Buying any business is a complex business.  Although Internet based businesses are not nearly as complex as traditional bricks and mortar type businesses, the process can still be daunting, especially to first time buyers.

For experienced buyers there certainly may be a greater comfort having been through the process before.  However, every firm works differently and every seller has different expectation.  Below are a number of common questions we receive from buyers regarding our process, our listings, and about buying an Internet business in general.

Questions on Our Listings

1. Do you go through a vetting process with your listings?
   The short answer is yes. We speak to many buyers who have looked at multiple businesses for sale in other places and quickly grew frustrated when they found that the financial statements shown did not stand up to the scrutiny of due diligence. Each and every client that Quiet Light Brokerage represents is required to provide us with detailed financial statements, detailed traffic reports, and complete a lengthy Q&A regarding their business. In addition, every client is informed that they will be expected to prove their financial statements using 3rd party documentation. In the rare event that we list a site that does not have 3rd party documentation available or only partially available, we do normally disclose this upfront to avoid a broken due diligence process.
2. How can I verify the financials of the business?
   Verifying financial statements on an Internet business is often easier to do than with a traditional brick and mortar store. Because Internet businesses tend to be much simpler to run with fewer moving parts, there is less to verify.As a general rule, Quiet Light Brokerage clients will be able to verify their financial statements with 3rd party documents.  This is usually bank statements and merchant account statements.  Tax returns can also be used, however, most tax returns for small businesses are not reliable methods for verifying financial statements.  This is primarily due to owners either reducing their income for tax purposes or running multiple money generating websites through one tax entity.

   In the rare even that a client of Quiet Light Brokerage is not able to verify a significant part of their financial statements through 3rd party documentation, this disclosure will be provided in our summary materials.  Levels of documentation vary from client to client, but as a rule Quiet Light Brokerage does look closely at whether a business will stand the scrutiny of due diligence.

3. How often do you come out with new listings?
   There is no regular schedule that we follow for releasing new listings.  We simply release our client’s websites to the marketplace as they become available.  That being said, because we are highly selective in who we take on as clients (less than 10% of potential clients actually reach the marketplace), an average month will see 5-7 new businesses being released.  During certain times of the year, primarily Christmas the the New Year, there are fewer businesses being released as most people are focused on the holidays rather than going through the work associated with selling their websites.

   We never release more than one business per day to our email list. Fill out the information below to be added to our notification list.

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4. Can you notify me of businesses that meet my specific criteria?
   We encourage all people who are interested in buying an online business to register for our email notification list – it is the best way to stay ahead of the marketplace in finding the best businesses for sale.  Outside of this, if you are seriously looking for a business to acquire, you should spend time speaking one on one with the brokers at Quiet Light Brokerage about their listings.  Knowing what you are looking for can give us a good feel for what we should look for when we screen our clients.  When a business comes to market that we know particularly meets your needs, we may take extra effort to bring it to your attention.
   Use the form below to get added to our notification list.

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Questions on Pricing, Offers, and Financing

1. How do you come up with the asking prices on your listings?
   Determining the value of any business takes research and time. In general we use what is known as the cashflow discount multiplier valuation method. You can read more about how to value an internet business.
2. Can I do seller financing?
   In some cases seller financing is a very real possibility, however, most sellers strongly prefer to work with buyers who can bring cash upfront to the closing table. The reason for this is that most sellers do not want to go through the process of collecting from a buyer should that buyer default on the seller financing. The struggle of collecting a delinquent payment is a fear that most sellers have.

   That being said, certain businesses lend themselves well to seller financing. In addition, many sellers will be open to seller financing so long as the terms of that financing are reasonable and simple. The longer the term of financing and the more complex the payback schedule (adding in balloon payments, for example), the less chance you have at having a seller agree to your offer. In addition, seller financing that exceeds 20% of the purchase price is usually not considered.

   In addition, the strongest businesses for sale – those that contain relatively low levels of risk and high levels of potential – will almost always garner an all cash offer from another buyer. If you are relying on significant owner financing in order to complete a deal, you should be aware that it may be more difficult to find a seller who is willing to accept an offer.

   Finally, seller financing differs from a holdback. Many buyers will holdback a relatively small portion of the funds during the transition period to ensure a smooth transition of ownership. This is a fairly common deal structure which does not tend to disrupt your ability to secure a deal unless the holdback period is longer than 30 days or greater than 20% of the asking price.

3. How open are your clients to performance based financing?
   Performance based financing is financing that involves financing a portion of the purchase price, but having that financed portion be dependent on the future success of the business. Common examples of performance based financing would be owner revenue sharing, bonus payments for revenue thresholds that are met, or a combination of the two.

   Performance based financing is something that is available on select businesses. There are two common scenarios in which we seek performance based financing. If a seller has recently seen a significant growth in revenues and income, but does not have enough history for that recent increase to impact their valuation, we may seek some form of performance based financing in order to help them cash in on the recent growth. The other common scenario is when there is a significant risk with the business that needs to be accounted for.

   It should be noted that the majority of sellers are not interested in performance based financing as they do not have any control over the decisions that a new owner will make for their business. Just as any buyer will try to reduce their risk as much as possible, sellers want to reduce their risk as well. Given that there is a high likelihood that most businesses can receive an all-cash offer, or a near all-cash offer, performance based financing is an unlikely option.
   

4. Can I get a bank to help finance the acquisition?
   It is rare that banks will fund the acquisition of a web based business, however, this can change as the lending markets change. Typically traditional banks are reluctant to finance acquisitions in which most of the value is wrapped up in “goodwill” – a non-physical asset that is difficult to quantify. Web based businesses happen to have the vast majority of their value in their goodwill (their reputation, their client base, their search engine rankings, etc). As a result, banks tend to have difficulty assessing the risk of an Internet acquisition.

   In addition to the difficulty of getting a bank to agree to fund an acquisition of a web based business, the other problem in finding a seller to agree to an offer that requires bank financing is the time that it takes to close that transaction. Although many bankers will tell you that the loan process takes just a few weeks, the reality is that the time to get funded on an Internet acquisition can drag out for weeks and even months. When there are cash buyers available to a seller, and when those cash buyers are able to fund the transaction in a matter of 15 – 30 days from an accepted offer, offers which rely on bank financing become less appealing.

   Should you require bank financing for an acquisition, be prepared to offer up secured assets as collateral. In most cases you will need to secure far more assets than the value of the business you are acquiring.

5. Do your sellers ever look for partnerships or investors?
   We do on occasion speak with individuals who are interested in finding a partner or invest for their business. However, the listings that we bring to the marketplace are always brought with the intention of being acquired in full. We specialize in facilitating asset sales. Outside of this speciality, we typically will not take on a client and bring them to market.