Selling Websites

How To Sell My Website? A Complete Guide to Selling a Website

April 27, 2020 By jake Leave a Comment

How to Sell a Website

15 years ago the idea of investing in websites was crazy. The internet itself was still in its infancy and building and publishing a website required coding expertise and knowledge that most people didn’t have. Fast forward to today. We have WordPress and thousands of online resources on how to build, manage, and run websites. And people finally believe in the digitization of the world.

All of this to say, the concept of investing in, buying and selling, websites is now becoming mainstream. What does that mean? That means that if you own a website that gets some traffic, it’s probably worth something to someone and you can sell it.

Whether you’re just realizing your website has value, or you’re a seasoned website owner, this guide will help walk you through the processes and best practices for selling your website.

I’m going to cover some important pre-sale topics first before discussing what a holistic sales process looks like, so please use this table of contents to help navigate around to the sections most helpful for you.

How Much is My Website Worth?

Before you sell your website, it’s important to figure out how much it’s worth. First of all, you want to make sure that its value is within your expectations and is a price you’re willing to sell for. Secondly, you’ll want to make sure you aren’t pricing it too low and leaving money on the table, or too high and scaring buyers off.

How much is a website worth? I’m going to use the “it’s worth what someone else will pay for it” line later. Websites generally sell for anywhere from 1-4x annual profits.

In the website space, it’s common to hear someone say, “take you profits and multiply it by 2” and that’s what it’s worth. However, value can vary drastically depending on a multitude of factors, and just multiplying it by 2 will potentially lead to a wildly inaccurate valuation.

How Are Websites Valued?

Websites are valued by taking the trailing 12-month profits or earnings and multiplying them by a valuation multiple. As mentioned above, websites generally sell for 1-4x the trailing 12-month profits or earnings.

Determining the valuation multiple is more difficult. It is a factor of risk, and an investors “return on time”. As with stocks and brick and mortar businesses, the riskier the investment, the lower the price or multiple they sell for. A second factor, however, not usually found in traditional investing is a buyers return on time. Buy a publicly traded stock and you’re not responsible for anything. Buy a website and you’re responsible for keeping it running, maintaining it, growing it, etc. A website that makes $100k a year with 5 hours per week of time requirement is a lot more attractive than one that requires 40 hours per week.

While risk and time are two large factors, there are dozens of factors that affect risk. Therefore, valuing a website requires an in-depth analysis of multiple aspects of the business, rather than simply taking your profits and multiplying them by 2.

Using Website Value Calculators

There are a lot of calculators out there that will try to tell you how much your website is worth simply by typing your URL and hitting enter. These calculators can be helpful if your website is getting traffic but isn’t monetized, but they are useless when you are generating revenues. These types of calculators estimate your traffic and then estimate how much money you can earn from paid advertisements based on the traffic you get.

If you sell products, or use an affiliate model, these calculators are pointless and inaccurate since you don’t want to put advertisements on your eCommerce store, for example.

One of the most important factors of valuation is monetization method, or how your website makes money. For example, eCommerce stores usually sell for 1.5x-3.0x profits, while content sites usually sell for 2.0x-3.5x their profits. So without knowing how a website makes money, and how much money it makes, it’s very difficult to tell you how much it’s worth.

We built a simple calculator that uses your monetization method and revenue/profits to give you an estimated range of how much it is worth. You can check it out here:

Website Valuation Calculator

The calculator linked above can help you get a ballpark idea of what your site is worth. Before you sell, you should get an in-depth valuation performed. Contact us, and we’ll provide a free, no obligation valuation for you.

Maximizing the Value of Your Website before You Sell

A common thing you’ll hear brokers preach is exit-planning. Exit planning is the process of preparing your business for sale and doing so with a focus on maximizing its value and the “sellability” of the website. In addition to that, it’s also planning around the timing of the sale to best fit your personal objectives.

We’re going to focus here on the maximizing value pieces as it’s the most tangible part of the process.

Obviously, you want to put as much money in your pocket as possible. So, let’s discuss three of our favorite (and easiest) strategies for maximizing the value of your website before you sell it:

Reducing owner workload through automation and outsourcing
Maximizing monetization
Cutting unnecessary expenses

1. Automation / Outsourcing: Reducing Owner Workload

As we discussed above, website buyers care about their return on time. Most buyers own a portfolio of websites and other businesses and don’t have 40 hours a week to spend running a business. The amount of time an owner spends managing and running the business on a weekly basis is one of the most important valuation factors.

Buyers are usually looking for websites that require less than 10 hours of weekly work. Less than 5 hours is the true sweet spot. If you’re business requires more than 20 hours per week from yourself, what can you outsource? Most importantly, what can you outsource cost-effectively?

Outsourcing to VA’s is extremely popular among websites and online businesses, as VA’s in places like the Philippines can be as cheap as $300/mo for a full 40-hour work week.

Secondly, is there anything you can automate? Any tedious processes that can be automated with a software or subscription product are great options.

The important thing is automating and outsourcing cost effectively. Cutting 5 hours of weekly workload for a price of $2k/month isn’t going to be worth it. But what if you can cut 20 hours of work with a $500/mo VA? 100% worth it.

2. Maximizing Website Monetization

Buyers love under-monetized websites because they can immediately reduce the multiple they paid for them by fulling monetizing them. Before you sell, implement all of the simple monetization strategies that you can to 1) boost revenues and profits, but also 2) diversify your revenue sources.

If you have a content site with zero monetization on it, someone might offer you $20,000 for it if they think it can make $1,000 per month from advertising revenue. If they know it makes $1,000 per month, they are probably willing to pay $30,000 or $35,000 for it.

Adding monetization methods is difficult for ecommerce, service, saas, lead gen, etc. type of business models, but it’s perfect for content and affiliate websites. If you have a content site with only ads on it, you’ve only broken the surface of monetization. You can likely add affiliate offers, maybe even sell your own products, etc.

Name of the game: max out your monetization to help boost your bottom line before you sell it. Buyers will always pay more for earnings that they know are real vs. earnings that they think they can achieve.

3. Cut Unnecessary Expenses

This is a simple concept, but it has a compounding effect. Every $1 of expense that you can cut is $2-$3 of additional money in your pocket.

Obviously, do not cut any expenses that are required for the business to be run or managed on a daily basis. Only cut the expenses that are more so discretionary and are not expenses that the new buyer will need to forego.

I pay nearly $2,200 for an SEO platform that I like to use across all of my websites. I have 8 personal websites, I use this tool for all of them, but I only run it through the P&L of one of them. It’s not required to operate the website, it’s not a need to have. But, it’s a like to have. A buyer probably wouldn’t justify this as an addback, even though it is somewhat discretionary. So, instead, I should just move the expense to the P&L of another one of my websites, or pay for it out of my own pocket, since I really use it for everything outside of just one website.

If I can cut that $2,200 annual expense and my business valuation multiple is 2.5x, I just increased the value of my site by $5,500.

The multiplier effect is great and can lead to some good valuations increases if you have meaningful expenses that can be cut.

Where Can You Sell Your Website? Using a Brokerage or a Marketplace

There are two options you can chose from when selling your website: selling it with a broker or selling it on a marketplace. Using a broker is similar to selling your house: you hire the broker, they get everything listed online, and share it with their companies’ network to find buyers, and guide you along the closing process. Using a marketplace is comparable to doing a “for sale by owner” transaction, where you are responsible for listing it online, finding buyers, negotiating offers, and handling the closing process.

Selling Your Website with a Broker

Brokers are a popular option for people who are new to the website and digital asset M&A space. However, they are also a great option for seasoned website veterans.

