage of revenue they share with you? What if the internet blows up tomorrow? (ok maybe not that extreme, but you get the idea)

Money in the bank now is ALWAYS better than potential money down the road

2) You get to work on something else if you want

For me, one major reason I sell my websites was because I get bored with them! My typical project lifespan is about 12-18 months, then it’s time for me to sell and move on to something else. There are a few other reasons for this timeline that I will explain later.

3) It’s a lot more exciting than “running” a website

Think about it. You have a website that is making $1,000 per month net profit every month. That’s not all that exciting of a paycheck coming in. Then you decide to sell your website business and someone makes you an offer of $24,000 cash RIGHT NOW. Now that’s a nice paycheck at one time! (Note, there are many factors that go into pricing your website which I will cover in future tips, but the majority of attention is given to profits of the website. The sales price is usually based on a multiple of the profits each month + whatever other assets the website has such as content, subscribers, traffic, etc).

4) Cash influx gives you lots of options

When you have a website making $1000 per month, you don’t have a lot of options to do with your money. When you have $24,000 sitting in your bank account, you have a lot more opportunities available to you. Cash is king in this world and by having excess cash sitting around, you can do things you never used to be able to do. Some basic things include:

- You can use some of that money to buy another website and fix it up to be resold later (like a real estate investor).

- Getting a loan for a house/car/boat, etc. If you have cash in the bank, you are much more likely to get a loan and a better interest rate than you are if you just have a small monthly income coming in. The lenders will see this cash as liquid capital available to pay back their loan (ie collateral).

- Pay cash for your next vehicle. There is no better feeling than walking into a car dealership, writing a check and driving home the car you just bought. Plus, it’s easier to negotiate a good deal when the dealer knows you are a cash buyer. They won’t want to let you walk away knowing your sale is just a check signature away.

- Safety net in case something goes wrong. Life happens, people lose their jobs, cars break down, hospital bills pile up, you name it. If you have excess cash due to selling a website, you will have a safety net to cover these “exciting” life issues.

- Take that vacation you’ve been putting off for years. With a smaller monthly income from your website business, it’s amazing how fast the money can and will be spent. It’s hard to save extra money when it comes in slowly over time. Selling your website solves this problem.

5) You can retire!

Let’s say you work your butt off and you have a website making a net profit of $15,000 per month. That’s a nice monthly income, BUT you have to WORK every day, every month to get that income. Now let’s say you decide to be smart and sell this cash cow to a website/business investor. You may get an offer of $350,000 to $500,000 for your website.

If you get $500,000 for your website, you can take that $500k and invest it in either stocks, real estate, bonds, cds, whatever. For example’s sake, let’s put this money in the stock market which historically returns about 8% interest per year.

$500,000 x 8% = $40,000 per year = $3,333 per month

So, by selling your website you now have a lump sum payment of $500,000.  That $500k is also WORKING FOR YOU, making you $3,333 per month EVERY MONTH, FOREVER, and YOU DON’T HAVE TO WORK to make that money!

If you can live off the interest alone, you will never have to touch that $500k.

What if you sell your website for $1 million? Can you live off a measly $6,666 per month the rest of your life?

Sure, these are simplistic examples, but they are to prove a point. There are obviously taxes and different interest returns for investments, etc.
I know it sounds like the possibility of selling your website for $1,000,000 is a bit far fetched, but it’s really not! Let’s run some more numbers…

To sell for a cool million, you’re site needs to generate about $30,000 per month in profits for at least 12 months straight. That comes out to about $1,000 per day in profits.

Do you think you can work hard enough right now, to get your business to make $1,000 per day? Especially when you know that you only have to bust your butt for 12-18 months, and then you can just cash out and live off the interest forever!

It’s a motivating concept really. If you break down how much you need to make per day and then you tell yourself you only need to do this for a year or two, it doesn’t seem nearly as overwhelming as trying to build a business that makes millions per year.

Of course, your goals may be different. Maybe you just want to have $50,000 in the bank, not a million. That’s even easier! All you need is a website that makes $1800 per month for 12-18 months and you’ll be able to sell your website for $50k cash without much trouble.

Do you see why I’m such a big fan of selling websites