6 Strategies for Maximising Your Website’s Market Value
Many of us have websites that generate some kind of revenue month to month. Whether you’re actively in the web business or just happened to build a site as a hobby and put some ads on it – you’re undoubtedly the owner of an asset that’s worth something.
What many in the industry don’t fully realise is that there’s a significant market out there for profitable websites of all kinds – from content sites and service businesses to eCommerce operations and marketplaces. There are an increasing number of buyers – both one-off and seasoned – getting involved in the industry and they’re all hungry for good opportunities.
Because of this, selling is often a very good option, and the cash that you’ll get for your website may just be what you needed to kick off that new project of yours or invest in a promising startup.
But it’s not all fun and games – there are some important things that one needs to consider before rushing into selling off a potentially very valuable asset. Some of these things can significantly affect how your site will be valued at, and in some cases whether it will even be bought at all!
Only Sell When the Time is Right
Even though you may running a perfectly viable and “sellable” business, choosing the right time for selling can make or break the deal – and have a huge impact on your site’s valuation.
For example, you should never sell your business whilst it’s undergoing a major software upgrade or a feature release, or any other change that can crucially affect the business.
This is because the majority of business buyers are first and foremost looking for stability, and don’t appreciate businesses that are going through changes of any kind when being sold, as these changes – even if positive – pose both a risk to the business itself, as well as to the ease of transition.
This is the reason why for a seller, a statement like “We’re currently at the final stages of launching a complete redesign of our site and the new owner can push it live short after the purchase” may appear as a value-add, but a buyer would see it as unnecessary risk of having to deal with a half-finished project, the success of which hasn’t been proven in any way.
The same applies to changes in your organisational structure, such as a business partner deciding to move away from the project, employees being recently fired or new ones hired, etc.
In short – any recent changes are usually very bad for the sale and the valuation of a business, and you should always look to establish as much stability as possible prior to bringing your business in front of potential buyers.
Take Advantage of all the “Quick Wins”
Similarly to the above, many sellers consider providing the buyer of the business with a list of “quick wins” a significant value-add, whereas in reality, these things add little to no value to the business.
Let’s say that you have a high-traffic website that publishes new content all the time, but you’ve never gotten around to starting to build a mailing list. Or that your SaaS product’s pricing has remained the same for 4 years and you’ve never split-tested different pricing points.
Whilst both of these are genuine opportunities, they add very little value to the business itself unless proven to be successful beforehand. This is why, when advising sellers, I always recommend them to take at least a few months to implement these “quick wins” themselves.
At this point the value proposition changes considerably, and “you might be able to increase the site’s revenue significantly by adjusting it’s pricing” becomes “we’ve adjusted our pricing and in the first 2 weeks alone, our revenue increased by 20%” – which needless to say is a significantly stronger argument for a higher valuation.
Make Sure Your Financials are in Order
Probably one of the key areas that inexperienced sellers tend to struggle in is preparing a proper set of financials – especially when smaller sites are concerned, or ones that have gradually grown from a hobby project to an actual business.
The good news is that a good website broker is there to help you prepare these documents, and will know in what format most buyers will want to see your numbers. They’re also there to help you iron out any issues with numbers not matching up properly and advise you on topics like determining what are valid add-backs or whether to use cash based or accrual accounting.
But that’s only one part of the equation – even though the broker can help and advise you, it’s still up to you to provide the broker with usable source information, as regardless of how good your broker is – if the source numbers are lacking then so will the final P&L, leading to many buyers shying away from the opportunity.
As a website seller preparing for an exit, you should at the very least take care of the following over the months leading to the sale:
1) Make sure that all of the site’s revenue and expenses are documented and can be adequately proven. As a general rule – any revenue that can’t be backed up by documentation can’t be claimed as revenue.
2) Go through all of your operating expenses and identify the ones that you’d like to consider adding back on the P&L. These are the expenses that aren’t directly connected to the site (e.g. let’s say that the company has paid for your business travels or your car), investments that were only one-off and will never re-occur, etc.