Pros of using a Broker:

Highly vetted buyer lists: all decent brokers will have lists, contacts, and relationships with hundreds of serious investors and buyers who have cash and are hungry to buy digital properties.
Higher valuation multiples: brokers have more vetted buyers so they are able to create more buyer competition, which ultimately increases valuation. Additionally, buyers trust brokered deals more as the brokers usually perform a lot of upfront work verifying the legitimacy of the business and its financials. This makes the deal less risky, which increases value.
Professional experience: brokers understand the full process from start to finish. They help with offer negotiation, legal documentation, transferring the website and assets, etc.
Time and effort: brokers handle all of the buyer communication, vet the potential buyers, and ultimately save time for you by making sure buyers aren’t just wasting your time or trying to knock-off your business model.
Escrow: selling a website safely requires the buyer putting money in Escrow before transferring the website. Brokers will setup and handle this for you.

Cons of using a Broker:

Fees: brokers take a fee which ranges anywhere from 8%-15% of the transaction value. Seven figure deals will fall on the low end of that range, while six-figure deals will fall on the high-end. On the bright side, brokers rarely have upfront fees and they only get paid when the website sells.

The only real downside to a broker is having to pay higher selling fees. However, they usually pay for themselves as the increased valuation they will get you will cover the fees you are paying.

Selling Your Website with a Marketplace

Marketplaces exist simply to connect sellers with buyers. Outside of connecting you with a buyer, they provide little value in the full transaction process. However, this can be a good option if you know what you are doing when it comes to selling a website. There are 3 marketplaces I will recommend, and discuss in more depth below:

Flippa
BizBuySell (and its affiliated sites)
Exchange Marketplace (Shopify stores only)

As a side-note, brokers are usually going to list your website on all the platforms that you would list them yourself. For example, we list all of our sites on BizBuySell, and usually Flippa. So you can tap into a lot of the places that brokers use, but a brokers secret sauce is really their private buyer list and the relationships they have with those buyers.

Pros of Selling with a Marketplace

Large buyer base: marketplaces, such as the ones above, usually have thousands and thousands of registered buyers. This can be valuable in helping you find the right buyer for your business, but it also has some downsides we will mention below.
Lower selling fees: all marketplaces still take fees. For example, Flippa’s fees range from 5% to 10%, with a few hundred bucks in upfront fees. Exchange takes an 11% fee. BizBuySell requires you to pay a monthly listing fee (like $100 or so) but doesn’t take any % selling fees.

Cons of Selling with a Marketplace

They’re still expensive: Flippa is the most popular marketplace for selling websites. They charge 10% up to $499k, 7.5% up to $1mm, and 5% for anything over $1mm. Those aren’t huge savings compared to a brokerage at 8%-15% and you get very little help or hand holding.
They have thousands of listings: the downside to having a lot of buyers is that they also have a ton of listings. Flippa has 5,000+ websites for sale, and over 3 million if you include domains. The likelihood the right buyer finds your listing among all the others is relatively low.
No handholding: most of these marketplaces offer very little assistance through the sales process. Flippa, however, does offer the most as some of the more valuable sites will get an account manager who can provide some tips and advice and they have their own Escrow service.
Tire-kickers and business model stealers: you’ll get a lot of people reaching out who aren’t really interested in buying your business, or who don’t have enough money to do so, but they still want to ask questions and waste your time. Additionally, there are a lot of people who browse these sites looking for business models they can replicate.
Scammers: buying a website from a marketplace probably leaves you most prone to scammers, but there are still scammers trying to buy sites as well. Never transfer your website before the money is in Escrow, or your hands.

Marketplaces for Selling a Website

The three marketplaces that are worth discussing in more depth are: Flippa, BizBuySell, and Exchange Marketplace. I’ll cover these three with a little more detail, in the event you are looking to sell your website yourself.

1. Flippa

Flippa is the original marketplace for selling websites. They were the first to the scenes in the late 2000’s and have been running strong ever since. Their website gets over 1 million hits per month and they have approx. 200,000 registered buyers on their platform. They have 3 (maybe 4 now) physical offices and 50+ full-time employees.

Flippa is our top recommendation if you are looking to sell your website yourself. They provide the most seller support compared to any other marketplace. They have a number of account managers who work with sellers, usually in the low six-figure range, helping them navigate the sale process. However, while their account managers are great for advice and ideas, they don’t actually do any of the heavy lifting for you.

Fees wise, Flippa isn’t going to really be a steal compared to using a broker. They charge upfront listing fees – they just reduced them to $15/month, but you do still have to pay for upgrades if you really want people to see your listing. Additionally, they charge a success fee which ranges from 10% for sub-$500k websites to 5% for $1 million or higher websites. On a $400k site for example, a broker will probably be in the 12%-15% range. So, you end up saving $10,000-$25,000, which is serious money, however, you also usually end up with a worse deal or lower valuation that what a broker could get you.

Overall, Flippa is a great platform but in my opinion, you are paying for more than you get with them.

2. BizBuySell

BizBuySell is an online marketplace that is really built for traditional brick-and-mortar businesses. If you browse their listings, you’ll see that it’s mostly restaurants, gas stations, auto mechanics, and other blue-collar type of physical businesses. With that being said, there are also a number of websites and online businesses listed here. Most brokers, including ourselves, list all of our opportunities on BizBuySell as well. BizBuySell is a network of sites, so in addition to having it listed on their primary site, it will also be listed on BizQuest.com and a few others, depending on the type of deal it is. BizBuySell and BizQuest are the two most popular “business for sale” marketplaces online.

You can find some good buyers on here but know that most visitors are looking for brick-and-mortar businesses, so you usually aren’t going to get a ton of leads from here. On average, we probably get 15-20 leads per listing on here, but we also pay a monthly subscription that gets us all of the premium listing features.

Pricing starts at $60/mo with a 6-month minimum and goes up to $100/month with a 3-month minimum. In addition to these base listing fees, they also try to upsell you premium features like email blasts and things like that. The more expensive tiers get more exposure, so we recommend choosing the best option if you are a serious seller.

Overall, if you are selling your website yourself, I would recommend listing it on this platform, BUT, I would also recommend you list it on Flippa as well.

3. Exchange Marketplace

Exchange Marketplace is exclusively for Shopify stores, so you can move on if your website is something else. The marketplace is owned and ran by Shopify, so it is legitimate. However, it hasn’t been a great platform in my experience and it’s crazy expensive.

Exchange claims to have a buyer contact list of 400,000 individuals. There are approx. 10,000 listings on their platform and in my opinion, most of them are junk. Exchange doesn’t do any vetting of the stores before they get listed, so there are a lot of crappy sites listed on there and it’s hard to navigate and find the good ones. As a website buyer myself, I mostly stay away from looking for stores on here because of this. On the selling side, we have listed a few businesses on here but have never received an advanced lead from it where the conversations lead to an offer being made. However, we did get a lot of tire kickers reaching out and wasting time.

My final gripe with Exchange is their selling fee. They charge a flat 11% selling fee, regardless of transaction size. If you have a six-figure website, you can probably negotiate a broker down to 11% and get way more value out of them. For their 11% fee, you get virtually zero help or support on the platform.

Overall, if you don’t mind some time wasters, you might be able to find a serious lead or two here, so why not try. However, I’d call you crazy if you ever paid their 11% fee.

Common Buyer Offer Structures & Financing

At a sub-$100k website, you should really only be looking for all cash offers. At that price point, there are plenty of buyers in the market that can make an all cash deal happen. But, once you start getting further into the six-figure price range, the number of buyers who can make all cash offers shrink. On a $500k website, unless a buyer is willing to risk 50% or more of their liquid net worth (which most won’t), the buyer needs to be a liquid millionaire.

