Most bloggers have, by now, seen Dane Carlson’s little widget to help you figure out how much your blog is worth.

Now, I know and love Dane, so I have no problem saying that the tool’s inherenty flawed (and Dane knows it). It’s an interesting piece of data, but yeah, nobody has ever sold a blog for anywhere near what the tool says – mainly because it simply doesn’t take enough data and variables into account.

So when I saw the latest little tool to create a “realistic” valuation for your blog I was inspired.

My problem with the tool was basically that while it was fairly accurate in terms of projecting revenue, I didn’t feel it provided enough data for a blogger to know if it was actually accurate or not. Also, the P/E model, based off an average from the S&P’s average just seemed fatally flawed for me, since it has no bearing on the blog or social media industry.

[[[ before I go any further, here is the model in case you want to download it right now: How Much Is Your Blog Worth, The Blog Model v2 ]]]

So I did a few things.

First, I built a larger model. I give full credit to JLA Ventures (one of the b5media blog network’s, where I’m the CEO, VC’s) for introducing me to this style of modelling, and full credit to Gili for inspiring this larger model. The larger model breaks out revenue and costs to monthly and yearly levels.

The second big change was basing costs on a proportionate basis (ie: if you spend 10$/month on hosting now with 1M pages/month and you grow by 10x, your hosting costs will probably increase relatively proportionately).

The third was bringing in a variable-based valuation model based on a random dataset of purchases at various pricepoints. Now I know data geeks will have more than enough data to disprove my multiples, which is why I’ve dropped the numbers in as in-sheet values instead of hiding them in the formulas. If you think a purchase at a certain level has a higher or lower multiple, just change it.

And, finally, I’ve given a range of valuations. Obviously the tool is ballpark, best-guess, but there’ll always be ranges.

End of the day, purchase price is rarely a reflection of pure revenue, profit, P/E, traction, etc. It’s a balancing act between what the seller wants and what the buyer needs.

So yeah, comments welcome, critiques welcome, here’s the model: How Much Is Your Blog Worth, The Blog Model v2