Category "Websites For sale"

When it comes time to sell your online business venture it is very important to prepare your business presentation and get your documentation organized. Even though a business appears to be attractive in its presentation, many deals will stall and fail to close because of a lack of clear historic documentation of the business financials and stats.

Due diligence is the act of scrutinizing the details of an online business for sale as offered to verify and corroborate all claims made in the listing. Many buyers fail to provide adequate data that convinces a potential buyer to sign a formal purchase agreement and close a deal.

Once a buyer submits a written offer – called a Letter of Intent (LOI) – and it is accepted in principle by the seller, there is a due diligence period where the buyer is provided with detailed financial information and business statistics that prove the claims of the offer.

These should include most of the following elements:

• Merchant credit card statements
• Bank statements
• Third Party payments – ie Amazon, clickbank, Google adsense , or other affiliate revenues and subsequent reports
• Tax returns – if available
• Site traffic stats – off the server or Google analytics including unique visitors, pageviews, referrals country of origin etc, Alexa ranking, etc
• Keyword search engine rankings
• Trademark/Copyright records
• Unique website content proof – www.copyscape.com – checks for duplicate content Issues.
• Costs of goods sold expense reports – invoices and wholesale pricing proof
• Inventory accuracy and physical count
• Online advertising expense reports – ie google adwords and Yahoo, MSN etc Pay Per Click (PPC) campaigns.
• Legal leans or pending or past law suits clearance
• Employee verification – payroll expenses and payroll tax to confirm employees and Expense.
• Site optimization issues – linking methods – verifying if there are any paid links, or ‘spammy’ techniques for getting lots of links that may cause issues in the future.
• Background check on seller - check WHOIS ownership of URL etc.

Customer database, email/newsletter subscribers list, Vendor list and vendor contracts/agreements are extremely sensitive information and will only be given upon signing of a definitive binding purchase agreement. Of course the agreement stipulates the corroboration of this data for the deal to close, so the buyer should not be concerned about the specifics as the deal will be terminated if this data proves false or misleading.

There are likely to be other items to check off the list depending on the business model, but this should be the bulk of the due diligence items to prepare in advance. If a seller has these in order, it will not only expedite the due diligence period leading to a quicker closing, but it will also provide a level of trust and comfort for the buyer that will compel them to complete the website for sale transaction as agreed upon in the LOI (non binding).

David Fairley

President,

www.websiteproperties.com  

The domain name marketplace is still such a wild west subjective market it is not easy to always discern what makes a domain name valuable – or what is known formally in the industry as “premium”!

Having represented many domain name owners in selling their assets – either as established websites or parked domains – I have gotten pretty savvy at establishing value according to market comps as well as sheer branding power, recognition, and generic type-in potential.

It is also interesting to note people’s perception of what constitutes a premium name to begin with. I have basically created a process of elimination that defines what is not, in my humble opinion, a premium domain name:
 

• hyphenated domain names
• most names ending in suffixes other than dotcom, dotnet,  dotorg or dotca or dotco.uk etc
• misspellings
• nonsense words

What constitutes ultra premium names are :

• Primarily Dotcom suffixes
• Generic words – one or two max with no hyphens – acting.com
• Words describing a specific product or service – ie strollers.com
• Words with high brand identity – like Amazon.com
• Popular adverbs or verbs and nouns – ie sex.com , parties.com

Other factors to consider when appraising a domain name are of course if there is an established site built for the name, how much traffic it receives, revenues it earns, members or subscribers it has, SEO , etc. These elements, more often than not will influence the selling price of a domain name than the actual name. In actual fact, once a site is earning money the focus is often placed more on the current earnings than on the domain itself when tabulating the value. It is almost a catch 22 when revenues are marginal verses when there is no history at all and just ‘potential’.
 

Another determining issue of the ultimate perception of value will come from how and where the domain name is marketed and offered for sale.
 

There are many domain names offered up in auction format via Sedo, Moniker, T.R.A.F.F.I.C. conventions/auctions, Namedrive, etc. These have been pretty successful for many domain name sellers. However, the vast majority of buyers at these are ‘domainers’ who have a speculation model they work from for the most part – like some real estate investors.

An alternate path of selling is to target sophisticated business buyers who have a more developmental approach when acquiring domain names – buy the name to develop out into a major site or portal. These tend to be longer term buyers who want to create a substantially bigger cash flow and exit at a much bigger future multiple – think business.com – purchased domain in 1999 for $7 million and reportedly listed the site for sale at $400 million in late 2007 . The owners developed the site into a massive and highly trafficked very profitable portal. The price they paid does not look so inflated, afterall!

The best case scenario is typically to develop the domain name into a useful website and get it indexed and ranked in the search engines – often the generic name comes up to the top of the search results because of the exact name equated to the search – like divorces.com for example. This will ultimately create far greater value for the domain name from more exposure, traffic and revenue.

Surfers are clicking less on the squatter domain name sites with PPC links these days so the value of undeveloped websites has been deteriorating steadily for the past 12 -18 months. Domain name owners are starting to turn their domain names into real websites because of this – which is good for everyone overall.

 

David Fairley

President,

Websiteproperties.com

I recently received the survey results from a major online multiple listing service for businesses for sale. The survey conducted included over 1700 business brokers in the US.