In these upper tiers, the buyer base from individual investors to other businesses, investor groups, institutional capital, etc. There are still plenty of individual buyers, but most of them will be looking to reduce the amount of upfront cash investment they need to make in the business, to increase its affordability.

There are 3 common financing structures we see buyers use for six-figure websites:

SBA Loans
Seller Financing
Earnouts

1. SBA Loans

From a sellers perspective, SBA loans are the most favorable financing option as the seller really isn’t a part of the equation. The SBA is a government organization that provides loans to small businesses, and individuals who are looking to purchase small businesses. To buy a website with an SBA loan, the SBA requires 3 years of US tax returns from the website/business, and then vets the potential buyers ability to run the business.

The buyer can then get up to 80% of the purchase price of the business financed over a 5 to 10-year period. This reduces their upfront investment requirement to 20% (it can be less, in some cases) and makes the business way more affordable from a cash investment perspective.

As the seller, you get all of your proceeds in cash. It’s a big win for you.

SBA Pre-Approved

With buyer demand for SBA financing at an all-time high, one option for sellers is to get their business SBA Pre-Approved. What this means is that business itself has been approved for an SBA loan. However, it does not guarantee that a potential buyer will get the SBA loan. In addition to the business, the SBA reviews the buyer’s credentials and personal financial situation before granting an SBA loan.

Getting a Pre-Approval can be a great way to increase the buyer base for your website or online business.

2. Seller Financing

Seller financing is when a buyer offers to pay the seller a guaranteed amount of money, over a fixed period of time. For example, on a $500k business you might receive $400k in cash, with $100k financed at $5k/month for 20 months.

What this does is allow the buyer to use the profits from the business to payback that last $100k portion, ultimately reducing the amount of cash required upfront. However, if the business falls off a cliff, or becomes unprofitable, the buyer is still obligated to pay the seller.

Pros of Seller Financing

You get a recurring stream of cash which can help any cash flow issues you might have if the website you sold was 100% of your income
It increases your potential buyer base

Cons of Seller Financing

Less cash is received upfront in the transaction
The buyer can still default on the monthly payments, in which case it is very difficult and costly (from a legal perspective) to go after the buyer
Legal documents become more complex as it will require a seller note/financing document to be drafted

Overall, seller financing is never an ideal financing structure to have in your deal, but they are becoming increasingly popular. For high-priced businesses, we almost always see a component of seller financing, or earnouts.

3. Earnouts

Earnouts are a financing structure in which the buyer offers to pay the seller a certain amount of money IF certain specific performance targets are met. Unlike seller financing, earnouts are not a guaranteed cash payment at a future date. Most earnouts are structured based on profitability and last a 12 to 24-month period of time.

Earnouts are a great structuring for bridging any difference in valuation that the buyer and seller might have. However, they are generally unfavorable to the seller. Outside of bringing more buyers to the table, offering to take an earnout has very little upside.

Cons of Earnouts

If the performance target isn’t met, you might receive zero additional dollars
Sellers can potentially manipulate the business to ensure the target is not met
A seller has very little influence in the business performance once the buyer takes over
Legal documentation becomes more tricky

Overall, earnouts can be good for bridging valuation differences, but are generally not favorable structures for website sellers.

How To Sell a Website

Now that I’ve covered the 4,000 words of pre-sale topics I wanted to discuss, let’s dig into the process of selling a website. I will note that this is what we consider a standard process for selling a website, but each deal itself is different.

This is the process for people who want to sell their website by themselves. If you want to sell through a broker, you are only responsible for Step 1 & 2 – the broker will handle everything else

8 Steps to Sell a Website

1. Prepare Your Website for Sale

Before you sell your website, you want to prepare it to be sold. Here is a checklist of things to think about or do before you sell:

Exit planning: are you ready to sell and is now the right time?
Get a professional valuation on your website (don’t forget our valuation calculator for rough estimates)
Outsource and automate to reduce the amount of weekly time required by a new owner
Fully monetize your website
Get any agreements you have with suppliers/customers/etc. down on paper with no change of control provisions
Clean up any bad code, fix site issues, etc.
Make sure Google Analytics and Webmaster tools are installed

The first part of the selling process is making sure you are ready to sell and then focusing on increasing the value of your website and increasing its “sellability”.

I usually recommend consulting with a broker, even if you are going to sell your website by yourself through a marketplace. A broker will give you a professional, market-driven valuation and offer their recommendations on what you can do to increase the value. Start there, determine if the valuation is good enough for you. If not, focus on the things they tell you will increase the value to where you want it to be.

2. Prepare Detailed Financials

I can’t stress enough the importance of having an accurate and detailed P&L. If a buyer can’t trust your P&L, they lose faith in the accuracy of it and that creates risk. A risk that the business profitability you are portraying is actually higher than it truly is. And risk creates a decreased valuation.

The P&L is the most important statement, but a balance sheet and cash flow statement can become important for larger businesses. A cash flow statement is especially important for businesses that use accrual accounting but have large inventory purchases on an annual basis.

I’ll try to not beat a dead horse here, but an accurate P&L is the most important thing. Additionally, tax returns are important as well as they are the best way to verify numbers and are necessary for things like SBA loans.

Additionally, it’s important to have bank statements or payment processor statements that can verify the income and track it back to your bank account.

3. Gather Traffic & Business Statistics

If you don’t have Google Analytics or Webmaster tools installed on your website, go ahead and install both of them. Having detailed traffic statistics is important for buyers to be able to analyze traffic trends, acquisition channels, pageview concentrations, country diversification, and a number of other traffic-related risk factors. Beyond the financials, the traffic statistics are probably the second most important thing.

In addition to traffic stats, buyers will want to see general business statistics or key performance indicators. For advertising websites, this could be ad CPM’s/RPM’s. For eCommerce stores it will be conversion rate, average order value, etc. SaaS will focus on churn, MRR, and ARR, etc. You’ll want to gather whatever statistics are important for your business and your monetization method.

4. Build an Investment Presentation

This step isn’t a requirement, but we highly recommend it. We build investment presentations for all of the businesses and websites we work with. The goal is to provide all the information a buyer needs to make an offer in one document, to speed up their review and due diligence process and to also to minimize the amount of time wasted answering the same questions over and over again.

We’ve written a blog post that walks you through the sections we include in our investment presentations and shows a few snippets of what of our pages look like. I’d recommend checking it out and building something similar.

How to Build and Investment Presentation to Sell Your Website

5. List it for Sale Online

Once we’ve got a sleek looking investment presentation, the next step is getting the business listed online on various marketplaces. If you choose to go the broker route, you’ll only be responsible for steps 1 & 2 on this list and the broker will handle everything else. But, let’s continue assuming you are doing this on your own.

If you want to dig into the Marketplace vs. Broker topic further, we wrote a full blog post on it here.

List your website on Flippa and BizBuySell

As I discussed above, these are the two places I recommend listing your website for sale. Flippa is the largest online business marketplace, and BizBuySell is the largest traditional business marketplace. Between the two of them, there are hundreds of thousands of potential buyers. Expect BizBuySell to run you $100/month as I recommend going with the highest tier listing option (if your website is large enough to justify it). For Flippa, expect some small upfront fees and then a 5% to 10% success fee.

If you do list your website on Flippa but end up finding a buyer on BizBuySell or somewhere else, you can always remove your listing from Flippa to avoid any success fees from them. You should only pay their success fee when they earn it, which is when they connect you with the buyer who buys your website.

How long it will it take to find a buyer?

