Interview: Greg Elfrink from Empire Flippers

1. From your point of view inside a brokerage, how has the site-selling market evolved in the last, say, five years (prices, buyers, trends, deal structures, etc.).

Content sites are starting to evolve away from just your typical affiliate site where they have the LONG homepage article (usually their main keyword they’re gunning for) and then a few support articles.

We still see these, but typically these are not your six-figure+ content sites. For sites with a higher valuation (around the $200k+ range), buyers are more interested in seeing the content site having a good brand and more of an authority site style design. None of this is probably news to your audience as you guys talk about it quite a bit.

As far as prices go, they’re going up. A few years ago we were the “20x” guys, because most people were only valuing content sites at 20x their net monthly profit.

Now, we’ve sold a site as high as 52x of their net monthly multiple. That was a rare case in a super hot niche, but still shows that these sites have grown in value a lot over the last few years with what investors are willing to pay.

I would say a good authority site with high quality content would have their average today at around 28-33x.

As far as deal structures go, this usually isn’t something you need to worry too much about until you get to the $200k+ range.

We have sold all cash before with a $1.7 million content site, but obviously, that’s an exception and pretty atypical.

The most common deal structure is for the seller to “finance” the deal through an earnout. So say a $700k site, the buyer puts down $500k, and then pays out the remaining $200k over a certain time period.

One interesting thing we’re seeing with the buy side is more and more people are starting to pool their money together to buy more content sites and have an entire portfolio of sites going at once.

We tend to call them “instituitonal investors” because they’re not just a solopreneur anymore, they have entire teams of operators running the sites they acquire and scaling them up. A lot of these organizations originally started as sellers too who used the capital they gained to buy other businesses from us.

Some of these organizations also are creating an investment angle here where people who want to get the ROI that can come with website investing but don’t want to even touch the website can invest some money with the company and that company will pay them dividends they earn from the sites they acquired.

Probably the most complex and more well known company that does this is WiredInvestors but we’re seeing a ton of others starting to populate the marketplace.

2. What are the most common kinds of deal structures? Full cash deals? Earn outs?

The most common kind of deal structure is seller financing for anything above the 200k+ range, though they can happen lower this is where they get especially common. The reasoning being is that traditional financing is hard to get in our industry for anything that is less than $2 million dollars.

Typically these earn outs are tied to a time period that is agreed upon in the negotiations and can be tied to milestones like revenue/net profit (buyers prefer it to be tied to net profit vs sellers would prefer it to be tied to revenue).

I actually wrote a huge guide on this called The Definitive Guide to Deal Structuring that you can check out here. It’s more helpful for buyers, but anyone looking at selling a multiple six figure site should give it a read too so they can know what kind of things to expect.

One of the most common things that really amazes me is that sellers don’t often charge interest to the buyer for these earn outs. They are literally giving a loan basically to the buyers at 0% interest. A lot of savvy buyers know this, so they’ll ask for the earn out even if they can pay full because it’s free money to them. Asking for interest is one way to either decrease the amount of the earn out, or at least get something out of taking the added risk.

Empire Flippers always manages these earn outs on behalf of our seller, so if someone is scared of selling their site because of these, we can handle that portion for them (and we don’t take our full commission out of the upfront fee either, rather we take it from the earn out just like the seller does so we’re in it together).

There are other financing options opening up too now like SBA loans in the USA are starting to become more reasonable. Businesses called “Family Offices” which are usually large trust fund managers also buy businesses from time to time in our space and might be open to loan money to a buyer to acquire one of these content sites. Both of these options are still pretty rare though in the sub $2 million space.

3. Who is buying sites these days and why?

There are a few different groups of people we see.

You have the middle management/executive still working their 9-5 who wants to get some skin in the game and they’ll buy a business from us, often it’ll be their first.

You have solopreneurs who have probably built out a lot of sites and maybe even sold some with us come back and buy sites from us. We see this one quite a lot where an SEO might build a $200k site, sell it, buy 2 $50k websites and use their same process (plus the extra $100k) to scale those two sites to the moon with content/links. Sometimes they’ll do CRO on the sites too which can increase the revenue pretty quickly that a site is earning. Some of these guys will hold onto the site, but often they’ll come back and sell that site with us 12 months down the road for sometimes double what they bought it for. I believe there is one site like this in particular that has been on our marketplace 4 times that we’ve sold over the years, which I find pretty funny and kind of cool.

Institutional Investors – These are the people I was talking about above. A lot of them will raise money from investor clubs, Family Offices, and other communities to then go and buy digital assets with and they’ll pay these people dividends from the website. Usually they have a “deal maker” that buys/negotiates the deal, a “money raiser” who actually raises the money from investors so they can buy different deals, and a few operators that will actually run the websites they acquire.

