What Happens When 1600 People Ask Us Anything About Buying & Selling Online Businesses?
It is no secret.
Buying OR selling an online business can be a lot of work. There is a lot that goes into it. If this is your first time doing either, you probably have a ton of questions. Even a long-time veteran may still be left wondering… am I doing this right?
In an effort to help people answer these questions, we have hosted three AMAs — Ask Me Anythings — in the last year and a half or so: two on Reddit and one in a special Slack group called Online Geniuses made specifically for people in digital entrepreneurship and marketing.
An Ask Me Anything is where experts on a certain topic make themselves available on a community platform to answer questions on that topic posed by anyone. The questions range from the most newbie-friendly questions to the complex, juicy advanced questions to which veterans are seeking answers.
Our first two AMAs were on Reddit, in the /entrepreneur and /AMA subreddits. The second AMA we did there got us to the first page of Reddit, topping out at position #11, and it was a huge success for us.
Our last AMA was with an online Slack group called Online Geniuses that is filled with digital entrepreneurs and marketers who are hustling and making cool things happen.
Throughout all three of these AMAs, we were honored to get a lot of really great questions. So we thought… why let all of these answers go to waste? What about people who didn’t get to attend these AMAs?
Why not write a blog post covering our top questions and answers?
So that is exactly what this post is.
If you’ve ever wondered what kind of questions people ask us when it comes to buying and selling online businesses, look no further.
These are the top highlights: the questions we had the most fun answering, ones we think you might be asking yourself, and hopefully the ones you’ll find the most useful.
The Top Questions Asked and Our Answers
I’ve selected these questions based on a few criteria:
- They were common questions asked across all three of our AMAs
- The questions were highly upvoted on Reddit
- The questions had high engagement rates in the form of comments
- And of course… they were just super interesting questions that you may not have thought of when it comes to buying and selling online businesses.
Let’s dive into it.
Question: Most business partnerships fail; how did your partnership with Joe Magnotti begin and what do you think made the partnership successful?
Justin: Joe and I are pretty down on partnerships overall. Not because ours has been bad, but because we’ve seen so many others in bad business partnerships.
We’ve talked about it at length on podcasts:
We were long-time friends before doing business together. I think that’s typically a recipe for disaster. (It was for our third partner on the first business… a real mess).
It helps that we both considered the business’ needs and were able to drop our egos when thinking about what’s “best for the business.” We’ve gotten pretty good at dropping personal biases and arguing on the business’ behalf with each other, which is helpful I think.
Question: When Empire Flippers was first starting out, how did you get traffic? And what was the most difficult thing during the first year of running Empire Flippers?
Justin: Back when we first started out we were called Adsense Flippers.
Honestly, we didn’t sell anyone’s sites but our own at first.
We would build out these little Adsense sites and then sell them on Flippa. It got to the point where we were doing so many of these, that we became a Flippa power user. We started a blog that detailed our journey along the way, which helped a lot to build an audience initially of other niche site builders who were doing the same thing.
When they saw we were selling these sites for a healthy profit on Flippa, people in our audience started asking us if we’d sell their sites for them on our Flippa account if they pay us a small commission fee.
It got us thinking… maybe there is something here for us.
Eventually we started selling so many other people’s sites instead of our own, we stopped building our own and eventually transformed our little niche site journey blog into an actual brokerage (and rebranded to Empire Flippers).
Question: How involved do you actually get with the transactions? Is your model actually meant to broker the interests of both parties or are you just interested in facilitating the transaction?
Justin: We represent the seller’s interests as we’re listing their business for sale, but in actuality we represent/protect both sides.
Our buyers are our clients just as much as our sellers. If we did a good job vetting the business, and a good job helping the seller/buyer negotiate the final pricing, then that also means we helped that buyer invest in what will hopefully be a successful digital asset for themselves.
Over time we have had a ton of repeat buyers, and often our sellers will also turn into buyers, so we really see ourselves looking to create a win-win-win situation.
Question: Is it better to add a new related niche to an existing site using its current domain power, or is it better to create two separate sites that could each be sold separately?