The average sale process takes approx. 3 months. If you are selling it yourself via a marketplace, I’d budget 4-6 months since you likely don’t have the connections a broker does. Smaller sites tend to sell faster since there is a bigger buyer pool, but the biggest factor is how attractive your website is and what multiple you are trying to sell it for.

Are there other places I can list my website?

Sure, there are dozens of other business for sale sites out there such as BusinessesForSale.com, BusinessBroker.net, etc. However, Flippa is really the only true or worthwhile marketplace out there that caters specifically to websites and digital businesses.

There are a number of places I DO NOT recommend you listing your website, and that includes: Facebook marketplace, eBay, online forums, Craigslist, and other widely viewed for sale websites. Legitimate buyers are not scouring these sites for deals. Listing on those sites will just subject your website to a bunch of eyes that don’t need to see it.

6. Sole Sourcing Buyers

To sell your website, you’re probably going to need to talk to 100 or so people. Obviously, this depends on a number of factors, but generally speaking you will need to find a lot of potential buyers. You might get enough interest if you choose the highest listing packages on Flippa and BizBuySell, but you also might not.

One of the best ways to find buyers is to sole-source them and reach out to them directly. As a broker, we spend a lot of time doing this on every one of our deals. A lot of them time, the right buyer for the business isn’t searching around a marketplace enough to find your listing. People actively looking to buy a business will frequently search marketplaces, but sometimes the best buyers aren’t the people actively looking every day at marketplaces.

Reaching out to Competitors and Similar Businesses

Our favorite group to target is competitors and similar businesses. The goal is to find an existing business that sees strategic value in your website. This could be your organic traffic and SERP positions, existing customer base, product offering, service, etc. The strategic value is created when they can use your website to boost their business to the next level. Strategic value is when you can take 1 + 1 equal 3, instead of 2.

For example, let’s say you have an automotive content site that writes about how to do-it-yourself repair things on your car. It makes $1,000/month from advertising revenue. This is probably interesting to someone who owns a similar content site, and it’s worth $1,000/month to them because that’s how much the site makes. Now let’s consider an automotive ecommerce store that sells car parts for the same type of car you write about on your content site. Your site is now worth more than $1,000/month to this ecommerce store, because they are pretty positive that they can increase their profit by another $1,000/month simply by linking to products in their store through the blog posts on the content site. That’s how you make 1+1 = 3.

This process is manual and time consuming. Here’s how I go about this process:

How to Reach Out Directly to Buyers

Brainstorm the type of businesses you think your website has the most strategic value for
Use Google to find a few dozen businesses and other websites that fit your criteria from step 1
Fill out an excel sheet with the website info and contact information for the owner or someone senior at the company (contact forms and chat boxes will mostly just go to customer service reps, try to find the owner or the number 2 or 3 guy)
Reach out to them explaining who you are, share your website domain, and let them know you can send them an investment presentation if they are interest in looking further

You’ll get some “no thanks” responses, but we’ve generally found that if we target the right person, we get a response more often than not. We used this process to sell a $120k website in 9 days. It took us 3 days from when we reached out to the first person to have the full $120k asking price in Escrow.

7. Receive Buyer Offers

Traditional investment banks use “bid due dates” when they run multi-million-dollar M&A deals. They require offers to be turned in on a specific date, so they get all of their offers at one specific time (usually about 1-3 months after they send their investment presentation around). Website and online business M&A is a bit trickier because offers come in one-off and randomly.

Managing the offer process is difficult when you haven’t done it before. Most buyers will try to haggle and negotiate to get the best deal for themselves. A lot of buyers will try to bait you into a bad offer with an offer expiration date. They will give you some offer, either below ask price, or with a lot of seller financing and tell you that you have 24 hours to accept it or its off the table.

What do you do? Well, it depends. How many other potential buyers are you talking to? How much buyer interest is there? What do other offers look like? How long have you been in the process for?

There is a lot to consider. If you get an offer for 80% of ask price 2 days after you list it for sale, you might want to hold off and see if more interested buyers show up to the table. More buyers = more competition = higher sale price. If you get an 80% offer after 2 months and it’s the only legitimate offer you’ve received, you might want to take it.

It all depends, and I can’t give you a straight answer since it depends on what’s most important to you.

Limit Buyer Access Until an Offer is Received

You’ll want to be careful of people trying to steal your business model and compete directly with you. Because of this, you should be careful about what information you provide to buyers before you have an offer, or at least proof of funds, in your hands. Here are a few pointers:

Only provide back-end website access after an offer is in hand (if you are okay with providing some access, make sure it is view only). My preference is just to send snippets of what they ask for or do video walk-throughs until you get an offer.
Never share supplier details or contacts until money is in Escrow
Do not give any account logins until money is in Escrow
Hide customer names and other sensitive info from any data you send over

Just be smart. If something smells fishy, ask for more information, ask for video proof of the money in their bank account (screenshots are faked all the time), etc.

Requiring Proof of Funds Before Accepting an Offer

You’ll usually receive an offer in the form of an LOI (Letter of Intent). An LOI does not legally bind you to sell your website to the buyer, but it does usually have an exclusivity period where you are not allowed to talk to any other potential buyers for 2-3 months or so long as you and the buyer who submitted the LOI are still working towards a transaction.

Before you accept an LOI, get proof that they have the money to buy your website! The last thing you want is for the buyer to spend 1-2 months doing due diligence and “gathering” funds only for them to not be able to come up with the money. Now you’re 1-2 months behind and need to re-engage all the old interested buyers.

8. Complete Legal Docs, Asset Transfer & Escrow

Once you sign an LOI, or offer, the buyer now enters the “due diligence” phase. It should not be expected for the buyer to post money in Escrow immediately, or for the buyer to sign a purchase agreement. This time is for a buyer to perform more in-depth due diligence and confirm that he wants to purchase the website. In this stage, you should have already confirmed that he has enough money to purchase it. So now, provide whatever access or data the buyer requests, while still maintaining some confidentiality where necessary.

Once the buyer confirms interest, you will need to setup and Escrow transaction (we recommend Escrow.com). Escrow is like a bank account – it’s where the buyer’s money will sit while you transfer all of the assets to him/her. Never transfer assets until the money is in Escrow or in your hands.

Here are details on how this stage of the process usually goes:

Buyer and seller sign an LOI
Buyer conducts in-depth due diligence to confirm interest in purchasing the website
Escrow account is setup and buyer funds it with agreed upon purchase price
Asset purchase agreement and other legal docs are drafted and signed
Seller transfers all the assets to the buyer
Buyer releases money from escrow to the seller
Seller provides ~1 month of post-sale support
Transaction is done!

Escrow

Escrow is not a requirement, but it should always be used to prevent getting scammed. The way it works is by using a third-part intermediary (the “escrow agent”) who oversees the transaction and ensures that the money is delivered at the appropriate time. Once money is in escrow the buyer cannot take it back unless the escrow agent authorizes it. An escrow agent will not authorize it unless you have authorized him to authorize it. And vice versa if you try to get the money out of escrow prior to transferring the assets.

Ultimately, it’s the only safe way to do a transaction online. It does cost ~1% of the transaction value, but it is common to see this split 50/50 between the seller and the buyer.

Post-Sale Support

Post-sale support is a negotiated point in any deal, but it is common to see the seller offer 1-month of free post-sale support, usually limited to 5-20 hours per week, depending on how time intensive the business is. If a buyer wants to negotiate a longer period of time, you can try to negotiate a salary or some form of compensation if you’d like, but it’s usually not worth losing a deal over this topic. The standard is 1-month, and I’ll leave it at that.

