Don’t make this newbie mistake…

So I talked with a friend who was hoping to live the internet marketing dream, but instead found himself the owner of 20 websites that make no money. Does this sound like a familiar story?

He told me what he had done, and the mistakes were obvious to both of us. First, he started new websites when he could have used Prosperly principles to find and buy ones that would have saved him the years of ramp up time to start getting real traffic. Second, instead of spending his time and money as a beginner on a couple of sites, he bought 20!

Now I’m not saying that having and running 20 websites is impossible. I’m just saying that you should start with a couple, fix them and automate them, and once they are profitable then buy a couple of more. It would have been better for him to have focused his time and money on developing a couple of performing websites versus 20 do-nothing websites.

Think of it this way, if you were flipping real estate would you rather buy a couple of TLC-need properties and put your time, money, and work into building assets that you could rent or sell? Or buy 20 vacant lots and construct a shell of a property that would be way too much to manage?

I always tell those who ask, especially beginners, that it is better to simplify than to go with the shotgun approach to see what sticks. I understand that since you don’t know what will make money the temptation is to do a ton of websites and hope one does become successful.

In the beginning there is too much of a learning curve. Since there are 4 stages (Buy, Fix, Run, Sell) of the website flipping process you should only be acquiring new websites when you have moved the websites into the Run stage.

This means they are out of the Buy stage and Fix stage. Try to have only 1 or 2 in Buy and Fix stages at all times.

Keep this in mind when you are looking for a site. Don’t become the owner of vast digital wasteland. Build slowly and grow your internet empire the right way.

When to reject an offer to buy your website

A good friend of mine contacted me recently to let me know that he has had someone come to him and offer to buy his website. I have been working with this friend for some time now and he has always wondered when would someone come asking about his site.

He had seen me get one offer after another on my websites and was waiting for the same thing to happen since he was following the principles about running a website that people will want to buy. Well it finally happened. He called me up to get my advice on whether I thought the deal was a good one and whether he should take the deal.

This brings me to the purpose of this post. When do you say no to an offer? I mean the allure of getting 5 or even 6 figures for a piece of intangible digital property is very hard to overcome. If you have read my story “Striking Internet Oil” then you know that I was faced with this same issue.

I had a site that I knew had a ton of potential. I had made good progress and within one week two different people contacted me to buy my website. I thought it was strange that they both contacted me at the same time. They both gave me good 5 figure offers for the site but due to my stubbornness or my knowledge of the industry I knew I could make a lot more money if I just improved the site a little. So I turned down both offers and went to work improving. I increased the traffic and revenue on the site and within a few months one of those companies came back and offered a good 6 figure offer. Now was the time to sell.

There was another instance where I was running a different website and the site was rocking. On some days the site was making $1000 all automated income. I got an offer to buy the website. I thought, “why would I give up this amazing income for one lump sum?” So I declined the offer. The guy kept harassing me and eventually I decided to sell the site. 3 days before the deal was going to go down all of the rankings dropped on the site. I still to this day don’t know why I lost the rankings. Needless to say the guy backed out of the deal. If I would have taken the offer when he first made it I wouldn’t have lost high 6 figures.

The point is when someone makes you an offer that you can live with, even if it isn’t the best offer in the world, you take it. You just never know if or when things will change. With so few barriers to entry in the internet world, money talks. Don’t be greedy. Take a good offer when it comes.

What is a good offer? That is something you have to decide but consider this: If you run a website that you are only putting a couple of hours of your time into a week, isn’t a 10 month revenue multiple a good deal? I know this is a subjective thing where we are dealing with time and emotional investments that are hard to let go or put a price on but to quote Tom Hanks in “You’ve Got Mail” it’s not personal, it’s business. Cut those emotional attachments and move on with your life with a thicker wallet.

The weekly review of website flipping

I thought I would give you a weekly review of some of the happenings in the world of flipping websites. One of the bigger sites to sell this week was atkinsonlab.net, which sold for $106,000. When I first looked that the domain I thought it was a diet website which would explain the price tag.

But as I looked into the site I realized that what they were selling is a network of websites that they have used to sell link building and SEO services. In other words they have hundreds of websites that they will use to promote your website for a fee.

They claimed to be making almost $25k per month on the site and yet it sold for $100k. Four months of revenue? Really? Let me be the first to tell you that if a deal seems too good to be true than it is too good to be true.

Why would a seller be willing to sell a $25k a month website for $100k? Why not just keep it and in 4 months you have your money? What this business is, is 100% against Google’s terms of service. The seller realizes how risky it is to have a network like this. What’s more is now they have displayed it to the world by putting the site/network of sites up for sale.

