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M O T I O N I N V E S T

The website buying landscape has certainly evolved over the years!

What started out as a small thread on the sitepoint forum has now grown into an industry with solutions for most of us!

This article is going to aim to introduce you to the website buying & selling industry online, it will cover the following.

It will be the most helpful for a buyer looking to acquire a content based website generating income from affiliates or ads. That is because it is the simplest/best online business model to get started with and the type of sites we sell. However, if you are looking to acquire a SAAS or e-commerce website this monster guide will still be helpful!

  • “Why” buy an online business
  • How do your personal constraints and skills play into what you should be looking for
  • Where to find websites for sale
  • Introduce you to the different services available to support your journey
  • How to evaluate a business – our complete due diligence checklist
  • The phases of a website purchase 
  • 16 funding options for buying a website
  • Typical deal structures
  • Frequently asked questions
  • Conclusion

This guide/course/masterclass was the result of over three decades of combined experience with the MotionInvest’s team core team.

  • building personal portfolios with 100’s of smaller sites purchased
  • over $1M spent on UpWork (just one one the founders)
  • several high 6 figure acquisitions executed for a private equity company
  • several 6 figure and a couple 7 figure exits

I hope some of the errors we have made along the way are captured in this guide and we can help you avoid them.

This is without a doubt the best resource/guide online if you are looking to buy a content website and we plan to add more sections and bonuses to it! 

Buying, growing and profiting from smaller content sites has been at the core of all of our business and we are excited to share some of our knowledge here on what we believe is the best business model to get started with online.

We will likely always keep this course free but please share it, bookmark it and signup to our email list to be notified when we have added additional resources and templates.

If you have any suggestions on how to improve this please let us know or if we left anyone off that should be included please contact us.

Settle in and enjoy…

Jon Gillham, Spencer Haws and Kelley Van Boxmeer

The MotionInvest Co-Founders

 

Buying Websites for Sale in 2019 - Where to Start

“Why” Buy an Online Business:

Here is the journey many of us take to get to this point…with an eye to achieving financial freedom for you and your family you start looking at options.

You look at the stock market and solid cash flowing businesses that are trading at a record P/E ratio of above 15x with the stock market returning a ROI of 8% if you are aggressive… looking for opportunities to do better and achieve financial freedom you look at other asset classes:

  • cryptocurrency/bitcoin… yikes!
  • gold… boring!
  • Brick and mortar store franchise… freedom sucking!

Then somehow you stumble onto owning your own income producing websites. Maybe it’s the annoying YouTube/Facebook ads we see and you want to dig behind the character and see if there are real people running real online businesses making REAL money!

At some point you ask yourself wait… can you buy a website?

The short answer is yes and this article shows you the entire industry landscape connecting buyers and sellers together. You will learn how to buy content websites with traffic from google or other search engines, such as Bing and Yahoo. This type of online business is often the best place to get started for 3 reasons…

  1. You can operate an understandable business model from anywhere with flexibility and freedom.
  2. The scalability of the business model becomes very interesting…if you can run one why not 5 or 10 or 50.
  3. If you can buy a business for 3x the annual earnings you can earn a 33% ROI even if you don’t grow it!

However, where do you get started?

  • Do it yourself?
  • Invest in a fund?
  • How do you purchase a website?
  • How much does it cost to buy a website?
  • Should you buy a few small sites or one big site?
  • What if you get scammed?
  • What if the site drops in a major search engine?

Fortunately, compared to a few years ago, the number of options available to you have greatly increased!

However, this increase in options has created its own problem of too many options making it difficult to navigate between the buyer and the seller. This article will map that path and discuss your options as a buyer.

The answer to where you should turn to get started is based on your personal situation but generally comes down to 2 key factors…

  1. Time/Capability – How much time & existing competence do you bring to the table?
  2. Money – How much capital are you wanting to invest in an online business?

Lets dig into these 2 questions in more detail…

1. How much time & existing competence do you bring to the table?

If you have under 5hrs a week I would not recommend you jump into this space. There is a lot to learn, many mistakes to make and learn from or avoid. If you have less than 5hrs a week your options are limited.

However, the options that become available to you increase with the more hours you have to put towards your online business.

Now, if you are someone with a skill set that you can bring to the table such as digital project management, content marketing, lead gen/sales, ecommerce or paid traffic then again the type of businesses you can buy increases.

For me personally, my schedule used to be 2-3hrs/night 5-6 nights per week. Not fun but 3 years of that schedule starting with some capability and I had more then replaced mine and my wife’s income. This effort was enough to build up my portfolio of profit generating niche content sites to allow me to secure the financial freedom I desired for my family.

So the bottom line is that your situation will be unique but you WILL need to be prepared to put in work! If you buy a website that is currently making money and don’t plan to put in work it will fail! Here is a very rough outline of your options based on your time/skill set…

  • <5hrs per week – Not recommended
  • 5-20hrs/week with no current skill set – Start slow / limited opportunities
  • 5-20hrs/week and you have an existing skill set – Lots of opportunities
  • 20hrs/week+ – Lots of opportunities
 

2. How much money are you wanting to invest in an online business?

The second part that is the largest determining factor on what options are available to you, is the amount of capital you want to deploy when purchasing an online business.

There are some players in the space that have literally billions of dollars to deploy in acquisitions. But what makes this type of business very appealing to many is that you can start where you are with the resources you have and there are now customized solutions for you along the journey.

Many people are first discovering this space because they are seeking returns and financial freedom that their job and the stock market can’t deliver.

Even if you have only $100 to bring to this industry, opportunities exist! Over the last couple of years more options have sprung up that support people bringing lower amount of capital to the table. Based on the capital you plan to invest in this asset class, here are the approximate options;

  • $0-$100 – Very limited options…better to wait and get just a just a little more capital to deploy
  • $100-$1,000 – Options to do almost everything yourself while following many great free training resources is generally your best option in this range
  • $1,000-$2,500 – Several options to shortcut the process or pay for training exist here to increase your chances of success
  • $2,500-$75,000 – Great sites already making money become available in this price range but vetted sites are rare as brokers don’t typically work in this space. Which is why we started MotionInvest.
  • $75,000-$200,000 – This is typically the entry point for working with brokers, in addition some small management services also become available but at this size really drag down the returns. Working with Due Diligence services also becomes a solid option starting in this price range.
  • $200,000-$1,000,000 – At this price point full service buyer reps and fully managed profit share companies start to operate and provide additional options. Along with the new services brokers really focus on this range connecting sellers with high net worth individuals or small funds. Additional funding options typically become available with SBA loans in this range as well.
  • $1,000,000 – $5,000,000 – High net worth individuals, entrepreneurs with successful exits under their belts and small PrivateEquity operates in this range with a combo of in house systems and support from the previously mentioned service providers.
  • $5,000,000 – Good for them 🙂 beyond my detailed understanding of the market and not covered in this guide… one day 🙂

The bottom line is that this journey of acquiring an online business already making money at a very attractive multiple exists with as little as $2.5k in capital to deploy.

 

 

 

Connection Between the Two – Time/Capability & Money

Now that we have covered your personal constraints and opportunities when it comes to buying a website the next section covers the website buying industry landscape. Where to go to expose yourself to this asset class given your constraints…

Where do you Buy a Profitable Online Business?

Based on your unique situation outlined above, the industry has an option for you. 

The 2 images below present the current online business and website buying/selling industry.

The first image below shows what opportunities exist for you based on the capital you have to invest and the time you have. 

Of course it is not perfect but if you are looking to figure out what opportunities exist in this asset class you can ask yourself how much time/money you have and at that intersection are your opportunities.

Website Buying and Selling Industry Landscape 2019

The image below shows a large number of the players in the industry for buying websites. From where to find websites for sale to how to get due diligence done, if they exist they are in the industry landscape map below.

The path between the buyer and the seller can be complex but this industry landscape shows the majority of the players and how they interact with one another and connect you the buyer to the website seller.

plan - Website Buying and Selling Industry Landscape 2019

If you are looking to buy a profitable online business such as a content website then think of the map above as your attack plan!

In the section below we are going to cover each of the players in the industry. From brokers to due diligence to operators and investment funds this guide will do a deep dive into…

  • What they are / how are they setup to benefit you
  • List of companies providing the service
    • Plus a tip from many of them
  • Benefit of working with them (pros)
  • Risk of working with them (cons)
  • Tips for working with them

The types of providers that are covered in this section include…

  1. Brokers
  2. Do it Yourself
  3. Direct Deals
  4. Due Diligence Service:
  5. Buy Side Representation:
  6. Starter Sites
  7. Profit Share Management
  8. Funds

If you have ever asked the question “where can you buy a website”, below you’ll find the most complete list with a detailed description of each service anywhere in the world! If we have missed any please contact us.

1. Brokers and Marketplaces

What is a website broker?

A broker is an independent party, person or firm who is hired by the seller (the brokers customers) to sell their website. They are typically compensated through a potential listing fee and earn a commission once the site sells. 

