Entrepreneurs-Journey.com

I remember my first website sale. I made $13,000 Australian dollars selling a website that I had built from scratch myself. That sale was a big windfall for me and a moment I won’t forget because it was the first time I saw the real potential of online property investment.

Since that sale I’ve gone on to sell more than $150,000 USD in websites. Some of the sites I built myself, investing my own time and sometimes money, while others I have purchased and then sold for a profit at a later date.

I’ve never lost money on a website investment, although I have bought some sites that were not big money spinners - I got out with pretty much the same as I went in with. When profits are made though, the worst I have done is double my money.

Long Term Investing?

On the Internet you might call what I do long term investing since most of the sites I bought were sold no earlier than 18 months time. The websites I built myself take as long as five years to reach the point of sale, although I could have sold earlier for less or held on longer for more.

The best return on investment from a flip (a site bought and later sold) was 1,000% - 10 times the money I put in. It took a little over two years to do that. Another trade was a set of sites I purchased 18 months prior that brought in a little over double my initial investment.

In the offline world, returns like that in 18 and 24 months would be considered exceptional and certainly not standard. If a share portfolio or investment in physical property returns 20% a year you are doing well.

The world of the web is different. Everything is changing fast, yet with so many websites and so many people online, the size and potential of the market is tremendous. There are bargains out there all the time and as long as you don’t screw up what you purchase, simply allowing a site to grow organically can result in significant profits, if you are prepared to wait.

Flipping Part Time

I’ve never focused all my energy on buying and selling websites, which is why I haven’t done that many trades. Most of the time I work on whatever my main business projects are at the time, but I keep my eyes on some of the website trading forums to see if bargains come up.

When a site matches my criteria, I act fast with an offer, do some basic due diligence and if all things go well, make a deal. I miss out on more sites than I purchase because other people out-bid me, the site sells before I find it or due diligence convinces me to pass on a particular site.

As a result of buying websites purely as a side project, I’ve focused on a certain type of website and made sure I have people working with me who can help with the activities I don’t have the time to do. You definitely need to be careful if you want website flipping to be a part time job, it can quickly suck all your time, especially if you choose the wrong type of site.

Criteria for Part Time Website Flipping

Here’s some advice from what I have learned in the previous years flipping websites part time.

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The stock market and real estate industry have long been populated by day traders and “flippers”, those that buy and sell in a short period of time in order to make a quick profit. In the real estate industry the life of a house flipper can be very appealing. Buy a renovator’s dream property at a discounted price, renovate and modernize it and then sell it at a few months later at a profit. This process can then be repeated over and over for a reasonably stable income. You might even get rich.

Flipping Fun

The life of a house flipper is often romanticized, with images of married couples buying old houses, spending a fun-filled six months working renovating and then making a cool $20-$50K profit on the sale and moving on to the next property. Do this three times a year and you have a recipe for a fairly nice lifestyle.

If you plan to renovate yourself then you better have the skills to do it or have the friends or family willing to help out. Alternatively you can hire professionals to perform the labor but you must factor in the cost into your expenses. There are also many other variables that need to be carefully controlled such as financing fees, real estate agent costs, legal fees, government charges and all the other issues that come with buying and selling property. Those with a keen eye for a bargain can do exceptionally well but it’s just as easy to lose money if you don’t do your research and plan. Watching the real estate market, tracking house prices and monitoring economic conditions are all important activities for a successful house flipper. Provided you do your homework and control your variables you stand a fair chance of succeeding.

Trading on the stock market is another area where the educated and diligent researchers can succeed. Knowing market trends, tracking company performance and economic indicators can all provide an extra edge and if you work on it full time you just may come out on top more often than not. Both the stock market and real estate industry have long been considered staple investment opportunities and even full time careers for those that choose to take on the challenge.

There is unique breed of entrepreneur that has taken the concept of flipping to another area; buying and selling businesses. A shrewd entrepreneur will locate an underperforming business, buy it, work their magic to improve performance and then sell it for a nice margin. It is by no means easy and certainly requires a lot of research and due diligence, but the rewards are there and no doubt it’s a heap of fun too (entrepreneur’s wet dream ).

