926 – 7 Practical Tips for Maximizing Your Web Business Sale Price

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Episode topics:

This simple step can make your site more valuable. [02:11]

If you’ve never heard of Empire Flippers… [03:43]

Are you just ready to get rid of your business? [07:22]

If you’re looking to sell based on what could be done with your site… [08:45]

There are, in fact, still people who roll the dice when buying. [10:18]

What’s risky? What’s less risky? And what’s too risky? [11:54]

Surely blackhat SEO is a thing of the past? [13:36]

James and Greg talk multiples of profit. [15:27]

You might consider these ways of monetizing your site… [18:02]

Email is still solid in 2022, and it could impact your website valuation. [22:19]

When you’ve done a number of things, product creation is the next natural step. [23:53]

So you’re ready to sell. Are there any tricky moves involved? [26:38]

Of course, payment systems have to be transferred. Greg discusses how it’s done. [31:33]

Is there anything James should have asked but didn’t? [34:34]

Build a profitable online business with help from James

James has spoken before with experts on the show about buying and selling websites, most recently with Matt and Liz Raad. This episode angles in somewhat differently, in a way that could be of great value to anyone looking to buy or sell an online business.

Say you’ve got a content site you’ve been working on for years, maybe seven or eight. It’s got fantastic SEO, and ranks well for phrases that bring in people with buying intent.

What could you do with that site to make it really valuable? And if you were then to put it for sale on a market like Empire Flippers, what would that process look like? And how would you then get paid for it?

That’s the bridge James would like to build over this episode, and to help do that he’s brought along Greg Elfrink from Empire Flippers to lend his expertise.

The fastest way to boost your site value

To increase the value of any business, says Greg, there’s many different things you can do. For a content site, however, with decent traffic, that’s already making money, he would suggest the quickest way: to take the five highest-performing pages in terms of revenue, and do conversion rate optimization (CRO).

The tests usually take a couple of weeks, but the impact is huge. Empire Flippers does it, and they’re an eight-figure company. They did an evaluation and increased their lead flow by 50 percent.

The next thing Greg would recommend is just as easy, and he would advise anyone buying a website as well to do this, first thing, together with CRO. That would be to get a tool like Clearscope or Surfer SEO and do the same – optimize those top five pages, the low-hanging fruit. Look at any keywords that are on, say, page two, or positions four to eight. Optimize those, because usually, you’ll have enough link juice to chase those keywords and increase your revenue rate and traffic.

If you’re using Amazon affiliate, Greg recommends you try different networks, unless you’re about to sell. If you’re about three months out from selling or even six months, however, he wouldn’t suggest doing that.

Because you want a consistent history of sales, asks James?

Right, says Greg. As you get closer to selling a business, you want to lean a little bit out of the growth and more into the maintenance mode, so the buyer understands what the level playing field looks like.

This is why Flippers sometimes turn down a large and profitable business, because a good chunk of its P&L is in experimental advertising. This is something they see especially in e-commerce.

When you’ve had enough of the business

James imagines some people are at a stage not of growth or maintenance, but of decline, where they’ve lost interest in the business and just want to get out of it. What advice would Greg have for them?

This is something they do see, Greg says, because they look at the reasons someone might sell a business, which fall into two categories: personal and business. The sale, hopefully, combines both to get the seller closer to their goals.

But if, as James says, the owner is disillusioned with the business and just wants to get rid of it, Greg’s advice would be, ideally, to sell it before sales and revenue start declining, because they’d obviously get much less for it then. If they do want to sell it and it’s in the stage of decline, they may just want to sell it as quickly as possible and still recoup some money. His best advice at that point is to be flexible and realistic with expectations.

Can you sell something based on potential?

Exactly, says James. It’s hardly an appealing prospect. There might be some element, though, of potential, that could appeal to someone with a renovator’s mindset.

Could the owner maybe not optimize the site, and leave it to the prospective buyer to picture what could be done with it?

Good question, says Greg. It actually works for both declining and growing businesses. Obviously, though, for a business in decline, it wouldn’t boost the multiple. Valuations are based on reality, and a large part of it is asking, how risky is the business? The less risk, the more premium the website valuation.

What James has touched on is called selling a potential, and Greg says they always tell their sellers, do not sell on potential. If you mention, though, say, you did a bad job on your on-page SEO, that might build potential in the buyer’s head where they actually start selling themselves on it, without further help from you.

That leads to something else Greg always tells sellers: don’t pretend your business is perfect. Every business has warts, and the buyer will figure it out, if they bother to do real due diligence.

Weighing the factors of risk

So a site in maintenance mode shows a stable history and reduces risk, says James, which is a factor in multiples.

That begs the question, what things are risky? And what’s less risky? How do we define a website as too risky?

Take James’s content site – what would determine if it’s risky or not for a buyer?

