Buying a Website? Don’t Overlook the Time Commitment

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Over the last few years the industry of buying and selling internet businesses has evolved from webmasters trading hobby sites amongst themselves into an industry filled with businesses, rather than just opportunities.

This shift in the industry has introduced a number of nuisances, and perhaps the most common one is both sellers and buyers underestimating the maintenance burden of the sites being sold and bought.

Based on my experience as a website broker, at least 30% of sellers in the $5,000 – $25,000 price range fail to accurately disclose the number of hours that maintaining the site takes. In addition, a similar percentage of sellers fail to accurately describe the skill sets needed to run the website they’re selling. These numbers are quite scary as they often lead to the website’s maintenance costs skyrocketing at the day of its takeover, effectively eating into the site’s net profit.

 

Not Necessarily an Intentional Deception

Sure, some sellers deliberately misrepresent the amount of time spent doing maintenance chores or the skill sets needed to run the site, but it’s not always intentional.

In most cases it’s completely unintentional and something that’s probably not occurred to the seller. After all, many websites have been run as a hobby, not a business. Webmasters who run their site as a hobby never even realize how much time they actually spend on their site daily, weekly and monthly.

Most sellers can estimate how much time they spend on bigger tasks, such as content production or product catalogue updates. The majority, however, severely underestimates the hours that they spend on the small tasks, such as replying to e-mails, posting updates on their Facebook page or spreading the word here and there. These “small” tasks often add up to a significant number.

Does the Buyer Have What It Takes?

A slightly different but a related issue is website owners falsely believing that nearly anybody is capable of taking over the work and maintaining the site. Whilst in some cases it is true, in others it’s the complete opposite.

Let’s look at content sites as an example. You may have started a blog about food recipes three years ago, knowing nothing about food or cooking. Based on this fact alone, many sellers would claim that the new owner of the website does not have to be experienced on the subject, either.

The reality, however, is that within those three years you’re likely to have acquired a substantial knowledge on the subject, and even though you had created the website originally with no expertise, your visitors have grown with you and are now expecting certain professionalism.  You are able to provide them with this experience, but the buyer of your website may not be.

What Should Sellers Do about It?

As with many things, there is the quick way and the good way.

The quick way is simply looking at your hours spent on maintaining the website realistically. Most website owners, when asked, think for a minute or two and then come up with an approximate that they believe to be close to accurate. Needless to say, this is the wrong way of doing it and almost never yields an accurate result. When planning to sell your website, start writing down your activities related to the site at least a few weeks, but ideally a month before listing the site for sale.

The ideal option, on the other hand, is outsourcing all maintenance aspects of your website prior to the sale in exchange for a fixed weekly or monthly fee. Even though it will increase your expenses, in most cases the value of the website raises instantly, meaning that you will make back the lost money many times over once you’re selling the site.

When you outsource the maintenance of your site, there will be much less room for misinterpretation of claims. Many serial buyers also value their time more than recreational webmasters do. Nowadays, it’s a standard practice to deduct the time spent on maintenance directly from net profits prior to valuating and making an offer on a site.

For outsourcing, you can either use private outsourcers such as Freelancer, Elance, or a professional website maintenance service such as Centurica’s WebsiteCare. Whilst the former is the cheaper option in the short term, the latter will tend to give you a much higher quality output minus the delegation headaches, and you’ll also eliminate the issue of having to transfer several freelance agreements to the buyer of your site once it’s being sold.

I’d advise against making these changes shortly before listing the site. There are very few things that buyers like less than the seller completely changing the operational aspects of the site weeks before listing it for sale. Should you make any fundamental changes, always make sure you allow everything to stabilize before selling the site.

What Should Buyers Do about It?

For buyers it’s important to always double check and verify the seller’s claims when it comes to maintenance hours and skill sets needed.

At our firm, a large part of our due diligence process is getting a complete understanding of the site’s business model as only then can we accurately say whether the seller’s claims are realistic or not. As a buyer, you should do the same. If you have any questions or uncertainties about the site then remember to always ask the seller right away, as once the purchase agreement is signed it’s often too late.

It also helps to speak to a professional, as often there are maintenance tasks that can be easily overlooked but that are in fact extremely time consuming, such as “behind the scenes” marketing, dealing with customer feedback and complaints or communicating with clients to get repeat business.

As an additional verification, you can always get a price quote from a website maintenance company to see what kind of maintenance levels they predict for the site. Even if you’re not sure whether you will outsource the maintenance of the site or do it in-house, all reputable website maintenance services are willing to give you a free price quote, which you can then cross check with your own list of maintenance tasks to see if you’ve missed anything.

Over to you

Let us know in the comments about what experiences you have with the hidden maintenance burden – either as a buyer or a seller.

Thanks to Al Hikes for the photo!

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  • JC McClain

    Totally agree… bids would be a lot less if we really took into account the time we will spend on the new site we are buying…yea I’m guilty of doing that lol
    I think the more experience you get with sites the more realistic you become when looking at sites for sale regardless of when the seller claims it doesn’t take any work to maintain.
    -JC

    • http://flippa.com/blog Ophelie Lechat

      Totally agree, JC — like most things, it comes down to experience and knowing what you’re actually buying.

    • Bryan O’Neil

      For internal use, we’ve developed a “master list” of maintenance tasks typically associated with each type of sites and this is also what I’ve been suggesting most serial buyers I’ve spoken with to do.

      So basically, for e-commerce you’d have a list consisting of:
      * customer enquiries (X minutes per month per order)
      * product catalogue updates (X minutes per month per change)
      * incoming order processing (X minutes per month per order)
      etc. etc.

      This way, whenever you’re looking at a site, you just go through your checklist, fill the empty fields based on what type of site it is and you’ll get a pretty good idea of the actual time commitment the site will take.

      Here’s an idea for Flippa: why not integrate something similar into the listing process, allowing sellers to tick off specific maintenance tasks and specify how long each task takes them? This would serve two purposes:
      a) The honest sellers would be reminded of certain tasks that they may otherwise simply forget about;
      b) The dishonest ones will have to enter false information, meaning that it would become much easier to confront/sue them as right now they can simply claim ignorance (not providing enough information doesn’t equal providing false information).

      Bryan

  • Nick Conneff

    As a broker, you may well be dealing with more honest practices, but lets face it, the majority of sellers on Flippa lie intentionally about maintenance time to make their site look more attractive. It is very good advice for buyers to understand exactly what is involved though. I speak from experience, having bought a site with ’2 hours’ maintenance per day, turned out to be more like 4-5 & impossible for me to manage profitably as a result. More fool me.

  • eric

    I just know that flippa is going down day by day due to certain and
    useless changing they are doing. I hope flippa will revise the procedure
    specially they changed the category option and make the buyers very
    hard to find out the sites. Just need to replace the category option as
    it was before.

    Thanks

  • Bad Picture

    I’m not sure you realized the picture you chose for this post is a nice example of animal cruelty, which I really think is in poor taste. ;)

    The horse is chained by the Muzzle, and has his head drooped, not because he is catching some zzz’s, but because he has been overworked. The horse is also probably malnourished and unhealthy, as seen from the coat. What a terrible choice of pictures, for what was otherwise a good post.