How can a website broker help you? They create a connection between both parties, the buyer and seller, facilitating the deal and often the transfer process. They can be a great resource to guide you to a website in a market that fits your personal situation in terms of capital available and time. 

How do website brokers sell websites? Usually, the brokers have a significant contact database to reach the largest possible base of buyers and sellers. Brokers build relationships with different buyers and sellers and try to connect them together when a deal makes sense.  

There are different types of internet business brokers, while some of them will adhere to the IBBA (international business brokers association) standards others don’t see it as being the best way to serve their clients. Many brokers will specialize in a certain type of online business like Coran from TheFBABroker or others who specialize in e-commerce websites.  

The brokerage fee a broker charges their customers is taken when a site is sold. Usually, it’s for their specialized services, and is calculated as a percentage of a specific transaction, or as a flat fee. For example a real estate broker fee is typically 2.5% while the market for an internet business broker justifies a higher fee of 7.5%-15% depending on the size of the deal.

Every broker has a contract with his clients that typically provides them exclusivity on a listing and may range from three to six months in the market.

A marketplace is similar to a broker but can be much more self serve with the middle man taking a smaller cut and providing less value. For example Flippa is the best known marketplace with very limited controls between someone who wants to list and their listing going live. While most brokers will have a “marketplace” with their listings for sale they are vetted to ensure only sites that meet that brokers standards get through. 

 

List of website brokers and marketplaces

Who are the best website brokers? Where do you find websites listed for sale? Well, if they exist they are on this exhaustive list below! Many of these brokers we have met personally and some we have done business with, whenever we have done any business with we try to disclose that. I reached out to get their tips for buying websites using brokers.

1. EmpireFlippers.com (done business with):

Empire Flippers is one of the most popular brokers or marketplaces to buy and sell websites. They started out at the lower price point but have progressively moved up market. They have consistently been in the inc 5000 list of fastest growing companies in the US and their after-sales support is industry leading with a well defined site transfer process.

“Be honest with what you want and can afford. A broker cuts down your leg work a tremendous amount by providing you enough deal flow that you can find a business that really suits you. In order for that to work in your favor, you need to tell the broker your criteria. The best way to do this is to set up a criteria discovery call. They last between 15-30 minutes and they can be a huge help in creating an actionable game plan when it comes to acquiring an online business. Not only will it help you find what you want easier with a broker, but it will help you tap into the vast knowledge that the broker has that you’ll be able to use whether you acquire through a marketplace like us, or somewhere else down the road in your business.”

Greg Elfrink

 

Director of Marketing

2. Thefbabroker.com (done business with):

Coran focuses on helping higher ticket Amazon FBA businesses get sold. His list is highly focused on Amazon FBA businesses over $1M.

3. Flippa.com (done business with):

The OG when it comes to selling websites. Lots left to be desired and a place that I have never felt good sending someone as there are A LOT of outright scams on the site. However, if you know what you are looking for there can be some decent deals here since the number of scams that exist keep the multiples on Flippa below market for even the legitimate sites.

4. Digitalacquisitions.co (done business with):

Dustin focuses on a diverse range of online business models and can have some of the most unique digital businesses for sale as a result.

“Get on the phone with the selling broker as soon as possible. This is a relationship business in more ways than one, and often there will be multiple buyers interested in the business you’re looking at. So if you can establish a relationship with the broker, that can only help your cause. It’s also important to explain why you’re interested in the business, why you think you’re the right buyer and how you’ll be funding the deal. So if you can’t get on a call, offer this information up-front and that will help you stand out, as well.”

Dustin Struckman

Director

5. FEInternational.com (done business with):

FE has carved out its niche in both SAAS businesses and affiliate websites. They have high quality sites for sale and a solid amount of deal flow which is evident by their inclusion on the inc 5000 list.

6. Trustiu.com:

Trustiu is an international website broker focusing on the European market and have a wide range in prices available.

“If you want to buy a website be honest with yourself, your capabilities and your budget. Don’t fall in love with a project’s metrics if you don’t have the knowledge and skills to maintain it. Talk with your broker and explain your background. This is critical to spott the best opportunites for you.

If you want to sell a website remember to do it at the best time, ie when it is growing. If this is not possible, keep in mind that one of the most important analytical factors for a potential buyer will be the current state of your site. The past results migth not be as important as you think and the “if’s” are not an option either. One of the biggests “mistakes” that a website owner can say is something like, “If the buyer does this and that …”.”

Nelson Ferreira

CEO & Founder

7. QuietLightBrokerage.com:

Website broker started in 2007 and popular for its experienced entrepreneurial brokers. Many of the brokers themselves come to QLB after successful exits and the co-founders at MotionInvest know some of them well. A very respected website broker with high quality (but high ticket) listings.

 

8. Buysellempire.com:

A broker that seems to specialize in e-commerce sites with a wide range of valuations and limited sites for sale. I don’t have experience with this broker so can’t comment further.

“Ignore Hypothetical Pitches, Stick to Facts. It’s easy to come across imaginary sales pitches from many business owners and brokers. Example “If you do this __ _, you can triple the income in no time.”

If that were so easy, the seller would have done it already. Don’t get caught with these bluffs justifying non-imaginary valuations from brokers. This should mean absolutely nothing for business valuation and your decision.

Choose your broker wisely, who evaluates businesses with current SDE and whether the purchase would be sustainable for you in the next 2-3 years down the line.”

Ansh

9. Websiteproperties.com:

With a wide range from listings for sale for $70k to $7.5m this experienced broker has a lot of listings available to search.

“It’s easy for buy side brokers to be focused on commissions rather than their obligation to you, the client. Find an experienced broker that has a good understanding of the type of business you’d like to invest in, access to capital providers in the space, and who will be capable of negotiating deal terms and a structure most suitable for your needs and not their bottom line.​”

Chris Sheedy

Vice President of Sales

10. Wesellyoursite.com:

A broker with 14 years experience and I believe the only fellow Canadians on the list. Currently no listings for sale and typically higher priced SAAS or e-commerce businesses.

11. Acquisitionstation.com:

A broker with extensive experience who currently has fairly limited inventory but does specialize in the sub $250k range.

12. Latonas.com:

Started in 2007 and based out of Peurto Rico, they have a large selection of content, ecommerce, FBA and SAAS businesses for sale and a good spread from over a dozen options below $100k to a similar number over $1M.

13. Bizbroker24.com:

Bizbroker24 makes a bold claim that they sell more internet businesses than anyone in the world. Their listings have a wide range from <$100k to over $25M.

“Find your Passion and Make it Your Business: Know Your Strengths, Match Your Passion With a Consumer Need, Choose the Right Market and Know Your Financial Limitations . A hot business opportunity should be based on a long-term trend, not a short-lived fad. Look at the business overall.”

Steven Endrizzi

CEO & Founder

14. Digitalexits.com:

Jock and his team at DigitalExits focus on fewer deals then some other brokers but aim to be a place where deals get done.

15. Websiteclosers.com:

A broker also on the inc 5000 list with ~40 active listings and 200 closed deals they have a large inventory if you are looking for either an ecommerce website or an affiliate website.

16. Exchangemarketplace.com:

This platform is powered by Shopify, which lets you buy and sell an online store with other people in the marketplace. To date it seems to have all the problems of the Flippa marketplace without any of the redeeming qualities. One to watch as once some additional data validation is implemented, the potential seller pool for shopify ecommerce sites is massive.

Pro tip – If you want to search many of the brokers above all in one place you can here

The benefit of working with brokers to buy websites

When you are looking to purchase a website whether it is an e-commerce website, content site or SAAS, a website broker likely has a listing that is interesting for you.

Most entrepreneurs when they decide to sell their business and don’t have a strategic acquisition option end up working with a broker. For this reason brokers will usually have a large number of different businesses for you to look at.

We have collectively worked with several of the brokers on the list above and have had mixed results in terms of success but never had a bad experience due to a brokers work.

If you are looking to buy a website / digital asset business I’ve outlined  the benefits of buying a business listed for sale by a broker.

1. Inventory – They Have the Sites for Sale:

Most importantly if you are looking for a website to buy you need to go where they are listed. Brokers do a great job of presenting the websites they have for sale and you can access a decent amount of information to understand if the site might meet your investment thesis.

2. Numbers are Validated:

Before listing a website for sale most brokers go through a solid due diligence process themselves to ensure they are listing businesses with verified numbers. The PnL (profit and loss) statement is typically where the brokers spend a lot of time before listing a site to ensure the yearly revenue, monthly profit and all other relevant information of the business is accurate. If this number turns out to be wrong in due diligence it can be a red flag and may result in the site not being listed.

This is because if it comes out in due diligence when you are buying the site that some of the numbers on the listing are wrong, it hurts their reputation and business.

However, whenever buying a website it is important to remember to DYOR – Do your own research! Like any form of deploying capital with the aim of acquiring an asset that will increase in value it is critical that you do your own research. Brokers are human and make mistakes so it is critical that you validate the numbers yourself. Even if it is not an outright error there are often times where the broker/seller may include add-backs that drastically impact the PnL which you don’t agree with.

