The Role of the Website Broker & Website Seller in a Website Sale
A website broker acts as an intermediary between a website buyer and a website seller.
In most cases, the website broker works for the website seller and receives a success fee as compensation from the seller upon the sale of the website. However, in certain instances, the broker may represent the website buyer in a website sale transaction and be financially compensated by the buyer.
How much do website brokers receive as a success fee?
Fees vary from broker to broker. But most website brokers receive a commission after the sale of the website of between 8% and 12.5%. Domain name brokers also receive commissions in this range.
Some website brokers set a minimum fee. They receive the higher of the minimum fee and the success fee. As such, if the success fee is higher than the minimum fee, then the broker receives the success fee. If the success fee is lower than the minimum fee, then the broker receives the minimum fee.
For example, some website brokers set a minimum fee of $5,000.
As a rule of thumb, we recommend that, as a website seller, if your website produces less than $1,000 per month in revenues, you should look to sell it yourself. It would be too small of a website sale for you to afford to hire a website broker. The success fee you would have to pay to the broker would be such a large percentage of your sale price that you would be left with very little money.
Website Sale Preparation and Marketing
Once a website broker agreement has been signed between a website seller or buyer and a website broker, the broker gets to work with the website sale. The first thing a website broker does is prepare a Prospectus. The prospectus outlines the website operations, traffic, financials, technology, etc. The website broker then collects supporting documentation such as Google Analytics reports, Google Adwords reports, Google AdSense reports, financial statements, and any other operational documents applicable to the specific website.
The Prospectus and supporting documents are then presented to potential website buyers for them to assess the website investment opportunity.
Website presentation to potential buyers
Of course, in order for a website broker to present the website to potential buyers, he has to have a database of buyers.
Our database of buyers has been, and continues to be, built up over years. It consists of buyers that we have worked with in the past, buyers who have bought websites from us in the past, buyers who have inquired about our website listings in the past, and buyers who add themselves to our buyer email list everyday on our corporate website.
Buyers in our database are added to specific website category lists that these buyers specify. For example, a buyer can choose to add himself or be added to an email list for AdSense or PPC websites only. As such, when we have websites for sale that fit this category, that buyer receives those specific listings.
In addition, in order to reach potential buyers beyond the email list, website brokers promote the website for sale using social media, paid and unpaid advertising, and a myriad of other promotional tools. This is important because you never know where the buyer will come from.
What is the role of the website seller?
Most website sellers are under the impression that they hand over the website sale to the website broker and are no longer involved in the website sale process until a buyer is found.
A website seller is very important in the website sale process because he has to continue to operate the website that will be purchased. One of the common mistakes that we have encountered over the years is that website sellers suddenly stop operating their websites optimally once they select the broker and decide to sell. This is a huge mistake.
For example, we have had rare situations in which a website loses almost 50% of its average monthly revenues the month after we begin presenting that website to buyers.
Of course, as buyers perform their due diligence on the website, they inevitably ask: “Why have the website revenues declined so drastically?”
In most cases, it is simply because the website seller has neglected the website because he believes he doesn’t have to run the website optimally anymore because he’s going to sell it. Unfortunately, what happens is website buyers see the revenue decline as a red flag and believe that the website seller is trying to sell them a bad website. Potential buyers think that this is just the beginning of a further decline in the website’s financials. Nobody wants to catch a falling knife.
I have seen so many website sales fall apart because a website seller completely neglected his website after it had been listed for sale.
So, as a website seller, run your website as well as, or even better than, you did prior to hiring a website broker to sell it.
What’s next?
As the website broker presents your website to potential buyers, the broker should keep you informed of the progress of your website sale. Ideally, you should receive updates at least once every two weeks.
If everything goes well, and a website buyer is interested in purchasing your website, you would then be required to participate in the original offer negotiations, provide access to confidential information for the buyer’s due diligence, and authorize the eventual website purchase agreement.
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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