How To Buy A Website In 5 Steps (Case Study)
One of the ways I’ve made a lot of money has come from the process of buying and selling websites. My largest sale so far was Netbook Reviews in a deal worth six figures (see details here on how to sell a website).
This year I’ve also had the goal to buy at least $100,000 worth of websites and even though I have been buying websites this year I generally keep the URL’s of these websites secret for competitive reasons. Today I want to actually talk about a website I just recently purchased called Copycat Crafts and explain some of the things I look for when I buy websites. I’m also going to cover this website’s progress as an ongoing case study each month explaining what I did in the previous month, why I did it and how much the website has earned etc. First let me explain why I bought this website.
Step 1: Look For Potential
When I buy a website I try to find properties that have room for improvement. If you’re shopping for real estate and see a kitchen that looks straight out of the 70′s, you know that if you update the kitchen properly you can add a lot of value to the house. In the same way you want to apply this mentality to websites. In the case of Copycat Crafts the website already had a great foundation to build on, the old owner simply needed to focus on other aspects of her business and didn’t have time to work on this website. In a future case study entry about this website I’ll explain what I’m doing to grow the website, but part of what attracted me to the website in the first place is because of it’s potential to grow into a true authority website that isn’t too reliant on search engine traffic. To continue my string of analogies you can consider websites like investments and with any investment strategy it’s important to balance your portfolio. With websites I prefer to have some variety so that if any one property suffers a drop in income or traffic my business can continue to function.
Step 2: Look For Ease Of Management
Copycat Crafts already had a writer being paid to help manage the website and whenever that is the case it makes website management much easier. She will continue to write for the website and will scale her effort based on the number of articles I’d like her to write as well as the other aspects of helping to manage the website. When you’re looking at buying a website it’s very important to consider how the content is currently being created. If the owner is doing all the work you want to know how much time they spend on the website and whether or not it’s something you could easily outsource to someone else as well. It would suck to buy a website for thousands of dollars and then not have enough time or the expertise required to run it effectively.
Step 3: Look At The Earnings History And Website Analytics
Copycat Crafts was started back in the fall of 2010 so it hasn’t even been around for a year but it already has been making a few hundred dollars per month. I’ll cover the income and how I plan to increase it in a follow up post. When you look at a website to buy the amount of money it’s making (and where it’s coming from) will play the largest role in determining the price the website will sell for. If there isn’t any income then the next step would be to look at the traffic and try to determine how much money could be made from the existing traffic. One way to do this is to look in the Google Adwords tool to determine how much advertisers are spending for various related keywords or do a search for the keywords to determine how many advertisements come up in the search engine results and try to judge demand that way.
Step 4: Look For Indicators Of A Bad Website Property:
Much like water leaking through a foundation can be incredibly expensive to fix if it isn’t caught in a home inspection you can also waste your money if you buy a website built on a weak foundation. If you’re looking at a website that gets the vast majority of it’s traffic from search engines it’s incredibly important to ask the owner how they built the links to their website as well as doing your own search of their links using a tool like Yahoo Site Explorer or a more comprehensive tool like SEOmoz. Another indicator of a potentially bad website property is when the seller is claiming the earnings are averaging $1,000 per month (for example) but when you look at the income history it’s only ever had one $1,000 month. You should almost always value a property based on an average of the trailing twelve months of income as this will help account for seasonality in earnings and provide you a more stable picture of what it can earn.
Step 5: Never Risk Money You Can’t Afford To Lose:
This is a step that I prefer to live by because even though I’m self employed I’d like to think I’m fairly risk averse. After all, I didn’t make the decision to become self employed – I was fired. So when I decide what website to buy I like to think about it from the perspective of what would happen if the website stopped making money? With this attitude I’ve found that the current maximum I’d be willing to spend on any single website property is around the $50,000 mark. This number will be different for everyone and I don’t want to discourage anyone from the idea of buying websites as a way to make money because you can buy websites in several different price ranges. Last summer I bought a website for $500 that has already earned me close to $5,000. There really is opportunity at every different price point.
Want To Learn More About Buying And Selling Websites?
