WES S03E06: Listing Your Business For Sale
Where can you go if you’d like to list your online business for sale? What are the pros and cons of listing privately vs. using a broker? What information should be included in the listing?
These are the questions we’ll answer in this episode. We look at the four main ways to sell your online business and discuss the advantages and disadvantages to each.
After listening to this episode you should have a strong idea on the best place for you to list and ultimately sell your online business.
Are you digging the show? Please stop by iTunes and leave us a review! We’ll give you a mention on the show and we’d love to hear your feedback!
Listen To The Full Interview:
What You’ll Learn From This Episode:
- 4 Main Ways To Sell Your Online Business
- Do it yourself
- Put together documentation
- Decide on a “central” place to list and sell your business
- Format your write-up
- Publish your central listing
- Advertise your central listing
- Put together your documentation
- Decide on Classified Vs. Auction Listing
- Submit all of the information, pay the listing fee, and follow the format we laid out in the DIY approach
- Decide on Reserve Vs. No Reserve
- Select your advertising options
- Publish on Flippa!
- Advertise your central listing
- Put together your documentation
- Pay listing fee and/or submit your information through the order form
- Expect to answer a list of questions
- Within 1-2 weeks expect to hear whether your listing was approved and the listing price for final approval
- Agree on the price and have your business listing go live
4. Private Equity Groups
Featured On The Show:
Ace Chapman: This is most people’s intro to this space so they have no idea what they’re doing and you get to be their practice to figure it out.
Woman: Buying and selling businesses just got out a lot easier. Welcome to the Web Equity show where thousands of successful entrepreneurs go to learn about buying, growing and selling online businesses, your hosts, Justin Cooke and Ace Chapman share their real life advice examples and to expert interviews to help you build and grow your own online portfolio. Now to your hosts, Justin and Ace.
Justin Cooke: Welcome back to the Web Equity show. I’m your host Justin Cooke and I’m here with my co-host Ace Chapman and today we are talking about listing your business for sale. This is season three, episode six and this is our 32nd episode buddy.
Ace Chapman: We are getting on up there. It’s pretty amazing and we got a lot of people listening so that’s even better.
Justin Cooke: Yes, we’ve got a nice little audience. We’ve definitely been a leading up to this episode with our five previous episodes of season three we’re going to actually walk through the process of getting your business listed for sale. We actually have four main options that we’re going to talk about. One of them isn’t quite as relevant to our audience and we have less experience in it, so we’re not going to talk too much about that one but we’re going to into detail on three of the options.
Ace Chapman: Yes, we’re going to take you through the process of from beginning to end, how to get listed on each of those three options and then for you guys that have experience with that fourth option, maybe one day we’ll bring one to you guys on and do an interview.
Justin Cooke: Yes, that’s a great idea. So before we do that, buddy, let’s do some shout outs. First up on Twitter, we got Kaylin I put out that we obviously just relaunched season three of the Web Equity show. Kaylin gives it a shout out. I’m a new listener I absolutely love the show. Cross 20 plus episodes in a week. That guy is fired up, so that’s impressive. Did you have a favorite episode? His favorite episode was the virtual properties versus offline real estate Hashtag wild west. I liked that one too, man. I think it’s really interesting when you start comparing buying these online websites and comparing them to some of the offline deals, especially when you look at like crowd funding and building funds out of the businesses. That’s really interesting.
Ace Chapman: Yes, and I think the cool thing is it can be easy for us who’ve been in this space to forget how incredible it as compared to some of the other options out there. And when you look at real estate and you look at all of the people that are creating funds and do different servicing around that and you fast forward in the space that we’re in, it’s like, man, this can be a very dynamic investment and it’s awesome to be in at the very beginning of it.
