High profile business acquisitions are in the news constantly, but you don’t have to run a huge business to benefit from the financial windfall of selling one.
In recent years, the market for buying or selling websites, blogs, and other online businesses has picked up significantly. That’s why you need to maximize the value of your website. If you have a profitable online business, you could be in a position to walk away with a nice parting gift.
As an online business owner, you’re building an asset. When I left my full-time job in 2008, I collected my last paycheck, and I would never make another dime from the 4 years that I put into that job.
But with online businesses, I’ve been able to sell my websites and get somewhere in the ballpark of 2 year’s worth of profit, sometimes more, when I’m ready to walk away.
Since 2010, I’ve had 6 different transactions (in a few cases, I sold multiple websites together), ranging anywhere from $1,000 to $500,000. Three of those transactions were for more than $200,000. Most of these sites were blogs, although they were monetized in different ways, like display ads, digital product, sales, and membership. There was also one Amazon FBA business in there as well.
The first website I sold was in 2010. I sold it for $50,000, but I made a ton of mistakes leading up to the sale. Fortunately, those mistakes helped me to do a better job in the future.
In this article, I’d like to share some tips that can help you to increase the value of your website, blog, or online business should you decide to sell. There are a lot of pros and cons to selling a website, so be sure you take the time to make the right decision for you.
This article is part one of a two-part series. Part two will be about the steps you can take to actually get your site sold.
I’ve never bought a website, but through my experience of selling several websites, I’ve learned some things about the way buyers think. I hope these tips will help you to maximize the value of your website or online business and to avoid leaving money on the table.
Tips to Maximize the Value of Your Website
1. Plan Ahead
When a potential buyer determines what he or she is willing to pay for a website, the biggest factor will be the average monthly profit that the site is producing. They may base it off of the average of the past 3 months, 6 months, or 12 months. It really just depends on the buyer, the age of the website, and other factors.
Most websites are not completely maximizing their value. If you plan ahead, you can give yourself some time to increase profit and traffic. Consequently, you will get more for the site when you sell it.
This was by far the biggest mistake I made when I sold my first website it 2010. I had been running the site part-time for a year and a half, and squeezing the most money out of the site was never my number one focus. The site had good traffic but was only making money from a few ads. When I decided to sell, I created some new ad zones and also started publishing sponsored content.
The revenue went from a steady $1,000 per month to $2,000 the next month. The last month I owned it, it went to $3,000. The jump in revenue was nice, but it was short term. From a buyer’s perspective, I didn’t have the proper revenue history to pull in 30x the profit of that final month. I should have held the site for 3-6 more months. The hold would have let me prove the site’s new profitability. As a result, I probably would’ve been able to sell it for closer to $90,000 instead of the $50,000 I actually got for it.
The next time I sold a site, I planned 6 months in advance. During those 6 months, I worked to increase the profitability of the site, and it paid off.
Depending on your situation and the reason you’re looking to sell, planning ahead may not always be possible. But unless there is some urgent reason why you need to sell right away, I highly recommend that you plan ahead and give yourself time to maximize the value of your site before selling.
Not sure what to do to maximize the value? Don’t worry, that’s what the rest of this article is about.
2. Reduce the Amount of Time You Spend Working on the Site
One of the first things a potential buyer will ask is how much time you spend working on the site. Buyers are investors, and most of them will outsource as much of the work as possible. They don’t want to buy a job (this is another thing I underestimated the first time I sold a site).
If a buyer is going to outsource the work of managing the site, he or she will need to estimate how much it will cost. They’ll deduct those expenses from what they anticipate bringing in to determine their expected profit from the site.
For example, say you have a site that averages $5,000 per month in profit, but you spend 40 hours per week working on the site. You’re probably not factoring that time that you spend into the profitability of the site. The buyer, however, has to consider it because most of that work is going to be outsourced to other people.
So, if you’re able to maintain that $5,000 per month profit and reduce your time down to 15 hours per week, you just increased the value of your business!
Cutting back your hours without losing income may sound like a tall task, but from my experience, it’s usually very do-able. If you’re like me, you probably spend time on things that aren’t 100% necessary or don’t directly generate income.
Take a step back and evaluate everything you do related to managing your website. Look for things that are taking up your time but not really producing much income. Could you spend less time on social media? Could you publish one or two fewer posts per month or per week? Is there a type of content you’re producing that never really gets results?
