When Is It Right to Sell a Website at a Loss?
Let’s face it, not all websites produce the results that its owner wanted when he launched the website. There comes a time when the owner may decide that it’s no longer worth investing any more time and money in the website. At this point, the owner decides to sell the website.
The challenge here is that very often the owner has invested more money in the website than he can get out of it in a website sale. This concept can be very difficult for website owners to accept.
In stocks, it’s pretty straightforward. Stocks are assets traded in a liquid marketplace. The price of a stock at any time is clear. If an investor bought a stock at $2 per share and it’s now at $1, the investor accepts that if he wants to sell today, he has to sell at $1. There’s no debate here. These are the cold hard facts.
In websites, it’s more complicated. There’s no liquid marketplace with a defined price for the website. Let’s say, the website owner invested $10,000 to register the domain name, build the website, add unique content to it, and promote it.
Most owners would expect to at least get back their original $10,000 investment. The argument is that if anyone else wanted to build the exact same website, they would need to spend $10,000. This is a valid point.
However, let’s assume that the website makes little to no money. When the owner lists it for sale, many buyers will ignore it completely. A few buyers will make offers significantly less than $10,000.
The fact is, the market only places value on the cost of building a website if the website makes money. Otherwise, the buyers’ argument is that they can build websites that produce no money too. The reason why buyers buy websites is to buy cash-flow. Not the website design or content. Buyers place the highest value on cash-flow.
So if you’re the website owner, what do you do?
1. If it’s a website in a niche you’re truly passionate about, and you have the time & resources to continue building, keep the website. Continue to work at it diligently until you figure out how to make it successful.
2. If you don’t care about the niche, and you have no time & resources to keep building the website, sell it at the market’s rate and move on.
Yes, sell it at a loss and re-focus and re-invest your time and money in more profitable projects. Don’t hang on to the website and wait for that elusive buyer who will pay big money for it. From my experience as a website broker, that buyer will never come.
If you sell and re-focus on other websites that you’re passionate about, the profits you will earn from these other websites will ultimately make up the losses on the website.
This is when you should sell your website at a loss.
Author: Kris Tabetando
Kris Tabetando provides mergers & acquisitions (M&A) advisory and brokerage services to Internet companies. He also partners with investors to acquire & manage Internet businesses.
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