Looking to Sell a Website or Web-Based Business? Everything You Need to Know From Start to Finish

Looking to Sell a Website or Web-Based Business? Everything You Need to Know From Start to Finish

Getting Started

  1.  Why are you really selling?

What’s My Website Worth?

  1.  Our valuation method
  2.  How much will it cost to go through a broker?
  3.  Listings we’ve recently sold
  4.  The buyers we work with

The Listing Process

  1.  How long will it take to sell and get paid?
  2.  What will buyers ask for during the listing period?
  3.  Example marketing materials
  4.  Things to expect during the sale
  5.  How you’re protected as a seller

Take the Next Step

Getting Started

The decision to sell your website or web-business is a big one.  It means that you will either move onto something else that is less time-consuming, will make you more money, or perhaps completely unrelated.  Either way, the decision shouldn’t be taken lightly and made in an educated way that will help get the most value out of your property.  The question we ask prospective sellers is:

Why are you really selling?

You may fall into one of these categories:

  • Working on a new project that needs time and resources to grow
  • Burnt out, lost interest, and/or otherwise not able to continue growing the website
  • Need the lump sum of cash now for personal or other emergencies
  • The business model and/or industry is set for a decline in the near future
  • The site has been negatively affected by Google updates or other fundamental issues
  • Building, buying, and selling websites is what you do

Even if your reason to sell is a compelling one, you may want to ask yourself

Is my website worth holding onto instead? 

Having a broker look at your site from a professional perspective can come in handy, especially if you are unsure about the decision to sell. Often enough, sellers are surprised to hear that with a few tweaks they could be making more money, and by doing so for a period of time, the value of the site increases.

We offer a free consultation where we determine if it’s the right time to sell, if not, we’ll make suggestions on how to increase the value of your business with a time frame in mind on when to re-explore selling.  That way we both benefit if the site sells for more later on.

sell a website, get a free website valuation

What’s my website worth?

The general rule of thumb is that a website or web-based business that is at least 1 years old, stable, and cash-flowing will sell for anywhere from:

2-3x the last twelve month’s total profit

So if we were looking at a business that had these stats:

  • 2 years old
  • $100,000 in total profit over last 12 months (consistent or trending up)
  • Diversified traffic and revenue sources
  • Generally easy to manage (<25 hours a week and with no specialized skills required)

It would likely sell for:

~$275,000-$300,000 or 2.75x-3x last year’s profit total

If the site was exactly the same but had these stats instead:

  • 1 year old
  • $100,000 in total profit over last 12 months (peaked early and is now trending down)
  • Reliant on one main traffic and revenue source
  • Difficult to manage

It will likely sell for:

~$175,000-$200,000 or 1.75x-2x last year’s profit total

Those that are younger, more time consuming, and are more reliant on one source of income or traffic will likely sell for a lower multiple.  Those that are more established, are highly automated, have diverse traffic and revenue sources, and are in long-term niches may sell for higher than this range.

According to centurica.com’s website buyer’s report, here are the average multiples by online business model in 2016 (over 500 listings analyzed):

average multiples on websites

Business models that have more desirable traits such as recurring revenue and proprietary systems (SaaS) will typically sell for higher multiples.  Partly because there are fewer high-quality listings to choose from, but also because it gives buyers the best chance at seeing a positive ROI.

Our valuation method

After selling 130 listings over the last 6 years we’ve gotten to know the market and our buyers well.  Our valuation method consists of a combination of industry comparables, stability and growth potential of traffic and revenue specific to the business model, in-house comparables with listings we’ve recently sold, and other factors surrounding the sellability of the listing in question.

We always strive to get the most money possible for the seller, but this means the listing actually has to sell.  It does no one any good to overprice a listing, have it go stale and sit on the market for months, just to lower the price to an appropriate level that buyers will take action on.  We try to find that “sweet spot” which is in the upper range of buyer interest so we maximize the potential for our sellers.

