The problem with Flippa – Why I say don’t use them
Posted on August 4th, 2010 in Buying Websites, Flipping Websites, selling websites | 9 Comments »
Since Prosperly’s inception, I have been a proponent of Flippa, formerly Sitepoint Marketplace. Flippa is the main website where people go to buy and sell websites. Whenever I have sold websites in the past I have always dealt directly with the buyer and never used Flippa to sell before. I finally decided to try them out to see how it would turn out for me. That is when I realized they have many flaws I couldn’t overlook.
Before I go into those flaws let me just report that I did reach an agreement on a purchase price for the site only to have to deal fall through over the next several weeks.
1. Buyers on Flippa expect to get a steal on a website. The seemingly going rate on the site is 10 months of net revenue. I’m not sure where or how this came to be but in the real business world that ratio is laughable. Most businesses sell for 2-3 years net revenue. I sold a website last year for a 7 year net revenue. Why 10 months? Because you don’t want to have to pay for a business what it is worth?
I think the main problem is sellers are putting their site out on display showing everyone exactly how your website makes money and exactly how much money you’re making. This is a problem because in the internet world the barrier to entry is almost non-existent. Any Joe Shmoe can buy a domain for $8, then go get a free WordPress template and be up and running in 10 minutes. Their thought process is since it is so easy why should they pay a 2 year multiple for a website. Inevitably most people that start these quick websites never achieve the traffic nor the money that the site for sell is doing but it just creates a problem where the market of buyers at a real business price is not there.
2. The fee structure is ridiculous. One of the problems I had with Flippa was the bookend fees they charged. They charge you to list your site for sale with all kinds of listing upgrades. You can easily end up spending $40-$50 to list your site for sale. I have no problem with them doing this. It is normal for businesses to charge listing fees.
On top of the listing fee is the purchase price fee. I can’t remember what that percentage is (I want to say 5%) but they cap you out at $499. That is where my site fell, the $499 cap. So I had to pay $40-$50 to list and then they wanted me to pay $499 once the deal had gone through. I agreed to this reluctantly because I knew Flippa could provide me with an audience. I just think you should make it one or the other. Charge me a listing fee, charge me a final sale fee, but don’t be greedy and charge me both.
3. If a deal falls through your out of luck and money. This one is the flaw that inspired this post. After I reached the agreement with the buyer he gave me the run around for a couple of weeks. During this time Flippa kept emailing me reminding me that I needed to pay the final transaction fee. I ignored the emails because I was still waiting to get paid for the site. It soon became apparent that the guy was not really going to put forth the money and so I moved on with my life.
Well I still kept getting emails from Flippa saying I needed to pay the final fee. I finally emailed them back saying the deal fell through and I never sold the site. I realized that I had taken the risk to pay the money to list the site for sale and since the deal fell through I was out the listing fee. I had no problem with that. But you can imagine my surprise when they emailed me and told me that even though the deal fell through I was still obligated to pay the final transaction fee (in this instance I had set it up to be split between me and the buyer) of $250.
So Flippa was demanding that I pay $250 for essentially nothing. I told them that it was ridiculous to ask me to pay the fee when I never received any money for the site but they kept demanding it and threatened to suspend my account. I told them to go ahead and suspend the account because I had and have no intention of ever paying the made up fee.
Congratulations Flippa! Not only did you lose one customer with your horrible fee policies, but I’m a guy with an audience and I will make sure they know about it too.
Flippa Alternative
If you want to find out where I go to find websites to buy click here.
So where do we go to find good buyers of websites. I have a few suggestions.
The first is a forum I recently found out about called Experienced People. I’m not sure why it’s named the way it is but it is a forum of people with money that like to buy and sell websites. It is a much more mature crowd than at Flippa.
The next Flippa alternative I would suggest when you are looking to sell a site is to contact your competitors. Remember, your competition is not your enemy. They can be some of your most valuable assets. If one of my competitors contacted me about buying their site I would be very interested. I have even tried to buy out my competition before.
Another option is to go directly to a business broker. I would only do this if your website is making over $3k a month. Their fees are high but they will also get you top dollar for your business.
The best option is to wait for someone to come to you. If you build an awesome website with great SEO rankings it won’t be long before people are contacting you about buying your site. This puts you in the driver seat. For example, on the site I sold for the 7 year multiple I had already received an offer for just over a 1 year multiple. The amount didn’t excite me so I passed. I fixed up the site more and got even higher rankings and then sold it for the 7 years of net revenue. That did excite me.
