How Do You Sell a Website?

At one point or another, most people who run online businesses consider selling their web empire.  And selling a website can be quick, easy and profitable.  Or it can be frustrating, confusing and not profitable.  As someone who has sold more than a few websites, all in under two days and some in less than an hour, here’s my frank advice on how deals get done.

First up is the valuation of your website.  That means figuring out what it’s worth.  And this is where most people totally screw up.

Let’s say John has a website that generates $1,000 a month is sales.  The site has a PageRank 5.  It has 10,000 visitors a month and is ranked well for many of the keywords in it’s market.  John also thinks the site has great potential.

In the brick and mortar business world, businesses are typically valued at 3 times yearly sales.  In John’s case that means his website would be valued at $36,000 ($1,000 a month is $12,000 a year…times 3 equals $36,000).

But since John’s website isn’t a brick and mortar business, it’s all 100% online, his business is actually valued very differently.

First let’s take the PageRank and traffic and Google rankings.  Those might help make a buyer be more interested in the site versus another, but they add zero to the dollar value of the website.  That’s because those things can disappear overnight.  And John’s thoughts of “great potential”?  Absolutely worthless.

The only thing that matters is the net monthly profit for the website.  In John’s case, although he has $1,000 a month in sales, let’s say his net monthly profit is only $500.  You then multiply that with a number between 8 and 12.  In John’s case, that would come out to $4,000 – $6,000.  And that’s what John’s website is worth…between $4,000 to $6,000 dollars (sorry John, it’s not worth the 36 grand your unemployed brother-in-law told you).

Now there are always variables and wildcards that might come into play, but typically in the real world of buying and selling websites, a websites value is between 8 and 12 times monthly net profit.  So now you know what you’re website is realistically worth…but where do you sell it?  Here are the 3 primary ways:

1. Brokers/We Buy Websites – First up is brokers.  They examine your website and financials and present your website to potential buyers.  If a sale is made, they typically pocket 10% of the sales price.  But because brokers work on commission, they typically only deal with websites valued in the six-figure or higher range.  If your website is worth that, brokers can make the process of selling your website relatively turn-key.

“We Buy Websites” types of businesses are the equivalent of people who stick signs on the side of the road that say “we buy houses”.  Type “sell your website” on Google and you’ll find plenty of these folks.  These guys are flippers…they buy websites and then flip them for a profit.  As a result, they prey on the desperate and uninformed to get dirt cheap prices for websites.  And some of these places have ulterior motives beyond just flipping (like finding untapped niches).  In a nutshell, avoid these places.

2. Direct Buyers – This is where you sell  your website to someone without having to go through a third-party.  Maybe someone contacts you and asks to buy your website.  Or maybe you contact other website owners in your market.  Or maybe someone tells you about someone else who might be interested in your site.

But more often than not, direct buys happen through forums.  And the major forums where the action takes place are Digtial Point, Sitepoint Market and the Warrior Forum.  You do a post about offering a website for sale and then people contact you for details.  It can be a great way to find legitimate buyers for your website without having to tell the world what your domain is (you reveal it to people only after they have contacted you and seem legit).

The downside is it’s also a great way to invite the worst the Internet has to offer into your life.  You can end up feeling like a car salesman, where people waste your time, tell you they are interested but then disappear or go as far as working out all the details of the sale…only then to drop the bomb that they don’t have the money.  Flippers also patrol these forums, so you typically want to stay away from any posts that say “Looking to buy websites…”.

3. Auctions – There are lots of auction sites where you can sell your online business, but honestly, the only one worth your time is the 800 pound gorilla Flippa.  With Flippa, you can list your website for sale starting at the cost of $19 (or you can pay more for a more prominent listing, which is usually well worth it).  You can set a reserve price and buy it now price.  And then people bid on your website, just like any other auction.

If and when someone buys your website, you can complete the transaction pretty much anyway you want, but almost everyone chooses to do it with Escrow.com.  They buyer will deposit the money with Escrow.com, you transfer your domain, website files, etc. to the buyer, and when both of you say “OK, the deal is done”, Escrow.com will send you a check.

Escrow.com will charge you a fee for this, which is based on a percentage of the escrow amount.  It can vary but is usually around 3%.  And Flippa will also charge you a “success fee” if you sell your website.  This success fee is 5% of the sales price, with a max success fee of $500.  Both the fees charged by Flippa and Escrow.com can be shared between the buyer and seller or picked up by one of them…that’s something you negotiate in the sale.

But really, the key to all of this is the very first thing I mentioned in this post; properly valuating your website.  And like I said, people screw this up all time because they stubbornly believe their website is worth way more than it actually is.  So if you want to actually sell your website and do it with a buyer who won’t screw you over…don’t be one of these people.