How to Build an Investment Presentation

March 14, 2020 By jake Leave a Comment

Building an Investment Presentation to Help Sell Your Website

An investment presentation is a crucial part of the selling process over at SaleAway. We strive to have the best investment presentations on the market. Not only do we encourage your presentation to be aesthetically pleasing, but also have the proper information buyers will be looking for. For our viewers and listeners reference, we will put screenshots at the bottom of the blog on our website of presentations we have created over at SaleAway. I’ll start by going over the main topics we typically include in our presentations at a high level, and then will pass it over to Zach and Jake to provide more details on each of the specific sections.

Executive Summary
Traffic Statistics
Financials
How the website generates revenues (products it sells, services it offers, etc.)
Day-to-day Operations & Owner Responsibilities
Business-Level Statistics (conversion rates, order data, customer breakdown, churn rates etc.)
Growth Opportunities
Assets Received in Sale
Seller QnA

It does depend on what kind of website or online business you are selling, but I will pass it over to Zach to go more in depth on what each of these sections entail:

1. Executive Summary

This portion will give a summary of your overall business, revenues (preferably Trailing Twelve Months or TTM), the net income figure, what kind of business you are selling and the time commitment you put towards your business on a weekly basis.

2. Traffic Statistics

Here a buyer will find a run down of your online traffic history. What we advise putting on this slide is a graph illustrating TTM unique visitors & pageviews, traffic commentary – which will go into where your traffic is generated and any explanations to rising or falling traffic over the last 12 months, visitors by country, and your acquisition channels – in other words, where your traffic comes from.

3. Financials

This is where your P&L and other financial statements will be. We advise giving an in-depth breakdown of your financials over a 2-year span if you have that much financial history. For example, it is currently 2020, we would advise having financial information from 2018 & 2019 posted so a potential buyer can see the growth in your online business. For your financials, we highly advise showing your Sales, Cost of Goods Sold, Gross Profit, Expenses, & Income Before Taxes. Along with the actual financials we advise having a commentary portion explaining possible expenses that may not be easily understood through the financials listed out. For instance, Cost of Goods Sold may just be one number on the financials, however in the commentary, you can put “Cost of Goods Sold includes shipping costs and employee costs.”

4. Revenue Generation / Business Model

This is where it could depend on what website or online business you are selling, but if you are selling an eCommerce or Drop shipping company, then the next step would be to explain what products you sell currently. This will be where you describe what products you currently sell, give a breakdown of products sold from best-selling down to all the other products (how many units sold, sales generated by those products, and % of net sales your products generate).

5. Day-to-Day Operations & Owner Responsibilities

This section will contain all of the day-to-day tasks you do for your website or online business, how many hours you put into you online business on a weekly basis, as well as listing out your employees, and explaining their day-to-day tasks.

6. Business-Specific Statistics / Key Performance Indicators

Again, this one will depend on the business you are selling.

- For an eCommerce or drop shipping business, this will include illustrating your conversion rate on a TTM basis, the TTM return rate, and providing a breakdown of where your online business does most of its sales. One thing potential like to see in this section as well is the returning customer rate by year breakdown. If your website or online business has a high and increasing Returning Customer Rate YoY (Year over Year), this is very enticing because it shows that not only do you have a loyal fan base, but also you have a great product that keeps customers coming back for more.
- Now if you are selling a SaaS business, you could provide details like an eCommerce or drop shipping business with a few differences. You would still want to show your conversion rate on a TTM basis and provide a breakdown of where your online business does most of its sales. Your online business or website may not have returns, so you won’t have to worry about that portion. You will want to provide the Returning Customer Rate as well as the TTM average order value and a breakdown of the average over the last 12 months.

7. Growth Opportunities

This section is pretty self-explanatory, but it is where you will illustrate to a potential buyer what they could do to drive more customers to your website or online business if they were to purchase. Some examples of growth opportunities for a drop shipping business could be “Start utilizing influencer marketing” or “Bulk ordering best-selling products to increase your margin”.

8. Assets Received in Sale

This is where you are going to lay out all the assets a buyer will receive from a sale. This includes domains, websites, social media accounts, customer data, industry contacts, supplier contacts, etc. Pretty much anything that is needed to run the business how you are today. This will give a buyer insight on everything they will be receiving with the purchase of your website or online business.

9. Seller Q&A

The last portion we like to include is a “Seller Q&A” and what we typically include in here is going to be commonly asked questions from buyers. The purpose of this question is to act as a FAQ for buyers to get more insight into the details of your business and make it easier on the buyers to have answers without having to reach out to the seller. Some common questions we include in this pertain to the transaction of the sale, employees, legal questions, marketing and advertising, financials, products, and operations.

If you would like SaleAway to give you a complimentary business valuation, reach out to us and we would be more than happy to provide that for you. Also, if you would like us to create an investment presentation for your selling process, we can do that as well.

Once your investment presentation is complete, then it’s time to take your website or online business to market. Where do you go from here? There are many questions you can ask yourself here, but if you reference How & Where to Sell Your Website or Online Business you will see a breakdown between using a marketplace or using a broker. Now there are advantages and disadvantages for using brokers or marketplaces, but you will have to make that decision on your own. Are you willing to wait longer for an offer or would you like a broker, SaleAway LLC, actively looking for a buyer for your website or online business?

Seller Financing vs. Earnouts

February 23, 2020 By jake Leave a Comment

As websites and online businesses become more popular, the pool of investors has grown significantly. The majority of buyers and investors in the space tend to be individuals, especially for smaller sized transactions below $1 million.

As website valuation multiples have started to expand, and the size of deals are getting bigger. Following this trend, we have seen more and more buyers making offers with unique financing structures, beyond an ‘all-cash’ offer.

The two most popular financing strategies we have seen buyers use are seller financing and earnouts.

On the surface, the two might seem similar, but they are very different. In this post we will cover:

Seller financing: what it is, and what an offer with seller financing looks like
Earnouts: what they are, and what an earnout looks like for the seller and buyer
Seller financing vs. earnouts: the difference between the two
Pro’s and con’s of each structure for both the buyer and seller
How to safely structure seller financing and earnouts from the sellers perspective

What is Seller Financing?

Seller financing is when a seller agrees to receive a portion of the sale price in the form of a note, or a series of payments over time rather than upfront. Buyers love seller financing because it requires them to make a smaller cash downpayment, ultimately allowing them to buy a bigger business with less cash.

Seller financing is an obligation from the buyer to pay the seller a guaranteed amount of money over a period of time.

What does an offer with seller financing look like?

Offers with seller financing will look something like this: 80% cash payment at closing, with 20% seller financed over a period of time. The period of time is usually 12-24 months from the date of closing.

Let’s use a $500k business as an example. A buyer offers to pay $400k of cash at closing, with $100k financed over a 24 month period. As a seller, you receive a $400k cash payment upfront, and then $4,167 per month for 24 consecutive months. Sometimes the offer will include an interest rate on the note, to reduce the lost returns from being able to reinvest the capital in the stock market.

Buyers love it because they only have to pay a portion of the purchase price out of their pockets. Assuming the business is cash flowing, the buyer then can use the cash flow from the business to make the monthly payments. A genius strategy that can reduce risk for a buyer and allow them to buy a business that they might not be able to afford with 100% cash.

