A big reason for this goal was to learn the ropes and determine whether I thought flipping sites would be a viable business model. So, while the first sites I bought this year were relatively small in terms of revenue; the plan was always for them to be a stepping stone to something larger. You can read all the case study posts I've made about buying sites right here.
Today I want to review the 4 sites that I've purchased this year and some of the lessons I've learned along the way. If you have ever been interested in buying and selling sites, I think this post will provide some good insights into the process.
Spending Over $25k – The Results?
My goal was to spend $25,000 buying websites in 2014. While this was an arbitrary number, I felt like it was a large enough amount to help me go from complete rookie status to somewhat experienced.
I'm happy to say that I'm no longer a rookie!
As of this month, I've purchased $37,100 worth of sites. That's right, I'm $12,100 past my spending goal for the year.
In total I've purchased 4 sites, and I'm very pleased with the results so far. In fact, I decided to put all the numbers in a chart for your viewing pleasure.
Here's all the basic stats for the sites I've purchased this year:
* The earnings of site 1 before purchase may not be accurate; I believe it was much lower…but I purchased based on the $450 number.
**Also the $394 in earnings for site 4 is due to the fact that I didn't really have the site in my possession until about Sept 4 or 5th. So, that's just about 5 or 6 days of earnings as of the time of this post.
The above chart has a ton of data, but I wanted to review some highlights.
First of all, I've spent $37,100 on the sites; but if I were to sell all the sites today I could potentially sell them for a total of $118,883. (That's based on the 20 times monthly earnings price that sites are sold on the Empire Flippers Marketplace).
In addition, I've already realized revenue of $12,109. So, add $12,109 and $118,883 for a total potential earnings of $130,992 if I were to sell the sites today. That's almost a six figure income when you subtract out my purchase price of $37,100…not bad!
Now I realize this is all potential profit at this point, but the sites are doing very well and I'm happy with the recurring monthly earnings of nearly $6,000 right now.
The other major point I wanted to make was that on average I paid just 9.08 times monthly earnings for the sites! The idea is to buy low and sell high, right?. Because I know that I can sell the sites for about 20 times monthly earnings, I knew that when I purchased the sites for less than 10 times monthly earnings that I could double my money right away if I decided to flip.
So, I've got a nice cushion built in. If all the sites suddenly dropped in earnings by HALF, I could still make a profit because I bought the sites for such a low multiple.
How to Negotiate a Great Price
How did I get such a good deal on the sites you ask? Honestly, it doesn't seem like I did anything special, but I did follow some basic principles that perhaps you should keep in mind when buying a site.
1. Get all the Stats
Simply ask them to add your email address as a “Read Only” access in Google Analytics. Any serious seller will add you without question.
This is your number one way to vet a deal. Take a look at where the traffic is coming from and look for red flags (such as all traffic coming from one website or huge fluctuations).
Also, get screenshots of earnings to see if it matches up with what you are seeing on Google Analytics. Yes, people can fake screenshots, but in most cases it's not likely to occur and you can validate the earnings somewhat by seeing how much traffic is coming to the site.
I usually like to see the past 3 months of earnings.
2. Contact the Seller Privately
Whether buying on Flippa or privately through email, you should always start a dialogue with the owner. If you have questions about where traffic is coming from, ask it! I usually have 4 or 5 questions before I even consider making an offer. These questions just vary on the site and what I'm seeing.
Such as, “Why has traffic decreased?” or “Why is so much traffic coming from this one referral source?” or “Do you write the content or do you have a writer?”
Once you've started a dialogue through private messaging or email, the seller knows you are serious.
3. Have a Price in Mind
Once you've seen all the stats, determine what you are willing to pay. I like to pay around the 10 times monthly earnings price. I will go higher if I really like the site, but probably not more than 12 times monthly or so.
The point is to buy LOW. There are sites being sold all the time, so if you can't get the deal you want you can always find a different site to buy.
