What is an Exit Strategy
An exit strategy is simply a strategic plan that prepares you to sell your website at some point in the future. The basics include:
- Having a rough idea of who might want to acquire your website and why they might want it
- Increasing the elements of what makes your site valuable
- Decreasing the factors that take away from your site’s value
Why You Need a Working Exit Strategy as Soon as Possible
Having a working exit strategy greatly helps you make strategic business decisions that increase the value of your website now and later. It also helps you avoid making mistakes that diminish the value of your site in the eyes of a potential buyer or mistakes that might make a buyer walk away completely.
14 Elements That Make Your Site Valuable to Potential Buyers
So what makes a site valuable to a potential buyer? What decisions can you begin making right now?
Every buyer is different and may have some unique reasons for wanting to acquire your website but there are some fundamentals that probably every smart buyer is going to be concerned with.
Take a minute and put yourself in the position of wanting to buy someone’s website.
- What would you want to know to have confidence that buying the site is a good idea?
- What would you want to know to avoid being scammed on the purchase?
- How would this website help you strategically grow your business?
Here is a list of 14 things you can begin working on, or avoid doing, that will increase the value of your website. As you read them, think of each point in terms of you the seller and from the prospective of a smart buyer. Doing so should help you see the value in paying attention to each of these elements.
#1 – Stable Revenue History
Every buyer is going to be interested in how much money your site is bringing in. A buyer’s prime concern is that the site’s revenue is going to be stable in the years after the purchase. No one wants to buy a website and then see its earnings crash.
That’s why you want to be able to demonstrate a stable revenue history to your prospective buyer to prove that your site has been a consistent earner over a long period of time.
How long of a revenue history do you need? I would suggest at least 2 years.
Might there be a buyer who is willing to acquire a site with a shorter revenue history? Sure, but you may not get the kind of price you want when selling it.
Here’s the main concern – anyone can artificially inflate the revenue of a website over a short period time. You could buy a bunch of ads, spend money on spammy links to temporarily increase your search engine rankings, load up your web pages with aggressive monetization schemes, and so on.
All these techniques can make a site bring in more money in the short term but over time, these tactics could reduce profitability as customers get annoyed at your monetization, Google penalizes your site for your SEO tactics, or advertising costs become higher than earnings.
Ideally, what you really want to demonstrate to a buyer is nice steady growth over time not just in revenue, but in actual profit.
Now there are always exceptions to this like in the case of YouTube which wasn’t profitable at all yet sold to Google for $1.65 billion in stock (source), but as a solo entrepreneur, you probably aren’t going to have a site with the kind of scale and large market share that a big entity like Google wants to grab and monetize. Plus, going for size without profit takes a lot of money and risk up front. I don’t recommend it unless you really, really know what you are doing.
Again, put yourself in the place of a potential buyer. Wouldn’t a site that has proven revenue over time be a safer bet than one that is inconsistent or only has a few months of earnings?
#2 – Multiple, Safe Revenue Streams
Generally speaking, having several ways of making money with a site is better than having just one. Multiple revenue streams spread out the risk of suddenly losing your main source of income.
For example, if you have a site that makes 90% of its money on one affiliate program, how safe is that revenue? All it takes is one decision to pull the affiliate program (or cut the commission rate) by the company offering it and the website value instantly decreases. Don’t think that will happen? It does – all the time.
Its smart business to diversify your sources of earnings. Its the same reason every sane investment advisor tells you not to put all your eggs in one basket. If a company tanks, so does your wealth.
There are all kinds of risk in business and nothing is guaranteed. Just because you are killing it on an affiliate program, Amazon FBA product, or ad network doesn’t mean that revenue is going to continue forever. Those of us who have been making a living online for many years have seen and experienced the volatility of revenue sources many times.
What makes a revenue stream safe? Generally speaking, it is one that you control and one that the market is going to want for a long time (an evergreen info product for example). Or it might be a revenue stream that has plenty of backup options if it fails (one product that can easily be replaced with another, one affiliate program or ad network that can be replaced with another, etc.)
Here is something you can do right now. Take an honest look at your current revenue streams:
- How many revenue streams do you have?
- What percentage of your total income do each of these revenue streams make up?
- Do you own and control these products and services?
- What likely events could possibly reduce or eliminate these revenue streams?
- How much would losing the top revenue stream affect your website value?
- What can you do right now to reduce the risk of losing these streams?
It can be hard to be honest with yourself with this exercise. It is painful to think that a large percentage your current means of income could go away literally overnight. Its much easier to fool yourself and not deal with it (I’ve been there and done that). But you are doing yourself a great disservice if you aren’t honest with yourself and at some point, it will probably come back to bite you.