Flipping Websites

Buying and selling businesses is appealing but given the high costs of making the purchase it is quite difficult to start, especially as a young entrepreneur. If you go wrong you may end up loosing a lot of money (just as you can with the stock market and real estate), so you really want to be sure of your skills and ability before investing.

The Internet is very new and the whole online commerce industry is just establishing marketing practices that work. Quite frankly, and this may sound harsh, but most of the people running businesses online have very poor websites. A lot of people running popular sites are not taking advantage of their traffic by monetizing it (this could be by choice or ignorance). Making a profit may be as simple as implementing a smart AdSense campaign on a popular site after buying it from an owner wishing to move on to other things. Perhaps an e-commerce site could use some search engine marketing or some tweaking to an AdWords campaign might do the trick, or better still, monetize, optimize, affiliate and upsell for maximum gain - make use of all the marketing tricks at your disposal.

I’m sure if we did some statistical sampling of the web industry search engine optimization techniques would be understood by a minority of webmasters and implemented well by even fewer. Search engine optimization is becoming mainstream and no doubt as the web continues to mature more and more people will study, test and build better websites, but it’s definitely still early days.

What this says to me is “business opportunity“. For those with the know-how, the energy to implement and a little bit of funds to buy the sites there are big gains to be made. What makes it even more appealing, especially for young or new entrepreneurs, is the price - we are talking about a lot less funds then it would take to invest in shares, buy property or purchase a bricks and mortar “real world” business. Websites with potential go for as low as a few hundred dollars.

The Advantages of Buying A Website

The big advantage of buying a site is you don’t have to establish an audience and wait for the site to be indexed within search engines. Most webmasters, even those that don’t know their SEO from their XML, will understand the benefit of link exchanges. Even the most poorly managed sites should have some form of backlink network developed and return a result in the major search engines. It may not be a top ten search result but it will be a result ready for you to optimize and improve.

Taking over a mature site (at least 12 months old) will mean you avoid the Google sandbox, a significant perk of buying established web property. Of course it really depends at what stage you take over a website as to how much of a step-up you gain and will no doubt reflect how much the owner will expect to receive for it (traffic for cash in simpler terms, but there are other variables to consider when selling a website).

Top 7 Website Acquisition Strategies

Before undertaking a search for a website acquisition a smart web entrepreneur will stop and have a good think about what she wants the site to do and how it will fit within her overall web business strategy. Here is a list of the top 7 strategies to consider when buying a new website:

1. Buy a site that has targeted traffic for a product or service you already produce or sell. You can direct traffic from the new site to your products/services through advertising, email lists or sales pages. This is a great way to establish a customer base very quickly but you have to be confident that the traffic is quality, targeted traffic. Don’t fall into the trap of buying a high traffic site that consumes lots of bandwidth but doesn’t have the type of user you can leverage for revenue, otherwise you might be buying a liability, not an asset.
2. Buy a site to generate advertising revenue. In this instance you might not change the site other than by working to increase the amount of traffic and improve the performance of advertisements on the site. Sites with lots of good content but are poorly optimized are perfect for this strategy. Once you own the rights to the content you can then further leverage it by repacking and republishing the content in other ways – perhaps information products, article marketing or as free give away enticements to join an email list.
3. Buy a site specifically to flip it quickly. This is perhaps the most risky venture (day-trading!) because you need to find sites that are clearly underperforming with the potential for a big upside result after you complete your renovation. Ideally you should locate e-commerce sites selling a product that has an established market that is only just starting to take off online AND the current owners are not good at search engine optimization or online marketing and are willing to sell.

   The theory is that you can quickly implement your changes, tweaking a few percentage point increases in multiple areas, resulting in a good double figure increase in sales in a short period of time. If you can complete your work just before the general marketplace catches up you can make a mint by selling the site at a premium before the Internet becomes saturated and your early mover advantage is eroded or the market slows.

   The web is one of the fastest industries in terms of competitive action due to the very low barriers to entry. To execute day-trading style website buying and selling requires an entrepreneur with their finger on the pulse of the web. They must be in tune with what’s new and willing to gamble on what’s going to be new tomorrow in order to have success.

