Just sold a multi-million dollar business. Questions?

[Thomas Smale]

My company just represented Drip in a multi-million dollar deal: http://feinternational.com/blog/fe-international-advises-sale-drip/

It's been awesome to see the growth of Drip from launch (we've been happy customers for years!) through to sale for Rob (owner of Drip).

I would be happy to answer any questions about selling businesses or building multi-million dollar online businesses.

 

[Steve Brownlie]

If someone is looking to sell a site (say a national lead gen business in the b2b space) for $500k+ what sort of revenue/profit would be typical to justify that valuation?

 

[Stephen]

Hi Thomas,
What sort of web based businesses are the hot thing right now, I'm guessing SaaS type stuff?

 

[Thomas Smale]

If someone is looking to sell a site (say a national lead gen business in the b2b space) for $500k+ what sort of revenue/profit would be typical to justify that valuation?

Will depend on a number of factors such as age, link profile, revenue diversity, growth and so on. Our average sale in 2015 was at a 2.7x annual multiple of SDE (which is profit not including owner compensation) so net in the $180-$200k region would, on average, justify a $500k valuation/sale.

Hi Thomas,
What sort of web based businesses are the hot thing right now, I'm guessing SaaS type stuff?

We have a lot of demand across the board. The key is profitability and a business built sustainably with ways to continue growing in future.

 

[bat-man]

Congratulations for the sale!

I'm very interested by the online business building aspect.
What can you tell us (that is not confidential) about for example their business model, strategy and growth to that point? Looks like they grew pretty fast in 3 years or so.

What is your take on the future for "automation" Platforms? Those seem to be doing great right now but obviously not all of them will succeed. What is in your opinion/experience the main factors to their success or failure?

 

[Ryuzaki]

Very nice sale. Congrats to you, the FEI team, Drip, and Leadpages!

What are the conditions that buyers expect in order for a seller to fetch the highest possible multiple for their respective industry? I'm curious about items like age, timeline of earnings, backlinks, content, monetization methods, etc. Thanks!

 

[The Kloser]

Nice Work!

Who pays the broker's commission seller or buyer? Is there an industry standard for website brokers commission fee on a sale?

 

[c4yrslf12]

Congrats on the sale.

General question: in terms of value, is it seen as an advantage or disadvantage if a site has nothing but organic traffic sales? Advantageous because the buyer can add other traffic funnels, or disadvantageous because the site is entirely dependent on one stream of traffic?

 

[Thomas Smale]

Congratulations for the sale!

I'm very interested by the online business building aspect.
What can you tell us (that is not confidential) about for example their business model, strategy and growth to that point? Looks like they grew pretty fast in 3 years or so.

What is your take on the future for "automation" Platforms? Those seem to be doing great right now but obviously not all of them will succeed. What is in your opinion/experience the main factors to their success or failure?

Their business model is public and self explanatory (SaaS email platform). They grew organically with a lot of content marketing and referrals from happy users. Rob is an experienced entrepreneur so that definitely helped.

Platforms on their own aren't much use if the users aren't getting maximum value from them. In Drip's case, they were proactive with [human] onboarding to make sure customers were fully using the platform to its maximum potential. Expecting users to figure it out for themselves is a recipe for failure.

Very nice sale. Congrats to you, the FEI team, Drip, and Leadpages!

What are the conditions that buyers expect in order for a seller to fetch the highest possible multiple for their respective industry? I'm curious about items like age, timeline of earnings, backlinks, content, monetization methods, etc. Thanks!

Thanks!

Values increase as businesses get older (assuming growing), good link profiles are worth more than spammy link profiles. Monetization methods don't matter too much within an industry (e.g. if you're a content business the difference between Adsense and Amazon affiliate valuation wise is minimal) but business models like SaaS tend to have higher valuations as the income is recurring and it's much harder to build a product and initial traction.

Nice Work!

Who pays the broker's commission seller or buyer? Is there an industry standard for website brokers commission fee on a sale?

Seller pays. Varies between 10-15% depending on size but there's no industry standard. Generally worse brokers will charge less to undercut the more established companies. We tend to be at the high end of the fee scale.

Congrats on the sale.

General question: in terms of value, is it seen as an advantage or disadvantage if a site has nothing but organic traffic sales? Advantageous because the buyer can add other traffic funnels, or disadvantageous because the site is entirely dependent on one stream of traffic?

Depends on the buyer and the business but generally worth less than a more diversified traffic profile. Single point of failure can be a concern, although the majority of businesses we see will rely on 1 traffic source over others. Having potential for growth with other traffic sources is helpful to valuation if it's proven to work but needs focus. Without that the potential is purely speculative.