Listing the Site With Empire Flippers – Project Go White Hat, part 10

This is one of the most important updates in the Project Go White Hat series.

You’ll see the valuation of the site, plus the complete listing and some offers from buyers! 

It answers one of the main questions about the whole project:

Are White Hat Links are better the Gray Hat Links for a valuation?

You saw the latest earnings and traffic stats in Part 9. Rob and I were thinking, “Oh, no. The value of the site is tanking…one policy change for the Amazon Associates program and monthly revenue went down by 35%.

We started the process of selling by listing the site with a broker.

This post is about listing the site with Empire Flippers…

 

And the VALUATION of the site is revealed

 

Be sure to check out the previous 9 posts if you haven’t read them yet.

Why Empire Flippers

We decided to go with Empire Flippers as the broker.

Are you thinking:

Why not sell the site ourselves and save the 15% commission payout?? 

The commission will be in the tens of thousands of dollars.

Here’s why we went with a broker:

  • They have a huge pool of buyers.
  • I don’t know how to sell a site — they are experts.
  • I don’t want to deal with the headache filtering the good offers from the bad. The tire-kickers and scammers always come out of the woodwork!
  • I don’t want to deal with the transfer and transition.

Could I learn how to do a website sell and transfer? Yes, but I’m not interested in learning. If I wanted to try to sell a site, it’d be better to experiment with a lower stakes transaction.

Here’s why I like Empire Flippers:

  • I trust them. Rob trusts them. I’ve known them for years and even guest posted on their blog twice. Once here (about building teams) and here (about selling a site for $10k).
  • I’ve listened to Justin and Joe for hundreds of hours thanks to their podcast.
  • They have huge audience.
  • Their email list is in the 45,000 range with many interested investors.
  • They have a pool of existing investors.
  • They value the sites in the range of 20-40+ times the monthly profit
  • They filter out the tire-kickers and scammers.
  • They deal with the high level negotiations and help the buyers structure reasonable offers.
  • They transfer the site.

The considerations for selling with Empire Flippers are:

  • The listing fee of $397 for people that haven’t sold with Empire Flippers, or $97 if you sold a site with them before.
  • They get their commission of 15% after the sale. It basically comes out of the buyer’s payment. So you can assume you’ll get about 85% of the offer price. There are can be fees with your bank associated with a wire transfer.

Other options besides Empire Flippers?

FE International is a great choice. They have a great reputation and professional staff. I’ve never worked with FE International but I know people that have, and they really liked working with them.

Listing the Site and Working With Empire Flippers

It’s simple, surprisingly simple for selling something so expensive.

To list with Empire Flippers, you provide:

  1. Screenshots of Google Analytics (or Clicky) to prove the traffic on the sites. We use Clicky on the site.
  2. Proof of earnings for at least six months, and we provided a full year of proof. However, we had to add some additional info because of the Amazon Associates commission rate change. We used the annual sales data from the last year to check what the revenue and income would have been under the new rates. They do request access to your Amazon Associates account as view-only so they can verify the earnings.
  3. List out your expenses by month. This is used to determine the monthly profit for the valuation. For this site the expenses are low due the fact there wasn’t any ongoing work fer the site and the low price of hosting. We provided the costs of the one time efforts of the guest posting campaign and the content improvement. Again, those weren’t ongoing costs but we provided that info anyway.

Here are some things to remember if you’re thinking of listing your site with Empire Flippers:

  • They sell online businesses, so it doesn’t have to be a niche or authority site. It can be drop shipping, FBA, software, or even a service business.
  • The average monthly profit has to be $1,000 or more. They set that limit because their overhead for each listing is somewhat fixed and predictable so they moved up the food chain and only sell sites that will list for $20k or higher. Think of it like this: They won’t make their margins if they sell cheaper sites.
  • The business needs to have at least six months of earnings. So it can’t be a flash in the pan or a business that doesn’t have a track record.
  • There can’t be any history of doing unsavory things, such as penalizations, 301 redirects, manipulations in the earnings, etc…
    • They state that if there are two instances or more, then the site will be rejected.
    • That implies that you could have one instance of, say, a 301 redirect or a penalization, but no more. My tip: Let them know if there is anything weird in the history of the site along with an explanation to smooth that part over with Empire Flippers.
  • If it’s a service business, like an SEO agency, then 50% of the income needs to come from multiple clients. That way if the client leaves the overall impact to the business is lower.
  • The site can’t be related to the following:  pornography, gambling hacking, illegal substances, any form of criminal activity, or any site promising cures through herbal remedies/other dubious claims.

Our Application

Here is what we provided in our application:

  1. $97 since we are repeat sellers.
  2. Proof of Earnings
  3. Proof of Traffic

The Wait…

Rob officially submitted the application on April 23.

