You should prepare your online property for sale by getting together the required information and financials in advance, then working to make a transition more manageable — and one of the first things most buyers ask for is a profit-and-loss statement.
Even though it is common for sellers with multiple properties to provide website-specific financials instead of a company P&L, those financials need to be attractive to a buyer, or the property just isn’t going to sell.
There’s nothing worse than mistakes, misleading others or providing inflated financials.
Always ensure that, above all, your financials are accurate and provable. That means source documents need to be available to a buyer on demand, and must confirm the validity of your claimed revenues and expenses. Think of it as less invasive than your last audit or colonoscopy.
Also, your business broker is your friend when it comes to selling your property, but since our reputation helps provide credibility to your sale, we, too, need you to be accurate. That’s why anything provided to us is reviewed and vetted.
There’s nothing worse than mistakes, misleading others or providing inflated financials. Nobody wants to buy losses, debts or a money-losing business unless there is potential for a significantly profitable turnaround.
So ensure the books reflect actual business operations and reduce unnecessary or unrelated expenses. And, of course, ditch that salary you’re overpaying yourself. Go with something realistic and fair. Here are a few other considerations to keep in mind:
SOMETIMES A BUSINESS ISN’T READY TO SELL
One company we are tentatively engaged to sell for is projected for over $1.2 million in revenues for 2021. The business is doubling every year and they are so busy with scaling they just can’t keep up. Because of this, the property cannot be listed for sale yet because their bookkeeping is very, very behind, so they don’t have up-to-date financials. Since we offer free consulting to streamline businesses for sale, we helped the company hire a new bookkeeper to expedite the financials.
SOMETIMES MISTAKES HAPPEN OR FINANCIAL STANDARDS ARE IGNORED
Once upon a time, a reputable seller who owned multiple properties provided rounded financials, which threw up a red flag. During due diligence, they could not prove a considerable portion of their revenues to a buyer. The seller provided a rational explanation, and based on their business history, we believed their claims. However, the buyer was a highly experienced and disciplined organization with basic requirements. They were unwilling to accept anything less than concrete financials, and the deal was dependent on the operator’s ability to continue running the business. The potential partnership soured due to lack of attention to the financials. Both parties walked away.
SOMETIMES IT’S OUTRIGHT FRAUD
If something seems too good to be true, or something stands out as being suspicious, there is likely something amiss. We’ve dealt with several former clients — former clients — that have attempted to game the system and could have potentially defrauded a buyer if they had purchased independently.
One property came in with complete revenue proofs and traffic data to support a modest price and exit. However, scrutiny with a keen eye ended its chances at being listed because the current revenues were zero. The seller was attempting to offload a website that they had stopped sending traffic to and that had no organic traffic of its own, in an attempt to scam a buyer into buying a dead website.
In another scenario, even though we often update listing details and prices as time goes on to keep our buyers informed of the thousand-plus listings we have, things can go awry. For instance, a seller provided us with an updated P&L where the document contained several changes, removed and added transactions, then included a significant cash injection for the previous month that was previously unreported. The seller claimed the books had been submitted incomplete earlier, but it derailed ongoing discussion with potential buyers so severely that the property ultimately couldn’t be sold.
The most egregious fraud I ever encountered involved not just unethical behavior but a horrifying mix of shady and illegal activity, ranging from fake financials, forged documents, tax fraud, embezzlement, a wide range of inconsistent false claims and — no surprise — a lawsuit. We caught that before it was too late, too.
No matter the circumstance, an experienced broker knows what to look for and can help avoid common pitfalls or fraudulent activity, mitigate trouble with an acquisition and protect you, the buyer or seller, before problems happen.
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.
