This article is a guest post by Marc from Vital Dollar. I came across Marc's website from the Rockstar Finance daily email and got pulled in immediately.
Marc has a lot of great stuff on his site and he has experience creating highly profitable websites. If you're interested in the stuff I talk about on my site you'd definitely be interested in the Vital Dollar so go check it out.
How to Sell a Website for $100,000+
The single most effective thing I’ve done on my journey to financial independence is to build and sell websites. Since 2010 I’ve had six different transactions to sell sites that I built (some of the transactions included multiple websites). Of those six transactions, three exceeded $100,000. Those lump sums have made a huge difference for my family’s financial situation, and we’ve been able to save and invest the majority of it.
I know Jim is also a big fan of creating digital assets in the form of websites and blogs, and he’s even bought websites, so I thought an article on the topic of selling websites would be very relevant at AcceleratedFI.
Although selling a website for six figures may seem like a daunting task, it’s really not that uncommon, and it’s certainly not unrealistic. When I started blogging I had no idea what I was doing. I learned as I went, and about 6 years later I was able to sell my first blog for $500,000 (in 2013).
That amount of money wasn’t enough to retire on, but it was a life-changing amount of money for me and my family. Since 2013 I’ve had two other sales that were each over $100,000. These were sites that I started as a hobby and turned into a full-time business.
The topic of selling websites always seems to be of interest to anyone who has a website or blog, so I’d like to break down the process in this article.
Why Sell an Established Website?
If you have an established, profitable website you may be wondering why you would want to sell it. Well, everyone’s situation is different, but here are a few common reasons.
To Cash Out With a Lump Sum of Money
There’s something very rewarding about getting a $100,000+ for a website that you built (or it could have been one that you bought from someone else and improved). Walking away with a few year’s worth of profit is an obvious reason that many people, myself included, would choose to sell a website. Cashing out now reduces your risk of something happening to the site in the future, which could reduce your monthly income and the value of the site.
To Free Up Your Time
If you manage a website or a blog you know how valuable, and limited, your time is. I know I’m always in a struggle to avoid the temptation to take on too much by starting other new websites and blogs. One of the main reasons I’ve chosen to sell websites in the past is to free up more of my time to work on something else without spreading myself too thin.
To Do Something Different
Maybe you’re just ready to move on and do something else. Managing a website or blog can be a lot of fun, but sometimes you can get burned out. If you’re not enjoying it anymore, maybe you would prefer to sell and start something else.
Your Personal Situation Has Changed
This is especially true if you have a full-time job and you manage a website on the side. Maybe your work schedule or hours changed, or maybe some aspect of your family life changed. If that’s the case, selling the site may be a good option.
Reasons You Might Not Want to Sell Your Website
Ok, so now that we’ve looked at some common reasons for choosing to sell a website, let’s look at the other side of the coin. There are also plenty of reasons or situations where it would be better to hold on to the site.
Loss of Ongoing Income
Yes, the lump sum that you get for selling a website is nice, but it also means that you’ll lose the ongoing income produced by the site. Of course, if you depend on that income you’ll want to have a plan to replace it.
The Site Hasn’t Yet Reached Its Potential
Although I’m a big advocate of selling websites and blogs, I recommend holding on to the site until you feel like you’ve taken it as far as you can. If you sell too early you’ll be missing out on a lot of money. Building a successful website takes a lot of time and effort. Once you turn the corner things get easier. You’ll probably be able to put in less time and make more money.
If you sell too early the buyer will be reaping all the rewards of your hard work. This is a fine line because you also don’t want to hold on to the site for too long and get to the point where the profit is consistently declining. Although there’s no formula that can tell you the exact right time, from my experience you usually know when you’ve taken the site as far as you can (or as far as you want to).
Personal Attachment to the Project
Websites and blogs that you create can be very personal. When you sell it you will completely give up your right to control the site in the future. The buyer is likely to make decisions that you wouldn’t make, and you’ll need to be ok with that. If you have a high level of personal attachment to the site it can be very difficult to give up that control to someone else.
What Determines the Value of a Website?
Determining the value of a website or online business can be difficult. In reality, the value of a website is whatever someone is willing to pay you for it.