Justin Cooke: Absolutely man. The market does still feel super early, right? Which is why we call it the wild west. I mean when you look at the real estate market, compare it to this market, it’s just so much more advanced, so much further along and a lot like things are both, I think stable. It’s a bit more unstable when it comes to online businesses, but it’s also just way more fleshed out. Right, and I think when it’s not fleshed out like the space we’re in, it just provides a ton of opportunity. All right man. Let’s get into it. We’re talking listing your business for sale. We see at the top of the show there’s four main ways to sell your online business. The first one, Ace is to do it yourself, the DIY approach, and we’re going to get into that. The second option is pretty well known.
Flippa. Flippa is the Ebay of selling websites. They’d been around for a long time. They were born out of forum called site point, a community online and the third option would be brokers and or marketplaces. That’s a part of what we’re a part of an Empire Flippers and guys like Quiet Light and the rest. There’s other brokers out there that you can do business with and then the fourth group is the private equity groups. These are people that are buying and holding a potentially selling off at packaging. A lot of large deals together. The thing with private equity Ace is that they’re typically much larger deals they’re looking at. So they’re more on the 10 million plus range, even in the hundreds of millions of dollars. Right?
Ace Chapman: Yes, that’s a little bit beyond the deals that we do and even light to do. I mean, I love the multiples that we deal with and I love the entrepreneurs that we get to deal with. This is more corporations and large organizations.
Justin Cooke: Yes, it’s outside of the scope. So we’re really going to cover the first three on this podcast and like you said, I’d love to get someone on the podcast who has done some of those like eight figure deals and we can talk to a little bit about deal structure and financing and due diligence. I think that’d be really interesting. All right man. Let’s get into some of the advantages and disadvantages with the first three.
All right, so the first option is the do it yourself or the DIY approach, and just generally best when you want full control of the process. We’ve had some people come to list their website or online business with Empire Flippers and they just didn’t want to operate under the parameters that we operate. So they wanted it to particularly be written this way. They wanted our acceptance of potential offers to be this way and it’s just not the way we do business.
And so we were like, look, “I think if you want to fully control that, you’re probably going to want to list it yourself and this isn’t a good fit for you.” So if they have a particular way they want to do things or you as a seller have a particularly, way you want to do things, you’re going to want to go your own route. That’s generally, if you have quite a bit of experience already in buying and selling businesses, it may be a better fit. Also, if you have an audience of people that are likely to purchase from you already. I know Andrea Darian over at e-commerce fuel assault an e-commerce business and he had a network of e-commerce entrepreneurs that were already in the space. So it might make more sense for him to sell the his audience rather than listing somewhere else.
Ace Chapman: Yes, that’s right Justin. So a great advantage with this is that you have the control. The biggest disadvantage is there’s a lot of work to be done and for most folks, they don’t know the work that needs to be done. So you end up losing the opportunity to sell to really great buyers because they come in and you don’t have everything put together the right way or you’re not prepared to answer the questions. I think knowing that you need answers prepared, it’s not something that you want to just do off the cuff. Those things are really a little bit tougher when you’re doing it on your own. So you may end up selling it for less. You’re a little bit more likely to have scammers come in and not know how to filter those guys out. So those are just issues that you want to keep in mind. If you go this route, do the research and be smart and we’re going to take you through some of those steps.
Justin Cooke: Yes. What are the ways you need to scam doing yourself? You’re less likely to scam to the seller than you are a buyer, buyers is someone I could just scam, but one of the ways is for a buyer to work with an escrow company that is their brother or their friends, right? So they’ve set up a fake escrow company and they’re like, oh yes, look the money’s in escrow. So that’s one of the ways to get scammed. One of the advantages though, obviously if you’re doing yourself and say you’re not paying fees, so the fees can be significant. So you’re talking 15% of the deal is likely saved by doing it yourself. What you have to look at is does it make more sense? Are you going to sell for more with a broker that overrides that 15% in fees and that’s sometimes the case.
