People that want to start making money online are always wondering how much it is really possible to earn with a website, how long it takes and so on.
They are basically trying to evaluate when it would be wise to ditch their regular 9 to 5 job in favor or working full time on the Internet.
One mistake that most people make when trying to find this answer is to neglect the asset value factor. That is, when you build a blog or website, apart from the monthly revenues, your will also be gaining asset value, because your blog or website is an asset that can be sold later on.
The same is not true with a salary that comes from a 9 to 5 job. You receive a sum of money monthly and some fringe benefits, but that is it.
Let’s use some numbers to illustrate the concept.
Suppose you have a person that has a 9 to 5 job that pays $1,500 monthly. That same person started developing a website a while ago, and if she was able to dedicate herself full time to the website, it would earn $1,000 monthly.
Doing both things at the same time is not possible, because each requires full time attention.
Which one should her choose?
Most people would say the 9 to 5 job, because it pays 50% more. After one year, the 9 to 5 job would yield $18,000 while the website would yield only $12,000.
The problem with this reasoning is the fact that it neglects the asset value of the website.
A website that earns money is just like a small company. It has a value, which is proportional to the amount of money that such website is expected to earn in the coming years. The right valuation is done with a method called Discounted Cash Flow, but for the sake of simplicity you can just use a multiple combined with the monthly revenues.
Low end websites tend to sell for 12 times their monthly revenues, while premium websites sell for as much as 48 times their monthly revenues. Even if we consider the lowest multiple, therefore, the website in our previous example should be worth $12,000.
If the person decides to sell the website, after one year her total revenues would be $24,000, which is 33,33% higher than what she would have earned with a 9 to 5 job.
Whenever you consider working with blogs or websites, therefore, remember that apart from the monthly revenues, you would also be gaining asset value.
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