Please PM Your Reserve Price

Almost every website listed for sale on Flippa that has any comments has the dreaded request: please PM your reserve price. This drives me nuts! I’ve been buying and selling on eBay for years and I’ve never had a buyer ask me what my reserve price was so why is it such a common practice at Flippa? Why do buyers feel they have a right to know what the reserve price is, but more importantly, why are sellers stupid enough to reveal it?

The whole point of having a reserve price is to prevent your website from selling for less than what you want. Having a reserve price allows you to start the bidding really low in an effort to generate lots of interest and bids. The hope is eventually a bidding war will occur and the bid prices will surpass the reserve. Now you can argue whether or not using a reserve price helps or hurts your selling efforts, but if you’re going to reveal your reserve, what’s the point?

If you’re going to do that, you might as well just start the bidding at your reserve price! If you use a reserve price and you reveal it, then you’re doing yourself a serious disservice as a seller. Nothing good can come from it. In fact, you will almost always leave money on the table.

Consider this, let’s say you have a website that you’re selling that you believe is worth $5,000 but secretly you’d be happy with anything over $3,500 so you set your reserve for $3,500. The buyer requests that you PM your reserve price…arggg. You make the foolish mistake of revealing it. One of three things will happen and in either scenario you lose:

1. The buyer thinks it’s too high so he doesn’t even follow your auction anymore – he moves on to other listings. You lose.

2. The buyer thinks the reserve is fair so he places a “reserve price bid.” Now the price of your website jumps instantly to $3,500 and other potential buyers flee because having to bid more than $3,500 so soon freaks them out. Your chances of a fierce bidding war diminishes instantly. You lose.

3. The buyer was willing to pay as much as $6,000 for your site so when he sees your reserve price he pees his pants. He can’t believe what a steal of a deal he’s going to get. Instead of placing a bid, this shrewd buyer holds out and instead sits back and watches the bidding unfold. If the bidding isn’t at the reserve price as the auction closes, he swoops in with a reserve price bid and steals the site for $3,500. And even if the bidding does surpass the reserve, he knows he can probably still get a good deal since the seller was foolish enough to scare away half of the buyers by revealing the reserve price. The competition won’t be nearly as fierce as it would be. You lose.

If you’re going to use a reserve price, don’t reveal it under any circumstances! When you get the request to, “PM your reserve price,” kindly tell them no and send them to this article so they understand why.

About Travis Van Slooten

Travis is an affiliate marketer and website flipper who ran FlipWebsites.com until the Fall of 2010.

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This entry was posted in Selling Websites and tagged Selling Tips.

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http://www.davidbatterson.com David Batterson

I currently have a site for sale on Flippa and the reserve was exceeded today on a 30 day listing with a bid of $3k. But my reserve was set at $2500. And I agree! What is the deal with asking a seller what their reserve price is?

I am happy that my reserve was exceeded. But now what? Is it like eBay? They will have to pay for it now I hope! It costs money to list a site on Flippa and it took a couple of hours to create my listing. We will see what happens! Haha! 12 hours to go on my auction! If it sells, I will be a happy man!
Hargfargl

Reserve price just bothers me as a buyer. If you have a price you won’t take any less for, start the bidding at that number.

Stop wasting my time with your games. 99% of sites are trash on Flippa now, and weeding out your insane reserve (13x MFA lol) is bothersome.

Maybe for hobbyists it’s great to ‘get caught up in the heat of the moment’ and have a bidding war on your ebook site about dog toenails. More power to you. But stop hiding reserves and being vague in PMs – I will bid what I think your site is worth adjusted for risk.

Less than your reserve? I walk. I am not going to walk up my bid.
More than your reserve? great, lets do business.

Simply:
Sellers: You lose no intrinsic value in your site by disclosing a reserve.
Me: I mitigate no risk by knowing or not knowing your reserve.

If I ask politely in a PM for a reserve price, and you get all pissy or vague guess what? My money walks.

http://www.flipwebsites.com Chris Yates

I can understand your point here. I wish all buyers had your mentality to just bid for what a site is worth right off the bat.

Based on your comments I see the reserve as something which is actually saving you time. It allows you as a buyer to walk away faster rather than sitting and bidding for hours.

