I Made $1,486.70 an Hour Last Year

So I read Search Engine Myths Exposed yesterday. (If you’re involved in Internet marketing at all, I’m sure you saw at least one person pushing it.) It was free, and since getting good at SEO is what started my journey, I figured I’d give it a look and see what “expert” advice this “guru” was giving.

The first thing I found was that he definitely has the Internet Marketing Hype Meter turned all the way up to 11 — as much as any other site I’ve ever seen. That made me even more confident that, despite claims to reveal the “truth” of what we “should really be doing” doing to rank well in Google, this was going to be a complete waste of time.

However, after wading through everything and finally downloading the e-book, I was surprised to find something that actually was well worth reading. Not only does he take on 7 genuine “truths” that you hear regularly about Google, he does a great job of debunking them with real evidence. I don’t agree with everything he says, but all in all this is a great resource and I definitely recommend it. (Which is one reason I hate seeing it wrapped in all the stereotypical Internet Marketing trappings. I think he’s keeping himself out of a much bigger market that way.)

$150/Month

The myths he proves wrong, though, weren’t the only thing interesting to me. Instead, what really stuck with me was the section where he gave lots of stats about a niche site he had built, gotten ranked in Google, and started generating AdSense revenue all in just a matter of a few months.

What caught my eye specifically was how proud he was that this site earned him $152.36 in December — so proud in fact that he highlighted it in yellow so you wouldn’t miss it.

$150? Seriously? You’d have to do 20 of those sites to be making any real revenue, and even then very few of us could quit our day jobs on that. I wasn’t impressed.

As so often happens, though, I started wondering if I was underestimating just how impressive that was. After all, it only took him 5 hours to build that site, and it generated him $372.50 in 2007. That’s $74.50/hour, and I bet there are lots of people who would be willing to work all day long for that. That’s good money.

Alright, so maybe I was wrong. It was sounding like he might be on to something after all.

$111.70/Hour

So my next thought was, “I wonder how much I made per hour last year.” I knew 2007 had been a great year, but I had never sat down to actually calculate how much I earned as a function of how many hours I worked.

I have a variety of revenue sources, making it hard to pull one total number, so I just pulled one of last year’s best-performing sites and used the stats from it. It’s a site that I actually own only a fraction of, but I figured it still would be a good site to compare to the one in the e-book.

First, I had to figure out how many hours I worked on the site. I’m always hopping back and forth between a variety of projects so it’s impossible to get an exact number, but I ballparked it at about 40 hours/month or 480 hours for the year.

Next, I had to add up my share of the profits for the year. That came to $53,615.01 or $111.70/hour — more than the site in the e-book, but then my profit was for the entire year and his was only for August through December. Had his site been live all year, that obviously would have raised his effective hourly rate quite a bit and almost certainly put it above mine.

There was a much greater source of earnings that we had not yet factored in, though.

The Missing Component

As I alluded to in the blueprint, your greatest value comes not from your monthly profits, but from the equity that you build up in the business. That’s because for every dollar that you add in monthly profit, the value of the business increases by some multiple of that. In other words, if you add $100 to your bottom line, you’re not only earning an extra $100 every month, but the value of the business has risen by several times that.

And that’s where financial independence comes from. You can either save up your profits until you have enough where you can live off of the interest that your savings are generating, or you can focus on building equity in your business and unlock it all at once by selling the site somewhere down the line. The first method will take 10 years or more depending on how disciplined you are (often much more), but the second only takes a fraction of that.

The other thing to remember, though, is that different types of businesses have much different multiples. Innophos Holdings, for example, has a price-to-earnings ratio of 12,320. In other words, investors are willing to pay more than 12,000 times Innophos’ profit. I didn’t look to see why, but suffice it to say that you and I will never anywhere near that sort of multiple :D

(It would probably be helpful here to take a look at How to: Build an Affiliate Site You Can Sell for $1M, if you haven’t seen it already, for a more in-depth discussion as to why multiples vary so widely.)