The bottom line is:

We will work hard to get the best price possible and in the shortest amount of time, for an amount that you are comfortable with even after we take out our fees.

How much will it cost me to go through a broker?

Our standard rates are 15% of the gross sales amount of the business.  There are zero fees upfront and you only have to pay when the site is successfully sold (when funds are released from escrow on the way to your bank) so there is no risk to list with us.  Our standard exclusivity period (meaning you can’t sell through anyone else) is 90 days.  Although we have sold sites within 24 hours of listing, we still ask for a certain amount of time to give the listing the best chance possible to sell.  There are exceptions to these rates as well, higher or lower, depending on the size of the site and how difficult it will be to sell.

To compare, Flippa.com is a self-service auction marketplace that requires you to create, manage, and sell your own listing and they charge 12-15% + listing upgrade fees.  We charge the same or even less to handle everything from start to finish.

brokers vs flippa

Many of the sellers we’ve worked with in the past appreciate that they:

  • Have support throughout the entire process from start to finish, so never feel like they are alone.
  • Can get higher prices than what would be possible on their own at places like Flippa.com or selling to associates and their contacts.
  • Have the support of a legal structure with enforceable contracts to get the deal done safely.
  • Can transfer the site and get paid through Escrow.com, to ensure they are protected from fraud.

Listings we’ve recently sold

Check out these 5 examples of listings we’ve recently sold.  From our experience, these results are typical with most website brokers.

examples of sites sold

Most of our listings sell thanks to a careful screening process – we reject around 95% of the leads that come in!

The buyers we work with

We work with buyers from all over the world, but the majority (90%) are based in the United States.  Here’s how our private list of 2,500 (growing daily) buyers breaks down:

buyers we work with

average budget for website buyers

We make an effort to not only get the best prices possible for listings we take on, but also screen our buyers to ensure they are a good fit for the business, have a professional track record, and have the funds necessary to complete the transaction.  Most sellers want their business to succeed under new ownership, so we do everything we can to ensure we don’t waste time or put the business at risk of falling off after the sale is complete.

Selling a website – the listing process

Here are the steps we take to sell your website:

1.  Get in touch

We will connect with you either on the phone, Skype (or your IM of choice), or email to discuss your business and gather initial due diligence items to provide you with a valuation range (please get in touch through our seller contact form.  We will also provide details on our fee structure and will also answer any questions you have regarding the process.  (this can all be done within 30 minutes, but we will spend as much time as needed for you to feel comfortable)

2.  Sign agreement, start listing process

If you are comfortable working with us and have signed a listing agreement, we move onto gathering further due diligence items (traffic analytics access, proof of revenue, etc.) and will ask you to fill out a simple Q+A that will help us prepare an information pack that we will use for marketing to our buyers.

Some of the due diligence items we verify are:

  • Domain ownership
  • Review of traffic analytics – will request read only access
  • SEO health check
  • Verify financials – revenue and expenses
  • Verify agreements and contracts
  • Transferability of accounts
  • Etc.

3.  Prep and launch listing

Once the marketing materials are completed, we will list it on acquisitionstation.com, contact our select buyers privately, list it on numerous marketplaces, and contact strategic buyers if necessary.  Note:  If desired, we can keep a listing confidential and only sell to select buyers privately.

4.  Speak to buyers and present offers

We will actively market your business and do everything we can to get the highest offer possible in the shortest amount of time.  We have sold businesses within hours of listing, but typically offers come in between 2-4 weeks.  You will be notified of any offers that come in with an explanation on who the buyer is, the specifics of the offer and its terms, and how likely the buyer is to negotiate up.  You as the seller always have the final say on accepting or rejecting an offer, although we will provide our professional suggestions.

Some buyers will request a conference call with you (we will assist you on this), but we have found this greatly increases the chance that they will make an offer.

