Easily half the people who contact me about selling their site don’t yet have any meaningful traffic or revenue. They’re very excited about the potential for the site, though, and are sure a buyer will be as well. Unfortunately, they’re wrong. No serious buyer cares about your potential.
Potential Means Nothing
There are two important aspects of serious buyers that make them serious buyers.
They’ve Seen (and Had) Lots of Great Ideas
If someone’s made it to the point of being a serious buyer, they’ve seen and had lots of great ideas. More importantly, they’ve seen most of those great ideas end up not being so great after all. Almost always it’s due to things that no one could have foreseen until it was exposed to real life. Anybody reading this who’s been around the block even a little is nodding his head right now.
That’s why, no matter how great your site seems to be, a smart buyer knows that nothing’s guaranteed. They want to see proof of the concept if they’re going to pay any meaningful number for it.
They Don’t Need Many Great Ideas
Virtually no one making significant money online has it spread across more than 1 or 2 concepts. The people you see running 10 or 15 different sites are still trying to find that one big thing (or they haven’t yet figured out how important it is to go deep).
The buyers paying the highest multiples are the buyers looking for 1 or 2 great ideas, and they’re willing to wait on the perfect opportunity. They didn’t get to where they are by jumping on anything with potential.
Potential Means Everything
No serious buyer is going to buy your site because of the potential, but they’re not going to buy a site without potential either. Let me explain.
When I sold my first site, I was amazed at the multiple I got. A lot of that was due to the particular timing (early 2008 before the economy tanked) and the particular topic. Factoring in just as much, though, was the fact that both traffic and revenue were on a sharp upward growth path and had been for awhile. The prospective buyers also knew that, because of their particular situations, they could make more money with the traffic than I could. How much they were willing to pay for the site was strongly impacted by the site’s potential.
Had the revenue and traffic been largely flat for several months (or longer) or, worse, actually been in decline, I wouldn’t have gotten anywhere near as good an offer. Similarly, we had several buyers drop out early in the process because they couldn’t do any better with the traffic than (or even as well as) I was doing.
Potential means everything when a buyer looks at how much he’s willing to pay for a site.
Two Sites on Opposite Ends of the Spectrum
This post was spurred by emails from two different site owners this week. One has a great site with lots of potential — but no business yet. The other has a great business, but one that time is passing by in a hurry. Both have a problem with potential: The first because it’s all he has; the second because his is running out.
Potential means nothing…and everything.