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Buying and Selling Websites

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This presentation is from Affiliate Summit East 2015 (August 2-4, 2015 in New York, NY). Session description: Expanding your affiliate business through website acquisitions and sales? Our experts will provide detailed strategies for buying and selling websites guaranteed to maximize your revenue potential.

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Buying and Selling Websites

  1. 1. Tips To Make Buying & Selling A Website Simple, Fast & Easy Founder & CEO, QuietLight Mark Daoust inquiries@quietlightbrokerage.com www.quietlightbrokerage.com(800)746-5034 FREE
  2. 2. 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
  3. 3. 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.
  4. 4. Buyers should start small, then develop an acquisition strategy, and sellers should focus on preparing the right documentation. PREPARING TO BUY OR SELL
  5. 5. Should I Buy Big or Buy Small? Tips 02
  6. 6. 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
  7. 7. Sellers: How Should You Prepare? Tips 03
  8. 8. 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
  9. 9. 9www.quietlightbrokerage.com Sellers: Financials are your First Focus, Make Sure they are Right Return on Investment Buyers have one reason to buy your business: for a return on investment. Learn to speak their language. Due Diligence Deals 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 Documents Collect and organize verification documents • Bank statements • Merchant statements • Tax returns
  10. 10. 10www.quietlightbrokerage.com Sellers: Don’t Ignore other Documents 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
  11. 11. Sellers should ‘own the ugly’ and buyers should act like high value buyers. EXPLORING THE MARKETPLACE
  12. 12. Sellers: Own the "Ugly" Parts of Your Business Tips 06
  13. 13. 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 ?
  14. 14. Buyers: How to Deal with a Bad Surprise Tips 07
  15. 15. 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
  16. 16. 16www.quietlightbrokerage.com Why do sellers hide things? 02 03 01 Sellers 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 Surprise Being surprised by "ugliness" isn't uncommon. How you react to it sets you apart as a buyer.
  17. 17. Buyers: Keep your offers simple. Sellers, don’t rely on a bidding war to get the best price possible. NEGOTIATING AN OFFER
  18. 18. Buyers: Keep Your Offers Simple Tips 08
  19. 19. 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
  20. 20. 20www.quietlightbrokerage.com Buyers: Keep Your Offers Simple VS Offer 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
  21. 21. Sellers: Bidding Wars are Not Always Good Tips 09
  22. 22. 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 Good Bidding 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
  23. 23. Want to learn more, download our whitepaper on the 5 Mistakes Sellers Make that Destroy Website Value http://www.quietlightbrokerage.com/5-mistakes
  24. 24. THANK YOU! inquiries@quietlightbrokerage.com www.quietlightbrokerage.com(800)746-5034 FREE
  25. 25. 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
  26. 26. About Quiet Light Brokerage We Sell High Value Websites
  27. 27. Buyers & Sellers Follow a Predictable Process Tips 01
  28. 28. Sellers: Financials are your First Focus Tips 04
  29. 29. Sellers: Don’t Ignore other Documents Tips 05
  30. 30. 30www.quietlightbrokerage.com Buyers: Keep Your Offers Simple VS Best 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?

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