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Why you should read this guide on how to sell a website
I have 25 years of experience of selling websites, apps and software businesses, having been involved in the digital revolution since its beginning in the mid-nineties. I have worked in various roles in selling websites in a London based corporate finance company, professionally valuing websites for clients, as a venture capitalist investing in websites, apps and software businesses and a founder/CEO (and eventual seller!) of a UK leading website and app business. I want to share my experiences to show you practical and affordable ways on how to sell a website.
Timing and reason for selling a website
Selling a website is much easier if you have an approach from a buyer, but this doesn’t always happen, so instead what should you do? Ideally the timing will be of your own choice, so you can plan six to nine months ahead of the sale period to maximise its value. However, often the timing of a sale is the result of changing or sudden unforeseen life circumstances. Either way, a good understanding of the sale process will prepare you adequately to attain the best possible value for your website.
Websites at all different stages of development can be sold, from beta websites not yet launched, to pre-revenue to fully trading businesses. The more established the website along this development stage, generally, the more it will be worth. It represents less risk to a purchaser and risk decreases price. More mature websites typically have accumulated more assets to value and sell, so not just a functioning website, but established traffic, customers, suppliers, revenue and eventually profits.
However, there are many buyers that actively seek early-stage websites at more reasonable prices. So, don’t be put off selling your website if it loss making or pre revenue, as everything has a price!
What are you selling when you sell a website?
Are you selling the assets of the business or the shares of a company? This is very important. Most website sales are sales of the assets of the business. Assets might include the actual website, an app, stock, a customer list, revenue and profits.
Selling shares of a company that owns the website and business is more complicated both for the seller and the buyer, as unforeseen liabilities can attach themselves to the shares of a company. Buyers would be wise to seek legal advice in these circumstances.
In asset sales, employees are not usually part of any transfer. The inclusion of employees in any sale of a website can add significant complications due to employment regulations, so legal advice should certainly be taken.
USPs when you sell a website
The unique selling proposition (“USPs”) summarises the key attributes that you might wish to highlight to any would-be-buyers. USPs are also key to support the valuation of your website. Think carefully about what these might be and write them down.
Often USPs are a factor of years of hard work and investment: a fully functioning website and/or app, growing website traffic, a loyal customer base or increasing turnover. They might include a significant investment of cash to build your website and/or app and the solving of significant problems. USPs can be both internally generated within the business you have built or external factors, such as operating in a rapidly growing sector, lack of competitors, early mover advantage.
A combination of several factors will give your website its unique selling points. Ultimately, the USPs that you are selling to a buyer represent the opportunity to make money now or in the near future.
How to value a website?
There are many ways to value a website, but ultimately your website is worth what someone is willing to pay for it. So, what might a purchaser be willing to pay for your website?
The valuation of a website is never just one simple metric, although it is often represented as such, often being cited as a multiple of profits or turnover. The valuation and eventual price paid by a buyer is a factor of many different metrics and circumstances of the website and business. For simplicity purposes, websites can be divided between pre and post revenue generating websites.
If the website is trading and generating revenue, it is known as post revenue. If it is profitable then the value can be assessed, amongst other factors, as a multiple of its annual profits. For smaller websites this might be in an average range of three to five to ten times annual profits, maybe more, but again it very much depends on many other factors. The profit multiple can be determined by factors such as the profit’s size, growth, consistency, dependability and opportunity to expand. This multiple can also be seen by a buyer as to how many years they will have to run the business to get their money back.
If the website is trading, so post revenue and loss making, meaning there are no profits to assess a valuation, the revenue is the next most significant metric to assess its valuation, although other metrics will always need to be considered. As with a profitable business, these additional metrics might include the number of customers, unique website visitors, business growth, sector dynamics, competition, USPs, investment to date, intellectual property, business size and so on.
When a website you want to sell is pre-revenue it usually means that it hasn’t started trading or to talk jargon, it has yet to monetise its visitors. It could be in a beta stage, so just having recently completed its IT development. It might be pre or post launch, but just focusing on customer and traffic growth. These websites are still desirable to the right buyer, who will be assessing the value to them of what you have created. This value could be assessed as a factor of the cash that has been invested to date, the time that has been inputted, the problems that have been solved and the monetary size of the opportunity that the website is now offering.
I stated above that valuation is what a buyer is willing to pay, but also and very importantly, it is what you the seller is willing to accept. A fair medium must be found for both parties that reflects the combination of many metrics touched on above.
Due diligence when you sell a website
Be prepared when you sell a website for the likely questions of a buyer. For sales that are asset sales, consider what assets a potential buyer will be acquiring and how you prove their ownership. List them all down and think about what you can provide a buyer to support their accuracy, completeness and your ownership. For example, if the website is trading and has revenue, are annual financial statements prepared, even better it prepared externally by accountants. In their absence, you might have management accounts available to share that set out the monthly costs and sales.
Most trading websites will have analytics, normally Google Analytics, to support the key traffic metrics.
Think about proof of ownership of the domain name, the actual website, as well as any other intellectual property that is for sale. Is there any IT infrastructure supporting the website that requires transferring or disclosure to a buyer? Is there stock? Are there any key contracts that might need disclosing, such as for a key supplier or a key customer?
Think what you would like to see as support for each of your significant identified assets that will help persuade a possible buyer. A little time ahead of when you decide to sell a website will place you in good stead.
Best place to sell a website
This is where I have to state a personal interest! CrowdMnA.com is the number one website in the UK to sell a website. Its simple five-step template of questions, some mandatory, most optional, guides sellers through the information required to produce a display to sell a website. It takes just a few minutes to complete and create an informed promotion live on CrowdMnA.com advertising your website for sale to thousands of potential buyers.
CrowdMnA.com also gives sellers the option to sell a website either as an auction or a private sale.
Once a sale is agreed, CrowdMnA.com provides for free a legal document for sale between the buyer and seller of the website. A reputable third-party escrow service is then used for the transfer of sale proceeds to provide the best possible protection for both the seller and buyer.