On the surface, there don’t seem to be too many differences between selling a physical business and your web-based company. Both offer a product or a service and both will have staff and other systems in place. However, there are many important things that are unique to each and will make a difference in the sale. To make things easier, there are brokers who help mediate the sales of different types of businesses such as Flippa.
They have the benefit of experience having brokered many deals. If you are new to selling a company, hiring a broker could be the best option for you.
Flippa was founded in 2009 and now operates four locations around the world. They specialize in helping you sell your web based business to targeted buyers. This can help take a lot of the stress off you and get you better offers in the long run.
Flippa’s employees are made up of a wide variety of entrepreneurs and career CS representatives. Together, they can help you figure out the best plan of attack for selling your web based business.
In this Flippa.com review, we will discuss the benefits and downsides of hiring a broker to sell your business. By knowing what to expect during the sale of your company, you can have an upper hand. Flippa can help you find the right buyers to keep your business going strong after you hand it off.
Overview of Flippa
Flippa claims to have the most leads browsing their marketplace out of all the online brokers. With 1.5 million users on their boards, there is a wide variety of buyers looking for opportunities. More users will almost always equal more offers in the long run.
The first decision you have to make when you decide to sell your company is whether to do it yourself. It is tempting to think that since you know everything about your business, you will know how to sell it. This could be true, but it is important to be sure before you try to do it on your own.
Flippa offers a free valuation as a first step in the process. This can be critical to not only knowing what you should charge, but if you are ready to sell. The valuation only takes five minutes and can give you a ballpark idea of where you’re at.
One of the most important things to note is that Flippa does not have in-house brokers. They are mainly in the business of providing quality leads and a professional platform. They do, however, work with third party brokers if that’s the direction you want to go.
While Flippa does offer brokers to work with you on your listing, you can also do it yourself. Many other business brokers like to take on every aspect of your sale. This makes Flippa a good option for people who want more control over their transaction.
Flippa is also unique in that they have business financing options for buyers. They have partnered with Guidant Financial to offer financing solutions to anyone buying through their marketplace. This opens up such a larger pool of leads who could turn into potential buyers.
Types of Businesses Flippa Sells
Flippa specializes in very specific types of businesses. Naturally, all of the companies on their roster are web-based. They do not deal in brick and mortar businesses and work exclusively in the digital marketplace.
One of the appeals of working with a mediator like Flippa is that they deal exclusively in certain business niches. Any business owner will know that the secret to finding your targeted audience is knowing your niche. The fact that Flippa understands this and caters to it contributes to their large buyer base.
One of the niches that Flippa has made many sales in over the years is Health and Beauty. Whether it is eCommerce, apps or websites, Flippa has sold all manner of Health and Beauty businesses. Seeing as it is one of the fastest growing niches in the online marketplace, this is no surprise.
Another popular business niche that Flippa has made many sales in is Education. The Education industry works well in the digital marketplace. Because of this, many of the companies that have been bought and sold on Flippa are Education based.
For the most part, if all of your company’s business is done online, Flippa will have sold one similar previously. Seeing as they have made over 250,000 sales worldwide, they have a lot of experience to pull from. This might be something to consider if you don’t have the kind of connections that they do.
Flippa Valuation Process
The valuation process for Flippa is very involved. The nice thing, though, is that getting started with it is incredibly easy. The valuation tool on their website is run by a bot and is very efficient.
Should you choose to work with one of the brokers at Flippa, there will be more of a valuation process. The brokers will go through all of your company’s assets, outgoing invoices and other factors. With this information, they will determine if your company is ready to sell and for how much.
If you are interested in immediately purchasing another business as you finish up your latest venture, they also have options. As part of selling a business on Flippa, they do what they call their “Due Diligence” analysis. With this, they analyze the seller, traffic, finances, sales and marketing. This in-depth analysis protects both the buyer and the seller and ensures a smooth transaction all around.
One of the most important aspects of the valuation process that is often overlooked is sales readiness. It might be disappointing to run a valuation and find out your company isn’t worth as much as you thought. However, now armed with that information, you can make an educated decision.
It can be intimidating to hand your business over to someone else to handle the sale. Luckily, Flippa works with a vast network of brokers to find the right person to help you. This kind of targeted brokering can really help you feel more comfortable with the whole process.
The process of selling your business with Flippa.com is easy and one of its main selling points. If you are attempting to sell your business on your own, finding leads can be the most difficult thing. By listing your company with a marketplace like Flippa, the leads are already there and will come to you.
If you are listing your company at Flippa.com without a broker, there are a few things you must do. The first thing is figuring out how to list your company in the marketplace. Having the right copy and materials will make a world of difference.
The other thing you must do is create an online Information Memorandum. This is kind of like a sale listing but has pertinent information to help you get matched to buyers. The more thorough the Information Memorandum is, the more likely you are to be matched with quality buyers.
