External factors that can impact a website business valuation
When selling a website, there are numerous external factors that can impact the valuation of the website business valuation. These external factors can include fundamental shifts in industries that require website businesses to evolve or be left behind. The most common occurrence is when a website business offers specific product or service and then suffers financially when an "800 pound gorilla" like Google or Apple begins to offer the same service for free. For example, many website businesses that offered VOIP service thought they were somewhat "untouchable" in the sense that VOIP is the future and the old fashioned telephone technology from local phone providers was the past. However, after Google decided to offer VOIP phone numbers and VOIP service for free, this was a huge external factor that impacted revenue growth for those website businesses that were charging upwards of $10 per month for VOIP service that Google now offered for free. That's right 100% free. It can be hard to compete in an industry where one of the largest companies in the world is now offering the core service that your website business offers for free. Why would your customers continue to pay you $10 for an arguably more reliable service (because it's Google) for free?
In my experience as a website broker, I'm often contacted by website business owners that need to plan an exit strategy because of an evolutionary shift in their specific niche industry. In another example, our online business broker team represented an internet business that sold vacation packages for Mexico resorts. This business saw a huge impact on revenues with the recent gang violence in certain areas of Mexico resort towns. The surge in gang violence resulted in many people cancelling their Mexico vacation packages and others to avoid booking vacations to Mexico. This was an external factor that the website business owner had absolutely no control over, but fortunately this was only a temporary external factor that hurt his website business valuation. Since timing is everything, our website broker recommended that this particular client hold off on selling until revenues rebounded. External factors that impact website business valuations are essentially risks, known or contingent, that can be mitigated by constantly analyzing the website's profitability and health, and making decisions to improve or evolve the business model to be less risky. A website broker can help you identify these risks and determine the best exit strategy that will maximize the value of your website sale. Buyers can often see these external factors as weaknesses in the business model, but they still make offers as one man's business model weakness is another man's growth opportunity to higher return on investment.