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|Selling £six figure website|
I'm in the final stages of agreeing to sell one of my websites for a six figure £ amount. I need any advice you can give me about the sales procedure. I don't need advice as to if I should sell it - the price is right and I want to sell.
I'm in the UK, the buyer is an Israeli and his company already owns several popular sites.
We are going to use a well-established escrow company to transfer money and ownership. But aside from that I have no idea what pitfalls await me in the final stages. Could anyone use a purchase like this to damage me? I have two other popular websites and several smaller ones.
I haven't seen any contract yet, I am meeting the guy on Thursday in London. He most certainly has experience of buying / selling websites in the past. I have no experience.
Any ideas or warnings will be most gratefully received.
Worried from Warwick.
Congrats on the sale! That said -- don't be sad if things fall through. I've gone through several web site sales over the last year and they have all been terrible, frustrating procedures.
You seem to be past most of the hurdles, but there are a few things to remember --
Make sure the contract spells out a maximum time you will spend assisting them in transferring the site to their servers. Some companies see your availability at the beginning as free labor for the site and will try to milk you for months running the site for them.
Get all the information you can on the people and company you're dealing with. I mean things like personal cell phone numbers and addresses and things. It sounds invasive and wrong right now, but when it's 2:00am eight days later and you're still wondering when he's going to tell escrow company to release the funds to you, it's good to have a backup-backup-backup means of getting in touch with someone.
Document everything you do. This is going to be a great learning experience for you.
Even if the person you meet on Thursday has experience buying web sites in the past, that doesn't mean he's not a dumbass. I recently sold a site to a small company that owns a few surprisingly large web sites. It turns out the owner has no idea how to run a web site. He didn't even know what PHP, MySQL, FTP, or a "shel script" is. He talked a good game until it came time to install the web site on his server, and no one in his office (it's about a six person operation) knew what to do. (He thought the solution to everything was "cPanel.")
Drink a lot of water. The stress you're going to go through over the next few weeks will take a toll on you. Your brain needs lubrication, and works best when it and your body are well hydrated. You need your brain to be alert at all times.
Be nice. Be honest. Don't let him take advantage of you.
If you see something that makes you uncomfortable -- walk away. Don't let the lure of all that money force you into making a bad decision that you'll regret later. I once almost sold a web site to a guy who turned out to be a hard-core spammer. He wasn't interested in the site at all, but in all of my heaps of user data, and was likely going to shut the actual site down. He offered me a metric assload of money for the property, but I ended up walking away from that deal, and to this day I feel good about it.
Make sure what you're doing is legal. I know that sounds silly, but depending your circumstances, it can be problematic. For example, your web site could be running on software that isn't allowed to be exported to companies in the nation in question. Or you may have to document (for your own records) that the company you're selling your site to isn't doing business with companies in another nation that your government deems hostile.
As the guy you're meeting with if you can record your conversations. Some people don't like this, but if you're meeting in a conference room in a business center they're usually more comfortable with it. I like to have everything recorded because I can sometimes skip or miss small details and will want to go back later to make sure I heard something right. You don't want to screw this up.
Good luck and keep us posted on your progress!
It is vital to get qualified advice about taxes before you complete the deal or even sign a letter of intent.
Consult with a knowledgeable accountant NOW because intelligent tax planning could make a major difference to the amount that actually ends up in your pocket.
The way the deal is structured and how things are labelled could make a big difference to how taxes are assessed. Are you selling your whole business, or just one asset, or ... ? Is there a corporation involved? What are the tax implications of selling intellectual property versus selling good will versus selling hard assets? And so on ...
The fact that buyer and seller come from different countries will add an extra layer of complication. In general, tax optimization strategies that are good for the buyer will be less good for the seller, and vice versa so to make a good deal you will need to negotiate several aspects besides just the price.
The most dangerous time will be when he's into the sites code and the money isn't yet released. If he/she is after something particular to your site (ie:list of member email addresses, code to some specific feature etc) this is when you'll find out.
Since you're meeting in person draft an "intent to sell/buy" agreement and clearly state that until money is released the sale is NOT final and that NO code/information is deemed to have changed hands. Make clear that it is still yours 100% until the funds are released. I know this is redundant but a poor judge hearing your case later needs to have something concrete with which to make a decision. Not all judges are net friendly.
|Your brain needs lubrication |
Got a chuckle out of that, thanks artefaqs.