So it’s something that you need to consider. Let’s look at option number two, which would be Flippa, the Ebay of selling websites and starter businesses. These are generally best for small websites, anything under $10,000. If it’s making a couple hundred bucks a month, maybe even less than a hundred dollars a month, or it’s really, really new. You’ve set it up within the last six months. If the website doesn’t have any profit, if it isn’t yet profitable, you’ve set everything up, but maybe you don’t even have revenue or profit coming in yet, Flippa is the place you’re going to want to go. You also may want to consider Flippa if you can’t get approved with a broker or a marketplace. If you submitted with a couple of people, one or two people and they, these brokers or marketplaces, did not accept your listing. Flipping may be your second best option either that the DIY route
Ace Chapman: I dealt with Flippa. I feel like Flippa is most people’s intro to this space, but there are some disadvantages. We’ve all gone there seen the list things. There’s a lot of low quality businesses that just you have to weigh through and your business, which could be an amazing business. It’s still going to be seen through the lens of, okay the so many of the businesses on here sucking. So you’re right next to this low quality business. Whereas with some of the other things we’re going to talk about, you can be listed next to high quality businesses and so that hurts your value. You’re also going to deal with a ton of time wasters. Like I said, this is most people’s intro to this space so they have no idea what they’re doing and you get to be their practice to figure it out.
Justin Cooke: One thing I couldn’t believe Ace is I think Flippa would make more sense if they were charging 5% or something. Because then it makes you think like “Well it takes more time and I don’t have the guidance and there’s some problems with it.” I’m position extra low quality businesses but I’m paying significantly less. But they now charge 15% when you use successfully complete the deal. So I mean you’re close to the market in the brokerages. So it’s like why not check there first and then take it to Flippa if you have to. One of the benefits though is that with Flippa you can list websites that have zero profit, right? So if it’s one of those businesses where you put a lot of money into tech, you’ve put like legitimately there’s an interesting backend or there’s interesting stuff going on but it’s not making any money and think Flippa is a pretty good option for that because there aren’t a lot of places you can take that.
If you have something really … you’re a coder, a programmer and you’ve built something really interesting. You just haven’t gotten the customers, you’re better off a Flippa. Brokers won’t be able to take you. Now, one of the other advantages with Flippa is that it’s just got a baked in audience. If you try to DIY it, right, do it on your own, where are you going to find the people that have been that should buy on Flippa, they have people looking to buy websites and they have a ton of buyers looking for sites under 10,000 so a $40 site or an $800 site looking to to spend a little bit of money. There’s a ton of people on flip and look and do that and get started.
Ace Chapman: Yes, and you want to think about your target market. So you’ve got a lot of buyers, but if you’ve got a really great $200,000 business, it’s very hard to justify. If you’re selling that startup site, it’s a thousand dollar deal or does it have revenue you’re talking about, those things. I think that’s when Flippa starts to make sense because they have the audience of those potential buyers, they’re sitting ready for you.
Justin Cooke: And the third option would be go to a broker or a marketplace. This is generally best for businesses or websites valued somewhere between $10,000 all the way up to 10 million and this is great because you’re going to be basically contracting a third party if the broker of the marketplace do a quite a bit of the work, not all of the work as we’ve already talked about this quite a bit that you need to do, but you’re going to have them do a lot of it and one of the clear advantages with a broker or a marketplace is you’re going to sell for larger multiples, right? They’re going to put this business together for you and package it in such a way that’s makes it very attractive, makes it really interesting to potential buyers and they have a baked in audience of people looking to buy businesses usually in that range.
Anything from 10,000 all the way up to $10 million and they’re your hands off approach is going to save you some time and hustle the broker or the marketplace, they’re going to deal with a lot of the time wasters and stuff you might deal with elsewhere. Then you’re also less likely to deal with scams or fraud. It doesn’t mean that it won’t happen, but it’s much less likely to happen if you’re working through an established broker or Margaret Place because they’ve done enough deals, they do this for a living. A lot of times it may be a seller’s first time ever selling their website or business may be their only time selling a website or business. So having that personal guidance and having someone walk you through it is helpful.
