This is a guest post from the super talented Josh Shogren of Passion into Paychecks fame (and an intern at FE International). He emailed me about writing about how to properly buy a website and seeing as I am currently working hard to regroup, this couldn't have come at a better time!
I will give my own analysis at the end, but strap yourself in, this is a seriously good post right here.
This is a fully informational post that requires reading NOT skimming. So if you are going to be scrolling all over the place then I suggest that you go away.
Take it away Josh...
Although this idea is very enticing, it’s not something that you should jump straight into as a beginner. In this article I’ll be walking you through the most important factors that will help you have success as a website buying beginner.
If you have zero experience running and operating an online business, then I would suggest waiting before you buy a website. Instead, you should think about starting a website from scratch and learning the ropes that way. This route will allow you to learn the necessary skills to successfully run a website without minimal risk. The skills that you’ll learn from doing this will translate over when you decide to invest in your first site.
I personally started out building my own websites from scratch for 5+ years before I moved into buying them. During those 5 years I was able to hone my skill set which has allowed me to find success buying and selling websites.
Here are some good resources on how to get started building your own site from scratch:
Those resources will point you in the right direction and have you building your own sites in no time!
Now, for those of you who have successfully built your own websites before, but have yet to take the dive into buying a website, the rest of the article is for you!
Play to your Strengths
This is so important.
In order to have the best chance of success, you need to stick with what you know and what has worked for you in the past. This applies to two main areas: skills and business model.
Let’s start with your skills. If you have built up a solid expertise in an area or two, then you should buy a site where you can fully maximize them. For example, if you have gotten really good at keyword research, then you should try to find a website that is underperforming with its content and hasn’t reached its full potential in that aspect. This will allow you to purchase this site with confidence because you know exactly how you are going to improve it.
The other part is the business model. If the bulk of your success has come from building Amazon Affiliate sites, then it would be smart for you to stick to the same business model when buying a site. Doing this will greatly increase your chances for success. It’ll allow you to apply the knowledge that have gained in the past onto the new website.
You should avoid buying a website that is outside of your comfort zone. For example, if your experience has primarily been with affiliate sites and you purchase a SaaS business, you’re looking at a sizeable learning curve. SaaS businesses require a lot of technical knowledge, and running a successful SaaS isn’t something you can learn overnight.
Bottom line here, stick with what you know and play to your strengths. I can’t stress this enough for those who have never purchased a website before.
Know the Market
The fact that there is a whole market dedicated to the buying and selling of online businesses is eye opening for most people. And the truth is, it’s only growing!
So before you start buying any websites, you should first familiarize yourself with the market and begin to understand how everything works.
This means having a solid understanding of:
- How to properly value websites
- The average multiples used for valuations
- How to spot scams (there’s a ton of them out there!)
- What metrics are the most important
- And a whole lot more
You will begin to gain an understanding of each one of these things once you submerge yourself in the market. Looking at the listings on a marketplace such as Flippa can be useful in learning about market trends. Take notes on the sites that are super active with bidders and seem to be a hot commodity, and try to understand why that is.
Get a feel for what the scams look like and how to avoid them (hint: a site making $2k a month selling for $1k is NOT a good deal, it’s a scam).
One caveat: If this is your first time buying a site, doing so through a marketplace has significant risks. Marketplaces are best used as a way to research the market due to the information about each site being publically available. In addition to being rife with aforementioned scams, you’ll have to do all of the work on due diligence and negotiation on your own. As such, buying through a qualified broker is recommended for first-time buyers.
I would suggest reading this website valuation guide here, it’ll explain what the most important metrics to look at when valuing a website and a whole bunch of other useful info.
Don’t rush into buying a website. This is probably the most common mistake that people make. They want to get started so badly that they settle for a subpar website and it ends up biting them in the butt.
I fully understand wanting to buy a website as soon as possible and how frustrating it can be to not find any good deals for a period of time. To give you an idea of how often I make new website purchases check out how many websites I have purchased in the last 12 months and the dates of each:
- August 2015
- March 2016
- April 2016
- May 2016
So in the past 12 months I made a total of four website purchases, that’s it! And I look at listings practically every day. Now, this isn’t to say that there were only four good deals in the last 12 months, but that is how many I ended up buying.
