One of the aspects that I love about running a business, is dreaming big and making income projections. I'm sure that many of you are the same. After all, what can be more exciting than getting struck with inspiration of a business idea and then quickly calculating potential profits and losses?
Pulling up an excel spreadsheet to quickly calculate whether a business idea is feasible is something that I've long enjoyed, (and perhaps have wasted a lot of time doing as well!). However, I do think its an important exercise to go through when starting any type of new venture. In fact, a simple spreadsheet may be all you ever need before getting started, as opposed to a full-blown business plan (like I was always taught while getting my MBA).
The Business Model for Niche Sites
Whether you want to build micro niche sites or large niche sites, the overall model is essentially the same. What I mean by this is that you have the same inputs and outputs. Essentially you will be paying for a domain, hosting, content, link building, and a theme or graphics. The amount you spend on a few of these items could just be larger or smaller depending on the type of site and how many sites you build.
Overall, the basic model for niche sites is to create content targeting specific keywords and to rank at the top of Google for those keywords. This is done in hopes of generating revenue through Google Adsense, Amazon Associates, your own product, or other affiliate programs.
This is the business model that eHow.com and About.com have implemented with great success on their web properties. However, as most of us are “solo” entrepreneurs, we aren't likely to build something quite as big as those websites, but our model is essentially the same. As long as a new piece of content is bringing in more money than it costs, its profitable.
Costs of Building a Small Niche Site
So, lets walk through an example of the potential income and expenses of a smaller niche website. First, I'm going to list out what it would cost to outsource everything (this is what I do). Here's are some of the standard expenses (obviously some of these may be more or less depending on your own strategy):
- Domain – $10
- Hosting – $6/mth
- Content – $180 (15 articles at $12 each)
- Theme or Logo – $40
- Virtual Assistant – $50 (to install plugins, add articles with hyperlinks, or other basic tasks).
- Link Building – $250 (I usually hire various services, but this is more than enough).
- Total Cost – $530 one-time, plus $6/month for hosting.
Now the hosting cost is a bit deceiving, because if you build 10 sites its NOT $6/mth for each new site. They can all share the same hosting account, so its still just $6/mth for all your sites combined. In addition, depending on what you do for link building, you can hire services or buy tools for MUCH less (or much more).
So, in order to break even in one year your site would need to make $602 ($530 to $72 for annual hosting). This means your site would need to make $50.17 per month or just $1.67 per day. This is a very small site, and getting a site to $50 a month is really not that big a deal.
As I've shown, I have quickly gotten my public niche site (bestsurvivalknifeguide.com) to over $350/mth already after about 3 months. This site is going to be highly profitable, which will allow me to invest in additional sites.
Now if you were to write the content yourself and do the link building yourself, yours costs would be significantly less. Here's what your expenses would look like:
- Domain – $10
- Hosting – $6/mth
- Content – $0 (15 articles written by you)
- Theme or Logo – $0 (Not required if you use free themes)
- Virtual Assistant – $0 (you can do these tasks on your own).
- Link Building – $0 (you can do your own link building).
- Total Cost – $10 one-time, plus $6/month for hosting.
If you do everything yourself, you can have a niche site up and running for $10 plus just $6/mth! So, as you can see depending on how much you do yourself, or if you decide to get help with link building, etc – you can spend anywhere from $10 to $530 to create a niche site.
Potential Profits for Niche Sites
As mentioned, my niche site that I've shared on this blog is bringing in around $350/mth, but the potential profits are MUCH bigger. In fact, I have had a number of small niche sites making over $1,500/mth each. My largest niche site was bringing in over $3,000 per month at its peak, and it was only about 20 pages of content.
So, you can see that the potential return on investment is HUGE.
And what's even better, is that in the SECOND year of existence, these sites only have expenses of about $82/year (domain renewal plus hosting). And even the hosting is negligible because again its shared with other sites. So, really the cost is only about $10 to keep a site around. And if its earning $350/mth, that's an annual profit of $4,290 with almost no work. (Most of my sites require NO ongoing articles or work in their second year…they are passive).
Then of course the idea is to build 20 or 30 of these sites to increase the overall income. Then you start looking at revenue numbers of $80k to $120k a year.
Obviously some sites will do better than others, so it won't all be pure profit (because you might have to build more sites to find successful ones). But hopefully this gives you an idea of the potential.
This is exactly what I did to quit my job 2 years ago. I was making more each month from my niche websites than from my day job…so I quit!
My Spreadsheet that I Use
I've used a number of different spreadsheet to “have fun” with my own niche site projections, and I want you to get in on the action (if you haven't already started your own spreadsheet). So, below you will find a link to my Excel spreadsheet that you can download and use. Here's a quick screenshot:
In this example, I put in costs that were fairly high for each site…over $700 each. (The domains are $7.50 because you can often get them for this price through discounts, etc). You can also see that the number of sites is adjustable…in this example I'm projecting to build 20. So, building 20 sites would cost me a total of $21,494 if I basically outsource everything besides keyword research. This includes a near full-time Virtual Assistant at $600 per month to help with some of the manual tasks of setting up sites, etc.
Now, for the fun part. Below is an image of the potential INCOME based on those cost projections of building 20 niche websites:
As you can see in the “Annual Profit” column, each site will need to make between $80 to $100 per month on average to break even with this projection. However, you can also see that if all 20 sites are as successful as my survival knife site, my annual profit is closer to $65k per year.
And then of course, if they each earn $500/month, the Annual revenue get to $120k per year…not bad!
Again, these projections are based on investing over $700 per site, which my guess is that most of you are not spending that much. If you are writing your own articles and doing your own link building, the break even point is going to be much less.
However, I'll let you determine your own costs and potential profits.
And yes, I know the spreadsheet is ugly and could likely be even more accurate (for the sticklers out there). However, projections are just that…projections. So this spreadsheet is more than sufficient to help you dream big and also stay realistic when it comes to the niche website business model.
And oh yeah, you can also project MUCH bigger projects using this spreadsheet as well. Want to build the next eHow.com? This spreadsheet can help you calculate the costs and profits…
I would love to hear your thoughts on my overall analysis of the niche website business model and the spreadsheet that I've shared with you. Do you have any questions or comments that you would like to add? What has your experience been with projecting your own profits and losses. I would love to hear it.