Full Version: Financing For Purchase of Airport Website
I am the owner of a limousine company and am interested in purchasing a web site that I currently advertise on. This website is for an airport. It is the "official" site for this particular airport and has over 2million visitors a year. The reason why I am interested in this site is the transportation page of this site. Currently eight transportation companies including myself advertise on this site. In addition to this, the site gives other options such as taking the railroad or taking shuttle buses into the city. Even with all of these options my company normally receives between 3-6 reservations a day from customers who got our company off of the website. Originally our prices were $175 + 20% gratuity for sedan and $225+ 20% gratuity for limousine but we have been forced to cut our prices due to the intense competition down to $135 all inclusive for sedan and $189 all inclusive for limousine. As of last month there were 7500 unique visitors to the transportation page of this site. Considering that we get between 3-6 reservations per day and our company has the 2nd highest prices, it is easy to extrapolate how many reservations are made. Also from the 7500 many people opt to use the shuttle option which is about $50 or the railroad option which is about $25-35. Our plan is to purchase this site and to remove all other limousine companies from the site as well as to remove the information about the railroad and the shuttle and to only put our limousine service on the site thus creating a monopoly on the transportation side and generating revenue this way. I will go from receiving 3-6 reservations a day from this site to between 50-60 reservations a day if you assume that only 25% of people who come to the transportation page looking for some form of transportation to/from the airport decide to book the only form of transportation available. In addition to the 50-60 bookings per day there will be an estimated 20-25 additional booking per day for return trips to the airport. All together 70-85 trips a day. Per trip my cost is $68 and my profit will be $107 assuming all jobs will be sedans, my cost for limousine is $72 per trip. Is there any way to get financing for this type of deal. I am looking for between 250K-500K for the purchase of the site and another $150K for the purchase of sedans to handle the increased volume. Also I am looking for a deal to be structured for between 2-5 years. Is there anyone out there who may be interested in something like this. Also they can keep the site underneath their name until the final loan payment has been made and then the site can be transferred to my company. This site is the site of a major airport in the area.
"....It is the "official" site for this particular airport and has over 2million visitors a year.."
what is this airport was to make that site unofficial...or start its own site?
what is this airport was to make that site unofficial...or start its own site?
Obviously that is a possibility but the name of this site is very unique to the airport. So even if they make their own site it wouldnt be a spopular as this one. This site has all the information about the airport including hotels, rental cars, airlines, flight info, delay, arrivals, parking, the whole nine yards...in fact other official government web sites link to this web site as the source of information for that particular airport. My interest in this site is from the transportation aspect, not the revenue aspect from the site. The site itself doesnt make over $50,000 a year. But the revenue that can be generated for a limousine company is quite substantial if they have a monopoly on the transportation part of the site and the only way to do so is by purchasing the site outright.
This seems like a topic for which I am uniquely qualified for being that I bring to the table background on finance as well as owning a website. There is a lot crossing through my mind so here are my random thoughts.
Regarding possible financing for the website This is very unlikely to happen specially at the numbers that you are talking about. Furthermore, the basis of your purchase price is based on changing the whole business model of the website from advertising related to mostly a captive advertising medium for your business. You are going from something existing to projections.
Financing for additional vehicles Sure that will be no problem as long as the cash flow is there.
Your estimated conversion rate of 25% Way too optimistic. I know a little about click through rates and conversion rates and I just don’t see how you can pull off those kind of rates. You are assuming that one in every four pageviews becomes a paying customer.
Regarding traffic figures You need to get together with someone that can review the information provided to properly analyze the value of a website. The value of a website is based mostly on the traffic. Ask the seller to provide logs and you can dissect them yourself with a log analyzer. They are cheap and give you a lot of information about the sources of traffic and the way that people move within a website. I use them sporadically in loanuniverse.com and have found a lot of nifty information about what attracts visitors.
The valuation of the website Normally websites are sold based on a multiple of revenues. It is true that like any investment one should use something like a discounted cash flow, but the multiple of revenues is more or less the standard.
The fickle mistress that is website traffic I know that you dismissed the possibility of the airport coming up with its own website, but if the airport comes up with an official website your traffic will dry up. A lot of what drives traffic are search engines, which have secret formulas for ranking relevance of a website to a particular search. An official site will leap over this one in short order due to the quality of links, domain, etc.
Other strategies that you might be able to take Lets do a little math. You said that the website makes $50,000 a year. Is that revenue? Assuming that this is revenue and also assuming that visitors is equal to pageviews {this is a big assumption} We can come up with the following:
$50,000 = 2,000,000 visitors
7,500 visitors per month to transportation page = 90,000 visitors a year to transportation page
90,000 visitors is 4.5% of the total visitors to the website.
