Building Equity
Value in
YOUR
AGENDA
1. Basics of Business Valuation
2. Ways to Value Your Digital Assets 3. Value of Website to a Buyer
4. Ways to Build Equity Value in Your Website 5. Ethically Profiting From Your Digital Assets
PRESENTER
DANIEL J. GEMP, President, CEO
Dreamscape Marketing, LLC
Dreamscape Marketing is a full service
marketing firm focusing on Responsive Site Design, Search Engine Optimization, Content Marketing, Social Media Strategies, Marketing Campaigns, Corporate and Brand Strategies with the express goal of increasing your
marketing ROI. Dreamscape specializes in the addiction treatment industry.
BUSINESS
VALUATION BASICS
• Most Common M&A
Business Valuation Methods:
Income Approach (Profitable Business)
Market Approach (All Industries)
Asset Approach (Real Estate & Finance)
• Weighted average of multiple
• Income Approach (Any Profitable Firm)
Business Value = value of the risk adjusted
cash flows that are expected to be generated by the asset
Typically use complex financial models that
apply a risk adjusted cost of capital to forecast cash flow
• Market Approach (All Industries)
Based on principle of substitution - prudent buyer would not pay more for an asset than it would cost to acquire a substitute asset of the same utility
Most common methods are:
• Guideline publicly traded company • Comparable transactions
– Difficult in Treatment space; High variability
• Asset Approach (Real Estate & Finance)
Revalues the assets and liabilities of a company at fair market value
Difference between the fair market value of assets and liabilities equals the value of the company’s equity
WAYS TO VALUE
YOUR DIGITAL
Digital Leverage • Bullish industry volume; nearing peak? Continue?
– 40+ Known Transactions in Fiscal Year 2014
• Treatment programs > $10m of Ebitda
– Trading at 10x – 13x (Trailing 12 mo) EBITDA
– Leaders like Acadia around 18x and AAC is at nearly 30x
– “Today, [investment bankers] don't specifically value the marketing piece but companies that have made the investment in their sales and marketing infrastructure do trade at a higher valuation”
Todd Rudsenske, Managing Director, Cain Brothers Healthcare Investment Bankers
“How do your web assets convince a buyer to pay 13x instead of 10x, or value web assets
HOW ARE MY DIGITAL ASSETS VALUED?
• Included in total enterprise value…
May decrease discount rate or support higher valuation multiple…which begs the question:
What is a site worth?
“How much would you pay a 24/7 sales person with consistent, upward, unlimited
Is the Web Risky Business?
Let’s assume you’re all smart, risk-averse, and good-looking…
2 facilities both get 100 admissions/month… •1 gets 100 consistently through the web
•The other gets 10 through the web
SHOW ME THE $$$
• ORGANIC: Website Value = Targeted
organic search traffic (higher converting by far)
• INORGANIC: paid traffic does little to build a facility’s long-term digital asset value
Cultivation of organic traffic will lead to an annuity of low-cost, reliable and highly-quality leads. This cost-per-admission will actually
Let’s Assume…
• A facility’s website can be separated from the sale of a facility
• Equivalent leads or traffic of the same quality can be purchased through third parties
• Weak web presence/rank can be
supplemented by investing in a high-value web site with minimal operating cost & risk
WEBSITE VALUATION
• Most Common to Value an
Addiction Recovery Center Focused Website:
Traffic Replacement Based Valuation (Substitute)
Reverse Engineering Cost Valuation (Replicate)
Lead/Admission Based Valuation (Replace)
• Weighted average of multiple approaches determine Fair Market Value
TRAFFIC-REPLACEMENT
• Based upon what a prudent buyer
would be willing to pay today to generate that same level of traffic
List keywords and phrases that drive organic traffic to your website and find associated traffic for each
Find maximum cost-per-click for each keyword or phrase and multiply by 45-50%
Multiply traffic generated for each key word times adjusted cost-per-click
• 80,000 unique visitors per year • Weighted average cost-per click:
$30 times 50% = $15/click *Increases 10-20%/yr
• 80,000 unique visitors * $15/click = $1,200,000 Replacement Cost
• $1,200,000 * An Average Web Site EBITDA multiple of 2.5 =
TRAFFIC-REPLACEMENT EXAMPLE
