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:
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:
- 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.
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.
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.
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
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.
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.
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.
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 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 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.