Ace Chapman: It is. Obviously I work with brokers, I do some deals that are off market and it’s just a lot more work from the buyer’s standpoint. So you end up with a little bit higher price and a lot of times that can make up for that commission because the buyer understands, “Wow, this is a lot easier than dealing with some folks off.” But there are some disadvantages, you lose the control. So obviously that’s a big advantage when you’re doing it on your own. They’ve been a little bit more control of a price and those things when you are doing it through Flippa. When you’re dealing with a broker, they will determine what the right list prices is. And a lot of times there may be flexibility and they may say, hey, if you go with this higher list price, we’re going to be less likely to sell or it’s going to take longer, blah, blah, blah.
But it’s still going to be within a certain range. The other thing is brokers. They have to be incentivized to do the deal and you want them to work with you and there’s going to be some commission that has to be paid there is on the very low end, I think around 10% on the higher end, around 15% but they’re going to control the process and walk you through each step. Who they’re having you talk to, what goes in the listing was put in the perspectives.
They design all those things. And then, and this can be an issue for some sellers, they control who gets to see it. So if you’re somebody that saying, “Well, I want you to list it. I’m okay with your price. I’m okay with what you put in the percentage, but I only want you to show it to these people that are in this opposite industry of me. I want to make sure that none of these people get to see it.” Some brokers aren’t going to like that because they’re incentivized to get it sold. They want to be able to share it to anybody who wants to buy it.
Justin Cooke: Yes, that’s true. Like handcuffing me on like who I’m able to show the information to. It’s difficult now it’s our interest to protect it because we want to protect the buyer who ultimately ends up with a business and we don’t want to share it just with everybody, but we want to be able to have our options and a little bit wider than you’re allowed to show it to five people. Right. This is it. If you can’t sell it to them, you can’t sell it. Well, we’re not interested in doing that deal. I think it was interesting you mentioned that brokers are incentivized to do the deal, right? They are because they’re making a commission. And that is not necessarily the deal you want. So from a broke, here’s the dirty little secret of our industry, right? So if you’re looking to sell your business for let’s say $400,000 and as a broker, right, that you’re selling broker, we can offer comes over 350-360, well 350-360 is good enough, right?
Let’s get the deal. Let’s move the deal. Let’s put a new deal in place. Right, let’s get the deal done. You’re like, “No, no, no, I’m losing like 40 $50,000 here.” So I mean all it does is a solid perspective you just have to say no. You have to be very clear on like what your expectations are and what you would exit four. But you may feel a little bit of pressure from your broker to get the deal done rather than necessarily get the price you want. So that’s the old … I mean most of the time brokers are aligned with your interests. That’s one of the ways in which they’re not.
Ace Chapman: Yes and their goal is to get a deal done. So you go in knowing that.
Justin Cooke: Yes. All right mam, the first three, let’s go through the process for actually getting the business listed on each of the platforms and you should make a quick note here that these processes are bound to change over time. So we’re doing this and early 2017 by 2019 how you get these lists may change a little bit. We’re going to try to be general enough and talk about the general steps and not the specific buttons you’re clicking on or what the screen says, that thing. So it should work into the future, but just want to make that clear.
So let’s talk about the DIY approach to selling your online business. This is where you’re doing it yourself. You haven’t contracted a broker, you’re not going to Flippa. You just want to sell it on your own. You still need to gather the documentation we mentioned the last episode, season three, episode five. If you haven’t got your documentation together or you don’t know what we’re talking about, you need to go back and listen to that episode.
Ace Chapman: You also need to figure out what central place you’re going to list your business. And so this is the listing that just teases people, tells a little bit about the business so that you can then go to the next level and share more deep information. I think the best choice is BizBuySell sale. I know you agree with that Justin, but you got to have some public place that lets the world know, “Hey, I’m selling this business and here’s a little bit about it.”
Justin Cooke: Yes. If you look, a lot of brokers are also list on BizBuySell and does cross these other places. I like BizBuySell in their format, Attica, and they do get quite a bit of visitors. People looking to buy businesses there. One of these, you want to make sure that wherever you’re centrally listing your place, it needs to be publicly accessible. So when you’re talking about a place to put that you’re selling your business, you don’t want to put it in a private group or no private forums for now. We’re actually going to talk about that in a future episode.
