A Small Work Related Rant – Valuation and Freelancers

I am writing this in a personal capacity as I felt it would be unfair to post this on a work site as it is not policy to post these sorts of observations on work related websites.

I have been buying and selling websites and technology businesses in a professional capacity since 2004 either on my own account or on behalf of clients. In this time I have participated in a large number of deals. When I speak to a vendor, their idea of the market value of a website or business is usually a little over what the market will pay. I would suggest that with the exception of the group I will deal with its generally between 5-10 percent but maybe as much as 15 percent from time to time.

In nine years in this business I have dealt with a large number of freelancers. In some ways I am still a freelancer. Now a number of freelancers set up businesses outside their core skill set in their spare time and I have no issue with this at all. I admire their entrepreneurial spirit. This is a good thing! The big problem is when it comes to time to sell. I used to get two or three calls like the following a week when I used to be a member of a certain freelance trade association and I am staggered by the number I have received in the past week.

It goes like this. I get a call asking if I can sell a website. I then ask pertinent questions to get a rough idea of value and verbally present a marketing plan. When it comes to freelancers the websites they build in their spare time are worth between £250 and £5000 as a general rule. There are some exceptions. Freelancers will explain that their hourly rate is £x. This is usually well over inflated. I’m sorry but if you are a front line IT call handler on contract to a local government organisation in the Midlands you do not earn £75 an hour! More like £15 if you are lucky!  They multiply their hourly rate by an over inflated amount of time that it took them to get their valuation. so a site worth £1000 realistically to them has a valuation of £30,000! They usually did not take 300 hours to develop either – more like 30 -40! Please stop lying!

This causes a number of problem for supply and demand in the market place and does have the effect of stalling new entrants to the market in the form of buyers. The other issue is the amount of commission they wish to pay on a sale if I am to sell the site or business on their behalf. I am sorry if your site is only worth £1000. I am not going to work on a commission of 1%. That means only £10 for me. Ergo I make a huge loss!  Yes your Estate Agent may work on 1% but that is on a property sale most likely greater than £150,000! Again this causes problems in the market as it stalls the entry of new stock to market at realistic prices which is the lifeblood of the market.

If I offered some of these sites out to market at the prices many freelancers who sell wanted for them I would be a laughing stock quite quickly. As I would be massively over inflating the real market worth.

I must say that experienced operators are on the whole very good but some freelancers do muddy the market with over ideological thinking and I do wish they would stop, especially of they are a member of a freelance trade association! As I said earlier the majority of these calls used to come from their members and no I will not name the association. It has been 2-3 years since I had these silly conversations with freelancers but in the past week I have seen the largest number (15) since then.

Penultimately the other issue that raises its head is that of the Flippa website as all of these freelancers have heard of it. If you want an increase in emails from Nigerian fraudsters and spam emails then please try and sell your site there. Listings start from only $9. See if you actually make a sale! I wish you luck! Sedo is okay but in a similar vein. You will be waiting a long time to sell at any price. Ebay is good but this is a specialist market that requires specialist  knowledge.

Apologies for the rant and my best wishes to the operators and freelancers who develop other businesses and have their heads screwed on when it comes to sale time!

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