When I get an idea for a new website to flip, the first thing I usually do is check the availability of domain names on GoDaddy. I also search Google to see what competition there is locally, organically and in the ad space. I then use a keyword tool to check and see how much search volume there is.
I used many keyword tools in the previous years but I recommend using the Google Keyword Planner. It’s free and gives you great information. You get to see the competition bids, the Google Ads bid range, volume trends, locations and mobile vs. desktop.
When doing this, I am always thinking about three things:
- What is the monthly income potential of this new site
- How long will it take this site to start getting traction
- How much can I flip the website for in the future
Buying and selling websites can be very rewarding. For buying a website, I recommend Flippa.com or EmpireFlippers.com.
For selling a website, I recommend the same sites but if you are selling a site for over $100,000, I recommend a broker like WebsiteProperties.com, I used them in the past.
I have bought sites in the past but I mainly enjoy the process of creating a website from scratch. It’s not nearly as time consuming as it used to be. These days, there are so many available resources for building your own website.
For example, you can build many types of websites on WordPress, it isn’t just for Blogs anymore. I talk about WordPress and how to start a site for $12 here: New Consulting Business
I flipped many of my own websites including the #1 ranked “Treadmills” website on Google at Treadmill-World.com. Once I grossed over 100K per month for consecutive months in a row, I decided to sell the site. I sold the site for 3X’s annual earnings.
The capture below shows my site when it was #1 on Google for Treadmills:
Setting up a website can be relatively easy. But getting it in a position to flip, takes quite a bit of hard work. It’s not just the setup, it’s everything in-between and it’s especially a challenge if you are brand new at building websites.
Tip:An exit strategy includes a monetary goal complimented with good timing.
Since this takes a ton of effort on your part, wouldn’t you want to bank as much profit as possibly when you flip the site? Remember, you are making a big fat -0- for all of your efforts over an extended period of time until the site starts getting traction. Plus, there is no guarantee that you will generate any income at all.
Does this sound daunting and a bit negative?
Sorry, it’s the reality and my real world experience from having failures over the years. But in saying that, there is also the potential for massive rewards beyond your wildest dreams.
A Solid Income During Ownership
Even if your end goal is to flip the site, your primary objective should be to make a solid monthly income during ownership. The consistent income will help to ensure you receive a nice payoff when selling.
If you are building an online business with an exit strategy in mind and your profit is increasing month over month, you should push the envelope a bit and get as much as you possibly can. Buyers love it when income is increasing month over month!
Here are some rules you should follow to maximize success…
18 Month Business Should Have 12 Strong Months: Typically, an internet business sale requires a 12 month history of earnings because buyers want to see income generated for each month. Therefore, selling your website when having a strong 12-month history of income is key.
In most instances, your first few months of income will be low until your website becomes established in the search engines. Just as a fine wine gets better with age, your website will too.
This means better authority, better rankings and better revenue. This is very common and exactly what I went through with my Treadmill-World website. The 1st month was 5K, the 2nd was 12K, the 3rd month 23K and so on…
The reason a 12-month history is key for bigger profits is because a listing price for your site is derived from a website’s annual earnings of net profit (NP). Depending on market conditions, a website sales price could warrant three, four, five or even ten times annual net profit.
Buyers may be willing to pay an exorbitant amount of money or exceed typical annual earnings based on demand and/or speculation. However, this typically isn’t the case for general niche or e-commerce websites.
Keep in mind, if your first month in a 12 month cycle is lower than average; i. e. first month is $2,000 and months 2-12 are $7,000, wait a month for the $2,000 month to fall off. This will put the most money in your pocket when selling.
Consequently, if your insight tells you there is a high probability of a spike in future months, then consider using the hold strategy a little longer.
When thinking about a buying and selling website business, it isn’t much different than a buying and selling real estate business. There are two types of investors in real estate:
- Buy and Hold
- Buy and Flip
An internet business is similar:
- Build or Buy and Hold
- Build or Buy and Flip
To get a jump start on things, consider buying a struggling internet business. You can then just give it a makeover and work on monetization. Depending on your objectives, you can decide to hold it or flip it.