How hard will it be for Google to go sign up for their service and see where the links start coming in from? That entire network could be shut down in no time. I assume the buyer doesn’t really realize this. Those kinds of businesses have no staying power.

I hope for the website buyers sake they make it at least 5 months before the carpet is taken out from underneath them.

Lesson To Prosperly Readers

When you are looking at established websites and internet businesses to buy, always look at long term potential. Reality is that you may never be able to sell a website that you own. Just like Warren Buffett says, don’t invest for a quick profit. You have to have a long term money making plan. Selling a website is just a result of having an awesome long term internet business.

Cool Website For Sale

I know I have been negative toward flippa especially when it comes to selling websites.

But the more I look at the site I do think more people are using the site both players and spammers so there are some good sites on the site to buy if you know where to look.

I came across this website for sale on flippa: twitterfollowers.com. The price right now is $42,000 (you can see the auction here). Why is the price so high? This is a really good exact match domain.

Exact match means the domain is an exact phrase people are going to search for on Google. Google seems to give preference in their rankings if you have a domain that matches exactly what the person searched. And with the rising popularity of Twitter this domain has a lot of earning potential over the long term.

I don’t usually buy websites just for the domain unless it is a good exact match. I am usually more interested in the websites age, how many links it has and if it currently has any rankings. But a good exact match domain can be a quick way into a competitive industry and with this domain for sale (twitterfollowers.com) People would automatically recognize it as an authority because of the domain.

Now I personally have no interest in running a website like this but I thought I would share it with you so you can see an example of what is out on the website flipping market right now.

Dont Use Flippa Until You Read This…Warning

Last Updated August 2012

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 in selling a website to see how it would turn out for me. That is when I realized they have many flaws I couldn’t overlook.

Let me just say that I think you can use Flippa to find websites to buy if you know how to filter through all of the garbage.

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 gets you on the front end and back end. 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.

Warning About Some Buyers On Flippa

3. Beware of buyers on flippa that bid on your auction and then never pay. After I reached the agreement with the buyer he kept assuring me that he was going to pay me for the site. Since I had never sold on Flippa before I had no reason to question him. He kept asking for more time.

Meanwhile Flippa was emailing me asking for me to pay the success fee and letting me know that if the buyer had backed out I could file a dispute. I didn’t file the dispute because the buyer kept saying he was going to pay me. Now to their credit they did give me several reminders to file a dispute but the timing just didnt work out for me.

So Flippa assumed that I had sold the site and wanted the success fee. They told me they would suspend my account if I didn’t pay, which eventually happened because I didn’t receive any money and therefore wouldn’t pay the success fee. Seems like a simple Whois lookup could have solved the problem. As long as you file a dispute in time you shouldn’t have any problem.

If the buyer drags you on for more than 2 weeks just file a dispute. It is not worth the hassle of being lead on forever just to not get paid.

A previous version of this post indicated that Flippa charges a success fee on when a sale falls through. Flippa does not charge the success fee in this case.

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 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.

I know that none of these are real alternatives of flippa because they are not marketplaces. I am going to find a good one. This industry deserves something better.

Update March 28, 2012

So I had another flippa account that I had been using long before this ever happened. I recently logged in with it to check a private auction that was happening. About a week ago they contacted me and notified me that they are shutting that account down too because it was a duplicate of my suspended account. I laughed because I hadn’t used that account since they were Sitepoint but I just thought it was interesting that they would come after that account too 2 years later.

As I have thought more about trying to buy websites on Flippa I decided to pay them the $249 success fee from 2 years earlier.

When I went to pay I emailed them and asked them to confirm that I would get the refund of the $249 in flippa credits. This was their response:

As you did not enter the Formal Dispute Procedure, we have no way of verifying that the site transfer did occur after the Sales Completion Date. If you had entered the Dispute Procedure, we would have been able to waive / credit your success fees and allow you to relist the item for free. Now that over a year has passed, we are not able to offer you a credit.
The Suspension has been removed from both of your accounts.

Please let us know if you need further information or assistance.

Kind Regards,

Flippa Customer Support.

But my account is in good standing again so that is good.

Update June 7, 2012 – They Paid Me Back!

I just wanted to give a quick update. This post has gotten a lot of exposure both in the search engines and also in forums as well. Well it finally got the upper management at flippa’s attention. Of course they contacted me and told me that I never should have had to pay the fee for the failed listing and that they have all of these new policies in place to ensure that doesn’t happen anymore. Then they gave me my money back.

How do I feel about all of this? I appreciate that they swallowed their pride and gave me my money back but there is just this prideful part of me that can’t help but think that I got a refund because I am causing them a lot of negative publicity. If this was a true gesture of caring for their customers then good on them. I guess I will give them the benefit of the doubt.