3. Stay on the Lookout for Your Type of Business

Once you have built a relationship with several website brokers they will understand what type of site/budget you are after and will notify you when some become available that might meet your investment thesis.

Are you searching for a “passive income” content site monetized through a credit-card CPA offer? Or are you an expert at being able to increase conversions looking for an e-commerce site with a low conversion rate you can improve? Or an app, FBA business, dropshipping store or looking to flip a website? Whatever your focus and budget is, by building a relationship with brokers who are most likely to have a listing you will be interested in you will be in a better position to know when they come up.

4. Deal Closing Support

It has happened to me before and a broker saved the day! After finding a great site, negotiating a deal, signing an LOI (Letter of Intent) and completing the due diligence we were ready to move forward with closing but the seller got cold feet. Sometimes these businesses are the sellers “baby” and they get emotional about letting it go. However, the broker was able to empathize with the seller in a way that I wouldn’t have been as a buyer which ensured the deal got done.

On top of the emotional support they sometimes need to provide their customers they can also be very helpful at problem solving whatever issue(s) the deal may get hung up on. If the lawyers are making an issue out of an item on the APA (asset purchase agreement) or the site/domain transfer ran into an issue, they have seen it before and can help the two parties get through it.

Risks of working with brokers

While there are many advantages to working with brokers you should be aware of some of the risks due to the incentive misalignment (more on this below). Let me also pre-qualify this by saying I have only had good experiences working with the brokers within the industry.

1. Their Incentives are not Aligned

A brokers business model is simple… they make a % of the revenue from 7.5-15% depending on the deal size. They want to get as much deal volume done as efficiently as possible and do it in such a way it doesn’t impact their future business. This means they aren’t as concerned with the long-term view of the business potential, they simply want to get a deal done. These incentives are not unique to online business either, business brokers in other industries and real estate brokers face the same set of incentives.

It is only you who will be holding the business in 6 months, 1 year, 3 years etc.

2. They Don’t Work for You – “Buyer (you) Beware”

Most brokers are very personable/likeable people…great to have beers with! But, it is always important to remember that their priorities are…

  1. Make Money – Specifically money for themselves now and in the future
  2. Company – Making their company money so they can keep doing the step above
  3. Seller – Doing right by their client who they have a contract with
  4. You – Not pissing off the buyer so it doesn’t hurt their reputation and ability to take care of the priorities above.

This is not meant to say that they will act unethically (I have never experienced that) but it is important to remember how the incentives are structured so you can look after your interests.

Tips for working with a broker to buy a website 

There are some useful tips that you can implement when buying a website through a broker.

1. Build a Relationship with the Broker

You should build a relationship with the brokers most likely to have a listing you are interested in so they can help keep an eye on the listings that make the most sense for your situation.

2. Trust but Verify – DYOR (Do Your Own Research) 

As a buyer, it’s necessary to collect all the data and operational details related to the website before purchasing it. This information will help you figure out if the business meets your time constraints and the level of attention the business needs on a daily or weekly basis. 

For a website, it’s previous traffic data, net profit trends, tools used, external resources used, and most importantly, income records are essential factors that you may want to verify yourself as well.

See the deep dive into due diligence later in this article to understand how to verify this yourself. 

3. Standards Driven Approach to Valuation & Add Backs

As a buyer, you should always try to figure out whether the valuation method and add backs included match the current industry standard. An add back is a cost that the seller identifies as either a one time or non essential cost moving forward. Often the owners income will be added back and any significant development work but what you want to be careful of is costs you will incur moving forward also being added back. You may not be correct with your assumptions, however you will be able to have a standards based discussion on the current valuation. Always be sure to inspect the add backs in detail as often essential operational costs may be added back. The add back section of a businesses PnL is the most open to interpretation and not highly structured like the rest of the PnL following accounting rules like GAAP

4. Get as Much Information on the Sellers Motivations as Possible from the Broker

The broker wants you to make a deal happen so they will often provide a lot of information about the seller including both written/unwritten reasons for selling the business. This information can be critical when it comes time to structure a deal. For example, if the broker knows and communicates to you that the seller is going through a life event (health, relationship) and needs to sell to free up time but doesn’t need all the cash now it can educate you about what type of offer to make that is a fit for everyone. There is more information below on how to structure an offer.

2. Build a Money Making Website Yourself

DIY - Website Buying and Selling Industry Landscape 2019

 

Like many of us when we started online our available capital was limited (as a broke student for me) and so our options of shortcutting the process and buying a money making website didn’t exist. 

 

This section discusses the pros and cons of building your own website from scratch rather than buying one.

 

How to create a website yourself 

 

You may think that creating a website yourself will require a lot of technical skill. However, today with easy to use CMSs like WordPress, drag and drop website builders, youtube tutorials and ready to use plugins; you can build a website within a few hours if you know what you are doing and within a few days even if you have very limited knowledge. 

 

Here are the basic steps…

 

Niche Selection

 

The most important step is completing the keyword research and competitor analysis to identify what the topic of your site will be about, how it will be monetized and what keyword/content ranking opportunities exist in the niche. 

 

  • See the ultimate guide to keyword research created by Spencer here.

 

Website Creation

 

Now that you have a clear idea of your website, you’ll need to get a reliable web hosting service such as Siteground, Bluehost or any other web host of your choice. While purchasing the web host you will be offered to select a domain name for your website. You can purchase it directly with the web host or you can go to any domain name registrar and buy one from it (such as Namecheap).

 

If you decide to buy the domain from a 3rd party registrar, you will be required to point the domain name to the Web Host.

 

From here, you will need to install wordpress in the backend of your web hosts cpanel. We recommend wordpress for your site since it offers a wide range of free + powerful features and extended work functions with lots of plugin options.

 

As soon as you install WordPress your site will be ready to design, add content and configure the globally recommended settings. With this setup, you only have to pay for the domain name and web hosting which will cost around $100 to bring your website live.

 

  • See the ultimate guide on how to start a blog at RyRob.com here.

 

Content Creation

 

Identifying content gaps in the marketplace where you can create useful/helpful resources that don’t exist or could be better that will truly help people is the key. 

 

For example this monster guide walking people through the website buying landscape and process did not currently exist and is the reason for its creation. Current articles around this were either a list of brokers or a website pushing their broker service, so we thought a holistic full industry guide to steer you through the landscape was needed.

 

If content marketing is not your focus there are content marketing services that specialize in creating content for website investors and portfolio owners. 

 

Training

 

If you have some capital to invest and decide that taking a course to increase your capabilities is a good idea here are a few thoughts to hopefully steer you in the right direction.

 

Courses can provide a framework for people to work through while they learn how to grow their site. Although I never took one I have changed my opinion on them as their quality has greatly increased. Now for the right person who has the capital to invest I do recommend they have a game plan (which can be greatly influenced by a course) when they set out to build an online business.

 

One such course is an AuthorityHackerPro which includes all the top quality training to build an authority website that can earn up to 6, 7, 8 figure income. It is not cheap or always available and not recommended unless you have already had some success online. 

 

Another excellent introductory course is Doug Cunningtons website growth course which provides a great step by step introduction to building a content site that will rank in Google. 

 

If you are looking for specific skill building then Jon Dykstra’s options are great or if all the options above are a little too pricey but you still want the structure of a course then look at deals on Udemy for digital marketing courses (courses often on sale for $9.99). 

Next we will look at the pro’s and con’s of building yourself vs buying. 

 

The benefit of building a website yourself

1. Building Fundamental Capabilities

The benefit you will get by building a website yourself is your personal growth as a webmaster, digital marketer and business owner. Building a website on your own takes courage and determination as well as consistent involvement. 

 

These skills that you will learn here will help you in future work and improve your working experience.

 

2. Save Costs

Building the site yourself will be less costly and you won’t need a huge amount of money to get your site started. Most of the tools and plugins are available for free (or limited functionality for free). 

 

Risk of building a website yourself

 

1. Time and Earnings Opportunity Cost

Building a site yourself from the ground up takes A LONG time! Many months/years of effort are required before the site will really become the cash cow you are looking for. 

It is a very long process, even though the building of the site looks easy and simple enough, it takes time to maintain, modify and update the content on your site. 

What takes the longest is the growth of of the rankings in Google and the eventual earnings. 

If you have capital sitting on the sidelines you are wanting to deploy but you choose to build a site first to see how it goes that is time you will never get back. 

 

2. Market Value of the Initial Skills You Develop are LOW

If you are a capable individual with a little capital to spare it can be a VERY inefficient allocation of your time to learn a skill set that you can pay someone $4-$5/hr on upwork to do.

 

3. Direct Deals

What is a direct deal?

A direct deal when buying and selling a website refers to a deal done directly with the seller (no middlemen involved). These deals do not require a broker.

In a direct deal, both the seller and buyer have to communicate with one another directly. If both parties agree with the website value then they can proceed to the transaction part where website files and money transfer takes place.

