At MonetizePros we are always looking for new ways to monetize. Why pick up monthly payments when you can get a lump sum and sell your website?
Monetizepros.com recently had the pleasure of interviewing industry expert Thomas Smale, Managing Director of FE International , a website brokerage business that grew from scratch into a seven-figure-a-year business in under 5 years. With a network of over 5,000 qualified buyers and an industry leading 300 transactions under their belt, we couldn’t wait to find out everything there is to know about how to successfully sell your website and why FEI are the best company to do that for you.
There’s a number of reason why you may decide it is the right time to plan your online business exit and list your business for sale. At FE International we have found that some of the most resounding reasons include the need to release cash tied up in a business (to invest in new ventures) a lack of time to upkeep the business due to other commitments or that the site was built purely with flipping in mind (and now it’s time to cash in on your investment).
This is almost entirely dependent on the amount of money your website is making monthly. If you are turning over less than $500 per month we recommend you use a marketplace such as Flippa where you can list the business without the need for a broker. You could also try dedicated sites such as the Warrior Forum, which has a popular ‘for sale’ section that will connect you with a whole host of smaller scale buyers.
However if you are making at least $500 a month we highly recommend that you work with a professional website broker such as FEI. Having completed over 300 transactions with the largest full-time team in the industry, we cannot only provide an invaluable level of expertise, but this enables us to give support and guidance that will maximize the value of your business in the preparation for sale.
Unfortunately there is a lot of inaccurate and over-generalized information available online about valuing your website. No online tool out there can give you the accurate valuation that you are looking for, instead they will simply offer you an arbitrary result that is usually extremely far from an actual listing price.
At FEI, when valuing a site we have found that the average sale price is approximately 2-3x annual net profit for businesses in the sub-$5M range. Instead of just using net profit which can lead to inaccurate results, we use “seller discretionary income” where we ‘add back’ costs that are not requisites for the new owner but the seller may have taken for personal benefit e.g. Company car or owner distribution.
One piece of advice I would give is to avoid brokers who offer extremely high valuations such as 5x annual net profit with no individual website variations taken into account. This tactic is used by disreputable brokers to entice businesses onto their list. Here the website will remain listed and unsold for months, in the meantime the seller is likely to spend less time working on their website and its value will quickly decline.
Everybody wants to know quick fixes to increase the value of their site however this process normally takes a few months to implement so it is always good to start sooner rather than later when exit planning. Ultimately, valuation is largely driven by the profitability of the website but there are some things that buyers look for when buying which can help you increase value and saleability:
Timing is key, a seller can make the mistake of underestimate the importance of the right time to sell a website. No matter what your reason is for exiting the business, my advice will always be to sell the business while it has seen a sustained period of steady growth (never when it’s on a decline or when you have lost interest in managing it).
Provided the work load is manageable and worthwhile relative to the revenue and profits of the business, websites with a stable holding pattern tend to be the sites that gain interest quickly and sell. This is because buyers like to see a website that is consistently growing and that they can see has genuine potential.
This is something that’s best to hear direct from our clients! Over the years, here are some of the reasons why clients have chosen to work with us vs. selling themselves:
Buyers are looking for businesses that they can grow quickly and will not only return their investment but will be profitable and sustainable for the future. At FEI we (broadly speaking) work with three main types of buyers; investment funds, online entrepreneurs and offline individuals looking for a passive income. Certain buyers might look almost entirely at a website’s finances whereas a strategic buyer might invest in a business that compliments their current portfolio of work. At the other end of the scale we have buyers who are simply interested in the particular niche because they want a project to work on part time as a hobby.
At FEI we have a network of over 5,000 pre vetted buyers who we take the time to work with closely to ensure we understand exactly what they are looking for, so that when we list your business, the right people are looking at it first.
At FEI we follow a tried and tested process for all deals. Our process has been designed to minimize your time commitment whilst maximizing final sales price of your business.
Our sales process is broken down into 6 steps:
Here’s a more detailed overview of the whole process for those interested: http://feinternational.com/blog/how-to-sell-your-online-business-with-fe-international/
This will largely depend upon the size of the business, the complexity of the business model and the individual needs of the seller. Naturally, larger and more complex websites will take longer to sell because of the larger investment at stake and the level of due diligence that is required. Smaller websites with less moving parts and higher-levels of automation are sold a lot quicker.
At FEI, 85% of online businesses sell within 60 days.
Almost all of our deals have confidential terms but sometimes clients are happy to talk about their experiences after the sale. Here are a few interviews we’ve done with clients:
If you are looking to sell we offer free valuations: http://feinternational.com/sell-your-website/
If you are looking to buy a website: http://feinternational.com/buy-a-website/
Want to learn more about buying, selling or running an online business? We always keep our blog updated: http://feinternational.com/blog/