If I had to guess, I was probably seriously interested in around 20-30 deals in the past 12 months, and ended up pulling the trigger on four of those. If we averaged that out over a year it would come out to around 1-3 websites PER month that caught my eye. Keep that in mind when you are looking for sites.
The best deals don’t come right away, you have to stay patient and wait for the good deals. This is a long-term game and you can’t rush good deals.
The most important takeaway from this is that it takes times to find the good deals.
Have a Plan of Attack Before You Buy
In my opinion, the most important ingredient to any successful website purchase is to have a strategy for how you plan to grow the site BEFORE you purchase. By doing this, you have a clear path on how to achieve quick wins within the first few months of it being under your ownership.
To explain this idea further, I’ll use a personal example from a recent site that I purchased. Here’s the quick backstory.
I came across a website that was making around $130 per month over the past 6 months. The bulk of the earnings were coming from AdSense, but here’s the thing. The site was only using ONE ad per page!
I knew that Google allowed six total ads per page (three regular units and three link units) so just from that alone I knew this site was severely under optimized. My plan once I bought the site was to not only add more ads per page, but also start split testing them using AmpedSense. From my previous experience, I knew I could easily find the best performing ad layout and that it would way outperform the earnings from that one ad.
It’s been just over one full month since I took over ownership of this site and in that time period the site was able to earn over $202.
Along with my plan to improve the AdSense earnings, I also knew that the niche of this site was perfect for QuinStreet, which is lead generation network for colleges and training programs. I’m fairly confident that QuinStreet will outperform AdSense by a longshot and it will be something that I’ll be testing in the future.
Aside from monetization strategies, I also had a few different ideas for growing the traffic to the site as well. I am going to be targeting local search terms and try to rank for them. This will allow me to target less competitive keywords since it’s on a local level. Also, the traffic I get from these local keywords will be extremely targeted for turning them into leads.
As you can see, before I purchased this website I had a handful of different methods and strategies to grow this site. Because of this, I was very confident that I would be able to increase the earnings for this site and have a successful website purchase.
You should try to do the same thing for any site that you are interested in buying. If you don’t have any ideas to grow it then you are basically buying the site for its current cash flow. This is perfectly fine, but wouldn’t you rather buy a site where you could grow the cash flow and increase the overall value of the site? I know I would!
The other aspect you should try to plan out is your exit strategy. Whether that is for you to flip the site within 6 months or hold onto it for 5 years and then sell. You don’t need an exact date, but a rough idea on the timeline of this site will help guide all of your decisions.
When you do go to sell, I’d highly recommend staying away from going through a marketplace or auction, such as Flippa. Instead, you should go with a broker.
The biggest reason is because they will properly value your website and help you sell for what it’s actually worth. You can avoid worrying about the auction not meeting reserve and instead have peace of mind knowing you are selling at the true value.
Only Spend What You’re Comfortable Losing
Just like with any type of investment, there’s always a risk of it not working out and you losing money. Well, the same principle applies to buying websites. There will always be that chance that the website could flop and you be out the money you paid for it.
For that reason, I’d recommend that you only spend the money that you are comfortable losing, and work with a reputable advisor on your purchase. This is even more important if you’ve never purchased a website before.
Wrapping It Up
That’s going to bring us to the end of the article, I hope that you’ve enjoyed.
If you stick to the rules that I have laid out in this post you will increase your chances of success as first time website buyers. If you have any questions I will be hanging out in the comments answering all that I can.
If you didn't get at least a tiny bit of value from this, then you are an idiot and you should read it again.
Go on, read it again.
However if you read it properly which I know you did because you're a cool cat like me and my dog, then you should have got some seriously useful information.
As I said in the intro, I am currently trying hard to re establish a way of making money since my Amazon account got banned, and so when I received Josh's email in my inbox, my eyes just lit up.
I have actually been looking to purchase something in the past, but I have never really been comfortable with knowing how to go about it...until now!
Anyway,I just want to thank Josh for this amazing post and I am sure he is willing to answer any questions you might have in the comments below.