If he is making $50,000 from the site, why don’t you offer him $10,000 a year for an exclusive advertising contract on those pages. That leaves him with 95% of the website to make $40,000.
The numbers might change, but you get the idea.
This whole thing reminded me that the sponsorship of my main page expires this month.
Good luck
Regarding possible financing for the website This is very unlikely to happen specially at the numbers that you are talking about. Furthermore, the basis of your purchase price is based on changing the whole business model of the website from advertising related to mostly a captive advertising medium for your business. You are going from something existing to projections.
Financing for additional vehicles Sure that will be no problem as long as the cash flow is there.
Your estimated conversion rate of 25% Way too optimistic. I know a little about click through rates and conversion rates and I just don’t see how you can pull off those kind of rates. You are assuming that one in every four pageviews becomes a paying customer.
Regarding traffic figures You need to get together with someone that can review the information provided to properly analyze the value of a website. The value of a website is based mostly on the traffic. Ask the seller to provide logs and you can dissect them yourself with a log analyzer. They are cheap and give you a lot of information about the sources of traffic and the way that people move within a website. I use them sporadically in loanuniverse.com and have found a lot of nifty information about what attracts visitors.
The valuation of the website Normally websites are sold based on a multiple of revenues. It is true that like any investment one should use something like a discounted cash flow, but the multiple of revenues is more or less the standard.
The fickle mistress that is website traffic I know that you dismissed the possibility of the airport coming up with its own website, but if the airport comes up with an official website your traffic will dry up. A lot of what drives traffic are search engines, which have secret formulas for ranking relevance of a website to a particular search. An official site will leap over this one in short order due to the quality of links, domain, etc.
Other strategies that you might be able to take Lets do a little math. You said that the website makes $50,000 a year. Is that revenue? Assuming that this is revenue and also assuming that visitors is equal to pageviews {this is a big assumption} We can come up with the following:
$50,000 = 2,000,000 visitors
7,500 visitors per month to transportation page = 90,000 visitors a year to transportation page
90,000 visitors is 4.5% of the total visitors to the website.
If he is making $50,000 from the site, why don’t you offer him $10,000 a year for an exclusive advertising contract on those pages. That leaves him with 95% of the website to make $40,000.
The numbers might change, but you get the idea.
This whole thing reminded me that the sponsorship of my main page expires this month.
Good luck
A few other issues I think wold be problematic with this plan.
1) Scaling up to support the new business. The web can be changed overnight but can you support the new business the next day. How would you know how many more cars to get and staff to hire.
2) Running your numbers I come up with more the $2,500,000 in new business. Actually, diverted business. By those numbers, the other 7 companies are averaging about $ 400,000 per year. I think it's a fair assumption that they won't all walk away from that business segment. Whether its a new website, other advertising, or something else they will find ways to try to preserve or re-acquire the business they had.
3) Changing the content may very well change the results. If 50 of the 250 visitors per day end up booking transportation from among the 8 provides, how many will if their is only one provider. I certainly wouldn't. Most consumers like to choose. A site with only one option looks rigged. In fact it is. I would suspect a large number of vistors would jump over to google and search for "ABC airport transportation" and get competitive results.
1) Scaling up to support the new business. The web can be changed overnight but can you support the new business the next day. How would you know how many more cars to get and staff to hire.
2) Running your numbers I come up with more the $2,500,000 in new business. Actually, diverted business. By those numbers, the other 7 companies are averaging about $ 400,000 per year. I think it's a fair assumption that they won't all walk away from that business segment. Whether its a new website, other advertising, or something else they will find ways to try to preserve or re-acquire the business they had.
3) Changing the content may very well change the results. If 50 of the 250 visitors per day end up booking transportation from among the 8 provides, how many will if their is only one provider. I certainly wouldn't. Most consumers like to choose. A site with only one option looks rigged. In fact it is. I would suspect a large number of vistors would jump over to google and search for "ABC airport transportation" and get competitive results.
I really appreciate your random thoughts they help me to make sure that i haven;t missed anything and I appreciate the fact that you took the time out to come up with them. The repsonses to them I have listed below.
"Furthermore, the basis of your purchase price is based on changing the whole business model of the website from advertising related to mostly a captive advertising medium for your business. You are going from something existing to projections."
I am not proposing to change the existing business model. The transportation page is not the only place where advertising occurs. The advertising will remain the same throughout the website as will the other information, nothing in the web site will change except the transportation page. In regards to projections, of course it has to be projections because I don't own the site and this has never been done so my only option is to make projections based upon the real data that I have.