All right, man. Step three. Let’s talk about the writeup. Like what do you actually write up about your business being for sale? The first thing is you need to have a title, so you’re going to need a compelling title and it should provide the highlights of the business.
It should give the general niche for the business should give a general number. So like if you can give how much revenue profit the business did last year, if you can talk about how many customers you’ve had, something that highlights it and makes it clickable. This is a clickbaity type title to where if someone sees that they go, “Oh, I’m interested in this particular business. Sounds interesting. I want to know more information.” So it’s really a clickbaity for the most part. After the title, someone’s click through to check out your listing. You want a brief overview and what we’re going to do here is just expand on the title so you want to hit the highlights about the business. How old is it, what are the revenues, what’s the profit, what’s the traffic, how much business have you done, what’s your customer lists look like?
What are your email subscribers, how many customers total have you had? This is your chance to sell them on the business, right? And a few bullet points and a couple of hundred words. This wants to be short, sweet and to the point on exactly what they’re going to get if they buy from you. The third section after the title, the brief overview, you’re going to want a more detailed or thorough look at the details, right? Revenue like month over month, quarter over quarter, year over year. You want to start looking at detailed information about the traffic, about the target market and this is the stuff for the wanks, right? Someone was looking at a business and they’re like, “Okay, I got your flashy headline. You were selling me on the overview. I get it. Now I want to dig into the details.”
This is the fine print, right? So you as a seller, you need to decide how much you want to share here. Are you going fully transparent where you share all the information? Are you holding just a little bit back or you being vague in general, you want to be more transparent, as transparent as you feel comfortable with being. Do that because the more information you get, the less crappy contacts you’re going to get from people. And the more your going to get people that are real potential buyers. And then the last piece, the fourth piece you’re going to want to do is you’re going to want to lay out clear instructions on how exactly to contact you and then provide some call to action. Let them know what the next step is to get ahold of you to potentially buy your business.
Ace Chapman: I think the key word you used there, that is what this is, it’s you’re really creating clickbait at this point. You need it to be factual. You need it to be enough to get their mouth watering, but you don’t want to do too much where you’re telling everything that’s in the prospectus. So it’s important to be detailed. There’s nothing worse than a three line description on a business and you’re like, okay, I don’t know anything. Is it worth me contacting you or not? So I think thinking about it like that, that clickbait as is an interesting way to go about it and then get those leads in there so that you can talk to them about your business.
Justin Cooke: Yes. So step four after formatting your writeup is actually getting it published, and this is what we call publishing your central listing. This is the one that is publicly available BizBuySell is a really good option and you’re going to put your information up there. Now keep in mind, after you do this, people are going to start contacting you, right? They’re going to have questions that are going to say, you didn’t include this or your numbers are off here. Something’s wrong there. And then as they contacted you over time, you can start to make adjustments to that listing.
So you can make changes and tweaks. If you find you’re getting the same question over and over, you can go back and add that answer. You can add that bit of information they needed so that hopefully it will minimize future context. Now I’ve had it to where people ask a question a few times, we go and add that very, very clearly and people still ask that question. They’re just not reading it through. So it’s not going to solve everything. But hopefully you want to cut on the time waster contacts that you get out of this.
Ace Chapman: And then at the end you want to get your listing out there. So in addition to all of the audience that’s going to come from BizBuySell to check out your listing, you can take that listing and promote at other places. And the more you do that, the more feedback you’re getting. You want to consider this a living document. So as you’re getting, just like Justin said, the questions and all that, you’re adding those in. You’re making the listing better, but the more you get it out there, the better, and we’re going to go through some of the ways that you can take a listing and promote it on the next episode, so that’ll be a great one.
Justin Cooke: Yes. We’re talking about advertising your central listing or your business for sale, which I think it’d be really helpful. Now, BizBuySell already has some baked in audience, so you’re good there, but if you did the post on medium or sometimes I’ve seen businesses for sale, they put it up on their own site, right? They’ve already got some traffic there on onsite and they’re listening in for sale. We’re going to talk about how to get the right buyers in front of listing. Even if you were the broker it doesn’t hurt to potentially advertise your business for sale. We’re going to talk about some of the interesting tricks and doing that.