I once sold a site (small site for an insignificant amount) and accidentally deleted the database the morning I was to transfer it. A backup saved my bacon. Great learning experience.
Good advice, JS_Harris.
Don't show the buyer ANYTHING in terms of code or data until there's money in escrow.
I had one guy who wanted to see my "operational manual" for how one of my web sites works. It turned out that he wasn't actually interested in completing the transaction, just getting inside my code and procedures in order to copy what I do.
Thanks very much for all that excellent advice. I will store it up for the next time because unfortunately the deal has just fallen through! Artefaq mentioned that the guy "might still be a dumbass". I leave that judgement to others, but I will mention that although all amounts (mine and his) had great big £ signs before them, he had actually converted shekels (Israeli) to euros rather then pounds sterling. So his offer was inflated by around 10%. He realised his mistake when he started calculating the escrow fees.
He never asked for code or anything like that, I'm not even sure he realised that around 10% of the code was in .asp rather than standard html.
Thanks again for the advice. The whole experience has not been a waste of time, it's been an education for next time.
don't be suprised if he comes back to you with a lower offer, this is a standard technique to get the price down - make an offer, get the seller emotionally commited, then start messing them around and dropping the price.
imo, it is extremely unlikely that the potential buyer confused pounds and euros.
I don't think he made a mistake, either. He's just looking for an excuse to back out of the deal.
This is the reason I don't do business with people in certain countries (Austria, Czech Republic, and a few others) anymore -- culturally they're trained to rarely say "no" even when it's something they don't want or don't want to do. So when it finally comes to performing a particular task or fulfilling an obligation or making a payment they go silent, disappear, or make some excuse. They'll drag you through six months of negotiations even though they had no intention of completing the deal, just because their culture trained them to avoid honesty and saying "no."
He's come back with a better offer out of the blue! We are now within £7,000 of an agreed price.
But between his original offer and this new one I've done some thinking. Mainly I've been thinking, why not just let the website go on autopilot for a year or two so that I can do what I really want to do? It's one of those websites where that is very possible without damaging rvenue. Who knows, if I stop mucking around with the website, it may even do better.
So here's what I'm going to do. I've dropped my price by £1,000 and I'm going to stick at that. Not a penny less. If it's meant to be, then he'll buy it at that price, if not, then I'll revert back to the autopilot idea.
I'll keep you posted.
Good luck! :-)
I don't want to sway you from selling, since you have your reasons and every business owner gets to the point where they want to move on to something else at some point... BUT.. Years ago I was "this" close to selling my site. We actually agreed on the price... but what we could not agree on was the delivery of payment. The buyer wanted to may me installments over time. I wanted lump sum.
Long story short, I opted to keep the site and put it on auto-pilot. That was about 9 years ago. Today the site makes more money in a month than what I almost sold it for back then. So maybe the sale falling through is not a bad thing...
But if you are ready to move on, I completely understand. Now that it is 10 years later, I can see myself getting closer to selling again. Just for a change of pace!
About the escrow service, I've been reading up about that. It seems the normal procedure is for the sale money to be paid to the escrow company and then I give the buyer access to my code etc. for a set time.
My code does have something in the asp which is unique to my area of the web and it would take eons to work out how to code and implement it from a blank piece of paper. As far as I can see, the buyer will get access to my code for a few days. He could copy off the code, decide he doesn't want to buy and that's it? Is there any way round that problem? Any thoughts?
One idea: with hold that piece of code/logic from the review process. I can't see why one piece of code would break a deal... the buyer probably won't even know it is missing if you are just sending them source to review... They probably just want to make sure it isn't all spaghetti code....
If you're selling the entire web site, the transfer of the domain is the proof Escrow.com uses to determine if you've kept your end of the bargain.
Maximillianos - in this particular case I think they will notice. The asp bit runs site wide and almost any page would clearly be incomplete without it, unfortunately.
Artefaqs - is that remark about transfer of domain from experience? That would be a good approach from my view. Transfer the domain to them as proof and that requires transfer of money to me.
But this whole thing now appears quite complicated. If the domain is they key, what about the hosting, after all that's where the code resides? Is it normal to give the buyer the password to the hosting account and let them keep the account / copy the code to their own account? Sorry to be a pain and keep asking! Anyone had specific experience?
