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Assorted Thoughts on Website Buying, Selling and Monetizing

Seller wanted $250K, I got him down to $15K. Power Negotiation Part I

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by
Clinton
, July 12th, 2010 at 09:39 AM (960 Views)
I know some of you are waiting for Part II of my You Don't Need To Work Hard To Make Money post.

This ain't it. You're going to have to keep holding your breath. All three of you!

In the meanwhile, I thought I'd share a tip on buying sites.

Sellers invariably think very highly of their own sites and the profit these sites can make. They've got nothing to lose by over-estimating the amount of traffic / earnings ... so they do it.

Use that to your advantage. Here's how...

Get the seller to commit in writing what he thinks the site will be doing in six months / a year with $x spent in marketing every month. It will be a highly ambitious and usually impossible figure. Fight the tempation to laugh. Don't argue with him. Praise his ability to make these projections. Accept all his figures. In fact, you can even go so far as to offer additional reasons why his projection must be correct. That'll massage his ego and play into his need to see his baby as a little goldmine. Get as much prediction out of him as you can. Ask for risks he sees and how severe they are. He'll provide some and underplay their significance. Agree with him again. Be on his side. But get it all in writing.

Then start looking for ways you can tie the price to the site meeting those projections. You'll be amazed at how much you can get him to drop the initial cash price in exchange for a huge chunk of money contingent on the business making what (you know) is an impossible level of profit.

It's not easy to pull off and sellers need to have enough security in the deal to feel comfortable about trusting you to pay them on delivery of targets. Do what it takes to put that security in place. You're never going to have to pay that extra price anyway!

I have one perfect example of such a deal. The site was making about $1500 a month. The seller wanted $250K because "he could see the site making $20,000 a month within a year". We agreed a selling price of $300K with $15K paid in advance and the rest payable in stages depending on how the site performed. It never made more than $1500 a month, the agreement period has now lapsed, and I'll never have to pay him another penny.

Try it out. That's one way of getting your hands on a good site that's just not otherwise selling.

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Comments

  1. Andy's Avatar
    "This ain't it. You're going to have to keep holding your breath. All three of you! "

    Uh Clinton, maybe you should make that closer to 30 - when I was in radio I was told that for every person who responded there were at least 10 more who wouldn't.

    Great post, this one and the previous one. Now how about those second acts?

    Andy
  2. tke71709's Avatar
    Well done sir, well done
  3. Clinton's Avatar
    Thanks Andy, that post has had some 600 page views, but I doubt there're that many people hitting the subscribe button (I don't know how to check for number of subscribers in this vbulletin 4.0 anyway. If one of you knows, please post or drop me a PM).

    tke71709, thanks, but just a humble "sir"? I've been waiting for an invitation to the Lords for services rendered against website flipping!
  4. christopheravell's Avatar
    Without knowing more about the terms of this agreement I could say on the surface a wise seller would never go for this; unless he had something to hide. What were the exact terms? Did the site make any LESS than $1500/mth? How much profit, over your $15,000 have you made?
  5. Dreemers's Avatar
    Why would the seller not simply think "he'll sit on it, do nothing and make sure he doesnt have to pay me a penny more. then when the time period is over he'll turn it into the world dominating behemoth of a company i know it could be with just a little work! the swine !"

    I dont doubt this worked however, theres nowt as strange as folk ! as they say...
  6. Clinton's Avatar
    Dreemers, nothing strange, the agreement saves him face.

    meathead1234 says here :
    BTW, love how you negotiated that 250k site for 15k... I'll have to use that later if you don't mind.
    The truth is that it never was a $250K site to start with!

    Why would the seller not simply think "he'll sit on it, do nothing and make sure he doesnt have to pay me a penny more. then when the time period is over he'll turn it into the world dominating behemoth of a company i know it could be with just a little work! the swine !"
    That's exactly what they think, that's why you have to be very clear as to what each party's responsibilities are during the agreement period. I currently have a deal like this that's still open - with the finance network I bought late last year. I pay the agreed marketing and SEO figure each month, the hosting and domain renewals for a few hundred sites and meet various other commitments. The seller is aware that I intend pumping a lot more money and attention into the network after the expiry of the agreed time.

    Past the agreement period if the business does turn into a behemoth it's very clear that it achieved such status with the buyer's extraordinary talents. Had it done so in the period immediately after purchase, part of the credit should go to the seller ... and he would have got his $300K price. I think it's fair and most reasonable sellers would probably agree.
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