Posts tagged "sell a Website business"

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

As a professional internet business brokerage, a large part of our job is coaching and guiding our clients prior to, during and after the process of selling their website business. Over the years and after dozens of successful online business for sale closings, we have identified 7 main key traits a seller needs to have so his business sells smoothly and for its maximum market value.

The first key is patience. Rushing to get to the finish line inevitably leads to mistakes, frustration, embarrassment and often failure. It is imperative to allow the process to unfold naturally and not with undue pressure to sell within a fixed time span. A listed business for sale rarely sells in the time period one expects and trying to force a sale is a quick way of killing a deal. Buyers never want to feel pressured as this is seen as a red flag. Be prepared mentally for at least a 4-6 month selling period. Great business opportunities sell themselves and often get a lot of offers quickly. If you are relaxed, this will exude confidence and trust in any prospective buyer that you are content to operate your successful healthy business until a deal can be reached.

Next is organization. Nothing drags out and throws a proverbial wrench into a deal more than chaotic books and records. Getting your statistics and financial book keeping organized and knowing other details like customer demographics, market share etc will go a long way to insuring a deal gets consummated. Having a solid grasp of your business and operations will transmit confidence in an interested buyer.

Following your organization is preperation. Gathering all of your data, financial details, bank statements, merchant acounts, tax returns, etc ahead of time and having them ready to provide a buyer who has extended an aceptable offer will facilitate a quicker smoother due diligence period that telegraphs trust and security to the buyer. This more than anything will secure a closing after an offer has been accepted.

Having a willingness to compromise is also crucial. Nothing kills a deal quicker than a stubborn seller unwilling to negotiate a fair and equitable deals for both parties. We have found that the best deals are always win/win where both seller and buyer are content and there are no bad feelings between them. Besides, there will always be a period of time each has to work together, so it is better to be on good terms from the start.

Flexibility is also key in getting a business transaction closed. This may mean offering or acepting some owner financing - perhaps up to 25-30% - which is becoming more the norm now with the credit crisis. It may also mean, getting less upfront in lieu of a back end upside earn-out or profit sharing arrangement. Obviously every deal depends on the party buying the business and the confidence in them. The point is that not every deal happens with all cash at close so being open to other options is necessary in most cases.

Respect is a trait that is often pivotal in getting to the end. Respect for yourself, the buyer and the business broker if you have engaged one. Understanding your needs and fears and the needs and anxieties of the other parties will allow you to remain more balanced and less emotional in the journey. Applying the Golden Rule is good practice in business as it is in life in general.

Finally, stay focused. Keep your business thriving and growing during the selling phase - the best way to kill a sale is if you lose traction or your business starts tanking. This is why it is an advantage to hiring a business broker in the beginning as they allow you to stay focused on the business operations and continue to grow and nurture it. A buyer will want to know the business is being taken care of right to the point of transaction.

 These seven key traits will insure a smooth selling process and a successful close of your internet business opportunity.

David Fairley

President

Websiteproperties.com

Who says you can't thrive in a recession? Not every business has to suffer from a downturn in the economy. Website Properties.com is a prime example of this. We are coming off our most fruitful month in the history of our company. We closed 6 website business for sale transactions in January which included a total of 26 websites!

Despite the gloomy news we are inundated with nightly, there are a lot of people who want to buy a website business and are searching actively. The main theme seems to be the perception that the markets, real estate and brick and mortar businesses are still too risky, whereas internet business opportunities with proven cash flow are a better bet in these times of uncertainty.

The quality of internet businesses for sale also seems to be improving as well. More aged sites with 4-8 years of history, great fundamentals, sales resilience, and stable and growing trends. The most popular sites we are selling currently tend to be ecommerce websites - primarily with drop ship models.

Looking forward, we anticpate a similarly great February, with lots of activity and new listings from new clients wanting to sell a website business. We are preparing to list these new quality online opportunities which should garner plenty of interest from buyers.

Keep in mind that some of the greatest opportunities exist in recessions and some of the biggest fortunes have been amassed during the worst economic downturns in history. Choose the thrive rather than survive in these times and you shall.

David Fairley

President, Websiteproperties.com

A common problem encountered by sellers when listing their website business for sale is that they have multiple internet businesses they operate under one ‘roof’ so to speak. The sellers often only keep one set of books for all the businesses and typically one bank account where funds are deposited.

The trouble starts when the owner wants to sell off one of their assets and has to separate the business revenues and expenses that are associated with this one component of their entire internet business ‘empire’!  Most sellers end up not including basic expenses in the profit and loss statements that need to be present or that will be expensed by a new owner.  The seller needs to prorate all operating expenses related to all his online businesses and spread these across in proportion to the sales volume of the specific site. It is better to err on the low side and be conservative with the expenses assigned to the site, since a new owner will have to deal with the full expense of this overhead for the one business if they buy it..

The other problem typically associated with these scenarios is the tax return  - if requested for due diligence or for SBA financing.  With a situation where there are multiple website businesses operated under one business name and ultimately one tax return, it becomes tricky to extract the the financial data from this and corroborate it with the individual business P&L .

Some sellers keep clean books that separate the business revenues and expenses, so this is not an issue for them, but for the vast majority of sellers with this set up it can become problematic in determining the accuracy of the books during due diligence.

My advice in the latter case is for a seller to create separate books for every individual business and prorate all expenses based on the % of gross revenues each site brings in relative to the total.

This will provide a more acurate and reasonable valuation of the individual site relative to the whole and avoid complications and doubt that will arise in the due diligence process. It also leads to a quicker cleaner close and a position of strength in the selling price when negotiatiating offers.

The other option of course is to sell the entire ‘armada’ of websites as a package, so all revenues and expenses are included and match up with the tax returns easily.

David Fairley

President, Websiteproperties.com