Since my first website negotiation back in 2001, I’ve seen buyers and sellers make all sorts of different mistakes. These are what I call “The Deadly Sins of Selling Your Website,” and it’s exactly why you should hire a broker to handle the process.
The single biggest mistake sellers make when they contact me is grossly overpricing their websites. Due to a lack of knowledge, their price is often higher than the market will bear, and yet many expect to complete the sale very quickly, which causes a real predicament: lost selling opportunities and unrealistic expectations that lead to a slow sale, or no sale at all. It is vital to price your property appropriately.
If you ever see or hear the word ‘potential’ when buying something, it means that someone is actively trying to sell you your future efforts.
I can usually tell who has been in business for a long time and who has no idea what they are doing (or has never sold anything before), because while both experienced and newbie sellers grossly overvalue their property, it’s the inexperienced folks who don’t take kindly at all to being told the reality.
Some believe that an asking price should be based on gross revenues, but because each business has vastly different profit margins (or no profit at all), it is profit that matters most. Additionally, the direction that profit is moving (up, down or flat) is what determines your revenue multiple. For example, media properties often have such high margins that their gross and net profits are almost identical, but camming and content creator platforms have much smaller margins.
I refer to people who disregard the profit and loss statements (P&Ls) as “dreamers,” because they are optimists who don’t see the reality of the state of their website or business, and thus rely on trying to sell on “potential” to support an inflated price. If you ever see or hear the word “potential” when buying something, it means that someone is actively trying to sell you your future efforts. Be aware that unlocking potential takes work. Work costs money.
Watch out for this mostly on properties with little to no revenues where someone has to build a website or business but hasn’t made it successful or profitable yet. Paying for “potential” carries risk. If you can see the potential, it has real value to you, and you believe you have the skillset to unlock it, then go for it! Otherwise, tread very carefully.
With high-tech acquisition prices, Silicon Valley has people thinking that they’re going to get a huge multiple, but nearly everything sells for between 2x to 4x profits. Regardless, we commonly get sellers looking for 10x or 20x multiples on profits. The only way those big multiples would make sense is if there were considerable assets (tech, valuable domains, patents, trademarks, etc.) to support them.
So, while mainstream properties can ask higher multiples because the buyers are limitless and include the biggest companies in the world, in the adult industry, the number of buyers is dramatically lower, with less access to capital and financing. This makes selling properties harder and reduces the potential multiple.
Even when you look closely at those blockbuster acquisition prices, many people do not know that those big buyouts you see on the news are often “earn-out” agreements. The initial purchase price is significantly lower, and the inflated number is not paid unless performance goals are met (and often, they aren’t reached).
For example, one of the startups I invested in was recently acquired by a giant digital devices company. The initial purchase price was around $30M, but the “earn-out” performance- based acquisition price was above $50M. So, I received an initial payment on the $30M but won’t receive the additional payouts unless they reach their targets. Usually, they’re pretty aggressive targets, but fingers crossed regardless.
They call me “The Dealmaker” because brokering for the adult industry’s largest marketplace is about more than just buying and selling. It is about structuring a deal, like “earn-outs.” There are many ways to package a deal, and I don’t get paid unless a deal appeals to both sides and the transaction happens. Often, that means going the extra mile and using industry contacts, resources from my other companies or putting on my consulting hat to help fix a business to prepare it for sale.
For help determining the highest price possible (without asking a ridiculous price), I recommend seeking out a broker who provides no-obligation property valuations, even if you decide not to sell. It never hurts to know what your website or business is worth.
Juicy Jay is best known as the CEO and founder of JuicyAds. Known as “The Dealmaker,” his brokerage Broker.xxx is the largest marketplace in the world for helping people buy and sell adult websites, businesses and domains.