People decide to sell their business for many reasons. Some have reached the age where retirement is on the horizon. In other situations, the business has simply outgrown the ownership group and they are unable to keep up with the involvement it takes to keep customers happy. For others, perhaps the project has grown stale and it’s time for a change. No matter what your reason is, you need to know the various options out there that exist when you look to sell your Internet business.
Speaking from experience, selling your online business gets much easier when you are armed with information in terms of what to expect before you list your business for sale. No matter what anyone tells you, there will be speed bumps involved in the process and the more organized you are ahead of listing the website or online business for sale, the better. Today I’ll talk about the best option for selling your digital assets, and that’s by using a specialized Internet business broker.
What is a Website Broker?
Much like a real estate agent helps sellers sell their homes, a website brokerage works to sell your website or online business.
The first step in the process of working with a website broker is finding a proper valuation. Of course, as a seller, you’ll want to get the highest price possible, but you’ll also want to list your business with a realistic expectation because the last thing you want to do is drag out the process longer than necessary.
Throughout the discovery process, you’ll see that any reputable web business broker will perform the following tasks during a comprehensive interview and deep dive into your financials:
- Determine a valuation range
- Interview you to gauge time spent working the business, identify intellectual property, and key suppliers
- Complete a listing brief
When this is all completed and done to your satisfaction, the listing can then be brought to market. Once that is done, the website broker is expected to do the following:
- Field all questions regarding the listing
- Act as an intermediary and host discussions between potential buyers and sellers
- Gather offers and present them to the seller
- Serve as an escrow agent of sort, gathering materials needed to transfer upon closing
- See to it the successful transfer of assets and closing of transaction
Hiring a Website Broker to Sell Your Business
Again, much like in real estate, an online business broker will have you sign a sales agreement.
When you find a website broker, you’ll most likely sign an exclusive agreement for them to market your business and earn a commission should the sale come to fruition. Once you hire a website broker, they will draft up the listing information that will include the business sector, financials, customer and traffic stats, and other pertinent information.
Each website broker uses a different process to screen potential buyers, (more on that down below in the website broker reviews portion) so you’ll have to find one that you are comfortable with. For me, my business has always been something I’ve kept tight lips on as we are in a copycat “me too” world, especially online, so I prefer to work with brokers who demand some sort of customer information or better yet, a refundable deposit, before the vital information is revealed.
Once your broker finds an interested buyer that wants to buy your online business or website, they will typically sign a letter of intent (LOI) with an offer. This is prior to the due diligence period where all of the business financials and procedures are more closely examined to make sure there aren’t any irregularities. Should you accept the offer, the due diligence period will commence.
Again, there are different scenarios that can happen here, and some offers are made after the LOI, so know that your situation may vary and this is something you should ask your website broker prior to engaging them.
Assuming everything checks out, money changes place using an escrow service. When I worked with Empire Flippers in 2020, we used Escrow.com. Many brokerages use Escrow.com because they are the gold standard when it comes to fair practices. In other scenarios, I’ve seen a lawyers trust account used or even another escrow service.
When everyone is satisfied with the transaction, meaning all intellectual property, business contacts, key suppliers, processes, procedures, and more, depending on the complexity of the business, the transaction is completed and the money is dispersed to the seller.
How to Place a Value on Your Website
Before hiring a broker and going to market, you should know about how valuations are placed on websites. Knowing the valuation ranges can help you know if you are getting a good deal, or a great deal. (Or, on the contrary, helping a broker sell an under-priced asset and making a quick commission for themselves. This happens more often than you think.)
The most basic way that a website broker will value your website is by taking your net profit and using a multiple.
These types of equations are quite common, and depending on your niche, the economy, and trends, you can expect multiples to range from 2 x all the way to 4 x. There’s a lot of debate on what a “good” valuation is, but there are so many variables and “yeah but’s” that it’s unfair to even attempt to satisfy everyone with placing a firm number out there for everyone to digest. However, if you are selling an e-commerce site or website designed to make affiliate commissions, you can expect a multiple of 25-30 times net profit. Again, I totally expect comments saying that “you can get way more today” but I stand firmly on my niche, economy, and trends comment made above.
Okay, you want examples? I’ll go there and speak from personal experiences without naming names.
“There is a global pandemic and wealthy families are looking to get out of retail stores and gas stations. They want to buy digital income producing assets. They will pay 4 x earnings.”
“During this global pandemic, no matter how hot your business is growth-wise, you can expect 2.5 times net earnings on any business.”
These are actual discussions that took place in 2020, during the Summer months of the COVID-19 pandemic.
Further, I’ll go into how a niche can either help or harm a seller.