All right, man. Let’s look at the second option, which is how to list your business on Flippa. The first step again, this is just putting together your documentation. Same as we talked about in the last episode, the same as you would do with the DIY approach.
The second step you need to decide on whether you’re going to go with a classified or an auction listing on Flippa, and here’s the difference. A classified as justice states, it’s like a craigslist post. If you’re older, it’s like the old classifieds, whereas an auction, you’re putting your business up for sale at a set price and then people are going to bid, right? They’re going to bid up that listing and sometimes you can use a reserve or no reserve, which we’re going to talk about in a minute, but effectively there’s an auction, there are multiple bidders and they’re going to try to hopefully bid up the price your business until it finally sells.
Ace Chapman: I missed the auction days, man. I remember going in there and participate in some of those auctions and we don’t get to do that anymore.
Justin Cooke: It’s exciting.
Ace Chapman: It Is, it’s a lot of fun.
Justin Cooke: It is, it is fun. It’s not fun though when you find yourself at two in the morning and then it extends again. And then extends again because they don’t have the sniping, right? Like you’ve tried to put in like a last little thing. Like you extend it and you’re like, “Oh my God, what am I going to do?” Those were the fun days though.
Ace Chapman: I remember those days. And that’s still the same. So it still does the extension.
Justin Cooke: Yes, yes. So and the classified is like, it’s more of you’re not going to get as much attention. The auction gets more attention on Flippa. So in terms of like native Flippa a traffic, you’re going to get more from the auction. With the classified, honestly, I don’t see why he would not go to BizBuySell almost all the time. If it’s small or it’s new, you can do it on Flippa. That’s the thing BizBuySell won’t take a new business and some of the small ones just don’t get as much traction there.
Okay. So step three you submit all of your information. You’re going to pay the listing fee on Flippa and then you’re going to follow the format that we laid out in the DIY approach is very similar. You want the to be clickbaity. Remember people are doing searches, they’re going through Flippa. You want your title and your information to stand out from the ones right above and below you. It actually makes sense to look at some of the titles, which ones attract to you and which ones don’t. And you may want to follow the pattern there.
Step four, Ace, you’re going to need decide on the reserve or no reserve are you a reserved guy or no reserve guy? Which do you prefer?
Ace Chapman: I think that it’s better to do no reserve. If you go in and especially the people that do the super high reserve if you lose that excitement. And if you really want to classified like we mentioned, you just set the price, we put it in there and that’s what it is. And that’s what a lot of people treat the reserve like and you lose that enthusiasm. So if you’re willing to go to Flippa, the most powerful thing you can do is just have no reserve, really promoted, hit it hard, take advantage of some of their upsells and that thing and go all in.
Justin Cooke: Yes. So for anyone who doesn’t know reserve or no reserve, reserve would mean you’ve set a price. So let’s say that I’m going to start the bidding at a dollar, but I’ve set the actual reserve to be $100,000. So unless the auction goes over a hundred thousand I’m not going to actually be forced to sell the business. So one train of thought is to use a reserve and you can set it at, $100,000 and you don’t have to tell people what the reserve is, but you’re going to get a ton of questions on Flippa of people asking you what the reserve is. Well, I’m a no reserve guy across the board, but there are two ways to do it with no reserve, right? The way we got started was, is, and we were, this was crazy. We would listen to a dollar with no reserve.
So basically we’d sell, and these are small sites, a $6,000 website or $8,000 website, we start off with a dollar with no reserves. So meaning if we only got one bid and people put up at buck, we’d sell it for a buck. Now the truth is it’s not going to go for a dollar because they’re a bunch of people looking. So we’ll go for a dollar and then five, then 10 then 15 and then a hundred and, and there was a whole bunch of action. There’s a lot of action on it. So that action would ultimately drive the bidding even higher. So we’d get more for our listing because we started off that way. So that’s one approach. If you just can’t stomach that and you’re like, I can’t start a dollar, no reserve, I would pull my hair out and I just can’t do it.