I’ve partnered with a team of website brokers to put together a comprehensive training course designed to teach you how to make money buying and selling website properties. We’ve included video training modules, sample contracts worth thousands of dollars (so you don’t need to hire your own lawyer to write them up), and a whole lot more. We’ll be launching this course soon and you can find out when it launches here:
Find Out When Virtual Moguls Opens Here
I’ll of course be continuing to discuss Copycat Crafts here on the blog in future updates, but if you’re serious about earning money from buying and selling websites be sure to check out Virtual Moguls and stay tuned for when we open that comprehensive course to the public.
Have Any Questions About Buying Websites?
Don’t be a lurker! Ask me a question about buying websites and I’ll give you an answer. I respond to nearly every comment tossed my way. I’ll see you in the comments below.
Tagged: buying websites, Copycat Crafts
Got something to say? Click here to reply
Excellent idea Chris. Flipping websites can be intimidating, but very profitable. I’ll be following Copycat Crafts progress.
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Chris Guthrie Reply:
July 6th, 2011 at 5:55 pm
Yah, I’m not really a website flipper per se because unless you hold an asset for at least 1 year before selling it you need to pay your regular income tax rate, whereas if you hold the website you should only have to pay capital gains of 15% (I may be off on my numbers but buying a website for $4,000 and selling it for $8,000 a few months later is not worth it in my opinion).
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Hello Chris,
I have several questions for you:
thanks for this article. I am also buying websites (but on lower price range
– how do you valuate the websites, you’re going to buy?
– do you have some target ROI? If yes, how high is it?
– do you invest on capital gains (“flipping”) or on cashflow (“holding”)?
Thanks for your answer!
Michal
[Reply]
Chris Guthrie Reply:
July 6th, 2011 at 5:58 pm
1. It depends on niche, income history, competitors, level of potential, ease of management etc. range from 10x monthly income up to 24x monthly income. 36x monthly income at the top (never done that high of a multiple before though).
2. I like $200 per month on up to $5,000 per month
3. I do both. I don’t really segment my money and distinguish it though. Lately I suppose you could say I’m spending some of the money I earned from my 6 figure sale
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Outstanding! I’ve just begun my journey into online money making and have been wondering about this exact topic. I wonder, is there a particular vendor you know and trust more than others? I’ve checked out Flippa, but I haven’t had the courage yet to pull the trigger.
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Trent Fowler Reply:
July 6th, 2011 at 7:48 pm
Also (and maybe you’ll discuss this in another post), but how does the transfer work? How is virtual real estate traded, and what legal issues surround it? You may not want to get too far into it, for whatever reason, it’s just something I’ve been wondering about.
Trent Fowler´s last [type] ..A fantastic cover
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Chris Guthrie Reply:
July 6th, 2011 at 9:37 pm
I used Escrow.com for this transaction and in the past 30 days or so sent about $10k through Escrow.com for various website purchases, domain purchases etc. it’s the safest way to buy websites.
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Chris Guthrie Reply:
July 6th, 2011 at 9:36 pm
Flippa is the only real large marketplace for buying and selling websites and because when it comes to making money online the market you’re starting with is always really small (just ask your friends and relatives how to make money online etc. – very few people do it) there’s only really support for one market these days.
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Mikael Rieck Reply:
October 26th, 2011 at 8:52 pm
Hi Chris,
I’ve only just found this series of posts (reading through them now), but would you be kind to clarify whether you find your new websites on Flippa or somewhere else?
Thanks
Mikael
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Chris Guthrie Reply:
October 27th, 2011 at 10:10 am
Yah that’s too long of a topic to answer in a comment. Will save it for a blog post, but basically I just seek out niches that I want to be in and make unsolicited offers. Also because I have this blog that thousands of people read on occasion deals come to me but more often I’m out looking for them.
Mikael Rieck Reply:
October 27th, 2011 at 10:51 am
Okay, thanks. I haven’t seen that many “good” websites being sold on Flippa at a reasonable price either. Will look forward to that post as it is kinda essential to copying the process
Mikael Rieck´s last [type] ..Lever af nettet – Adsense er kun en lille del af det
Hi Chris,
That’s a great looking site, did it come like that or have you made significant design changes?
