Hey everyone, today I'm excited to bring you a guest post from Greg Elflink, the content manager over at EmpireFlippers.com. I have know the founders of Empire Flippers since, well, before Empire Flippers ever existed!
I've seen their marketplace grow and I've even used it myself to both buy and sell websites. Lots of great affiliate and other types of websites are constantly coming up over there.
Today, Greg is going to walk you through how they sold a customer's website on their marketplace for $550,000. If you are looking at either buying or selling a website, Greg has some great tips.
With that, I'll let Greg take it from here…
If you could spend two years working on a site that would later sell for almost 14 times more than the average American annual salary, would you?
Spencer is well known for his awesome knowledge of how to build Amazon affiliate niche sites, and if you want to build out sites and make them turn a profit, then this blog is one of the best out there for teaching how to do just that, you don’t have to go far to see case studies he’s made like this one where he created a successful niche site from scratch.
But what if you wanted to collect future revenue from one of those sites all upfront without having to wait for months on in for your affiliate commissions to come your way?
That is exactly the question confronted by one of our sellers when he listed his Amazon affiliate site in Empire Flipper’s online business marketplace. This seller in particular realized the earnings he could get “now” by putting his profitable website up for sale.
When it comes to selling your site, one of the most important things you can do is to make it as easy to hand off as possible.
This site had a few things going for it that made it a simple matter of plug and play for the new owner:
- Monetized via the Amazon Associates program, which is a very easy to understand monetization method, and one that is simple to transfer over to a new owner.
- Built on WordPress, one of the most widely-used CMS platforms on the internet.
- Outsourced content to competent writers.
- Needed only two articles a month to maintain earnings.
The interesting thing about the content on this site is that it was almost all commercial intent-style articles, including reviews, top 10, the best X for Y, etc.
The site covered a vast array of products in the electronics space, too, which goes to show that you can earn quite a significant income in this space even with the lower Amazon Associates commission fee typically attached to sales of electronic products.
The next important piece of selling a business is to make sure that the buyer has seen that the business is profitable. The best way to do this is to keep track of everything — gross profit, expenses (with explanations for the expenses), and net profit. Track these numbers religiously every month.
Of course, we verify the earnings of every Amazon affiliate site that comes into our marketplace, so some of this work can be done for you if you are using a professional broker to sell your asset.
Still, it is good to get into the habit of tracking both profits and your actual traffic. Therefore, make sure you have something like Google Analytics or Clicky set up from the start, so a potential buyer can see any trends or opportunities when they are doing their due diligence on your website.
Now, at this point, you might look at an Amazon affiliate site earning $18,857 per month and wonder, why would anyone sell this?
I mean, it’s pretty passive income, right?
As is the case with an offline business, there is a plethora of reasons why someone might sell an online business. We have had people sell their businesses so they could buy a house free and clear, adopt a child (which is quite expensive to do), or reinvest their profits into other businesses and projects.
In the case of this specific site, the seller was living in a low tax country but had plans to move back to Europe, to a country with a much higher tax rate. Therefore, they decided to sell the business and collect as much money upfront as they could, without having to pay a large tax fee on the profits.
Understanding how taxes work for your specific situation is an important part of doing business, which is why we highly recommend you have good tax counseling as your business gets bigger.
So how exactly DID we sell this business for $550,000 in just over a month?
Let’s dive into the details!
$550,000 Amazon Associate Business Highlights
The business began in August 2014, focusing on the electronics niche, where the vast majority of articles are based on commercial keywords written as in-depth reviews of products.
After producing dozens of articles for over two years, the seller saw the website’s earnings explode. The site currently makes $18,857 on average every single month from the Amazon Associates program. This was all done without a private blog network (PBN), a choice made because Google’s updates of its search algorithm increasingly hammer PBNs. Natural link-building strategies were used instead, making this site a safer investment because it used no black or grey hat strategies.