You should also not reveal this price, but instead ask THEM what they are willing to let the site go for. This can be a bit of a dance as neither party usually wants to reveal their price, but after a few emails or messages back and forth some numbers will start to come out.
If they offer you a great deal (below your price), then buy it!
4. Don't Get Emotionally Attached
If they offer a price that is close to what you are willing to accept, then you will likely be able to negotiate them down a bit. I may have to go through my emails and messages to see exactly what I do, but essentially I stall or ask more questions. I don't either accept or reject their price, but simply keep talking about the site or other questions I have.
If you are buying on Flippa, this can be particularly effective if the auction is getting near the end time.
For example on “Site 4”, I had been in discussions with the site owner for a few days leading up to the closing time. I was willing to pay nearly $20,000 for the site (it had $1,911 in earnings). However, I asked what his reserve price was, and he said $15.5k.
So, with only a couple hours left, the price was still at about $12k; so I put in a bid of $13,100 and contacted the owner and asked what he'd be willing to let it go for. Because the auction was not extremely active and there was only about an hour left; he probably knew I was one of the only ones interested.
He said he would let it go for $15k, but only if I took the offer right away. I said, “Let's do it”. So, he created a Buy it Now price of $15k and I immediately accepted before anyone else on Flippa saw the buy it now button.
Because the owner was facing the possibility of not selling for his reserve price, he was willing to wiggle. I on the other hand was not emotionally attached to the auction and was willing to walk away at any point.
By not pulling the trigger at my $20k potential buying price and not immediately bidding his reserve of $15.5k, I was able to walk away with an excellent price.
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If you get emotionally involved in a site, you can end up over spending. Just remember that there are plenty of fish in the sea; you can always find a new deal if you don't like the price.
5. Be Willing to Walk Away
If something doesn't feel right about the deal or you can't get the price you want, be willing to walk away. In fact, this happened to me last week.
I was contacted by a reader of NichePursuits and offered a great site. The site was earning about $1,800 a month and had everything I was looking for. However, the seller was also very experienced and was not willing to let the site go for anywhere near 10 times monthly earnings. They wanted closer to $30k for the site, while I was only willing to pay around $15 to $20k. This was just way too much of a gap to make up.
So, while I wish that I owned the site because its a great one with lots of potential; I had to be willing to walk away from the deal.
I don't get every deal, but by being picky I've been able to snatch up 4 good deals this year and hopefully more in the near future.
A Few Takeaways
I've certainly learned a few things this year about buying websites. First of all…its a lot of fun! I've really enjoyed searching, negotiating, and adding great sites to my portfolio.
I've also learned that I need to stick with what I'm familiar with and that buying smaller sites is just as much work as owning larger sites.
I bought the “Pinterest” site for several reasons listed here; but it was outside the realm of my personal experience with sites. The traffic all comes from Pinterest rather than search engines (which is what I'm familiar with). As a result, I've learned that it's more work than I anticipated, and I've not been able to grow it as hoped.
On the other hand, I have been able to grow the traffic to “Site 1” by quite a bit. So, I've been able to increase the earnings by a nice percentage; but the numbers are still small. Sure, its great that the site is now earning $120 more per month than it was a couple of months ago; but the impact to my overall income is insignificant. It's just a small site that is never going to make a big difference one way or another to my overall portfolio.
This is why I started buying larger sites (see exhibit “Site 3” and “Site 4”). Site 3 earned about $3,400 last month (and I expect a decent increase in September as well) and site 4 will do close to $2,000. These larger sites are doing 10 times what the other sites are doing, but don't require much more work. I get MUCH more impact for my time and effort put into the sites.
So, overall I'll be sticking with sites that are SEO focused and are bigger earners. I've been able to leverage my keyword research skills and link building abilities to grow site 3 quite a bit already, and expect to do the same with site 4.
As always, I'd love to hear your thoughts on the subject of buying and selling sites. I've shared some of the things that I've learned this year so far, but if you have any additional questions on details that perhaps I missed, let me know.