Justin: Here’s something interesting — the multiple goes UP as you build larger, more profitable sites.
So, for example, four separate websites earning $5K per month each might be worth $120K each, but one larger site earning $20K per month might be worth $600K or more.
The further up you go in value the larger the multiples, all else being equal.
I wouldn’t build on sub-domains. If you were considering subdomains or separate domains, I’d suggest separate domains. (Best, in my opinion, would be to do them all under the same domain, though)
Question: How has the recent Amazon affiliate payout change (mostly decrease) affected sales prices? Obviously prices will be down a little, but are buyers more skeptical about sites monetized through a single affiliate program or channel now?
Justin: Sites have definitely taken a hit. This is a rough guess, but probably down around 20% or so across the board from the listings we’ve seen?
We saw some hesitation around Amazon Associate sites for a week or two, but that’s mostly passed now that the change has been announced and finalized. For more information check out our blog post Amazon Commissions Changes: End of an Era? Or An Opportunity?
Question: How extensively do you research the seller’s information to make sure it is accurate (i.e., sales, traffic etc)? As a buyer, my biggest fear would be buying a site based on bogus data and getting screwed over.
Justin: All of the submitted listings to us go through our vetting process. We verify the earnings and traffic on the business to make sure they’re accurate.
The way we do that varies site to site and is based on the monetization method. For Amazon sites, for example, we gain access to their account and verify the earnings through Amazon.
We have other checks too, not directly tied to earnings/traffic, that we’ve found over years of doing this to help us weed out scammers and sketchy sites.
Keep in mind this is just to improve the integrity of our marketplace overall. It does not mean we can’t be fooled, that all of our sites are a guarantee of any sort, etc.
Due diligence is always the responsibility of the buyer. You can’t trust the broker to do your due diligence for you. While we always look for win-win deals and help both sellers and buyers, we’re ultimately working on the seller’s behalf.
Question: Two questions: 1. In your experience, what site model seems to be the most successful for new guys to get off the ground and make money with? 2. What site type tends to sell for the highest multiple and largest sums of monies? (I wanna be a millionaire).
Bonus 3. How do you think augmented reality will change the face of the internet?
- Amazon Associate sites.
- Recurring SaaS businesses, currently.
Bonus: Think it’s going to change more than the internet. I’m currently more interested in self-driving cars… that seems to be coming quickly and with MASSIVE impact.
Questions: When vetting websites for sale on Empire Flippers, what is your process and policy when it comes to PBNs and links which seriously violate Google’s policies?
Is the buyer always informed of these, and do you need to see a sustained period of traffic before approval to omit churn/burn risk?
Justin: We sell websites and online businesses that use Private Blog Networks (PBNs) but we require disclosure of the PBN, which is unique in our industry.
We always inform potential buyers through our marketplace about the PBN.
We require the business to have 12 months of history and at least 12 months of steady earnings for businesses we sell (six months for AdSense/Amazon Associates). Many are around two to four years old.
Greg: Hey guys, jumping in here. I’ll be adding some extra insight to a few of our questions throughout this post. Just to be clear, my words in italics didn’t originally appear in the AMAs but I felt I could expand on our answers to give you more insights!
If you want MORE information about purchasing sites that have a PBN attached to it, or just want to know what the heck is going on with PBN-fueled sites or what they are, check out my post on The Risk and Rewards of PBNs. It can better help educate you on the risks and whether those are risks you should take.
Some buyers want to avoid these sites, while other buyers have come back to our marketplace to purchase PBN-fueled sites over and over again. Remember, part of your due diligence process is to discover the risks you are willing to take.
Sometimes we get flack as a brokerage from white hat SEOs who use outreach techniques to build their backlinks, or people who just don’t like PBNs, as to why we even sell them. The truth is, a solid PBN can keep a site earning for years and years down the road if it’s well maintained and the quality of the site is good. Most brokers actually DO sell sites that have PBNs attached to them.
The thing is? They’re just not telling you.
We have a transparency first policy. If we find a PBN associated with a site on our marketplace, unlike many of our competitors, we’re going to be upfront about it so you can properly weigh your decisions during the due diligence process.
