Wether you are in the business of flipping websites or selling your long established website you need to prepare to get the best value for your baby.
Buyers have expectations and will be doing a detailed vetting of your website, brand and potentially you.
It is best to prepare well in advance of a potential sale. There are many places to sell your site and making the right choice is critical. Finally you need to be careful with the closing details to complete a smooth transaction.
What is the Site Worth — Valuations
Well this is the most important part to many — how much can I get? Valuations will typically be a multiple of average trailing monthly revenues. So if your site made an average profit of $10k/mo over the last 6 months then you would multiply the $10k x the multiple number. The multiple can be anywhere from 20x -50x+. It is a simple formula …
[6 Months’ Average Profit] x (20 to 50+) = Target/Listing Price
What makes a site worth 20x vs 50x?
- Passive or active — does the new owner need to put in 40-50 hours per week or 10?
- Seasonality — Are the sales lumpy with much of the revenue coming during summer or holidays etc.
- Type of business — affiliate, ads, eCommerce, SaaS
- Earnings trajectory — if earnings are going down month over month the multiple will be lower
- Industry trends — SaaS may be hot and affiliate weak when you are selling
This is where having a broker involved is helpful. They will be able to do a full evaluation of your business, look at trends, help with accounting issues like how to classify content writing etc.
This process can also be a useful business planning tool. If you know you want an exit strategy where you get $500k for your business you can reverse the process and divide $500k by the multiple for your business type. This will give you a target monthly revenue goal.
[Target exit price] / (20 to 50+) = Monthly Net Profit Goal
When to Sell
This is a very personal decision. Some people plan to sell to cash-out and retire. Others want to trade up and use the sale proceeds to buy or start a bigger venture.
The most important thing is to sell into strength
You never want to sell as your business is faltering and sales are in decline. Smart buyers know that it is very difficult to turn around a downward trend. Unless you are very lucky and have a naive buyer you will be getting a much lower multiple and have fewer buyers to consider offers from.
Some industries are particularly vulnerable to changes from partners or traffic sources. Amazon recently cut commission rates by near 50%. For any site that was monetizing primarily with Amazon affiliate sales the company valuation went down as well. The same goes for ad-based revenue sites. The lates Google update can alter traffic by huge amounts and the traffic is what drives the ad revenue.
Website sales are typically asset sales. People are buying a revenue stream. In the case of eCommerce and FBA sure the inventory is added in but, few are buying a business and goodwill.
How to Prepare
You really want to plan a sale at least 6 month ahead of time. This gives you time to prepare and for any changes to be measured. Among the important things to do to get your house in order are ..
Make sure you have setup Google analytics for your site. Visitor metrics are important for almost all websites. Likewise you should have setup your Google Search Console (GSC) account to see what terms are bringing visitors to your site and which pages are the most successful.
Now is the time to remove any black or grey-hat items that you may have used in the past. Check your backlink profile closely. If you find some dodgy backlinks request they be removed. If you can’t get them removed consider disavowing them. Check GSC for any errors, warnings, or penalties and resolve them. This is also a good time to do a full SEO audit. Fix any on-page technical issues, make sure that you aren’t indexing thin or irrelevant pages, etc. This is not the time to be buying links but if you are lacking high quality backlinks consider an outreach campaign.
Hosting, Themes & Plugins
Make sure everything is up to date and that you your premium plugins and themes are paid for and have support contracts. No one wants to buy a site and find you are using cracked or bootleg software. From a hosting standpoint check your sites performance, make sure OS and component versions like PHP are up to date, review your backup process.
Many people spend so much time working on creating their site and growing the business that they neglect having proper accounting records. This is a critical item and it is best to have outside accounting or at least use a proper set of accounting tools. Don’t plan on sending the prospect a shoebox full of receipts. If you are an Amazon affiliate with a few sites, be sure that you have setup Amazon tracking ids that separate out the site sales performance. Otherwise there will be no way to tell which of your multiple sites the revenue came from.
