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BroadbandMan
Posts: 43
Joined: 6/11/2004
From: http://www.1coolsearch.com
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Any Advice For Negotiating Selling a Web Business? - 1/15/2006 21:56:46
Hi everyone!
I was recently contacted by a rather large company in my industry that wants to purchase my Internet properties and have me come and work with them. They asked me to provide the following:
1) Back ground info on yourself
2) Current sites
3) Lead flow from sites – paid and non-paid, consumer and business
I was hoping to gather advice from anyone who has been in this position, or has entered into any talks of selling sites with a large company in my industry. I would like to know any recommendations/do's/don't's/wish I would haves. I am apprehensive about giving out too much information about my sites for a multitude of reasons, I don't want to expose my SEO efforts or my marketing strategies as I work alone and I don't want to disclose any more information than is crucial to the negotiations. Any help that can be offered here would be helpful. Thanks very much.
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golfer
Posts: 1758
Joined: 1/5/2005
From: Bath, Wiltshire, UK
Status: offline
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RE: Any Advice For Negotiating Selling a Web Business? - 1/16/2006 3:52:16
Hi
As you work alone I think you need some advice and assistance from someone who you can confide in and also knows how to deal in selling your business.
You may wish to consider searching out a solicitor who specialises in business sales and purchases. They are not cheap but they will be a great help to you.
They can handle your negotiations and attend the face to face meetings as your advisor.
Hope this is helpful.
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Ian
'You'll miss me when I've gone'
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Mojo
Posts: 2431
From: Chicago
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RE: Any Advice For Negotiating Selling a Web Business? - 1/16/2006 13:04:23
I sell sites on an ongoing basis, but never to a competitor - I think that would drive the price upwards a little bit.
Any time you're looking to sell a site you run the risk of the entire process being a slight-of-hand technique by the supposed buyer to find out your company information.
Have they made any kind of tentative offer? There are exceptions, but the vast majority of sites have a final sales price based upon a multiple of monthly profit - typically 6 to 10 months for a newer site or 8 to 12 months for an established site. For the most part these sites will have their traffic coming from the organic (free) search engine results. Sites that depend on PPC traffic can often sell for less - unless they are selling a unique product. For every site that sells for 36 months profit there are 5000 sites that sell for 12 months (or less) profit.
Either way, it can be tricky.
quote:
I don't want to expose my SEO efforts or my marketing strategies as I work alone and I don't want to disclose any more information than is crucial to the negotiations. Any help that can be offered here would be helpful. Thanks very much.
Yep. Once you start giving up all your sites you're exposing yourself to many bad things. What if the company is just after some competitive analysis? What if the company isn't really involved and it's just a rogue employee fishing for infomation that he can use to build his own business or worse?
Paranoid? Maybe a little, but I have seen various flavors of most of those listed above. There is a cottage industry built up around copying sites that are for sale - what better way to learn if a specific category can be profitable than to have inside information?
I would try giving them as little information as possible until you get more information from them. You should make sure you're both on the same page before showing them the family jewels. Maybe your site is only making $1000 per month, but you would never dream of selling it for only $12k. It's best to find that out before disclosing all the nasty details about your business.
Something else to consider - Salary and Profit are not the same (hat tip to Threadwatch). Let's say your site brings in $5000 per month after expenses, but before you pay anyone. Someone has to do the work, right? Most self-employeed people would just take the $5000 and call it business profit. Except, it's NOT PROFIT. That $5000 was an expenditure. It was salery. The business had a net profit of ZERO. Most web businesses take someones time to operate and that time needs to be accounted at a fair market value.
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dsimon
Posts: 2
Joined: 5/26/2004
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RE: Any Advice For Negotiating Selling a Web Business? - 1/18/2006 17:25:58
You've already gotten some excellent advice. The only thing I can add is a bit about the process. If the offer price is based upon sales multiples, the multiples should fall into some range.
Investment bankers and venture capitalists keep databases of recent sales and multiples. (forgive me if you already know this stuff). These are called Merger and Acquisition databases. When you list a bunch of those recent sales multiples in an Excel worksheet and average them, they become "a comp table" or a "comparable sales analysis". You can probably datamine Securities and Exchange files for the buyer's recent purchases they are publicly traded. (Look in Forms 10Q and 10K www.sec.gov)
If the buyer offers less than the average multiple - that's called a "Haircut" and means the buyer sees some weakness in your company versus the others that have recently been sold. If they offer more than the average multiple, you've negotiated a "premium" offer. Sometimes it just helps to know the lingo...
A small investment banking firm may be able to help you compile a list of recent sales. Banking fees can be 1-2% of purchase price, but fees are always negotiable. You can also negotiate perks - for example, you could negotiate a bonus for yourself based upon future revenue or traffic generated by the site after the purchase. Some attorneys also subscribe to M&A databases - so an attorney could help with the negotiating as well.
The buyer should be able to give you some indication of a multiple range. This allows you to determine whether or not they're price is worth your time and energy.
Congratulations and Best of luck!
quote:
http://www.1coolsearch.com
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Helene
Posts: 213
Joined: 9/17/2002
From: a small island in Canada eh?
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RE: Any Advice For Negotiating Selling a Web Business? - 1/19/2006 11:34:19
Hi there -
I can't underscore enough what Mojo said:
quote:
Paranoid? Maybe a little, but .....There is a cottage industry built up around copying sites that are for sale - what better way to learn if a specific category can be profitable than to have inside information?
and
I would try giving them as little information as possible until you get more information from them. You should make sure you're both on the same page before showing them the family jewels. Maybe your site is only making $1000 per month, but you would never dream of selling it for only $12k. It's best to find that out before disclosing all the nasty details about your business.
Sadly, I speak from experience. I spent a lot of time and energy last year in trying to sell my web business (to no avail). On potential buyer in particular, had nothing more up his sleeve than to find out more about my business. I was too naive and too hopeful that he would purchase... AND he kept saying that he was "preparing an off". But he slunk off after getting a lot of details about my business. As he was in a slightly different line of work, I didn't realize it at the time that he was in the process of setting himself up to be a competitor.
Watch out. I was too generous in spilling out the guts of the business because I trusted his word that he was in the middle of preparing an offer.
To you I say "good luck" and "be careful" !!!
- Hope it works out for you.
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Helene M.
websitemanagement.ca
Personal Site:
Best of Salt Spring Online
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dpf
Posts: 7121
Joined: 11/12/2003
From: India-napolis
Status: offline
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RE: Any Advice For Negotiating Selling a Web Business? - 1/19/2006 11:49:02
quote:
have me come and work with them. Have they made a specific job offer yet? How interested are you in getting a job?
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Dan
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