Good guidance for people looking to buy undervalued web sites.
I recently attended an internet marketing event in Austin where Ryan Moran gave a talk about buying and selling established web sites. Since I know this is a hot topic amongst many domain name owners, I reached out to Ryan with a few questions. Ryan’s web site is eTycoon.net.
Domain Name Wire: What types of sites do you look to buy?
The best websites to buy are the ones that have some sort of obvious value-add missing from them. For example, buying a website with a huge customer list that is not monetized is a smart move, because you can monetize the list within a few hours. Similarly, websites that have a lot of traffic but not revenue, or products that have no upsell, are further examples of sites that are doing something right but have obvious money being left on the table.
DNW: What are the best and worst places to buy web sites?
The best deals are the ones that are found privately. Just like a real estate investor wouldn’t rely on the MLS to source all of his deals, a virtual real estate investor should never rely on auction sites for deals. The best are found privately, especially if you are looking for a specific type of website. When buying and selling websites on the auctions, you’re limited to what’s currently on the market. The worst place to find deals is probably eBay – that used to be the major player, but now it’s full of scams.
DNW: How much do you typically pay for a site? Is it based on an earnings metric?
As a rule, it’s usually best to pay on an earnings metric. You always keep yourself safe doing this, and it always gives you something to negotiate from. When you stick to paying a certain earnings multiple, you are following a certain personal standard. My recommendation is to shoot for between 8x – 12x the monthly earnings for the site. If the site has no earnings, then you need to valuate other compensating factors, which is a little trickier.
DNW: What price range do you typically pay? $1,000? $10,000?
The most I’ve ever paid for a websites was $30,000. That site made passive money for me for years – I wish I could buy more of them. Anything above the $5,000 range should be treated like an asset – it should be making money every month and be mostly passive. If it’s less than that, it might be a project that needs some work, or the goal maybe to flip the website. With that in mind, some of my best deals have been found right around the $1,000 mark.
DNW: What are the biggest mistakes people making when buying web sites?
Getting caught up in the auction frenzy is a big mistake that a lot of website buyers make when they are first starting out. I’ve heard that a lot of folks never even take the time to change out their Adsense codes or affiliate links when they buy a website out of pure laziness. It’s like buying an info product – the buyer loves the rush, but he or she hates the work involved to make it profitable. Based on that, the biggest mistake people can make is buying sites and letting them sit idly on their servers. That’s a recipe for a lot of wasted dough.