Great tips. Thanks.
Thanks for the tips.
If I may add something about pricing. There is a tendency in some quarters to quote 10x or 12x of earnings as a standard. My advice to sellers: Don’t fall for that.
I have plenty of examples of sites that have sold for 60x. And countless examples of well established, quality, content sites that have sold for 24x and more.
Maybe the 12x that gets quoted is an average. Or the median. I don’t believe it is but let’s say that it’s an accurate median/average - that doesn’t mean anything for your individual site. If the range of multiples starts at 2x and extends to 100x your site could fall anywhere in-between. Say you value your $1000 a month site at 12x when it’s more likely to achieve close to 100x … you are losing $88,000.
The only people who benefit from sticking to this fake “industry standard” are 1) Sellers with close to worthless sites who know they won’t get 12x in open auction and 2) Buyers who know the price will far exceed 12x at open auction and want to do a quick deal with you to snap your site up at a bargain.
If you’re not in a hurry to close the auction, my advice would be to let the market decide the price.
May I just add… by “let the market decide the price” FMP does NOT mean setting the minimum bid to 24x multiple of 2006 earnings on your downwards trending site that would just take “a bit of work and it would be back to earning what it used to”.
Here are “businesses” that don’t qualify for 24x monthly multiple:
Its been around for 3 weeks. It doesn’t matter how much it earns. Its not gonna go for 24x. A site can be earning serious money only for a few days, but it has to be established.
You put a lot of work into it and you “don’t really count that as an expense”. Once you start subtracting a McDonald’s level salary from your “profit” your “business” soon becomes not such a good deal after all.
A crappy clickbank product that you hyped to all your friends, got a few sales, and now are trying to unload
A software product that doesn’t get regular sales
Any website/product/service where the new owner would have to find new means of advertising or in fact, just do any significant amount of work to sustain the current level of profit. Nobody is interested in buying into a job.
Ecommerce sites that are not dropship and the sales process is not outsourced. It doesn’t matter how many good contracts or whatever you have. Unless you’ve got 7 figures overturn, chances of finding someone ready to pay you 24x profit to take over gluing address labels to packages are damn slim indeed.
Your unreleased website/software that will change the world and took you five years of sacrificing your social life to build, but now you can’t be bothered to release it to public.
You’re making a lot of money from very little crappy traffic with one company/ad program. Like a video site with Zango ads. Or a proxy site that by mistake got accepted into TribalFusion and is now doing very high CPMs. This is just too risky, your chances of getting a good price are so low you’re just better off keeping quiet and silently making a good living.
You’re “lying” about your profit figures. The multiple is not a multiple of your best month which occurred in year 2006 when you put up images alongside YPN ads to trick people into clicking finance ads on your arcade site. It usually is the average of last 3-6 months profit, but can be simply last month’s profit.
Another “very unlikely to” category is sites with any downwards trends. Sites that sell for high multiples are usually perceived as low risk assets. If your site is trending downwards, that is risky, as you can never know how low that trend will take you.
In the end, there are 4 reasons buyers are ready to pay huge multiples for websites:
It is extremely stable. It is old. There is no work required. Just sit back and watch the money roll in without ever worrying about anything.
You missed an easy way to monetize the site. The buyer knows this, so he pays a huge multiple because he knows he can double revenue in a day.
It fits in really well with the buyer’s current assets to the point where owning your website would increase his profit by so much to justify a much higher price tag. Chances of finding a buyer like this are close to zero.
The buyer is a dumbass. This is a not as uncommon as you might think.
Thanks for the tips. Very helpful.
Absolutely, Edman, sorry if that wasn’t clear. By “let the market decide” I meant let buyers bid against each other to the max level they feel is a fair price. Even then the max figure reached may not be a fair price if there was a rogue bidder in there playing shill.
You’ve done an excellent job of detailing the primary flotsam and jetsam in the listings :). I wouldn’t pay 24x for any of those cases you described. Many of them wouldn’t attract 12x in open auction. My lower limit of 2x is still too high for some sites and they end up without a single bid. There are plenty of examples of these too.
My advice to anyone with a site like that is to NOT set a high BIN if you genuinely want to sell. Though it’s a BIN and not a reserve, buyers somehow seem to read that as your price expectation and shy away.
If I may point out that your #2 is a pet peeve of mine. It’s not even a Macjob salary I expect them to deduct but a fair salary for the level of expertise required to run the site. I’ve often paid in excess of $50 p/h to replace an owner/webmaster. If you’re selling a site you need to appreciate that your time has value. If you don’t acknowledge it in your listings you may end up looking silly when someone recalculates your “profits” and shows that your site is worthless.
Great tips Edman and FMP. Bookmarked the thread
I’ve got to agree on letting the market set the price.
Maybe someone really wants the site. People get attached to things emotionally, and can bid up items.
Then again… maybe no one will bid.
it will help me a lot while selling my sites…thanks
Thanks for tips.
These are all great tips. Do you have any tips on what’s an ideal length of time for an auction? A week, a few days, 30 days?
I don’t believe it makes a big difference to the final price. Note: SP now allow you to both increase and decrease the length of the auction after you’ve started it.
Thank you, that is helpful. I’ve heard various tips…run it for longer to let excitement build up…run it for less time so that people feel more urgency…I guess there is no perfect formula.
I agree, some people tend to change their minds of the length of the auction period when it comes to no one ever bids on it.
- Making things easy for your buyers may attract more buyers. Keep a zip copy of all the reports etc. that you can link him to. Create a limited access account to your stats / Google Analytics / affiliate account so he can log in and download what he needs at his convenience. Be prepared to compile a detailed guide to running and managing the site. And, importantly for many buyers, make a public offer to upload it to the winning bidder’s server/hosting and set it all up for him.
gr8 helpful post…
Thanks for the tips .Worth reading
Ever heard of the tomato frog? It’s only about 60 mm long so it puffs itself up to fool other animals that it’s much larger than it really is: Tomato Frog. Sitepoint has lots of tomato frogs.
Sometimes as a seller you get threads like this one.
“If the deal falls through, my company is prepared to offer $135,000 for this site.”
“My Budget is around $60k to $70k range so let me know as well if the other $100k bid drops out.”
That’s typical of the tomato frog. He (it’s usually a he) wants to talk big but without ending up with having to follow through on his boasts. A buyer really serious about buying at $135K would contact you privately.
Something else the tomato frogs do is boast about how clever they are. They do this by posing as experts: “Nice site, definitely worth $200,000 or more” (of course! They deal in $200K sites everyday so can recognize one immediately")
My suggestion: Be cruel to frogs. You can splat them, deflate them and let out all their gas by just deleting their posts.
Tomato frog legs don’t taste of chicken, they taste of manure. Specifically, bull manure.
That goes both ways though. One of the easiest methods of getting the price you want is to ask a friend to make a fake bid on your own auction. If somebody falls for it, you get someone to bid a higher price, if not, you can say “the deal fell through” and ask the last person who bid. Often a fake bid is exactly what is needed to kick start an auction.