Updated: Mar 10, 2021
In a previous post, we elaborated on how flipping websites can be a lucrative investment. However, there are plenty of websites worthy of keeping indefinitely and enjoying the income they provide with minimal effort or time. In addition, I've known many investors who created a diversified portfolio of income producing websites. This is not much different than owning income-producing houses. If you have some basic tech skills and are willing to learn how to manage, retain, upgrade, design, and evaluate websites, then you too can earn serious money this way.
How Can You Start?
Acquiring a website for the sole purpose of earning cash flow is one of the smartest things you can do in this day and age. At the time of this writing, investing in websites feels more prudent than ever given the crumbling economy and 10% unemployment rate. The goal is to treat it like a form of digital real estate. For instance, like you would with a rental property, you can make small sets of improvements to your site over time to increase its appreciation. In the mean time, you monetize it (or don't) and make income.
Traditionally, an entrepreneur might want to make a website from scratch. But that can be difficult- and often depends on a lot of luck given how timing is extremely important when you consider the fickle markets and tastes of the public. Sure, there is a sprawling world of niche ideas that haven't been explored yet. But there's also established online marketplaces where you can buy a website that is already providing cash flow. Or perhaps the website isn't providing cash flow, but it's getting a lot of traffic. It's up to you to glean its potential.
There are many platforms acting as intermediaries in this marketplace such as flippa, empireflippers, websitebroker, and wesellyoursite. These platforms contain an ever-changing list of potential websites that are up for sale. Some are good investments. Some not so much.
A good idea is to choose the website based on your expertise and skills. For instance, if you know nothing about sports, its probably not a great idea to buy a website that's about sports betting -- even if it's on autopilot. Why? Well it may not be on autopilot forever. Things change and you may have to take a more active role.
Do Your Due Diligence
When you select a website you think you may want to acquire, use this as an opportunity to learn about its niche and how the business operates. One of the first steps you must take includes using Google Analytics to analyze traffic to this site. This data will be listed on Flippa and other platforms, but it's important you verify.
Next step should involve inspecting related social media, reviews and forums to understand the site's presence in its niche community and any potential opportunities. Also, make sure the website is valid and in good standing. Use Reddit and Quora for research.
Lastly, don't be shy about asking for verification of any information the seller is purporting to be true- like number of leads, P&L or website conversions. Investigate ways to decrease expenses and maximize profit.
If the Valuation Fits, Present an Offer
Once you found your website, analyze the price the seller wants for it. Valuations for healthy, operating websites typically go for 20-35x its monthly net profit. That's about 2-3x annual net profit. For instance, a website that generates $4,000 of profit per month could be sold for anywhere between $80,000 and $140,000.
However, if you're looking for something smaller, there's plenty of websites on Flippa selling for a fraction of that. Another option is to buy several websites producing only $200 per month and grow them... Maybe eventually hitting more than $1000 per month. There's a lot of room for ideas.
Close the Deal
Once you and the seller agree on a purchase price, it is time to sign the agreement and close the deal. Don't forget to ensure proper transferring of all the related assets of the deal. This includes assets like the website's domain, logos, text, leads, etc. Other things to remember include warranties, covenants, indemnifications, etc.
Keep in mind, most likely the seller will want to be compensated for the revenue they earned prior to your purchase. Exact dates as to when this cutoff actually is will need to be established during negotiations.
Real Estate of the Virtual World
Websites are the real estate of the virtual world. Website owners work precisely like real estate investors but in the intangible, mysterious world of the web. However, unlike the scarcity of land, there's an endless amount of websites and competition. It's important that you do your due diligence to pick out a winner.
It might look effortless and doable, but just like other businesses, it also has its fair share of risks. Sometimes the websites with the most potential don't give you the results you'd expect. On the contrary, the sites you think are useless may multiply your income unexpectedly with just a little 'tender loving care.' The good news is there's an endless amount of resources to help you on this journey. A journey worth taking in this day and age.