If you want to diversify your revenue streams, look into online course creation.
#3 – Good Record-Keeping to Verify Profits
Solo entrepreneurs are notorious for being poor record keepers. After all, we are entrepreneurs, not accountants.
I don’t know about you but I hate bookkeeping. I hire it all out to an accountant who can keep track of all that and pull up records when I need it.
You need to keep great financial records of your earnings and your expenses. No sane buyer is just going to “take your word for it” regarding your website’s profitability. At some point, you are going to need to prove every claim you make about your site’s revenue sources, expenses, and any other liabilities that affect your site’s value.
Do your present and future self a favor and start keep good financial records right now. If you hate doing it, it might be less expensive than you think to hire an accountant or a bookkeeper. Plus, you’ll have less stress at tax time.
#4 – Low Expenses
Keeping your expenses low is going to help you now and when you want to sell your site.
A sly buyer will try to leverage your expenses against you to try to drive down the purchase price. Even worse, they may have all kinds of ways to reduce or eliminate those expenses once they actually acquire your site resulting in even more profit for them.
Here are some tips on keeping your expenses low:
- Outsource and avoid hiring part or full time employees whenever possible
- Avoid costly rent and lease agreements. Working from home has a lot of benefits if it fits your lifestyle, personality, and home situation.
- Automate with reasonably priced software to avoid labor costs
- Try to align your expenses with what actually helps generate profit as much as possible (i.e. sales and marketing costs)
#5 – Valuable and Loyal Customers
Valuable and loyal customers greatly increase the value of your website and the stability of your revenue streams. Anyone looking to purchase your site is going to favor a business with customers that will keep buying instead of customers that buy once or don’t buy at all.
This is often a great weakness for many solo entrepreneurs. Relying on monetization methods like affiliate marketing and ad networks often keep solo operators from creating their own products and building a long-term customer base.
Yes, blogging and monetizing with affiliate programs and ads is much faster and easier in the short run. Selling on Amazon is easier than running your own store. But those methods make it harder to really get to know what those customers want and if you are really attracting the kind of long term, high value customers more mature businesses crave.
If you don’t have your own customer base, think and research ways to create one. Info products are often great fits for most websites and you probably know more than you think you do. If you’re not an expert, you can still create an online course.
#6 -Proprietary Products or Services
Selling or advertising other people’s stuff is fine to start but the real long term money is typically made by selling what you’ve created. Not only do you build those valuable and loyal customers, you have more than just a website to sell.
When you have your own products or services, you open the door to more potential buyers and sellers. Now instead of someone just wanting to buy your traffic and content, you have something that a buyer can add to their own products or services, or build upon and improve.
Additionally, when you develop your own products or services, you are building intellectual property and trade secrets. These all have inherent value for prospective buyer.
#7 – Strong Customer Relationships
Knowing what your customers want and serving their needs profitably is the essence of business. Start now by getting to know your customers and build trust by solving their problems better than your competition.
Start soliciting feedback from your customers as soon as possible. Find out why they like your site, why they bought from you, how likely they are to refer you to a friend, why they didn’t buy from you, what problem you can help solve, and so on.
Build in strong communication that answers their questions immediately through automated systems and FAQs. Answer their potential objections in your marketing copy. Educate them thoroughly about what you can do for them. Offer strong guarantees to reinforce their confidence in what you are selling.
Make your customers feel like you really care. So few businesses do this well but those that do, and offer tremendous products and services, have a great competitive advantage. You’ll also make yourself a much more attractive acquisition target.
#8 – Make Your Business as Turn-Key As Possible
A turn-key business is one that takes very little effort to take over and operate. If your website is built on poor technology that makes it hard to change, a smart buyer is going to factor that into the cost of buying. If there is a lot of personnel training needed to reproduce your business processes, that is another cost.
The more time and money a buyer has to put into your website to integrate into his or her own, the more that will probably lower the value in their perception.
Here are some ways to make a site turn-key:
- Use software instead of people – a business run by software is easier and cheaper to take over than a business run by people. Automate wherever possible to streamline your business processes and lower the cost of running your business. As a solo entrepreneur, this is probably going to appeal to you anyway.
- Use industry standard software – run your site on a popular CMS like WordPress or Drupal instead of something a buyer may never have heard of and has to train an employee to learn. Use industry standard marketing and other software for the same reason.
- Make your business processes easy to reproduce – for every process in your business, write down the steps whether it is blogging, email marketing, course creation, etc. If it is written down and streamlined, it makes it easier for a buyer to outsource or train someone to reproduce.
#9 – Use as Little Complicated Technology as Possible
I realize this is going to sound contradictory to my above recommendations about relying on software and automation but it won’t if you get the principle.
