While it is ideal to sell your website when sales are increasing, circumstances may dictate otherwise and you may be forced to sell when the financial performance is deteriorating.
Many prospective clients approach us to sell a website when their sales have dropped off a cliff and our advice is simple and straightforward: Either reverse the current trend and rebuild your business, or accept a lower multiple.
It doesn’t matter to a buyer that your traffic was 100,000/month a couple of years ago or that your domain name is valuable. A buyer is mostly concerned with the current performance of your internet business and the trailing twelve months’ financials.
Obviously there are other variables that will impact your website valuation, but none is as important as the recent financial performance and its trend. All things being equal, a website with stability or growth will always have at least a 0.25-1.0x greater multiple of earnings valuation than one with a decline.
If the reason for a website’s decline is the fact that the owner hasn’t focused his time and efforts into it (and it can be made apparent to a buyer) and the trend can be easily reversed, then of course the valuation will not take as steep of a haircut.
However, if the internet business has suffered due to increased competition, changes in search engine algorithms, or the decreased popularity of your product(s), then you can almost certainly expect a much lower valuation as buyers will be extremely cautious.
Now, this doesn’t mean that there won’t be any buyers. It just means that buyers will expect to pay a lower multiple for your site due to the obvious circumstances. In fact, we have specific buyers who only wish to purchase “turnaround situations” where they can pay a lower multiple, and put extra focus and funds into the website, bring it back to its former glory, and then sell it for a significantly higher multiple.
An experienced website broker will be able to provide you with an accurate current market valuation that which takes all factors into consideration.