Alright, back to the AMA!
Question: In a rapidly expanding business which you own, how much do you decide to pay yourself? How do you split finances between what you live on, and what goes back the business?
Justin: That’s a great question — appreciate it.
Managing growth has been tricky with a fast-growing business. This has been especially true the last year or so.
A unique advantage we have is that we live/work in SE Asia. (Most of the time… we’re “location independent” so we travel a bit to the U.S., Europe, etc.) The costs of living are awfully low. Entrepreneurs here in Saigon are bootstrapping their new businesses out here and paying themselves $2K a month in some cases.
At this point, we pay ourselves a reasonable salary ($100K) and then take profit share distributions. It makes a ton of sense for us to reinvest as much back into the business as we can, but only where we’re pretty certain we’ll get real value.
Question: What is your average sale time, and close rate? What percent of listings sell vs. not sell?
Justin: All-time, we’ve closed more than 95% of the businesses we’ve listed.
Of the businesses sold, 80% or more were closed within 60 days.
Question: What business sold on your platform has grown into the largest?
Justin: I can’t give you the exact business as it’s confidential, but we had a customer buy a dropshipping business doing $1,500/month in profit two years ago.
We spoke to him around a month ago and he’s closing in on $100K per month.
That’s a pretty ridiculous example, though, and not typical.
We don’t actually get much feedback from buyers post-sale. They don’t have much incentive to share how they’re doing unless we happen to know them or talk outside of just our transactional relationship, you know?
Greg: Hey guys! I just wanted to interject here and say Justin’s point here is true. Though, if you have bought a business with us and would like to tell your story, I am working on a project that helps enlighten people more about what buyers do with the businesses they have acquired.
If you want to reach out to me, use this contact form and in your message reference this post and your desire to speak to me about your business acquisition.
Preferably, you should have owned the business at least six months before we chat so you’d have sometime to engage in building the business.
Alright… back to the scheduled programming…
Question: What are the key factors that make an e-commerce store more viable/attractive in a sale? Where should my focus be when structuring the business for the best market viability when selling it? Such as LLC or Corp, and other strategies?
Justin: There are A LOT of things you can do to build your business from the ground up and prepare for a sale. The biggest piece of advice is to make the business as plug-and-play as possible for a new buyer.
One mistake we have seen from sellers that source their own products is that they do all of their quality control themselves (actually shipping products to themselves, opening up the products, sometimes even packaging and fulfilling the orders themselves). While this might seem like a good way to reduce expenses, it significantly reduces your potential buyer pool as very few buyers want to fulfill the orders themselves.
There are plenty of third party solutions that can handle something like this for you. This is especially true if the buyer lives outside the U.S. and the primary market is the U.S.
If you want to do a deep dive and really understand all the intricacies of building to sell, our content manager (Greg) recently wrote a guest post on Shopify about the topic called How to Prepare Your E-commerce Business for Sale that you can check out.
Question: Hi Justin, German nomad and perpetual traveller in mid-twenties here, doing private labeling and FBA to EU customers with a HK company as solopreneur. Expanding to NA these months. I have been doing FBA for a year now and while profitable, I struggle with cash flow and hence also growth. Selling could give me the capital to reinvest and restart. Age, HK, and a nomadic life don’t make it easy to get credit. Interesting to hear about you for the first time.
1. In short, what are my advantages when selling through you?
2. How do you typically evaluate an FBA company? Reviews, ratings, brands, profit, margins, sales etc — what counts and how much?
3. Can you give me examples of past relevant sales with interesting details?
Thanks for the questions! Love the nomad community and happy to help!
- We’ve got a large, hungry audience of buyers, an excellent track record and reputation in the market, and we walk you through the process, step-by-step.
- Similar to other businesses! You can take a look at our Valuation Tool (with an option for FBA businesses)
- Here are some audio/video testimonials from some of our clients.
Hope that helps!
Greg: Amazon FBA businesses can be cash cows for entrepreneurs… but they can also be TOUGH to actually pull money out of when they are require so much capital for growth. This is a tricky position to be in with your business and can be super frustrating.