Hopefully the guy will buy my website and I can document my experience along the way for others to benefit from it. Possibly I might get completely conned and still people will benefit from my experience. More likely of course, the sale will still fall through.
I sold a site recently, and the process was that when they put down a deposit, I gave them access to copy the site to their own servers. But they didn't control of the domain name until their next payment was in my lawyer's hands.
I didn't have any clever code to protect, though. What made the site valuable was the backlinks so cloning my content wouldn't do them much good until they had the domain to go with it.
nomis5 - That was what happened the last time I sold a site, which was in late January.
From memory (so I may have left something out):
Step 1: Buyer started a new transaction and sent money to Escrow.com
Step 2: Buyer's money cleared Escrow.com and Escrow.com notified me to transfer the web site.
Step 3: I uploaded all of the code to the buyer's server, began the domain transfer notified Escrow.com.
Step 4: The "inspection period" started. Three calendar days during which the buyer had the option to tell Escrow.com that he liked what he saw and to release the money to me immediately. But the buyer wasn't everything he was supposed to be (not technically savvy) so at the end of the three days of me trying to explain what a database is to the buyer, Escrow.com verified that the domain had been transferred (through a whois lookup) and released the money to me.
Thanks for those replies. So it looks like the normal is the buyer gets to see the code for a couple of days but does not get the domain until the money is transferred. That matches what JS-Harris indicated earlier.
I suppose there is always some risk in any transaction. And maybe, just maybe, I am being a bit protective about my precious asp code! Possibly anyone with a brain could do the same. And without the backlinks and domain name maybe it's not worth that much.
Panic over then, thanks.
I think the fact that he tried to hose you out of your first price, then came back with a better offer shows two things:
1 - He places a lot of value on ownership of your site.
2 - He cannot be trusted.
I like the way Buckworks handled it. You're talking six figures here. A lawyer is a minor expense compared with what you might lose.
Good luck and I hope it all goes well.
[edited by: phranque at 4:00 pm (utc) on Mar 11, 2010]
[edit reason] see StickyMail [/edit]
Buckworks has given you some top advice.
I beleive the key is in getting the right brains in place to act as insurance. Speak to either a good lawyer or accountant , but both professions must be involved. Consider a decent fee as the price of security of mind and pocket. Make sure you understand the technical implications as well in the transfer - a " change document " is vital.
You have to consider warranty , idemnity , intellectual property , funds , title , recourse if things break down , jurisdiction of law , taxation , securing the contract etc etc . For a small amount no such consideration is needed - but this is a good amount and $10 to $20k would be good security. Make sure the skills are from a specialised commercial lawyer / accountant. A middle tier firm is what you should consider as their fees will not be as high.
Good luck and congrats on achieving this level.
If you are about to sell your website for a six figure £ amount it would be absolutely reckless not to spend a few £ for a professionl lawyer and/or accountant. Don't let greed get the better of you, you could end with the website gone and zero £ on your account.
|I'm in the UK, the buyer is an Israeli ...We are going to use a well-established escrow company |
As long as it's not escrow dot com. If he's an experienced buyer (like me) he could get your site for free and without you having any case against him ;) It's as easy as pie. I've done it in the past - by accident (though I always made restitution to the seller as soon as I discovered the problem). If it can be done by accident you bet that a canny enough buyer can do it intentionally.
|He could copy off the code, decide he doesn't want to buy and that's it? Is there any way round that problem? Any thoughts? |
There is no way around that if you're using a Californian based escrow company rather than a UK legal firm. Or any escrow company anywhere in the world that happens to have registered for US business in the state of California.
|Possibly I might get completely conned |
You don't need to. I've written extensively about the sale of sites, safe transactions and smooth transfers and have been involved in the sale/purchase of millions of dollars worth of sites. Drop me a sticky for links to my material on the subject or ask in the thread for answers.
|But this whole thing now appears quite complicated. If the domain is they key, what about the hosting, after all that's where the code resides? Is it normal to give the buyer the password to the hosting account and let them keep the account / copy the code to their own account? |
There is no "normal". Each case is individual and it's up to you to decide the conditions you want to impose, the route you want the transaction to take. Decide that with your lawyer prior to drawing up the contract. Bear in mind that if you use an escrow company (particularly the one I think you're planning on using), their terms and conditions and grievance procedure complete replace the carefully drawn up contract between buyer and seller and your rights under UK law.