I’ll also be interested in how your planning to add additional revenue streams in the future. Thanks for posting
Craig´s last [type] ..Black and White Zeus Damask Comforter Set
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Chris Guthrie Reply:
July 6th, 2011 at 9:37 pm
Hey Craig,
Yes the site came like that. The original owner used to be a designer so she already built a unique look in for the site etc.
Chris
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Hi Chris,
Thanks for the post. That’s a nice site! So how does copycatcrafts.com make money at the moment? Is it from purely ad revenue? Also, if the traffic is not mainly search engine based then where does most of it come from?
Keith Douglas´s last [type] ..At some point in time, he was important
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Chris Guthrie Reply:
July 7th, 2011 at 9:32 am
Hey Keith,
It’s less than $200 a month. But I’m going to cover monetization, traffic etc. in future posts etc.
Chris
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You’ve hit my nail on the head. I want to learn how to grow a business through acquisition.
In conventional (offline) businesses the quickest way to grow is to acquire other companies and their sales/orderbooks and look for synergies to reduce cost and increase profitability, whilst at the same time adding value through reinforcing the good aspects of the combined entity and removing the bad elements. So the same should work online – except for most online businesses the cost base already starts off being very low. But I can see that it should work. But how? Over to you!
I am struggling with how Copycats made money though. Am I missing something? There appears to be very little monetisation on what is a very comprehensive and well put-together niche site?
Love the website and podcast – keep it up.
Regards,
Steve Price
[Reply]
Chris Guthrie Reply:
July 7th, 2011 at 9:34 am
Hey Steve,
Yes that’s why this year I’m shooting to spend $100k on buying just websites this year. The way it makes money though is currently through a niche banner ad network called RivitMedia and that is currently the only method. I’m going to cover more of what I do to improve site income in follow up blog posts and in even more detail etc. inside Virtual Moguls.
Chris
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Flipping websites seems to be all the craze as of late which means a lot of scammers out there on Flippa, etc. This is a great guide for those who want to purchase and flip websites. If someone knows what they are doing then they can easily apply SEO best practices, increase traffic, and increase revenue slightly to be able to at least double their money when they resell. I think the best model is what you did with Netbook reviews where you built a diversified authority website that create real value and sold for real value as well.
Jay´s last [type] ..Do Prepaid Credit Cards Help Your Credit?
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I have sold one of my first website at flippa. But I did not appraise it properly and it only fetched me some hundreds of dollars. Today, I know better, An aged domain with keyword on the domain can sell well. We need to nurture our domain names in order to increase the value and cost. Thanks for sharing on this.
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Thanks for the tips man! I’ve been setting my first steps in the website buying/selling world, so this is a real help!
Bjorn´s last [type] ..iPhone vs BlackBerry
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Chris Guthrie Reply:
July 14th, 2011 at 11:32 am
Glad I could help
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Great tips Chris. Can you elaborate a bit more on bad websites? I’m not quite sure what you mean by “how they built links”. What should we be looking for?
Congrats on your 6 figure deal
Thank you!
Anita´s last [type] ..Average Cost of Kitchen Remodel – Tips to Help You Save Money
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Chris Guthrie Reply:
July 14th, 2011 at 11:35 am
Hey Anita,
The best way is to just look at the links they are getting via Yahoo etc.
If you see links from a bunch of auto blogs, social bookmarking sites etc. these are a lot lower value than some links from major websites i.e. Engadget.com if it were a tech website.
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The thing that puts me off buying other people’s sites is that I don’t know if they’ll take a hit in an algo change. When you consider how many sites got hurt by Panda – it’s bad enough when all you’ve spent is time plus $10 for the domain. But if you’ve shelled more than that, it’s got to be painful.
How do you protect yourself from that? Are there tell-tale signs that a site might be on the borderline, and might get tipped over by an algo change? Do you analyse sites to see that they are whitehat for instance?
Rose´s last [type] ..How to Rank In Bing
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Chris Guthrie Reply:
July 14th, 2011 at 11:40 am
Best way to tell is to look at the traffic and income history. Look for ups and downs and ask where they came from (if any are present). Then looking at the links is another thing.
There is always a risk that a site you buy can lose some value but depending on the types of sites you buy you can mitigate that risk in some ways.
