October 6, 2008

Sell Your Site?

5 steps to plan for profits.

Step #1 Get Ready To Say Goodbye Before You Say Hello

Assuming you are intending to make a profit from your membership site, an exit plan will be an integral part of your business plan right from the beginning. Every step you take to develop your business will take you a little closer to selling your membership site.

There are three elements that make up your exit plan;

1. Timescale for exit.

2. Exit option. For most membership sites this will be a simple trade sale. For offline businesses, other options may be a family succession or a sole trader merger, but these are not common with online businesses.

3. The identification of potential obstacles to selling your site and how you intend to deal with these.

Step #2 Structure your business to make it easy to sell

If you know from the start that you will eventually sell your membership site, you can structure it to make this a simple and profitable process for you.

Tax relief

Tax laws vary greatly by country, so it is advisable to check tax relief legislation locally when you start your business. The length of time you own your membership site, as well as the type of ownership, and the type of products and services you offer can impact whether you are entitled to tax relief on the profit you make from your site.

Co-owners

If you are the sole owner of your membership site, selling it will be a relatively simple matter. If however you have co-owners, no matter how small their share, you need to give some thought to them when you put together your exit strategy. In this case your exit plan will have a shareholder strategy detailing the following points:

• Agreement on how each co-owner’s share will be valued on sale.

• Agreement as to whether any co-owner must offer the other co-owners the option to buy their share before they sell it to a third party.

• Agreement on what will happen to smaller shareowners if the majority owner decides to sell.

Having a business structure in place that makes your site ready to sell will ensure a smooth and speedy sale. If you spend time trying to sort out tax affairs and obtain co-owner agreement at the time of the sale, you may well deter your potential buyers from completing the transaction.

Step #3 Time really is everything

Your site will be of the most value when business is booming. If your membership numbers are growing, your profits are increasing and your subject is gaining in popularity, it might be the perfect time to sell. It is a good idea to set ourselves targets that will determine a good time to sell.

The targets you set for your membership could include the following:

• A certain yearly revenue
• A fixed number of members
• A particular rate of growth

Step #4 Determine how much your site is worth?

Method 1) Price to earnings ratio

This is a reasonably simple way to come up with an indicative value for your membership site. Calculate the future maintainable profits of your membership site. Once you know the maintainable profits of your business you need to decide how many years’ profits your membership site is worth

Method 2) Cost to rebuild

This method values your site based on what it would cost you to build it from scratch at the time of sale. Some of the factors to include are:

• Cost of actually creating the site, hiring a programmer, buying the domain name etc.
• Cost of hiring a ghostwriter to write all the content
• Cost for the working hours you have put into the site
• Cost of any software you have used
• Cost of advertising
• Cost of hosting the site
• Cost for your customer list

Other factors to consider when valuing your site include:

• Your target audience
• Your revenue streams
• Your site traffic
• Age and reputation of your site
• Your domain name
• Customer loyalty
• Customer list

Step #5 Preparing to sell your membership site, successfully.

Before you put your site on the market, it is worth spending some time drawing up a detailed memorandum of sale. This may take some time and effort, but it prepares you for the selling process and answers many of the questions your potential buyers are going to ask.

Here are some of the elements that you might include in your memorandum of sale:

• Business description
• What is included
• Requirements for business
• Breakdown of profits
• Asking price
• Statistics

It may be difficult to consider selling your site before it’s even begun but consider this… YouTube was launched in 2005, and within two years was bought by Google for an alleged $1.65 billion. I bet they had an exit plan in place!

Source:Membership Millionaire