Using Seller Financing to Attract Website Buyers
Most website deals involving seller financing are in transactions over $100,000. This is a rule of thumb. But as I noted in the article When To Structure an All-Cash Website Deal, this rule is not carved in stone. It depends on the buyer and seller involved and the type of website for sale.
Seller financing can be a very effective promotional tool for a website seller. It can be especially helpful if the seller is not entirely sure what the website is worth or how to price it. The possibility of financing brings in more website buyers. This is because if the website is over-priced, these buyers would glance at its listing and move on. Possible financing causes them to stop and talk.
Offering seller financing provides website sellers with one of the most important elements in successfully selling a website – Deal Flow.
Let’s enter the mind of a buyer for a moment. The possibility of getting financing for a website deal says 2 important things to a potential buyer:
1. The Asking Price is flexible and is not the amount of cash he has to part with.
2. The Seller is serious about getting a deal done quickly and believes in the website’s performance enough to be willing to finance the sale.
Every website for sale competes with thousands of other websites for sale in the marketplace. As such, the most important thing for a seller is to get buyers to come in through the door.
Think of a website listing like a product in a shop window. The shopkeeper’s primary task is getting pedestrians off the street and into the shop. If no-one comes into the shop, there are no sales. Therefore, the product or signage must be attractive enough for people to get off the street, pop into the shop, and take a closer look at the product. Then, the shopkeeper can move to his sales pitch and presentation. Until the potential buyer walks into the shop, nothing happens.
The same approach applies to websites listed for sale. If no buyer ever contacts the seller, the website will never sell. Seller financing is an effective tool to get buyers to “come in through the door” and take a closer look at the website. Then, the website seller can really pitch his website to the buyer.
There’s one big question: What seller financing terms should a website seller offer to buyers?
The seller never has to state exactly what financing terms he’s offering. He just has to offer the possibility of seller financing to buyers. In this way, he can shift the responsibility over to the buyer and ask the buyer what financing terms he’s looking for.
This moves the sale process to the next important step – receiving an offer.
In order to qualify for financing, a buyer must make an offer and state what financing terms he wants in his offer. No matter what terms the buyer asks for, this is a very important step forward in the sale process.
The most difficult thing in a website sale process for a seller is to get a buyer to commit and make an offer. Many buyers ask dozens of questions and can’t decide whether to make an offer or how much to offer.
Offering seller financing pushes a buyer to commit faster and make an offer. To receive financing, a buyer has to make an offer that will be financed.
A seller can’t structure financing until a buyer makes an actual offer. A seller can’t finance no offer.
At this phase in the sale process, as a website seller, you must listen very carefully. The numbers that the buyer states in his offer package are extremely important. They qualify the buyer. They tell you whether he’s as a real buyer you should keep talking to. Or whether he’s a curious buyer who will never buy the website.
If it’s not a serious offer, you can decline it, and move on. You are not obligated to accept any offer or offer financing to anyone. You offer financing at your discretion.
If it’s a serious offer, keep talking. The buyer’s numbers tell you how much cash he can really invest in the website. This cash number is always flexible. In fact, everything is flexible. All the terms (cash down-payment, monthly payments, interest rate, length of the agreement, etc.) are flexible. Everything is negotiable.
So, negotiate everything.
The purpose of offering seller financing is to bring as many buyers in the door as possible. That’s why simply offering seller financing is so important. It brings more buyers in. Then, you can screen them quickly.
Think about how banks attract customers. Banks get applications for loans everyday because they announce to the public that they offer loans. But the bank decides who to lend to. Not everyone gets a loan. The bank’s public offer creates deal flow. It brings in loan applications. Then, the bank screens the borrowers.
As a website seller, you may even get a more lucrative deal by selling your website with financing than by selling it in an all-cash deal.
Seller financing provides website sellers with deal flow. Then, the seller decides which deal he likes. It’s a great a promotional tool to attract website buyers and sell a website.
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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