The site had some expenses —$127 a month — but compared to the net profit, they were pretty minimal and covered the costs of outsourcing and uploading two new pieces of content a month.
Other than its size, the website is a classic Amazon affiliate niche site. The one big difference is that this site has far more content on it than your average niche site, and when I say niche I mean that very loosely. While the site mainly reviewed electronic products, it also reviewed products in tons of other niches, too. The way the branding of the website worked also allowed the new owner to write about pretty much any niche they desired.
As the site’s domain authority grows, it will be able to rank for more and more broader niches as time goes on.
So how did this website get sold for such a high price? How was the valuation done?
The site was initially listed at $565,711, and this price fluctuated due to our monthly re-evaluation. Basically, new net profit and expense numbers are sent in every month, this can move the needle up or down on the price for the business. Ultimately, this business sold for $550,000 due to the negotiation process, which we will get into below.
Let’s talk a little bit about how a site of this size is valuated properly, in order to attract a slew of qualified buyers.
Preparing and Listing the Business
Before this business went live on our marketplace, there were a few items that we needed.
Every site that enters our marketplace has to be vetted if they’re going to become one of our websites for sale. That means we have to verify income and the site’s traffic. Depending on the business, there are several different ways we can go about this. For instance, an Amazon FBA business will go through a different process than an Amazon affiliate business.
For Amazon affiliate businesses (including this one specifically), we verify proof of earnings by logging into the seller’s Amazon account. The seller gives us view-only access, and from there we take screenshots from their accounts to show what they earn with their associated tracking IDs.
This site was a bit different in that it used about 12 different tracking IDs. Once the website was being prepared for sale, the owner converted all the tracking IDs into one to keep all the earnings for the site in one place.
Once our agents logged in and checked everything out, we moved on to traffic.
We always want to make sure the traffic that a website is getting is legitimate, which is why we also get permissions to login to their analytics. Typically, there are two analytics a seller uses:
- Google Analytics
- Clicky (a third party analytics software that is very reliable)
This seller was using Google Analytics, so it was a simple process to login and gather the data.
One thing we make sure of is that the seller doesn’t have any other sites that might be in direct competition with the website they’re selling. While we have ways to figure out who owns what (which obviously we won’t reveal here), this seller in particular was very forthcoming.
He revealed all the sites he owned, and while some had overlap, none of them were directly competing with each other. In the cases of overlap, there were a few items in similar niches that were also written about on the main site. This was unavoidable, since the seller’s site was a gigantic review site covering multiple niches.
We ran all the content through Copyscape, a plagiarism checker, which proved that everything on the website was unique.
After all the vetting was concluded, the website was given the valuation of $553,859 at a 30x multiple. This was due to the length of time it had been around, its solid content, and its long history of ranking on Google.
This initial list price was later changed to $565,711 due to the site accumulating another full month’s worth of earnings in the days after going live on our marketplace. Since the site earned more, the average was adjusted in line with the original valuation given to the site and the price was updated.
Once the site was listed, we began the process of weeding through unqualified buyers to give the seller the “crème de la crème” of qualified buyers.
We do this through our marketing process, which includes advertising the listing to our 35,000+ email list of buyers, plus pushing the listing via social media.
For buyers to see the site in its entirety, they are required to submit a deposit. This gets rid of the majority of tire-kickers, since typically only serious buyers will submit a deposit. From here, the seller will give these new potential buyers access to analytics for them to begin their own due diligence.
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Within two days, we had three interested buyers willing to put down a deposit to view the specifics of the site. One even wanted to set up a call with the seller.
While they set up the call, even more depositors came along wanting to start the process of looking over the site.
The Negotiation Process
While many depositors performed due diligence, only a few became qualified enough buyers to allow them to get on the phone with the seller. One issue that potential buyers had with the site, despite the very attractive fact it was monetized via the Amazon affiliate program, was that it wasn’t really focused on a single niche. This turned away a couple of high-end buyers.
However, after our vetting process, we had a range of buyers looking at the site.