I think if the site is a high quality one (traffic, revenue, etc.) and the seller has reasonable expectations for sales price, there is really no need for a reserve because the site will end up selling for what it’s worth to the best buyer.

http://www.startnonprofitorganization.com/ Bob@startnpo

I am a flippa buyer–and i see it from that perspective. Flippa has the option that they call ‘Preferential Negotiating Position’ which allows a seller to negotiate with the highest bidder, just in case the reserve is not met.

Overall agree that it is beneficial for the seller to keep the reserve price confidential.
http://bow.to Matt@BuySellWebsites

I tell the sellers at http://bow.to the same thing. There is no benefit to reveal the BIN at the beginning of the auction. Wait until about 1 day before the auction is about to end. Great advice there.

youmoron

Spam……. Also, why have you posted a site that has not content?

Silly Noobie

http://webcheaphosting.com Fasmail67

Hi Travis!

I dont reveal this to buyers and when they kept asking, i sends a fake figure. But reading your post now, i will stop giving, not even the fake reserve price…

Thanks for this.
Lalala

I usually don’t disclose my reserve price because usually after knowing my reserve price, these people dont even bid! So far i only tell potential buyers that i’d rather not disclose the reserve price and ask them to respect that. But i really think Flippa should make it a rule for buyers not to ask seller’s reserve price.
Titus Raj

thanks for the advice
http://twitter.com/Unityverse Infinite Unityverse

Thanks Travis. Got that this morning.
http://cashblogging.johntreby.com/ John Treby

@Travis-much appreciated your reply-Do you know not many bloggers do that-For anyone finding this comment out in the abith on Google you have found a real straight shooter about Flippa- just read his posts-Again thank you T.
http://johntreby.com John Treby

I am so glad I found your site on Google.My first time flipping a site with Flippa-paid the $29 to put on home page-instantly got comment what is your BIN and reserve price which spun me out a bit-I have bought houses, cars, antiques at auctions and you would never think of asking what is your reserve price-So I am with you telling them zip and sending them to your site if ok.
The site I am selling is on photography with a page rank of 2 with Google and is a year old-not really knowing what it is worth of course I put a reserve price on it as put hours of work into it and do not want to give it away.
Again bloody great advice and good comments all round-Has really helped me today-Thank you

Travis

John:

Thanks for the compliments! Glad this article helped. As long as the website you are selling is of high quality and your reserve is realistic, there is no reason to reveal your reserve. I don’t know when this “trend” started with website flipping but it drives me crazy. The rules of auctions are pretty straight forward…you bid the highest amount you think the site is worth (or at least what you’re willing to pay). If that amount meets the reserve, then great. If it doesn’t, then you move on to another website!

Travis

http://www.TomsAdventure.com Tommy

As a buyer, I find reserve prices extremely annoying. I’m not going to waste my time estimating the value of the website if the seller wants some ridiculous amount of money. They might as well start the auction at the minimum that they will accept, so I know if I should waste anymore time looking at the auction from the get-go.

Travis

Tommy:

I hear you – and generally agree. Unfortunately, it’s the misuse of the reserve price that leads to frustrated buyers like yourself. However, if used correctly (i.e. using a REALISTIC reserve), I think reserve pricing is great. I use reserve pricing in all of my auctions except maybe a few that I truly don’t care about.

And I also agree that if the reserve price is ridiculous, then a seller is better off to just list it with a starting bid that equals the reserve price rather than wasting people’s time.

Travis
Loosn

Exactly, if you do not see value in the site, you will not bid. Those who see value in it will certainly bid

http://www.vreflipping.com John Lenaghan

Hey Travis, just came across your site when searching for something, and was surprised to see a familiar face at the top. Nice job you’ve done here!

This post jumped out at me because I was just discussing this with someone yesterday. I agree with several of the other people who said that putting a reserve on your auctions creates a bit of an “artificial floor.” I’ve always thought if that’s the least you’re willing to take, just start the auction at that price.

I agree with you about revealing the reserve though, to some degree at least. I don’t have a problem with sharing it privately by PM if someone asks, but I would never put it in the comments. If it’s revealed publicly, you might as well have started the auction at that price. Sharing it privately can help prove you’re “not a retard” to use Peter’s term from a few comments up. As a seller, I can see where he’s coming from and that’s kind of how I’ve always viewed sharing a reserve through PM.

