Since a few years I’ve been busy buying websites. What does that mean?
In this post I’ll try to explain a bit more what’s all about and how it works.
Website for sale? Really?
Yes, like any other business, websites can be sold and bought too. Just imagine a restaurant: you can open your own from scratch or you can buy an existing one.
The difference is quite obvious: the existing restaurant is already a started business with an history of clients and revenues that a new one hasn’t.
Same same with websites. Buying an existing one with revenues is a shortcut to save the time and efforts it takes to start from zero, and provides an existing profit to build upon.
When I say websites, I mean the domain as well as the web pages and content. Buying/selling domain names is a different story and I leave that to the domainers.
Finding websites for sale
It’s not well known that is possible to buy & sell websites, and one of the first questions I get when I talk about it is ‘where do you find websites for sale?”. There are three main sources: marketplaces, brokers and direct contact.
Those are websites connecting people wanting to sell their websites with buyers. There are a few nowadays but the ones I’m familiar with and I recommend are:
Flippa.com : Flippa is the industry leader and the biggest out there. But it’s also full of crap. I estimate 95% of the offers there are scams… so it takes some time to find the real good opportunities and when there’s one be sure that there will be others ready to bid for it.
EmpireFlippers : Justin & Joe run a very useful podcast fill with information about entrepreneurship, online businesses and website selling/acquisition. They have a controlled marketplace that should provide higher quality: websites are vetted and there’s a deposit to ensure only serious buyers are in.
Brokers are middle-man putting together sellers and buyers. The biggest error you can do is to think that buying a brokered website is safer. From my experience, like house agencies, brokers don’t add much value and must not replace an attentive inspection and evaluation of the online business you’re interested into.
FEinternational: one of the most serious broker, traditionally for high-end deals but more recently also in the sub-20K price range. Their blog is very useful.
QuietLight: mostly high-end offers, still good to follow.
Latonas a well known broker.
Direct contact means approaching the current website owner to see if he/she’s interested in selling.
It’s the most unpredictable approach because most of the owners are not familiar with the ‘buying/selling websites’ thing and will either ask disproportionate amount of money or just use you to discover the value of their website.
It’s also the most interesting approach, because often a website abandoned by the owner can be easily revived and grow.
I had some success contacting owners of websites that were previously sold on Flippa.
Evaluating a website
The next obvious question is: how much a website is worth?
There’s no simple answer. A website reviewing sport shoes can be much more valuable to a shoe store owner than to me.
But we need to put some numbers down, so I’d say that in general websites sell from 12x to 20x the net monthly profit.
A website netting $500/month can sell from $6.000 to $10.000, depending on a lot of factors such as time required to run the website, possibilities to increase earnings, type of market and audience, how long has been online, and so on.
Once you find an interesting website, it’s time to evaluate and verify all the seller claims about traffic, earnings and market.
The whole due diligence process is a mix of science and magic.
To verify the traffic I demand access to Google Analytics, the de-facto standard tool, and I don’t trust server logs that can be easily tempered.
To verify earnings I ask the seller for a Skype call and a Team Viewer session in which he/she can share the desktop and show in real-time the earning reports from the different systems, and take all the screenshot/exports required for further analysis.
Other things to evaluate carefully are the market, the SEO done on the website, the list of assets on sale (mailing list? social media account?), if there’s any copyright/law infringement, if the 3rd-party accounts (example: affiliates or ad networks) can be transferred or must be recreated and subject to an approval process.
This is just an introduction to this vast and extremely important aspect of buying a website.
For websites worth more than a few grands, I found excellent the due diligence services provided by Centurica. I don’t see this as a replacement for my own analysis but rather an expert second opinion before an investment.
A form of investment
Since I started buying websites I had few great, some OK and few bad deals. Overall I find acquiring existing websites a great investment.
I still have to find an investment with a better return: even if a website bought for 20x is under-performing and will take, let’s say, three years to break even, we’re still facing a 33% return-of-investment!
Compare that with buying an house (2-6% ROI?) or investing in stocks (5-15% ROI?).
Of course websites requires work and are much less a passive investment than real estate or financial products, but this makes it more exciting for me as I feel more in control of a website than the stock market or the real estate market.
There’s a very interesting article by Bryan O’Neil about this, don’t let the impressive title put you off 😉
This post is just an introduction, for anyone interested in learning more about website acquisition I recommend some good resources for further readings:
- Flippa Guide for buyers
- Justin Guilchrist presentation on evaluating websites
- FlipFilter Blog : FlipFilter is a useful tool I use to filter listings from multiple sources, and the blog has excellent info
- Bryan O’Neil blog: Bryan is a website acquisition entrepreneur and consultant, involved with Flippa and Centurica
- ExperiencedPeople : nowadays a grumpy and unwelcoming forum, it was once a great resource and its archives are packed with useful content on buying websites and online businesses
Happy to hear your thoughts and answer any question!