Should I sell my website? What is it worth?
December 27, 2007 9:30 PM   Subscribe

Someone e-mailed and wants to buy one of my websites. Should I do it? How much should I ask for? Should I feel like a sell-out? There are complicating factors.

The site in question is a fan site for a children's book author. (Yeah, it's that one.) I started it over ten years ago and I used to work on it a LOT. The whole CMS is coded by me, but more importantly, most of the content was written by me. I'm not doing much with it these days, but it still generates a nice amount of revenue (around $200+ per month in advertising, and a small amount in Amazon referrals). I've had a number of offers to sell over the years, but the person asking always gave off a slightly dodgy vibe. I didn't start the site to make money, and it's built up a lot of goodwill and trust with kids, parents, and teachers over the years. I don't want to sell them out just to have the site turn into porn or spam.

HOWEVER - this latest offer is from a real person (I googled), who appears to be a genuine fan who wants to keep the site going. They've stated that they could offer "a very good price" for it. Me, I just bought a house. I've still got $20K in student loan debt. An unexpected chunk of change would come in very handy. I'd also like to see the site continue to evolve and grow, and I've admittedly had very little time for it these days. The things holding me back are 1) the aforementioned trust issue with my visitors, 2) the legal issues of selling my intellectual property and 3) my stupid ego not wanting to let go of something that I built.

The first and second issues can probably be dealt with pretty easily. I'm guessing if I do go through with this, I'd want my lawyer to draw up a contract for the seller to sign outlining things like retention of copyright, granting a license to use my content, etc. Is there anything I'm forgetting here? What recourse would I have if the seller breaks the contract? (I'm in Australia.)

It's the third issue - my ego - that's the real sticking point. I'm not that much of a curmudgeon that I'd rather a resource remain dormant than have somebody else work on it. But when you've invested so much of yourself in something, how do you let go?

And how the hell much should I ask for this site, anyway? I've read this thread, but it didn't seem directly applicable. Or should I maybe offer some sort of partnership deal?
posted by web-goddess to Technology (23 answers total) 5 users marked this as a favorite
 
Response by poster: I should add in case it's relevant that my site has tacit approval from the author's estate. I've met his widow, and in fact I sold them (at cost) their current .com domain name (which I registered years before they even thought of building a website). They're happy for me to maintain it and they've never asked me to take down any material. I just wanted to throw that out there before somebody started calling me out for violating copyright.
posted by web-goddess at 9:32 PM on December 27, 2007


$10,000-25,000, depending on how much really care and if this person wants to play hardball.
posted by dhammond at 9:59 PM on December 27, 2007


If the "very good price" is equal to or greater than your student debt plus five years income from the site (which, carry the one, is around $32,500) I'd say go for it. Unless you've got a valuation that puts it higher than that.
posted by krisjohn at 10:02 PM on December 27, 2007


Response by poster: Are you using the metric of 4-10x the yearly revenue? Or just pulling that out of your ass? Just curious. :)
posted by web-goddess at 10:03 PM on December 27, 2007


What is the site worth to you right now? One way to figure that out would be to get the present value of the sum of projected furutre cash flows: Using the "~$200/mo" as a starting point and building a (very) rough Discounted Cash Flow model for an explicit period of 4 years, with revenue declining by 2% per month after the first year ... and depending on the discount rate (10-20%) ... the site is worth somewhere between $3700 and $6300 (not considering your time and expenses)

The buyer may be willing to pay an amount less than or greater than that. If the latter is the case, you have even more incentive to sell.
posted by fourstar at 10:08 PM on December 27, 2007


I should have noted that the more time and expenses it takes to maintain the site, the less the site is (theoretically) worth.
posted by fourstar at 10:12 PM on December 27, 2007


I sold firedog.com for 20K without any content and without knowing who it was buying it....they offered $500, I tossed out 20K just because I wanted them to leave me alone :)

reg
posted by legotech at 10:24 PM on December 27, 2007 [1 favorite]


If it really is who I think it is, you could really charge anything you want. I'd charge enough to pay off my loans, take a nice long vacation and put a good nest egg into your savings.
posted by thebrokenmuse at 12:42 AM on December 28, 2007


Best answer: "...my site has tacit approval from the author's estate."