Every successful business will have a few negative reviews. Track these down and try to get retractions or at least be sure to respond to them. Check things like your BBB and TrustPilot report. Also be sure to do this for the senior executives or founder.
Compliance & Terms of Service
Be sure that you are FTC, GDPR etc. compliant. If an email list is being sold be sure to scrub it and that it is 100% opt-in. If you are selling software or a SaaS product update the terms and conditions. If you are an Amazon affiliate make sure that you are in compliance with their terms and conditions and have proper affiliate disclosures.
Standard Operating Procedures (SOP)
One of the best things you can do for the new owner is to have SOPs in place for your most critical tasks. This will allow them to outsource or take over these tasks much quicker and have a smoother transition.
Contracts Suppliers & Staff
Check that you have contracts in place with suppliers and that they are up to date. Check for non-competes and at least non-disclosure agreements in place for staff and contractors.
As you can see, there are many touch-points . Having an acquisition team is a great idea if this is a medium or larger sale. This is another area that a good broker can help with. The team typically would include …
- Owner or company lead person
- Engineer or tech representative
- Business Broker
What do Buyers Want
Understand what buyers want when they purchase a site will help you position your offer in the best possible light. Generally buyers want …
- Reliable revenues — People are trying to hit the ground running and grow an existing revenue base. They want to skip that first year of unpredictable growth and avoid things like Google’s “Sandbox” where new sites need to earn their trust and authority. This is why declining sales are a major issue.
- Honesty — If you are caught fudging on any issue than the buyer will assume you have been less than straight-forward on others. No business is perfect so just be honest about any missteps or omissions.
- Passive Investment — Many buyers are looking for an ROI not a full-time job. A site that requires 10 hours a week of the buyers time has a different value than one requiring 60 hours. But again be honest so the buyer can factor in additional management costs if needed.
Where to Sell
Nowadays there are many places to sell your website. Most sellers of successful sites will want an exclusive selling contract of 6 months or so. Fees are often on a sliding schedule depending on the size of the final transaction. You should never need to pay to list a site for sale but you may elect to purchase services to get your site in shape for a transaction.
There are many small and large business brokers that will work with you to sell a site. These brokers often have customers looking to make purchases. Traditionally one of the biggest issues for a buyer is that brokers are much like real estate agents — they work for the seller. Like buying a house, it is a caveat emptor environment with little vetting done by the broker. It is up to you to find the flaws in the deal.
Brokers will generally want a six-month lockup. They get an exclusive contract to sell you site. They will take a percentage of the transaction value as their fee. This can range for 15% for smaller transactions to 6% for bigger deals.
There is a newer breed of brokers that include firms like Empire Flippers and FE International (FEI) These brokers pre-qualify and vet much of the sellers information. They understand online businesses, SEO, Analytics, and trends in the industry. Some of the brokers with a significant transaction history include …
One of the best known and reliable broker/marketplaces Empire Flippers is a full-service broker/marketplace for selling and buying websites. They usually have a great portfolio of sites that include …
- Amazon FBA
- Affiliate Sites
- Ad monetized content sites
- eCommerce Sites
- SaaS sites
Empire marketplace listings range from $30K – $1million+ listings. They have a particularly strong portfolio of content and SEO driven sites. Here is a sampling…
Empire does a complete vetting and pre-qualification process. This is beneficial for all parties and gets deals done.
FEI is a direct competitor to Empire Flippers and they also do a good job of qualifying and vetting the sellers website. FEI has a focus on higher-priced sites. Some of the differentiators of FEI are …
- 94.1% success rate – hard to beat that
- Track Record — Over 750+ deals done
- Global network of 50,000+ pre-qualified tech investors.
- Confidential Process. They don’t disclose site URL or other details until the prospective buyers are vetted.
Website Properties sells online businesses and premium domain names. There deal sizes are in the Empire Flippers ranges. They are a slightly lower priced broker for sellers with very aggressive sell commission costs on transactions.
For entrepreneurs by entrepreneurs seems to be Quiet LIght’s motto. They have a good mix of SaaS, FBA, eCommerce and other sites.