It took a few weeks to process the application when I sold a site before a couple years ago, but Rob experienced a faster turn around when he last sold a site.

There is normally some back and forth with the Empire Flippers team as they review the application and get view-only access to accounts.

By April 25, they had all the information they needed.

And we just had to wait. Nothing we could do would speed things up.

We were thinking:

“What will the valuation be?”

“Will a White Hat site be more valuable?”

“Will it sell faster?”

The Valuation and Listing

Empire Flippers let you know their valuation based on a number of factors.

Once Empire Flippers has all the information they need, they vet the site.

They verify everything to ensure the site is solid, reliable, and something they can sell to investors. All the vetting is with the buyer’s interest in mind. They don’t want to sell a site that isn’t going to be a good investment.

Then, Empire Flippers let you know their valuation based on a number of factors. You have to approve the listing price, of course. Remember, Rob and I talked about potentially lowering the listing price to ensure a fast sell.

But we thought the price was great and allowed for some negotiation. It’d be dumb to list our final price upfront since we’d have no wiggle room.

Well, we honestly didn’t have a bottom price in mind, but either way we went with the valuation of:

$275,340

Here is the listing from the EF Marketplace:

It received a 33x monthly multiple, which is quite good. We were happy with that.

Did the White Hat links increase the value? Yes, and here is what Empire Flippers had to say.

I chatted with Greg on the E.F. team:

Yes! White Hat links for sure can add value to the website’s overall value.

There is another super valuable thing to having white hat links though.

It dramatically improves your buyer pool. We both know how myopic SEOs can be on certain types of links, and even savvy/unsavvy buyers who are not SEOs can be a bit sketched out by some link profiles.

So it improves your negotiations on price and can get more risk adverse (but cash heavy) buyers to take the dive. Which can also lead to smaller earn outs for really big websites.

The Offers

It’s a lot of money. Literally, it’s more expensive than the town home I live in.

Many people know what it’s like to finance a house. You have to get a mortgage because most people don’t have that much cash.

I’m telling you that because selling a site at this price means that the offers might be creative.

  • Buyers want to limit risk
  • Buyers may not have all the cash upfront and need to pay over time, i.e. seller financing.

Let’s review some offers and ideas that were on the table. By the way, Rob handled talks with potential buyers after they made a deposit and worked with Empire Flippers.

May 16: A Weird One

Here’s a weird one that we received after Rob chatted with an investor.

  • Sales Price: $250,320
  • Upfront: $125,160
  • Earn out: $125,160 paid out at 30% of monthly net profit until paid
  • Empire Flippers to hold domain during earn to ensure payout terms are met.

We didn’t like this one at all. There are too many contingencies and we’d bare so much of the risk though the payout period. The kicker was that it’d take about seven years to pay off the remaining 50% of the sale price with a realistic earnings payout. We’d have no control on improving the revenue or decisions on content or outreach.

May 18: Less Weird But Incomplete at Best

Rob talked to an interested person that thought the site was worth more like $200,000 and wondered if we’d even consider that range. (We were open to it depends on several factors.)

The potential buyer wanted to keep the systems and processes in place:

  1. The ones for content
  2. The hiring process
  3. The system for outreach, and so on

We were fine with all that. In fact, you can pretty much get those if you just sign up for the Niche Site Project email list!

When we got the offer, we weren’t impressed.

  • Sales Price: $200,000
  • Upfront: $150,000
  • Earn out: $5,000 per month if the site made $8,344 in a month. If not, no payment would be made.

The major issue here is the payout criteria. Since the earnings have been lower for the site, hitting the $8,344 mark would be rare until the retail season. That pretty much kills the payout for the remaining $50,000.

And what if the site makes $8,000 one month and $20,000 for the rest of the months? Do we still just get the $5,000 payout amount?

The offer wasn’t well thought out and didn’t cover a lot of scenarios that could happen. This is why is seems incomplete: it doesn’t address some really basic scenarios about things that are likely to happen. I didn’t even try to think of unlikely things that could happen…

But they were interested, we were willing to negotiate, and we needed to really figure out what part of the offer was important to them.

Was it the earnings level? The cash upfront?

An important factor for us was to have a short payout period, which is really seller financing when you think about it.

Ideally, it would be an offer where all the cash is paid upfront: no payout period.

Negotiations and Counter Offers

Empire Flippers helps you structure the counter offers so that makes it easier. They will let you know if you’re off base and what to do to improve the counter offer. They know more about what’s important to the potential buyer so that bridges the gap in the negotiations.

I won’t share all the counter offer details here — it’s confidential — but I’ll give you one example.

