How To Sell One Website Company When You Have Several Sites Online
A familiar problem encountered by sellers when listing their website business for sale is that they have multiple online businesses they operate under one ‘roof’ so to speak. The sellers often only keep one set of accounting measures for all the businesses in operation and typically one bank account where funds are deposited.
Multiple site owner tip #1: Create separate entities for each internet presence and have them owned by a larger company. This will cost a little more at set-up, but will more than make up for it on the backside. At minimum, separate bookkeeping measures should put in place to make carving them away from the others more feasible at the time of the exit.
The trouble begins when the owner wishes to sell off one of their assets and has to proportionate the business revenues and expenses that are associated with this one component of their entire internet business ‘empire’! Most sellers end up excluding basic expenses in the P & L statements that need to be present or that will be incurred by a new owner. The seller needs to proportionate all operating expenses related to all of their internet businesses and cast these across in ratio to the sales volume of the specific site. It is better to blunder on the low side and be conservative with the expenses attached to the site, since a new owner will have to assume the full expense of this operating cost for the one business if they acquire it.
Multiple site owner tip #2: File taxes separately for each internet business.
Another problem typically associated with these scenarios is the tax return – if requested for due diligence or for SBA financing. With a situation where there are multiple internet businesses operated under one business name and ultimately one tax return, it becomes difficult to dig out the financial data from this and confirm it with the individual business P&L statement .
Some sellers execute good accounting measures that break up the business revenues and expenses, so this is not a concern for them, but for the vast majority of sellers with this set up, it can become challenging in determining the accuracy of the books during due diligence.
Summary: My advice, in review of these stated problems, is for a seller to fashion separate accounting measures for every individual business and separate all expenses based on the % of gross revenues each site adds relative to the total.
This will supply a more precise and reasonable valuation of the individual site relative to the whole and avoid problems and distrust that could arise in the due diligence process. It also leads to a speedier, cleaner close and a point of vigor in the selling price when negotiating offers.
Another strategy that can be used of course, is to sell the entire ‘armada’ of internet businesses as a package, so all income and expenses are built in and match up with the tax returns easily. Keep in mind that all of these transactions are treated as an asset purchase and that none of the business structure is passed on in the closure of this acquisition.
David Fairley
President, Websiteproperties.com
Tags:internet businesses
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