The alternative is this. Start, again do you know reserve, but put the first bid at a price that’s lower than you’re comfortable with. So let’s say I would sell the business to $80,000 I’d be very uncomfortable with it. You may start at 80 and then hopefully we’ll get bid up. Now, I wouldn’t do it with a business that large, but let’s say like I don’t know started at 800 and I’d be happy to sell it 12 or 14 or 15 go a little bit lower than you’re comfortable with and get the bidding started. That way you’re not going to get as much action as if you did a dollar no reserve, but you won’t be selling for price that you’re totally uncomfortable with either.
Ace Chapman: And step five, we talk, we get into the whole advertising aspect of this. So we’ve talked a little bit about having no reserve and that’s when you really want to get aggressive. You want to have your promotion lined up offsite of Flippa but in onsite-
Justin Cooke: Well onsite Flippa has onsite advertising options in terms of getting featured in terms of how to promote your listing on Flippa, there’s a whole bunch of options. I’m not going to get through all of them, but we found that featuring on Flippa search is generally better than using their offsite model. So if you want to like get featured in social media for Flippa that wasn’t worth the price point. Whereas like getting highlighted or featured on Flippa was valuable. And the last thing you do is you publish on Flippa and again Flippa will take basically anything you list and obviously for lying about it. So they’ll take those down. But it doesn’t have to necessarily be making money so they’re good for that and a good option. And then the last step, again, you’re going to do some off site marketing.
You’re going to get people to your Flippa listing and we’re going to talk about that in the next podcast episode. All right Ace we’re in the last one or we’re talking how to list your business with a broker or a marketplace. Again, step one, put together your documentation we talked about in the last episodes. Step two, you’re going to pay the listing fee and or submit your information through the order form. Some brokers or market places charge you a listing fee upfront. Some don’t. It just depends on the company you’re working with. Step three, expect to answer a list of questions so the broker is going to get back to you generally with a list of questions it maybe 10 questions it maybe 40 questions it maybe a hundred questions. They’re going to be back with a whole bunch of questions for you and they’re going to be some followup emails about the documentation that you’re submitting, so they’re going to request more documentation.
They’re going to asked a bunch of questions, sometimes even a phone call or two to clear up any questions or mistakes they have. And this is what’s known as the vetting process. So we do this at Empire Flippers, once you submit the information, we’re going to reach out to you with a whole bunch of questions and requests for documentation. Once you send that to us, we may get on a phone call with you just to clear everything up and make sure we got everything correct and then make sure you’re good to go. It takes about one to two weeks from the time you submit to actually hear whether you’re listing was approved and then to finally get the list price for the final approval. So you submit your information, there’s a bunch of questions and maybe there’s a phone call and then they’ll let you know or we’ll let you know that yes you’re approved and we’re listing your business at 250,000 or whatever the list prices.
Ace Chapman: You’ll have to agree on the price with a broker. We talk a little bit about this before. It’s something that is in a negotiation. I’ve dealt with listing with brokers and that thing and like I said, their goal is to get a deal done. So they’re going to come up with a price that’s going to get the deal done and you still, as the seller want to understand that you want to have some flexibility. One of the mistakes that you can make is agreeing on the price with the broker and thinking I’m getting all of that at closing. As soon as this thing sells and of the time there’s going be some portion of whole back or earn out or those things. And that’s what I’m seeing in the market.
Justin Cooke: Yes. When we get the seller and they’re not happy with the price, we have some flexibility. So we generally have a range and we can go from here to here and we normally justify the reason that we pick the price that we picked in that range is because of the vetting that we just did. But we can go up or down a little bit depending. We have, there’s some wiggle room. And then sometimes if you’re like, I want two times that or something that’s way outside of what we’re willing to do, then we just won’t be able to do business with you. So we have a range where we can adjust a little bit, adjust up or adjust down. Outside of that we won’t do it. The other thing we won’t do Ace, is we won’t discount when someone really, really wants to drop the price significantly that we don’t do that either. In fact, we looked at often as suspect, like what’s the problem here?