There’s a reason Greg tells people to steer clear of sites below 100K, unless they’re using a broker they really trust, or a curated marketplace like Flippers. That’s the area where risky, scammy assets typically dwell.

The cheap, junky stuff, says James.

Greg concurs. One thing he would look at is diversity of traffic, not just by traffic channel. What he means is, does over 50 percent of your traffic come to one page? That’s risky on a content site.

James’s site gets all-organic traffic, but distributed across many different pages.

Way less risky, says Greg. Some 100K businesses are a higher risk, because they usually have only one page. A competitor coming in on the right keyword could crush them.

Is blackhat SEO still a thing?

Another factor of risk would be how you do your backlinks. Is it a spammy build, like PBN links?

Surely no one does that anymore, says James.

Oh they do, says Greg, just not on their marketplace. He has a lot of technical SEO friends still very much into blackhat. He himself is very white hat and finds it much easier.

James agrees. It lets you sleep at night.

If you’re building a real brand, says Greg, 90 percent of SEO is just good quality content and backlinks. And you don’t even need good quality content to rank. It’s good if you actually want to make money, to convert.

James and Greg talk multiples…

Now a big indicator Greg mentioned was multiples. They’re talking about multiples of profit, James supposes? Profit before taxes or owner’s expenses?

Yeah, Greg says, they price pretty much everything with EBITDA (earnings before interest, taxes, depreciation, and amortization) and SDE. SDE is seller discretionary earnings. Say your website makes $10K a month, and you bring home $9,000 profit. You can pay yourself or reinvest – SDE.

And what kind of multiples is Greg talking, asks James? James runs a publisher model with his content site, building a list, sending emails and making affiliate promotions. He makes good profit from SEO across multiple pages. What sort of multiple might he expect?

A well-built content site, with good signs of growth and low risk, says Greg – you’re looking at multiples between 35 and maybe even 40X SDE. That’s monthly, not annual, just to be clear.

So basically, it’s like three years’ worth of profit, says James.

Exactly, Greg says. Content multiples are kind of hitting that ceiling right around there. But if you have a high quality thing that is different, like you have an email list, multiple traffic channels, all that kind of stuff, you can get higher than that, especially if it’s a bigger business.

Networks you might consider for monetization

Now James wants to talk about networks, monetization. He used to run Google ads before switching to Ezoic. It made him more money, but slowed down the site and showed too many of the wrong ads. So James switched back.

If he were to sell, he says, he’d probably switch to something that makes more money at some point. For now, he’d rather grow brand equity and make sure people come back and enjoy the experience. What kind of networks or monetization could he consider?

Off the top, says Greg, one thing that James said is extremely important – the most valuable thing for any business owner is their audience, and how to keep them coming back over and over and over again. It’s the difference between handing people a brochure they’ll likely toss, or giving them a magazine that they’ll enjoy and eventually subscribe to.

Now in terms of monetization, James mentioned Ezoic. A lot of Greg’s friends have used it, with the same speed issues. Apparently they have gotten better with ad-serving.

There are two other networks Greg’s seen people use to great effect – Mediavine and AdThrive. You may need a higher traffic threshold for both of them, but users have had a lot of success. They’re less intrusive, too, don’t slow down your site, per feedback from Greg’s friends.

There’s another network, MonetizeMore, that is probably the best Greg would wager, but you need a gargantuan amount of traffic, he says, to be able to apply for it.

What about things like building an email list or adding your own product, asks James? Are these good moves?

They’re a great move, says Greg. one of the things he often tell his SEO friends is, he finds a lot of them get pretty myopic – they just rank and bank and move on to the next site or the next article. But high-intent, organic search traffic is one of the best highest-converting traffic sources you can possibly ever get.

SEO people are usually very good at it, says James, because they’re good at technical stuff and they can be creative. But they do tend to get technical myopia. Being too good at a technical thing can be a handicap.

How does email contribute to valuation?

James thinks email is as solid in 2022 as it was 10 years ago. People keep talking about it dying and going away, but it’s not going anywhere as far as he can tell.

Greg thinks it’s gotten even more important over the last year and a half or so, as we’re heading into more of a cookieless future. He reckons email is the most important thing you can do for your valuation if you use it right. A lot of his friends, in the SEO space at least, will build out an email list to increase their valuation.

But then he’ll ask them, how much revenue has this created? And they say, nothing, I’ve never emailed them. They don’t want to annoy the list.

They’re annoying the list if they collect the email and never send them an email, says James, because the people joined for that. At the very least you could capture the email and update people whenever you have new content, like he does.

Where product creation is the next obvious move

James has played with paid traffic and survey funnels and the like, and was able to really accelerate his email list, but then it’s a matter of what to sell. So that’s where he thinks product creation is a natural pathway if you’ve got the ability to do it. Or if you can find someone, at least do an affiliation – that might be more direct than putting advertising panels on your website.