The report clearly established some trends I have been reiterating in my blog lately. In particular, the trend towards more owner financing in the deal structure. Because of the economic downturn and credit crisis, traditional bank and SBA financing has been much more difficult to acquire for buyers. Especially when there are no "real" assets involved like real estate or capital equipment. Banks still seem to have a bigger aversion towards 'virtual' real estate or internet businesses even though the financial statements are solid and show stability!

Consequently, buyers who are willing to make fair market offers that a seller is likely to accept are requesting owner financing of 20% - 50% depending on the deal. In the case where cash flows are strong and growing the percentage is less and higher when the sales trend is flat or in decline. This allows a reasonable and fair market price to be accepted, as well as keeps some 'skin in the game' as it were, for the seller - an often important element for buyers who consider this an act of confidence in the business's future.

The seller benefit is getting closer to their asking price and actually earning interest on their money in an investment they are familiar with and have more control over. A big issue for sellers is where they will invest their funds upon selling their business? With the uncertainty and volatility in the stock and bond markets and real estate and the ultra low interest rates for bank savings, there are not too many good options to invest larger sums of money at the close. So, doing some owner financing at a fair rate - say 8%-10% - can be an excellent long term strategy for a seller to contemplate.

Another aspect the survey unveiled was the time frame it is taking, on average, to sell a website business has increased by 3 months to an average of 12 months. This is the time from attracting a buyer to completing the close. Now, the vast majority of these deals are traditional brick and mortar which tend to take longer to close, however, we have experienced a similar trend from our previous average of 4-6 months , now stretching to 7-9 months. Of course a lot of this has to do with the attractiveness of the business opportunity as well as the price and flexibility of the seller.

We recently sold an ecommerce website that was listed and closed within 2 1/2 weeks - the niche, the price and the terms were all attractive and an ideal buyer was there to acquire it! The seller was also very organized, had clean books and detailed information available, and was very flexible and reasonable with regards to the fair market price.

So, despite the economic doldrums we find ourselves in, there are still internet businesses being bought and sold regularly. The keys are to maintain flexibility in the deal structure, be organized and prepared for intense scrutiny, and find a balanced selling price that is fair and acceptable for both parties.

 David Fairley

President,

www.websiteproperties.com

On the eve of turkey day and a well deserved long weekend, I thought it would be appropriate to give thanks for the business I find myself engaged in currently. As a website business broker I spend my days conversing with website owners wanting to sell their internet businesses and budding internet entrepreneurs looking for the next deal. I get to interact with a very interesting cross section of people and generally have very stimulating conversations.

I am thankful for the opportunity I am presented with daily to offer advice and help people achieve both financial success and financial freedom from both sides. Many new buyers looking to start out on their own, away from corporate America after 20 years, get the thrill of finally owning and building their own business that they can operate from their home in their pajamas instead of commuting to a skyscraper in their suit and tie!

I get to assist sellers who have worked hard developing and building great fundamentally solid website businesses that are attractive to many buyers. I get to celebrate their joy and new found freedom after a deal is closed and often maintain long term relationships with these clients often participating in their future business deals. 

I am thankful for working with a dedicated, intelligent and fun staff and partners who know the value of team work, customer service, loyalty and excellence! They make it easy to enjoy my company, manage its growth and celebrate its successes too!

To know that the deals we broker are fair and balanced and are a win win win for all parties, including websiteproperties.com, is a great feeling. I truely am blessed doing what I love and helping people achieve their dreams and goals and building great relationships along the way.

So, I will enjoy my time off over this festive holiday, but undoubtly I will find time to creep back online to read and answer some emails because when you do what you love, it is not work.

Happy and safe Thanksgiving to all my readers, clients and prospective buyers who visit an read my blog.

David Fairley

President,

www.websiteproperties.com

The year that is passing may not have many fond memories for a lot of people, but for those who have invested in an online business for sale or have sold one, it wasn't such a rough ride! In fact, now that the shock and awe has passed there is an air of optimism among internet investors and website owners. 2009 is setting up to be a great year for internet entrepreneurs. Sales offline dove by several points while online sales remained positive or flat for the most part. With more layoffs and uncertainty in the workforce more people are turning to the internet for opportunities to supplement their income or take matters into their own hands.

Overall we have seen a lot of activity in the last 6 weeks of this year and expect a surge in the new year as people follow their new years resolutions to take action. There are plenty of excellent website opportunities available so saavy buyers can cherry pick the best internet businesses. There are still a lot of buyers sitting on cash reserves too that are willing to make all cash offers but at more aggressive multiples. However, 2009 may be the year of a higher percentage of owner financing deals and as a larger percentage of the selling price because interest rates are not providing much incentive for sellers to stash their cash in a bank or CD. Other deals will likely get structured with earn outs and upside potentials built in so the risks and the rewards are spread evenly between buyers and sellers.

 In the end, the best deals are always fair and balanced where all sides are happy and feel comfortable. We at www.Websiteproperties.com will continue to strive towards fair and balanced deals for our clients while respecting our qualified buyers who subscribe to our opportunity alerts. In addition, we will strive towards representing and listing only the best, most fundamentally solid web-based businesses on the market, so buyers know they can rely on us to present exceptional and exciting online business opportunities.

 From all of us at Website Properties, have a Happy and Prosperous New Year.

David Fairley

President