Very important that you never mention this to the purchaser; such approvals may not be and probably will not be transferable. Simply because she liked what you were doing with the site and perhaps was comfortable with the scale you were operating at doesn't imply this would be the case if someone else were in the saddle. If this approval is a key driver of the sale, and later is revoked by the estate you might find yourself on the wrong end of a lawsuit.

Also you will have to pay US taxes on this windfall. I'd suggest you think in terms of net and gross up the total price so you'll realise your necessary sum, after taxes.

Finally, considering some of the details, I'd suggest that you get a Solicitor to write up a contract covering the sale, and make sure the transaction is final and binding. No sense having someone come back at you a year or two later if, for example, the estate wants the site pulled down.
posted by Mutant at 12:44 AM on December 28, 2007 [1 favorite]


Most brick and mortar type businesses seem to sell for about double the gross revenue, which looks to be about $5000 in your case.
posted by blue_beetle at 12:55 AM on December 28, 2007


Also you will have to pay US taxes on this windfall.

Why would she?
posted by Malor at 1:58 AM on December 28, 2007


Also you will have to pay US taxes on this windfall.

Why would she?


I'm American, living in London and a colleague - another American ex-pat - was fortunate enough to win the UK lottery. This was nothing eye popping, about a fifty thousand pounds, but he didn't declare the winnings on his US taxes.

A few years later the IRS asked after their share, plus interest plus penalties. He contested this as he'd purchased the lottery ticket while in England, using foreign sourced income that had been fully taxed. This argument got him nowhere with the IRS, and he ended up paying.

If web-goddess acquired the domain using capital earned from US sources the case would be even clearer.

We Americans are lucky enough to be taxed on citizenship, not residency. I still have to file US tax returns even though I haven't lived in America for almost eleven years. This obligation never ends, unless US citizenship is renounced. And even then the IRS will send you a bill.

Of course she may be able to structure the sale to minimise US taxes but if the sums are large enough the IRS will eventually find out about the transaction.
posted by Mutant at 2:14 AM on December 28, 2007


We Americans are lucky enough to be taxed on citizenship, not residency.

web-goddess is an Australian these days (I know, I went to the party). So, what you say is true for US citizens in foreign countries, though incorrect in this case.

Hi web-goddess!.
posted by qwip at 3:07 AM on December 28, 2007


"web-goddess is an Australian these days (I know, I went to the party). So, what you say is true for US citizens in foreign countries, though incorrect in this case."

Minor point: one has to actively renounce US citizenship; simply taking a second passport doesn't suffice to cut ties to the US.

Renouncing US citizen isn't easy, and in fact almost always will be viewed by the IRS in particular as a tax dodge. Typcially they project expected tax revenue ten years forward and issue the bill I previously mentioned.
posted by Mutant at 3:31 AM on December 28, 2007


Best answer: The 4x to 10x metric may be a useful guide. As you can see, the valuation is something you can argue over and in the end comes down to what someone will pay. At the moment you are getting $2500 per year for little input. If we take the middle of the 4x to 10x range, that equates to $17500. I'd try that out. On the one hand the buyer is going to have to factor in the cost of running the site, which you do for free. On the other, he/she is buying an unique property with significant goodwill and no doubt has ideas about how to raise the revenue stream. Indeed, maybe ask 20, which factors in your legal costs, and be prepared to come down. Don't get involved in any conversations about your relationship with the author's estate and don't make any commitments or allow any conditions that may undo the sale at a later date. I'd agree a price and then present the buyer with a simple binding sale contract drawn up by your lawyer.
posted by londongeezer at 3:43 AM on December 28, 2007 [1 favorite]


Response by poster: Thanks everybody. (And Hi qwip!)

Mutant is indeed correct that I'm still an American citizen and thus still up for US taxes. That's definitely a consideration. And I did start the site way back in college, when I was still living in the US. So they've got me there.