[edited by: oddsod at 11:28 am (utc) on Mar 11, 2010]
[edited by: phranque at 4:01 pm (utc) on Mar 11, 2010]
[edit reason] see StickyMail [/edit]
The term "6 figures" is being bandied about here as if it were gold, but £100,000 is not THAT much money when it's your livelihood. Maybe 2 years salary to a lot of poeple?
Admittedly it could also be £999,999 which is very different but a low 6-figure for a money-making website wouldn't warrant a sale in my opinion, and much less after you've paid escrow, lawyer and accountant fees.
I was recently offered 12 months revenue plus $10,000 for a site, which would have taken it very close to 6-figures and it was a no-brainer - I much prefer to keep it and the revenue for the next year and beyond.
I know this is not the type of reply the OP was looking for, for which I apologise, but wanted to express my opinion anyway in case it gives food for thought.
|I give the buyer access to my code etc. for a set time |
Personally as someone who has used escrow/com previously, set the time to view to 1 day - otherwise they can reverse the deal once having changed DNS and trialled your traffic....and taken your code.
We got stung by that one on a 3 day view - luckily all turned out ok in the end.
We didn't lie about traffic, we didn't lie about anything to do with this website - but the buyer was convinced traffic was higher and wanted to play with the code etc.
He cancelled - although he picked up the cost for the cancellation fee.
Just a small warning - and as previous poster has said - it's not a UK company so legal recourse would be a nightmare. Protect yourself first - personally for a large transaction - I would use a solictor and their bonded account.
Just as a counterpoint (you probably shouldn't do this) I've sold six figure websites twice. Both times were to people I knew, and both times there was no escrow. In fact, both times there was little more than a handshake. And in both cases, everything went great for both buyer and seller.
And I'm currrently looking at selling a block of website business to someone on a different continent. I'd imagine we'll do this without a contract as well, though it's only going to be a 5 figure deal, not a 6 figure one.
Thanks for all that advice.
Yes the price is in the very low six figures. And that's the problem. The site for sale represents about 35% of my website portfolio so I simply can't afford to risk loosing it for no money. I have a current partner, two ex-wives and several children to support after all!
But at the price, it's not worth spending £10k or the like on lawyers and accountants. It would make the deal unrealistic.
Also, it's clear from the advice given that I am totally unprepared for this deal. I had no idea of the complications. I imagined use of an escrow company followed by a quick transfer of money / site with no complications.
I need to call off the deal and consider if I really am up to ever selling a site of that value. Here's a few thoughts on your valuable comments.
Wheel - good point, though you did your deals with people you knew. You also are clearly more streetwise than me.
Webwalla - your point is the key. It's a lot of money but using lawyers and accountants kills it immediately. The price is not enough for that.
Oddsod - thanks for the warning. If you can do that by accident, that's me out of the deal.
Whitey - " warranty , idemnity , intellectual property , funds , title , recourse if things break down , jurisdiction of law , taxation , securing the contract etc etc". You're right, and I'm a web site manager and not much good at anything else. I couldn't manage thinking about two of those things at the same time let alone all.
Thanks to all of the other contributors, all good stuff.
The deal's off, I'll stick to what I know. And thanks to the mods for putting this as a featured post which attracted attention. I hope it helps others in the same situation at some time.
|using lawyers and accountants |
This can be done for < 2% of the transaction... for £2k a heads of agreement can be set up, 2 page letter outlining what's being sold etc etc and then using a solicitor that allows you use their bank account as the 'escrow' account. The money is held 'in trust' for the seller and once all transfer made, then you get the cash. I've done it and it doesn't need to be anywhere need £10k+. Just don't use central London legal or accounting professionals ;).
|You're right, and I'm a web site manager and not much good at anything else. |
That's not necessarily a deal breaker. A good broker - I don't do broking and don't have a recommendation for brokers, sorry - may be able to assist you with all that. But professional advisers shouldn't cost £10K. You'd need just a lawyer, not an accountant. As TinkyWinky says, it could be done in £2K.
But if you've decided to call it off, then it's your decision. Hope I didn't scare you unnecessarily. The buyer may well have been an honest, well-intentioned one. They do exist :) And this type are always willing to sit and discuss options and accept reasonable terms that increase your comfort level.
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