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]

Just be wary that once the domain name transfer is initiated, you cannot stop it, reverse it or cancel it.

I got hosed by this last year when selling a domain name. I received payment (via Paypal), the funds were in my account and the transaction was marked "complete"... I then initiated the transfer of the domain. The next day I get an email from Paypal, they have decided I'm the recipient of a random audit. I tried to cancel the domain transfer. I was told sorry too late from GoDaddy. After a week, Paypal takes the funds back out of my account and return the money to the buyer. No reason or explanation other than they thought the transaction was suspicious due to the fact that the BUYER had not used their paypal account in a few years. Yeah, you can guess how livid I was. Then, to top it off, I called Paypal to complain and figure out what was going on after talking to the buyer (who was confused and wanted to resend me the money... fortunately). I told them to call the buyer to confirm, they said they don't make phone calls... they are an internet company and only deal with email. (the buyer was not receiving the emails from Paypal - her ISP was filtering them as spam).

Long story short, I had to get the buyer to send me a snail mail check, since Paypal said they could not guarantee the payment would get approved to me if she sent it a second time. (what?)

I "was" a long standing Paypal customer.

Be wary of 3rd parties involved in the transaction. Some things are out of your control the minute you click "ok".

[buckworks]

I would not have sold the site I referenced earlier in the thread for only three years earnings. I held out for significantly more than that ... and got it.

As several have pointed out, a productive, well-established website has value just to keep it, and that puts one in a strong position to negotiate.

There are risks and rewards to balance on both the buyer's and the seller's side.

Here's one that hasn't been mentioned yet: if you just kept the site, but something happened to you, what would happen to the site? Would your heirs know how to keep the site going and sustain the income? If the answer is no, or with great difficulty, that might make a purchase offer seem more attractive. If you have no heirs you might not care about that.

[oddsod]

If he says no then sure, he has the code but that will always be the case whatever option is used.

Not so. With a properly constructed contract, he gets the code only after he's made a non-refundable full payment to your lawyer.

He tells the lawyers to transfer the funds

If you are using a legal firm for escrow ...why the split transaction and release the code early?

And, as maximillianos says, once it's gone, it's gone.

[buckworks]

3. He tells the lawyers to transfer the funds

You need a step in there where the buyer first transfers the purchase price to your lawyer to be held in trust.

DO NOT transfer the domain name unless the agreed amount is in your lawyer's possession, in a form that cannot be reversed by the buyer.

The funds will only be paid to you when the buyer has possession of the domain, but they need to be in your lawyer's hands before you transfer the domain.

[webfox007]

I have acquired quite a few internet businesses, one being 7 figures and there are all sorts of rabbit holes one can fall into. I will say, DON'T use an escrow service. On one of my smaller 6 figure deals, i used the largest escrow company in the US and even though my escrow instructions were very detailed in terms of when the cash was to be paid out, my escrow officer, had her quarterly bonus coming up and "prematurely" closed escrow (paid the seller) and 10 days later i find out about it.....after i called her and said the seller is in breach and i want my money returned. Well, their attorneys got involved and told me in so many words, "sue us" but, expect to pay a lot since they had an army of attorneys. At the end of the day she got fired but, i got screwed out of a lot of money and got a piece of crap business. So, use the attorneys trust account as the escrow service and a good attorney will administer tight closing instructions. Good Luck! I have a lot more stories on this process but, it would require novels.

[Lance912]

With any website buy/sell, the outcome is tied to the other party. If the other party is honest, it'll go smooth. If the other party is dishonest, it's not going to go well. You can do some stuff to protect yourself, but at the end of the day, it's going to be a headache.

[Whitey]

I didn't mean to encourage you to call the deal off.

Maybe, you need to think why your buyer considers your sites good. If you can improve the value of your sites by what you anticipate they can do , maybe you can raise the sell price.

But also ask yourself [ as others have said here ] what the value of the income is versus selling currently. 5 - 10 times average income over , say a 3 year annual average , would seem a good figure. So the key question I'm asking is , are you underselling your site value ?

[eltercerhombre]

I may say I haven't read every post here, sorry.

But if you're selling in GBP then you're probably in the UK. I may be wrong, but I believe EU laws doesn't allow to pass you personal data to the USA without informing and getting consent from every individual user. At least that's the way in Spain.

So, if you also sell the user database, check with a lawyer.

[Edwin]

Also, the higher the multiple, the more that any increase in revenue will boost the final value of the deal.

Should be obvious, but it's still educational to look at some sample figures.

A $25,000 a year site sold at 4x revenue would net $100,000
The same site sold at 6x revenue... $150,000
The same site sold at 8x revenue... $200,000

But then you work hard and double the annual revenue from the site. That extra $25,000 a year could be worth $100,000 or $200,000 in your pocket at sales time depending on where the multiple lies!

[oddsod]

If you can improve the value of your sites by what you anticipate they can do , maybe you can raise the sell price.

Unfortunately, that's one of the biggest nuisances around. Buyers simply hate people pumping up the value of their offering based on "potential". Anyone can claim any potential ... and most usually do. Buyers dismiss almost all of it. The value of your site doesn't increase by you changing your anticipation of what it'll make. It increases in value if there's some verfiable change in market conditions or business prospects that the buyer recognises as having the ability to increase profit (and only to the extent the buyer sees profit increasing).

the higher the multiple, the more that any increase in revenue will boost the final value of the deal.

Absolutely. One caveat. Historical revenue serves no purpose except where it provides a guide to the future. And it's not revenue (turnover) buyers are mainly concerned about. Future profit is what they are after and their estimation of future profit is what they base their valuation on.