The funny thing is, the mere fact that someone else is interested in the site makes me feel more inclined to work on it. I've already had a couple ideas today for new things to incorporate. So the idea of passing it on entirely to another person seems more remote. I'm leaning towards throwing out the $20K figure, with the idea that it's probably beyond what the buyer wants to pay, but if by a miracle they agree, it's worth it to sell. If they don't want to offer that much - but they seem like someone with skills to offer - I might offer a 50/50 partnership for the ad revenue.

> If it really is who I think it is, you could really charge anything you want.

It's not Rowling, if that's who you're thinking. I was just being coy. It's the site listed in my profile.
posted by web-goddess at 3:57 AM on December 28, 2007


Minor point: one has to actively renounce US citizenship; simply taking a second passport doesn't suffice to cut ties to the US.

I stand corrected!
posted by qwip at 4:56 AM on December 28, 2007


If you are going to throw out a number aim way higher than what you really expect to get. You can always lower your price during negotiations. Raising it is usually close to impossible.
posted by COD at 5:57 AM on December 28, 2007


>Should I feel like a sell-out?

not at all. you worked for it. you should feel proud that someone else values your labor of love. selling out is doing something for money's sake, which you did not. you just happened to be offered cold, hard cash for this.

I'd talk to this person. ask him or her what plans are being made, what they'd turn this property into. if you like the ideas, go for it.

at the very least talk. can't hurt.
posted by krautland at 6:50 AM on December 28, 2007


also: congratulations.
posted by krautland at 6:50 AM on December 28, 2007


Since this has been marked as a best answer, people reading this thread in the future should take caution:

  • Earnings multiples are typically applied to net income, "the bottom line" of an income statement. Valuation multiples do not get applied to the "top line", revenue/sales ($200/mo in this case). For companies without positive net income, like startups, valuation multiples are sometimes applied to lines that come higher on the income statement (on the gamble that these businesses will eventually be profitable).

  • Multiples for small businesses are really arbitrary and should not be used. To get an idea of what is actually a fair price, the seller should forecast the net income she believes she will receive every month in to the future and discount those cash flows to their present value -- keep in mind that a dollar recieved today is worth more than a dollar recieved next year. I suspect this sum will be lower than others' suggested selling prices, but it is the amount that the buyer can hope to actually recoup.

  • posted by fourstar at 8:01 AM on December 28, 2007


    It's worth what someone will pay. I sold a business years ago, and it was hard to set a price; brokers like formulas, but buyers don't seem to. It's very hard to appraise domain names and sites. Most of the information about comparable sales is not public. Don't sell it cheaply, unless you want to be rid of it. It may have unrealized ad potential. You aren't putting in a lot of effort to maximize it. All that said, it might be worthwhile to sell it to someone who will maintain it in an acceptable way.

    If you sell it, you need a way to transfer it. The buyer of the domain name I sold recently used godaddy.com's transfer service. It was not at all helpful. I used escrow.com. They confirmed that they had the money from the buyer, so I tried to transfer the name with godaddy. They were not responding promptly, so the buyer registered an account at my domain registrar, dotster, and I transferred the domain name to that account. Buyer and I let escrow.com know the transfer was complete and they sent me the money. Surprisingly painless.

    Good luck!
    posted by theora55 at 8:35 AM on December 28, 2007


    Response by poster: Thanks for the clarification, fourstar. I don't think the "bottom line" versus "top line" distinction means much in my case though, because the current site expenses amount to $10/month. Also, I know that your advice is good, but it feels weird to me to reduce the site solely into its earnings potential. In a case like this, don't you also want to compensate the person for all the work and intellectual capital they've put into it over the years? Or maybe I'm just being emotional, and it really does just come down to money-in/money-out.

    At any rate, the potential buyer has written back today to answer my questions about her intentions for the site. As I suspected, this is a fan who just wants to see the site continue, without any real plans as to increasing revenue. I get the feeling that she's not the lottery ticket I was hoping for. She seems pretty intelligent, though, so I'm leaning towards asking her to be a contributor and giving her a portion of the income. I don't want to offer her half the money and have her do no work, so I imagine we're going to have to put some things in writing. Any suggestions or advice for this?

    Thanks to everyone for their answers so far!
    posted by web-goddess at 2:27 PM on December 28, 2007


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