There are certain aspects of selling a website and getting maximum value for it that are agreed upon in the industry.
After analyzing hundreds of different sales, the aspects that investors are concerned with are the aspects that will determine how quickly they’ll be able to see a return on their investment, and how stable the business is going to be after they buy it.
With so many sophisticated buyers investing large amounts of money, there’s hardly room for them to take risks on buying a website that potentially won’t make any money.
If you are thinking about selling a website or an online business that you’ve developed and want to ensure you’re going to get the maximum value from the sale, you need to address each of the areas that investors are looking into.
During the negotiation process, you can expect investors to go through your business with a fine-toothed comb, pouring over the details, making sure nothing is being left out and that they can make an educated decision with their money.
Whether you’re selling the website for $2,000, $200,000, $2,000,000, or even more, going over the areas listed below can help you capitalize on your hard work and make sure your buyers are getting into a situation where they are positioned to win.
#1 – Cash Flow
Investors aren’t going to want to buy your business if it’s strapped for cash flow.
If you are generating $100,000 per month in revenue but only keeping $1,000 per month in profits, there’s very little room in the business for an investor to make a return.
It also shows that your business model is highly volatile and if you face any significant changes in the business you could be shutting your doors.
If you have cash flow problems in your business, dig into your books and figure out where you’re wasting money, how you can increase your profit margins, and possibly even tap into new market segments that are worth more to the business.
Cash flow is the ultimate metric that determines how much your business is worth, and if you have cash flow problems you’re going to have other problems, like finding an investor that’s willing to make an offer to buy it from you.
#2 – Organic SEO Rankings
Organic search engine traffic is some of the most profitable, highest converting traffic you can drive to your business and website.
Once you have obtained the top spots, holding your high rankings is relatively straightforward, provided you’re not working in a highly competitive industry.
Even with that being said, if you have built the business around ranking in the search results of major search engines, your business could be far more lucrative to an investor that understands the power of search engine traffic.
However, if you’re entirely reliant on the search engines to keep your business afloat, you’ll need to diversify your traffic sources before you list the business for sale to help reduce the risk that your investor faces if they buy the business from you.
#3 – Traffic Stats
Once you’ve diversified your traffic sources, and are making sure that you’re tracking how each and every visitor finds their way into your site, you’re going to need to identify how much of the traffic is converting into revenue for the business.
There are 2 key metrics that you want to focus on: your conversion rate and your close rate.
Your conversion rate is easy to identify, and easy to increase. You can identify it based on how many visitors are converted into leads for your business. If you convert 5 out of every 100 visitors into a new lead, you have a 5% conversion ratio.
Your close ratio is a bit harder to identify and will require you to identify how many leads you’re able to convert into a paying customer. If you can convert 20 of your leads into paying customers, you have a 20% close rate.
To increase your revenue based off these stats you can drive more traffic into the site, increase your conversion ratio on the site, or work with your sales team to convert more leads into paying customers.
#4 – Traffic Trends
Traffic is the backbone of every internet business. If your traffic is on an upward trend, investors are going to be more inclined to offer a higher asking price.
However, if your traffic has become stagnant or, worse, has begun declining in the months leading up to you deciding to sell the business, investors are going to be more leery about making an offer for the business.
If your traffic has recently been on a downward trend, you’re going to want to plan ahead.
Instead of selling the site right away, try to give yourself 3-6 months to get the traffic moving forward again. Investors are going to want to see that there is still potential left in the business, and traffic that is decreasing is a big sign that something is going on in the business.
Most times, investors aren’t going to dig in to find out what’s going wrong and whether or not they can fix the issue, they’ll simply move onto the next offer.
#5 – Business Model
While it may be too late to address this issue by the time you make the decision to sell, the business model you’ve chosen plays a large role in what investors are going to be willing to offer you to buy the business from you.
Advertising-focused websites and websites that send their visitors off to another business in exchange for a commission are always going to fetch a lower premium.
Businesses that were built around maintaining a list of customers and capturing those customers for themselves, especially businesses that receive recurring revenue will fetch higher premiums and be far more attractive to investors.
If you realize that your business model is volatile, you will want to find ways to capture your customers and generate revenue from them for your own business, if it’s at all possible.
This will delay the time it takes you to sell the business, but could pay off huge when you start looking for investors.
#6 – Domain Name
Even though most business owners probably don’t think about it, the domain name attached to your business could increase the price you can ask for it when you decide to sell.
This is especially true if you have spent years marketing the business and the domain name is well known and branded.
It’s hard to place a value on the domain name by itself, but if it’s considered to be a premium name or is receiving a large amount of branded direct traffic, it increases the value of your business and investors are going to find your offer more attractive.
#7 – Average Customer Value
Another metric that plays a big role in how much investors are willing to offer is your average customer value.
If you are giving yourself time before the business will actually be sold, increasing this value can deliver exponential returns in the final value you can ask for the business.
For instance, increasing your average customer value by 10%, and increasing your average monthly revenue by 10% can deliver a 200% return or more on your final asking price.
Since most sites sell for an average of 2.44 times their yearly net profits, increasing your monthly revenue by $1,000 by increasing your average customer value could mean an additional $28,000 from the sale.
It’s worth putting this work in up front instead of letting your investor do it after they’ve bought the business from you. Not only will it show your investor that your business still has potential left in it, but you’re going to get more from the sale.
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