"Your estimated conversion rate of 25% Way too optimistic. I know a little about click through rates and conversion rates and I just don’t see how you can pull off those kind of rates. You are assuming that one in every four pageviews becomes a paying customer."
My estimated conversion rate is based upon unique hits, not upon all page hits to the transportation page. Secondly, it is common sense that if you come to the transportation page of an airport, you are doing so to look for some form of transportation. This airport is a hub for a major regional airline and most (95%) of the individuals who fly on this airline are visitors to the city, not to a suburb. Thus, they need to find a method to goto the city. I think 25% conversion rate is a fair figure, if you dont think so, you are also forgetting to factor in the fact that people who take a sedan to the city from the airport, more than likely need to return as well. In addition to this, people often hire a limousine to take them out in the city and if they have already used a service and they are visitors they are more than likely to call the same service.
"Regarding traffic figures. You need to get together with someone that can review the information provided to properly analyze the value of a website. The value of a website is based mostly on the traffic. Ask the seller to provide logs and you can dissect them yourself with a log analyzer. They are cheap and give you a lot of information about the sources of traffic and the way that people move within a website. I use them sporadically in loanuniverse.com and have found a lot of nifty information about what attracts visitors."
Because I am an advertiser on the site, I have access to their logs and this is how I track the numbers on this site, I know how many hits are on each page, each unique individual, which sites that person goes to, how many times he/she visits the site, what domains, etc. etc.
"The valuation of the website. Normally websites are sold based on a multiple of revenues. It is true that like any investment one should use something like a discounted cash flow, but the multiple of revenues is more or less the standard."
The valuation that I have set for it is $200,000...revenues X 4. The reason why I am willing to pay more than that is because to me, the revenues from the site (advertising), I dont really care about them because the real money for me will be coming from the limousine company
"The fickle mistress that is website traffic. I know that you dismissed the possibility of the airport coming up with its own website, but if the airport comes up with an official website your traffic will dry up. A lot of what drives traffic are search engines, which have secret formulas for ranking relevance of a website to a particular search. An official site will leap over this one in short order due to the quality of links, domain, etc."
That may be true but this website has the name of the airport in it i.e. lax.com or laxairport.com...even if an official website from the airport comes about it will not be able to have a name as good as this one. Secondly, this website has all the relevant material about the airport, if you search for it under google for airport name and transportation this si the first site which comes up.
"Other strategies that you might be able to take" Lets do a little math. You said that the website makes $50,000 a year. Is that revenue?"
Yes it is revenue...it is almost all profit because they are just static pages.
"Assuming that this is revenue and also assuming that visitors is equal to pageviews {this is a big assumption} We can come up with the following:
$50,000 = 2,000,000 visitors
7,500 visitors per month to transportation page = 90,000 visitors a year to transportation page
90,000 visitors is 4.5% of the total visitors to the website.
If he is making $50,000 from the site, why don’t you offer him $10,000 a year for an exclusive advertising contract on those pages. That leaves him with 95% of the website to make $40,000.
The numbers might change, but you get the idea."
Actually there are about 13,000-15,000 page hits to the transportation page per month and about 6500-8000 unique visitors to the transportation page. I have offered him that much for a year contract and he refuses because of his high moral grounds that he doesnt want anyone to have a monopoly because then it isn't fair to the consumer. Also his second reason is that if he gives me a monopoly and kicks everyone else off then what happens if i dont decide to renew, then he will be stuck because all the other companies wouldnt trust him to come back because they would think that they can be kicked off...i even offered him a three year deal.
Tim, In reference to your comments:
"1) Scaling up to support the new business. The web can be changed overnight but can you support the new business the next day. How would you know how many more cars to get and staff to hire. "
Yes I can support the new business the next day. I am in the limousine business, thus obviously I would know how many cars to buy. Also, I wouldn't go and buy the cars the next day. I have many subcontractors (farm out companies, and individuals) who I would give the excess work out to in the first three to seven days. During that time I will be able to see how many reservations I am getting as well as how many cars I need and how much staff to hire. Buying a car in the limousine industry is not that difficult. I will give you an example, all of our cars are 2003 and higher models. You can purchase a 2003 black lincoln towncar for around $9,000 from individual drivers and financing in the livery industry is very easy to get.
"2) Running your numbers I come up with more the $2,500,000 in new business. Actually, diverted business. By those numbers, the other 7 companies are averaging about $ 400,000 per year. I think it's a fair assumption that they won't all walk away from that business segment. Whether its a new website, other advertising, or something else they will find ways to try to preserve or re-acquire the business they had."
