You built a WordPress business from the ground up. It took lots of time, effort, and even money to push it across the barometer of success. It’s been an exhilarating and sometimes exhausting experience.
But you would do it all again.
Maybe you built it from the ground up using your plugin development skills or invested thousands to acquire an already-budding WordPress product business or plugin.
Wherever your journey began, it’s brought you to the same crossroads most come to:
Is it time to sell my WordPress business? And how do I do so profitably?
It can happen at any time—six months or even 10 years later. There comes a time when you feel the need to part ways with the company you built.
But how do you find buyers for a WordPress business? Or better yet, how do you value your business, so you get a fair deal on the effort you put into building and growing your online company?
These are the questions we’ll answer today. Continue reading to learn how you can value and sell your WordPress business profitably.
The WordPress market is hot (and why now is a good time to sell)
Timing is everything. This is true whether you’re trying to start, expand, or sell a business. If you wait too long, you can miss great opportunities—and if you move too soon, you could sell yourself short.
Is now a good time to sell your WordPress business?
The simple answer, yes.
Over the past year, dozens of WordPress business owners approached us about selling their company. That demand led us to start FlipWP. There’s a recurring theme here—there are plenty of buyers and sellers out there, but there’s a disconnect because there was no legit space for the two to find one another.
So they’re left at the mercy of Facebook groups, Slack, and social media DMs to connect with and perform exchanges. However, this isn’t an optimal situation and you shouldn’t have to deal with this type of situation, especially now.
Although the pandemic hurt a lot of brick-and-mortar businesses, something unprecedented happened among WordPress businesses: The demand for WordPress increased. In April 2020, we witnessed searches for WordPress increase by 52% in one month:
Ellipsis’ research at the start of 2021 showed that WooCommerce was the major growth area last year, with searches for WooCommerce keywords up 44% in 2020. Plugins overall were up 18%, though. Both of those outpace WordPress’ overall growth:
WordPress as a fast-growing platform is certainly one driver of investment, but it’s not the only factor. We saw WordPress search volumes come down through the start of 2021 to pre-pandemic levels. WordPress businesses don’t report sales declining, but this points to an ecosystem that’s becoming more complex and mature. Ellipsis’ research from Dr. Oliver Crook from the Department of Statistics at the University of Oxford does forecast search volumes coming back up in the second half of this year, but it’s no longer plain-sailing guaranteed:
But why all the interest in WordPress and plugins? Likely because more people are looking to take control of their financial well-being. Many are even forgoing the startup phase and jumping right into merging and acquiring other businesses to expand their own portfolio.
We’re also witnessing a ton of action in the WordPress business M&A realm: Over the past two years, there were nearly 40 WordPress acquisitions. The adoption rate for WordPress for sites also continues to rise—as of 2019, it powers 40% of all websites (that’s four million websites).
So if you’re considering selling your WordPress business, there’s a great chance you can do so with favourable results. But the question you have to ask yourself now is…
Why sell my WordPress business?
Deciding to sell a business can sometimes happen for positive reasons. For instance, it can happen at a time when your company is seeing substantial growth and success. In fact, this is an excellent time to put your business on the market if you’re considering exiting.
Others may decide to sell because they feel it’s time for a change. Inspiration can hit at any moment, driving you towards an entirely new venture.
But not all transitions are positive. Sometimes, growth can be overwhelming, especially if you lack the will, desire, or skill to see it through. When your business grows stressful, it can turn what used to be a dream into a nightmare. So exiting now before you burn out is optimal.
Joost De Valk recently spoke on this as a reason behind Yoast’s merger with Newfold Digital (which was likely a $100M+ exit).
Yoast had always been bootstrapped, it was only our own money in this business, and we’d grown to 140+ employees. This was and is something we’re super proud of, but it was also causing stress. From COVID to euro/dollar exchange rates to the always existing, nagging fear of “what if they just all stop buying tomorrow” and more. We felt now was a good time for us to get away from that stress and find a company that could provide the backing we needed. — Joost De Valk, Founder and Chief Product Officer @ Yoast.
In addition to stress, many entrepreneurs face personal issues like health problems, family obligations, and relationship troubles. These factors can make owning a business difficult. They also lead to poor decision-making, which makes it harder to run a successful operation. This is where a sale (or even a merger) can be a valid decision.
If you’re pondering doing the same for your WordPress business (for whatever reason), then you’ll find the benefits enticing. The most obvious is the cash from the deal, but you’ll also free up time and resources to pursue other goals, and reduce your stress and anxiety levels.
Sometimes, you need a break before embarking on a new entrepreneurial journey. This gives you the chance to take a breather.
After deciding to sell your WordPress business, it’s time to consider the type of exit you want to undergo. Here’s a closer look at your options.
3 most common exits from a WordPress business
Exiting a business can be tricky, especially if you don’t have all your paperwork in order. This is why we recommend keeping a digital “paper” trail for everything (sales, products, growth, expenses, etc.). Then when it comes time to exit, the process is seamless.
Here’s an overview of the main three types of exits to consider.
1. Clean exit
You invested a lot of your time and energy into your WordPress business. And now you’re ready to move on to something new. If you’re no longer interested in being involved in the business, you should opt for a clean exit.
This means after the sale, you have no further ties with the business, and the buyer assumes control over all the operations.
A great example of this was the recent acquisition of Advanced Custom Fields by Delicious Brains. Elliott Condon, the creator of ACF, decided after a decade it was time to move on. As a husband and new father, he felt he didn’t have it in him to take the business another ten years. It needed a dedicated team (he was a solo plugin developer) to take it to the next level, so he sold it to Delicious Brains.
2. Acqui-hire
Now, what if you enjoy the work you do in your business but want to do something different? In this scenario, you can sell your WordPress business and then work on a project for the acquirer. This allows you to get paid a lump sum (and then receive ongoing payments for the work you perform).