Usually, this kind of deal happens with…

  1. Smaller sites (where paying a listing fee and dealing with the inefficiency isn’t worth it)
  2. Strategic acquisitions (you buying a competitor you were already aware of)
  3. Much larger mergers and acquisitions where the seller might go direct to the known entities that can handle that size

The majority of the people reading this will fall into group a or b so that is what we are focused on and have experience with.

Where to find a direct deal?

Finding a direct deal is hard! Typically people do not have a large enough portfolio of sites they have for sale to list it on a site so you need to go hunting.

However, on social platforms like Facebook you may be able to find some direct deals in groups where people are actively engaged in discussions around building websites to make money. There are various Facebook groups where people post when they are willing to sell a website, and of course without a broker.

In the case where you know the niche you want to be in you can send direct emails to other website owners asking if they would be interested in selling you their website. This approach has been tested by many with varying results. Here is a system you can execute yourself for B2B lead generation

Spencer, Kelley and I started MotionInvest.com to address this hole in the market and provide a storefront where direct deals could be done efficiently on both the buy and sell side. We acquire the sites directly ourselves so you are selling to us and if you are buying a site you are buying from us. Our skin is in the game since we need to truly vet the sites to ensure we never buy/hold a high risk site. You can read more about the history behind MotionInvest and the problems we are solving at Spencers post here.

 

“Find a site that you can at least resonate with the niche! These sites are still at the stage where you can’t put an entire team in place so you will be spending time thinking about/reading about the niche you have selected. So make sure you enjoy it.”

Kelley Van Boxmeer

CEO & Co-Founder

Benefits of a direct deal

1. Efficient Purchase of Sites

With a direct deal the purchase can be more efficient and faster since you are only dealing with one party (the seller)

2. Price can be Lower

There are no brokerage fees or listing fees that the seller is taking into consideration when they are selling. For this reason sometimes direct deals will be done at a lower multiple than a brokered deal.

3. Support from the Seller

Since you build a direct relationship with the Seller there may be more interest moving forward in continuing to provide support. At MotionInvest we are providing this support with resources, a customized ASANA action plan and regular calls. You can see all the post sale support here.

Risk of a direct deal:

1. Inexperienced Other Party

If the seller is inexperienced the process can turn from efficient to very inefficient and without a broker to assist the seller you will be stuck handholding them through the process

2. No Broker Assisting With Due Diligence Data Collection

Brokers have an incentive to not get a reputation for having poor quality listings with incorrect data. Although even with a broker it is still 100% buyer beware and you need to do your own research with a direct deal you are the only one coordinating with the seller and this means that data collection to do proper due diligence can be more time consuming. 

3. Transfer Process has Increased Risk

The transfer process can have increased risk depending on your trust level of the other party. For example, if you send the money before they send the domain you might get scammed. Solutions such as Escrow.com exist to mitigate this risk if your trust in the other party is a concern. 

4. Wasting Time

If you are considering doing outreach or monitoring social media for sites you can potentially waste a significant amount of time without any certainty of being able to find a site that meets your investment thesis. 

4. Due Diligence Services

Due Diligence

What is a due diligence service?

Due diligence is a term used to refer to the process of research and analysis that is done before selling or buying websites in order to verify whether there are any major or potential issues with the website. A due diligence service completes their due diligence process for you and provides a detailed report.

There is a significant deep dive into the due diligence process outlined below but this section will cover the providers that exist to assist with Due Diligence. 

These services are for buyers who are looking to understand the risk of the site and double check that the PnL is correct without them needing to do all the work themselves. 

Buy side brokerages also provide their own internal due diligence service for their customers but more on those services further down. 

A due diligence service is like taking the used car you are about to buy to a professional mechanic to get them to inspect it.

acting fast

List Of due diligence services

I have personally used Centurica (one of the providers) when we were scaling the acquisition arm of a private equity company since it provided a great on demand service for the detailed work of PnL verification for more complex online businesses. 

In the list below we have mentioned the existing due diligence services that are available. 

  • Centurica.com (done business with): Centurica is the leading website risk assessment company that helps website buyers by providing services like due diligence, website assessments, and verification details to the website buyers.

“There are hundreds of moving parts in a business acquisition. We recommend hiring a due diligence firm with an established process to professionalize your diligence period. An experienced team can help both new and experienced buyers avoid costly mistakes.

Identifying the issues is only the first step. Your team of diligence, tax, legal, financial and other partners should not only identify issues, but also help you understand the severity of the problems and determine ways to mitigate the risk.

In situations where there are commingled businesses in a single entity, a lack of bookkeeping, large volatility in financials or traffic, uncertain account, supplier or vendor transitions, declining trends, or other risks that the buyer does not clearly understand, we recommend hiring external consultants to provide insight and support.”

Brian Deiner

Advisor

  • Rapiddiligence.com: This site offers precise due diligence and value estimation of any website you’re considering to purchase.

“Once you’re certain that you want to buy an online business. Depending on the due diligence company and the service you choose, everything else can be figured out. For example, we have clients who know exactly what they want and as experienced buyers, they solely want our due diligence expertise on a particular business. Others, usually first or second time buyers, want us to guide them from start to finish – including risk profiling and budgeting. We’re happy to do all that, as long as you’ve done the industry research and know this is what you want to invest in.”

Ahmed Raza

CEO & Senior Analyst

Benefits of working with a due diligence service

A due diligence service can be either your primary or secondary layer of certainty when it comes to the website you are buying.

1. Be certain about the data

Having a trained second set of eyes to go over all the data and verify everything is correct can help ensure you avoid some very costly mistakes. 

2. Understand the risks of the website

Looking at several factors beyond just the data these services can help explain to you the risk of certain characteristics of the website. For example if the backlink profile has risks to the site embedded within it this can be a risk that is good to know before purchasing the site. 

3. Cover Your A$ & Being Responsible with Capital Allocation

Any activity only intended to cover your A$ is typically inefficient. However, in this case if you are deploying outside capital than being able to show how you have done EVERYTHING you can to be a good steward of their capital is valuable.

Risk of working with a due diligence service

1. Time

The main risk of working with a due diligence service is the extended amount of time to get the deal done. Especially if there are multiple people competing to purchase the site requiring due diligence can take an increased amount of time. As I show further down the critical path for most site purchases that involve a due diligence service is the report they provide. When speed matters to get a deal done you might miss out!

2. Cost

Both in terms of the fee paid (which in my experience is not unreasonable) and time for all parties it can be expensive. If the seller is time constrained and looking for an efficient sale needing to go through this process might make your offer not as attractive as another. 

3. “Make a Mountain out of a MoleHill”

If the service doesn’t find anything it wouldn’t be doing its job and every site has some amount of risk associated with it. So almost always these reports identify some “yellow” flags which can be a distraction from getting the deal done or cause someone without full understanding of the report to throw up roadblocks.

Ain't No Problem

4. False Sense of Confidence

Buying websites that make money has risk with it! Even if nothing is identified doing the most comprehensive due diligence it does not mean that there isn’t risk such as the rankings dropping in Google, getting kicked off of the monetization platform you are working with or one of many other risks we live with. A due diligence service is great but ultimately they don’t have skin in the game and you are 100% responsible for the website you are buying.

5. Buy-Side Broker or Representation

Starter

What is a done for you starter site?

A starter website typically refers to the services that provide websites which include all the fundamental components needed to be a successful money making site.

It has all the parts but no momentum behind it… think of a starter site as a race car with no fuel in it, an engine and tires that could be upgraded over time and then you need to fuel it and drive the race.

These sites will include all the elements you need to be successful so you can directly concentrate on the growth of it, no need to learn low value and single use capabilities like installing wordpress or logo design.

List of companies that provide done for you starter sites

There are a few companies that offer completely designed, optimized done for you starter sites. Most of them are very good.

Here’s are the companies that produce done for your starter sites.

  • BrandBuilders.io (Done business with & a part owner): BrandBuilders provides excellent customizable starter websites that are well optimized and ready to go instantly for you. You can also order custom blogs, custom made affiliate sites and custom made eCommerce websites as well. The websites that they provide are compatible with SEO and you will be able to create an online brand immediately.

Make sure you don’t underestimate the work! We can help you get started with a solid foundation and with a site that you can be succesful with but it is up to you to grow the business. Plan and schedule consistent work blocks to growth the site!
BrandBuilders.io”

Jonathan Gillham

Co-Founder

 

  • HumanProofDesigns: With this company, you can build any kind of website to gear up your business right away, rather than crafting it yourself. They can provide done-for-you blog, eCommerce sites, affiliate sites, etc. You can also buy some “aged” sites that have started making some money however the multiple that is charged for these revenue generating starter sites is very high.
  • Pure-ecommerce.com: This company offers a complete ecommerce business in a box full package. Pure-eCommerce produces ready-made websites for sale that provides you with everything you require to start your own ecommerce business including the connections to suppliers.