For example: The CopyCatCrafts.com website is more geared towards being an authority in the crafting space and that’s partly why I wasn’t worried about sharing it. Whereas I own many websites that are specifically there just to have top search engine rankings etc.
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Hey Chris,
Could you share where you look for websites that are being sold? How did you find this one? Thanks.
Tomaz´s last [type] ..How To Deal With The Constant Change And Problems Of Internet – And Life
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Chris Guthrie Reply:
July 14th, 2011 at 11:53 am
I do a combination of finding people via my website: getridofyourwebsite.com (although 99% of the websites I’ve seen come through there are crappy) I also use various contacts (I knew the previous owner of this website) and then I also just do research on which markets I want to move into and contact buyers that way.
I also use some software to help with the process as well and I’ll be sharing the results from this software via the Virtual Moguls course when we release it.
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Great post chris.
Lots of people claim to be site flipping gurus. And dont know how to use this simple site auctioning strategies of yours.
Thanks buddy
Jerrywhyte´s last [type] ..Whatsapp Messenger – Send Unlimited Free SMS and MMS With Whats Application Software
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Chris Guthrie Reply:
July 14th, 2011 at 11:55 am
Hey Jerry, and that’s the thing. I don’t really like to flip websites quickly because if you buy a website from someone for $10k for example and resell it 6 months later for $20k you have to pay regular income tax levels on the extra $10k; however, if you hold the website for 1 year before selling then you can pay the lower 15% capital gains tax rate instead. These rules are what my accountant has told me though so you should always talk to your accountant before writing sales down like this.
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Jerrywhyte Reply:
July 15th, 2011 at 9:58 am
Thanks Chris,
Those tax paying stuff applies to both international users lets say outside the US.
I have a site(smf forum) to sell what is your advice? its about 6 months old having good backlinks and with a Pagerank of one.
Please your advice and suggestion would be appreciated
Thanks Buddy
Jerrywhyte´s last [type] ..Relevant Best SEO Friendly Web Directories Lists Online
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Chris Guthrie Reply:
July 15th, 2011 at 6:24 pm
Unless it’s making money I’d suggest building it up so that it can make money. People rarely buy websites for any substantial value unless the dollars are flowing in.
great advice Chris. I never though of this business model. Sounds interesting and definitely want to get into it.
hoping for a follow up post on How and where to start looking for websites to buy.
Vijay´s last [type] ..How to Invest in Overseas Stocks – International Stock Market Investment
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A lot of my domains are registered trademarks and as such are hard to sell. Recently I was trying to move such a domain in a small private forum I belong to. I got a few bites but in the end everyone was scared off by that.
So, there is opportunity there! This particular website was generating about $60 a month, and I was only looking for $500, but no one took it.
In the end I was glad because the next month, the site did more than $100, and has held around there.
Joe Hernandez´s last [type] ..Flipping a Website for a $170,000 Profit
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Chris Guthrie Reply:
July 15th, 2011 at 6:15 pm
Yah, I’m really not a fan of using trademarks in any of my domain names now simply because I make too much money from my business. If one company decided to sue I don’t want to get wiped out and have to start over.
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Just purchased my first site on Flippa. I purchased a PLR blog before, but re-vamped that one completely – mainly because of the content. This one is new met requirements of a niche set if I were to create it myself.
Can’t wait to see how it does!
Learn With Tim´s last [type] ..June 2011 Income Report
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Chris Guthrie Reply:
July 15th, 2011 at 6:15 pm
Cool, are you documenting it on your blog or anything?
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Hey Chris,
Just curious what your thoughts are about Sedo?
I’ve had most of my sites parked with Sedo for as long as I can remember, and have sold a few through them over the years. But I’ve never used flippa. I’m definitely no domainer, but have built up a new niche site that I’m considering selling. Looking at the traffic stats for Sedo and Flippa, they get about the same…
Wes´s last [type] ..Removing Desolate Pages that Waste Valuable Link Equity
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Chris Guthrie Reply:
July 15th, 2011 at 6:18 pm
I’ve used Sedo back in like 2007 but I never really got any bites for a couple reasons:
1. I didn’t have amazing names
2. I set my prices too high
So for the most part I don’t even really bother with domain parking these days. In my opinion, unless you were one of the lucky/visionary type people to hand register hundreds – thousands of amazing domain names there is no reason why you shouldn’t just be building a website for each of your domain names.