Pro’s and Con’s of Seller Financing for a Seller

Pro’s:

Provides a recurring stream of income after you sell your cash-flowing asset
- This can help any short-term cash flow issues you might have if your website or business is 100% of your income
Brings more buyers to the table as it makes the business more affordable

Con’s:

You receive less cash upfront
Collecting payments if the buyer defaults can be difficult and costly
Papering legal documents for this is more difficult than a 100% cash offer

Pro’s and Con’s of Seller Financing for a Buyer

Pro’s:

Allows you to buy bigger websites with less cash
You can use the profits of the business to pay for the monthly financing payments
Easier and cheaper to obtain than traditional bank or SBA financing

Con’s:

You are obligated to continue paying the monthly payment, even if the business fails
You can be sued if you default and lose the website, and potentially personal assets such as your investments or house

How to Safely Structure Seller Financing for a Seller

The biggest risk for the seller is the buyer not being able to make the monthly payments, and defaulting on the loan. If the buyer defaults, you will have to enforce the note with legal action which can be very costly. If a buyer defaults it’s likely because the business is not performing well anymore. So, there might be little value in taking the website back.

If you receive an offer with seller financing, here is what you should do to reduce risk:

Require as much financial information from the seller as possible: current income, personal assets and net worth, etc.
Target seller financing only 20%-30% of the sale price
Hold the domain name in escrow until the final payment is received so that you can take the business back in the event of default
Require a personal guaranty, or collateralize the loan with other unencumbered assets such as a house, car, etc.
Ask for an interest rate on the financed amount. You are losing out on potential investment returns by not getting the cash upfront, so ask for an interest rate to get a make up for this
Get legal counsel involved to draft the agreement
Discuss the repercussions with the seller ahead of time in case of default

For a more detailed guide on seller financing, read our post: A Seller’s Guide to Seller Financing: How to Structure a Safe Transaction (to be published soon)

What is an Earnout?

An earnout is a financing structure in which the buyer offers to pay the seller an additional amount of cash, IF the business hits certain targets.

Earnouts are structured based on the performance of the business that is being sold. Earnouts are not a guarantee that the seller will receive more cash at a later date.

These are a great way to bridge the gap between valuation differences. If you, as the seller, think your website is worth $550k, but the buyer only thinks it’s worth $500k, you can use an earnout structure to bridge the gap. In this instance, the buyer might offer to pay you the remaining $50k, if the business maintains an average profit of $x over the next 12-months.

Examples of Earnouts in Business/Website Sales

There are hundreds of ways to structure an earnout, but here are two of the most popular we see. We’ll continue with our example of a $500k business with a $400k cash downpayment.

The seller will receive 50% of the businesses profits, paid monthly, until the additional $100k is paid
Let’s say the business is currently making $200k in annual profit. If the business maintains $200k or greater of profitability over the next 12-months, the seller receives a $100k cash payment at the end of the 12-months
- You can also tier this so that you receive 50% or 75% of the $100k if the business only hits 50% of 75% of the profitability target, for example

With seller financing, the seller is taking the risk. Because of this, it is common to receive (or ask for) additional upside. Ie. if the valuation is $500k, the buyer might offer $400k cash, but 50% of business profits paid monthly (or annually) until the seller gets paid $150k.

Remember, there is no guarantee! The business must hit the performance targets, or else the seller may get nothing.

Pro’s and Con’s of Earnouts for a Seller

Pro’s:

Opportunity for additional cash upside if the business performs well
Can provide additional current income if the business you sold is 100% of your income
Brings more buyers to the table because it reduces risk for them

Con’s:

You might receive $0 on top of the upfront cash if the business doesn’t perform
The seller can sometimes manipulate profitability to make it so the targets aren’t hit
- For example, they start spending $100k a year in paid ads that aren’t profitable, or they hire an SEO agency, or hire VA’s, etc.
The seller usually has very little influence on the performance of the business
- This results in the seller having to stay involved post-close to ensure the business performs well enough
Papering legal documents is more difficult

Pro’s and Con’s of Earnouts for a Buyer

Pro’s:

Allows you to buy a bigger business with less cash
You only pay if the business performs well, and any payments can be made with business profits
The seller will provide more post-sale support to ensure the business hits its targets

Con’s:

No cons here for the buyer!

How to Safely Structure Earnouts for a Seller

As mentioned above, the buyer can do things to manipulate the metrics to make sure the targets aren’t hit. There is a lot of seller risk here, so there are a lot of thins to do to safely structure the earnout:

Agree upfront on a detailed calculation of how the performance targets work. You can structure expenses as addbacks so that any expenses the buyer adds to the business post-close are added back to the profitability, not affecting the performance target
- Exclude things like: interest expenses, hired VA’s/employees, added marketing costs, etc.
Ask for additional upside, if you are selling your site for $500k, ask for a $550k valuation to add $50k of upside for the additional risk you are taking
Get a lawyer involved to structure this in the safest way for you
Ask for a salary or additional monthly payment if the buyer expects you to stay involved post-close
Make sure you fully vet the buyer and his ability to continue running the business. You want to make sure he has a good track record and knows what he is doing!

The Difference Between Seller Financing and Earnouts

Seller financing is guaranteed, earnouts are not. Therefore, earnouts are riskier for sellers, but better for buyers.
Earnouts can have additional upside, whereas seller financing usually does not
Sellers need to stay more involved in the post-sale operations to ensure the business performs. Business performance doesn’t matter in seller financing
Buyers can default on seller financing, creating need for legal action. There is less legal risk in earnouts (although there is still plenty)

How & Where to Sell Your Website or Online Business

December 26, 2019 By jake Leave a Comment

How To Sell Your Website or Online Business

When it comes to selling your website or business, there are a lot of options out there to choose from. There are traditional M&A/business brokers, online marketplaces, and specialized website and digital business brokers. Where you choose to sell your website can have a significant impact on your valuation and amount of money you end up putting in your pocket.

The best place to list your business for sale will likely depend on a number of factors, such as: the size of your business, the amount of work you are willing to put in, your tolerance for fees, negotiation skills, and so on. We’re going to walk you through the differences between the various options out on the market, the differences between marketplaces and brokerages, and also tell you where you shouldn’t sell your business.

Selling with a Brokerage or a Marketplace

There are two legitimate options when it comes to selling your online business: with a specialized online business broker or with an online marketplace. Online business brokers are specialized and certified individuals or companies who connect you with potential buyers and help out with the due diligence, negotiation, and closing aspects of selling your business. Selling your business through a marketplace is more like a “for sale by owner” process where you are responsible for every step of the deal process from find the buyer to answering questions and handling the closing process.

As you would guess, selling with a brokerage is more expensive as fees tend to be higher. When making the broker vs. marketplace decision, most sellers tend to think they are okay with spending a little more time and the process taking a little bit longer if they can pay lower fees. However, simply making the decision based off of fees could actually be worse for you.

Here are the 7 top things you should consider when deciding to sell your online business with a broker or on a marketplace:

The size of your business and how quickly you want to sell
Amount of work and hours you are okay putting in
The potential buyer base
Average sale prices
Transaction Fees
Negotiation and due diligence
Legal documentation and transfer of assets

Where You Shouldn’t Sell Your Website

There are a handful of places where we recommend you NOT list your business for sale for various reasons:

eBay
Craigslist
Facebook Groups (or Marketplace)
Online Forums
Freemarket

Serious buyers aren’t going to sites like this to find websites or businesses for sale. You’ll run into a ton of tire kickers and time wasters and expose your business to more eyes than you should.

Brokerage vs. Marketplace: 7 Things to Consider Before Selling your Website

1. Size of your Business and How Quickly you Need to Sell It

My general rule is: if your website is worth $100k or more, use a broker without question. If your website is worth less than $100k, you can go either way, depending on how quickly you want to sell your site. Generally, selling with a broker will result in a quicker sale, since they have a huge buyer base of qualified investors with serious capital who are loathing for great opportunities.

