Selling One Website Company When You Have Several Sites Online

Dec.14, 2008 in Internet

A familiar problem encountered by sellers when selling their ecommerce business for sale is that they have numerous online businesses they control under one ‘roof’ so to speak. The sellers often only keep one set of accounting measures for all the businesses in operation and normally one bank account where funds are deposited.

Multiple site owner tip #1: Create separate entities for each website presence and have them owned by the parent company. This will cost a little more at set-up, but will more than pay dividends on the backside. At the very least, separate accounting measures should structured to make carving them away from the others more feasible at the time of the sale.

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The difiiculty starts when the owner desires to sell off one of their assets and has to split the business revenues and expenses that are associated with this one section of their entire website business ‘empire’! Most sellers end up removing basic expenses in the P & L statements that need to be present or that will be expensed by a new owner. The seller needs to segment all operating expenses related to all of their website businesses and spread these across in ratio to the sales volume of the specific site. It is better to make a mistake on the low side and be conservative with the expenses assessed to the site, since a new owner will have to deal with the full expense of this operating cost for the one business if they acquire it.

Multiple site owner tip #2: File separate tax returns for each website business.
Another problem normally associated with these scenarios is the tax return - if requested for due diligence or for SBA financing. With a situation where there are multiple website businesses operated under one business name and ultimately one tax return, it becomes tricky to extract the financial data from this and corroborate it with the individual business profit and loss statement .

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Some sellers execute good accounting measures that split the business revenues and expenses, so this is not an issue for them, but for the vast majority of sellers with this set up, it can become challenging in determining the precision of the books during due diligence.

Summary: My advice, in examination of these stated problems, is for a seller to set up separate accounting measures for every individual business and separate all expenses based on the % of gross revenues each site brings in relative to the total.
This will supply a more precise and sound valuation of the individual site relative to the whole and avoid problems and suspicion that will arise in the due diligence process. It also leads to a speedier, cleaner close and a position of power in the selling price when negotiating offers.

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Another tactic that can be used of course, is to sell the entire ’fleet’ of website businesses as a package, so all income and expenses are included and are equal to the tax returns easily. Keep in mind that all of these sales are treated as an asset purchase and that none of the business structure is passed on in the closure of this acquisition.

David Fairley
President, Websiteproperties.com