4. Who is selling sites? Why?

The majority of people who sell their sites with us are solopreneurs. They might have a team, but if they do it is usually smaller than 10 people and often part time VAs versus actual full time employees.

The reasons why they sell really run the gamut. We’ve seen everything from divorces, raising money to adopt a child, wanting to buy a home free and clear, investing into offline investments, or most commonly they’re just tired of the project and want the capital so they can jumpstart their next project.

We’ve seen a lot of people “roll up” their projects this way. Basically, they’ll start a few simple ones and sell them for $20-50k, then use that money to get a leg up into more complex projects that are more lucrative and sell those so they can get an even bigger leg up into even more complex projects.

One of our clients has sold probably around $600k worth of Amazon affiliate sites with us and they’ve used that money to start a pretty successful productized service and now a SaaS project they’re working on.

5. What’s the basic process of selling a site

It’s a bit different depending on which way you go (Private vs. Brokerage) but a lot of overlap as you might imagine.

Prepare the Business

You want to get everything in order here, these could be SOPs, proof of income/traffic, really any documentation or things you’ll need to hand off to the new owner should be ready to go before you ever start selling it.

Market the business

For a private sale this means you’re going have to hustle UNLESS you have a good platform with an audience that is already predisposed to liking online businesses. Then a private sale can be fairly easily depending on your audience.

People like Jon Haver has done this in the opposite direction where he uses his audience to proactively buy online businesses often for less then he could get if he’d gone with a brokerage (though he still likes brokerages too). This hustle will be email outreach, posting in groups, pretty much anywhere a buyer might hang out.

Be prepared for a lot of timewasters and have a good system to filter them out. If you go with a brokerage, a lot of the heavy lifting of the marketing is taken care of by us.

We have over 30,000 people on our email list that are looking at our listings weekly, we do Youtube promotions, facebook ads, blog, participate in different communities etc. that gets rid of a lot of the traditional challenges you’d run into marketing the business in a private sale situation.

Negotiations

For a private sale you’ll want to make sure you are extra careful here.

One reason why brokerages tend to sell at a premium versus a private sale is that the seller just doesn’t know what their website is worth, or if they do they just burnt out from all the timewasters/tirekickers giving lowball offers.

Eventually, a lot of these sellers just assume their site MUST be worth this lowball offer and takes one. You got to make sure to filter out these timewasters somehow in a private sale or just stay strong to a minimum price you’d be willing to walk away from.

On the brokerage side, we tend to handle most of the negotiations on your behalf. We filter out bad offers and if someone makes a reasonable offer, we will counter to make the offer better for the seller before we approach the seller with the offer.

We also do what are called Buyer-Seller conference calls which is where the buyer, one our Business Advisors, and the seller all get on a call together to hash things out.

Our advisor will usually do a prep call with the seller to tell them what this buyer is into and in general counsel them on what to say to the buyer. The key thing to remember with negotiations whether you do private or a brokered sale is that it is all about the give/take. If you want a higher cash upfront offer, you might need to take an overall lower sales price. If you want a higher overall sales price, you’ll have to be okay with a potentially longer earn out scenario.

Migrating the Site

This is where you have agreed to the deal, money is being held in escrow or by the broker and you’ve started transferring everything over to the buyer – changing up affiliate links, display ad accounts, hosting etc.

We hold onto the domain at Empire Flippers until the buyer verifies traffic/revenue and once the buyer is all up to speed and informed us of that, we’ll release the payment to the seller and push the domain to the buyer’s registrar.

And that’s it!

5. What should a seller have in order before selling?

This depends on A LOT of factors.

For your basic content site, you honestly don’t need too much. You’ll need to be able to provide proof of your traffic/revenue.

The two most trusted traffic analytics services that we use are Google Analytics and Clicky, and these are the two a buyer is most comfortable with.

We’ve actually turned away sites that just use Jetpack analytics because they’re just not as reliable. Most of your audience will probably just need these to be honest.

Things start becoming more complex if you start adding an ecommerce portion to your business selling your own physical products, or selling an info product/any kind of service.

Other things to think about here is to make sure you have detailed answers as to why you had any traffic/revenue dips/spikes. These are obvious areas the buyer is going to have questions about, unless of course the spike is in the holiday season which tends to see most site revenue spiked.

If you have a team in place, think about whether that team is going to go to the new owner. Since most of our sellers might have 1-5 VAs, usually this is no problem. If they decide they want to keep these VAs for other projects, it’ll be worth your while to hire a new set of VAs to take over the tasks that will go over to the new owner or offer the buyer your support to help them hire replacements once they purchase the site.