Having said that, I never use reserves on my auctions and since learning from my early mistakes, my sites have all sold from anywhere from 21x to 64x monthly revenue, most in the 30-40x range. I’m a firm believer in letting the market show what the site is worth. As long as you do some good promotion for the listing, and write a decent listing in the first place, I think it will work out in the end.

The funny thing is, though, that I’m the “nervous nellie” you confess to being when I sell anything on eBay. I always set a reserve over there for exactly the reason you do it on your site auctions – an insurance policy of sorts.

And if you’ve never had a reserve request on eBay, you’re lucky. I get people asking me the reserve on practically every auction I list over there, it’s just by private message so you don’t see it in the listing.

Travis

Hey John!

Great to hear from you! It sounds like you’re having tremendous success flipping websites and looking at your Flippa profile confirms that:) Speaking of your success, your Snoring Solutions website was a most active auction with 52 bids back in January and was featured in my Market Snapshot:
http://www.flipwebsites.com/market-snapshot/website-flipping-market-snapshot-1-31-10/

I probably don’t need to use a reserve on my auctions but I always do. I guess I lack confidence in the websites I own. I’m always fearful that for some reason my sites won’t sell that well.

I’ve been a seller on eBay going back to 2001 and I’ve used a reserve price many times. I’ve never had someone PM me for the reserve price – but then again on eBay I’ve always used a very low reserve so the bidding typically surpasses it very quickly.

I wish you continued success and be sure to stop by from time-to-time!

Travis

http://www.callonclick.com/ Ansel Taft

As a frequent buyer, I see reserve prices as a seller’s game, designed to keep the market from determining the site’s worth. If the site someone’s selling is as good as they claim, the market will bear out, if not reward them. As an economics major, a reserve is an artificial floor.

I agree with one point: if someone reveals their reserve, I am not going to bid if their reserve is beyond my perceived value for the site; because I feel they’re wasting both of our time.

My recommendation to sellers is start your auction at your reserve. Reserves annoy people.

Travis

Ansel:

All good points. I still think there is a place for reserve pricing IF done right. I believe most sellers don’t have a clue what their websites are worth so they use the reserve to protect themselves. I’ll give you a perfect example. The last site I sold I had no idea what the value was. I thought my site was worth at least $3,000 and I figured if I could get that or anything better, I would be happy. I wasn’t willing to let it go for less than that so to protect myself “just in case” I set the reserve at that price and started the bidding at $1. Much to my surprise, the site sold for $5,500.

I use reserve pricing on everything I sell but to be honest it has never come into play because my sites have always sold well beyond the reserve. You might ask, why use the reserve then? Because I’m a nervous Nellie and there is no guarantee my site will sell well even if I’m convinced otherwise. For me, reserve pricing is an insurance policy.

Travis

http://www.callonclick.com/ Ansel Taft

Fair enough.

Believe it or not, I came back to this post to send it to someone, in case they used a reserve. It’s still a good reference, even if I am still opposed to reserves. :p

Travis

Ansel:

Good to hear;) Have a good one!

Travis

http://www.blogflippingbee.com Missy

Hey, Travis:

I was thinking the exact same thing, as far as why is it such a common practice on Flippa. If someone is truly interested in a site, they should watch it and bid when they’re ready.

Asking for the reserve price takes ALOT out of the (fun) process. Site value is driven by the marketplace, not the seller. The site will sell for what the market decides it will sell for. But the reserve is there for two reasons, one so one doesn’t get burned. And two the surprise element.

Missy
Blog Flipping Bee

Travis

Hey Missy! I agree completely – although I’m sure the hardcore buyers like Peter, Ryan, et al. are rolling their eyes at the “fun aspect” as they are there to buy and not have fun:)

Travis

http://www.petertdavis.com Peter Davis

Nonsense. The only real situation a seller needs a reserve price is when his expectations of the value of his site are so inflated beyond reality that it’s not really worth the buyer’s time. And, that’s why we ask what your reserve is, because we need to weed out retards who think their crappy site is worth a mint.

Actually, I can think of one legit reason for having a reserve, if the site is such an esoteric type that you’re likely to only have one interested buyer. In that case, you’re better off not using Flippa anyway, just negotiate direct with the buyer.

For most sites, it’s just best to let the market set the value. If you don’t get the bids, your site just wasn’t worth what you think it was.