This was the arrangement for Automatic’s acquisition of Frontity. The agreement was Automatic would fund Frontity’s team, so they can focus on WordPress core and Gutenberg.
3. Growth
This is a great choice if you’re observing substantial growth and need funding to keep up with the demand. Maybe you need a larger team or additional resources and tools to make operations more efficient.
In this scenario, the acquirer buys the company and keeps your team onboard to continue working in the business. It’s also the perfect arrangement to focus more on development and less on marketing and growth strategies.
StellarWP does this often—most recently in September 2021 with LearnDash. Stellar’s acquisition of LearnDash may be a slight departure from this model, as Chris Lema is moving to a General Manager role for the product. It’s unclear what LearnDash’s founders are doing, but the whole team is joining and I’d assume this is a variation on the same approach we’ve seen before.
When it comes time to exit (or stay in) your WordPress business, be sure about the approach you’ll take. Determine if you and your team will stay, how soon you want to sell, and what part of the business you want to keep or give away.
What’s my WordPress business worth?
Worst case scenario: You decide to sell your WordPress business, and you end up with the short end of the stick. If you knew how much your business was truly worth, you could’ve received a better payout.
It’s every business owner’s worst nightmare, and it’s what holds many back from agreeing to a sale. By understanding how to value your business, you can rest easy knowing your asking price is on point.
But how exactly do you value a WordPress business? It’s not like there’s a formal appraisal service you can call to provide a business valuation.
The answer relies on a variety of factors, so there’s no cookie-cutter way to do this. For example, you’ll have to determine your business’:
- Strategic value: How easy is it to integrate your business/solution into the buyer’s company? The simpler, the better.
- Asset value: Do you have large, multi-year contracts? Recurring revenue from long-term subscribers? Or maybe a large variety of digital products (i.e., e-commerce plugin) that are popular and sell well? If so, then this will be attractive to buyers.
- Revenue value (most common): Is your revenue trending up? Down? Or is it steady? Has your revenue grown quickly? Or did it hit a snag lately? And most importantly, what’s your profit margin? These are the questions that’ll determine whether your business is worth a buyer’s investment. If you’re generating $500K per month, with a $300K/mo expense, then it won’t look as promising as a $500K/mo business with only $50k/mo in expenses. What they want to see are continuous growth and large profit margins.
- People value (2nd most common): This is vital if you’re doing an acqui-hire since the acquirer will use your team for their projects. It’s not so much as their salary in question, but the skillsets they bring to the table. The higher their expertise, the higher their value.
After figuring out the overall value of your WordPress business, it’s time to determine your asking price. In most cases, WordPress businesses ask for 3x to 4x the ARR (annual recurring revenue).
Of course, some demand much higher (as much as 20x ARR for high-end deals valuing into the millions), but this is a solid starting point for most. Plus, it works well for various types of exits and methods of valuation.
We’ve seen situations where the acquirer uses different metrics (like EBITDA or number of people) and still comes up with similar figures. There are assumptions baked into this, such as scale from selling digital goods, renewal rates, ARR, support burden, revenue growth, and so on.
However, 3-4x ARR tends to be the sweet spot in the majority of these cases. We’ve seen this as a common selling point for the deal that occurs on FlipWP.
Now, keep in mind your opinion also holds some weight. Some WP business sellers want more, and by asking for it, they sometimes get it. This may feel unintuitive since your business may be worth $X, but you desire more (or less) than the valuation.
In some cases, holding out for the price you’re demanding can lead to a better deal. Just keep in mind—negotiating the sale of a business is already intense, so prepare for the added stress.
If you want to make the process as simple as possible, then we recommend sticking with the 3-4x ARR.
How do I get offers?
You have a pretty good idea of what your WP business is worth and how much to ask for. How do you get your business listed in front of prospective buyers, so you can start getting offers?
There are two options: You can go the long and treacherous route of scouring social networks and groups for buyers, hoping to find the perfect match.
Or you can use FlipWP to find folks who are ready to buy today. By joining FlipWP, you get direct access to qualified buyers.
How does FlipWP work?
The platform is free to use for sellers. All you have to do is register on our site and then connect with us to discuss a valuation. We’ll provide a form to fill out to gather all the key details, and then we’ll set up your listing.
We’ll then send out your listing to our private list of pre-qualified buyers. These are vetted customers who pay a premium price to access sellers like you.
Here’s an example of a listing on FliipWP:
Those interested in purchasing your business will contact you directly, then you can begin the negotiation process. After reaching an agreement on the purchase price and terms of sales, you perform the handover. This is when the exchange for money and business assets occurs.
FlipWP only asks for 1% of the sale price (our success fee).
In exchange, you get to list as many businesses as you want for free. Plus, you get access to support from experts (Alex and Iain), who can help you find a buyer (and the best deal) for your business.
Meanwhile, we recommend getting all your financial numbers and documents together to share with potential buyers. You’ll need documents for the due diligence process to show revenue, expenses, etc. It’s a good idea to have a summary sheet prepared for interested buyers to streamline the process.
Find a buyer for your WordPress business
Selling your WordPress business is a big decision—and so was starting one in the first place. But if you feel selling is the next step of your journey, make it a simple process.
Too many struggle with finding the right buyer and go through countless negotiations that end up in a flop. Some may offer too low of a price or back out at the last minute. This can grow tiresome and make it challenging to sell your WordPress business profitably.
Don’t give up and don’t settle. FlipWP heard the pains of the WP business community and decided to pave the way for buyers and sellers to unite in a safe and productive environment. So if you’re looking to sell your WordPress business with little to no headache while receiving support from experts in WP M&A, then sign up to FlipWP for free today!
Alex Denning
September 24, 2021