After years of hard work and stress, your website has amassed a reliable following and draws in numerous leads for your business. What’s the next step? Some may want to keep building, expanding, innovating – until they can take their business across borders. Others may want to sell the website to a bigger organisation and live off the profits.
No matter the purpose of your website, if it is successful and draws in a large number of visits, it probably has a lot of value to outside investors or entrepreneurs. Small, but growing, websites such as content sites, software as a service (SaaS) and e-commerce stores are highly sought after by bigger organisations looking to expand their portfolio.
So how do you value your website and ensure that you get paid the most? If you have a great website and would like to sell it, here are a few tips that will make the process less stressful and more rewarding:
SEO is key when it comes to price
Attracting organic traffic through good SEO practices is one of the most appealing factors for potential buyers. It shows the buyer that you have a solid SEO strategy in place that keeps the website high on the rankings of search engines going forward.
Having a great SEO structure also means that the website will maintain it’s ranking and performance during the takeover change period, which could last a couple of months. Unlike PPC campaigns, good SEO doesn’t need daily maintenance and monitoring, and it doesn’t cost a cent.
The SEO groundwork has already been done, so the buyer can focus on taking the content of the website to the next level. They can test more complex SEO techniques at a later stage if they need to. The basic principle is the higher your website is ranked on search engines, the more attractive it is to potential buyers.
How are online businesses and websites usually valued?
Websites and online businesses will be valued differently by various buyers in different locations around the world. There are automated valuation tools available online that can predict an estimate of your website, but it really comes down the buyer.
The foundation of a valuation is usually calculated from your website’s 12-month average net profit, multiplied by anything between 20 and 50 (depending on how profitable that website is). If your business is growing rapidly and has major potential to rake in sales, the profits will be multiplied at the upper end of the formula (i.e. towards 50).
Some website evaluators will take your earnings before interest, tax, depreciation and amortisation (EBITDA) and multiply those by two or three to arrive at an estimated value of a website.
The difference between these two formulas is that the first one is based on monthly profits and the second one is based on annual profits. It’s good to know about both formulas so you can understand how a buyer arrives at their offer price.
How to get the most from the sale of your website
The final offer price really comes down to how much the buyer thinks your website is worth. The formulas and valuations are just estimates, but if the buyer doesn’t perceive the value of your site, they won’t offer you as much.
You can try to put yourself in the buyer’s shoes and ask how much work still needs to be done on the website, what will this cost and how much money is it likely to generate in return. Two important factors to note are the average net profit of the website and how long it has been online for. We’ll also take a look at several other factors that affect the price of your site.
- Average net profit
The higher your average net profit, the more valuable your business will be to a buyer. You can find and put into effect ways to reduce your expenses and increase your margins prior to selling. This will raise the value of your website.
You can cut expenses by scaling back your content output slightly, reducing your costs to writers and content creators. You can also cancel any unnecessary monthly subscriptions to SEO services and other web-based platforms that you may have needed in the past; if it’s not vital to the functioning of your website, cancel it.
Bear in mind that this doesn’t mean you should get rid of employees and freelancers and start doing the work yourself. Buyers aren’t going to buy a website/business if they have to take on all the work alone.
- Age of your website
The longer your website has been live and generating profits, the more appealing it will be to buyers. Added to this, if your website is still growing steadily, the offer price is likely to be even higher.
Before selling, if there are any improvements to be done or major changes to be made to the website, do them as soon as you can. The longer these changes have been in effect prior to selling, the better. A buyer is not likely to acquire a website that has had a major redesign a month ago because it hasn’t been tested and the profitability and ranking may be compromised.
Year-on-year growth will show the buyer that your website can stand the test of time and that the SEO works, despite the numerous algorithm changes that take place at Google.
- Critical points of failure
A critical point of failure is something that can break your business if it fails. For example, having only Google-organic traffic means that your website could fail if Google penalises the site after an algorithm change. Most websites have one or two critical points, so know what they are and try to address them.
Other examples include; you only have one supplier for your e-commerce site – if they close down, you’ll have no more stock; you’re affiliated with a bigger website – if they change their Terms of Service you could get banned without knowing it and lose your traffic.
The best way to reduce your critical points is to diversify your traffic sources, have a backup plan and a different way to monetise the site if needs be. You’ll need to show a potential buyer that alternative plans are in place should something go wrong.
- Social media following
No online business is complete without social media accounts and strategies to connect with consumers. The more followers you have, the bigger your reach, influence and pool of potential site visitors.
These are appealing factors to buyers as it generally means that you can market offerings to a wider audience and attract more traffic to the website. If you can prove that your social media strategy and promotion is generating real results, then your website value will increase.
- Uniqueness and brand image
A good website is one that can’t simply be copied and replicated in a day. The more unique your site and the better your product offerings, the more a buyer is likely to pay. But having a strong position in a niche market is not all a buyer will be looking for.
If your audience is loyal to your brand and you’ve amassed a real community around your offering, then your website is more valuable to a buyer. Your business needs to be unique but also attract repeat buyers who love what you have to offer. The harder it is to copy your website and offerings, the more money you’re likely to get.
Whatever your reasons for wanting to sell your website, make sure you put in the work to make it the best it can possibly be before approaching potential buyers. It’s in your interest to invest time and a bit of money to get your website to a sellable stage.
Being paid 20 to 50 months of your profit in one go is a great way to jumpstart another bigger project. Remember to be conservative in your estimations of your site – you’re more likely to see a higher value than a buyer because of all the work you had to put it to build it.
Have a minimum sales price in mind – anything less than this, you can refuse the offer, and anything more will make you happy with the sale.
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Mobimeme offers content marketing, SEO, analytics, social media management and expert direction in the digital sphere. Building and growing online audiences for your business is what we do best. Get in touch with us to find out more about our package offerings and how you can improve your website and following.