Most buyers will use a multiple of monthly or yearly profit to determine what they are willing to pay for the site. In most cases this is going to be based on your average monthly profit over the past 12 months.
For example, if you own a site that is 3 years old, the most significant period of time (in terms of determining value) is the past 12 months. Let’s say during the past 12 months you made a total of $48,000 in profit. That comes out to an average of $4,000 profit per month.
Right now the market for selling websites is better than it has been in the past. A pretty typical valuation for an established website right now would be 36x your average monthly profit. In this case, the site averaging $4,000 in profit over the past 12 months would be valued at $144,000 ($4,000 x 36).
Of course, that’s a general example. The multiple and valuation can be higher or lower depending on the specifics, but this is pretty typical for the current market.
Profit is by far the biggest factor in determining the value of a website. A lot of sellers will talk about the potential of a website. Potential for growth is great, but most buyers will base the amount that they are willing to pay on the existing profits of the site.
There are plenty of noteworthy exceptions, but for the typical blogger or niche website builder, you’ll usually find that this formula is pretty accurate.
Getting to Six Figures
Now that we know how most buyers will determine the value, let’s work backwards and see what average monthly profit we’ll need in order to hit the $100,000 valuation mark.
If you have a site that has averaged $3,000 in profit over the past 12 months, and a buyer is willing to give you 36x that average monthly profit, the valuation would be $108,000.
There are two things I want to point out right now:
- The 36x valuation is a target, but the offers you receive may be less. With that in mind, let’s assume of value of 30 times the monthly profit instead of 36, to be more conservative.
- If you’re selling the website through a broker you’ll have broker fees to pay from the proceeds. The fees can vary depending on the broker that you hire, but typically it will be 10-15% for a transaction in this price range.
With that in mind, let’s make some adjustments. If you have a site that has averaged $4,000 in profit over the past 12 months, and a buyer is willing to give you 30x that average monthly profit, the valuation would be $120,000. If the broker fee is 15%, you would be left with $102,000 after the broker fee.
So if you’ve been wondering what you need to do to be able to sell a website for six figures, there you have it. Build a website that generates $4,000 in profit per month and you should realistically be able to sell it and make $100,000 or more, even after broker fees.
What sounds easier, building a website worth $100,000 or building a website that makes $4,000 per month in profit? If you’re like me, it sounds a lot more realistic to reach $4,000 per month in profit. That’s one of the reasons I love selling websites. Even small(ish) websites can bring six-figure paydays.
What Buyers Look For
Going through multiple website sales in the past, I’ve learned a lot about the mentality of a buyer and what they are (usually) looking for. Of course, every buyer is different. But in general most buyers have a lot in common.
The best situation is to have diverse traffic sources for your website. If you’re relying strictly on one source of traffic, regardless of which source that is, you’re at a bigger risk.
Many bloggers get the majority of their traffic from Pinterest. If you’ve been using Pinterest in the past year you know that they make constant changes to their platform, and you and I have no control over that. Pinterest can be a great source of traffic, but it could go away very quickly.
Organic Google search traffic is another big one for many site owners, especially those who take the niche site approach. Organic search traffic is often considered high-quality traffic, but there is also some risk here. Google changes its algorithm constantly, and they also issue manual penalties for things that they don’t like. Most buyers would like to see some other sources of traffic as well, in case anything happens to the Google search rankings.
The best thing you can do is work to establish multiple sources of traffic. That doesn’t mean that you need several sources that are all even, but don’t rely on 90% of your traffic from any one source. If your search traffic is low, see Jim’s guide to improving search rankings for your existing pages.
Work to build up search traffic, social media traffic (at least from one social network), traffic coming from links on other websites, and direct traffic. The traffic reported as “direct” in Google Analytics can be any number of different things, but in a lot of cases it’s people typing your domain name in the browser to go directly to your site, or clicks from your email marketing.
How does your site or blog make money? The ideal situation is to have more than one different stream of revenue. For example, if you have a niche site you may make the majority of your income from Amazon’s affiliate program. But it’s ideal if you also have some other income, which gives you or the buyer a little bit of security in case Amazon shuts down the account or makes major changes to their commission structure (which they have done in the past).
