In some of the older posts, we discuss the different factors that influence the multiple which an online business will sell for. One of the most important factors is the longevity of the website business. Ecommerce and other internet businesses that have a longer track record generally will fetch a superior multiple than ones with shorter track records.
We receive many calls from website owners wanting to sell their online business after only operating it for a year or so. We always advise them that while the site can be sold, it would unquestionably be more prudent to have some patience and operate the business for at least another year or two.
Sure, many other website brokers would not be honest and tell them the same as they would want to just get the listing and whatever commission they can earn. However, at W3 Business Advisors, we would not ethically be doing our job and looking out for the best interest of a client if we did not instruct explain this to them. Sure, as a successful entrepreneurial website owner, it can be exciting building a profitable website business and then rapidly flip it.
However, “aging” the business and operating it for a longer period can certainly increase the multiple from 1.5 or 2.0x trailing twelve months cash flow to 3.0x cash flow. The majority of the sellers do in fact wisely take our advice, keeping in touch with us, and ultimately listing and selling the website with us for a substantially higher price.
An experienced, confident and successful business broker will lead the client in the direction that is best for the client – not themselves! It is their fiduciary and moral responsibility to do so.