6 Mistakes Sellers Make When Selling Websites: #1 Unrealistic Asking Price
In order to make it easy for readers to understand and remember the subject matter in these articles, I thought it best to break this article down into 6 parts and deliver the information in a series of articles.
The number 1 mistake that website sellers make when looking to sell their websites is incorrect pricing. Website sellers, like most business sellers, generally believe that their websites are worth significantly more than they actually are.
Every website business is unique. However, each business listed for sale has to compete with all the other businesses listed for sale at that time. And when business buyers are looking for good investments, price is the primary consideration. An overpriced website business will drive away potential buyers.
What’s the right price?
For example, let’s say every website in a specific niche is listed for sale at or sells for 4 times EBITDA or cash-flow. And a website seller believes that he has a very special and unique website in that niche and decides to price his website at 10 times cash-flow. No matter how great his website is, when listed in competitive business-for-sale marketplaces, it will receive no interest from buyers.
Website sellers often forget that they need to be able to get buyers in the door for them to assess their website for sale. Most businesses are listed for sale online. When buyers are scanning listings for sale, they don’t have the time to analyse every single listing in detail. As such, they quickly weed out businesses if their earnings multiple is too high relative to the standard multiple in the marketplace.
They look at revenues or profits and compare them to the asking price. If the price-earnings ratio is too high, they simply move on to the next listing.
As such, the website listed for sale will not receive any traffic, any views, and therefore the website owner will not even have the opportunity to explain how his website is special and why it should be priced at 10 times cashflow.
There is competition for websites for sale
You have to look at websites for sale in the same way that you look at products for sale on a shelf in a grocery store.
For example, if every other can of beans on the shelf is priced at about $2 and your can of beans is priced at $10 because you believe it is of a significantly higher quality, you can expect very little sales from your product. The reason is that people have to be willing to spend $10 to buy the product and find out if it actually is of better quality. And most people will not do it.
Therefore, if you overprice your website business because you believe it is of significantly higher quality than every other website in the marketplace, you will not receive any buyer interest. Buyers will not spend the extra time and effort to find out why your website is so special.
Your website asking price is a promotional tool to bring in potential buyers.
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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