REVERSE-
ENGINEERING COST
1. Cost to Build the Website +
2. Cost to Drive the Same Amount of Traffic to That Website +
3. Time Value of Lost Admissions While Website Traffic is Being Built
• Cost of Initial Website:
$500 per page * 300 pages = $150,000
• Cost of Content:
$250 per piece of content * 700 pieces = $175,000
• Ramp Up Opportunity Cost:
80,000 unique visitors * 5% = 4,000 potential leads * 50% (Leads will increase as SEO rank increases) = 2,000 leads * $250/lead (assumes an average) = $500,000
• Human Resources:
3-4 FTE over 12-18 months = about 6,000 hours of labor at $100/hour = $600,000
REVERSE-ENGINEERING COST EXAMPLE
LEAD/ADMISSIONS
Total Annual Traffic x
Lead Conversion % = # of Leads x
Price per Lead
80,000 unique visitors *
5% lead conversion = 4,000 Leads
4,000 Leads * $250/lead = $1,000,000
$1,000,000 * average EBITDA multiple of 2.5
LEAD/ADMISSIONS EXAMPLE
FMV OF WEBSITE
Traffic Replacement Based Valuation = $3,000,000 Reverse Engineering Cost Valuation = $1,425,000 Lead/Admission Based Valuation = $2,500,000
ESTIMATED DIGITAL ASSET VALUE =
$2,308,000
VALUE OF WEBSITE
TO A BUYER
EXAMPLE
Purchase: 80,000 targeted and
high-quality unique visitors per year 1. 80,000 unique visitors * 5% inquiry
conversion = 4,000 Potential Leads
2. Of the 4,000 inquiries, convert 5%-6% to admissions
• Assume an average price range
of outpatient treatment patient value of $12,800 and inpatient treatment patient value of $24,700
• Potential admissions unique visitors will generate per year:
Low-end: 4,000 * 5% = 200 * $12,800 = $2,560,000 Mid-Point: 4,000 * 5.5% = 220 *$18,750 = $4,125,000
High-end: 4,000 * 6% = 240 * $24,700 = $5,928,000
THE QUESTION
Would you pay up to $2,308,000 once to get $4,125,000 per year in additional revenue and
every year thereafter, while also hedging the price of any additional cost-per-click and paid
WAYS TO BUILD
EQUITY VALUE IN
YOUR WEBSITE
HOW TO BUILD
WEBSITE EQUITY VALUE
1. Do you have a separate lead generation and corporate website?
2. Does your website have alumni and
professional portals that focus on the unique needs of each?
3. Is your website responsive and do you offer a smart phone app to enhance prospects,
professional referral partners, and alumni’s user experience?
4. Did you update your website design in the last 12-18 months?
5. Is your website focused on your brand and
your company or your clients and prospects? 6. Do you have an analytics tracking platform
that does, at least, the following:
Track organic, paid and social media traffic
Track inbound calls by source
Traffic geo-location analysis
Competitive analysis
HOW TO BUILD
7. Is your website community focused on brand/corporate focus?
8. How often is your content updated?
9. What other digital assets do you offer your
visitors? Addiction calculators, tours, e-books, guides, checklists, etc?
10.Do you have video testimonials?
11.Do you have pictures of your facilities?
12.Do you have videos, video tours of facilities and video help guides?
HOW TO BUILD
13.Is your content written at no more than an 8th-grade level?
14.Do you actively post good content on multiple social media platforms? Do you comment on other’s content on the web?
15.Are you truthful and sincere in all features, programs and amenities you offer?
HOW TO BUILD
ETHICALLY PROFITING
FROM YOUR
WEBSITE ETHICS
• If the sale includes the rights to the name/ brand, then you will not be able to use that name in the future (301 redirect or Migrate) • BUT if you retain the rights to the URL (or
content from that URL if migrated) then you also retain its Page Rank and search rank • Therefore, all search engine ranking history
and value will be retained as long as you continue to support its maintenance
ALL VALUATION IS SUBJECTIVE…
But, investing in your website/s and growing your digital asset portfolio will have a multiplier effect on the valuation
of your overall business; or allow for a separation of assets for sale
LITTLE DOUBT
Whether you are a buyer or
seller, there are huge opportunities
to profit from your web assets at lower risk and operating costs!
To receive a copy of Dreamscape Marketing’s
white paper entitled:
BUILDING EQUITY VALUE IN
YOUR DIGITAL ASSETS
e-mail or call Dan Gemp at:
[email protected] Direct / Mobile | 410-707-3661 Toll-Free | 1-800-571-8553 x 4
