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Is There Any Value At All To An Unlaunched Website?
By Quiet Light
I hate it when a project fails. Unfortunately I’ve had my share of projects that never make it to their official launch, and I know I’m not alone. Most entrepreneurs will have a full collection of unrealized ideas and projects, some of which we invest heavily in before walking away.
People abandon their projects before their official launch for a variety of reasons – a lack of funds, a lack of infrastructure, or simply because a new, more exciting project, becomes the new focus. But for those who invested a significant amount of money into an idea and still believe in the idea, simply walking away can seem like a bad option. Many of these people hope to sell the website and recoup some, if not all, of their investment.
Unfortunately, though, most pre-launch websites do not sell for anywhere near the amount of money their owner’s invest. This usually leaves the owner with nothing more than a tax write off in the form of a major loss.
So why is it that pre-launch websites aren’t worth much? What should an owner do who has invested in a project that hasn’t yet begun to return that investment?
The Website Value Of Potential
“Potential” is a dangerous word to throw around any negotiation. While buyers may genuinely want to buy a business that has real potential, if your selling point is nothing more than potential, most buyers will simply walk away.
Many times when a seller is pitching their business based on its potential, what they are actually pitching is the potential of the business with a significant “if”:
- If someone were to put some marketing dollars behind this business, then…
- If someone had the resources to finish this off, then…
- If a larger company with more infrastructure got behind this idea, then…
It is like the potential of the website is locked inside of a box and the seller is just looking for a buyer who might have that key to open the box. This is not a convincing pitch.
What Is Potential?
In physics, we would talk about the arrow having “potential energy”. Potential energy is the energy an object has due to its position. However, that energy is not yet realized because it needs some outside force to act on it in order to realize its potential.
In the world of websites, potential acts in the same way. Pre-revenue sites may have potential value, but they first need that outside force to act in order for them to gain value.
This outside force will vary from one website to the next, but one thing is almost always true: the current owner, for some reason, doesn’t have access to whatever is needed to properly launch the website.
So Why Isn’t Potential Valuable?
There are two problems with valuing a business on its potential alone. First, no one really knows how much force it will take to make the website profitable. Second, once it does become a revenue-generating website, no one really knows just how much revenue it will produce.
I want to address the second problem first. While a website owner may have some projections of revenue and earnings once a website’s potential earnings are forced into actual earnings, no one really knows what these earnings will be. Projections are simply educated guesses (and many aren’t all that “educated”).
This is compounded by the first problem – asking a buyer to buy your concept and invest more in the hopes that your educated guess of revenue is correct is a very difficult sell.
How Much Energy Is Needed?
Let’s go back again to physics: this time, imagine a boulder precariously perched at the top of a hill. From its appearance, it may look like it could tumble down at any moment. But have you ever tried to push a boulder? It’s really, really difficult.
You may think that the business is on the brink of being a solid revenue generator, but until you actually try to “push the boulder”, you’ll never know, and neither do most buyers.
So How Much Is An Unlaunched Website Worth?
Unfortunately most pre-launch websites are worth only a fraction of what their owners invest. In addition, estimating a value can be difficult as much of the value is wrapped up in subjective value. That said, most pre-launch websites will have difficulty getting a value of more than $10,000 with most being in the low four-figure territory or lower.
For websites that have done a soft launch, but are not fully deployed, their value can be higher, but a lot depends on what aspects of the website and idea have been proven.
What Should You Do With Your Unlaunched Website?
If you own a website that hasn’t launched yet, selling is probably your least desirable option. The value you put into your project simply doesn’t translate in a marketplace sale.
But there are a few other options you can consider:
Launch With What You Have
Many people make the mistake of waiting until everything is perfect before they launch their idea into reality. A more practical approach is to launch your idea in smaller increments. This allows you to test the idea and gather data.
This also gives you more options in a sale. As I mentioned above, the problem with pre-launch websites is that they are all potential. By launching a part of your project, you can show how that potential translates into reality. While this won’t get you to your full potential value, it will bring you closer than if you keep everything locked up.
Offer a Partnership
Taking on a partner is always risky, but it may be just the thing you need to put your website over those last few hurdles. There are a lot of development firms and entrepreneurs who would gladly invest in a project they believe in if the original owner is willing to come along for the ride.
How the partnership is structured can vary quite a bit. You may want to stay on board with a voice in the partnership, or you may opt to become silent and simply collect the rewards if your new partner is able to unlock your project’s potential.
Dedicate a Period of Time for More Work
Often a person who is cutting on a pre-launch website is doing so because they are burnt out on the project. What is unfortunate is that their idea may actually be a good idea with real potential (there is that word again).
Entrepreneurs can be fickle. We often lack the attention span needed to see a project through to its maturity, and as a result, we leave a lot of good projects in their development phase so we can pursue that next business. (take a look at Steve Tobak’s great article on this behavior).
Make a promise to yourself to dedicate the next 3 months, 6 months, or 12 months to your project. Establish benchmarks where you can measure the success of your project to determine if it makes sense to continue its pursuit.
Cut Your Losses
Alternatives to selling need to be weighed against the benefits of simply shutting down the project.
It is well known that nearly everyone falls victim to sunk cost bias. This is when we make bad decisions primarily because we have already invested in something and we don’t want to lose that money entirely.
The problem with sunk cost bias is that it can cause us to act irrationally. While we may regret losing our investment, take a step back and ask whether it makes sense to chase a bad time and financial investment with a further investment of time and possibly more money. Ask yourself what is good for you today and for the future.
Most entrepreneurs will experience a few duds in their life as a startup artist. Investing in a project only to be forced to abandon it before its maturation can be frustrating, especially if you are looking at a substantial loss.
While you may not want to walk away from the project, there are some options available, but much of this depends on your personal situation.
Try to avoid sunk cost bias, look at your project objectively, and make a decision on what is truly best for you personally. And, of course, if you need an outside opinion, you can always have an expert at Quiet Light give you their opinion of your project.