That is an incorrect estimate...maybe around $250,000 a year because most have lower prices and you are also forgetting about the railroad and shuttle option that some people choose. Obviously they won't be happy about it, but there isn't much that they can do. They can do as much advertising as they want but when someone types in xxxxx airport transportation into Google this website will still be number 1.
"3) Changing the content may very well change the results. If 50 of the 250 visitors per day end up booking transportation from among the 8 provides, how many will if their is only one provider. I certainly wouldn't. Most consumers like to choose. A site with only one option looks rigged. In fact it is. I would suspect a large number of vistors would jump over to google and search for "ABC airport transportation" and get competitive results."
I dont plan on leaving just one option. I plan on putting about 6 different companies. Each with different web sites. Also each with different phone numbers as well as prices. Because you are right, I wouldnt pick if there was just one company I would think it is rigged also. I have thought about that aspect as well.
I really appreciate both of your thoughts and comments. If you have any more please give them to me because it helps me to make sure I have thought everything out. Also if you know of anyone that can help me with financing with this please let me know.
Thanks
"Furthermore, the basis of your purchase price is based on changing the whole business model of the website from advertising related to mostly a captive advertising medium for your business. You are going from something existing to projections."
I am not proposing to change the existing business model. The transportation page is not the only place where advertising occurs. The advertising will remain the same throughout the website as will the other information, nothing in the web site will change except the transportation page. In regards to projections, of course it has to be projections because I don't own the site and this has never been done so my only option is to make projections based upon the real data that I have.
"Your estimated conversion rate of 25% Way too optimistic. I know a little about click through rates and conversion rates and I just don’t see how you can pull off those kind of rates. You are assuming that one in every four pageviews becomes a paying customer."
My estimated conversion rate is based upon unique hits, not upon all page hits to the transportation page. Secondly, it is common sense that if you come to the transportation page of an airport, you are doing so to look for some form of transportation. This airport is a hub for a major regional airline and most (95%) of the individuals who fly on this airline are visitors to the city, not to a suburb. Thus, they need to find a method to goto the city. I think 25% conversion rate is a fair figure, if you dont think so, you are also forgetting to factor in the fact that people who take a sedan to the city from the airport, more than likely need to return as well. In addition to this, people often hire a limousine to take them out in the city and if they have already used a service and they are visitors they are more than likely to call the same service.
"Regarding traffic figures. You need to get together with someone that can review the information provided to properly analyze the value of a website. The value of a website is based mostly on the traffic. Ask the seller to provide logs and you can dissect them yourself with a log analyzer. They are cheap and give you a lot of information about the sources of traffic and the way that people move within a website. I use them sporadically in loanuniverse.com and have found a lot of nifty information about what attracts visitors."
Because I am an advertiser on the site, I have access to their logs and this is how I track the numbers on this site, I know how many hits are on each page, each unique individual, which sites that person goes to, how many times he/she visits the site, what domains, etc. etc.
"The valuation of the website. Normally websites are sold based on a multiple of revenues. It is true that like any investment one should use something like a discounted cash flow, but the multiple of revenues is more or less the standard."
The valuation that I have set for it is $200,000...revenues X 4. The reason why I am willing to pay more than that is because to me, the revenues from the site (advertising), I dont really care about them because the real money for me will be coming from the limousine company
"The fickle mistress that is website traffic. I know that you dismissed the possibility of the airport coming up with its own website, but if the airport comes up with an official website your traffic will dry up. A lot of what drives traffic are search engines, which have secret formulas for ranking relevance of a website to a particular search. An official site will leap over this one in short order due to the quality of links, domain, etc."
That may be true but this website has the name of the airport in it i.e. lax.com or laxairport.com...even if an official website from the airport comes about it will not be able to have a name as good as this one. Secondly, this website has all the relevant material about the airport, if you search for it under google for airport name and transportation this si the first site which comes up.
"Other strategies that you might be able to take" Lets do a little math. You said that the website makes $50,000 a year. Is that revenue?"
Yes it is revenue...it is almost all profit because they are just static pages.
"Assuming that this is revenue and also assuming that visitors is equal to pageviews {this is a big assumption} We can come up with the following:
$50,000 = 2,000,000 visitors
7,500 visitors per month to transportation page = 90,000 visitors a year to transportation page
90,000 visitors is 4.5% of the total visitors to the website.
If he is making $50,000 from the site, why don’t you offer him $10,000 a year for an exclusive advertising contract on those pages. That leaves him with 95% of the website to make $40,000.
The numbers might change, but you get the idea."
