Lots of people think that developing their entire portfolio or at least a decent percentage of it is the way to go. After all, even if the domain doesn’t end up generating more revenue, development at least increases the resale value of a domain. Right? WRONG!
Revenue Multiples 101
Most of you probably don’t buy sites on a regular basis but those who do can confirm that there’s a HUGE discrepancy when it comes to revenue multiples. On the one hand, if you have a website which relies exclusively on search engine traffic and want to sell it at its market value, you shouldn’t expect more than 6x – 8x MONTHLY revenue. Yes, m-o-n-t-h-l-y!
Now, of course, a complex site with a consistent traffic/revenue track record as well as with plenty of room to grow and an actual business model (not just a traffic source or two, not just a monetization method or two etc.) can be sold for a lot more in terms of multiples but let’s face it, most websites developed by the average domainer do NOT belong in this category, as I’ve explained here and here
OK but What If I Only Sell the Domain Based on Its Inherent Value?
It should be clear that you shouldn’t expect more than 6x – 8x monthly rev based on the fundamentals of a mediocre website. But doesn’t having a premium domain help? Of course it can help but a lot of times, you are doing more harm than good by turning a good domain into a mediocre (at best) website.
If the domain is actually great, then a serious developer who has a respectable budget and wants to turn it into a website which actually provides value will think twice about buying it from you if it has been turned into a mediocre website.
Why? Because the average domainer who develops websites usually ends up screwing up royally by:
1) Building links too aggressively -> a Google penalty
2) Using too many ad units -> AdSense issues
3) Turning the domain into a thin site which didn’t pass a manual check -> a Google penalty
… and so on.
In other words, if I’m a serious developer and want to buy a domain from you, I’ll think twice about doing it if you turned it into something like a minisite for one simple reason: crappy development carries more risk than you imagine.
If the domain got banned by Google because the previous owner built links too aggressively (for example), I’ll have to work a lot harder and invest more money in order to fix everything.
If the AdSense account of the previous owner got closed because the domain was turned into a MFA (Made For AdSense) site, I might end up being in trouble.
The list could go on and on but since I don’t want to turn this post into a novel, I’ll stop here and make it clear one final time that:
Crappy development REDUCES the resale value of a domain!