Let’s say you make a weight loss website focused around selling acai berry weight loss pills. It’s earning a whopping $19,000 monthly in commissions and the site ranks for pretty much every term that has “acai berry” in it. Every product recommended is some sort of weight loss supplement containing acai berry, and that’s where 100% of the commissions are made.
Now, let’s say your colleague you know from trade shows and SEO groups has a website in the weight loss niche, and makes the exact same $19,000 monthly in commissions. However, his website makes money from 10 different supplements that help people lose weight, and his SEO strategy is geared more towards general weight loss tactics and tips that are evergreen.
Which web business will get the higher multiple?
I’m not a website broker, but I’ve been in this game going on 20 years, and I’ve been in these types of talks before.
This is an easy answer.
Seller B has a business that isn’t dependent on a trend.
That graph right there shows you how a trend can be very profitable for a short time period. Seller A did a great job of getting ahead of that trend and riding it out to some nice revenues.
BUT, in the long run, his site isn’t worth as much as Seller B’s website, and this graph compares the search trends to acai berry to weight loss in the same time frame.
This is a glowing example of how trends can effect a business valuation. My words of wisdom to anyone creating a website designed to solve problems is to think evergreen.
Evergreen content will always be relevant, have a purpose, and solve problems.
Back on the topic of valuations here, there are other variables that will come into play besides your trend factor.
#1: Sales and Profit
This is the number one key driver in obtaining a valuation. As mentioned before, if all variables are the same, you’ll get a valuation based on a multiple of net revenue.
#2: Market Share
You don’t need to have a large piece of the pie, but what a broker will look at here is your market share as well as room for growth. Your multiple will be negatively affected if you have all of the market share and there is little or no room for growth.
#3: Secular Growth Trends
Nobody wants to buy an online business that’s at the end of it’s trend. Would you pay top dollar for an online hoverboard shop in 2021? Your valuation will be affected either positively, or negatively, based on the secular trends and future potential of your business.
#4: Customer Acquisition Channels
If all of your customers come from Facebook advertising, but none come from search engine traffic or native ads, that’s a huge opportunity for a buyer. This will likely give your valuation a bump because there is a lot more potential to reach new customers.
#5: What is Your Place in the Market?
A lot like market share, where do you stand? Are you a small “me too” brand that private labeled a product that various other sellers offer? Or better yet, do you have custom formulas that nobody else can offer? These variables all affect your valuation one way or another.
#6: Talent Changes & Procedures
How important are you or your skill sets to the business? If you are irreplaceable, your business will become a lot more difficult to sell. However, if you have strong procedures in place that can be executed by anyone willing to learn them, your business becomes more attractive based on the ability to interchange personnel.
These six traits will shape the value of your business. Of course, other variables will come into play because no two businesses are the exact same, but you can get a solid understanding of how to value your online business by delving into the above traits.
Which Website Broker is the Best?
There are many avenues you can explore when it’s time to sell your online business, so I’ll start with the easiest way to list and sell a website.
If you want to list as fast as humanly possible, online marketplaces are your best option.
My Favorite Online Marketplace is Empire Flippers
I found Empire Flippers to be very hands on, informative, and professional. They have a huge team that works in unison from around the globe, catering to every need of seeing through to a successful sale. I have been a seller in my transactions there, and I continue to walk away very happy with the way everything was handled. It's first class all the way. They are far more than a marketplace, they offer you a point person who represents you and is a liaison between you and the potential buyer / seller. So don't think that you will list with them and be up to your own muscle to get it done, they provide you plenty of help and contact points should you have questions or want to discuss your sale or purchase.
There is a reason this group has won the Inc. 5000 award as one of the fastest growing companies in America four years running.
More Information: EmpireFlippers.com
Websites that fall on the lower end of the revenue spectrum or are simple to manage content websites usually sell best on marketplaces like Empire Flippers. On the lower end fo the marketplaces is the also popular platform of Flippa. Flippa is perhaps the most well known of all of the places to buy a website, and I’ve worked with them on a few occasions. It’s a straight forward process of listing your site for sale online for their massive following to see. I do prefer Empire Flippers personally, and once you go through the vetting processes with each you'll see that the white glove service offered by Empire puts them in an entirely different level.
More Information: Flippa.com
Broker’s that cater to a specific industry are abundant all over the world. Yacht brokers, stock brokers, mortgage brokers, and of course, website brokers. A website brokerage specializes in the process of selling digital assets and online businesses. This can be as simple as a valuable domain name to as complex as an e-commerce business that has retail distribution, an Amazon presence, and even online distributors. If you are a medium sized business, and by this the loose definition can be $250,000 to $10, even $20 million, this is a great avenue to check out.