Travis

Peter:

Thanks for stopping by – and great blog you have by the way;) It’s got some great info for website flippers. I can see your point about weeding out the “retards,” as you put it, but I think a lot of people on Flippa use the reserve because they’re nervous their site might actually sell dirt cheap – or they’re not sure what their site is worth so they put a reserve to protect themselves.

I use a reserve every time I sell a site because even though I know I’m selling a solid site, I want a reserve “just in case.”

But again I think you’re missing the point. A reserve price is meant to be private. It was never meant to be made public. If you’re going to use a reserve and reveal it, then just start the auction at that price. And if you’re a buyer who needs to weed out the “retards,” just place a bid you believe the site is worth. If you hit the reserve, then great. If you don’t, then you know the seller is out of line on pricing and you move on. It takes just as much time to place a bid you think is reasonable as it does to ask the seller what the reserve is.

Travis

http://www.tradingwebsitesblog.com Danny Batelic

Travis, great advice. I’m going to send buyers this linknext time I’m asked.
Cheers
Danny

Travis

Danny:

Thanks for stopping by and leaving your comments! You can also tell your buyers that revealing the reserve price is also against Flippa’s terms and conditions:
http://flippa.com/termsandconditions

Travis

http://www.etycoon.net Ryan – eTycoon

Travis, I think I’m gonna have to disagree with you on this one, because from a buyer standpoint, I’m not going to bid until I see that the reserve price has been met.

Of course, I’m more of a buyer than a seller, and that buying experience has allowed me to create good selling experiences. I know that a high reserve turns off buyers, and you need those low bids to get the ball rolling and get them into a bidding war.

In fact, I’d argue that not revealing your reserve price will actually decrease the overall price that you’ll get at the time of close, because you don’t have people bidding up the price of the auction. Instead, the tendency is to wait until the reserve has been met, and once it’s met, then you jump in if it’s still within your price range.

What you say makes sense from a sellers perspective, but when you factor in the buyer’s thinking, I think you shoot yourself in the foot by keeping high reserves and not disclosing them. However, the fact of the matter is that each site sale and every buyer is unique.

Travis

Ryan:

Thanks for stopping by! I hope all is well over at eTycoon:) I can see your point from a buyer’s perspective. However, I still ask the question – why have a reserve price if you reveal it? You might as well just have the starting bid be your reserve price.

Travis

http://www.etycoon.net Ryan – eTycoon

Well, the reserve price exists to ensure that you get a specific amount, right? You reveal the reserve so that it gets met as soon as possible. That way, on-the-fence buyers who wait until the reserve is met to bid are given the green light to jump in on the action.

But again, everything I do is through the buyer lens and getting as many bids as possible.

Michael

Just surfing the net, and as an avid ebayer, I agree with Peter and Ryan. In fact, I was searching why some don’t reveal their reserve price it doesn’t make sense to me–I almost immediately take those items of my watch list. Some claim it gives buyers an advantage, and I just don’t see how as someone that bids based on past auction final prices. Knowing a reserve never gives me any idea what other bidders are planning to snipe. Knowing the reserve doesn’t take any excitement out of bidding for this exact reason. If I’m looking to buy something it’s almost never just from one buyer either. In those cases, the hassle of waiting to see what the reserve is takes any fun out of it and I just watch other items or wait for another listing. In selling I never set a reserve as a well timed, well written and honest listing has always brought me what I thought my items were worth and then some.

Travis

Michael:

I see your points – and they are all valid ones. However, I get the sense that you are not an advocate of reserve pricing to begin with. As I mentioned in my post, we can debate whether using a reserve price makes sense or not.

The point I’m simply making is that if you’re going to use the reserve, don’t reveal it – especially if your reserve is reasonable and you have something valuable to sell (because the bidding will likely surpass the reserve anyway – or SHOULD pass the reserve).

If you are selling something that doesn’t have much value and you slap on a ridiculous reserve price, then you’re shooting yourself in the foot to begin with.

A reserve price in an auction setting shouldn’t put off a buyer if used correctly and in the right situations. Reserve pricing has always been a way for a seller to protect himself from selling a website too low (because maybe he has no clue how valuable his website truly is or he doesn’t know how to price his site). Unfortunately, most sellers use it incorrectly and in the wrong situations – i.e. they slap a 20x multiple reserve price on a site that will be lucky to get a 4x multiple:)

Travis