Should You Sell Your Content Site Now or Let it Sit?
To sell, or not to sell?
With the massive increase in website demand in the mergers and acquisitions (M&A) industry, more and more website owners are being approached by big investors.
It can come as a shock, if you weren’t previously aware that investors buy businesses, to receive such an offer and to realize that your website isn’t just a business that earns you income but an investable asset.
As assets, websites are increasing in value because of a flood of capital pouring into the online business mergers and acquisitions (M&A) industry. It’s an exciting prospect to take advantage of at this time, but how can you do that best?
Aside from such surefire reasons for selling your website as needing a large sum of capital quickly, there are other things to consider when timing your exit.
Most of the conversations we see about this topic focus on how to get the highest possible price, but there’s more to timing your exit. Taking the example of needing capital quickly, the owner would have to sacrifice the maximum possible exit price in favor of a quick transaction by dropping the sale price.
In this article, we will discuss how to determine the best time to sell your business for you and how to get the highest possible sale price when you do sell.
When to Sell Now
If you have an offer on the table, it can be tempting to grab it with two hands in case you don’t receive another offer for a long time.
The fact that someone has reached out to you could be a sign you have a good website that would generate interest in the current M&A market. The best way to generate the most interest in your website is to prepare it for sale and list it on a marketplace.
When considering the market-related reasons to sell, it’s good to know that you have leverage in the deal if you sell right before your peak season. An online business buyer’s main motivation is to generate a return on investment (ROI) as soon as possible, so if they acquire your website and it goes right into peak season, their profits will increase and it will help the buyer get an ROI more quickly than if they acquired your site after peak season.
Having this leverage puts you in a good position to sell quickly and negotiate a high sale price.
We usually recommend this approach to website owners whose business is running flat, with little to no growth or decline, as they can use prospective seasonal growth as leverage to negotiate a good sale price.
Another reason to sell now is because we’re currently experiencing a season of the seller for the first time in the history of this market. The value of content sites and online businesses as a whole has increased dramatically over the past year.
A growing flood of capital is entering the market from big investors and investing firms who are aggregating brands to build huge online business portfolios. These investors are now looking for new ways to strengthen their ecommerce-focused portfolios by bolting content sites onto their ecommerce brands to act as mini media companies.
However, if you’re anticipating year-on-year growth for your business, another option is to sit through your peak season.
When to Let Your Site Sit
Another way to leverage peak season is to sit through it. If your projections show that this year’s peak season will outperform last year’s by a significant margin, then your business’ profits will increase, which will increase its valuation.
You don’t need to fear losing out on the opportunity to sell even if you turn down a current offer. There will always be buyers for online businesses. Buyer demand is increasing, as shown by the increase of verified funds on our marketplace from $1BN at this point last year to over $4.7BN at the time of writing this article.
That said, while sitting through your peak season will see your profits, valuation, and average net profit increase, you will lose the bargaining leverage of a quick ROI opportunity.
Also, it’s always possible that external factors, like Google and commission updates, will impact your site’s performance, preventing it from riding the profitable wave. It’s worth bearing that risk in mind.
If you want leverage for your deal, an upcoming peak season isn’t the only means of getting it. This leads us to a common question about timing a content site exit.
What if You’ve Just Created a Big Batch of Content?
If you have recently created new content for your website, you can wait to see if the site grows. Any resulting growth will command a higher sale price, as the site’s average net profits will have increased.
However, it’s not just net profits that affect your site’s value.
As aforementioned, the buyer’s motivation is ROI. You need to leave provide some growth prospects to help them achieve that ROI. If you wait to list your site for sale until after your site grows as a result of your content release, how will the buyer grow the site further? We recommend opting to at least hold onto some content as a buyer incentive.
If your website has a straightforward setup (i.e., it generates almost all of its traffic from SEO), most of its income is drawn from a few affiliate or display advertising networks, it doesn’t have any audience assets like an email list or a social media following, then the buyer will have to build those growth channels from scratch, delaying their ROI. In this case, it may not make sense to release all of your new content. If you do have some of these growth assets, then launching your batch of content and waiting for a profit increase makes more sense for you.
Sit or sell is the key question—but there is a third, unconventional option to consider.
Test the Market
Another option is to list your website for sale and see what happens. You can get a feel for the market demand for your website by the types of offers you get and feedback from potential buyers on the readiness of your website for sale. When going this route, it’s best to list for sale privately because with a broker, you are held to an exclusivity contract that prevents you from listing on other marketplaces.
While it does take some work to prepare your website for sale, including organizing your finances and operations, these preparations will improve your business and likely make it more profitable. They will also help clarify your website’s growth opportunities and scaling potential.
While your site is listed for sale, you can run it as normal and keep earning 100% of its profits. The only thing you really have to lose is the time taken to review offers and speak with buyers, so the gains in your website’s improvements should outweigh the loss of time.
If you are keen to consider an offer you have already received, then it’s worth knowing whether the offer reflects an accurate valuation of your business.
How to Evaluate an Offer
When we value an online business, we consider factors such as business model, age, and growth or decline, to name just a few.
If you’re not ready to go through the in-depth process of discovering the true value of your website, you can use a simple formula to get a baseline valuation figure.
Your monthly net profit should be taken from a twelve-month average, and the multiple should be a figure calculated based on the factors that determine your business’ value, including those listed in the above paragraph.
To give you an idea of the current worth of content sites, they list at 41.7X on average.
Keeping this figure in mind when assessing offers should help you navigate negotiations. However, there’s no way to say how much higher or lower a price you should accept without looking more deeply into your business. For example, if your profits had been declining considerably over the past year, your business wouldn’t be in the best position for an investor to make an ROI, which would significantly reduce your multiple.
The average value of content sites has increased considerably over the past year. In 2020, the average list multiple for content sites on our marketplace was 33.8X; a comparison to the 41.7X average in 2021 demonstrates the huge jump in content site value over the past year alone.
To give an example of just how big that jump is, a business earning $10,000 net profit per month in 2020 would have an expected valuation of $338,000. In 2021, the same business earning the same net profit would have an expected valuation closer to $417,000.
In terms of the state of the market, there’s never been a better time to sell your content site, but the most important factor to consider is your personal circumstances.
Consider Your Circumstances Before Selling
We never advise that an online business owner try to time a sale based solely on the market because it can change uncontrollably. However, planning effectively and preparing your site for sale will set your site up for the highest possible sale price whenever it is the best time for you to sell, giving you more control over your exit.
When you sell depends more on your personal circumstances than anything else. You might have a need for the capital, you’re bored of your niche, or you might not have any reason to exit right now. In any case, your circumstances should be the number one determinant of when you sell.
If you’d like some personalized advice on how to prepare your website for sale, schedule a free exit planning call with one of our expert business advisors.