When buying an internet business, there are a few things you should consider:
- How many visitors does the site get per month
- What is the monthly revenue being generated
- How long has the site been indexed by search engines
The two above internet strategies are completely different, right?
You could use the build and hold strategy. But building and holding doesn’t really mean hold on to the site forever. In most cases, a sale would eventually occur. Similar to the typical homeowner selling their home within a five to seven-year period. There are pros and cons to both.
Let’s first look at the pros 2 building and holding a website.
Build and Hold Website Strategy: PRO
- Continued growth with increasing Revenue
- Increased search engine rankings due to age domain, aged site pages, etc.
- Brand recognition and repeat customers
- Consistent Revenue month after month; bread and butter
- Potential for an even bigger payoff due to long-term established business: repeat customers, large list of subscribers, Etc.
Build and Hold Website Strategy: CON
- Dependent on market conditions
- Dependent on search engines
- Married to customers in business
- Dependent on monthly income and less focused on new business opportunities
Build (or buy) and Flip Website Strategy: PRO
- Substantial payoff at closing potential
- Rinse and repeat business model
- Long vacation in Endless R&R days upon sale
- Low investment opportunity
- Profit while preparing for exit strategy
- Enjoyment of watching your business grow
There are a few more key things you need to be prepared for:
Use a business broker for top dollar: you might balk at a commission rate to 5 to 10%, but you have to consider the benefits. Your broker serves as a mediator and negotiator on your behalf and buyers simply feel more comfortable dealing with a broker then the owner themselves.
The experience and professionalism of a qualified and experienced broker can be priceless. It sure was for me when selling Treadmill-World.com.
Keep Good Records: If your records aren’t clean, you may have problems that surface during the buyer’s due diligence process.
The fact is, if your records are less than perfect your human, but if there are noticeable gaps in your books, you should be ready for the buyer to ask you serious questions. You will need to show clear documentation on all discrepancies.
Keep Good Records throughout the course of ownership. Also, when filling out a website prospectus, (detailed report about your business), you should be as accurate as possible. I learned from personal experience that documentation is critical to a successful sale. The buyer I had for my Treadmill-World.com site was a real stickler and for good reason!
So the question is: When your next website reaches a solid profit, will you be ready to sell for top dollar?
Here is a short list of top selling websites. Hopefully this inspires you to gain a big payoff on your next website!
- Linkedin.com sold to Microsoft for 26.2 billion
- PayPal acquires honey for 4 billion
- Chewy.com sold to PetSmart for 3.35 billion
- Zillow buys Trulia for 2.5 billion
- Google acquires skip it for 2.1 billion
- Youtube.com sold to Google for 1.65 billion
- News Corp to buy move Inc. for 950 million
- Zappos sold to Amazon for 850 million
- Howstuffworks.com sold to Discovery for 250 million
- Techcrunch.com sold to AOL for 30 million
- Hotornot.com sounds for 20 million
- Bankaholic.com sold to Bankrate.com for 15 million
- DHD.com sells to Mail.com 14 million
- Consumersearch.com sold 2 About for 14 million
- Postlets.com sells to Zillow.com for 1 million
- Treadmill-World.com sold for 250,000 (Jeff Knize past site)
- Retweet.com sold for 250,000
- School – grants.com sold for 80,000
- Pontoonguide.com sold to a private party for $74,000
- Blogcatalog.com sold for 40,000
- AutomobileInsuranceReview.com sold for 18,999
- Articletale.Info sold for 10,000
- Beeadvised.com sold to a private party for 10,000 (Jeff Knize past site)
- Mygokarts.com sold on Flippa.com for 9,000 (Jeff Knize past site)
CONCLUSION
Whatever type of website you decide to buy and sell or build and sell, be sure to do your research. You want to know who you are competing with and how fierce the competition is. This will determine where you will fit in the marketplace.
As a website entrepreneur, your goal is to increase income month over month and have the potential for a big payoff. In order to achieve this, you need to do a lot of things right and be 100% dedicated to your goal. If you do this, you’ll be glad you did! I know I was when I closed on my $250,000 Treadmill-World.com website flip.