Having a good set of SOPs is super handy too. Standard operating proceudres are basically the “operator’s manual” to your business and while this won’t add more value to your sales price, it does make your business far more attractive because it makes the business more plug and play.

Speaking of earn outs from above, if you’re planning on selling your site in 12-24 months, I highly recommend reaching out to SBA lenders now. The whole process can take up to 90 days whether they approve you or not. The reasoning why you should do this is so an SBA lender has pre-qualified your content site for a loan, so when you do find a buyer that is offering you an earn out scenario you can counter with the SBA lender you’ve found to give that buyer a loan. This can vastly decrease the earn out for you and decrease the risk you’re taking because you’ll get the vast majority of the business’s sales price upfront, leaving the entire loan repayment risk between the buyer and the SBA lender instead.

6. What should a buyer have in order before making an offer?

They should have the core competencies to run the business. Luckily, content sites tend to be pretty easy businesses to run for the most part in comparison to SaaS businesses or full-fledged ecommerce stores so this usually isn’t much of an issue for content sites.

A buyer obviously needs to have the money ready to buy the business, and that money shouldn’t be a rainy day fund either it should be money they’re 100% okay if they lost it. After all, this is a volatile industry and while there is high ROI to be had, it is also risky.

A buyer needs to make sure the site has checked all of their due diligence boxes. We can’t really tell you what is the best due diligence because it varies wildly from buyer to buyer. Some buyers love buying sites with PBNs because they know they’ll win on the price of the site and to them they only need 1-2 out of every 10 sites to really work to be making great returns.

Other buyers LOVE sites with a lot of penalties because they know how to fix it and will also get a good deal on the site. Other people might want 100% clean links, or a certain link portfolio or certain content quality standards.

A buyer should define what it is they are looking for before they start looking for it. A good way to think of due diligence is to think “How can I eliminate the choices I have to choose from quickly?”. This lets you filter through hundreds of deals way faster leaving just a handful of deals that you can do deeper dives on before making a buying decision.

7. What do the brokerages handle?

This depends on the brokerage. Overall, a good one is going take the majority of the heavy lifting off your hands. For instance, 100% of the marketing of your listing is going to be handled by the brokerage. 85% of the sales is handled by the brokerage too.

The seller comes in on the last 15% during buyer-seller conference calls and reviewing offers we’ve helped buyers craft to appeal to the seller. Also the brokerage can greatly speed up the sale of your business if that brokerage has a big audience. This isn’t so much the case if you go with a brokerage that is just one person out there selling a business, since they usually don’t have the same resources to really grow a huge audience like we can.

From a buyer perspective, going with a brokerage takes a lot of the friction out of making sure it is an actual legitimate business. For example we have an entire dedicated team whose sole task is to vet every business we put onto our marketplace.

Vetting is different than due diligence, which is important to keep in mind, we’re just making sure that everything the seller tells us is legitimate and true such as traffic/revenue etc., the due diligence is still on the buyer. Still, this takes a lot of fear away from the buyer and lets them get down to real due diligence a lot quicker.

A couple things we do that other brokerages don’t really do is we handle the migrations side of things too.

Migrations is where you actually hand the asset off to the new owner and it can be sometimes a tedious/technical process, and we’ll do that for the buyer/seller. We also will manage any earn out scenario between the buyer and the seller, making sure payments are coming in on time or stepping in if there is any issues we’re seeing so we can help the buyer/seller work through it.

One cool thing we do that no other brokerage does as far as I know, is that we will pay out a seller in any cryptocurrency they want. This is nice for some sellers who live in countries with capital controls, though some sellers just prefer getting the crypto over the fiat. We also will accept crypto from a buyer if they want to purchase a site with it

Another solid thing a broker has that you don’t really get with a private sale (usually) is just the experience.

We handle deal negotiations for a living, we’ve sold over $50 million worth of businesses now so we’ve been around the block. This means we can give both buyers and sellers solid counsel on how they should proceed.

For example, some sellers have totally unrealistic expectations as to how valuable their business is (often due to emotional investment in the business is) and we can help bring them down to a more realistic sales price.

Likewise, if a buyer offers an incredibly unrealistic offer, we can tell them that it is one and help them craft a more reasonable offer that a seller might go for. This helps take a lot of the guesswork out of things.

Of course, selling/buying a business whether it is your first or 50th always comes with unique challenges since every business is different. We’ve done so many deals that the majority of potential problems that come up, we already know how to solve, which is beneficial to both parties too.

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