In general, the more technologically complicated your site is, the more a potential buyer is going to have to spend in time and money to learn how to use it. They may try to use this against you by claiming they will have to hire someone to operate your site and then use that projected cost to lower the buying price.
This isn’t a major problem if you don’t take the bait. Here is how you can avoid falling into this trap:
- There is a time and place for making your own custom scripts and software as those can add proprietary value for your business, but remember also the cost of someone having to learn it. If you do have your own custom technology developed, make sure it is easy to use and well documented. Try to get it as stable as possible so there is little to no ongoing development or maintenance costs.
- If you are using off the shelf software from a third party (WordPress plugins, email marketing, CRM software, etc.), simply log how much time it actually takes on a weekly basis to use it. Demonstrate that the time it takes to use is actually less costly than hiring a person. If you use software that is well documented and has lots of user guides and training material, you can show that the learning curve to get up and running is quite small.
Simple, industry standard technology is fine. More complicated, custom software is where you will probably run into some potential difficulties.
#10 – Domain Has a Clean History of Search Engine Penalties
Getting a penalty from a search engine that results in a loss of traffic really sucks. Not only will it hurt your present sales but it will be a red mark on your analytics and revenue history. Avoid getting penalized at all costs.
If you do get penalized, it isn’t the end of the world but it may hurt for awhile. A website I sold for a very nice profit went through a couple penalties over its 12 year history. Fortunately, we were able to recover and demonstrate stable revenue for years after the penalties. However, if I had tried to sell the site before the recovery, it would have been absolutely brutal.
No buyer cares about what your site was earning before the penalty. If your revenue tanks and all new content is being suppressed by a Google penalty, you can not expect to get a good selling price for that site if it sells at all.
#11 – Maintain a Stellar Reputation
There are so many ways now for angry customers to tell the world online how a business cheated them that I am surprised some businesses still rely on shady tactics. Don’t do it. A poor reputation is going to hurt you now and in the long run.
Yes, I know some people get away with unethical business practices and it doesn’t seem to hurt them when they sell but any smart buyer is going to do their research on your website and business. If there are a lot of complaints and poor marks from sites like the Better Business Bureau, you are going to have some explaining to do and it could hurt you when its time to sell.
#12 – Unique Value and Position in the Market
From the very start, you should always strive to offer unique value and occupy your own place within the broader market. Don’t be a copy cat. Find a way to do things differently, to do them better, to offer what others aren’t offering, to solve problems that aren’t being solved, to serve a group of people that aren’t being served, etc.
If you have something unique the market wants, you make yourself a more attractive target to buy. If you reach and serve markets that others aren’t, buying you might be just the strategy someone wants to get access to that market.
#13 – Repeatable Processes That Lead to Profit
Whatever you are doing to make a profit, try to make it repeatable and predictable. A buyer wants to acquire a site that they know will continue producing for them. They want to be able to keep doing what you are doing and build upon it to recover their investment as quickly as possible.
If you are a blogger, demonstrate over time that x number of articles written using whatever strategy you are using typically produces y in revenue. If you are buying ads on a certain channel, show that writing them a certain way and showing them to a certain audience at a certain price produces a predictable amount of revenue.
If your revenue is haphazard and unpredictable, it makes it hard for a buyer to know for sure if they can sustain your success.
#14 – Make Your Business as Independent From You and Others as Possible
When someone wants to buy your website, they typically just want your website and not you and ten other employees needed to run it.
People cost a lot of money and can be a real drain on profits. A website, on the other hand, can be a fairly hands-free and low cost technology that can produce income on its own once set up.
Try to design your business in a way that doesn’t require you or someone else specifically to run it. Sure, every site needs a webmaster but don’t make your website so tied to one person that that person can hold a potential sale hostage if they refuse to cooperate.
When I sold my large site, my webmaster agreed to help with the transition for a few months at a nice hourly rate. Then the acquiring company got rid of him as soon as possible (he knew that in advance, don’t feel bad for him). Once his specialized knowledge in how the site operated was no longer needed, why keep paying for his services?
As for me, the great thing about my site is they didn’t need me at all. Even though our sales agreement included a certain number of consulting hours from me if necessary, they didn’t take advantage of it. They didn’t need to.
That’s what you want. You want a site that can be sold and operated by other people and not just you or any one particular individual.
Conclusion
I hope this article helped you think through what factors make your site more valuable to sell. If you focus on these things now, you will be way ahead of the curve and will be building long term strategic value.
Honestly, I wish I had this information before I got started. I hope some of the lessons I had to learn the hard way will benefit you on your own journey to success.
Start planning for your future website sale now. Your future self will thank you.
Helpful Resource – What Makes a Website Valuable