4. Purchase a community driven site. A site with a massive forum filled with a nice target niche audience can be a gold mine to a entrepreneur. Often these sites were built by hobbyist fans, not aimed to profit in any way. Their website might have ballooned in growth to the point where the bandwidth is costing them a lot each month and since they are not skilled in website monetization they will be willing to sell the site at a bargain price. This can be a great strategy to make advertising revenue but be very careful with audience selection. Some forum communities are very difficult to make money from and may end up costing you more in ongoing hosting fees. Ideally choose a community demographic that has established high keyword prices in AdSense/high value to advertisers (electronic gadgets for example), has a good selection of affiliate products you could market or suits some products or services you already sell yourself.
5. Look for a site operating in a highly popular keyword niche or one you expect will become popular in the near future. Keywords drive search engine traffic and if you can pick the trends before they become trends you may own some valuable property. Consider if you could guess what tomorrow’s “blog” or “podcast” will be and buy the sites with established keyword rich content before they become mainstream topics and overpriced.
6. Remove the competition or merge with the competition. In this case you buy competing websites or negotiate a merger to combine with them to create one large enterprise. Depending on the industry you operate in this can be a very smart strategy to create market dominance. One of the best examples is website hosting. Often smaller hosts are bought up by larger hosting businesses with the result increased stability and professionalism.
7. Purchase a site strictly for the domain name. Obviously in this case you don’t care too much about what is already developed in terms of website content, you just want the street address (URL). Imagine a few years ago if you purchased mp3.com or blog.com. In this case the address itself is of significant value regardless of the website, or if you are good at picking trends, you might see the future value in a domain name before the market realizes it.

There are many other options available for how to use a new website acquisition and of course what you do with a new website and what type of website you search for will depend on your skills, the industry you operate in and your cash to spend. Remember to take some time listing a few goals you want your new website to achieve and strategize exactly what you will do with the new website before you buy it.

Investing Time And Energy Into Your New Website

Make sure you have the time to manage your new investment in web property. Remember just the transfer process and daily maintenance of your site will take time and energy and if you don’t have it available now then maybe you should hold off making the purchase. It would be a shame if your good intentions to improve a website result in you instead killing it because you don’t have the time to maintain the status quo. Remember a new website comes with new responsibilities, for example support emails and phone, server maintenance, SPAM control and the usual day-to-day activities of a webmaster. Don’t get caught up in the excitement of the purchase making you blind to the reality of how much additional work will be added to your daily activities.

Where To Locate Websites For Sale

I could point you in the direction of a few good website trading sites (this article has some links - How To Sell A Website) but you will be very lucky if you find a bargain there. To find good sites you have to search deep into the web. Use the main search engines to find websites operating in an industry you feel confident buying into. Don’t look for the big sites, the sites on the first few pages of search results unless they show clear potential - perhaps in industries with low competition so “bad” sites show up in the first page of search results. Professional or popular keyword sites are usually too expensive, well managed (they wouldn’t appear in the first few pages of the search results if they weren’t) and the owner likely won’t be interested in making the sale or will be looking for six figures if they are.

You must look deep in the search results. Find the solo-webmasters that perhaps don’t take their site too seriously but have been diligent over the years adding content consistently, if not in large quantities. You need to find the good sites with potential, not great sites already optimized or poor sites going nowhere. The more research you do during the search phase the smarter buy you will make. No matter how much time you put into the search it’s going to be gamble when you do decide to buy. There are just too many variables to consider and control, but by being smart and patient you reduce the risk.

Buying The Website

Once you find a good site that meets your criteria start monitoring and researching it. Check backlinks, investigate it’s history (try the Wayback Machine) and if the site has a community (forums, chatrooms, comment system, helpdesk, etc) see what goes on there. Check the site design, the structure of the links, headings, titles and keyword density. Check the site statistics if they are available (look for those little webstat icons or try Alexa rankings).

Once you get a good feel for the site and you are interested in buying it’s time to contact the owner. You should be able to find an email address for the website owner somewhere on the site, if you can’t do a domain name lookup in the WhoIs database where you will find the email address for the person that registered the domain. Remember some websites will simply be hobbies for the owner which will make the purchasing process that much easier, while others will be fully fledged businesses making the transfer process just that little bit longer (think about business registration and incorporation detail transfers – now consider you may not even be located in the same country!).

