One of the biggest issues facing website owners today is that they do not know the value of their website. Some may ask, why? Who cares if I don’t know the value? All I care about is that it is making money now and I love what I do.
Sure, that is fine for now, but do you have an exit strategy? What if there are extenuating circumstances that stop you from being able to run your site the way you are right now?
Every website or business needs an exit strategy and it helps to be prepared from the start.
One of the problems that profitable site owners face is that they are disorganized when it comes to keeping track of historical data. They may have traffic statistics and some basic merchant account revenue details, but they do not have the complete picture.
So, my advice to all you website owners: Be prepared from the start as there are many potential investors out there who are willing to pay good money for a profitable web based business! There is a market to sell your site, and depending on the niche, your site can be worth up to 3 times your profit!
So how do you make sure that you can be prepared when a potential buyer comes knocking on your door? What metrics need to be tallied and what records need to be in order to ensure buyers can have a complete picture of your web business and make a realistic offer for purchase?
Here are the keys to be well prepared for any potential buyer:
1) Financial Records
Dollars spent versus dollars earned is probably the most important type of records one can keep in any business, not just online businesses. If you have already started your e-business and do not have these records in order or do not know how to, speak to your accountant and get that sorted out right away. If not just to position your website to sell, but to keep the tax man happy too. Investors need to see profit and loss statements from the past couple of years and they are really interested to see if there has been significant growth over those years. Your website is only worth what it has done lately. For instance, if you made $35K each of the last 2 years, your income is fairly steady and your site may sell for $60-70K. Now, if you made $100K in 2008, but only made $35K in 2009, the value of your site drops drastically. Not only will an investor see a reduction in revenue, but he will offer less for your business than the first scenario. It is all about how you position your site!
2) Traffic Information
This one is fairly easy and MOST website owners do a pretty good job with this. Make sure you have your traffic in order. Use Google Analytics if you do not already do so and you will be able to provide historical traffic data at a click of a button.
3) Growth Opportunities
Constantly be searching for key growth areas on your site. Do this from the start. If you identify them, but never actually get to them, you at least give potential buyers some ideas as to how to increase the value of the website.
Put it all together! This is almost like creating a business plan. Firstly, you need to do a full SWOT analysis on your web business. For those who do not know, a SWOT analysis identifies any business’s Strengths, Weaknesses, Opportunities and Threats. Once that is complete, compile your profit and loss statements for the past couple of years and work them into the document. Then, add traffic details from Google Analytics or any other program you may use. You also want to provide a brief background on the business that explains how exactly your website makes money, how traffic is acquired and what the history of the site is. By putting this document together, you will not only be in a great position to sell your site, but you will have a much better understanding of the value of your business.
So, these are the basics. If every site owner that approaches me has this information at their fingertips, it will certainly speed up the process of selling the site and it will also add value. Simply by being organized you can add intrinsic value to the business.
About the author: If you are a site owner and need help putting any of this information together, or are curious about selling your website, simply contact me and I would be happy to help you! As well, if you know anyone that may be able to benefit from a website broker, you can reach me at Michael@wesellyoursite.com or simply visit www.wesellyoursite.com.