For sub $100k sites, you will probably pay anywhere from 3%-5% more in selling fees for using a broker over a marketplace, so at this size range it really depends on how fee conscious you are and how much work you want to put into selling it yourself.

Using a marketplace typically takes longer because it is dependent upon a buyer actually finding your listing on a marketplace. Most marketplaces tend to have thousands of listings, which makes it a lot less likely that the right buyer finds your listing as quickly as they would through a broker. If you are in a fire-sale situation and need to sell your business within the next few weeks and don’t care how much money you sell it for, then putting it on an auction-styled marketplace could be a good solution – but we never recommend this otherwise.

If you don’t know what your website is worth, reach out to a broker and ask them for a free valuation.

2. Required Time and Effort

If you sell on a marketplace, you will receive virtually no help from anyone. The marketplaces take a % fee for connecting you with a buyer, not for helping you communicate, negotiate, and execute a transaction with one. You will be responsible for answering all buyer questions, getting on multiple phone calls, providing the same info over and over again. And in the end, 90% of the people you talk to are likely not serious or legitimate buyers. It sucks spending an hour plus providing super detailed answers to questions, only to get an offer that is 80% seller financed; or for them to never respond and use that information for competitive purposes.

With a broker, you are going to pay a higher fee, but you are going to do way less work. Here are some services a broker provides that are super valuable to a seller:

Prepare a professional investment presentation
Handle NDA’s and information sharing to make sure your information isn’t stolen for competitive purposes
Communicate with all buyers: answering questions, initial phone calls, etc.
Negotiate the best offer for you
Help guide you through the legal documentation phase
Ensure all assets are transferred properly
Provide escrow services to make sure the money is in safe hands before you give the keys away

Overall, you get so much more help and assistance out of a broker which helps prevent you from getting screwed over, and significantly reduces the amount of time you have to put in to the selling process.

3. The Potential Buyer Base

Brokerages have a highly qualified buyer base of people who are eager to invest their money in online businesses. Brokerages will send your listing out to targeted buyers via email, and they tend to have very high open rates on those emails. Brokers have relationships and know people personally – marketplaces do not. They have phone numbers and people who will pick up the phone when they call.

Marketplaces have the same. However, as I mentioned earlier, it’s all about the potential buyers actually finding your listing on the marketplace. And this is a lot more difficult to do when there are thousands of listings they have to sort and sift through.

Additionally, a brokerage will list your website not only on its website, but also on a handful of other marketplace type websites, such as BizBuySell.com and BizQuest.com at no additional cost to ensure your listing reaches the maximum number of potential buyers.

Brokers also list on the same marketplaces you would, in certain instances. We, for example, list all of our businesses on Flippa.com, if we find a buyer from Flippa, we share our commission we earn with the marketplace. So we reach the same buyers you would on the marketplace, but also thousands more through our proprietary buyers list and the other sites we list one, such as the ones mentioned above. It costs no more for you but greatly expands the buyer base compared to only using a marketplace.

4. Valuation Multiples

On average, websites sold through brokerages receive higher valuation multiples, meaning you are more likely to sell your business for a higher price. Here’s why:

Brokers take a lot of pride in their reputation, and selling a bad business makes for a bad reputation. These firms will do a lot of diligence and vetting on their own before selling a website, and potential buyers trust and value this. Because of the trust and reputation, buyers are willing to pay more.
For higher priced websites, they have a bigger and more accessible buyer base, which creates more competition. If you list a $1M site on a marketplace and it gets 5,000 views, how many of those 5,000 people actually have $1M of cash to buy it? Probably less than the amount of people the broker knows that have that much money to buy it. This creates more competition amongst buyers which results in higher sale prices.
They are better negotiators.

5. Transaction Fees

The one place brokerages lose is transaction fees.

If you sell your website with a broker, you will pay a higher % in transaction fees.

Average Marketplace Transaction Fees:

The most common marketplace, Flippa.com (and our recommended marketplace if you go that route) charges:

10% for websites that sell for $1-$499k
7.5% for websites $500k-$1M
5% if the sale price is $1M-$5M

ExchangeMarketplace, which is only for Shopify sites, charges 11% regardless of sale price.

Average Broker Transaction Fees:

Less than $500k: 10%-15%
$500k-$1M: 8%-12% (the big dogs charge up to 15% for sub-$1M)
$1M+: 5%-8%

Fees tend to vary a lot depending on the broker. A firm with less than 10 people will probably be on the lower end, while the big guys (FE International, QueitLight, etc.) will be on the higher end because they have more fixed expenses to cover.

But: broker fees are almost always negotiable. You’ll get quoted on the higher end, but they can typically move a little lower, especially if you have a really good business.

Also, keep in mind, brokers do not even get $1 if they don’t bring a buyer to the table, whereas, some marketplaces will charge you an upfront fee for listing.

6. Negotiation and Due Diligence

This goes hand in hand with #2 above, but I thought it worth mentioning again. Receiving an offer for your business is an awesome start, but this is when a lot of the work begins. First off, there are a lot of small points to negotiate, depending on the size of your business.

Depending on the structure you might have seller financing, earnouts, a required amount of time to stick around the business post-closing, etc. Having a broker who has experienced all types of transactions and is familiar with what is standard or “market” is extremely helpful when it comes to negotiating a final offer.

And in conjunction with a final offer is due diligence. Once an LOI is signed a buyer will want to take a deep dive into the financials, analytics, employees, the website itself, etc. There will be a lot of document requests and questions to answer. If you aren’t familiar with selling an online business, having someone by your side to help protect you is invaluable for more complex transactions.

7. Legal Documentation and Transfer of Assets

Transferring assets is straight-forward for the most part, but it can get tricky if you have certain non-transferable monetization methods such as Adsense, Amazon FBA, eBay, etc. Not knowing how to properly transfer these assets can ruin a deal.

Additionally, there are varying degrees of legal documents that will need to be drafted. We recommend always using a lawyer, but for people who do not want to spend the money on one, a broker will be dangerous enough to help you get through the docs. They will also have “template” documents for you to work off of and will know exactly what documentation is needed for selling the business, setting up seller financing, transferring copyrights, trademarks, patents, etc.

Again, just helpful to have someone with experience by your side if you are unsure how the process works.

Where to Sell your Online Business or Website: Marketplaces

There are a number of marketplaces out there, but here are a few where you can list your website for sale if you want to run the show yourself:

Flippa.com – Flippa is the largest marketplace out there and is our recommended option for people going the marketplace route. On this marketplace you have the option of listing your site as an auction or as a classified. We recommend only doing auctions for really small sites (sub-$25k or so).
ExchangeMarketplace.com – only for Shopify sites. It’s worth listing it on here if you are a Shopify store, but we’ve never found a lot of serious buyers on this platform. I would definitely suggest also listing it on Flippa.
BizBuySell and BizQuest – these sites are more so for traditional brick and mortar businesses, but its definitely worth listing on here in conjunction with the above. The downside is you have to pay per month to list your site on these places. There are also a handful of other similar sites out there, but this are the two biggest.

Where to Sell your Online Business or Website: Brokers

I would love to just list ourselves on this section, but there are a handful of brokers on the market and it always makes sense to talk to more than just one. Some specialize in certain types of sites such as SaaS or Affiliate, while some might have more expertise in certain industries such as Automotive, Finance/Business, or Home & Garden.

I’ll give you a list of some of our favorites and break them down by size.

The Big Dogs: these are the guys you should be speaking to if you have a multi-million dollar website or online business and are okay with paying higher fees.