Start casually by introducing yourself to the owner, state you like the site and then slowly gauge how much interest the owner has in their web property. Eventually you are going to have to express your interest in making a purchase and you can spend as much time as you like communicating with the owner to negotiate a deal. Like with buying anything, the negotiation process can be laborious as you gather the information you need to calculate a price. This process can be swift and easy or slow and painful depending on your attitudes and the willingness of the owner to make the sale and release private information about their website. You will need to know details like website statistics, revenues, and costs, all information that the current owner may be hesitant to give out (see How Much Is Your Website Worth? for a discussion of important website metrics when determining the value of a site). Demonstrating your sincerity at this point will go a long way in helping you to divulge as much information as you can order to properly evaluate the website.

If you are lucky the owner of the site may simply be so excited that their website will make them some money that a few hundred dollars will seal the deal, others, the more savvy owners will realise the value of their asset and you might have more difficulty negotiating and will pay a higher price. Remember you are never under any obligation to buy so don’t force yourself to offer too much because there are plenty, literally millions, of other sites out there.

Don’t Forget The Little Details

When you finally agree on a price don’t forget to look after the little technical details as you manage the transfer of ownership. Here is a list of some important factors:

• Transfer of the domain name registration details, the business name, incorporation information, hosting ownership and any third party software or subscriptions to your name. Check that everything, absolutely everything, has your name on it by the time the deal is done.
• Get a contract made up outlining the deal and have all parties sign and date it. Also consider creating a clause stopping the previous owner starting up a competing site immediately after the sale.
• Download the email lists. Download the email lists. Download the email lists. There is nothing more important in a web business then the mailing lists so make sure you have these safely in hand with backups.
• Outline how much support, if any, will be provided by the ex-owner for a transition period. Having the owner available for questions for a few months after the sale can make the transfer less stressful.

Buying A Website Is A Very Effective Entry Strategy

Given the time it takes to get a new website off the ground because of issues like the Google Sandbox and the amount of work and effort it takes to create a site, produce content and build backlinks, the prospect of buying a ready established domain and website is very appealing. If you have a sound understanding of search engine optimization and the industry you work in online, you should have no problem finding under optimized websites, or perhaps fully fledged web e-commerce businesses to buy. By adding content, fixing title tags, linking structure and all the other good search engine marketing practices you can very quickly start reaping rewards. Sites with quality traffic but no monetization strategy are huge opportunities ready for you to step in, stick some advertisements up, use your AdSense optimization skills and boom, start profiting immediately. Alternatively you might look for sites that augment your existing web enterprises and purchase the targeted traffic to effectively “buy customers”. No matter what your strategy, the web is ripe with opportunities for smart investors and you don’t have to have a wallet the size of Rupert Murdoch’s to start buying and profiting.

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It is a joyous time when you are ready to sell your website. While you will be fraught with questions and unknown variables when ultimately you decide to sell your website it can be like winning a jackpot and a big change to your life. You might have been building your web business for years, consistently working on it day after day and night after night. When it finally sells you get a (hopefully) big cash injection and move on to new projects feeling renewed and excited about your future prospects. But before this can happen you have to make the sale, which in and of itself is a tricky task.

I sold a website back in 2004 and at the time it was a pretty big deal for me. I had built the site for a hobby in 1998. It went through 3 different domain name and site name changes, at least 4 major design changes and I put in thousands of hours working on it over 7 years, but damn it was fun most of the time. Eventually it became time to move on and pass my baby on to new hands that would keep it growing and moving forward.

The funny thing was I didn’t really think about selling my site because it was making money so consistently. It had become so routine that it was just part of my life. One day it dawned on me - Why can’t I sell it? It produces revenue so has a value - let’s give it a go! I really wanted to move on to other projects and just the idea of not having to look after the site was a huge relief - I knew selling it was the right thing to do. But how on earth do you sell a website?

How To Sell A Website

I’m going to recount the processes I went through to sell my site. By no means should you consider what I did as hard and fast rules but they should give you some guidelines. Remember that there are many ways you can go about the process and you should explore all your options before deciding to sell.

How Much Is Your Site Worth?

