Why Use A Website Broker and How Much Do They Cost?
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This guest post was contributed by the team at www.digitalexits.com – is you are looking to sell your website they are offering a free website valuation for all income diary readers.
Sites like flippa.com have opened the market to the possibility of selling your website. However you may be sitting there with a decent business on your hands that is making over $5,000 per month in net profit and you want to sell.
If you research multiples on auction platforms you will find an average of around 8-12 times monthly net multiples. On a site that makes $5,000 per month that is $40,000 to $60,000 at the close of sale.
While this this may be a respectable sum, you might be sitting there thinking about all the hard work you’ve put into your site and you deserve a better return on the sweat equity you have invested.
That is why you need to find a retail buyer not a wholesale buyer.
A retail buyer is an investor that is looking for better places to put their capital than earning low returns in the bank. They want assets that are relatively hands off and have good growth trends. You won’t find these retail buyers on many of the auction platforms because they want to deal with bigger sites with more established revenue streams (minimum 2 years) and pay a premium for them.
That is where a website broker comes in.
You may get $40,000 for your website from a wholesale buyer. Whereas with a retailer buyer you can fetch anywhere between 2-5 times yearly earnings, with the average around 2-3 times yearly net earnings.
Would you rather $40,000 or $180,000 for selling your website?
Website brokers introduce you to retail buyers.
What is a website broker?
Full disclosure here: I am a website broker, so I can answer these questions in full.
The primary function of a website broker is to help webmasters sell their web business.
Your site will get evaluated and then presented in a way to gain the highest possible price.
In that process there are a number of tasks performed to try and maximise price:
- Determine an appropriate valuation range
- Compile an information memorandum (sales memorandum)
- Market the website
- Present the website to potential buyers
- Draft and present offers
- Assist in negotiation on behalf of the seller
- Protect sellers’ confidentiality
- Look after paperwork
- Provide after-sales support.
How does it work?
The process is similar to that of a realtor (real estate agent). You approach a website broker looking to sell. You enter into a sales agreement with them. This is normally an exclusive agreement that is valid for 90 days. The broker will then prepare the information memorandum about the website to be used to show potential buyers. In this document is all the relevant information about the website, its financials, traffic stats and answers to general questions.
The broker will then go out and sell your website to potential buyers. Screen them with their screening process and present you the best offers.
The buyer will normally sign a letter of intent (LOI) and ask for a set period for final due diligence. It is your choice as the buyer as to whether you allow this to be exclusive or not
They will make a formal offer after due diligence, you will either accept or decline that offer.
Then the transfer process happens. Money is normally transferred using an escrow service. That can either be the brokers trust account, a lawyers trust account or an escrow service. We prefer our own service or escrow.com. The site is then transferred to the new owner, the seller receives their funds and the buyer will take ownership of the website.
Why would you hire a website broker?
Brokers give you a wider reach of retail buyers and investors. Also they will usually have a unique marketing method of selling sites as well as processes and systems that support the sales process.
This includes marketing and contacts that the average Webmaster can’t access including their list of buyers, investors, entrepreneurs and subscriptions to business-classified sites.
An example of a recent site we sold. A general Webmaster blog on entrepreneurship and online business. The owner started the site back in 2005. It had over 3000 pages of content and was earning $169,000 per year in advertising revenue
He came to us wanting $180,000. We ended up selling it for $363,000.
Youtube Video: 3 Benefits of Using A Website Broker
Not ready to sell just yet?
Checkout our youtube video: 5 ways to sell your online business for a higher price. If you are interested we can also advise you on an exit planning strategy before you are looking to sell. What this involves is us analysing your business and looking for ways to quickly improve value by analysing how you can boost profit and sales before selling. Or if you have a traditional brick and mortar business we recommend this business valuation service.
What is the time frame?
Anywhere from two weeks to 6 months. Factors that influence timing of sales include getting access to the relevant website information from the seller, negotiation time and sellers getting finance available.
What do they cost?
A website broker will generally charge 10% of the gross sale price to sell your website.
Are fees charged up front?
They are 100% commission based. They do not make any money until they sell your website so there is a low level of risk of listing your site with them.
What are the best sites for a website broker?
The best sites are established sites that are making solid monthly earnings. A good range is between $50,000 and $2,000,000 in value.
They also have the following characteristics:
- Established websites, not turnkey sites. 2 years plus income is a bonus, a community or strong presence in your particular niche is seen favourably.
- Sites with credible traffic in their market. Buyers prefer sites with multiple traffic streams.
- Premium money is paid for:
- With premium domains
- Have an existing active community
- Make recurring yearly income
- Have multiple income streams
- That are highly systemized
- Have strong earnings history
- What’s not good:
- Adult sites
- Pharmaceutical Sites
- Proxies, arcades, etc.
What if I can’t sell my website?
Normally they will ask for a 90-day agency period. Good brokers have a clearance rate of about 80%. Main reasons for a site not selling is generally price related and the seller wanting more money than the market will offer them.
About The Author
Jock is the founder of www.digitalexits.com - is you are looking to sell your website they are offering a free website valuation for all income diary readers. Visit www.digitalexits.com/website-broker for more details.