List of E-Commerce & Website Brokers
These are in no particular order. In some cases, I have had interactions with the companies below and make comments about my experiences, good or bad.
Founded by Digital Entrepreneurs in 2013.
More Information: https://digitalexits.com/
Quiet Light Brokerage
I’ve known of this company since 2010 and have had many interactions with them. All have been incredibly helpful and insightful. Founded by Mark Daoust in 2006, they also have a podcast that has helped me learn how to better prepare my businesses for an exit. I’ve had some mixed feelings about multiples they’ve given me (in comparison to other opinions) when exploring an exit, but I tend to think this is because they would rather have a quick closing than shoot for the moon and have a listing last for many months.
More Information: https://www.quietlightbrokerage.com/
Rick Latona has been around for what seems like forever! I’ve admired this guy’s domain holdings for as long as I can remember. I’ve seen Latona’s at industry trade shows and they are the real deal. A quick look at their website states the Rick got hit pretty hard in 2008 by the economic conditions (I feel you Rick, I was right there with you) and decided to go back go school, going to Harvard Business School to “start over.” When he finished, he decided to shift his focus to web assets that cash flow, and that’s how his domain portfolio turned into Latona’s, place that sells money making web properties.
More Information: https://latonas.com/
Based in Seattle, Washington is a boutique type firm called Website Properties. Founded by David Fairley, I know this company better than the rest because I did their search engine optimization for quite some time. I can say that David and his team are highly skilled in what they do and they are very solid people. It’s been a few years since I’ve spoke to David but looking at his site it appears he has done some re-branding and expanded. David, if you read this, drop me a line, I’d love to catch up.
More Information: https://websiteproperties.com/
M & A Companies and Investment Banks
Lastly, if your business has a value of $20 million or higher, you’ll likely be able to get interest from merger & acquisition companies as well as investment banks.
How Long Will it Take to Sell Your Internet Business?
This will vary depending on how organized you are, how realistic your asking price is, and the overall interest in your market. As a rule of thumb, a smaller business should sell inside of six months time, often times even happening in less than 90 days. This time frame includes getting information to prospective buyers, having discussions with the broker, negotiating, and completing the sale. This is a hands on process, and you will be spending time talking to interested parties along the way, so be ready to answer any question about your business that may come up.
Who Decides to Buy an Online Business
The interest in your Internet business could come from a wide range of people. For the most part, you’ll attract seasoned Internet Marketers looking to add to their portfolio. Many times a marketer with some skin in whatever space the website is in will have genuine interest so they can gain more market share.
However, you could get a totally different prospect. Heck, it could even be a first time Internet Business person who has always dreamt of making money online. Especially with COVID-19 happening in 2020, there is definitely a shift of interest from people who had their hands in brick and mortar stores to wanting to be involved in making money online.
Odds are, you’ll get an Entrepreneur to buy your business. If you have large enough revenues, it could even be a publicly traded company or larger publisher or media company simply looking to get more reach online by buying digital assets and customer bases. Anything is possible these days, so keep an open mind as you’ll never know who may kick the tires!
What are the Website Broker Commissions or Fees for Selling Your Website?
I’ve seen ranges all across the board here but typically you will see 10-15%. Some parties will adjust their percentage on your inventory, so it’s a good idea to have a grip on what to expect before agreeing to list with any website broker.
Are There Any Upfront Fees for Website Brokers?
NO. If anyone asks for a fee upfront, avoid them. (I’ll leave a special caveat out there for anyone who may approach you to market your business on the low so it’s not publicly for sale. I’ve seen people charge for those types of arrangements although I’ve never participated in that type of deal myself.)
How to Maximize the Value of Your Internet Business
If there is one part of this article that you read twice, let it be this one.
There are many ways you can maximize the value of your online business, including:
- Owning intellectual property. (Trademarks, patents.)
- Possessing high value domain names.
- Having customers on recurring revenue models. (Re-bills.)
- Having a community.
- Strong social media presence.
- Have multiple sources of revenue.
- Strong revenue trends and upward growth.
- Have documented processes and procedures that are easily replica-table by other parties.
And that’s all! Of course, having a solid reputation online is something that most buyers will expect. Before you list your online business for sale, make sure to scan the Internet and look for comments on sites like RipoffReport and the Better Business Bureau. You may have people that left comments about your business that could benefit from a public response.
Feel free to ask me anything about the process of selling your website, preferably in the comments section below, but if you feel it’s of private nature use the contact page and I’ll do my best to get back to you ASAP.