One way you can pull large amounts of capital out of the Amazon FBA selling machine you’ve created is by selling that business. Selling is a good idea if you have other Amazon FBA businesses operating with multiple different brands. You can sell off one of these brands and use that extra capital to leverage yourself into more competitive (and lucrative) spaces.
For a case study of a $1.7 million Amazon FBA business we sold, check out this post.
Question: What do you feel adds the most value to an online business? Building an audience (email lists, FB, IG), having multiple sales channels (FBA, Shopify store, retail) or is it something else? Ideally both I am guessing, but I am currently selling FBA and would like to know where I should focus my efforts next. Thanks!
Justin: That’s a tough one.
It’s tough, because the thing that will likely get you a higher valuation in terms of multiple, might hurt your valuation in monthly net profit.
Here’s what I mean:
Expanding your sales channels OUTSIDE of Amazon is a great idea. It diversifies your risk of being only on one platform (Amazon) in a buyer’s mind.
But… you end up spending a ton of time SLOGGING away on an e-commerce website when you could have made quite a bit more money/profit by devoting that time/resources to expanding your products on Amazon!
That’s why it’s tough.
All of the things you mentioned add value, though. The hard part is determining which will give you the best ROI on your time/resources.
Question: How do you see valuation multiples changing in the next year, three years, and five years?
Justin: Since we’ve started, we’ve seen multiples climb from around 10–12x monthly earnings (Back in 2008–2010 before we were brokering) to around 20x in 2012–2013, to 24–35x+ in the last year or so.
In the next year I’d expect multiples to continue slowly increasing.
In the next 3–5 years I would expect multiples to increase even further. My reason for this is that access to capital for these acquisitions will likely become easier. With leverage, multiples will continue to climb, IMO.
Really interesting space to be in, for sure!
Greg: When Justin wrote this answer on the Entrepreneur Reddit AMA, he was absolutely correct. The AMA happened almost a year ago now, and multiples have steadily climbed across the board into the 30x–50x range.
While financing is still difficult (you can find ways to make financing work with the right deal structure), people are getting more access to capital by selling off various businesses they have built up. They take the capital gained from the sale of these businesses to then acquire other businesses.
Sometimes they do multiple acquisitions, and sometimes they use the capital to leverage themselves into much more lucrative niches (whether it is building or buying one). As more people enter the buying and selling online business space, more acquisition capital is also coming in that is driving up these multiples.
Right now is a good time to buy before the multiples keep going up.
Question: What are the easiest websites to sell? Also, what is some strong advice that you would give to an webmaster? Best regards, from someone who’s going to get his website listed on Monday.
Justin: Awesome! Wishing you the best with the sale.
AdSense/Amazon sites have a large buying pool and sell quickly/easily. For us, sites in the $10K–$100K range sell really quickly.
For website builders, I’d recommend sticking with it. It’s easy to get distracted with shiny new objects and other business models. If you have a process that’s working, stick with it and scale it up!
Question: I have bought a site via EF and it’s going great, so thanks for that… what do you suggest is the minimum time before I try to re-sell that same property now that I have increased earnings and traffic? Does it even matter?
Justin: Awesome! Glad to hear things have gone well for you.
No minimum time required. I’d look more at the earnings/trajectory and try to base it around the time you’ll get maximum value.
If you’ve made significant improvements to the site in the last one to three months, you might want to wait until those improvements have translated to earnings. That way you’ll get the value of those in the sale…
Greg: This is good advice, and waiting a full 12 months after purchasing might be your best bet to get the highest return if everything is steady or on an upward trajectory. Most businesses on our marketplace are now starting to be based on a 12-month average since our businesses are growing larger in their valuations and buyers want to see longer track records as the buy-in point increases into the high six- and seven-figure range. We find buyers are much more interested in a business that has taken this kind of time frame into account in their valuation.