Benefits of working with a done for you starter site service

The done-for-you starter sites have some great advantages as well as disadvantages.

  1. Get started Fast and Focus on what matters 

This is the biggest advantage. As these sites are designed, built and often have the initial content put on entirely by 3rd party companies, you don’t need to learn ALL those new skills! You can shortcut the process by up to 3 months in most cases. For many people that shortening of the time between where they are and success makes A LOT of sense.

  1. Custom made designs at cost effective prices

With a custom site option you can get a good looking custom site done for your unique idea at a very reasonable cost. Working with a website developer that only builds organic traffic focused sites that are typically monetized through affiliate or display ads ensures your site is setup and ready for success.

  1. No SEO errors that can prevent your business from getting off the ground

Getting a site built by people that know what they are doing vs yourself can avoid several fatal setup errors that will prevent you from being able to achieve the success you are looking to achieve. For example, it might be enough to cause you to rethink your plans if you made an error where you tried to grow your site for months only to realize you never turned off noindex!

Risks of using a done for you starter site service

  1. Only the start – be ready to work

There is ONE very big risk I have seen with this model and people thinking they are further along then they really are and not putting in the required work. Getting the site made is the easy part! The hard part is growing the site and before you sign up to one of these services ensure you are prepared to put in the time necessary to achieve what you want to. 

7. Profit Share Operator/Management

A profit-share or operator management agreement is a structure where you give your capital to an experienced operator to find, buy and grow a site.

List of companies currently offering this service:

IncomeStore: IncomeStore is the leader in this space. They have been around for a decade and demonstrated consistent very high growth rates landing on the Inc. 5000 several years in a row with $50M in revenue in 2018.

 

The great thing about managing an online business is the fact that there are more data and analytics than ever before. So take the emotion out of it and allow the data and math to dictate your decisions. 

There may be a specific industry that you want to get involved with. Make sure you deep-dive the data before you do. If there are not readily available supply and demand gaps that you can attack, then you might be fighting an uphill battle. 

Truly learning how to interpret your data will also give you a good feel for when you have reached a point of diminishing returns.  Doing this will allow you to generate an exit strategy ahead of the curve, further increasing profitability. 

Dan Lewchanyn

Communications Director

OnFolio: Onfolio was started in 2019 by Dom Wells originally from HumanProofDesigns. He offers a few services including a buy and manage or just management service. Compared to IncomeStore it provides a significantly lower price point for participation.

“Find a site that you can at least resonate with the niche! These sites are still at the stage where you can’t put an entire team in place so you will be spending time thinking about/reading about the niche you have selected. So make sure you enjoy it. “

Dom Wells

Owner

AlphaInvestors: Like OnFolio AlphaInvestors started in 2019 and provides a full stack of solutions including its flagship service to buy and manage a website for you.

“My number one tip for working with website operators would be to give them complete control. That’s based on a premise that the operator is someone you trust (as it should be). Don’t micro-manage. Let them run the project through their system because, more often than not, the operator can find the ‘hidden’ quick wins just by taking a quick look at the site. If you’re constantly interfering in their job, there’s a (very) high chance that you’re limiting the growth of your investment. I fired a handful of clients when they tried to be hands-on because that didn’t allow us to do what we do best – scale profitable websites.”

Andrej Ilisin

Founder/CEO

 

Benefits of working with an operator

  1. Saves you Time

If you have capital you are looking to deploy into this asset class but are short on time then this is a great way to get some exposure to this space.

  1. Return Potential

The return potential for digital assets is very attractive when they are growing. An asset that is relatively liquid (sites can be sold with some certainty) that can move up by 100% or down by 50%+ in a year provides a very nice return compared to other investments (when it moves in the right direction).

Risks of working with an operator/management company

  1. They can’t let losers be losers in their portfolio!

When operating a portfolio of digital assets it is a matter of when, not if that one of the sites will be negatively impacted by either a technical error or a Google algorithm update. It rarely (almost never) makes sense to double down on a loser to build it back up vs accelerate the growth of your winners. Under the operator model where 100% of your interest is in the 1 site you invested in but the operator is incentivized by sites across the entire portfolio it creates a significant inefficiency where the operator is needing to put time into losers (or even worse, lost causes) at the expense of the growth opportunities on the sites that are growing. So even if you are fortunate enough to have a winner it is likely not getting the attention it would otherwise be getting because limited focus is being directed at the losers.

  1. Returns are not attractive unless you invest a larger sum (200k+) or the site grows A LOT

Here is some math that shows the expected return profile may not be attractive. Say you work with an operator to deploy $100k and buy a site making ~$2.8k/month. Management takes a $1k/month mgmt fee and operating costs run $800/month leaving $1k/month to be returned to you or 10% ROI for a high risk asset. These models often only work when the operator can grow the asset significantly. When evaluating an operator arrangement the number may be different then above but I recommend that you do a growth rate sensitivity analysis and understand what will happen to your return in each of the following growth rate scenarios: -75%,-50%, -25%, 0%, 25%, 50%, 100%.

IncomeStore has done an interesting guarantee to address both of these problems. Because of their scale they guarantee a 15% ROI and therefore can let the losers be losers because they make up for it on the winners. As long as the strategies they are relying on now continue to work everyone is happy.

8. Digital Asset Funds

Finally I will cover a few other ways to get exposure to digital assets. Passive investing through either a micro fund or a public company with exposure to this asset class is an interesting way to gain access in a very passive way.

Digital asset investment vehicles

WiredInvestors (done business with) – Not actively taking on additional capital

GrowthStackInc – A micro fund that focuses on digital assets.

LTV Fund (done business with founders but not LTV fund) – Created by the founders of the broker FE International LTV fund is to focus primarily on SAAS.

Constellation Software (I own a small position of this stock) – For exposure to digital assets in a public vehicle you can look at Constellation Software and their 10 year history of generating a 30% return on invested capital. Don’t let their incredibly ugly website fool you this Canadian company has built a track record and culture that warrants its comparison as the digital asset version of Berkshire Hathaway.

ForkEquity – A micro PE fund focused on small digital assets. Specializing in more tech enabled companies compared to content sites. They also have some acquisition training at microacquisitions.com   

Website Due Diligence Checklist

So far we have covered…

  • what makes website buying appealing
  • what your options are based on the time and investment capital you have
  • introduced you to the many different options and service providers in the industry

Next we are going to look at how to review a website to identify if it might be a good purchase (aka Due Diligence).

When looking at established websites for sale, it’s easy to see a few graphs sent over from the current owner and believe this is a great site. But without completing a proper deep dive and a due diligence data check, you will never know the true value/risks of what you are buying.

Over the course of 10+ years, Jon, Kelley and Spencer have bought and sold 100’s of websites and have created some internal website due diligence systems to ensure the sites they are buying are as low risk and high quality as possible.

Too many times we have heard horror stories from prospective website investors who have spent a lot of money only to realize they should have seen the warning signs in the data deep dive.

We want you, our audience, to be aware of what you are buying and we want you (even if you are not buying with us), to be knowledgeable when buying a site so you protect yourself from buying a lemon. This is why we are showing you the process we use when we buy sites and what type of due diligence each and every site goes through.

Time to do a due diligence deep dive!

Your Day

General Site Once Over

Remember during this process all the data you see will impact whether an offer will be made, what type of offer to make and the amount of that offer.

In addition while working through this process make sure to not only be focused on the offer but what would happen after and try to spot any opportunities for growth.

You want to take a look at the actual site and see how it’s being monetized or what type of site it actually is (niche content site, e-commerce, drop shipping, SAAS, etc.) and what the site is actually built on. 95%+ of the time the site is built on WordPress and we usually only buy sites that are built on WordPress to keep our operations standardized.

During the general site once over have a look at the content and ensure it is readable. You can also look at the design, but that’s an easy fix by using a free wordpress theme or something similar. You also want to look at opportunities to improve the site. If you don’t have an idea at the start then use the due diligence process as a great step in coming up with a growth plan. Also, some people care about what the site is about, you are going to be working on it for a while, so sometimes it’s good to buy a site in a niche you are interested in (or at least one that’s not in a niche you are embarrassed about – ask Jon about the topic of a site he bought thinking it was about something else – embarrassing!).

Take a look at the domain name to ensure its not spammy looking.

 

Example of spammy looking sitesExample of Non spammy looking sites
Ahjzyz.com (doesn’t look english)blueofcolors.com
Bjdkds.com (doesn’t look english)calgarybodypaint.com
Anti-aging-ratgeber.net (too many hyphens, should have 0-2 only)Glcsc.org (this may be acronym)
Cheap-jordanssale.com (usually anything with cheap in it is spammy)Ego-chic.com (looks english and doesn’t have to many hyphens)

Income Verification

You need to ensure that the income they have provided is actually valid. The best is to view images or video/screenshare of the platform where the earnings are being claimed to be from. This cannot be a google sheet they have uploaded or a document that states how much they made each month. It needs to be actual proof.