FE International
QuietLight
Empire Flippers (I consider these guys more of a hybrid marketplace/broker. You will pay the highest fees and get the least assistance with the sale process, but they do a lot of volume and have a lot of buyers)

The Middle-Market: these brokers are best suited for deals less than $3M in value, who have lighter fees (in some cases), and offer a more personalized service.

Acquisition Station
Digital Exits
Website Properties
Deal Flow Brokerage
Upward Exits

When You Should Sell Your Website or Online Business

October 23, 2018 By jake Leave a Comment

When Should You Sell Your Website or Online Business?

An often-over-looked aspect of online business investing is creating an exit strategy to determine the right time to sell your website. Exit strategies may be complicated to put in place since it will vary from person to person and business to business. After all, how do you truly know the right time to sell your website before you are even ready to sell? In this post we intend to highlight important questions you should ask yourself in the process of creating your exit strategy.

Why Did You Start Your Online Business?

This is an excellent first question to ask yourself; what were your motivations behind building an online business? Some people start businesses for the hope of a big payout one day, some do it for passive income for years to come, while others are not interested in the money but rather do it as a passion. Of course, we cannot summarize all online entrepreneurs into three categories, but consider which of the following closely represents your motivation behind your business.

I’m ready to get rich overnight!

We know. We know. No one is truly getting rich overnight. You’ve grinded hundreds of late nights working on your business with one goal in mind: “I want to sell my business eventually and receive a lump sum payoff”. If this is you, you likely have some form of exit strategy in mind. You know that you want to sell your business, but you may not know exactly when.

I want to generate passive income

You started your online business to create passive income for the foreseeable future. In most scenarios, you likely put in a considerable amount of work up-front with the hope that the business would grow into passive income.

I have a passion for this topic/industry

One of your passions sparked the motivation to start your website. You didn’t start the business with profit as the main goal, however, you began to monetize your website as the opportunities arose. Although you are now making a profit from your website it is simply a side benefit to doing what you love.

As previously mentioned – not every online business owner will fit into the above three categories. However, the important overarching questions remain:

Why did you start your online business?
What were your goals? Have you reached them?
Are you in it for the passion, passive income, long-term growth, or something else?

Am I Ready to Consider Selling My Website?

Once you determine your own answers to the aforementioned questions it is time to examine your answers in depth to begin creating an exit strategy for your business. Now is the time to use your answers to focus on the following: When is the right time to sell my business?

Business Owner Type – “Get Rich Overnight”

For online business owners who began their business to “get rich overnight” the right time to sell is likely driven by monetary goals. You may have goals such as, “I want to sell my business once it is worth $100,000”, or “I will sell my business once I maximize the traffic and profitability”. If you have yet to come up with an exit strategy you should consider:

How much is my business worth?
Can I increase the value further?
Is the work required to grow the business further worth the time, or can I use the money from the sale of my current business to invest in a more promising opportunity?

It may be a good opportunity to sell your website now if you believe you have grown the business to its furthest profitability and traffic. You might not have the time available or want to put in the time required to take the business to the next level. On the contrary, if you can continue to grow and develop the business its likely not be the right time to sell. You may have the opportunity to increase the businesses valuation in order to sell for a higher value down the road.

The Passive Income Investor

Website owners who started their business with the idea to create a longer-term stream of passive income will likely want to consider the passivity of their business. You may have a goal like, “I want to grow my business to $3,000 per month while working less than 20 hours per month”. The following questions will help point you in the right direction to determining an exit strategy:

Is my business earning the passive income goal I had in mind?
How many hours am I putting into the business? Is it as passive as I would like?
Can I sell my current business and invest the money into more passive and/or more profitable opportunities?

You may want to consider selling your business if it is not as passive as initially expected. Maybe there is too much work involved in growing the profits and traffic to your goals. Perhaps there is an opportunity to sell your website and re-invest into a business that will provide higher profits and more passivity. However, if your business is providing your desired profit and amount of work then you likely are in a position to hold onto your business, unless there are other factors at work.

The Passionate Business Owner

Those who began their online business to follow their passion and do what they love may find it tougher to come up with an exit strategy. As opposed to making money, your goals are likely more aligned with doing something you love and helping your readers/customers/subscribers. However, maybe your website has grown so large you cannot resist the payout from selling, or you have lost interest in your passion. Some things to examine are:

Do I still love what I do? Is it still a passion?
What is the value of my website? Would I be happy with that amount, or would I be depressed if I sold my website?
Has my website grown so large I no longer have the time?

Assuming you are still passionate about your business it may be tough to decide on whether to sell your website. If you were to find out your business is worth significantly more than you ever expected, would you sell it? Maybe your business has grown too large and you are losing interest in your passion because the business side is sucking up too much of your time. These are tough questions to answer and vary significantly from person to person. At the end of the day you should consider what is right for you as there is no generalized right or wrong answer.

How Much Is My Website Worth?

For some, this is potentially the most important question. This could be the final deciding question for all three categories of online business owners. The value of your business might be tempting enough to convince you to exit and move on. Without further ado, let’s jump straight in and begin to examine the basics behind website valuations.

Valuing your Online Business using a Market-Driven Multiple

The most widespread practice in valuing an online business is applying a market-driven multiple to your trailing 12-month (TTM) profits averaged to a monthly number. Most online businesses fall somewhere in the range of 20-28x monthly profit. To highlight this in an example:

Past 12 Months Profit: $48,000

Average Monthly Profit = $48,000 / 12 months = $4,000 Per Month

Low Multiple: 20x

Low End Valuation: $4,000 x 20 = $80,000

Median Multiple: 24x

Median Valuation: $4,000 x 24 = $96,000

High Multiple: 28x

High Valuation: $4,000 x 28 = $112,000

Using this approach to website valuation shows the median value (24x multiple) of $96,000. In other words, a business netting $4,000 profit per month is worth roughly $96,000. However, it is important to note some factors that go into determining whether a multiple on the higher or lower end are used in website valuations. Additionally, there are some outliers that may generate valuations over 30x, while others may fall below 20x.

How to Determine the Correct Multiple

This is where things become slightly tougher as it is not easy to perfectly weight the factors that may raise or lower the multiple applied to your businesses monthly profit. Several factors to consider include:

Hours required per week – generally more passive online businesses will see higher multiples, while time consuming ventures see lower multiples
Trailing 12-Month (TTM) Profit Trends – lower multiples apply to a business with profits that are trending down during the TTM. On the contrary, a higher multiple will be given to business trending up.
Monetization Method – how is the business monetized? Amazon FBA, affiliate, e-commerce/dropshipping, and SaaS are among the various monetization methods. Multiples vary depending upon the form of monetization, as well as the number of monetization methods used
Age of the Business – Typically older websites with more stable profits are given more favorable multiples

Please note – this is by no means an exhaustive list of factors that affect the multiple and valuation of an online business. Each unique business will vary depending on its current situation, so the important take away is that most valuations fall somewhere between 20-28x.

Additionally, please do not hesitate to reach out to us to receive a free valuation of your website.

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Beware of crappy value websites out there, however, if you are looking for a simple solution, check out this website value calculator.

Determining when to sell your website is ultimately up to your goals…let us help!

Determining the right time to sell your website and creating an exit strategy vary on a case by case basis. Start with clarifying your goals for the business. Examine whether there are potential opportunities to continue growing the business, or if you have maximized the profitability of the website. At the end of the day, it is up to you to put a plan in place and decide what is best for you. Most websites sell within a multiple range of 20-28x monthly profits averaged over the TTM. Using this number range will provide you with a rough estimate of the value of your website, however, the correct multiple for your website depends on several factors. If you have decided now is the right time to sell your website, please do not hesitate to reach out to us to receive an in-depth valuation.