5.  Agree on offer, sign purchase agreement, head into escrow

Once an offer has been agreed upon by both parties and an LOI (Letter of Intent to buy the assets) has been signed, the buyer will have a period of time (typically 7-14 days depending on the size and needs) to finalize their due diligence prior to signing the WAPA (Web Asset Purchase Agreement, legally binding) and funding escrow.  Once the funds have been secured in escrow, the seller will be asked to send over all of the assets to the buyer, after which the buyer will have a period of time (3-5 days typically) to inspect everything prior to releasing funds.

6.  Releasing of funds

Once the buyer is happy, funds will be released from escrow (our agreed upon commission % will be automatically withheld) to your chosen bank account via wire transfer.

We only ask to be paid upon a completed sale, so there is no risk to work with us.

How long will it take to sell and get paid?

We typically see listings close and sellers get paid within 45-60 days after listing.  Sometimes we’re able to get offers within days, other times it can take a couple of months.  We’ll let you know how we think your listing in particular will perform, but generally here’s what you can expect in terms of a listing timeline:

  1. Agree on valuation and finish listing prep due diligence (1-3 days)
  2. Sign listing agreement (60-90 days exclusivity at 15% on gross sale amount due at closing, no upfront fees, minimums, or retainer), seller disclosure statement, and fill out seller Q+A (1-2 days)
  3. Prep marketing materials and launch listing (1-3 days)
  • Buyers stage 1 – qualifying and initial interest (throughout listing period)
  • Buyers stage 2 – asking questions and due diligence, calls (results in 1 day-2 weeks)
  • Buyers stage 3 – offers and negotiating, prepping close (results in 2-4 weeks)
  • Buyers stage 4 – final due diligence, purchase agreement, escrow (transfer of assets and inspection) (1-3 weeks to complete)

And finally, releasing of funds, support period begins if applicable

What will buyers ask for during the listing period?

Some buyers will be happy moving forward with minimal due diligence.  Most, however, want to see a breakdown of the following:

  • User access or PDF reports to traffic analytics (most preferred is Google analytics)
  • Monthly gross revenue, expenses, and net profit numbers (income statement and/or profit loss statements)
  • Screenshots or videos proving any and all revenue
  • Information on past marketing activities and what is required to maintain/grow the business
  • Information and/or proof of employees and contractors to ensure they staying on at the advertised cost (especially useful for content, SaaS, and e-Commerce sites)

Some buyers may request a conference call with you in an effort to get a feel for who you are, how you’ve run the business, and where how you’d grow it.  We’ve seen that these calls dramatically increase the chance of a buyer making an offer, so they are encouraged.  We are with you on the call, assisting where necessary.  No negotiations are done on the call, it is strictly informational.

Example marketing materials

We create unique marketing materials for each listing.  Here’s an example infopack that we show to NDA-signed, qualified buyers:

infopack example

 

And a sample listing on one of the most popular businesses for sale marketplaces through our broker account:

bizbuysell sample listing

 

buyers per listing

Things to expect during the sale

Here are some things you should expect when you sell a website

Buyer questions and requests after listing:  Even though we provide a lot of information for buyers upfront, they will still come back with more due diligence questions and requests as they get comfortable with the business and deciding on making an offer.  Conference calls are requested usually when a buyer is in the later stages of due diligence and want to get to know you as the seller and the business better.  Generally, these last less than one hour and are pretty basic with no negotiations on the call.  We’ve seen these greatly increase the chances of an offer.

Offers will likely be structured with creative financing:  Don’t expect to have a 100% cash offer at this level, although this can happen, it’s more likely that the buyers will structure their offer with some form of creative terms like seller financing, holdbacks, or earn outs (typically 80%+ of the offer is in cash).  This is in an effort to mitigate some of the risks and keep you around for a longer period of time after the sale for support/training.  This is completely normal and happens in about 60% of deals.

