buying and selling websites
TRANSCRIPT
Tips To Make Buying & Selling A Website Simple, Fast & Easy
Founder & CEO, QuietLight
Mark Daoust
www.quietlightbrokerage.com(800)746-5034 FREE
2www.quietlightbrokerage.com
Founded in 2007
600+websites & online
businesses sold
vv$70M+
in total transactions
$20M on track
sales in 2015
We’ve learned a lot about what
makes a successful sale and acquisition
Buyers & Sellers Follow a Predictable Process
Explore the Marketplace
Negotiate an Offer
…there’s more, but we won’t explore due
diligence or closing
Preparation to Buy or Sell
I want to step through this common process and pull 1 or 2 lessons for both buyers and sellers for each step that we’ve observed over the course of 600 deals and $70mm+ in acquisitions.
Buyers should start small, then develop an acquisition strategy, and sellers should focus on preparing the right documentation.
PREPARING TO BUY OR SELL
Should I Buy Big or Buy Small?Tips 02
6www.quietlightbrokerage.com
Should I Buy Big or Buy Small?
Go into your first purchase knowing you could lose your
entire investment
Online businesses lose value faster than offline businesses
Starting big can be overwhelming & leave you
miserable
Identify natural points of leverage
Know what you are good at
Pool Resources
As you gain experience, buy bigger with an acquisition strategy
First time buyers should buy small
Sellers: How Should You Prepare?Tips 03
8www.quietlightbrokerage.com
Sellers: How Should You Prepare for a Sale?
01
VALUATION
Get a starting valuation. You’ll discover if you should wait or if you
are ready to go to market today
02
TIMING
Timing your sale has significant impact on
value
03
FINANCIAL FOCUS
Your financials should always be the first place
you focus. Get these right.
04
DOCUMENTATION
Prepare documentation
9www.quietlightbrokerage.com
Sellers: Financials are your First Focus, Make Sure they are RightReturn on InvestmentBuyers have one reason to buy your business: for a return on investment. Learn to speak their language.
Due DiligenceDeals fall apart most frequently during due diligence. Get your financials right to make this a breeze.
Accounting Methodology Make sure your accounting methodology is right for the best valuation.• Accrual/cash basis accounting can turn out different valuations• Recording certain expenses wrong can lower your valuation
(example: website rebuild)
Verification DocumentsCollect and organize verification documents• Bank statements• Merchant statements• Tax returns
10www.quietlightbrokerage.com
Sellers: Don’t Ignore other Documents
CONTRACTS
VARIOUS REPORTS
GOOGLE ANALYTICS
01
02
03
Financials are the most important documents to have right, but don’t ignore other documents
Contracts with vendors
Various reports on membership/clients (collect as much as possible)
Google Analytics setup & installed correctly
Sellers should ‘own the ugly’ and buyers should act like high value buyers.
EXPLORING THE MARKETPLACE
Sellers: Own the "Ugly" Parts of Your BusinessTips 06
13www.quietlightbrokerage.com
Sellers: Own the "Ugly" Parts of Your Business
There is no such thing as the perfect website for sale. Don't hide the
ugly parts of your business - own them.
Don't Hide The Ugly Parts
Buyers can handle weaknesses. Buyers can handle threats. Buyers can't handle
surprises.
Buyers Can't Handle Surprises
Buyer's will assume the worst if they are
surprised by a weakness
Buyer's Will Assume the Worst
Buyers will also question your honesty
and competency if they discover a
significant omission.
Buyers will Question your Honesty
Be upfront about weaknesses. Explain
them. Explore them.
Be Upfront about Weaknesses
Help a buyer to form the proper conclusion about your business's
weakness.
Help Buyer to Form Proper Conclusion
?
Buyers: How to Deal with a Bad SurpriseTips 07
15www.quietlightbrokerage.com
Buyers: How to Deal with a Bad Surprise
Learn to act like a high value buyer
Possible Conclusion
Ask Seller
Make Observation
Reach Conclusion
16www.quietlightbrokerage.com
Why do sellers hide things?
