Selling your site

[Nico]

Hi,

I recently received an offer to buy my Famous Dead site, which after talking about details, i rejected.
But that got my thinking on what's the best way to handle this situation.
I should clarify that i wasn't going to sell the site (specially since im working on re-launching it with new content/design), the buyer contacted me directly and made me an offer.

So, a couple of questions that you can help me with...


First, how do you know if the buyer is serious about buying?
I mean, you don't want to start giving all kinds of info to anyone right?
I did a search about the potential buyer, but that was it. I could have asked for personal info before i proceed, etc.

If someone wants to buy, do you give them a direct price or you want them to give you a first offer?

How do you calculate the value of your site?
I know there are tons of ways of doing this, but what do you guys do?
For sites that are already making money, i see that's it's pretty common to multiply the amount you are earning per month by X months. Like: $500 x 12months = $6000
But i don't like that approach very much, because it leaves so much variables out (design, content, custom programming, domain, etc).

How do you handle the payment and transfer process?
I assume that you ask for a 50% advanced, then transfer the domain & site, and then ask for the other 50%. Probably Paypal is the common payment method?

What about contracts?


Thanks,
Nico

[ZigE]

Keeping in mind i've never bought or sold a website before, but did have a meeting with a potential buyer not long ago.

1) You can never be 100% sure, but if you can find out a bit about them, maybe speak to them on the phone. You can get people to sign non-disclosure documents before your give out any sensitive information (if its needed.)

2) Once they have the revenues of the site they'd usually make an offer and you negotiate from there.

3) x12 months seems cheap to me, but I've seen alot of adsense sites go for that. Normal everyday businesses sell for around 28 - 36 months. It really depends on the site, is it a market leader, projected earnings, does it rely on only search engine traffic.. etc etc

4) Escrow?

5) No idea, speak to a lawyer/accountant I guess.

[Chris]

#1 Have them submit an offer in writing. Even if they email the offer, tell them to submit it in writing before you'll consider it.

Do this, even if you don't want to sell.

Why? If you ever need to valuate your site in the future you will have a written record of what someone was willing to pay for it in the past. This could prove invaluable. I know I wish I had done this.

You would definitely use an escrow service to handle transfering. For a really big sum though you'd probably meet face to face with lawyers and sign a purchase agreement and transfer the funds right there on the spot.

[Chris]

As for how to calculate value.

Always start with assets.

Assets + some degree of going forward profits.

If you want to be technical, and your business is big enough, you would look at public company valuations for companies in your same sector with your same business model and extrapolate your value based on comparisons with your income vs. theirs.

[Nico]

Thanks ZigE and Chris.


x12 months seems cheap to me, but I've seen alot of adsense sites go for that. Normal everyday businesses sell for around 28 - 36 months.

I agree that 12months is pretty low, i was just giving it as an example. I guess, like you said, it depends on the site and on what the owner wants.



#1 Have them submit an offer in writing. Even if they email the offer, tell them to submit it in writing before you'll consider it.

That's a good advice. Although i think having the actual papers would be far better than an email. I can see how asking them to submit an offer in writting could really help us, not only to find out if they are serious, but also like you said, to have some proof of the offer.



As for how to calculate value.
Always start with assets.
Assets + some degree of going forward profits.


What do you mean with start with Assets??

[rpanella]

What do you mean with start with Assets??

Assets include domains, software to run the site, etc.

So if you have a domain worth 5k and are only making 100/mo you could base your price on something like 5k + 100*(revenue multiple)

Basically, without any revenue your site is still as valuable as its assets.
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[Chris]

Think of it like a manufacturing business. Your assets are your building, your machinery and equipment, etc. Things you could sell if you took apart the business and ceased operation.

[Nico]

oh, right, thanks! That's what i was thinking about, you start with the assets and then you add the Profits.