Posts tagged "internet business for sale"

The most common question posed by sellers when considering working with a website business broker like us is "how long will it take to sell my internet business for sale?" Not having a crystal ball to extract the exact date and time, we usually provide our potential clients with - a standard time to complete a sale and close is 4 - 6 months on average. Going into more detail with sellers about their website business fundamentals, financial history and trends, internet business model, and online niche typically gives us a better picture of the anticipated timeframe that a 'potential' sale may transpire.

Ultimately, we explain to our clients or potential sellers that the website should be compelling and attractive itself to garner a lot of interest and get offers quickly. If it has great financials - strong growth, good profit margins, more than 3 years history, etc it is going to be very appealing to the pool of savvy buyers searching for quality sites currently. The greater the fundamentals pertinent to internet businesses, such as large monthly unique visitors, excellent search engine positioning, large customer database, good domain name, etc, the more appealing and attractive the business opportunity will be perceived.

The business model - ie ecommerce, dropship, recurring monthly membership, afiliate or pay per click passive sites - will also be important features of the website business opportunity. The niche the website operates in also determines interest as well. The biggest single determining factor is likely asking price in the end though. A site priced out of the acceptable fair market range will sit for a longer time and not sell or get offers on it. Just like the real estate market, internet business opportunities need to be fairly priced so all parties feel like winners.

In the end, our job as website business broker specialists is to facilitate the process by getting excellent exposure for our clients website businesses. We accomplish this by our excellent organic search engine positioning for dozens of major keyword phrases like websites for sale, by listing the opportunities in multiple business for sale portals and by emailing our subscribers our newest listings. We can and do get the opportunities in front of a large majority of internet business buyers, but the business ultimately sells itself. Consequently, we are very particular about what clients we engage and list. They must have all or most of the qualities of a financially solid, fundamentally strong online businesses if we are going to represent and sell them.

If we like the internet business and would like to own it, we pretty much know it is going to be a site that some other buyer will want to acquire too! In summary, some of the best opportunities sell within the first month of a listing not including due diligence and closing and the majority of our listings close in 3 - 6 months.

David Fairley

President, www.websiteproperties.com

Even though we are diligent in screening and reviewing our clients, their business financials and fundamentals prior to engaging them and listing their internet businesses for sale, occassionally we have some website businesses that precipitately descend in their traffic, revenues and other fundamentals during the course of selling their business.

Sometimes, as in quarter 4 of 2008, it was due to an overall sharp down turn that most businesses suffered a setback. However, many times it has to do more with how the seller is operating their business, or has been running it prior to contacting us to sell.

The most common reason for business revenue atrophy seems to be correlated with the seller's dip in focus, passion about their business or just laziness! Once their mind is taken off their website business and they are not actively working on evolving or improving it, many online businesses start to decay - some slowly and others rapidly. Too many sellers, especially ones that have created what are termed as passive revenue websites - such as a niche content site that serves up adsense ads or affiliate links that they earn commissions - sit back in cruise mode and don't continue to push the envelope and continue with their content and link building to improve their search engine positioning or even dominance.

We always counsel our clients to continue working their internet business for sale as if they were planning on keeping it and striving to hit the next elevated traffic and revenue targets. Websites for sale that show progressive earnings and traffic growth are always more attractive to buyers and sell for larger multiples in the end.

Recently, we have experienced a few listings where our clients have pretty much dropped the ball and let their online business's atrophy to the point where we can no longer get behind the opportunity and continue selling it for them in good conscience - even at a fire sale. Consequently, when it hits this tipping point, it is time for us to jettison the business listing from our current websites for sale page and file it in archives where it will rust along with other sites that met the same fate because of their truant owners that inevitably were trying to dump their business before it started the downward inertia.

To preserve our websites reputation of presenting quality internet business for sale opportunities, we regularly assess our inventory and have taken to culling the sites that no longer measure up to our standards or our educated and savvy buyers' standards who subscribe to our buyer alerts or regularly visit our website and who count on us to deliver a quality product and service.

David Fairley

Founder & President

Recently, we have had some issues come up with non compete agreements for a few deals we are working on. I felt was a timely opportunity to cover this aspect of a website business sale for both buyers and sellers.

