Selling £six figure website

[nomis5]

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.

[maximillianos]

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.

That has always been my problem. I've had two serious buyers inquire about my biggest site. Both came to the conclusion that my site was a great earner, and a great business for my family, but not something they could buy from me since it was worth more for me to keep it than they could offer. And I kind of agree. Even if they offered me 36-48 months revenue, I'd still be on the fence since my site has been growing year after year for 10 years now.

If I sell for 3 years revenue, where does that leave me in 3 years? Perhaps a dwindling back account and no website...

Unless there is a huge potential (and huge mark-up on the offer), many big sites are unsellable when they are the bread and butter of a family... Unless of course you are ready to retire! But then again, why not just let your site(s) be your retirement income... =)

[Edwin]

These days, when the return on "cash in the bank" is often 1% or less, selling a site for 3-4x annual revenues is effectively handing the buyer a 25%-33% ROI.

Obviously, the web is a highly volatile environment, but for large well-established sites with years of earnings history and a strong pattern of traffic from well-diversified sources, I would have thought the multiples should be a lot higher to justify selling since even if you take taxes out of the equation, a site earning for example $25,000 a year would sell for $100,000 at the top end of the above range, but that $100,000 in the bank is going to bring in less than $1,000 a year!

Of course, if you use the funds to pay off debt, your own ROI could be a lot higher. For example, paying off a 7% mortgage brings you an effective 7% return on the money and greater security (but you're still far short of the 25% keeping the site would have brought)

[maximillianos]

Good analogy Edwin... Even with reasonable returns of 5%, it is hard to justify selling a solid earning site. The site itself is an incredible investment that keeps doubling your money each year with no principle (for some sites this is the case).

My "problem" is I quit my day job years ago, so I'm semi-retired to the point where I simply maintain my site(s) and don't have a real job, so I burn through most of my site's earnings to cover living expenses for my family. This makes it a higher risk investment to me since I have more to lose if things go south. But if I had a day job, it would simply be money in the bank each year, doubling and tripling.

Hmmm.. Kind of makes me want to go out and get a day job again! NOT! ;-)

[Edwin]

My "problem" is I quit my day job years ago, so I'm semi-retired to the point where I simply maintain my site(s) and don't have a real job, so I burn through most of my site's earnings to cover living expenses for my family. This makes it a higher risk investment to me since I have more to lose if things go south. But if I had a day job, it would simply be money in the bank each year, doubling and tripling.

One solution might be to expand your site network so that you've got plenty of money in the bank at the end of the year, even after living expenses. If they're the kind of sites that "run themselves" (the best kind!) then once built and promoted, they're like an ATM stuck on "dispense money" :)

[oddsod]

The market decides the rate.

It doesn't matter what the owner thinks is fair. If he wants to sell he has to accept what the market is willing to pay whether that's 24x (months), 36x or 2x.

Anyone thinking that market prices are too low should be out there taking out mortgages at 7% and buying sites to get 30% returns. There are a lot of sites selling every single day. And I'm not talking just the junk at Flippa.

I run a forum discussing issues surrounding the buying and selling of sites. Everyday I hear at least one moan about prices being too low. There is no such thing as too low or too high. There's only what the market sets.

[Jane_Doe]

Even if they offered me 36-48 months revenue, I'd still be on the fence since my site has been growing year after year for 10 years now.

I've never sold a site for the same reason. I just buy more when I can find good deals.

[maximillianos]

One solution might be to expand your site network so that you've got plenty of money in the bank at the end of the year, even after living expenses. If they're the kind of sites that "run themselves" (the best kind!) then once built and promoted, they're like an ATM stuck on "dispense money" :)

Definitely working on it! But it is getting harder and harder to produce good earners in this saturated landscape.

I've got a few sites that are climbing up the ladder, but they have a long way to go to even things out. =)

[anand84]

The topic's really making me awe..I hope there comes a day when I get the "privilege" to do something similar..

[Jane_Doe]

There is no such thing as too low or too high. There's only what the market sets.

There's is no such thing as too low or too high if you are auctioning off your sites. But in deciding whether to keep or sell a site there is definitely too low of a price.

Why sell a popular site with growing traffic that has been paying your mortgage and then some for 10 years for one year's earnings or even three years earnings?

In hindsight, I was right to pass up all of the offers I received for my different sites over the years. There has never been an instance where I would have made more money had I sold the site.

[nomis5]

Not sure, dithering back again. Please pick lots of holes in this sequence of events! I've taken on board your comments and think I can protect myself as described below. First, I've decided that the code of the website is not that valuable on its own. What is valuable is the code plus the domain name, or even the domain name on its own.

Here's what my partner has come up with.

I give the buyer a copy of the code two days before he receives the domain name. He examines the code for two days and lets me know if it's OK. If he says no then sure, he has the code but that will always be the case whatever option is used.

Then I transfer the domain to him and give him ftp access.

Then he does the following in 24 hours:

1. Verify the domain name has been transferred
2. Verify that the code on the server is the same as I supplied two days earlier
3. He tells the lawyers to transfer the funds

If anything outside that happens I cancel the deal and secure the domain name and the ftp access back to me?