When you acquire a business, improve it, and have a whole extra year of data to show for it, you will be able to command a much higher multiple, in addition to the higher net profit working in your favor. A good rule of thumb is to look at the last trailing 12 months of average net profit, then multiply it by 25–30 to get a conservative estimate of what the site will be worth.
Question: Long-time listener to your podcast from back in the Adsense Flipper days. Love you guys and what you put out! I’ve bid on a few sites but not yet had a purchase. I’ve become somewhat discouraged by the number of bids in front of me. My question: What is your advice on how best to actually close a deal with you guys once a site I see as valuable gets listed? Usually I’m like ‘bid 11’ by the time I get your weekly email and put on my deposit. Do sites normally sell to the first bidder or two or are there a lot of lookie-lous?
Justin: Wow — a long time listener! Appreciate it! Yes, people who send in the wire we receive first are the ones who get the business. Since our brand has grown, a lot of our smaller businesses for sale can have heavy competition that can make it hard for someone to grab the site for themselves. We often call this the “Wire Race”.
To help out our serious buyers, we allow them to keep some credit with us so that way when they do find a site that is valuable they can instantly buy it without needing to worry about the wire.
Our content manager recently wrote a whole post on this subject called How to Win the Wire Race.
Question: If someone was looking to buy their way up to 3k+ per month in profit, but didn’t have the cash to do so, how would you recommend getting financing for the purchase(s).
Justin: Use the Operator-Investor model. Here’s how that works:
Find yourself someone with more cash than time. Partner with them on the deal — you could do a 50/50 split or some variation of that. You front 10% of the cash on a $120K–$150K purchase and they front the rest.
That should get you around $5K–$7K per month in net profit, getting you to the $3K per month you were looking for.
Question: Thank you for the AMA. What is the typical selling period for a company valued at over $500k?
Justin: I know this answer sucks, but the truth is “it depends.”
We normally tell sellers 4–6 months, but we’ve sold a $500K+ business in just over a month. Another took just over three months.
It’s really going to depend on the business itself. How easy is it for the buyer to take over? How wide is the appeal? Is there any specific technical or domain knowledge required that makes it obscure? Those will all affect the buyer pool and how quickly the business will sell.
Question: Why do you charge $300 to list the site, and then also an additional 15% of the sale value? I have a site I want to list with you but your double-charge is preventing me from doing so.
Justin: We’ve found the $297 listing fee to be a tremendous buffer between those that are serious and those just looking for a valuation, looking for someone to buy a lemon, etc. It helps to defray the cost of vetting the submissions too, but isn’t much of a money maker for us.
The 15% is where we really make our money and it’s valued based on our large network of buyers, the fact that we help with negotiations, we do the transfer for you, etc.
If there’s not a fit there’s not a fit, of course. If you think it’s worth it, we’d love to do business!
(UPDATE: We’ve updated our commission structure and removed listing fees. Read more about that here.)
Question: Does it make sense to be based in Asia when the majority of your customers/sellers are based in the US/Europe?
Justin: That’s a really good question. (Especially considering the fact it’s midnight here in Saigon… 1 a.m. for Joe in the Philippines!)
Honestly, we’re in SE Asia for the lifestyle. We’ve considered setting up an office in the US, but both of us would HATE that.
In the end, we’re setting up the company we want to run. Yes, we’d probably do more business and grow faster with an office in the U.S., but where’s the fun in that! 🙂
Question: Hi Justin, I’d be interested in buying a six-figure site from EF but wonder how to determine the ROI. 1: Get the site, continuously optimise it and just let it run to recoup the investment and make a decent profit after, or 2: Assume I can get a decent return for x months (eg 12/24) and sell it for the same price I bought it for or more. What’s the most common and/ or advisable model in your opinion? Obviously it’s a case-to-case observation, but I’m wondering how people monetise/ spread risks on their investment in general in the most effective way. Thanks!
Justin: Great question!
We’ve seen it work both ways.
In the first example, you’re talking about purchasing and just maintaining the site. (This could be through slowly adding links, a bit of content, etc.) Many do this and then resell the sites one to three years later. They get the added benefit of having a longer track record and improved multiple. Add to that the fact that multiples have been going up and you could get a really nice return with this model.