You may get frustrated with the process:  Not every deal is smooth sailing.  Issues with due diligence, delays with buyers, tough negotiations, conflicts with purchase agreement and terms, complications with transferring the business during the escrow phase, etc. are things that have happened and could happen with your listing.  But, that’s why we’re here.  We have closed on deals that looked to be out of control, helping the seller understand and work through the issues in an effective and calm way.

Pushing hard until the end:  It is in your best interest (as well as ours) to continue running the business as usual all the way until it is transferred to the new owner during escrow.  This is to ensure that traffic and revenue stay consistent with what we have advertised, as the value is closely tied to it.

It may not get sold:  It’s rare, but not every listing ends up sold (we sell around ~90% of listings we take on).  This happens for a variety of reasons, the most common being that it’s priced too high and buyers get scared off, has a major buyer concern such as traffic and/or revenue being too reliant on one source, the business is considered too risky for most buyers, and others.  We do our best to overcome these objections, but sometimes it takes until near the end of the exclusivity period to get an acceptable offer, that or it goes unsold.

Staying updated:  We will be available to answer your questions, give you an update on the progress of the sale, talk you through a concern, or anything else you’d like to discuss during the day and even most evenings.  Feel free to get in touch anytime.

Protection Offered

Selling your web property that you’ve worked so hard to build is a leap of faith.  You are hoping that someone is willing to make an offer, that this person will follow through with the purchase, and that the money will make it safely into your hands after a smooth transition to the new owner.

The worries that would normally come from doing this yourself can be diminished by working with an experienced broker and using escrow.com’s secure process.  We have your back all the way to the end.

The Letter of Intent and Web Asset Purchase Agreement

When a buyer makes an offer, they can either do so verbally, written via email, or through a letter of intent to purchase (LOI).  The latter is our preferred method, because it presents a more committed form of an offer, and sets the tone for the terms of the offer and expectations for due diligence required by the buyer to move forward.

Most buyers will choose to complete the bulk of their due diligence prior to signing the legally binding purchase agreement.  If all of the DD checks out, the buyer’s commitment is solidified as the deal moves into the escrow phase.  This greatly reduces the possibility of a buyer backing out once the money is secured and transfer is started in escrow, which is one of the biggest concerns for sellers.

Out of over 125 deals that we’ve seen over the years, only 1 has gone into escrow’s arbitration process with the end result being positive for both parties.  Every other deal has completed without an issue.

The Web Asset Purchase Agreement is specially structured for transactions of digital assets, and contains language that protects both the buyer and seller.  The buyer will know exactly what assets they are supposed to get, the seller will know exactly how much they are supposed to be paid and when, and both parties are protected by the right to cancel the agreement if anything has been misrepresented through the jurisdiction they reside in (typically the seller’s).

How does escrow work?

Escrow is a simple 5 step process as seen by the following graphic available here.

Neither the buyer or the seller has a particular advantage over the other, so both parties feel protected knowing that escrow is there to ensure a smooth and safe transaction by securing the funds, allowing a short inspection period to inspect the assets, and releasing funds to the seller directly to their bank account upon completion.

Take the next step

free website valuation

 

If you have read through the guide and are comfortable with discussing the sale of your web-based business with us, please get in touch through the contact form

We will discuss the business and provide our best valuation for it as possible, as well as answer any questions and/or concerns you have.  We’ll come up with a plan that makes sense for your personal situation and hopefully come to a suitable agreement so that we can move forward with getting the listing in front of buyers as soon as possible.

We love hearing from you, even if it means that we just get to chat about your business, life, kids, sports, etc., or give you advice on how to grow your business while you hold it and increase its value.  Either way, we appreciate you and wish you the best of luck whatever direction you decide to pursue!

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About the Author:

Acquisition Station
We are website brokers. We sell profitable web-based assets. Work with our experienced website brokers to buy and sell cash-flowing digital media, e-Commerce, SaaS, digital products, software, and affiliate websites.