The Actual Hourly Rates

So to calculate the actual effective hourly rates, we have to factor in not only how much profit was generated, but also how much the value of the business increased.

Let’s assume a generous 2X yearly earnings valuation for the site in the e-book. (I think it would be closer to 6 or 12 months, and I’m not sure how many people would be willing to even buy a site that only makes $150/month, but 2X will still give us a good number to compare to.) Let’s also give him credit for a full year’s worth of $150 months rather than just a partial year.

That would put his annual earnings at $1,800 (12 months X $150/month) and the value of his site increased by $3,600 (2 X $1,800). That means he earned an effective rate of $1,080/hour ($5,400 / 5 hours) — much different than the $74.50/hour we calculated previously, and very much a worthwhile effort.

How about my site? Well my share of the profits, as we’ve already seen, was $53,615.01. However, we know already that we’re looking at at least a 10X multiple when we sell our site. Using that multiple, my share of the increase in value of the site was $1,320,000, for an effective hourly rate of $1,486.70 — 38% higher than his.

What’s the Point?

FerrariLooking at those two numbers, it probably seems like we’re arguing about the difference between a Ferrari and a Maserati doesn’t it? Wouldn’t you be plenty happy with either one?

I would :D

What I want you to see is this, though: the vast majority of your earnings aren’t unlocked until you sell the site. He earned $1,080/hour only if he manages to sell what he built. Otherwise, he only earned $360/hour. That’s a huge difference. It’s like buying a Ferrari for your grandmother to drive back and forth to church on Sunday — you’re wasting so much of the value.

We need to be focused just as much on our liquidity event (the point at which all our equity gets turned into cash) as we are on monthly profits.

Said another way: if you’re not building a site that someone else will buy somewhere down the road for a really good multiple, you’re just stealing money from yourself.

I think it’s a great idea to start out with sites like the one in the e-book just to get a feel for everything and to get your feet under you, but that’s only the beginning. The real value lies in taking what you’ve learned there and focusing it on just a few high-multiple sites that you can eventually sell to a larger company. That’s where the real money is.


Comments


  • CY

    February 21, 2008
    at 12:45 am

    Shane:

    “I donít agree with everything he says…”
    Interesing. What’s that you don’t agree with Jon?

    cheers,
    CY


     

  • Shane

    February 21, 2008
    at 4:02 pm

    Darn you, CY, you made me have to go through and read that whole thing again ;) Actually I’m glad I did. Other than Joel Comm’s AdSense book (which I had to pay for), I don’t know that I’ve ever had anything that had scam written all over as much as this over-hyped e-book did that ended up actually living up to the hype. Jon has done an absolutely phenomenal job.

    I know there were some smaller things I disagreed with the first time around, but many of those were probably pedantic. The larger issue, though, is his whole triangular linking scheme. It may work now, but like all link schemes it will eventually lose its effectiveness.

    More importantly, though, it’s not a long-term solution. If you try to sell a site based on this link scheme, you’re not going to get anywhere near the value out of it as you would if the links were genuine links not subject to lose their power at any time.

    Now could you use this scheme to give your site an instant head start, and then go on to build a firmer foundation for the site? I think there’s probably a good chance you could. But I would advise strongly against basing your livelihood on something as temporal as this. Just too much chance that the house of cards you’ve built comes crashing down.


     

  • CY

    February 22, 2008
    at 3:19 am

    hey shane: I pretty much agree with what you said, it is a long term solution.

    I was expecting your reply, this I choose to be notify of followup comments via e-mail. It ain’t working, it’s not even in my SPAM box.

    hmm.. just a head up.


     

  • Aakash

    March 30, 2008
    at 2:53 am

    Wow $53,615 is kinda impressive.


