Posts tagged "Internet business"

The last 6 weeks have been quite a shock to most Americans and people around the world. The economic upheavals have been monumental and without precedent. In our business as website business brokers, we have seen multiple deals fall apart or not move forward as a result of the uncertainty and fear in the marketplace. Of course, in any economic swing there will be people and businesses that reap massive profits and actually thrive. However, the vast majority of people and businesses feel the effects both financially and emotionally as a result of the meltdown on Wall St and now Main Street.

In this climate, there are definitely more sellers than active buyers in the internet business sales and acquisition field. The point is - is that there are buyers! These buyers are being extremely selective and cautious and are literally cherry picking the most attractive website business opportunities available providing the price is right. Sellers with online business opportunities that are stable or still growing despite the economic malaise because of the niche they are in, stand the best probability of consummating a deal in this period. The other sellers that will succeed in closing deals will be those that are more aggressive with their selling prices.

Just like in real estate, the seller that drops his price lower than the rest of the market gets more attention and sells quicker. If you hold out too long for a premium price or average price in volatile markets, you can find that you wind up selling for much less in the long term if things get even rougher.

A year ago, the average multiple on an average website business with solid fundamentals was 3-3.5 times the net trailing 12 month profit. In this global financial crisis, average sites are tending to be moving if they are priced between 2.0 -  2.5 times the trailing 12 months all cash at close. The selling price may be higher if more owner financing is involved, which, with the current credit crunch, has become more prevalent. The risks of a further down turn are tangible, so buyers are factoring this in when making offers. As I mentioned earlier, there will be lots of good deals to pick up for buyers with good capital reserves but buyers needing financing are just not able to secure the funds to get a deal done currently. The best opportunities will still get a better multiple on their business because they are able to thrive in this environment, but the pressure from the market means that it is a buyers marketplace and sellers will need to adjust their price expectations if they want to get acquired. The other choice is simply to ride this out and hope there is a quick turnaround later in 2009.

 David Fairley

President,

www.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

I was recently lassood by a family member to assist in their quest for an online business for sale they could buy and operate to create a steady stream of income. The process of working with my sister has been pretty insightful to say the least! What was quite revealing is how daunting the internet and doing business online appears to be to the uninitiated. There is a lot of fear and apprehension and sense of overwhelm that new buyers with no experience have when starting the process.

The single biggest step for new and future internet entrepreneurs is to get clear on what areas of interest they have, like gardening, organic food, healthy lifestyle, etc and then hone in on a specific segment within the category. It is critical to your future success to target a clearly defined niche. When you are looking to buy a website business, you should be searching for internet business opportunities that are more narrowly focused and specialized. Websites that try to be too broad - something for everybody - often fail to maximize the true potential of a specific niche. Trying to sell tools verses selling only garden hand tools is an example or focusing on educational toys rather than just toys.

Staying narrowly focused doesn't mean you can't sell a broad range of products or services within the specific niche. For example, a specialized kitchen gadget niche selling only salt and pepper shakers could offer these items in multiple categories and price ranges and potentially offer thousands of different salt and pepper shakers.

Another benefit of niche sites is they tend to dominate the natural search engine results because they are extremely relevant to the search queries from surfers. This means more targeted traffic, higher conversion rates and greater sales and profits overall.

Often when you have identified specific areas of interest, it becomes easier to see specific opportunities within these categories. You will be able to refine your search for a website purchase much easier and recognize a good opportunity that is interesting to you after engaging in this process. Even if websites on the market currently don't fit the criteria of the niche segments you are interested in, you can always contact websites within the niche directly and ask them if they have interest in selling.

The third option of course is, build it yourself if you can't find a good existing internet business opportunity to buy.

Either way, finding an interesting focused product category, subject matter or service area will provide a higher probability of success than a website hocking thousands of products in hundreds of different niches.

 Good hunting!

David Fairley

President, www.websiteproperties.com