Why should or shouldn't you sell your business by auction?

**newsgyrl** · May 6th, 2010, 10:01 AM

Hi I'm a journalist writing an article about How to Sell a Business. I'm looking at both brick and mortar businesses and Web-based businesses. I will attribute any information I learn to this forum or Clinton Lee.

My Question:

Why would someone choose to auction their business as opposed to the conventional ways of selling the business by word of mouth or by broker, etc?

**hooperman** · May 6th, 2010, 10:05 AM

Because word of mouth can be an inefficient way of telling people your business is for sale? Word of mouth only works on that circle of mouths and ears. What if I want to reach further than that circle?

Welcome to the forums newgyrl

Have you had any experiences buying/selling websites or businesses?

**Clinton** · May 6th, 2010, 10:27 AM

Hi newsgyrl, nice talking with you yesterday, thanks for getting in touch and welcome to experienced-people.net

There are advatages to using a good broker as some of them have a database of interested buyers. However, listing a business - whether B&M or online business - at places like businessesforsale.com exposes the opportunity to a wide range of prospective buyers. A larger number of buyers competing for a business translates into a better price for the seller.

There are other advantages. Brokers may charge 10% of the final sale price, business listing websites charge a flat rate of a hundred dollars or so. With business listing sites you can place your opportunity in a very specific industry categorisation and reach more "qualified" buyers - buyers who have an interest in that industry.

Further, most brokers have a threshold. If your business is likely to command a price of under $10K, no broker would be interested. Most would need to see value of at least $100K before they take a business on to their books as it's very time intensive for them to market your business. For smaller businesses there's no option but to market the business directly via business listing websites such as sunbeltnetwork, daltonsbusiness.co.uk, businessforsale.com etc). For lower value websites, auction marketplaces like Flippa.com and digitalpoint.com work well.

Attributions to the experienced-people.net site would be great

**newsgyrl** · May 6th, 2010, 6:05 PM

Really great responses! Thanks for following up. No Hooperman, I've never sold a Web site, but I accidentally let my domain name expire and now someone wants $250 dollars for it when I originally paid $60 for three years in 2004

.

**LukeMoulton** · May 6th, 2010, 6:13 PM

In regards to Web-based businesses, the major advantage of an online auction is exposure. Selling your business in an online auction marketplace exposes the offering to a global audience. Given that many web based businesses can be run from anywhere with a laptop and Internet connection, your online auction can attract buyers from many different countries.

**flipfilter** · May 7th, 2010, 6:28 AM

Hi Newsgyrl

I think the stats also speak for themselves.

We run analysis on data from sites that are sold as auctions (e.g. Flippa, Webmasters Marketplace) , forum postings (e.g. Digital Point) and fixed price sales (e.g. Website Broker).

The results are possibly skewed by volume (the largest site is Flippa - an auction site, and more people = more demand = higher prices), but overall a site will often sell for more on auction than by any other method (this extends to buy it now format versus auction format - auction still wins)

It's possibly down to the fact that no one can really value a website, and an auction allows the price to be set by what the market is willing to pay.

Auctions also centre around a marketplace, and a marketplace can offer features that forums cant, like payment integration, better security and more exposure. Here's an example:

This site failed to attract sufficient bids on Digital Point
http://forums.digitalpoint.com/showthread.php?t=1744845

but later sold on flippa for $5,000
http://flippa.com/auctions/89930/Est...taste-tripping
(I havent done any indepth research as to why - maybe I've missed something obvious!)

Justin

**Clinton** · May 7th, 2010, 6:30 AM

newsgryl, LukeMoulton is the marketing manager at Flippa.com, one of the main marketplaces for website businesses ...and a very active one. If you visit his site you'll get a fair idea of what sells at prices from a few hundred to a several thousand dollars. Flippa sometimes get one of the larger businesses as well and recently had a $250K transaction go through their marketplace. Bear in mind that all listings at Flippa are for online businesses, not B&Ms.

**3Six** · May 7th, 2010, 9:18 AM

newsgryl, you've certainly come to the right place

and welcome to the forums.

What type of audience are you writing the article for? If they are multi-millionaire entrepreneurs they're unlikely to be interested in Flippa or what happens there. If they are webmasters looking to start an online business they'll find a lot of starter sites in Flippa for under $500. If they're small business owners looking to invest a few thousand dollars they may like the commenting facility in Flippa auctions where buyers can ask questions of the seller in public and get responses posted in the thread.