Your site is worth as much as someone is willing to give you for it. Simple answer really. I know, that doesn’t help when you go out advertising a site for sale and everyone is asking how much you want for it and you don’t know what to say. You don’t want to undercut yourself especially after years of hard work, but then again, you are selling a website - virtual property - it just seems a little bit strange doesn’t it. That’s what my friends told me after I sold my site.

Friend: “You sold a website?!?”

Me: “Yeah”

Friend: “But a website isn’t anything, how did you get money for it?”

Me: “Well I took the average revenue the site was earning minus the costs of running the site and then multiplied by 2.5″

Friend: “Ahh, okay, well, umm, that’s great (walks off muttering about geeks…)”

As with traditional business, website business or even just a hobby site that brings in money, it’s hard to determine a selling price. What you need to consider are what you will be happy to walk away with and what the numbers tell you. Other variables that will come in to play are the industry your site operates in (competition too), how much labour and technical skill is required to manage the site, the costs (hosting, marketing, staff, etc), whether the business is growing and how fast, the future potential and whether the industry is a buyers or sellers market (supply vs demand). And that’s just part of it.

Some people will tell you a business should be sold for ten times it’s gross profit, or 5 times average revenue or 2 times last years total revenue. EBizBrokers state that generally an e-business website is worth three to six times earnings before interest and tax, so if your website profits are $100,000 you have an asset worth $300,000.

When I first decided to sell the figure of 2-3 times yearly revenue went through my head as a fair valuation given if the new owners kept things at least constant they would recoup the buy price in 2-3 years. I would be happy, very happy, to get that sort of price for my hobby site.

your site is worth how much someone is willing to give you…

In my case my website operated in an industry and had a target market that would be hard to extract much more revenue beyond what I already was getting from advertising. Yes it certainly was possible, but it would take a new income stream to make significant gains. My website operated in a small niche that would not present me with a lot of buyers - but you won’t really know demand until you try and sell of course.

I had a special personal consideration to think of as well, I didn’t want my site to go to just anybody, it had to go to someone that would look after it and keep the dream alive. I didn’t want some overseas buyer to absorb the site into their business and lose the great community that I had. The new owners had to share the passion I had when I first started and hopefully take the site to new heights. (In the end though I would have taken anything if I exhausted all options to find good owners - I wanted to walk away with something for my hard work even if it meant the site would die a slow death under new management. Yes this might sound heartless but I’m being honest and I didn’t really believe I would be forced to sell to a potentially bad owner.)

Preparing To Sell

The more information you can provide to potential buyers the better. Raw statistics are especially important to most buyers and if they don’t ask you for certain numbers then they don’t know what they are doing and are probably not really interested. You should prepare at least these figures:

• Your website traffic statistics including unique visitors (averages and totals), pageviews (averages and totals), growth rates over time, which countries they are from, how much traffic comes from search engines and direct bookmarks, which keywords your site is popular for and the PageRank of your site. I made available direct access to my log files with a statistics package like Awstats or Webalizer so serious buyers could get a good grasp on my site’s performance.

Most web servers come with a statistics package. Ask your web host if you don’t know. The most common are Awstats (demo) and Webalizer (demo) which often are preinstalled on many hosting packages. Become familiar with these packages so you can accurately assess your site traffic.

Source: Making money from your website using advertising

• Your financial figures. If you run a proper business then you should have these in some form of accounting package. The profit and loss statement is a popular choice for potential buyers but of course the more data you can provide the better. Because my site was a hobby I didn’t have any detailed bookkeeping records however I did record some figures including all the money advertisers had paid me for the last 18 months. I also had bills for expenses such as hosting and domain names and given those were the only costs and income for the site I provided those figures to serious buyers.
• You need a good sales spiel email letter introducing your website and you, your site’s history, why you want to sell your site, what your site offers to the new owner (current financial and future potential) and any other important factors. Don’t give away your asking price up front but certainly make note of the important factors, such as traffic figures and if your site is profitable.

Finding Buyers

Once you have decided a rough figure you would be happy with you can head out and find buyers and see how much demand there is. With my 2-3 times revenue figure firmly planted in my mind as a goal to work for I went off to find a buyer.

