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.