Ace Chapman: Yes.
Justin Cooke: I wonder if other brokers do that if they will not drop it. Like they’re like, look, “Let’s just slash the price to half.” We won’t do it.
Ace Chapman: Yes. And I feel I’ve seen it happen. So I’ve definitely seen it happen. And quite honestly it happens on the sketchiest deals. And so that’s a signal. And now, cause I literally have been watching a deal where this just recently happened and they slashed the price a few times to the point where it got to the point where it was like half of the original price. And as a buyer, that’s a huge red flag. And it just so happens that a lot of times it is on the sketches deals. So if you see that happen as for your buyers listening, that’s something to pay attention to as a red flag.
Justin Cooke: Yes, red flag it. I mean we change our price month to month depending on the earnings that did, but yes, a seller are coming to us saying, “Look I want to slash my prices in a half”. That’s not something we’ll do. Just like we won’t let you say, “I’m going to sell it for twice where you’re trying to list it for.” We won’t do that either. So we’ve arranged that we’re in and that’s it has to be the box.
Ace Chapman: It’s not about just dropping the price, it’s when it goes down to 50% of the original price or something like that.
Justin Cooke: Yes. All right man. Once you agree on the price and you have your business go live, you are now alive. You are listed, your start getting some action and again, the last step would be to advertise this listing that’s listed on the marketplace or with the brokerage. And again, we’re going to talk about this in the next episode. A lot of tips and tricks, things that we’ve actually used in the past and we’re going to share with you and then the we actually use today as brokers, so I think you’re going to dig it.
Some final tips, Ace for all these different approaches. The first, if you’re doing it DIY, you know I think that’s a really a good fit for people that already have an audience, people that would potentially buy from them in that niche. And if you’re going to do that, a BizBuySell is a great place. I mean you could post on your own site or medium whatever, but BizBuySell we’ll have some baked in audience is probably a good fit for you. What do you think man?
Ace Chapman: I think one thing I mentioned about that, it doesn’t … I have seen some guys with very small audiences that are pulling that off and they’re selling at a premium because you’ve already built, every time I go in, I do a deal with the seller. My first thing is can I trust this person? I know we got to do it like a speed dating type of building trust. And there are folks that have some very small audiences that are able to sell a lot higher than what they’re going to get on BizBuySell or these other marketplaces, and they’re doing it because the trust is already there. So if you’re somebody, even with a small blog, that’s something to consider.
Justin Cooke: That’s a good point. If you’re selling for under $10,000 so it’s a small site it’s a starter site, Flippa is probably your best option. You probably wouldn’t be able to get to BizBuySell it’s not old enough. It’s not big enough. So it’s best for no profits for starter sites, if the business is valued somewhere on the low end, we’ll say $10,000 on the high end, 10 million look for brokers or marketplaces, that’s probably going to be your best fit and you’re going to get the best service and value and best price for your business. If you’re looking over $10 million, you’re going to have to look at some private equity groups.
Again, you could take it to a broker, might be a little outside of their range and we’ll look at some of the other deals they’ve done, make sure they’ve done deals in that range, but you’re probably going need to start looking at private equity groups and a lot of times I’ve seen brokers consult on these deals like a $30 million deal. They’ll consult with you but they end up selling to one of these private groups
All right ace that’s it for this episode. If anyone’s listened to this and you dig the show. Please head over to webequityshow.com and make sure to let us know and you can also drop us an iTunes review and we’d really appreciate it. In the next episode we’ll look at how to promote your business for sale once it’s listed and give you some tricks you probably haven’t heard of to help ensure a sale. All right, see you next time.
Ace Chapman: See you guys.
Woman: Thanks for listening to the Web Equity show. Now is your chance to be a part of the action. Go to www.webequityshow.com/gift and send us your business acquisition or [anxit 00:34:29] questions and have it answered on the show.