Others go into a purchase with a plan to really put some time/effort/energy in to grow the site.
Typically, you’ll want to focus on one larger purchase with this method. If you’re buying multiple sites it can be distracting and take away from your focus, in my opinion.
Personally, I like the second model more. Joe’s a fan of the first.
Question: Thanks for the AMA Justin. Quick question for you: Who do you recommend for a lending company when buying websites? I really want to invest in a site, but most are running $40–50k. I don’t have that much saved, so I’d need to finance around half. I’ve had car loans, college loans, etc, but never a loan for a virtual asset. Would conventional banks even consider lending 20k for a website? Or are there other legitimate loan companies that specialize in website buying? Thanks for your time!
Justin: Your first and best option will typically be seller financing. You can’t beat a 0% interest rate!
To be clear, though, it might be tough getting seller financing in the $40K–$50K range. It doesn’t hurt to ask, but don’t expect much more than $5K–$10K to be financed, if at all.
Aside from that, you might want to partner with an investor. Purchase an $80K–$100K site and do a 50/50 or 60/40 split. Split the profits with the investor and you’re there.
Someone else mentioned Lendvo, but I’m pretty sure they require a personal guarantee. You can also try something like Kabbage.
Most lenders in this space still require a personal guarantee. I’d expect to see more financing options in the next couple of years, but probably for six to seven figure purchases, mostly. Once that happens, expect valuation to increase significantly…
Question: Thanks for the AMA — I have used the other two big boys in the space, but as your portfolio has grown our group is really interested in listing with and buying from you. With your buyer list, do you find that the time to close on a site in the 10-100k range is drastically faster than it is for one in the 100-200k range? I.e., does your buyer pool look for fast, lower-end acquisitions without complex financing/earn-outs that they can ramp up, or larger deals that have a longer closing/negotiation time but ensure a more consistent, albeit lower, ROI?
Justin: Awesome — good to hear!
Sites in the $10K–$50K range sell awfully quickly — usually within the first week. There’s very little involvement from Joe or I — our team will generally handle these sales quickly/easily.
The $50K—$200K range takes a bit longer and has a bit more time required from our management team.
$200K–$1M is where Joe is heavily focused. He spends quite a bit of time here and these can take as little as a few weeks to as long as 9–12 months. We typically ask for six months and can do enough deals in that timeframe to be worthwhile.
$1M+ is where we’re going. We have buyers here, but not enough seller deal flow. We’re working on it!
We’re coming from a place of quick sub-$100K purchases, but have moved into the mid-six figure sweet spot. It takes more of our time/effort/energy, but the deal sizes make it worth it.
Greg: Hey guys, as I mentioned, this AMA was about a year ago now. Since then, we have sold in the seven-figure deal range.
Here’s a case study on the seven-figure Amazon FBA business we sold in eight months. We have started attracting more seven-figure deals to the marketplace, like this one here, and likely will continue to start attracting and closing more of these deals in the next year or two.
Question: I have a website that made $195k last year and it will probably make about $180k this year (also, I have virtually no expenses). It’s all through affiliate marketing and I’m considered an authority in my niche. How much could I sell the site for and should I keep working on it for another year to see if the sales multiples continue to rise? Also, does it become more difficult to sell sites at this income level?
Justin: I’d need more information, but a rough guess would be around $450K–$550K depending on a bunch of factors. For a better rough estimate, check out our Valuation Tool.
It’s a little more challenging to sell, just because there are less buyers in that range then, say, a $50K–$100K purchase. Still, there are plenty of buyers to find the business a home.
One thing: how much of the business is you, personally? Is there a podcast attached? Some authority you personally bring to the table? Those businesses can be more difficult to sell.
Probably best to set up a call with us here using our contact form to run through some stuff with you. Even if it’s not a good sale right now, we can probably give you some tips to maximize value in a future sale.
Question: Do you think that e-commerce/dropshipping sites are worth creating anymore because Amazon has such a huge share of the market?
Justin: Definitely worth it!
