opinion

Adventures in Dealmaking: Keep It 'Business as Usual'

Adventures in Dealmaking: Keep It 'Business as Usual'

I’m a nice guy so I hate to say this publicly, but: website owners need to stop messing up their websites before trying to sell them.

Many website and business owners wait too long to decide to sell their websites. Frequently, it becomes an afterthought once they’ve moved onto the next project — “Oh yeah, I guess I should sell that website I don’t care about anymore that used to make a lot of money.” In a world of breakneck content scrolling, the sale price of a website is greatly determined by the revenue it generates rather than the content it contains. If neglected, it may end up as a depreciable asset at best.

The moral of the story? Don’t be your own worst enemy.

Already “checked out” or onto the next project, some webmasters entirely bail on their websites, neglect them or put them on autopilot and hope for a quick sale despite revenues plunging into the abyss. Buyers aren’t stupid — and neither is your friendly neighborhood broker — so keeping your websites well-maintained and operating as usual is the most important thing when trying to get that big exit.

Just like selling a house, some websites take longer to sell than others. Did you know that realtors keep their houses on the market longer than the average home seller? That's because they price accordingly, preserve their assets and aren’t looking to make a quick buck. It can take longer to sell your websites than your house — and the higher the value and price, the longer it will generally take to sell, due to fewer buyers as the price point increases. Therefore, you need to keep maintaining and operating your website until the transition to the new owner is complete.

Avoid this sin of neglect at all costs. If you neglect a website, the revenues will likely tumble — and any serious buyer will ask for the most up-to-date financials. The consequence is that revenue drops or gains make your price a moving target and scare away legitimate buyers, which will only make it harder to sell.

Once upon a time, I received the initial information on a web property that made it sound like a fantastic opportunity. The price seemed entirely reasonable, and I was happy to be working with someone who understood the actual value of their business instead of expecting a tenfold return. I was pumped. But by the time I received the financials, the revenues and traffic were in freefall. Much like peeling back the layers of an onion, the deal started to stink as I kept asking questions, getting more documents, and doing the due diligence.

Many unprofitable companies get bought and sold, selling for millions or even billions of dollars. Uber is an excellent example of an enormous company that makes a ton of money, but not a lot of profits. Still, investors dump truckloads of money into the company because they know the eventual payday for changing the world is enormous.

I consider all companies, even distressed properties, to be sellable. But distressed assets need to be priced accordingly, and the acquirer has to see enough meat on the bone to dig in. Look at Tai Lopez’s acquisitions of Pier 1, Radio Shack, Linens ’n Things, Dress Barn and more. They were all distressed properties that were acquired for pennies on the dollar. I’ve personally made good money acquiring properties that were losers and turning them into big winners, as well.

Getting back to my story, however, the revenues for this property had already dropped by quite a lot in a short period before it came up for sale. The seller had lost some key contracts, and there were outside competitive forces at play. But the biggest problem was that the seller had abandoned the website and was doing nothing to stop the freefall.

We had the lemons, and it was time to make lemonade. In a situation like this, time matters — but price matters even more. To get ahead of the dropping revenues, I recommended pricing the listing to sell, which would enable an acquiring buyer with their eyes wide open to get the acquisition completed, the property transferred and still have enough remaining value to make the purchase a win for everyone. Then, it would be destined to be a comeback story.

But that never happened.

The seller was understandably reluctant to sell their project at a price that made sense to a buyer. The website was dropping by double digits monthly and they only continued to lose money into the darkness. We never listed the property and it never changed hands.

The best time to sell a website is when it still has an upward trajectory. The worst-selling time is when profits are falling, better known as “selling too late.”

The moral of the story? Don’t be your own worst enemy. Long before you’ve given up, gotten bored, decided to stop running your website or let it decay into the digital graveyard, call your favorite broker. As soon as those revenues or traffic start a heavy trajectory downward, you’re in a race against time. Suppose you’re already there; it’s time to act. No buyer likes uncertainty or guessing how low it will go. Either right the ship or prepare for liquidation pricing. Otherwise, you’re asking your broker to hit a moving target, and that’s difficult to do.

Juicy Jay is the CEO and founder of the JuicyAds advertising network, as well as the founder of Broker.xxx, which helps people buy and sell adult websites and businesses. He also provides executive consulting, business strategy and marketing services at Consulting.xxx.

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