Every internet business for sale will incorporate a non compete agreement or clause at the very least. This non compete element of the business is there to protect the prospect who wants to buy a website business from an unethical seller who sells their existing business and turns around and starts another similar or identical business that competes with their old site! Of course this could devastate the new owners hopes of maintaining or growing their newly acquired business opportunity, as the seller would have complete insight on the marketplace, vendors, customers, marketing and advertising channels, etc. The non compete is designed to effectively legally eliminate this scenario from unfolding.

The usual length of time is 3 years, however some business opportunities necessitate longer terms - 5-7+ years and some buyers demand more protection. If their are proprietary products, software, business practices that need exclusivity to stay competitive, then a longer term may be in order.

On the side of the seller, the term should not be as big an issue - assuming they are done with the niche and they typically have infinite other ideas and niches they would like to pursue! The seller's case usually involves not being limited or restricted to explore and develop other businesses providing they are in unrelated niches or businesses. This is usually accomplished by specifying exactly what they can not pursue - based on exactly what they are selling currently. An example case is identifying espresso makers and accessories as the specific products off the table - but perhaps not coffee beans, for instance. Making it crystal clear in the non compete agreement will avoid any future problems of overlap or competition, intentionally or otherwise.

In the case of another client, we discovered after going into due diligence when an LOI (letter of intent) or written offer was presented with the traditional 3 year non compete clause, the seller would not accept it? We discovered subsequently, that the seller had multiple sites in the same space selling a similar product! Whether this was naive exclusion or intentional misrepresentation is debatable, but what is important is securing a deal with the protection of a clear and concise non compete that is reasonable and fair to both parties. Obviously, this was a deal killer and likely saved the buyer from an unsavory experience.

In the end, most sellers sincerely want their buyers to succeed beyond them and are very accommodating with this aspect of the purchase agreement. If both parties place themselves in the other's position, a fair and balanced non-compete, purchase agreement and completed business for sale transaction are the final result.

 David Fairley

President, www.websiteproperties.com

When determining the actual value of a website business beyond the financial profit and loss statements using method such as EBITA , Cash Basis , etc , the main supporting fundamentals, other than the financial condition of the business, are unique to internet opportunities. These fundamentals typically underscore the reason for a buyer to pay a fair market price or above average multiple of net profit. The following list encompasses what are considered relevant and important attributes of an internet business opportunity:

Domain Name - specific to the product niche, generic, dotcom or other suffix, memorable, etc

Organic Search Engine Positioning - Natural rankings on major and tiertiary keywords in Google as well as yahoo and MSN

Unique Monthly Visitor Traffic and Page Views - natural traffic vs PPC, country of origin, top 20 referrers

Age and History of Website Business - Usually -the older the site, the more stable and potentially authoritative, as well as easier to spot trends and solidity

Unique and/or proprietary content and products - content is king - unique content along with proprietary products or product or information dominence providing competitive edge

Customer Database - Large loyal customer base, % of repeat sales, recurring billing - autoship, etc

Niche / Market Size And Potential And Competition - Is the product or service easy to obtain offline, popularity, price points, who else is selling, growth sector or dying...?

Growth Trends - Sales, Profits and margins, and Traffic - Trending up consistently year over year, flat yet stable, dropping like a sack of hammers?

Vendors - Quantity and Quality - barriers to entry, proprietary relationships, etc

Drop-Ship or Inventory Model - can it be home based or is a warehouse needed - other considerations - margins, speed to ship, customer service experience, extra fees

strategic partnerships - ie Amazon.com , shop.com , Bizrate, BBB, etc - other developed sales channels make for more stable revenues and growth.

Having checked through these line items and finding most if not all of these to be robust , for example, would likely lend to a website business being substantiated at a higher valuation - say 3.5 - 5 times net annual cashflow or profit verses an average 2.5 -3 times multiple of earnings.

Solid Fundamentals beyond the actual sales revenues and net profit will compel a buyer to make his best offer potentially well above the average market multiple because the business has greater probability of creating a stronger and quicker ROI(return on investment) than online businesses without them. Sellers with websites that have these elements typically receive at or close to asking price for their businesses for sale and sometimes even more when there are multiple suitors.

So if you are a buyer seeking a website for sale be sure to review these elements closely as long as the financial statements meet your interest.

Sellers need to present as much detail on these as possible to the buyer so they can make a sound and solid offer that is acceptable.

David Fairley

President, websiteproperties.com