After your company is listed, buyers will start to contact you on Flippa. Once you find the right buyer you will complete the contract of sale and exchange assets. All of it is taken care of on Flippa’s interface making it much easier than traditional methods.
It is hard to get a business off the ground and successful to the point where it can be sold. Oftentimes, people are selling their company because they are wanting to retire. If you are instead looking for your next business opportunity, you are already in the marketplace.
Flippa Success Rates
The most important thing about listing your company with a mediator like Flippa is that the leads are built in. Trying to sell a company on your own sounds like a good idea and for some people it might be. If you are not connected and can’t generate leads though, a marketplace is your best bet.
Flippa has a unique aspect of its business that is not often seen in other business sale mediators. They offer access to a collective buyer pool that is worth over 1.2 billion dollars. With this buyer pool, they invest in relevant opportunities and it could be very lucrative for the right person.
Another intriguing aspect of Flippa.com’s business model is that all of their buyers are verified. Outside of a marketplace, deals fall through all the time even with contracts in place. With Flippa’s identity verification you can avoid getting scammed.
The same identity verification happens for the seller as well. This verification ensures that everyone is who they say they are and can be very reassuring. This contributes to the success rate of sales since you are only dealing with real people.
Flippa.com has sold over 250,000 businesses in their 11 years of being in business. That kind of volume leads to a huge buyer pool. A bigger buyer pool will lead to a much higher rate of success than other means of marketing your company.
Fees Charged by Flippa to Sell a Business
Unlike some of the other, more hands on brokerages and business marketplaces, Flippa is relatively inexpensive. If your business sells for less than $50,000, Flippa takes a 10% cut. This is a fairly small amount for smaller businesses.
As your company’s selling price goes up, Flippa’s rate goes down. If your company sells for between $50,000 and $100,000 they will take 7.5%. As the amount goes up, the dollar amount of their rate will go up as well.
If your company sells for over $100,000 Flippa takes only 5%. The most important thing to remember about these rates is that they are only charged if your business is sold. There is a small, flat fee to list but that is it.
If you choose to use one of Flippa’s partner brokers, they charge 15% at the sale of your company. This might seem like a lot but if you are unsure about the process, this could be very helpful. By hiring a broker, you can be sure that all of your merchandising and copy is professional and top notch.
It might hurt a little bit to have to give up any percentage of your business’s sale. As understandable as it is, no one wants the process to be full of headaches and worry. If you want the sale to be as easy for you as possible, this could be a good choice.
You can see all their fees here.
Also, Flippa does have small listing fees that are on top of the percentages they take which are listed above. These fees are listed below:
- For a starter site you pay a $15 listing fee
- If you are selling a domain you will pay a $10 listing fee
- For selling apps you pay a $15 listing fee
- Established websites pay a $49 listing fee
You can also upgrade your listings on the Flippa marketplace to get your listing seen by more people. This ranges from $65 to $545 depending on what type of extra exposure you’re paying for.
We would not advise using these upgrade features unless you know you’re selling a business that is going to be worth the extra expense. If for example you’re selling a small business that may sell for less than $2,000, these upgrade fees may not be worth it.
Pros and Cons of Using Flippa
Professional listings get professional buyers – By listing your company with Flippa, you are putting it under the eyes of the best leads. This will give you your choice of buyers at a higher quality. ID verification means that only serious inquiries are coming in.
Brokers know what to do – If you want to ensure professional merchandising for your company, hiring a broker could be a good choice. They know the best information to put forward and who to cater to. They will know who your ads should be targeted towards the most.
Less stress – The value of this pro can not be overstated. Any business owner will say that managing stress is a huge priority in their day to day work life. Hiring someone else to sell your company could be an important step in keeping the anxiety low.
Giving up control – If you are uncomfortable with handing over the reigns of the sale, consider listing yourself. You may know who you have in mind to target and who you want running your company. Giving that job to someone else could be risky.
Less profit – Let’s face it, no matter what, you are giving up some money by using a third party. If the margin on your company’s sale is already thin, you may not want to do that. However, if it is that thin, perhaps your company isn’t ready to be sold yet.
When you use a traditional broker such as Website Properties you stand a better chance of getting a higher price for your business. Flippa is more of a business for sale marketplace with auction type listings and most of the time you will not get as much for your business on these types of marketplaces.
One advantage of Flippa is they take a smaller cut of your profits than a traditional business broker but traditional brokers can normally get you more money for your business. You need to weigh these factors before you decide to sell your business.
Open to scams – No matter how well vetted a buyer may be on the internet, scams can slip through. This will be one of the disadvantages of any internet sale. If you are not willing to take that risk, face-to-face sales might be your best option.
Unlike selling with a regular business broker, using Flippa can open you up to more issues with scammers. Traditional brokers such as Website Properties do very thorough vetting of buyers meaning there is less likely to have any issues with unscrupulous people.