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Best Tips for Buying an Online Business

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I’ve made it my business to help people buy and sell websites, and I’ve bought and sold more than a few during my career.

What does that mean to you?

It means I can help you navigate your way through the process, whether you’re buying or selling. I’ve learned quite a bit from mistakes I’ve made personally and those mistakes I’ve watched other entrepreneurs make along the way.

If you’ve ever thought about buying and selling websites as an investment strategy, this article is full of tips and pointers that can help you.

One caveat, when I mention the term “websites”, I’m speaking about the entire website, domain name included.  Buying and selling domain names is a completely different realm, and has quite a bit of speculation that goes along with it.

How to Find Websites for Sale

Many people don’t understand how to go about finding websites to buy, or where they should go to sell a website that they own. There are three different ways.

Marketplaces

Public marketplaces make it easy to find websites that are already being sold, and to view listings of active websites so you can brush up on your due diligence skills.

There are quite a few available right now, but there are really only two that are worth mentioning: Flippa and EmpireFlippers.

Flippa.com is considered to be one of the biggest public marketplaces which can be a good thing, and a bad thing.  On one hand, there are thousands of active listings at the same time.  However, a large portion of those listings are low-quality websites and straight-out scams.  That means you’re really going to need to understand what you’re looking at before you use them to buy a website.

EmpireFlippers is a marketplace run by a couple of guys, Justin and Joe, that have a great podcast helping entrepreneurs build and run their online businesses, and learn how to buy and sell websites.  They keep strict control over their marketplace, which dramatically improves the quality, and every website that’s listed with them has been vetted to ensure they are reputable.

Direct Outreach

A great way to secure websites to merge into your own, or even enter into a new business, is to reach out to website owners in the niche you’re interested in and pitch them an offer to buy.

This approach works but can be unpredictable at times because most of the people you’ll be reaching out to aren’t exactly familiar with buying and selling, in general.  That means they’re going to ask a large amount of questions, and requires a ton of time and research on your part.

Other times, they may use you to figure out how much their own website is worth, or want to pitch outrageous prices and offers.

Even with the downsides, this can be an incredibly interesting approach to buying and selling sites.  If you can find websites that have been abandoned by their previous owners, it’s easy for you to revamp the site and breathe new life into it.

Brokers

By far, one of the easiest ways to buy, or sell, a website is through a brokerage.  They function as the middleman, connecting buyers with sellers, and have built their entire business around making the process happen as smoothly as possible.

A broker can help you safely navigate through the negotiations, due diligence, closing the deal, and transferring the website once it’s sold. Often, a broker will use an escrow service to ensure buyer and seller protection during the transfer of the assets and payments.

Some more well-known reputable brokers are Digital Exits and FEInternational.

Digital Exits is going to be the best bet for higher-end deals, while FEInternational can help you with smaller websites.

How to Evaluate a Website

The next question you’ll find yourself asking is “how do I figure out what a website is worth?”

Unfortunately, there is no easy way to answer this question.

For instance, a website that generates revenue by reviewing sneakers and shoes can be worth far more to a person that owns a shoe store than it may be to you, if you don’t own a shoe store or have any interest in shoes.

In general, though, a website can be valued between 12x and 36x the monthly net profits, with most websites selling for an average 20x monthly profits.

That means a website that generates $500 per month in profits will be worth between $6,000 to $10,000 to the right buyer.

This again, though, depends on quite a few different factors, like how much time is required to maintain the site, growth potential, the type of audience, how long the website has been profitable, how established and stable it is, and much, much more.

You’re going to need to learn how to approach the due diligence process, and understand exactly what you’re looking for.

To verify a website’s traffic, you will need the owner to give you access to their Google Analytics or other stat tracking service.  This is a fairly standard practice.  You don’t want to rely on logs from their servers, because those can be easily manipulated.

You will also need to verify the website’s earnings.  To do this, get on a Skype call and use a software like TeamViewer so the seller can share their desktop.  Once they have shared their desktop, have them access their earning accounts and hit refresh on the page.  Have them take screenshots and export spreadsheets so you can refer back to them later on.

You’ll need to examine how the website was built, how they’re generating traffic, and what assets are going to be included in the deal.  For example, are they including their email and social media accounts?  Can their 3rd-party and affiliate accounts be transferred?

Verify that there are no copyright claims or infringements with the content they’ve created and the images they’ve used.  Check to make sure the SEO strategies they’ve used aren’t considered blackhat or greyhat, and that the traffic sources are considered reliable.

Performing due diligence is an incredibly complex topic, and one that would require an article dedicated entirely to doing it properly.

If the website you are thinking about buying cost more than a few thousand dollars, you’ll want to get a second opinion unless you know exactly what you’re looking at, and looking for.

A New Investment Strategy

Since I’ve bought a sold a few websites on my own, and have helped countless other people buy and sell websites, I have seen quite a few great deals happen.

Overall, investing in websites is a great strategy to take whether you want to buy an asset that is undervalued, or you want to continue banking on the revenue being generated each month.

It’s going to be hard to find an investment strategy that delivers a better return.  Even if you buy a website at a 20x monthly earnings multiple and it’s underperforming, if you put 3 years of time into it to see an ROI, you are still getting a 33% return on your money.

Compare that to buying and holding real estate that delivers between 2% to 6% each year, or investing in the stock market that can deliver between 5% to 15% on a year-to-year basis.

Websites do require work, and they’re not nearly as passive as investing in the stock market, but for people who like to have control and want to tap into an amazing ROI, websites easily beat the stock market and real estate strategies.

This guest post is courtesy of Jock Purtle.

About Gresham Harkless Jr.

Gresham Harkless is a Media Consultant for Blue 16 Media and the Blogger-in-Chief for CEO Blog Nation. CEO Blog Nation is a community of blogs for entrepreneurs and business owners. Started in much the same way as most small businesses, CEO Blog Nation captures the essence of entrepreneurship by allowing entrepreneurs and business owners to have a voice. CEO Blog Nation provides news, information, events and even startup business tips for entrepreneurs, startups and business owners to succeed.
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