Whether the site is monetized through Amazon Associates, AdSense, CJ, Shopify or other product sales you need to dig into each revenue source and verify it.

Make sure the earnings don’t vanish when you move the site into your control.

search

 

Good Revenue Proof: This is the revenue data from a site using Amazon Associates, it also shows the tracking ID. You always want to get the screenshot with the tracking ID present so that way you know the graph is from that site. You also want to check the site to ensure that the one in the screenshot matches the one on the site. You can do this by clicking on some of the links and going to Amazon and checking the referral link.

 

 

 

Bad Revenue Proof: This is just a document the seller sent that is just a document, not actual photo proof of revenue from any platform. Anyone can fluff these numbers and so that is why it’s important to get revenue proof from the dashboard so you have a better idea.

 

Often sites that are selling a digital products are especially difficult. Typically their compliance to bookkeeping standards have not been where we need them to truly validate the revenue from the digital product.

bad proof

 

Next you want to see the trend of the income. Here are some of the common trends.

 

Downward trend: If the site is consistently decreasing in income, you will more than likely want to stay away from that site.

 

Hilly Trend: A hilly data trend, sees lows, highs, lows and highs all in a few months. These ones can still be okay but just means you want to  ensure the rest of the due diligence process passes with flying colors.

 

 

Seasonal Trend: This can sometimes look like a downwards trend, but usually on a 12 month income graph, it will start low and go high, or it will start high go low and go high again. Another way to tell if the site is seasonal is to check the site itself. If it’s about winter jackets and the higher months are in the winter months, there is a reason for that. Same if it was a bathing suit site and the summer months were higher than the winter months. If your unsure whether or not your site is seasonal you can always type the main keyword or niche into Google Trends to see what their charts say.

 

Upwards Trend: This data trend means the site is currently growing and is continuing to grow. These types of sites are always the best! Just be careful you aren’t thinking it is growing when it in fact might be a seasonal site on the up swing. A quick check of Google Trends should help!

 

Based on this revenue verification we can take the verified costs and clearly understand the sites profit. 

Analytics Verification

Reviewing analytics data is a big part in the due diligence process as this is all about verifying the people coming to the site. You never want to go off of just a photo of Analytics, you should also ask to be added to the account as view only access. This way you can go into the analytics and dig around and view the graph for yourself with certainty that what you are viewing is indeed for that specific site.

 

Just like the income trends, you will want to analyze the analytics graph the same way. We like to look at both the 2 years traffic and the last 12 months traffic to see what type of trend we are getting. The same rules apply for Google Analytics as it does for the trend for the income, so if a sites user count is decreasing, you will usually not want to buy the site.

 

Upward Trend Example:

 

Seasonal Trend Example:

Downwards Trend Example (BAD):

 

Stable Trend Example:

After checking the trend and establishing whether it’s stable, seasonal, hilly or upward, you will want to check where most of the traffic is coming from. If its an English site, is most of the traffic coming from English speaking places such as US, CA, UK, AU or is the traffic coming from other countries.

You can view this by following the image below.

 

You will then be able to take a look at the graph and see where a majority of the traffic is coming from.

 

You’ll also want to check the bounce rate and avg session duration to ensure that the traffic looks “real”. If you have any questions still on if the traffic may be fishy you can look at the device the visitors are using and you should see a wide range of devices.

 

Next, you want to check to see which pages are getting the most amount of traffic. What we’re looking for here is that the site DOESN’T have 1 or 2 of the pages make up 70-80% of the traffic, you want it to be as diverse as possible.

 

The percentage matters as we don’t want one or two pages getting most of the traffic, because if anything happens to those pages or articles, the site will lose most of the traffic and income.

 

We want to verify the sources of traffic to ensure there is a reasonable split between organic, referral (and if there is a large percent of referral will those links stay in place), social media and direct.

 

Good:

As you can see from the graph above, the traffic data is spread out nicely as the top page only gets ~12% of the traffic, which means it’s spread out amongst a lot of other pages.

 

Bad:

Top two pages are bringing in over 92% of the traffic, so if anything ever happens to just these two pages, the site will probably lose most of its income.

 

One advanced due diligence check before investing in a site is to check the conversion rate and click through rate to the platform where the site is monetized. What you are wanting to see is no numbers that appear abnormal such as an Amazon Associate site with RPV (revenue per visitor) above $1 or conversion rate on Amazon above the normal ~5-15%. For click through rates we don’t want to see anything too far outside of the normal range of around 25% for a well optimized amazon associate site. If any of these numbers are “different” we simply need to investigate to see if we can reverse engineer the logic behind why they are the way they are. If in the end it all makes sense that is fine, if we are still left confused we may not want to go ahead with an offer.

 

In addition to the raw traffic data you want to look at two additional pieces to get a feel for the sites user engagement.

 

  1. Blog Comments

If the site has the ability to leave comments on posts, it’s definitely a great sign to see people actually leaving comments. An active and engaged community is great as long as it isn’t a Cult of Personality (the current site owners personality) that you can’t continue once you acquire the site.

 

  1. Social Media Engagement

Ideally, we also want to see some amount of engagement on social media channels, although many smaller affiliate sites will have none. So checking to see if there was some engagement is great but this is not critical. It is best if you see no signs of manipulated social followers as this is another data point to show that the seller was willing to use blackhat tactics (for example, buying fake followers).

 

 

To do the quick Social Media engagement check we use BuzzSumo.com

 

Backlink Verification – Real & Relevant Links

There are a variety of different backlink tools available online but we choose to use the Majestic product as one of the tools because we believe it to be quite accurate and it also provides some unique visualizations of the data. It’s important to check the backlink data of the site because there could be some spammy links that may not be hurting the site right now, but later down the road could result in a Google penalty and in turn a loss of your rankings or even becoming deindexed from Google altogether.

 

To check the domain you would start by copying the domain name from the actual site and pasting it in Majestic.

 

If you get this below where no TF and CF shows, then the site is no good or it could mean they are using their robots.txt file to block Majestic bots but this is very rare (about 1/50 sites) and if they are blocking then they may have a sketchy reason for blocking. One valid reason for blocking majestic or other crawlers would be if the site was MASSIVE with low value RPM and wanted to keep its hosting costs down.

 

If you see something similar to the image above, you may want to stay away from this one. 

 

Here are some more examples:

Example of a Bad Backlinks

As we can see in Majestic, it has a trust flow of 8 and a citation flow of 24.

 

But there are two other places that need to be checked as well. The anchor text profile and the backlinks.

 

For the anchor text profile, you can see that there are not only spammy words being used but also foreign anchor text. This is a clear sign that this domain has been abused.

 

 

However, sometimes the Anchor Text appears to be normal and we would have to also check the backlinks to ensure there isn’t any foreign or spammy links.

As you scroll through the list of backlinks, first check to see if there are any unusual or foreign text.

If there isn’t anything that stands out, click on a few links and open them up to see if there is anything suspicious that pops up. 

 

When we open up a few backlinks we get some pages that look like the above image. This is a clear sign of spam. It has no relevance to the website we are analyzing and it’s also foreign.

 

If we see these types of things we will not buy the site as we believe down the road the site may take a dip or get hit with a penalty.

 

It is very hard when analyzing backlinks to give a hard go or no-go but after reviewing thousands of domains our team has a good handle on what backlink profiles look “real” and “relevant”

 

Example of a good backlink profile:

As you can see from the image below, Trust Flow and Citation flow are very high. The topical trust flow’s first category is Recreation/Pets which is good because the site is about pets.

 

The referring domains are also high (above 10) which is a good sign as it means there are a lot of sites linking to this site.

 

This backlink profile below is VERY good and would not be the typical profile for a smaller site.

 

 

Next we want to check the anchor text to ensure there isn’t any foreign text.

 

As we can see, there isn’t anything spammy or foreign language in the anchor text profile. The blocked out red lines are mostly to do with the sites name.

 

Next we are going to look at the backlinks of the site to ensure they are not being linked to from foreign sites or PBN sites. To do this, you want to go to the backlink tab and open up a few of the sites to see what the pages look like that are linking back to the site. On a good site, they will have backlinks from real and relevant sites. We would like to see some in-content links. If the site is only blog commenting links and directories, this means there isn’t any quality sites linking to the site your analyzing. 

 

The quick check for foreign content is to make sure that there is not foreign text. If there is, open the link and see what type of site it leads too. If the site is relevant but just in a different language this is okay, but if the site is irrelevant then it means its spam. 

 

When we open up a lot of these backlinks we can see that some links are directory style, some are blog comments and some are in-content and they are all from niche relevant blogs that have to do with pets (the niche for the site). This is a good sign! 

 

When reviewing a backlink profile, it is important we don’t get hung up on a couple bad links and decide the site is no good. We want to take a balanced approach here and look at the backlink profile as a whole, using it as one factor that impacts the risk of the site.

SEMrush Verification

In SEMrush, we look at the traffic chart, the keywords it’s ranking for in search engines as well as the number of pages it has indexed and the traffic that is going to them.