You don’t have to totally eliminate things either. Focus your efforts instead. Try to reduce the amount of time you spend on social media, writing new posts, or other tasks.
Most likely you’ll be able to find several ways you can cut back without having a damaging impact on your site. This optimization is an important step to maximize the value of your website.
3. Find Good Contractors Willing to Transition
As I mentioned, the buyer is likely to outsource a lot of the work. If you have freelancers, a VA, or even employees in place, it will make things that much easier for the buyer. It’s possible that the buyer will have other people that he or she will want to hire. In many cases, the buyer would prefer to continue to use the people who are already familiar with the site.
One of the big benefits here is that there is no guesswork related to cost. If you have a freelancer who contributes 5 blog posts per month, and you pay $100 per article, those are very concrete numbers.
If you’re doing all of the work yourself, the buyer will have to estimate how much it will cost to pay a contractor. A high conservative estimate can negatively impact the value of your site.
Not only does it help to have real-world numbers, but buyers often won’t have much knowledge of the topic of your site or blog. The buyer will likely have to spend time learning in the transition period. Freelancers or virtual assistants can keep things running while the buyer gets up to speed.
If you’re currently doing all of the work yourself, outsource some of that work. It will add some expenses for you, but reducing the amount of time you spend on the site can more than outweigh that cost.
4. Diversify Your Income Sources
Buying a website can be a risky decision. The more you can do to minimize the risk for a buyer, the more likely you will be to get a great price for it.
One of the biggest areas of risk is related to the sources of income. The more revenue streams you have, the less risky it will be.
Take a look at the ways you’re making money and see what you can do to add other revenue streams. Things like display ads, sponsored content, affiliate marketing, digital product, physical products, and membership are common options.
Diversifying can also include expanding on your current revenue streams. For example, if your site makes most of its money from one affiliate program, find a few other affiliate programs that you can join. If you make the majority of your income from selling a digital product, consider other products that you could create and sell.
5. Work to Increase Your Current Income Streams
In addition to diversifying, you also should try to make the most of the income streams that you already have. If you use display ads on your site, could you make more by moving to a different ad network? Could you place a new ad zone on the site without having a big impact on the user experience?
If affiliate marketing is one of your big income streams, look for ways to make more money from your top affiliate programs. You could also contact affiliate managers and ask for an increase in your commission. Also, you could find a few new affiliate programs that you can start promoting. You may even be able to go back through your archives and add affiliate links to some of your top posts.
One of the exciting things here is when you think about the true impact of the results that you get. Say you make some changes and increase your affiliate earnings by $1,000 per month. If your site sells for 30x your monthly profit, those changes just added $30,000 to the sales price! This is part of why I recommend planning ahead. You’ll probably need to show that you can sustain these gains for a few months in order for buyers to justify a higher price.
6. Diversify Your Traffic Sources
Your traffic sources also impact the risk for the buyer. If one source drives your traffic, the buyer could be in a bad spot if that traffic drops.
Some traffic sources are considered riskier than others. If your site gets 80% of its traffic from Pinterest, that is going to be considered a big risk.
Work to have a nice balance of traffic that includes Google search, social media, direct traffic, and referrals from other websites.
In terms of reducing risk, one of the big things you can do is focus on building an email list. With a responsive email list, the buyer has some insurance if other traffic starts to dip.
7. Cut Any Unnecessary Expenses
Take a look at all of the expenses involved with running the site. These expenses are obviously decreasing the profit of your site. As a result, they also reduce the value of your website.
Most of your expenses are probably necessary, but there may be some that you could reduce or completely eliminate.
Evaluate every monthly expense to see if it really is justified or if you can reduce it.
Now, On to Actually Selling Your Site
In the follow up to this article, we’ll look at the different ways you can go about selling your website. Then I’ll give you some tips for finding the right buyer and making a smooth sale.
How are you working to maximize the value of your website now? Can you ever imagine yourself selling your site?
About the Author
Marc Andre has built successful blogs and websites in industries like web/graphic design, photography, and travel. He’s currently writing about personal finance at Vital Dollar. If you’d like to learn more about his approach to building successful blogs he’s offering a free 7-day Blogging Fundamentals email course.
So true about reducing the time working with the website. Need to think about it, thanks.