If you have got to the stage in your business where you have decided it is time to sell your website then you have to decide whether or not to hire a broker. You could try and sell the business on your own but an experienced website broker could be pivotal in a successful sale. The question that many ask is how do I pick a good online business broker? Will a broker extract maximum value from a sale and represent my interests?
Why work with a website broker?
Website brokers exist to help website owners sell their online businesses. A website broker provides a similar function to a traditional business broker but specialises in online businesses. You want to sell your asset, you approach a website broker and you enter into a representation agreement with them. Here are a number of reasons you may decide to work with a broker:
- A broker provides access to an established network of buyers.
- Selling a website is a time consuming task and brokers take over the heavy lifting.
- Selling a business is a complex process and an established broker will have an established and proven process to follow.
- Objectivity. Selling a business is an emotional process and a broker will mentor you through the whole thing.
- Brokers keep the sale of businesses confidential through the use of non-disclosure agreements and qualification of buyers.
- Website brokers are experienced negotiators and know how to get you the best deal and terms.
There are many benefits to working with an intermediary to handle the sale of your online business but how do you go about choosing the best online business broker? Here are 10 things you should consider:
1. How well do they answer your questions?
A good broker will take the time to explain their process to you and give you all the information you need to make a decision. You want to be confident in your online business brokers’ abilities, track record and experience. Be reasonable with the questions you ask and ultimately make sure you feel comfortable as you will generally be working with the broker you choose for a number of months.
2. Is the broker legitimate?
Unfortunately, in all industries there are always companies who pretend to be legitimate but are not. Here are some things you should look out for:
- Do they have an about us page? If so, what information can you find out about the management/team? LinkedIn profiles? Can you find any articles they have written that would be related to your business?
- Do they have a company name/address? Is this address legitimate (not a PO box)? Can you find the company in country/State searches?
- Do they make claims that don’t correlate with evidence you can find? For example, if a broker claims to have sold 2000 businesses, do they have those on a sold page? A reasonable number of testimonials from clients?
- Are they members of relevant industry associations such as the International Business Brokers Association (IBBA)?
3. How many listings does the website broker have?
Check how many other internet businesses for sale the broker has. A lack of listings is a good indication that they are aren’t popular. Conversely, a large number of listings is indicative that the broker will take on any website that comes their way. Roughly three to seven active listings per broker is a good balance. This will ensure that the brokerage will dedicate enough time to working with you and the sale of your website.
4. How do they value my business?
A good online business broker will devise appropriate realistic valuation for your internet business. Why? They only get paid when you do so it’s in their best interest to value your website appropriately whilst also commanding the best possible price for your business. A website valued too highly will remain listed and both you and the broker will be wasting your time.
Always ask a broker “how do you value an online business?” Valuation calculations take into consideration a lot of factors. With that in mind, no formula applies to every business and a broker who gives a generic “net yearly income multiplied by two” (or similar) without knowing anything about the business is demonstrating their lack of understanding of the market.
Most small online businesses are valued on a multiple of seller discretionary earnings (SDE). This is the net profits of the business with expenses that benefit the current owner(s) but are not pertinent to the business “added back”. For example, the current owner might pay for a personal car through the company which is not a relevant expense to the sale of the asset itself.
5. How big is the broker’s buyer network?
The amount of buyers in a broker’s network is also an important indication of whether they would be suitable to work with. Brokers that boast ‘qualified’ buyers in the tens of thousands is likely to have a generic mailing list. Relationships take time to cultivate so a broker with a smaller dedicated buyer network is more valuable to you and also more likely to sell your business. When it comes to buyers, a small number of qualified buyers is far more valuable than a large number of unqualified buyers.
6. How long does an internet business take to sell?
The amount of time it takes to sell a website depends on a variety of factors such as the deal size and complexity, the market the business is in and the business model. That being said, always ask your broker what the average sale time is for online businesses they list. This is a good indication of how active their buyer network is and if they value businesses appropriately. Depending on the size of the business, anywhere between 30-90 days should be the average.
7. Does the broker provide legal assistance?
Good brokers will provide assistance drafting legal agreements and will have experience in creative deal structuring and negotiation of terms. You should also be advised by your broker to seek independent legal advice to review all documents before they are signed. Avoid brokers who claim you do not need a lawyer/attorney or do not use asset purchase agreements for all sales.
8. Do they value confidentiality?
Confidentiality is important throughout the sales process. You do not want staff, customers or competitors finding out about a potential sale. Professional brokers will hold confidentiality in very high regard and will create interest in your business by only providing teaser information. Interested buyers will have to be qualified to demonstrate they have the financial means to purchase a business. Finally, brokers should require interested buyers to sign a non-disclosure agreement before sensitive information is released.
9. How much experience does the brokerage have?
It is important to look for a broker who has prior experience selling businesses like yours so make sure to ask a broker about their transaction history and success rate with similar businesses. Brokers who have relevant experience or have sold similar businesses in the past will be more likely to complete a sale than those who have not. They not only have connections who are interested in buying a business like yours but the broker will already have a good understanding of your industry. Don’t forget -this doesn’t just apply to a niche or business model. A fashion blog and an e-commerce website that sells clothes are two different businesses entirely. Work with a broker who is experienced and qualified to sell your website.
10. Is the broker working full-time?
Many companies these days have migrated to a decentralised workforce working remotely to reduce costs. However, working remotely or from home can often be an indication that the broker is a one-man-band or that brokering is their part-time occupation.
A broker will be representing you and your business so you want a brokerage firm who will handle your deal with professionalism, from a quality work environment and have a dedicated team of full-time brokers who are working towards the goal of selling your business.
Do you want your broker selling your business to prospective buyers from an office or from a coffee shop in Thailand? Professionalism goes a long way in closing the deal.
Got a question about selling your website? Get in touch!