There are a number of different ways you can make money with a website or blog, including display ads, AdSense, affiliate programs, selling your own products, and sponsored content. From my experience, buyers typically prefer if you have a mix of multiple income streams.
The revenue and profit of just about any website will be up and down. Buyers understand this, but you’ll want to avoid wild swings that are difficult to justify or predict.
Seasonal variances are totally normal and easy to explain. For example, if you run a niche website related to camping and your primary monetization method is the Amazon affiliate program, your income will probably be a lot higher in the summer than in the winter. You may have a spike around Christmas as well, but in general, people will be more likely to buy camping-related products during warmer weather than in the winter.
Anyone buying a website with seasonal factors like this will expect to see rises in the summer and decreases in the fall and winter. Those types of trends are predictable.
What you want to avoid are big changes that can’t be explained by seasonality or other legitimate reasons.
Not Dependent on You Personally
If your website or blog is extremely personal, potential buyers are likely to wonder what will happen when you’re no longer running the site. What I mean by “personal” is, do you brand the website around yourself? If people are following the website because of their interest in you more than their interest in the content you publish or the topics you cover, that could be a problem for some buyers.
If your site is currently personally branded and you’re thinking about selling it in the future, you may want to consider scaling back on the personal branding ahead of time.
Work That Can Be Outsourced
Most people who are buying a website are investors. In general, they will want to outsource as much of the work as possible related to running the website (especially for a site with a value of over $100,000).
If you’re already outsourcing some or most of the work, that will be a positive for potential buyers. They’ll probably ask if your current freelancers will be interested in continuing to work for them after the sale. Some buyers may have their own people that they want to hire, but most would prefer to use the same people you’re already using, assuming they’re doing a good job.
If you’re currently doing all of the work yourself you may want to think about outsourcing some of it, or at least finding some freelancers who could potentially be hired by the buyer.
Potential buyers will want to know how much time you are spending on the website per week, and specifically what tasks you’re doing. The easier those things are for the buyer to replicate and/or outsource, the better off you’ll be. This means the work to run the site should be simple.
Some buyers may ask for a manual or video training that will walk them through the process of managing the site. Even if you are not going to prepare this documentation ahead of time, it can be helpful to think about exactly what you do with this site. Is the work simple enough that you can show someone else how to do it? If not, make some changes to simplify things before trying to sell.
Minimal Working Hours
Since buyers are investors, they don’t want to put much of their own time into running the site after they buy it. If they are outsourcing all of the work, the costs of outsourcing will be impacted by how much work is required to run the site.
The closer your website is to running on autopilot, the better it will be for potential buyers. My recommendation is to think about everything you do related to running the website. Chances are, a lot of the time you’re spending on the site could be eliminated or drastically cut back without having a major impact on revenue. Try to find things that you do that are not really contributing much value to the site, and move to eliminate that. Cut your working hours down as much as possible so when potential buyers ask how much time you spend working on the site you can give them a low number. Of course, you don’t want to neglect the site. You just want to cut out the unnecessary stuff that isn’t generating results.
A Timeless Niche, Not a Fad
Someone who is spending in excess of $100,000 on a website will want it to continue to produce profit for years to come. Make sure your site is not built around a fad or something that will lose popularity anytime soon.
Opportunities for Growth
Earlier I mentioned that most buyers will not want to base the price that they are willing to pay on potential. They want actual profit.
That is true. But most buyers will also ask about potential or opportunities for growth. While they are likely to base their price on actual profit, they also want to believe that they will be able to increase profit going forward.
Anticipate questions about opportunities for growth, and have a list of things that a buyer could do to increase profit from the site. Think about things you would do if you continued to own the site. You will know a lot more about the site than potential buyers, so your insight on future growth will probably be very valuable to them.
No Shady Link Building
One of the best ways for a buyer to make a bad investment is to purchase a website that winds up with a manual penalty from Google. The most likely reason for a manual penalty is link building.
I recommend not using a PBN (private blog network) or buying links from other websites if you plan to sell your site. These types of link building tactics will put your site at risk, and many buyers will ask about it before moving forward.