Chris
[Reply]
Wes Reply:
July 16th, 2011 at 9:43 pm
Oh yeah, I completely agree. It’s laughable how much I make from parking my domains there. I have them mostly there just because that’s the first place I started parking them, and it stuck.
I was actually curious how you felt about using sedo’s auction system and selling domains on Sedo compared to Flippa?
Wes´s last [type] ..Removing Desolate Pages that Waste Valuable Link Equity
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Chris Guthrie Reply:
July 18th, 2011 at 11:21 am
I haven’t really tried it to be honest. I have listed some names via TobyClements.com though he does domain brokering.
Hey Chris,
I really appreciate getting some excellent advice on buying websites for capital gains (while every marketer and his brother are pushing info on flipping sites for income).
I purchased one affiliate site back in the fall of ’09 for $350. I’ve made close to $3k in commissions since buying it. After reading your post, if I had to do it all over again, I probably would take a pass on buying the site. Why? The niche. It’s a ‘desperate’ niche, the primary affiliate product gets conversions (w/a low refund rate), but I failed to consider the impact of having little interest in the niche.Considering the method of traffic generation (free search engine traffic) needed to continue to generate commissions and my time involvement (in creating content, getting backlinks, etc.), personal interest was something I should have given more thought to.
Ray
[Reply]
Chris Guthrie Reply:
July 15th, 2011 at 6:21 pm
Hey Ray,
Hit me up via getridofyourwebsite.com and perhaps I’ll buy it? In any case yes I think it is important to have interest in the site and although I’m not a huge crafter myself, my wife is sort of into it so it’s not like I’m completely out in left field not even knowing what’s going on with the niche.
We’ll see how it goes though
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How much per month was your NetbookReviews.com website making before you sold it?
[Reply]
Chris Guthrie Reply:
July 15th, 2011 at 6:29 pm
I can’t disclose that as per the terms in the contract I signed. Sorry, I’d love to share but I can’t
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Hi Chris,
Thanks for the free eBook. It has really opened my eyes to the world of money-making on the internet.
However, how can I increase traffic to my site?
Thanks.
Stanley
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Hi Chirs, I have been planning to buy lots of domains that are already built and only needs proper management. Do you know where i could start my research on that? By the way, the income for your sites is pretty impressive.
Jersi´s last [type] ..How to Get a Date
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Great tips to consider when buying a website. I must admit that i never thought of this before. But reading this article makes me more aware about this kind of matters. Thank you so much for sharing your knowledge regarding this.
phin´s last [type] ..- DATING ADVICE FOR WOMEN
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Chris,
Thanks for the content. The comments helped answer a bunch of my questions although I may have missed the approximate amount you spent on this site.
I think the big question for me out of this article was where you the site. To the earlier point Flippa seems to be exactly that home to a number of folks just “flipping” brand new sites. After watching for a 1.5 months I’ve seen the same sellers back again and again with variations on the same site with all the same “hyped up” claims. I’m starting to think you should consider the low end sites as a possible paid start in a niche the bad news is 9 out of 10 times you’re going to have to spend and rebuild the content.
Any thoughts on buying e-commerce sites – any experience?
Interesting case study you’ve got going with Copycatcrafts and I’m following along to see how your results go.
Thanks,
Norm
[Reply]
Chris Guthrie Reply:
July 20th, 2011 at 11:35 am
Hey Norm,
To address your earlier comment about Flippa listings and flipping brand new sites > I never buy that crap. The first thing I teach people is that you can’t buy based only on potential. There has to be some existing income history for me to bother spending my money.
I’ve never owned any e-commerce sites with actual products etc. or drop shipping. I’ve always just used affiliate programs instead.
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Buying and then selling websites can be a very profitable business if you can add value to the websites you buy, but first you have to find a website that has potentials to grow. This post can really help someone find a website like this thanks for sharing
Kostas´s last [type] ..Finding Guest Post Opportunities
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Thank you Chris, you’ve really opened my eyes to the business of internet. I now have my mini website up and running as a test run.
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I don’t mind exchanging guest posts with other bloggers
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