Someone had offered to buy a 50% stake in the website of one of my coaching clients at an undeniably attractive valuation of 47 x L6M (that’s 47 times the average monthly profit for the last 6 months).
So, in our monthly coaching session, they asked for my help to figure out what to do. However you look at it, this was an important and potentially life-changing decision!
It’s one thing to sell a website—and another to sell a 50% stake in it and add a partner to your business.
Questions to Ask Yourself
This is one of those situations in life where there is no right or wrong answer, and the only person who can decide is yourself.
Before you even think about the offer, ask yourself:
Do you need a partner for your media company here and now? In other words, would you have considered selling a 50% stake in your website even if this person had never contacted you and there was no offer on the table?
A partner can skyrocket your site’s growth by bringing in money, editorial resources, and new practices to your site’s operations. But they can also make your life miserable in many ways if they don’t know what they’re doing or if their goals conflict with yours.
Who is the person or company offering to buy 50% of your website? How long have they been in this business? How big is their portfolio? Do they buy, build, grow, and sell their websites in a similar way to you—or different from you?
If you see major differences in the content they create, the links they build, and the way they approach the business as a whole, that may or may not be a showstopper for you.
Why do they want this site, why at this time, and why do they want to acquire 50% (instead of 100%) of it?
If you’re an expert in your niche and have built a website on a topic for which very few people can research, write, and edit content, they may want to invest in growing an asset but keep your expertise on board.
This, however, is rare.
It would mean that your partner displays a level of sophistication and forward-thinking that’s unusual for this game, where most players are motivated by fat margins and quick flips.
It is more common that the person or company doesn’t have the money to buy the entire site at the valuation they are discussing with you or that, for one reason or another, they’re not willing to pay it.
Worse, they might try to squeeze every last penny out of the website by cluttering it with all sorts of ugly ads and selling links in guest posts until (a) RPM and ad revenue drop significantly and/or (b) the site gets penalized by Google.
Once they drive the website’s value down, they’ll either jump ship (while being entitled to 50% of whatever profit remains) or propose to buy you out at a ridiculously low valuation (then 301-redirect the whole site or sell the domain name).
What are they not telling you?
In the case of my coaching client, due diligence on the prospective partner revealed that they had a display ad network with dissatisfied ad buyers and disgruntled publishers.
Maybe they wanted to change and buy up high-value sites that they could use to expand their network. Or maybe the only way to stay in business is to keep buying up 50% of emerging websites and milk them as they run them into the ground.
World Wide Wild Wild Web is a big, big place. There are a lot of great people and companies worth partnering with. And just as many vultures you should avoid.
In the case of my coaching client, they decided that the risks far outweighed the benefits. And they decided to double down on this website in the next 1-2 years to grow it even more.