NetBusinessBlog

How to Buy and Sell Websites Online

Posted on 22. Nov, 2007 by Dave in Advertising, Business

A friend of mine Adnan over at Blogtrepreneur.com got in touch to say he was selling his blog. Blogs are hot property and very sort after right now, selling for great prices. This takes me on to what you should look for when buying and selling any website online through sites such as Sitepoint.

I think I am perfectly poised to offer advice in this area having purchased over $19k worth in websites over the course of this year all from Sitepoint a website and other from Sitepoint this year..

For me, buying sites is a fun activity (when I have the cash of course). I made a decision earlier this year to start buying sites instead of starting one from scratch, personally because I no longer enjoy the start up process involved in making a successful site (some might say that is exciting) because I have been online for years I find it tedious and boring now and would rather leave that to someone else. I actually enjoy the day to day running and looking for new opportunities once a site is established.

When browsing Sitepoint, I like to see how much money a site is making (like most do I would imagine), take a quick look at their marketplace, make sure I can see long term potential value and then make a decision to purchase. I do not waste much time on this, I have found I can spot great opportunities quickly by summing up a few important factors. I also love the speed at which you can spot a site for a good price, workout their marketplace (numbers of consumers etc) then ball park their exact revenue based on traffic and product/service for instance. This for me is by far the easiest way to make money online.

Like anything though experience matters I think, having been online for many years I feel I can sum up a good site from a bad one easier than I could of, let’s say 5 years ago. I love it that it takes only a matter of hours to do some research and then buy a site. I have decided to outline what I deem as important factors you should look for when purchasing a website online.

Here is my Checklist “Due Diligence” for a website Buyer.

1. Website Validation

So much you can do here really ecompasses the whole amount – Check Whois first, name, contact email name of ownership, look at the date of the site as this is a great indication of (has it just been built last week) and is currently earning $100k per month (alarm bells) leave this one and move on. Check traffic data making sure to check for valid URLs (is it false paid for traffic, visit the URLs yourself to see) speak to the owner via instant messenger or other, even better phone to get a solid understanding of the sale and why they are selling.

Note: PR is not as important as it used to be, just make sure the site has the traffic is states and you?re happy with that. Do not purchase a site purely on PageRank!

2. Seller Validation

On sites like Sitepoint do a thorough check on the seller to see who he/she says they are, search their name/username/forum name etc…(ask them for this if you cannot find it) in Google this should bring up valuable data on sites they may own and if they have left comments on blogs or forums.

3. Managing the Website

Make sure the seller is going to set up the website and/or offer some form of after support in the price of the sale. Databases are commonly used on many sites and problems will arise if they are not transferred to your hosting provider correctly. Also the seller may use third party scripts to enable functions on their site (you need to have a full understanding of how they work and how to use them).

4. Understand how the Site Makes its Money

(be anal about this). Make sure the seller is going to guide you through how they sell their service/product, to who, from who, where too, everything you can. If they cannot do this do not buy the site. Unless you understand their market very well and have ties to the same industries as them you should be ok, otherwise this will cause you major headaches.

4 (a). If the site just sells a product that anyone can buy and you can order it from a certain wholesaler (for instance) that is fine (simple process). It will get more complicated If the site uses Affiliate Marketing to make its revenue. This is where you will need to join Affiliated Networks to set-up your own Account, you need to find out if you can you join the same one’s to make similar money. If for some reason you cannot get an account with the same provider (say you?re in the UK and they only offer their service to US residents) that would mean a serious problem for you and your earnings.

5. Design and Usability

Website owners overlook this important aspect their website(s). A well designed site can and will improve usability for your visitors/consumers ten fold. A site that states it is making lets say $3k per month can jump to $4.5k with a simple re-design that may cost you $500-$1000 USD this is money well spent. Always make sure to see the value in a well designed an usable site.

6. Revenue – this is most commonly over inflated in website sales. Never completely believe their revenue details as they will always inflate this to a certain amount to get more visitors to their sale.

Disclaimer: The following guide is not a 100% full proof way to work out the amount of revenue a site is making, but, It will give you a ball park figure to set against a Seller is he or she is inflating the revenue details a little too much to get the sale.

How I work this Out

Hit Google and search the sites product/service, if it makes money from Advertising search the Network it uses. Get information like Retail price for products, Average Service prices comparing three other Services in the same arena and for Advertising you want information on CPA, CPC, CPM, like if a visitor visits their site one they get paid $0.01 cents etc.

Working it out Approximately

For products it is easy – My false product is weight loss pills so say this website just sells this one product and the owner is stating he makes $20k per year selling this one product. Without asking them any questions you can do some due diligence on their revenue claims. I would visit a wholesaler (plenty online selling this type of product to get a rough purchase price) I get a cost price of $10 I know by looking at competing retailers this product is selling at $24.99 for 100 tablets.

I can now work off a margin of 40%. So here we have a product that has $10 to buy and sells for $24.99 (this is gross) without advertising costs. They stated in their sale, all traffic is organic so costs are Zero apart from a Hosting charge which is $300 per year. Ok, so they would need to have sold (approx) 1350 units over the year at $24.99 to make roughly this type of revenue after costs.

Now to work out how many visitors to their site based on this product. Google the product name “weight loss pills 100n” (example) find out how many times this has been searched for in a month say 40,000 times and their Google listing for this term is on the first page. This could give them at least 5% of that traffic per month (if they are above the fold in first three results) which would amount too (approx) 66 visits per day (this is conservative) product names will not get many searches per month but are much more targeted unlike a broad keyword like ?loss weight?.

In this market it is safe to say they would hit a sales conversion rate of 3% (I would like to think) So we have 66 visits converting at 3% which is almost 2 people at $24.99 this would be over a year period $17,892.72 (less hosting cost) USD per year. They are almost spot on with their evaluations of revenue, therefore I would be happy to take this website on without even asking any further questions.

Websites that make money are summed up like this “Numbers Game” put more faces to your Places! that is it for the most before looking at the quality of service or product etc.. they are selling.

Never, Ever think you will make the same money a previous owner made, they are different to you and have different desires, determinations for making their site a success. You may take it to another level or you may make less money. All sites and owners are not created equal, remember that…

Also, Never, Ever presume you can leave things in the hands of the Seller as nine times of ten you cannot. They will make mistakes and forget important things you need (I promise) – not being able to get hold them for after support when you need their help is a major problem.

When a site is fairly old the previous owner may have joined (lots) of online services under their name. This can and will cause issues unless they tell the service owner you are going to join up under the same domain name for instance. If this is not done correctly you will have a problem of ownership, this will mean you having to prove ownership. This has proved a problem for me even now and has annoyed me a tad and wasted countless hours messing about when all I needed was a list of what service the previous owner used to promote the website and username/passwords etc.

I did name this post “How to Buy and Sell Websites Online” seeing as I haven’t yet sold a website I will leave this for a later post, as I am planning to sell a site before the new year.

Good Luck!