Instead of relying on a PBN, spend more time doing keyword research to find low-hanging fruit that you can rank for.
Of course, you can still sell a site if you’ve used some of these link building approaches, but most buyers will drop their valuation of the site.
Ideally, the traffic and profit of your website will be level or trending upwards when you sell it. If traffic and profit have been trending down it can be a red flag for buyers, and your price is likely to be impacted.
Remember earlier we looked at seasonality. Most buyers will look at year-over-year trends when they are evaluating a website to get a realistic picture that is not influenced by seasonality.
For example, let’s go with the camping website that we talked about earlier. Sales peak in the summer and then decline in the fall. If you’re looking to sell your site in November an experienced buyer would not be thrown off by the fact that your revenue declined from August to September to October. That type of seasonal decline is expected. An experienced buyer will probably be more interested in year-to-year comparisons. How did your profit in August of this year compare to August of last year? That is a more accurate measure of whether your site is trending up or down.
How to Sell Your Website
The ins and outs of selling a website or blog is a much bigger topic than I can cover in detail here, but let’s take a look at the basics.
There are three primary ways to sell a website: 1) on your own, 2) use a broker, or 3) sell it at a marketplace like Flippa.
In general, I wouldn’t recommend selling a six-figure website on Flippa. Of course, there are some examples of sites that have sold for good values there, but in general I wouldn’t recommend it for sales of the size that we’re talking about.
A broker will help you to market the website, weed out the potential buyers who aren’t serious, introduce you to the best potential buyers, and help you to negotiate the sale. The broker may also provide you with legal documents that you can use (although I recommend having your own attorney review them), and some brokers will also help with the transition.
In exchange for the broker’s services, they’ll charge a fee that will typically be a percentage of the sale price. Most brokers charge somewhere in the 10-15% range. If you get into higher amounts, like over $1 million, the percentage will often be reduced.
I’ve sold websites on my own, through a broker, and on Flippa. If you’ve never sold a site before I would recommend using a broker, especially for a site worth six figures.
While no one likes paying 10-15% to a broker, a good broker may be able to help you get a higher price than you could get on your own. The broker will have a network of potential buyers, so hopefully that leads to a quicker sale and a good price for you.
If you sell the site on your own you’ll need to contact potential buyers and negotiate the sale. If you have someone in your network that you think may be interested, this may be a good option. If you do go this route I would recommend having an attorney draft the agreement or at least review it.
Regardless of whether you plan to sell the website on your own or through a broker, I highly recommend that you at least speak to a broker first. Most brokers will give you a free valuation and consultation, so you’ve got nothing to lose. The valuation that you get from a broker can be extremely valuable information, even if you decide not to hire the broker.
Just a few months ago I sold a blog through Quiet Light Brokerage, and I had a great experience with them. They focus on selling websites with six and seven figure values. Within 4 days of listing my site with them I had 2 solid offers. Even after the broker fees I still made more from the sale than I would have been able to sell the site for on my own. Of course, not all sites sell that quickly, but I had a great experience with Quiet Light.
Other brokers like Empire Flippers and FE International are very popular and will give you a free valuation and consultation. Empire Flippers actually has an automated valuation tool that is pretty good. Just enter your details and you’ll get an email with their estimated range for the valuation.
When you’re talking to brokers, keep in mind that they are trying to get your business (usually). Some of them will give you pretty aggressive numbers in terms of what they want to list your site for. Try to get some real life examples of sites they’ve sold recently to see what types of multiple they are bringing (i.e. how many months of profit the site sold for). Try to keep the comparisons as similar as possible. If your site is an Amazon affiliate site, ask for examples of other Amazon affiliate sites they sold in the same price range. If yours is an ecommerce site, ask for ecommerce examples. Don’t choose a broker simply because they will list the site for the highest amount.
Best of luck with selling your own website! If you have questions please leave a comment and I’ll do my best to answer it.
Marc has been a full-time blogger since 2008. He runs the personal finance blog VitalDollar.com and has has blogs in other industries like web design, photography, and travel.
Thanks for the opportunity to publish this article on AcceleratedFI. I appreciate it.