For the offer that we received on May 18, we countered with a more specific progressive payout schedule that addressed our concerns:

Site Earns || Payout

  • $10,000 = $6,500
  • $8,344 = $5,000
  • $6,060 = $3,000
  • $4,545 = $2,272
  • $3,030 = $1,500
  • $3,000 and below no payment will be made
  • Waiting for the right offer

It’s a big decision like selling a house and even though Rob and I want to sell fast, we have to be realistic and practical.

Some of the offers were unclear, and from my perspective incomplete. They don’t cover the contingencies that are possible and even likely.

Normally, that wouldn’t really matter much, but some of the offers extend out for months and even years for the payout.

Ideally, we want to see as much of the selling price upfront with no payments. If there are payments, usually based on a percent of ongoing revenue, we want that period to be as brief as possible.

No 14-month seller financing plans. We bare so much risk and have very little upside.

So we wait.

Your thoughts?

Leave a comment and tell me:

  1. What you think about the valuation
  2. If you think we should have held the site longer to recover earnings

In the NEXT UPDATE, Part 11:

  • We get another interview and offer.
  • The winning offer.
  • Transitioning the site to the new owner.

Check out my YouTube Channel for tutorials and demos.

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15 comments… add one
  • matt a

    Doug,

    This is crazy! The buyers are essentially laying out 40% of the principle so they can finance the rest of the purchase with YOUR money. If i heard this offer, i would have went off on the buyer for insulting my intelligence. Are the remaining payments even guaranteed in escrow? Empire Flippers allows shit deals like this to be made? I literally can’t grasp how crazy this is. They are just offsetting all risk to you, complete bullshit.

    • Matt, Right!
      Luckily, EF sits in the middle…but we did find the offer unusual.
      I guess people go for that if they are really in need of the cash.

      • Adam

        I actually think offering 50% (or some similar %) upfront and a 50% profit split/earn-out/seller financing over a period of 12-36 months is quite reasonable, if not ideal for the seller. As long as Empire Flippers maintains the ability to revert the business to the original owners, you are holding the collateral on your seller financing, leaving your risk at a moderate level, and probably on par with what a buyer feels he’s risking by buying a e-commerce / advertising business that could quickly go sideways (banned for a PBN, amazon bans for a product problem etc…).

        Large scale brick and mortar businesses frequently use seller financing, some over many years. It’s quite reasonable.

        What I didn’t see you mention, that I would likely have suggested, is to actually treat the earn out as seller financing and apply an interest rate to the balance. You could probably juice 5-10% return on the seller financed portion.

        • Adam, great comment.
          Yep, you nailed it – there should be interest applied for the financing.

          • Adam

            The flip side though is that as a buyer I would want contingencies in the contract in the event the revenue/earnings numbers received a substantial decline during that earn out due to the seller’s prior actions or a google update, etc… I think wanting the seller to have skin in the game, when digital assets can so quickly go up in smoke, is important as well.

  • Charles

    Cool read. How are your azon clicks higher than your visitors? Clicking and testing the links yourself?

    • Charles

      Also, what do you think is a normal or good visitor to click ratio?

    • Charles, thanks for reading.
      Where do you see clicks to Amazon?

      That could happen if a visitors clicks to Amazon more than once. We test the links, of course, but not more than like 1 click.

      And click to visitor ratio… I don’t have much data on that but if you can get about 25-50% of your visitors to click Amazon that’s good.

      • charles

        Hi,

        Looking at your listing on EF, for example January Amazon shows 107,606 clicks, January Clicky shows 89,236 clicks and the other months are similar.

        I was just wondering how that was. I like to divide earnings by azon clicks to get an average earnings per click.

        • Ah…I see what you mean…you looked at the listing on EF not this post.

          🙂 People look at more than one item…Most people click to Amazon more than one time.

          So you have all the data you need in the screenshots to calculate that stuff.

  • James

    I know the guys at EF said having white hat improves the value but if you had of kept the pbn’s in place and the earning’s were at previous levels what would the valuation be? I would have thought you would have got a slightly smaller multiple but higher overall sale price.

    • James, great point. It’s impossible to answer really since things changed outside of the PBNs & White Hat links.

      • The popularity of some keywords.
      • The Amazon Commission Rates.

      But you’re on the right track, of course…it could have been worth more if the PBNs were still in place.

      But the other side of the coin is that fewer buyers may have been interested.

      For me the whole project was about going from Gray Hat to White Hat…so I wouldn’t even be involved if that part didn’t happen. 🙂

      • James

        Yeah Doug, the pool of buyers would have probably been smaller and I get it was part of a project. I have been toying with selling a site with EF but wanted to see the end of this project so really appreciate you guys sharing the case study.

  • Carlos

    First of all, thank you for sharing the selling process with us. For someone like me who is need in this its really an eye opener.

    I can understand that you would want to get as much upfront payment as possible and resude any further risks.

    Looking forward to part 11. Cheers

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