     

  • How to Value a Website » Ask Shane.org

    March 31, 2008
    at 10:53 am

    […] you know what’s valuable, you can focus on those things and make your exit as lucrative as possible. Tags: Blogging Experiment Related PostsGuest Blogger OpeningHow to Get […]


     

  • italian calcio

    May 17, 2008
    at 11:54 am

    Hello

    Two questions …. How much you think my site is worth (Link in name is my site)

    and second … how would one go about trying to drastically increase traffic to a site

    thanks


     

  • Shane

    May 19, 2008
    at 11:01 am

    Your site looks good, but I’d have to have not only more details on what kind of revenue and traffic you were seeing each month, but also the market that you’re in and what traffic is worth in that market. At the end of the day, though, it’s worth whatever someone is willing to pay for it. The only way to know that for sure is to take it to market and let the market speak.

    The best way to drive lots of traffic is to create a site with real value to its intended audience and then let them know about it. If they really, really like the site, they’ll spread the word for you.

    Obviously there are thousands of ways to drive traffic, but that’s the one with the greatest long-term impact.


     

  • Yogesh Agrawal

    May 20, 2008
    at 4:57 pm

    Hi Shane,
    I went to the search engine myth exposed page, there is no option to download it. Do you mind sharing the copy of it?
    Thanks,
    Yogesh


     

  • Shane

    May 20, 2008
    at 5:52 pm

    I wish I could, Yogesh, but it’s not mine to distribute. I’m sorry :(


     

  • Kevin Bussey

    May 21, 2008
    at 1:21 pm

    Shane,

    Do you think there is a way to generate any money for a ministry blog?


     

  • Shane

    May 22, 2008
    at 7:06 am

    Definitely. Like with any blog, though, it’s largely a function of how much traffic you’re getting. If you’re getting at least a few thousand visitors/month, you can start seeing some decent revenue from recommending products/services/etc. that have affiliate programs for them and especially from advertisers paying a flat monthly rate to advertise with buttons and banners.


     

  • Kevin Bussey

    May 22, 2008
    at 9:10 am

    Shane,

    I’m getting 500-700 a day. So what do I need to do?


     
  • […] here?† Be sure to subscribe to the RSS feed so you don’t miss anything!As I’ve pointed out often, income is great, but it barely holds a candle to what you can make when you sell a site.† If […]


     

  • lee

    September 16, 2008
    at 12:25 am


     

  • Shane

    September 16, 2008
    at 8:55 am

    HA! I liked this quote: “Benjamin R. Civiletti, who charges $1,000 an hour for his work at Venable LLP, says ‘the figure is meaningless.'”


     
  • […] huge paycheck is nice, but it’s nothing at all when compared with building equity in your own business. Related Posts50 Cent Explains Why You’ll Never SucceedLesson 6: You Have to Work for […]


     

  • smitty

    April 17, 2009
    at 2:58 pm

    I thought this whole website was a scam. Shane you really provide some useful information here. I don’t know what made me take the time to read the information here but i did. Thanks and keep up the good work i’ll be lurking.


     

  • Shane

    April 17, 2009
    at 3:29 pm

    Thanks, Smitty! Don’t lurk too much, though. Jump in with some comments and questions!


     

  • Belinda Meyer

    June 12, 2009
    at 2:02 am

    Hi Shane, I have read a lot about branding your site and injecting it with your personality. After reading your article, selling a site makes sense. But then it probably also makes sense not to personalise it too much. Nobody will want to buy a site which has your face and name all over it? It that correct?


     

  • Shane

    June 15, 2009
    at 9:11 am

    As a general rule, that’s absolutely correct, Belinda. If the site is too closely tied to you, the site suffers if you’re ever taken out of the picture.


     

  • Akif Shamim

    August 25, 2011
    at 3:28 pm

    Okay from your last comment i can conclude one thing and that is, Build up an empire than sell it’s rooms first, than it’s floors and than whole building :) take everything that you cn from it. right? but how do you sell your sites and how do you find people who buy these high cost sites?


     

  • Shane

    September 15, 2011
    at 5:00 pm

    You have to work with an expert when selling your high-value site. Check out the links under “Most Popular Articles” in the sidebar for more details.