 

The same things we check in Analytics we check in SEMRush and the reason for this is that we validate the traffic numbers and get a better idea of the type of keywords the site is ranking for. 

 

First, you will want to take a look at the graph to see what kind of trend the site is showing here compared to the Google Analytics graph (analytics graph will be more accurate), but always good to have another piece of evidence to go off of.

 

 

This graph shows an increase in traffic and then stability afterwards with a slight decline. You would want to do a similar trend check to see how the traffic is moving. You shouldn’t see much deviation from Google Analytics but if you do, you might want to dig into Analytics a bit more just to be on the safe side.

 

The second thing you want to check are the keywords its ranking for in Google or other search engines. If it’s an Amazon Associate site or some other affiliate website, is it ranking for some good buyer intent keywords in the top 10 and are there some keywords in the top 10-30 that have potential to improve? Or if its an Adsense site, we want to see it ranking for keywords that have a high CPC.

 

Another thing to check is the traffic % across different keywords. Is one keyword getting a majority of the traffic or is it split up amongst the keywords, especially if one of the keywords is something like “best lawn chairs 2018” when its 2019 and not ranking for the same keyword 2019, this means that this keyword will soon become irrelevant.

 

Another red flag that would impact the purchase price or maybe result in no deal is if they reported no paid traffic but either analytics or SEMRush showed some signs of paid traffic. 

 

As we can see from the below image, 2 of the more trafficked keywords have 2018 in them and since we are in 2019, these keywords aren’t really being searched anymore. Just planning to change the keywords to the current year is a good thing to do but there is no certainty that similar rankings will be achieved.

 

The next thing we look for is the pages and the amount of traffic going to the pages (again this is similar to analytics but it’s always better to check multiple places in order to verify everything thoroughly). This also gives you an opportunity to see what keywords the individual pages are ranking for and how many pages are on the site.

 

Good Example:

Traffic % is spread out amongst multiple pages.

 

Bad Example:

Two things are wrong with this, one is the fact that there are only 3 pages total so the site is very thin. The second is that all the traffic is going to only one of these 3 pages.

 

Ahrefs Verification

When looking at websites for sale, we use Ahrefs to double check the backlinks, keywords as well as the source to visualize the referring backlink timeline.

 

Example of a Good Site:

URL rating and Domain rating are very high. We like to see sites above 10 for both but the higher the better. Also, as you can see for the referring domains chart, the backlinks are increasing at a normal rate.

 

 

Next we want to look at the backlinks to ensure there isn’t anything spammy, this is the same process that we use with Majestic, but we are double checking to make sure we didn’t miss anything.

 

 

 

You will want to take a look at the sites linking to the website you are analyzing and then click on the links and ensure they are linking to real and relevant links. With this particular site, it had a lot of good links that were relevant and had a few blog comments and directory links. Nothing foreign, spammy or PBNs.

 

Example of a Bad Domain

In the photo below you can see that the URL rating (UR) and domain rating (DR) are very low. You can also see by looking at the referring domain chart that its on a downwards trend for losing backlinks which is not good, we want sites that have either a stable trend or an upwards trend.

 

When we go to look at the backlinks, we are able to see that a lot of backlinks are foreign and have no relevance to the actual site.

 

This is a clear sign of spam and we would stay away from buying websites like this.

Archive & Who.IS Check – a websites used vehicle report

This step is about using available information to confirm the story/history of the site/domain is consistent with what the seller is saying. 


After going through the steps above, we have a good understanding of what the sites link structure looks like, but what we don’t know yet is the history of the domain.  Did it use to be home to a forgein site, did it use to be linked to anything spammy such as a pharmaceutical site or porn site? The way we check this is to look at Archive of the site and check a few different dates in time that the site has been in existence for.

 

 

The image above shows that the domain has been around since 2001, you will want to check a date for each year and see what the site looked like that year. It’s important to check each year so you understand the history and to make sure you don’t miss any changes that don’t line up with the sellers story. 

 

For example if the seller says he is the only owner but we see in the archives that it was actually a physical store before and within the time he owned it, questions will be raised. Similarly, we want to see in who.is that the domain registrar history lines up with what the seller is saying. Is it a recently expired domain that the seller picked up and the traffic is based off of links that weren’t placed to the current content and therefore may be removed in the future? 

 

This is about knowing the history of the website similar to a used vehicle report!

 

 

Content Quality and Plagiarism Free

One of the last steps in our website due diligence is to make sure that the content on the site is quality and unique with nothing that has been plagiarized from other sites. To do this check, we use Copyscape and we take 3-5 articles(depending on the size of the site) from the site and paste the article into copyscape to get a plagiarism score. Since the article is already live on the internet, it will say you have a 100% match with an article, but that will probably be the the site you are looking to purchase. We are making sure that each article has less than a 15% match with other websites on the internet.

 

 

As we can see from the image below, there are 4 sites that match some of the articles text.

 

You will want to click on compare text for each of the results to check the plagiarism score and to see which site it matches with. The example below shows 100% match but when I look at what the site is, it’s the site I am looking at buying so that is okay.

 

After you check the rest of the results  and none have over 15% match, then it passes this check.

 

Example of Higher Plagiarism

The check below shows that there is a 20% match and that the match its linked with is from another website. This means that ⅕ of the article is plagiarized. If the website for sale only has this article showing above 15% we may still consider it but if it has a few articles over 15% then we will tend to stay away from these sites (unless it is clear that it was the other site who plagiarized the one we are looking to buy – this can sometimes be verified in archive.org).

 

Content Quality

We want to get a sense of the content quality to understand if it is something that is going to need to be entirely updated or is it good enough to work with and improve upon. 

 

To do this we do 2 steps….

 

  1. Review the top 10 pages and getting a feel for the quality of the content. If you were searching for the keywords the site is ranking for would you be happy with the content? 
  2. Leveraging a tool called MarketMuse we run the most important pages through their content analyzer and compete tool that provides a measure how well the article covers the topic people are searching for. A low score is not on its own a bad thing since it means it could be an opportunity for improvement! 

 

SEO Audit & Site Speed Check

An SEO best practice compliance audit can help reveal if there are any fatal flaws with the website that will impact the offer due to the costs to fix them. 

 

However, if there are any SEO issues identified when you do an audit report these can be a great opportunity since you will be able to fix them and realize the upside. 

 

To do a site SEO Audit my favourite free tool is Neal Patels here, or check out a complete list of 12 website checker tools.

 

Site Speed Check – I typically use these 2 products:

  1. GTmetrix
  2. Google PageSpeed Insights

 

We are only looking to see if there are issues that will be expensive to fix. If there are easy to fix, significant website SEO or pagespeed issues these are great opportunities for growth!

 

Phases of a Deal

Now we have covered… 

  1. what makes website buying appealing
  2. what your options are based on time and investment capital
  3. Introduced you to the many different service providers in the industry
  4. how to complete due diligence

 

Next we are going to cover the phases of a deal and how the process typically works as well as identify a few situations where the process is a little different and why that is. 

 

The process of buying a website typically looks like this…

 

 

For reference here is the same process but for websites for sale on MotionInvest.com

Below I will cover each of these steps in a little more detail along with a tip or two from my experiences. 

 

  1. Search for a site to buy based on your criteria
    • Use the tool available at Centurica MarketWatch to monitor listings
    • Build relationships with the brokers that typically list sites you are interested in
    • Hire a VA to assist with monitoring the listings so you can act quickly if a site that meets what you are looking for comes up
  2. Find a site that interests you and either complete an NDA or make a deposit if needed to get access to the data needed for due diligence
  3. Complete preliminary due diligence
  4. Get on a phone call with the seller (and broker if one is involved) to discuss the history of the business, how it operates, growth opportunities
    • Make sure you are friendly with whomever is setting up the call and the seller. The seller wants to see their site go to a good home and they don’t want some a-hole to be running it…so make sure you aren’t one! 
    • Understand what REALLY matters to the seller, ask lots of open ended questions and listen intently. The key is to find items they REALLY care about that aren’t as big a deal for you. 
  5. Decide if the deal is a fit and based on the intel gathered from the broker and the seller call, make an offer via an Letter of Intent (LOI)
    • See the section below on funding and typical deal structures
  6. Complete due diligence
    • See the deep dive into the due diligence process here (LINK TO ANCHOR IN POST)
  7. Agree to terms and sign an APA (asset purchase agreement)
  8. Secure funding 
    • At this stage the funding should already be secured but may need to be “collected” from different sources to be ready for an efficient closing. 
    • See the 16 sources of funding discussed below. 
  9. Close the deal
  10. Transition the business
    • Having everyone on the same page with how to transition the business is a big deal. I have found a Google Sheet that lays out the schedule for the transition of the business and a complete list of all account to move is very helpful. Below is the schedule for a slightly more complex transition that involved combining a couple businesses into a new entity. 



    • During this time a lot of login information will be getting shared, to keep security high make sure to use a password management tool like LastPass or 1Password.