You’ll hear A LOT of “those are dead” or “that doesn’t work anymore” naysayers. Don’t buy into that…
We heard the same thing when we started with AdSense sites and did extremely well even though everyone said AdSense was “dead.”
We sell plenty of e-commerce and dropshipping sites today with sellers who didn’t pay attention to the chatter and continued plugging away.
Question: Thanks for this AMA. 1) What elements contribute to the large differences in valuations for online companies versus traditional investments such as equities? Are the online companies listed on your marketplace really that much more risky than a traditional equity investment? 2) Do you track or inquire with buyers about how well site earnings are sustained after purchase? 3) What are some typical red flags or common concerns one should watch out for when completing due diligence to buy? Thanks!
Justin: 1) These types of websites and online businesses are less risky than your traditional Angel/VC startups, but more risky than buying Amazon stock, for example.
The smaller and newer the business the more risk, typically. A two year-old Amazon affiliate site worth $30K is going to be much more risky than a $5M e-commerce business with multiple product lines, traffic channels, etc. That risk is typically taken into account in the multiple (and often the deal structure).
2) We get hear some positive and negative stories, but mostly anecdotal. We’ve done some podcast interviews with buyers post-sale. Here’s one that went well. Another here. Here’s one that went badly. Some lessons to be learned in those interviews, for sure.
We also have some buyer/seller testimonials on our YouTube account, along with seller interviews to check out.
I’d also mentioned that more than half of our buyers are repeat customers purchasing more.
Some of them have had issues with some purchases but came back again which is promising.
Actually, many of our sellers that have done six-figuresales with us eventually turn into buyers. They get sick of starting from scratch and are looking for something that’s already earning that they can improve.
3) Make sure the seller is a “real” person. This sounds basic, but is an important step in our vetting process, honestly. Scammers don’t like to use their real names/identities! Personally, I’d look for sites that look like they have had some love/attention put into them. Buy someone’s baby… not their side project (where possible). That’s just me, though…
Question: Thanks for doing this AMA. You say to ask for earn-outs or seller financing. What’s the average % of the deal that’s earn-out or seller financed? And do buyers ever finance through third parties?
Justin: Definitely ask — what can it hurt!
You’re not as likely to get it for deals under $100K. Too much competition on the buy side — someone else will swoop in and offer/purchase out from under you, typically. It CAN happen… but not nearly as often.
For $100K–500K you might be looking at 10–40% depending on the deal. It’s really going to depend on the seller and what they’re open to. We sometimes help argue the case with the sellers where more risk is involved to get the deal done.
$500K$1M+ you’ll see this much more often… usually 10% to as high as 50% or more. Again, it depends on the seller and your competition as a buyer.
Lendvo is a third party option. A few other even smaller players are emerging. When they pop up we’ll mention them, for sure!
Question: I have a site I’m interested in selling after the holiday season. If I were to sell in January or February, how would you factor in the “holiday bump” in my earnings? I thought I read you guys average the last three months of earnings; do you expand it further for the holiday season? Also, what’s the biggest factor in getting 20x versus 30x for an AA site?
For seasonal sites (and almost anything on Amazon) we’re really looking for a 12-month average. In some instances we have to use less due to the earnings trajectory/history, but then we’re looking at 6 months with a slightly lower multiple. That will usually get fleshed out in negotiations either way if we’re still priced a bit too high.
Biggest factor? Length of earnings history. Have 24 months track record and you’ll be much closer to 30. Slightly increasing earnings quarter over quarter is even better!
Wow… That’s a Lot of Questions!
As you can see, we really take these AMAs seriously. In one of the AMAs, we had over 1600 questions that we answered in a single sitting!
We love giving back to the community and helping educate entrepreneurs on buying and selling online businesses. Hopefully this snapshot of our AMAs along with some additional insights has answered the burning questions you may have had!
If they didn’t… well, just ask below in the comments and we’ll give the best answer that we can to your question!
Remember, the key to any successful sale or acquisition almost always comes down to good preparation. Preparation is best gained through education, so keep coming back to our blog and podcast to learn as much as you can.
Photo credit: BrianAJackson