I’ve bought (and sold) many websites in my history as an entrepreneur and blogger for many different reasons. For some I was simply interested in the IP (intellectual property) that could be used to bolster some existing sites while others were loss-experiments (experiments where I was certain I’d “lose” financially) while others were intended to be improved and sold (or “flipped”).
The last reason I’ve done this was to actually build a business and sustain it as a significant source of income. Those purchases are much more rare and take a lot of thought and preparation but when done can become very profitable long-term.
The challenge, naturally, is to know what domain and website/blog to purchase and whether or not it’s going to be a good investment based on your needs and your personal goals. There are many people who will tell you that buying websites can be very profitable, and that’s true, but many of them fail to mention how much you can lose if you do it poorly and how it may take a lot of losses (at first) to eventually learn the pattern of success.
The biggest reason why purchasing a blog or a website might be a good alternative to purchasing other IP is because the initial investment is significantly smaller than other purchases that you could make, like a physical brick-and-mortar franchise or real estate or any other small business.
The thing is that most people selling an offline business won’t let it go for cheap while people online are willing to let go of their babies for far less, sometimes 1 to 2 times their annual revenue. This is, by far, a better financial purchase if you’re looking at just that quantitative advantage alone.
Like anything this will take some practice and a bit of touch-and-go learning so my advice is to start small and grow your purchases as you become successful and ultimately more profitable. And never borrow, if you can – always purchase in cash and profit from there on out.
As I mentioned above it’s typical for a business owner to calculate the overall value of a business in a 3x to 5x model – that is, multiplying the yearly profits by three to five times.
So if a business profits $10,000 in a calendar year then they’ll sell it to you for $30,000 to $50,000 dollars. For most people this isn’t a feasible purchase (unless they get a loan, of course). Online, the numbers can be much closer to 1x to 2x valuation so instead of $30-50k you could get the online equivalent to $10,000 to $20,000.
A lot cheaper, obviously!
Why the difference of opinion and execution? Mostly because many people still don’t believe that a website and/or profitable blog is a sustainable (or credible) source of income and there’s still this general stigma or hesitancy of pricing it historically in line with small businesses. To heck with the stigma – use this to your advantage!
The other major reason is that most people simply don’t have any business sense or history with selling their IPs and so they’ll let it go on the cheap. In addition, there’s much less emotional attachment to a “website” and so presenting any form of cash, even low figures, is still enough to overcome the emotional barrier of a sale.
2. Do Your Research
You can know pretty definitively if the site you’re interested in purchasing is worth it’s weight, so to speak. Google and a basic keyword search will tell you almost all that you need.
Here’s what I generally do before making a decision and remember that some of this will be vetted out as you discuss with the potential buyer while some of this you will have to do on your own.
- Google – Does Google really like this site? Do some keyword research and find out. Read my SEO Series to help out as well! Sites on the first page of Google are obviously strong while sites on the 2nd, 3rd, 4th and beyond either have a lot of potential or are relatively weak.
- Pagerank, Etc. – Things like Pagerank, the number of pages in Google, links in Google and others (use Webmaster Tools and get screenshots), Alexa ranking, Bing, Compete, SEOmoz, Length of Domain age, web hosting, and more should be at the top of your list.
- Overall Traffic – Although traffic for the site right now might be important the question is how it’s currently being “earned” and whether it’s been optimized. Purchasing a site that has a lot of “luck” and a whole lot of potential for optimization is a crown jewel, especially if you can get it on the cheap. Asking to see the Google Analytics isn’t a bad idea at all – in fact, I suggest you do it.
- Design – Does the current iteration of the site’s design “work”? If not then you may have to invest time and money on a redesign. Just factor this cost in as well.
- Monthly Costs – Make sure to also factor in monthly costs of the registration, domain, hosting, and other collateral services that the website might use that are integral to it’s current form and/or success.
- Earnings – This is obvious but you’ll want to know what the website and/or blog has done financially in the last few quarters as well as year-over-year. Get these figures and make sure they can be confirmed. No “around $X.XX a year…” verbiage please! Only work with verifiable statements.
- Social Media – Is there any social media presence through social networks, etc? What are the follower and “like” counts on those?
- Your Interest – This is one of the most important things to consider in your list of “research” is whether or not you’re really interested in this niche and/or domain name. Outside of just experimenting (which I do, a lot) you’ll want to purchase a domain and make an investment that matters to you personally and your personal interests, especially if you want to grow it long-term. Make sure there’s good alignment here!
These are some of the main considerations that you should consider but not an exclusive list. At the end of the day you should feel comfortable with your purchase and your decision. Make sure that you don’t find yourself in any pressure situation to make a purchase!
3. Where to Buy
Some of the better (notice how I didn’t say “best”) places to purchase are what are typically considered “marketplaces” – spots where people list websites to purchase. Some of the better ones are Flippa, Sitepoint, WebsiteBroker, Digital Point, and a few others. I would start with those first (especially Flippa) to get a good feel of what you’re doing.
The reason I say “better” and not “best” is because of a few reasons: First, there’s more competition to bid and purchase meaning you’ll probably pay a higher price. Secondly, there could be something wrong with the site, like the site getting recently banned from Google, that you’d have to be made aware of and that might be the reason that the site is being listed in the first place.
That’s reason I suggest doing a lot of your own research and getting all that you need in a non-marketplace sale. These are some of the best and it’s how I (mostly) sell my IPs (private sale). I get to work faster and the buyer typically gets a pretty sweet deal.
4. The Sale and Transfer
Lastly you’ll just want to be aware of the sale and transfer process that will naturally have to happen. The sale process isn’t anything too difficult – just make sure you know what you’re getting into and do all of the due diligence as possible. Get some advice from others who have done it before so that you can go in with as much information as possible.
Remember to start on smaller websites in the beginning and make sure you’re comfortable with the details of the contract. Review the above list of things to “research” as you walk through this phase. Having an email conversation is good and perhaps a phone or skype convo might be good as well.
Transferring the site is the next step and you’ll want to decide how to transfer the IP and the money in a way that protects you. There are three options typically:
- Escrow – Using an escrow service like Escrow.com to help broker the sale is nice but it slows down the process and there’s a fee associated with it.
- Parts – Transfer the sale in parts either through portions of the site or through access of admin perms. For example, sending 30% for the domain, another 30% for the files, and the final 40% for admin rights to the account. You can make a lot of this up and simply requires trust as a go-between between the two parties.
- Whole – Cash on delivery requires a lot of trust and can work for smaller sites. I do this at times because I have more than just the site on the line – I have my personal brand on the line as well so people who buy my IP can trust what I’m saying and offering. This is the “cleanest” and “quickest” but also the most “dangerous” if you do it poorly.
Lastly is the actual migration of the content and/or site which could be done via an FTP package and then perhaps a few clicks to transfer the domain to a new registrar. Most of these things can be as easy or as difficult as you make them out to be but it isn’t all that bad. There’s enough resources out there to guide you through that step if you need to.
Sometimes you don’t even have to do much at all except pass a few bucks.
Ah! One final note that’s worth mentioning… you won’t find any contract here as part of the sale because that’s up to you. I suggest that you create on (you can find tons of boilerplate contracts, including one right here, to protect yourself!
Good luck and have fun with it!