And here’s the deal structure I have in mind: $1 paid today and the remainder paid in $1 installments for as long as the business is running at a profit.
Not such a good deal, is it?
But if you want a big price for your business you need to be willing to play the game the way the big businesses play it. Sellers of small businesses often expect to get the agreed price paid in cash on the day of completion. That’s not how it works in the biggest deals. The biggest deals involve some form of seller financing i.e. the seller defers part of the payment.
Offering credit when they sell a website is anathema to most small business owners.
“No way,” they cry. “How can I trust the buyer to pay me for my website?”
Or, “I need the money now, that’s the reason I’m selling my website!”
And that’s fair enough. If you want an all cash deal that’s entirely your prerogative. However, if you want the best price you’re going to have to be flexible on not just payment terms, but on a few other things as well.
If, instead of demanding $500K for your business, you’re willing to take $300K upfront with the balance securitised on the business’ stock, the buyer’s house or some other asset, you will be opening up the opportunity to a wider range of buyers – those who can’t quite raise $500K in cash.
But more importantly, you could expect a significantly higher price simply from making this one concession when selling a website.
$600K wouldn’t be unreasonable.
That’s a whole 20% more than you would have obtained before.
But “seller financing” is just one of several tools available in the deal structure. If you are willing to accept some personal responsibility for driving sales and meeting projections for a year or two post handover, for example, you could bump the price up by another 20% – 30% when you sell a website.
There are numerous ways a seller can mitigate the risk inherent in any transaction. There are warranties and indemnities you could extend that could add another 20% to the price. Or you could take part payment in stock of the merged company.
Not only that, you could collect a ‘salary’ or consulting fee for staying around!
Detailing all the ways in which a seller can add value to the deal is beyond the scope of this article, but I’ve hopefully whetted your appetite and spurred you to investigate the thoughts shared in this post.
Above all, please know…
Your website may be worth a lot more than you think, but what you obtain for it, is going to be dependent on how you go about selling it.
You do not have to settle for the “going multiple” when you sell a website or any business!
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