The potential buyers that wanted to set up a call with this seller had a few questions:
- Did the seller’s VA come with the purchase?
- Were there notes on how the seller performed keyword research and built backlinks?
- Could the last three months of Amazon ordered items be exported to discuss on the call?
- Was the seller’s second site available to purchase as well?
While the second site wasn’t for sale for at least another six months, the seller was more than willing to share his process for growing his sites. His VA wasn’t part of the deal, so the seller decided to create a two-hour video outlining all of the tasks that his current VA did.
This was an awesome value boost, because the potential buyers then had a good roadmap and understanding of how to do the tasks themselves, whether or not they did hire it out to a new VA.
In addition, the seller provided 29 new keywords for a buyer to go after, along with his backlinking process. The seller also provided eight additional articles that he had already had written but had yet to upload to the site. He also included his strategy for how he got backlinks from actual manufacturers of products.
For the keyword research process, the seller decided to instruct the new potential buyer via Skype on how he used Long Tail Pro to find new keywords to target with his website.
The Buyer-Seller Conference Call
Once this information was gathered, the seller and buyer moved ahead with a buyer-seller conference call. These calls are an indicator that a buyer is nearly at the end of our sales cycle. While it doesn’t always happen on a conference call, we do frequently have hard offers made on these calls.
Because of this, we have a deal consultant on the line to assist both the buyer and the seller. The deal consultant coaches the seller about the buyer and helps smooth out the negotiation process.
In this case, the buyer made an offer of $550,000 for the website. The buyer would pay $430,000 upfront as a down payment on the website and then $10,000 a month for the next year in an earn-out scenario.
The seller agreed to these terms and sold the site for a total of $550,000 — receiving a total of $467,500 in total profits after Empire Flippers’ brokerage fees.
Not a bad payday for an Amazon affiliate site!
The Migration of a Six Figure Website to the New Owner
The migration process for Amazon affiliate sites is a pretty straightforward task, and it’s something our migration specialists excel at. Once the down payment was received and the earn out was agreed on, the migration process began immediately, along with a valuation period of 14 days as outlined by the buyer.
All the Amazon Associates links were transferred over to the new owner. Along with the site came a few other domains that were associated with this website. These sites and the main moneymaker were converted into the new owner’s name.
For the seller to receive their $10,000 a month, the earn-out agreement stipulated that the site had to earn at least $14,000 per month.
These earnings were achieved and, as the year went along, the buyer decided to accelerate the payments to the seller, finishing the payments in just four months instead of twelve. The buyer was able to get the seller to agree to a $11k discount for the accelerated payment. The seller was more than happy to get the remaining $109k in his bank account sooner rather than later.
With the buyer verifying traffic numbers and earnings from Amazon’s Associate program, and the seller’s earn-out complete, the deal was closed and deemed successful.
How Can You Sell a Six Figure Niche Site?
Selling a business is an exciting process.
You can collect 20-30 months of profit upfront, often in as little as a month’s time. So what are some quick tips you can use to prepare your site for sale, possibly even in the six figure range?
- Track your analytics and earnings religiously from day one.
- Prepare future keywords for a buyer to target after the purchase.
- If you have a VA and don’t wish to include him or her in the sale, then create tutorials for the new buyer to educate a new VA with.
- Be open to negotiations. This seller was open to a year-long earn out; this flexibility allowed them to sell a very big site in a very short time.
- Be as transparent as possible when you are selling these sites.
The sky really is the limit when it comes to how big a niche site can become. While common wisdom dictates that sites always focus on just one niche, this site proved that even a website that meanders around different niches can still be incredibly successful.
If you want to sell your online business, we recommend using a professional brokerage. The seller would have been more hard-pressed to sell this site if it hadn’t been for our marketing of the listing. The buyer reach would have been much lower, and the room for error much larger, without a system in place for both selling and migrating the site successfully.
If you are in the market right now, it might also be worthwhile to check out our podcast episode where we talk about preparing your site for sale.