0203
01Sellers focus on metrics that aren't the same as you need to make a buying decision.
Sellers generally don't know what you need to make a good decision.
Sellers love to focus on their accomplishments, not their failures
Buyers: How to Deal with a Bad SurpriseBeing surprised by "ugliness" isn't uncommon. How you react to it sets you apart as a buyer.
Buyers: Keep your offers simple. Sellers, don’t rely on a bidding war to get the best price possible.
NEGOTIATING AN OFFER
Buyers: Keep Your Offers Simple Tips 08
19www.quietlightbrokerage.com
Buyers: Keep Your Offers Simple
There is value to building in complexity (holdbacks, financing,
performance bonuses) into an offer to protect against risk
Value to Building in Complexity
Overly complex offers rarely succeed because sellers have
difficulty identifying their real value
Complex Offers Rarely Succeed
Which of these is easier to understand? Which seems less risky? Simple offers are more
easily accepted
Simple Offers More Easily Accepted
20www.quietlightbrokerage.com
Buyers: Keep Your Offers Simple
VSOffer 01
• Total Offer: $450,000
• $400,000 Cash
• $50,000 30-Day Holdback
Offer 02
• Total Offer $480,000• $300,000 Cash at Close• $120,000 Payable Over 3 Years w/ $25 balloon
payment at end• Performance bonus of $5,000 for each quarter over
3 years that matches or exceeds sellers last respective quarter's net income.
• Net income shall include revenue - expenses with expenses not exceeding seller's last respective quarterly expenses.
Consider these Two Offers
Which of these is easier to understand? Which seems less risky? Simple offers are more easily accepted
Sellers: Bidding Wars are Not Always GoodTips 09
22www.quietlightbrokerage.com
Sellers: Bidding Wars are Not Always Good
Inform all parties that there are multiple interested buyers
Give buyers an option to back out if you anticipate competing bids
Give remaining buyers a deadline to submit an offer
If two or more offers are received when you weren’t expecting, allow all buyers to submit one revised offer. Ask them to make it their best and final.
The GoodBidding wars can use competition to leverage purchase price
The Bad• It can cause a lot of bad will (remember
that deals are made on trust)• Buyers who lose may feel increased
leverage if the business comes back to market
• Buyers who overpay due to bidding wars are more likely to back out of a transaction.
• A bidding war might be a sign that you priced improperly
Managing a Bidding War
Want to learn more, download our whitepaper on the
5 Mistakes Sellers Make that Destroy Website Value
http://www.quietlightbrokerage.com/5-mistakes
THANK [email protected]
www.quietlightbrokerage.com(800)746-5034 FREE
25www.quietlightbrokerage.com
A Quick Look into the Presentation
Start
End
About Us Tips -01 Tips -03
Tips -08 Tips -07 Tips -05
Tips -04
Tips -09
Tips -02
Tips -06
About Quiet Light Brokerage
Buyers: How to Deal with a Bad Surprise
Buyers & Sellers Follow a Predictable Process
Should I Buy Big or Buy Small?
Sellers: Should you Wait or Ready to
Go?
Sellers: Financials are your First Focus
Sellers: Don’t Ignore other Documents
Sellers: Own the "Ugly" Parts of Your
Business
Buyers: Keep Your Offers Simple
Sellers: Bidding Wars are Not Always Good
About Quiet Light BrokerageWe Sell High Value Websites
Buyers & Sellers Follow a Predictable ProcessTips 01
Sellers: Financials are your First FocusTips 04
Sellers: Don’t Ignore other DocumentsTips 05
30www.quietlightbrokerage.com
Buyers: Keep Your Offers Simple
VSBest case
Est. $150,000 tax liability leaving $600k (absent broker fees)
Worst case
Est. $263,369 tax liability leaving $486,630 + higher taxes on regular income
Example on Allocation
Depending on how the purchase price is allocated, a seller will pay drastically different taxes. Here is a “best case” and “worst case” scenario for a $750,000 deal
The tax consequences for the seller can be a deal breaker.
Larger offers ($500k+), negotiate the asset allocation up front. Why?