Searching Your Industry

My initial thoughts were to find a local buyer in my home country (my site was focused on the Australian marketplace). I figured the best place to start would be the retail outlets that sold products that my market was using. I emailed all the stores I could find contact details for, some of which I had already established relationships with because they advertised on my site. I also emailed some of the largest overseas online stores and websites that I thought I should at least notify that I was looking for a buyer to get some interest going.

When you first head out to find buyers you should look to contact individuals that will understand the value of your site because they will be the easiest to sell too (they won’t need to be “taught” about your marketplace). They will also be the most excited about the prospect because most likely they already sell to the same target market and you will be bringing them a lot of potential new customers.

Searching Outside Your Industry

Once you search locally with no success you might want to try and search simply for a buyer looking for a website. This could be a web entrepreneur that sees the potential in your site or simply someone interested in running a website and would prefer to buy one rather then build from scratch. Obviously with this method you are going to have to do more explaining if the potential buyer doesn’t understand your industry and even worse if they don’t understand website hosting at all you will have a lot of technical training to do if they buy it. You will also need a really good sales pitch and the numbers (financial details) will count for a lot more since that might be the only part of your web business the buyer will understand.

There are a handful of online places you can try and sell your site. EBay’s Business/Websites for sale section is a popular choice but remember eBay is an auction so the negotiation and haggling is all automated. Your auction listing page will have to be very good to get a good price and you will be very much at the whimsy of eBay’s traffic which might not be ideal for what you are selling.

A better option in my mind is try a few forums like the SitePoint SiteSell area where you can list your site for sale and get some exposure. The best thing about this is you can go in and search the archives to see what other sites have sold for in the past. By comparing the details of previous sales you can get a feel for what your site might sell for. Try hunting around in other forums such as SearchEngineForums - buy my website and businesses for sale/brokerage sites such as BusinessBroker, BuySellWebsite and eBizBrokers) to drum up some interest in your sale and conduct research.

Making The Sale

Eventually you should find someone interested in your site and the negotiation will begin. As with any negotiation the mindset and “state of urgency” of the buyer and seller play key roles in determining who has the upper hand. If the buyer is not desperate or the seller is then the power can rest in the buyers hands and she can dictate the terms and price. Of course it can be the other way around with the buyer very eager and the seller not so desperate, or any combination. Each case is different but as a seller remember to stick to your guns and don’t sell unless you are happy with the terms. No regrets.

In my case I had my set price in mind but I was also new to selling websites so to be honest I was a little star struck to think about the numbers I could get from my site. In the end I presented my price, we negotiated terms and eventually I was discounted down $1,500 off what I presented, which I was quite happy with. We agree on details such as where the site would be hosted, how long I would make myself available to train the new owners and the transfer of ownership record changes. It took about three months for the new owners to get the hang of things and for about a year after the sale I would jump in and help now and then with technical matters.

When finalising the details of the sale I suggest you keep in mind these points:

1. How and when will the money be transferred? I suggest an upfront partial payment (we did 50%) and a final payment once the transfer has been made. Are you going to use cheque/check? Direct bank wire? Cash in hand?
2. Write up some form of formal contract with dates and agreed upon price and have all parties sign it. Of course if you are completing a big bucks deal then get yourself a lawyer to make sure you stay on top of the legal concerns.
3. Define how long you will provide support for. I chose to make myself available for a long time and even today I still help out occasionally. You might want to play it safe and document the mandatory period you must provide support.
4. Stay on top of all the technical little things. Web business is a complicated task and there are a lot of web tools that you might be using and have even forgot about. Don’t forget web hosting, domain names, autoresponders, mailing lists, software, subscriptions, paid directory listings and any of the host elements that might be used by your web business that you need to transfer to the new owners.

Moving Forward Post Sale

You’re all smiles, your pockets are laden with cash and the world is a wonderful place. Now don’t screw it up and blow all your money on partying too hard, stupid investments or get rich schemes. You’ve learnt what it takes to build a web business and sell it. No doubt you would like to do it again and you have more business ideas to test. Remember how hard it was first time round with no capital available? You had to bootstrap your business, provide your own funding or beg family/friends/the bank for funds. Now you have capital which you can use and invest wisely. Sure celebrate a little, have some fun and enjoy the moment, but remember you didn’t get to where you are by wasting money and you’re not about to start wasting it now.

Yaro Starak
Internet Entrepreneur

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