Making Your Website More Valuable

Most of us do not start up a website with the thought of selling it one day – we usually start up a website with the thought of making that site popular, useful, and/or profitable.  But inevitably, for anyone who has been in the online business world for any significant period of time, the thought enters our heads about whether or not we should sell our business.
There are a lot of articles on the Internet that concern how much a web business is worth.  It is a topic that we may address some day in the future, but for the purposes of this article, I want to focus on factors that can help increase the value of your web based business.
As the owner of Quiet Light Brokerage, a group of internet business brokers, I have the opportunity to see quite a few businesses and have my pulse on the marketplace on any given day.  I run across quite a few small online businesses that could make significant improvements to their marketplace value with just a few tweaks and changes.
One important note before we start: these tips are geared towards businesses whose value would be more than a few thousand dollars.  This is not geared toward the “Flippa” crowd, but rather to more established online businesses.
With that, below are a few tips on increasing the value of your website.

Financial Records

The lifeblood of any online business acquisition is a business’s financials.  If any experienced buyer approaches you, or if you solicit your site for sale to an experienced buyer, one of the very first things that a buyer will request are financial statements.
The reason for this is simple: buyers want to know how much they can reasonably invest in acquiring your business.  Whether you are selling or, a buyer is constantly gauging the relative risk of their investment.  Financial statements are simply the easiest way to get a starting point as to where a business can be financially.
Many people will read the above statements and think “but my business is much more than just the financials”.  This is most likely true – every business has a host of intangibles that are mixed together to create an appealing business that works well.  These intangibles do work together to build value in your business, but in the end, buyers are looking to gauge the riskiness of their investments, and financial statements help them do so.
But it goes a step further – whereas financial statements help a buyer gauge the riskiness of a particular acquisition, detailed and accurate financial statements that are easily verifiable help a buyer put to rest certain perceptions of risk.  The point here is often lost on many people considering selling their businesses: detailed, verifiable, and clean financials can help you sell your online business faster and for more money.
Recommendations – If you think you may be selling your business in the near future do what you can to get your finances in order.  This would include either hiring a book keeper or buying a version of Quickbooks and learning how to use it.  Be sure to separate your business activities from personal expenses and income as well as other business activities. If you are able to, setup a dedicated business entity for the business you wish to sell – businesses that can be verified with tax returns are absolute gold to prospective buyers as it opens up the possibility for them to get a loan to buy your business.

Paint Yourself Out of the Picture

Nobody wants to buy themselves a job.  Buying an Internet business comes with a set of risks that buyer’s are very familiar with.  In essence, an Internet based business is an assetless business – the only asset tends to be “goodwill” and possibly some inventory (goodwill is a general accounting term used to describe a business’s reputation, relationships, and other intangibles).  The problem with goodwill acquisitions is that they can quickly lose their value.  If one were buying a restaurant instead of an Internet business, and the restaurant had to close, that person would still have the value of furniture, fixtures, equipment, and real estate to fall back upon.
In light of these risks, buyers find Internet businesses appealing for the same reasons you and I find them appealing: you can run a very profitable operation without having to manage a full store.  Often times, you can run a great operation and work just part time.
Keep this in mind when preparing your business to sell: the more you paint yourself out of the picture and allow the business to be run without the owner being an “owner/operator”, the more buyers you will ultimately be able to appeal to.
Recommendations: Write out a current “day and week in the life of” describing your daily, weekly, and monthly tasks with the business.  What can be done by someone else?  What needs to be done by yourself?  Try to get your hourly workload to no more than 10-15 hours per week and outsource what you can outsource.  In addition, don’t wrap up your business in a special talent that you personally have (e.g. web design, seo, special writing style, etc).

Look for Single Points of Failure

Keeping in mind the previous section’s discussion on buyers looking to assess risk and the nature of how quickly an Internet business can lose value, it is important to identify single points of failure for your business.  A single point of failure is any part of your business that you rely on that cannot be replaced by something else.  Below are a few examples:
  • You currently rely on just one vendor for all of your products
  • You are a web design agency who has one very talented web designer that does most of your work
  • You have a handful of clients who make up a disproportionate amount of your revenue base
  • Your only source of traffic is from your top Google rankings
That last point is one that may surprise some website owners.  It used to be the case that a top Google ranking was something that would add significant value.  However, with the impact of the Panda updates and previously the Florida updates, buyers simply don’t trust rankings to be permanent.  It is far better to show that the business is well balanced in all regards.  Should one key aspect of the business falter, you need to demonstrate that while it may affect the business, even significantly, it would not kill the business because there is a backup plan.
Recommendation: Identify single points of failure and build a backup plan.  If you currently rely too heavily on one or two vendors, reach out to other vendors and find out what it would take to start up with them.  If you only have Google rankings driving traffic, startup a PPC campaign so you know what the cost structure would be.  Startup a newsletter, build your social media presence, and the like.

Selling an online business can be a fun, yet intimidating process.  By planning properly, sellers can often add thousands or tens of thousands of dollars to their overall value.


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