Resources for Buying and Selling Online Businesses

Never Miss a Beat - Get Updates Direct to Your Inbox

Seller’s Remorse: When It’s NOT a Good Idea To Sell Your Website

By Quiet Light
Last Updated on | Reading Time: 3 minutes

Are you truly ready to sell your website, or are you solving a temporary problem with a permanent solution?

As I’ve said before, making the choice to sell your website is a big decision. All business owners experience frustration and even burnout from time to time, but selling your business before you should can be just as disastrous as hanging onto one that’s better off in someone else’s hands.

So how can you determine not only when to sell your business, but whether you should?

Don’t Underestimate the Power of Emotion—or Fatigue

remorse

On most valuation calls, I openly discuss the pros and cons of selling a website business. I also make sure I ask the one critical question all buyers will eventually ask:

“If it’s such a great business, why are you selling it?”

I find the two most common responses are that the seller is emotionally done with the business, or a partnership is not working out as well as hoped. Let’s consider the effects of burnout in the first of two scenarios taken from my own experience:

Dawn’s Story

I got a valuation call from “Dawn,” who wanted to sell her coupon website. The site was about four years old, took about 20 hours a week to operate, and produced about $100,000 a year in cash flow. Trends were positive, and the site had plenty of room for growth.

Based on the details Dawn provided, I gave her a value range of $250,000 to $300,000.

Twenty hours a week may not sound like much of a workload, but Dawn was in her late 20s and a mother to four young kids. Running a business and working as a full-time stay-at home mom was not in her life plan. She was ready to sell.

At Dawn’s request, I provided an estimated sales value for her business if she sold right away:

[list type=”disc”]

  • Estimated Sale Price: $275,000
  • (-) Broker Fee: $275,000 x 10% = $27,500, leaving taxable proceeds of $247,500
  • (-) Federal Capital Gains Taxes: $247,500 x 18.9% = $46,777.50
  • (-) State Capital Gains Taxes: $247,500 x 6% = $14,850
  • Total after broker fee and tax proceeds: $185,872.50

[/list]

I told Dawn that $185,872.50 was roughly equal to two-and-a-half years’ worth of after-tax income. To get this value, I took the business’ average annual cash flow of $100,000 and subtracted 30% for all taxes, write-offs, etc. to get $70,000. I then divided the estimated proceeds of $185,872 by $70,000 to get approximately 2.65 years of after-tax income.

I explained the numbers to her, as well as the amount she’d be left with after the sale. I also advised her to run all estimates and numbers by her accountant before making a final decision. Each state has its own tax structure, and every business owner has their own unique blend of write-offs, spousal income, etc.

Reviewing the numbers, I asked Dawn to give some serious thought to keeping the business and hiring someone, either to help her complete essential tasks or, better yet, do the work she found most tedious and time consuming.

If she chose to sell, she’d have just over two-and-a-half years of income, but if she decided to hire someone (at around $25,000 a year) to help out with the bulk of the work, she’d have at least $75,000 in pre-tax income for life (assuming the business income remained flat). Holding the business for even five more years would mean she’d have $375,000 in taxable income and an asset ready to sell for $275,000.

A tempting proposition, to be sure. But Dawn ultimately decided to sell, and was very happy with the price she got. While sustaining the business was certainly a viable option with the addition of some hired help, she was emotionally spent and wanted her sole focus to be her children. Sometimes, the emotional toll of sustaining a business is far greater than any amount of potential earnings.

When Partnerships Go Bad, Should You Sell Your Website?

It may be easier for a sole business owner to make the decision to sell, and it may be based on very personal reasons. But what about a partnership?

Consider a different scenario involving a successful partnership—and a long-term friendship—headed for trouble. Did they choose to sell as well, or did they discover another way?

Check back here next week for the second part of the “When NOT to Sell Your Website” series. In the meantime, have you ever reconsidered a selling decision? Why or why not? Share your story in the comments!

Photo Credit: cesarastudillo Via photopin cc

Thinking of Selling Now or Later?

Get your free valuation & marketplace-readiness assessment. We’ll never push you to sell. And we’ll always be honest about whether or not selling is the right choice for you.

Icon
Icon
[index]
[index]
[523.251,659.255,783.991]
[523.251,659.255,783.991]