Motivating yourself to grind through the beginning stages of an authority website is as simple as gaining clarity of what your end game might look like.
If you’re thinking that $1,000 a month in affiliate revenue is small potatoes, I would say you’re not understanding the ROI potential in this industry!
Let’s have a little fun this week and do a few projections to understand what our website asset might be worth after the first 2 to 3 years.
We’re going to need to make some reasonable revenue assumptions to project ROI.
I’m using past experience as well as what the market is telling me I can expect in the immediate term.
- June ‘23 = $100 average monthly revenue
- December ‘23 = $1,000 average monthly revenue
- June ‘24 = $1500 average monthly revenue
- December ‘24 = $2,750 average monthly revenue
These numbers were derived from the traffic we can reasonably expect to generate over the first two years and a modest conversion rate.
Of course, there are a ton of unknowns that could skew these assumptions one way or another:
- How much additional revenue will our email marketing efforts generate above organic search traffic?
- How will our numbers be affected if we get hit with an algorithmic penalty or some other type of Google nonsense?
- What will the search engine landscape look like with the current advent of GPT and other A.I. technologies?
The point is; these are rough revenue projections and they’re all we have to go on right now.
Projecting Website Value
It’s been a few years since I sold an authority website.
Back then, you could reasonably expect to receive 20x-36x average monthly profit.
I totally thought those multiples were too high at the time. To my surprise, they’ve only gone up since then!
According to Mushfiq Sarker, you can expect to receive 35x-45x average monthly profit when selling a revenue-generating website in 2023.
Respected website brokers, FEI, state that you can expect to receive 3x-6x average annual profit.
From a monthly perspective, that’s 36x-72x average monthly profit!
Let’s look at different levels of profit to get an idea of what our affiliate website could be worth in the not-so-distant future:
- $1,000 average monthly profit = $35,000 - $72,000 valuation
- $5,000 average monthly profit = $175,000 - $360,000 valuation
- $10,000 average monthly profit = $350,000 - $720,000 valuation
Those are some motivating numbers for sure.
Now, we’re still in the early stages of our new authority site. It’s difficult to determine what kind of profit we’ll see after the initial 12 months.
My guess is that we’ll reach the $1,000+ average monthly profit level within the first 30 months from when the website is indexed.
Projecting Profit & ROI
Your return on investment is, essentially, all that matters.
Now that we understand how the website will be valued at various levels of profit, we can roughly project our ROI based on our initial investment (read: $27,000 budget).
Using our revenue assumptions from above, I can expect to have recouped my initial investment somewhere around Q1 of ‘24. We’re in the green beyond that.
At this point, I need to remind you that we’ll be reinvesting earnings as we go. The projection I’m doing right now is based on our initial investment of $27,000.
Some may say that the reinvested earnings will decrease profitability.
I believe that anything that’s reinvested will only accelerate earnings, ultimately leading to a larger profit margin in a shorter period of time.
So, we’re moving forward with the idea that we’re earning $1,000+ average monthly profit over our operating expenses around the 24-30 month timeframe.
If we use a conservative 45x valuation, we could sell the website for roughly $45,000 after 2.5 to 3 years.
Comparing this to our initial investment of $27,000, we’re looking at a total gain of $18,000 and a 66.67% ROI!
In an effort to be realistic and transparent, I didn’t include the actual affiliate earnings we would accrue during the lifetime of the site here since they will be reinvested. The profit and ROI numbers above are purely based on the sale of the asset.
What About Labor Costs?
I’ll be the first one to say that we’re not accounting for the time we’re spending building and maintaining the site.
Some niche site builders account for this, and others do not.
Of course, if you tie some arbitrary value to the hours you put into building a website, your profit and ROI will be lower.
From my perspective, I’m focused on any potential opportunity cost.
In other words, can I spend the same amount of time on some other endeavor and get a better return on my (side-hustle) time?
I don’t think I can.
So, I’m more than happy to put my energy towards the authority website and get it as profitable as possible. I’ll worry about the costs of labor if and when we hire a site manager.
Even though our numbers here are assumptive, I do believe we’re in the ballpark of where we’ll end up.
We expect to earn a minimum ROI of 66.67% after 2.5 to 3 years!
Keep in mind these projections were based on $1,000 average monthly profits. The ROI will get significantly better at higher profit margins.
Can you think of another investment with a similar risk profile that can generate these types of returns?