I sold a few websites for six and seven figures so maybe you find my experiences and lessons learned helpful.
Who Is Your Target Buyer
Who do you sell to? The two common options are:
- industry buyers like us or other media companies that regularly buy online businesses, or
- an end user in the industry the website is about.
Our first sale was to an end user. The website was about a specific conutry. The buyer was a consulting company in that country. The fact that we dominated Google for keywords related to the site’s topic was more important than the revenue multiple. The site therefore sold for a price that would not be justifiable just by looking at its revenue.
If your buyer is an end-user, the strategic fit is more important than the revenue multiple.
In fact, a few things may be more important than the revenue:
- Does the buyer trust you?
- Is there a gurantee that you will be there to provide assistance and training?
- Would financing options help justify a higher price?
If you want to sell for a couple of hundred thousands to an end user, you are on your own. These kind of sales don’t happen over Flippa, Sedo or via brokers. Indeed, you are most likely to know potential the buyers anyway from your industry, so why not approach them directly? Start building your network early on.
If on the other hand you want to sell your websites to a buyer from the online marketing industry, you absolutely have to have an income producing website. Be it AdSense, direct advertising, affiliate or ecommerce income – without a substantial business behind it, the website likely won’t sell.
How Much Is My Site Worth
Normally websites sell on a multiple of monthly or yearly revenue. In our experience (and keep in mind that our websites are monetized primarily with AdSense), the sweet spot at which a website sells fast is 2-3x yearly net profits. To reach that $100,000 sale, you would need net profits of at least $50,000 over the past 12 months or $4,100 per month.
A few factors may make it possible to sell for a higher multiple:
- significant, sustained growth
- a niche that is currently in high demand
- a premium domain
- sheer luck
In some cases you may need to sell for a smaller multiple, for example if you need cash fast (in that case I suggest you contact us :).
Pick a Great Broker
Website brokers come and go quickly. It’s the easiest way to get started in the business without upfront capital investment. Unfortunately, the people with no money to invest are usually also not the best sales people ever, so you have to be careful when picking a broker.
A good broker can significantly shorten the time it takes to sell and increase the sales price. A broker can actively promote your listing beyond their website and mailing lists and get you a wider interested audience. Most importantly, the broker will negotiate on your behalf. You can focus instead on creating a good relationship with the buyer.
Dress Up The Bride
What do you need to prepare a successful sale?
- Ideally you have 2+ years of operating history and can show that in Google Analytics and financials.
- Prepare a site-specific P&L statement that includes the time you spend on development, maintenance, marketing and customer support.
- Compile a short executive summary that lists the site’s strengths, stats, key numbers and addresses possible questions from buyers. Create a document that you can show proudly – this is likely the first or second thing potential buyers will see. No spelling errors, please, and hire someone to design the layout unless you are a professional designer.
- If you are not in the US or UK, you have a disadvantage. Some buyers simply don’t want to deal with “foreigners” because they are afraid of the risk of geographical (and legal) distance in case of disputes. You may want to consider establishing a US or UK holding company, especially for high value websites.
Compile a FAQ
- What is included in the sale?
- What is the operating cost?
- How much time do you spend on the site?
- What technical knowledge is required to operate the site?
- Who is the hosting company? Can the server be taken over?
- Will you provide migration assistance after the purchase?
- Who is behind the site?
The Conf Call
After a potential buyer has seen the executive summary or the broker’s offer memo, the next step is usually a conference call.
You may think the goal of the conf call is to answer the buyer’s questions. It’s not. The ultimate goal is to build trust and give buyers the confidence that you created something worth buying and will be there to support them even after the sale. Savvy buyers will have most answers already before going on the call, and they will check your answers for plausibility.
Keep in mind that most buyers may not be aware on the intricacies of your particular industry. Tone down the jargon and explain things like for a six year old. Let the buyer take the lead on how technical to allow the conversation to become. The worst case is to have a buyer pretend to understand a conversation and then fail to put in an offer because he was actually confused the whole time.
Be absolutely honest. Do not exaggerate. Don’t avoid the hard questions. Everything will be discovered during due diligence and can derail deals and open you up to potential legal liability.
Try to keep negotiations out of the first conf call. The ideal is when you can defer them to the broker and focus on building a healthy relationship where you are the good guy.
In the past years, I have negotiated buying and selling hundreds of websites. Here is the single most important negotiation tactic I have learned:
Be prepared to walk away.
If you sense real interest from the potential buyer, the temptation is great to take the deal as done. It’s very easy to start spending the money mentally already.
Unfortunately, this is especially tempting if you actually need the money. You know, for things like paying the mortgage.
Imagining yourself buying things with the money that you do not have yet, makes it much more difficult to stay on course during negotiation.
Here is the thing. To make a six figure sales, you have to turn an offer of $90,000 down.
It’s best to assume, with certainty, that the deal will fall through. It very likely will anyway. For every successful sale, you usually need at least five conf calls (ie seriously interested parties).
Don’t get distracted by the negotiation too much and keep working on the site. It’s business as usual until the money is in your bank account.
- switching to the buyer’s Google Analytics,
- testing the buyer’s AdSense codes for a couple of days, or
- performing additional revenue testing with the buyer’s affiliate accounts
- confirming and validating supplier relationships
This summarizes the site, lists its highlights and explains again why this is a good purchase. Just to reassure the buyer that he is making a good decision.
- Operating The Site
Guide to daily or weekly tasks.
- Site Logins
Admin panel, server (ssh) login, MySQL, datacenter, Twitter/FB accounts, etc
- SEO and Promotion Tips
Provide the new owner with all necessary information to keep running and growing the site. Share your best practices here. Once we have sold the site, we share everything we have ever learning about online marketing.
Share AdSense and affiliate tips.
- Key Contacts
List all affiliate, supplier and internal contacts.
- Technical Details
CMS and plugin details, backup guides, system administation guides.
Sales are usually completed through an escrow account, provided either by the broker or by a company like Escrow.com or Sedo. This is quite straight forward. Buyer wires money to escrow account, domain and website are transferred, and after an inspection period, the funds are released to you.
Make sure to be available during the inspection period for 24 hours a day.
Remember that things can still go sour. We had multiple instances when escrow was fully funded and the buyer backed out last minute for reasons entirely his own.
Once, I fucked up during escrow. I pushed a faulty update to the production server, updating another site with the AdSense codes of the site being sold. If you see this when buying a site, it would be a classic red flag. It puts a question mark on the whole revenue. Indeed it spooked the buyer and he got out of the deal. I refunded the escrow fee plus some and walked away from a six figure payday. So don’t party until the money hits your bank account.
Accept payment only through escrow (services like Escrow.com, Sedo or a broker) and only after you have thoroughly vetted the buyer. Some common payment frauds are:
- PayPal – do not accept PayPal for anything where you are not prepared to take the loss. Depending on the funding type for the PayPal purchase, the payment can be cancelled, reversed or taken back.
Another common PayPal fraud is when the buyer sends an invoice instead of a payment and hops to confuse the seller (“PayPal Invoice Scam”).
- Transfer before payment. While you normally would never do this with any valuable property, some buyers try to offer reassurances (“you can claim back the property through xyz within 7 days anyway, so sending payment after transfer is fine”).
- Wire transfer fraud. If the buyer pays direct via wire transfer, the wire may be reversed.
- Credit card charge back.
As you can see, all of these payment frauds have the buyer pay direct to the seller. So be very attentive when accepting that option.