Actually there are about 13,000-15,000 page hits to the transportation page per month and about 6500-8000 unique visitors to the transportation page. I have offered him that much for a year contract and he refuses because of his high moral grounds that he doesnt want anyone to have a monopoly because then it isn't fair to the consumer. Also his second reason is that if he gives me a monopoly and kicks everyone else off then what happens if i dont decide to renew, then he will be stuck because all the other companies wouldnt trust him to come back because they would think that they can be kicked off...i even offered him a three year deal.
Tim, In reference to your comments:
"1) Scaling up to support the new business. The web can be changed overnight but can you support the new business the next day. How would you know how many more cars to get and staff to hire. "
Yes I can support the new business the next day. I am in the limousine business, thus obviously I would know how many cars to buy. Also, I wouldn't go and buy the cars the next day. I have many subcontractors (farm out companies, and individuals) who I would give the excess work out to in the first three to seven days. During that time I will be able to see how many reservations I am getting as well as how many cars I need and how much staff to hire. Buying a car in the limousine industry is not that difficult. I will give you an example, all of our cars are 2003 and higher models. You can purchase a 2003 black lincoln towncar for around $9,000 from individual drivers and financing in the livery industry is very easy to get.
"2) Running your numbers I come up with more the $2,500,000 in new business. Actually, diverted business. By those numbers, the other 7 companies are averaging about $ 400,000 per year. I think it's a fair assumption that they won't all walk away from that business segment. Whether its a new website, other advertising, or something else they will find ways to try to preserve or re-acquire the business they had."
That is an incorrect estimate...maybe around $250,000 a year because most have lower prices and you are also forgetting about the railroad and shuttle option that some people choose. Obviously they won't be happy about it, but there isn't much that they can do. They can do as much advertising as they want but when someone types in xxxxx airport transportation into Google this website will still be number 1.
"3) Changing the content may very well change the results. If 50 of the 250 visitors per day end up booking transportation from among the 8 provides, how many will if their is only one provider. I certainly wouldn't. Most consumers like to choose. A site with only one option looks rigged. In fact it is. I would suspect a large number of vistors would jump over to google and search for "ABC airport transportation" and get competitive results."
I dont plan on leaving just one option. I plan on putting about 6 different companies. Each with different web sites. Also each with different phone numbers as well as prices. Because you are right, I wouldnt pick if there was just one company I would think it is rigged also. I have thought about that aspect as well.
I really appreciate both of your thoughts and comments. If you have any more please give them to me because it helps me to make sure I have thought everything out. Also if you know of anyone that can help me with financing with this please let me know.
Thanks
Hmmm. Must but those new energizers in my calculator.
70 trips per day * 365 days * $100 profit per trip = $2.5MM. As Loanuniverse said, financing for the web site purchase is very unlikely. You may be able to get cash out of your business from various sources including: advance against future credit card sales, equipment sale-leaseback, and/or real estate.
I would not recommend such a deal because it is basically unsecured. Do you have any collateral that can be pledged? That might make the deal palatable to a lender that buys into the projections.
Personally, they sound too good to be true. Then again, I am one of the few people involved in lending that actually knows something about websites.
On the other hand, do you have a good and logical argument? Yes you do.
Personally, they sound too good to be true. Then again, I am one of the few people involved in lending that actually knows something about websites.
On the other hand, do you have a good and logical argument? Yes you do.
QUOTE(loanuniverse @ Jun 22 2006, 02:44 PM) 
I would not recommend such a deal because it is basically unsecured. Do you have any collateral that can be pledged? That might make the deal palatable to a lender that buys into the projections.
Personally, they sound too good to be true. Then again, I am one of the few people involved in lending that actually knows something about websites.
On the other hand, do you have a good and logical argument? Yes you do.
By collateral what exactly do you mean? Do you mean my current limousines? Do you mean credit card receivables? That is true you do know about websites, no doubt about it, but this website is going to be used for a completely different purpose in terms of generating revenue...if someone else was to purchase it, for them the advertising revenue is all that matters, but for me on the other hand i could care less about the advertising revenue. In fact I would be willing to give all the advertising revenue away, I am much more interested in using the transportation page to drive business to my company.
QUOTE(drvbasic @ Jun 23 2006, 12:12 AM)
By collateral what exactly do you mean? Do you mean my current limousines? Do you mean credit card receivables?
In this case other collateral would be your personal residence or other real estate.
QUOTE(loanuniverse @ Jun 23 2006, 07:12 AM)
In this case other collateral would be your personal residence or other real estate.
Yes I have about $260,000 in equity in my house. Could I use that for collateral
Yes you could. Now you have to get a lender that believes.
QUOTE(loanuniverse @ Jun 23 2006, 07:59 PM)
Yes you could. Now you have to get a lender that believes.
Any ideas?
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