Many brokers in the online space focus on a particular revenue/profit range. This makes sense with different infrastructure and staff needed for a $50K deal then a $50 million deal. In Digital exits case they focus on companies with a $250k to $5million profit range.
Marketplaces & Auctions
This is where the bulk of the transactions happen. From very small sites to large businesses there is a marketplace for every transaction. Some of the marketplaces like Empire Flippers and FEI do a good job of qualifying and analyzing the websites … making for a smoother transaction. Others like Flippa and most brokers place all of the vetting burden on the buyer.
BizBuySell is a well known marketplace for all types of businesses. Mixed in with the online businesses is everything from gas stations to restaurants. It is a good place to find non-tech buyers for easy to run websites.
The bigger marketplaces like Empire Flippers and FEI have minimums for transactions. It makes sense as they are a very high-touch operation with account managers and vetting teams. There just is not enough revenue from the commission of a $10k transaction to support the staff and infrastructure.
Most people know of Flippa. It is however the Wild Wild West of selling and buying marketplaces. Buyers need to be particularly careful of all sorts of scams on Flippa here as little to no vetting takes place. There is everything from worthless duplicate content sites to quality profitable online businesses. Sellers should always use an escrow service. You will often be told you can get a better price if you skip the escrow, or do the transaction off Flippa — never do this.
A marketplace dedicated to Shopify sites for sale. This is run by Shopify and prices range from $100 to thousands. It is a good place to get a start in eCommerce. They currently have over 3,000 Shopify sites for sale.
Often you know someone who wants to start a new business. As a successful website owner you likely have a network of people who know about you and your site. These can be the quickest and cleanest deals and of course will save the broker fees. Still use a lawyer to keep everything business-like.
Competitors and Partners
Competitors and partners are a great resource for selling to. They know your industry and your sites strengths and weaknesses. The problem is that you are exposing the inner workings of your business to your competitor. There are many cases of last minute changes to term-sheets or other wrinkles that thwart a deal. Now you have a competitor that knows all of your strengths, weaknesses, revenue sources and other proprietary details.
Often employees will worry about their future when they hear that your business is for sale. They can often pool together resources or get an SBA loan or similar to fund the transaction.
Completing the Transaction
Many a deal has fallen apart just before closing. This is when buyers often get cold feet and small things can sidetrack a deal. It is important that everyone understands the final steps.
Fro the smaller Flippa type sales no term- sheets or contracts are done. For larger transactions, again this is where a broker will be helpful. Your local small business lawyer is likely not familiar with the typical term-sheet for this type of transaction.
You want to use an Escrow service on all but the smallest of deals. It is not expensive and gives the buyer and seller confidence that the funds will transfer. Some of the marketplaces have their own escrow service others use a generic service like Escrow.com. The main point is that it provides a way fro the seller to make the transfer knowing that the funds are available. It gives the buyer the ability to make final last checks of the site. It is a crucial element that should never be omitted.
A transition plan should be agreed to. There are a number of issues to consider …
- How long will the previous owner be available for consultation?
- Will the former owner be running the operation for a period of time so that the new owner can learn the systems?
- How much and what kind of training for the new owner will there be?
A smooth transition is not just for the new owners sake. This is critical step to keep your customers loyal and the sales and traffic on-track.
Customers and employees need to have confidence in the new team. Press releases are usually a good idea. An emphasis on support and growth should be made.
Selling your website is an exiting step in your business career. It is a testament to the value of all of your hard work. Work with professionals if the transaction is anything but a very small one. Starting well in advance and preparation is the key to a smooth transaction and the highest value for your website.
Where are the best places to sell your website?
It depends on the value. Lower priced sites are best on FB groups like Flipping Websites or Flippa. More established businesses are best marketed on sites like Empire Flippers or FE International.
How much do websites sell for?
Valuations are usually based on a multiple of monthly earnings. The multiple range from 20X - 50+X monthly profits
Why do people sell profitable sites?
Lots of reasons just like offline businesses. From retirement to creating liquidity for a larger site purchase.