Greg also thinks creating products is the next natural step. He’s seen content sites become e-commerce or even software juggernauts. Some people create software and services around their niche. But he imagines a lot of people listening are probably in the Amazon Associates Program.

Now, he recommends moving away from Amazon, so just a higher-paying program. But one of the cool things is, if you are looking at building your own product, Amazon tells you what’s selling on your website. Say you’re a gardening website, and you can see a certain kind of spade that’s your number one seller for whatever reason. Well, now you know the first product you should probably be making. So you get paid for R&D.

The many considerations around selling

So alright, says James, he’s got his content optimized, he’s getting a few different channels activated. He’s got his email built, he’s selling some things, has started making his own products. What else?

Does he do anything tricky, like go and roll up? Or buy up some other businesses? Or does he try and sell it himself? Or does he just go along to the broker? And if he does, what are they going to want from him to be able to sell the site? Because he imagines there’s work to be done.

There may be little awkward things, he thinks, like payment carts, or can you export the database of the customers? Do you even have permission to transfer them? And what about social media accounts? And how do you organize the hosting?

Most of what James has mentioned, yes, says Greg, they’ll be transferring it. When someone buys a business from them, it’s typically an APA, an asset purchase agreement. So any asset of the business will go over to the new owner, which includes things like social media, podcast, YouTube, and the like.

Now, if your plan is to sell your business, he says, if you have a YouTube channel, or any podcast, Greg highly recommend it not be you doing the show, because that puts you in a weird position where the buyer has to sort of be you.

But they do transfer YouTube. In fact, they’ve even sold just YouTube channels.

In terms of customer data, they would transfer that as well. Now in the case of a content site, usually that’s pretty thin. Usually, the closest you get to that is the email list, which you would transfer over to the new owner.

Domain as well, everything would be transferred over, hosting. One of Flippers’ more unique advantages as an M&A broker is that they have an actual migrations team that would work with the buyers and sellers on that.

Do you ever transfer team members along with a site, asks James?

It always depends on the buyer and the seller, says Greg. First off, the seller has to let them know that they’re willing to let their team go. Sometimes they’ll hire replacements for the brand that will go with the new owner. But that’s a little bit rare. Sellers sometimes are okay with the buyer taking the team, and often the buyers will take the team. Because a buyer typically wants everything as it was for the seller. They might change it later, but when they first start off, they want it at that equal playing field of growth.

Dealing with the payment systems

What happens with things like payment systems, James wants to know? It could be awkward with PayPal, for example, because you might have a lot of stuff coming to one account.

The second part is collecting money. It’s pretty hard to transfer that. Is there a scenario where you would collect money and then transfer it on maybe an accounting basis, which is what James did when he sold his service? Or do you have people migrate to a new billing, where you’ll probably lose a few of them trying to do that?

With PayPal, says Greg, they tell people they need to switch their merchant processor before they can sell.

Gotcha, says James. So before they sell, they migrate people onto Stripe or something else.

Right, Greg says, and it has to be six months before or after the transfer is done, because as James said, you’re going to lose some people. Some won’t like the experience.

For his content sites, says James, would the new owner just switch out his AdSense ads for their AdSense ads, if he just had AdSense?

That’s the way it is done typically, says Greg. AdSense would be the new owner’s account. And the new owner needs to make sure that they have an approved account before they buy the business, unless they talked with the seller and agreed otherwise.

Same thing with affiliate links. They would just replace all of your affiliate links with theirs, which is something Flipper’s migration team does on behalf of the buyer and the seller.

The thing James should have asked

Now Greg know the market well, and has seen so many deals. Is there something James should have asked that he hasn’t?

Greg would say one of the most important things when it comes to selling or buying a business is do not time the market. He gets asked that all the time: when’s the best time to sell? When’s the best time to buy? It doesn’t matter.

The best time to do either is when you can get significantly closer to your personal or business goals. And don’t sacrifice your personal and business goals for a little bit of extra growth.

Greg had a friend whose content site was valued at around $450,000 to $500,000. He knew changing links from PBN to whitehat could increase his valuation by about 10 percent. So he did that over six months. In month four or five, a Google algorithm update happened. It crushed his business, which never recovered. He ended up selling that same business with Flippers for 220K.

So if you can sell your business to get closer to your personal business goals, says Greg, he would do it, because you don’t know what the opportunity cost is by waiting.

It’s been a refreshing chat, says James. The big lesson he’s really gotten is, do good stuff, have a great product, and don’t over-optimize. He was just speaking previously with a client he’s had for over 10 years. He has what James would call an un-optimized business, but so drama-free. He’s having the best life ever and a substantial income.

If you’re interested in buying or selling an online business, check out Empire Flippers. And if you want to speak with Greg himself, his email is [email protected]

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