3) Take good care to separate your personal and business accounts. If you’re running your site as a sole trader (meaning you don’t have a separate company set up for it) and the site’s income and expenditure is therefore mixed with your personal income and expenses then you should block out significant time to split the ‘business money’ from your ‘personal money’, as this is the data that every single buyer will want to see, and expect to be fully accurate.
Manage Your Expectations
Whilst rarely a deal-breaker or something that would affect a site’s valuation, mismanagement of one’s expectations is something that can often cause significant stress, and as a result lead to issues between the seller and the broker, as well as sometimes the seller and the buyer.
As someone who’s just about to start thinking of a potential exit, you should first tell yourself a few things:]
1) Selling a business of any kind – be it online or offline – is almost never an easy or a quick process. It takes time and (a lot of) energy to get everything prepared for the broker, to answer all of the pre- due diligence questions, and to go through several iterations of finances before getting it right. And that’s all before you even reach any potential buyers!
2) On average, you can expect to speak to at least 3-4 (but often as many as 8-9) different potential buyers before getting a solid offer. Trying to find suitable times for conference calls and answering repetitive questions is tedious at best, but it’s unavoidable. Choosing a good broker helps immensely, though, as a good broker will pre-screen all potential buyers and not waste your time making you speak to “tyre kickers” or people who aren’t likely to make a suitable offer.
3) One might think that once an offer has been made and accepted, and the Letter of Intent signed, it’s all uphill from there and the worst is over. But not quite. Regardless of what your broker tells you or how good they are, due diligence is NEVER a fun or easy process.
Even with the best of buyers, you can expect a lot of digging, difficult questions, and requests for more data. This is nearly always a nerve-wracking and time-consuming process, but needless to say, being properly prepared helps significantly.
In short, make sure that you block out a lot of time from your schedule for the selling of your business, as being too busy or unavailable for important calls or information requests is something that can easily break an otherwise healthy deal.
PLEASE Don’t Shut Down Your Business
This may sound like stating the obvious, but in my 7 years in web business brokerage, I’ve seen several cases where, prior to listing a business for sale, the owner has essentially shut the business down.
These people have had various justifications for it – from being “too tired of the business to continue running it” to “wanting to make it easier for the buyer to assume a business that doesn’t have any current orders/liabilities”, but whatever the justification, it is ALWAYS wrong to do it.
As mentioned above, most buyers are looking for stability and continuity, and having a business shut down for even a mere few weeks can have a significant impact on its future health – to the extent that the vast majority of buyers wouldn’t even look at the business any further upon finding out that its operations have seized or paused.
Just keep running the business as you would if you weren’t selling it, and buyers are going to be much happier and pay you a significantly higher multiple than what would be the case otherwise.
Speak to a Knowledgeable Broker
Last but certainly not least – if your website is valued at above $50,000 then you should always speak to a broker to make sure that you don’t land on a fraudulent buyer and to have the peace of mind that all legal documentation is taken care of. You’ll also have someone by your side who knows the industry and even better – does most of the hard work for you.
In most cases, the 10-15% fee that brokers tend to charge is well worth it, and you can typically expect to “make it back” in the form of an increased valuation of your site – triggered by the combination of flawless presentation of your business, and brokers having an existing pool of buyers to pitch your business to.
Finding a good broker isn’t easy, though. You should always make sure that your broker not only appears knowledgeable, but that they also have actual real-world experience dealing with sites similar to yours, that they’re an established firm rather than a one-man-show, and most importantly – that they don’t con you into signing a long-term agreement by over-promising you on things that they won’t be able to deliver, such as an incredibly high selling price or a super quick completion.
I’d like to also invite you to check out the Website Broker Reviews section of this site, where I’ve reviewed all of the major web business brokerages and offer both recommendations and warnings to make sure that you’ll get what you pay for.