Preparing a Website for Sale :: Sell Websites Buy Websites

Preparing a Website for Sale Reprinted with permission of VotanWeb.com A website owner recently asked me to succinctly define what an owner must do in order to prepare a website for sale. I segmented my response into major categories as follows: Financial Since most website sales are based upon a multiple of the cash flow (either EBITDA or Discretionary Cash Flow), the website owner must have all of the financial records segregated and in good order. At a minimum, we would suggest having three years of financial statements and tax returns. If there are substantial differences between taxable income and book income (e.g. cash basis vs. accrual), those must be identified and explained. Culling out all significant discretionary expenditures along with isolating any unusual and non-recurring expenditures and losses will be important. Operations The Seller will want to identify all products and services provided by his (her) website and the specific markets served. In this review, it will be important to define the strategic advantages enjoyed by the website in their respective niche as well as comparative gross profit margins for each product and service. Growth Opportunities While buyers will purchase a website at a price predicated on current and historical cash flows, the main impetus for the purchase will be the ability of the buyer to grow the website at a rate that exceeds the norm for similar opportunities. It is important for the Seller to visualize those growth possibilities and define them tangibly in terms of product extensions to current lines, existing products to new markets, better market penetration, wider geographical distribution and etc. Deal Structure The preponderance of transactions in the sale of privately held website are handled as an asset sale (versus sale of stock). This type of sale will result in the buyer receiving a stepped up basis in the assets purchased (which generates future tax deductions) while concurrently avoiding unwanted contingent liabilities that result from a stock sale. The owner must sit down with his CPA and/or attorney and understand the tax implications of this transaction under each scenario so that he will not be surprised at closing or worse yet, when preparing his individual and corporate tax return. Remember, it's not what you get but what you keep that counts! Available Financing Most website owners would prefer to be cashed out of the transaction at closing and do as little owner financing as possible.