  11. Grow the site – Now the work begins 🙂

Situations where this is different:

  • Some marketplaces and brokers don’t typically have an exclusive due diligence period. Typically for the less expensive and simpler to understand sites the need for exclusive DD is not as great
  • Some marketplaces like Flippa don’t have a structure for a seller phone calls 

 

Online Business Funding Options and Typical Deal Structures

 

In this section I am going to go over sources of funding to purchase a website and what some typical deal structures look like. 

Since most readers are from the US this is a very US focused list, while I am Canadian there are not as many creative tax solutions here. So with that the usual disclaimer to talk to your accountant/lawyer and especially when it is a Canadian listing the options.

 

These options are listed for interest purposes only and I don’t share any opinion on which option is best for your situation. Understand that website buying is not risk free!   

16 Sources of Funding:

  1. Your personal capital
    • Your cash in non-registered savings/checking accounts
  2. Self Directed IRA or 401k
    • Moving money in your self directed IRA or 401k to purchase a website
  3. Borrow from traditional lender
    • Leveraging personal assets as collateral or in some cases the collateral of the business you are acquiring you can secure a traditional loan
  4. Friends and Family
    • Present the opportunity/risks of website buying to friends and family. 
  5. Investors
    • Be sure to stay compliant with the Securities and Exchange Commission (SEC) but you can present the opportunity to investors via a prospectus and secure funds. 
  6. SBA Loan
    • An option that has become more popular over the last several years. Here is a great article on the topic produced by Quiet Light Brokerage.  
  7. Credit Card
    • For smaller site purchases using credit cards could be used as part of the funding solution
  8. New Tech Enabled Business Lending
    • Companies like Lendvo and ClearBanc leverage technology to connect into the cashflow of a business and offer funding based on ecommerce specific data in the case of ClearBanc. 
  9. Peer to Peer Lending
  10. Cryptocurrency
    • Use your cryptocurrency to acquire an income generating website
  11. Cryptocurrency Loan
    • Using a service like Celcius you can borrow up to 50% against the value of your crypto for between 5 & 10% then purchase an income producing website. If you don’t mind the leverage you can Hodl and buy a website.  
  12. Seller Financing – Holdback
    • A holdback is used in cases where there is a “nuclear” risk and is attached to a specific milestone. Reasons for using a holdback could be a significant clients contract is up for renewal in 2 months, an outstanding liability exists around chargebacks or a critical service providers future is unclear. In each of these situations you can select an amount that reflects the impact that risk has on the businesses value. For example if the client up for renewal in 2 months represents 25% of revenue you could hold back 25% of the purchase price for 3 months to be released if and only if the client renews.
  13. Seller Financing – Loan
    • Often a seller does not require 100% of the funding right away and may be willing to take a portion of the sale price as a loan payable to him/her to help get the sale done. This could look like 10% of the purchase price is turned into a loan payable over 2 years with a 10% interest rate. To see what the repayment schedule would look like here is an online calculator.  
  14. Seller Financing – Earnout
    • An earn-out is when the buyer agrees to pay the seller based on the performance of the business moving forward. The earnout can get complicated since it can be attached to revenue or profit and then as a % of baseline. For example a simple earnout might say 25% of the purchase price will be paid as an earn-out over 24 every quarter as long as the business generates revenue greater than 75% of the trailing 12 months baseline at the time of purchase. It can get much more complicated when bands get applied and to incentivize the seller if they are critical to its ongoing success/transition they can receive compensation that exceeds the offer price. An example of this would be if a site is sold on a 3x multiple and 25% of the total consideration is to be paid as an earnout the earnout could say “total consideration of 75% paid in cash at closing with 25% to be paid over 3 years with the seller receiving quarterly payouts of 25% of the quarterly profits. In this example if the business doubles in profitability day 1 and stays steady for 3 years then the seller would receive a total of 75% + (25% doubled) = 125% after 3 years. For most acquisitions I have done over $100k they have had some earnout component. 
  15. Seller Financing – Equity
    • Another way to deploy less cash and keep the seller engaged is to have them retain some equity. This can be a challenge and a mistake I have made is having the seller who was “done with it” receive an equity stake that was too small compared to the cash payout they received and they didn’t stay engaged. 
  16. Seller Financing – Consulting Post Sale
    • If the seller does a specific task that is important to the ongoing success of the business you can agree to a scope of work and compensation as part of the total offering to buy the site. One example of where I used this structure successfully was with a website that had someone who enjoyed talking about the topic but didn’t want to run the business anymore. She didn’t need a large cash payment but wanted to transition out and still receive nice monthly payments. As a result we structured a deal where she had a 2 year contract as a very well paid marketer to do what she wanted to be doing anyway (talking about the topic and spreading the word of the website) while receiving a significantly reduced initial payment. 

Typical Deal Structures

One thing to remember is that if you get too clever and the structure is confusing, the seller would much rather go with a buyer who is going to make the process simple. 

 

When building a portfolio having complex deal structures have a managerial cost. Tracking each unique deal structure is an administrative burden that distracts from the main objective which should be growth. 

 

If there truly is a significant risk then getting creative with the offer is great or if the purchase price is high it can be worth the burden but whenever possible the best offer to buy a website is 100% cash at the cheapest price the seller is willing to take.

 

  • Under $100k Simple Websites (organic traffic with income from affiliate/ads)
    • Almost always 100% cash at the price you and the seller agree to
  • $100k-$1,000k Simple Websites (organic traffic with income from affiliate/ads) 
    • A structure might involve total consideration equal to 95% of asking with 75% of that price paid at closing and 25% attached to the ongoing performance of the business. Up to 25% to be paid proportional to the sites baseline traffic up to a maximum of the total consideration.
  • Over 1,000,000 or significant/complex risks
    • This is when things can get really interesting with multiple sources of seller financing combined in an attempt to mitigate risks and align incentives. 

Website Buying Questions 

Here are some of the questions people have asked us after reviewing this guide or looking to deploy their time/capital for the first time into this asset class.

 

Should I buy 1 website or a portfolio? 

I have seen people be incredibly successful with both approaches. It comes down to your personality. 

  • Are you passionate about a specific topic and when you talk to friends about your online business do you talk about the topic/content for your site? 
    • If yes then you should have 1 website and focus on being an authority in that space! Here is a great case study on what can happen when you focus!
  • Do you like building systems/processes, when you talk to friends about your online business are you talking about traffic, content, links, earnings, systems etc?
    • If yes then likely you will be more inclined to be a portfolio operator and will desire to have several sites you manage.  This is definitely where I find myself!

 

How much does it cost to buy a website?

Websites typically cost anywhere from 2x-4x the trailing 12 months earnings. Each asset class is different and the factors that go into how much the website costs are significant. Centurica has a great report that talks in detail about the cost to buy a website depending on various factors. Some of the factors that matter are…

  • Is it growing, stable or declining?
  • Are the earnings and traffic lumpy, seasonal, declining, steady, growing?
  • Are the sources of traffic diversified and stable?
  • How old is the site?
  • Is the market growing or shrinking?
  • How is the quality of the content on the site? 
  • What is the quality of the backlink profile?
  • How hard will the business be to continue to run when the owner is gone? (does the content need a PhD to keep updated?)
  • Are the methods the site is making money diversified and low risk?
  • Is the niche a risky one that could face regulatory trouble that could impact it?  

 

How much should you sell a website for?

From experience as soon as you are no longer putting in effort to a site you should sell it! A site like all things is either growing or dying… before it starts dying get it into the hands of someone that can focus on growing it. The market value for purchasing a site depends on all the factors above and also how quickly/efficiently you are looking to sell. You can sell privately for less quickly with minimal effort compared to taking months and a significant effort to sell via a broker. 

 

How much money can you make buying websites?

The economics of purchasing an asset class when the multiple to buy is 3x is very attractive! A 33% compounding ROI if the site didn’t grow is better than WarrenBuffet has done generating a 21% return over his 50 year investing career! Obviously the risk is not zero when purchasing websites and this is in part why the multiples are where they are for this asset class. 

 

Are there payment services to facilitate the purchase payment from the buyer to the seller?

Yes services like escrow.com, escrow.trade have sprung up to help with the transfer of funds between the buyer and the seller for an online transaction. 

Conclusion

Congrats… if you got through all of this and digested it well done! 

 

Myself and the entire team at MotionInvest have poured our brains and sweat into creating this massive resource. A big thanks to the other players/friends in the industry who helped with parts of this document. 

 

My hope is that if you are considering purchasing a website this document has been a helpful guide in walking you through how the process works. 

 

It has been a fun journey building this document and we look forward to improving it over the years. 

 

Whether you fall into the do it yourself camp or have more money than time and looking for a fund/operator we hope this guide has got you further down your journey. 

 

This asset class (websites making money with free traffic from Google) has changed many people’s lives including my families and this guide I hope can help others on their journey to building a business of their own that gives them and their family financial freedom. 

 

If you have any comments or suggestions please let us know!

 

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