Website Sellers Looking to Sell New Websites to Website Buyers
We addressed how website age affects website sale price in a previous article. We indicated that everything else being equal, the higher the website age, the higher the value of the website. This is because website buyers look to buy established websites. They prefer websites with stable revenues over a long period of time.
It’s a simple matter of supply and demand. There is a higher demand for established websites that generate cash-flow than for new websites. For this reason, the sale prices of established websites are higher than the sale prices of new websites.
Established websites are the types of websites that our website buyers and website investors are interested in. As such, when we receive messages from website sellers looking to sell relatively new websites, we have to decline these opportunities. These are generally websites that have been developed within the last 12 months and do not have long revenue history. Very often, they have no revenues at all.
New Websites are essentially Website Templates
Don’t get me wrong, you can sell new websites to website buyers. But you must remember that it is significantly more difficult to do so. The reason for this is that website buyers seek cash-flow. When you’re selling your website, you are essentially selling a website template. Unlike website templates sold online where the same template is sold to lots of people, your template may be unique. As such, you would expect your unique template to have a higher value than the other mass-marketed templates. In fact, this is true.
However, you will almost never receive the full cost of producing this template from a website buyer. For example, if you spent thousands of dollars designing and building your website, you cannot expect to receive the full amount of your time and money invested in this project. Unfortunately, website buyers place significantly more value on cash-producing websites than they do on website templates that may produce cash in the future.
For this reason, we generally decline to sell new websites to our website buyers.
Website Buyers are looking for Proven Marketing Systems
Running a successful website business is difficult. As such, website buyers are looking for proven marketing systems. They are more interested in marketing systems than they are interested in website design & development. They seek to invest their money in marketing systems that produce cash-flow. Establishing a successful marketing system is the most difficult part of running a website successfully.
What is a marketing system?
In its simplest form, a marketing system is a process by which a website attracts traffic and converts some of the website traffic to leads, and later converts these leads into customers. A website owner who has successfully established such a lead generation process and has a good conversion rate, will inevitably sell his website at a good price.
In many instances, the cash-producing website need not even have a good design. The website template could be a simple WordPress theme or custom-made template. But as long as it generates good cash-flow, ideally stable cash flow, it is deemed valuable to website buyers.
So, website buyers invest in website marketing systems when they purchase websites. New websites that do not have proven marketing systems are difficult to sell to buyers. The bulk of the value is in the website marketing system, and not in the website template.
New Website Sellers are offering Future Cash-Flow Potential
Unfortunately, new websites do not have proven marketing systems yet. Therefore, new website sellers are selling the hope that the new website will produce cash-flow in the future. They are selling the potential of the website.
This strategy often works for much larger Internet businesses that have other assets that a buyer may be interested in besides cash-flow. These include a database of registered users, email lists, or a premium domain name.
Most small websites do not have any of these other assets. They hope to acquire these assets over time. However, most website buyers do not believe that the new website can achieve the potential that the website seller is claiming.
It is very difficult to sell a website’s potential to website buyers looking for websites under $100,000.
Search engines rank older websites higher than new websites
The final reason why website buyers often prefer older websites over new websites is because of search engine ranking. Everything else being equal, search engines give websites higher ranking due to their age.
Website buyers generally feel that a website with a longer revenue history, and a website that has survived multiple search engine algorithm updates, is more likely to continue to do much better in the future than a new website that has not proven itself yet.
Website buyers feel that the risk level is lower with an established website than with a new website.
Why do Website Brokers refuse to sell new websites?
Like our firm, most website brokers do not sell new websites. The reason is some website brokers have minimum commissions that they expect to receive upon a website sale. Owing to the low demand from website buyers for new websites, the expected website sale prices tend to be low. This means that website brokers may not be able to achieve their minimum success fee on these new website sales.
It is already difficult to sell a website at any price point. It is significantly more difficult to sell a new website with little to no cash-flow that most website buyers do not want.
For these reasons, many website brokers decline new website sale opportunities altogether.
Where do you sell new websites?
Of course, there are online marketplaces where you can sell new websites directly to website buyers. Marketplaces like Flippa.com and business-for-sale forums cater to new websites, as well as established websites.
However, as indicated above, the website buyers on these marketplaces expect to purchase these websites (or website templates) for a significant discount to the cost of producing them. These buyers expect significant bargains. As a new website seller, you have to be ready for this when negotiating with a website buyers at these online marketplaces.
Unfortunately, some business-for-sale marketplaces will not accept new websites, or new businesses, that do not produce revenues yet.
If you have an established website business that you are looking to sell, Contact Us today.
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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