Podcast 3: How To Sell Websites For Seven Figures With Justin Hartzman

Intro: Welcome to the MakeMoneyOnTheInternet.com Podcast where you learn tips and strategies from the pros on how to build your own online business. Now, here is your host Chris Guthrie.

Chris: Hello, Chris Guthrie here and I’m very excited to have Jason Hartzman on the podcast today, to talk about one of my favorite ways to make money online, and that is, with buying and selling websites. Justin is a co-founder of WeSellYourSite.com and has sold millions of dollars worth of websites over the past few years. Welcome to the show, Justin.

Justin: Thanks, Chris. Appreciate you having me on today. I hope I can answer the questions you have for me.

Chris: Yeah. So, I know you’ve been buying and selling website for a while now but I’m just kind of curious – actually before we even get into the history of your buying and selling websites – what got you started online and making money? How did you even get on the web and making a living from it?

Justin: Well, it’s an interesting story. I mean I’m still a young guy, 20 years of age. But, I started about age 12 or 13 with my partner who I still work with today. And, we are building – well, before we were into websites we had this thing called the computer which is brand new. We had Internet on it. We found every which way as young entrepreneurs to make money from that and as we went about the Internet it got more popular we started building pretty interesting websites. A lot of content based Adsense stuff and before Adsense working with TribalFusion and blah blah networks that were out there in the past. And, we seem to make a lot of money by just bringing traffic to free things and we found a good niche in that and really young we started to find people who want to buy them from us who knew more about it and we started selling stuff really early on and then we had a kind of a break and we went to finish high school and went to college and learn there is other things out there to have fun with and after that we came back to it and seem to hit it really big in the MySpace niche where we started providing, you know, all the free content again. Free content was key back then, it still is today to everyone out there. So they take our content, they promote us and we learned SEO from very early ages then and marketing and providing free content, production of content and outsourcing really early and we made these big sites and as the sites became bigger and bigger and bigger and we had better connections to better advertising. We’d sell them and we’d buy small ones and make them bigger and sell them. Before Internet flipping even existed, it was just a little niche that we knew about because we were in a specific market. And then, we had one site that we started first and we let that build up and we are just doing naturally, naturally, naturally and after about six months, so it wasn’t even that long a time, the site was making huge amounts of money a month. And, somebody came by and we had been asked to sell it. We went away and sought, you know, how could we sell it out there and there wasn’t the Flippas and there wasn’t any other sort of stuff and there was business brokers and we used a business broker and he was charging us 10% and we found that, you know, we gave it to him, he found some people but it would always end up where, you know, we would do all the work. We’d answer the questions, we call them back. Other time we start doing absolutely everything ourselves and we’re paying him to do nothing but provide us with someone who may be interested in buying our websites. He couldn’t answer those questions; he knew nothing about the Internet. So we started a company called All You Can Eat Internet. We’re producing websites for ourselves and for clients in all different genres. And we started a company the very same time back in 2000, 2004 beginning of 2005 called WeSellYourSite.com. We were pretty much the first Internet web brokers specifically for Internet websites out there if – I don’t think there was anyone else. I could be wrong but it’s something we’ll look into and we said why are we doing this, why are we even paying someone else to do it, let’s start by selling our own sites. As we started selling our own sites for six figures and higher we went, you know, well we got to help other people. We know other webmasters; let’s do this. So we build up the company from there providing a service that was specifically for Internet entrepreneurs of Internet properties to get them most money and find the right investors for them. So that’s sort of where we started and how we evolved to be what we are today and there is lots of stuff in between but, that’s for another day.

Chris: All right. So, that’s pretty good history. So, it’s basically the idea of, kind of, starting your own brokerage, just kind of born out of the idea that when you talk to traditional business broker they just didn’t really know the web and didn’t really know how to sell on it. And, so you thought you know this is just something that we can probably do ourselves because we’ve already have experience selling our own websites.

Justin: Exactly. And along that came you know, sort of – everyone likes to make a sale but there is always the up-sell that makes it better. We want to go to our clients and when they bought something that wasn’t ours and we’ve done all that good work we want to give them the knowledge and the understanding of how to get upside of that, instead of oh, we know nothing about the Internet, we come from traditional investing in property or in real brick and mortar business, what do we do next, we wanted to provide consultancy services with our actual knowledge of what made us successful to provide to them so they realize an upside and [indiscernible] work for them in the long run versus being you know a pain in the butt. We want them to come back to us and buy more sites and that’s what really made us successful and continues to this day.

Chris: Okay. So I know, I mean, it sounds like some of the first people that you helped sell their websites; they were just friends of yours and you, kind of, all kind of travelling in that same space. But, just the idea of it from a business model because I know that listeners here are always kind of curious how different people are making money online. It just seems like a, know you, classic chicken and the egg type thing, where you need people with great websites so you can sell but then you also need access to buyers that have money that actually can afford to buy these types of websites. How did you find your first buyers? I mean, I think we already know, kind of, how you found your first website to sell, kind of from your friends. But how did you find these people that you sold these websites to?

Justin: Well, to be perfectly honest with you it seems that from the very beginning it was hard to always find the good websites to sell. We could find a website to sell but it was the good ones that someone wanted to actually purchase. But what was hard – easy for us, sorry, was finding the people who want to buy them. We had a large network of high worth individuals that we built websites for, or that we knew from venture cap listings that we’ve done on other projects. All these sort of people have come to us in a group and they heard about what we were doing, we had some early on articles that really push a lot of investors to us and then, you know, we knew SEO at that time, we had a website. When someone was looking for to buy online business we were the ones who came up. There was a lot of people because there wasn’t a Flippa out there to go find; they want to use us to find specific sites for their portfolio to buy. So for us it was really, you know, they came in, the investors came to us and they are always there is finding that right website that they are looking for because everyone has different buying criteria, everyone knows a little bit, something different about what’s going on online. A lot of people want specific, some people only want ecommerce. Some people only want ecommerce that are drop ship than are inventory held, some want digital delivery, some content, some list out the next thing, we had to make sure that we start bringing in good inventory of things to sell for the people who we want to sell them to. So that’s sort of – it may be chicken before an egg but I think it was really the fact that we had one more than the other and our job was to go find the right properties to sell to them.

Chris: That’s a good point, actually. I mean I want to come back to that a little bit later on but, I wanted to say too I know for those of you listening, I met Justin early this year. I was a consultant for the buyer on a website that he sold. It was DealofDay.com and the owner, the person who owned was Joel Comm and he was on one of the earlier podcasts that I did. And now this deal as Joel mentioned was worth seven figures. What this your largest sale of the year? Or, have you had other larger ones than that?

Justin: This year from January to now that was the, I believe, the largest or second largest sale; in our history, no. We’ve done sites up to, you know, the $8 Million mark.

Chris: Okay. So, what are some of those websites that you sold that you might be able to discuss? I know that depending on different contracts you might not be able to say anything. But are there any that you’re able to discuss?

Justin: Yeah, of course. We can talk about a couple so that listeners can go around and to see what kind of things sell really well. You know in the digital delivery space we just recently sold a small site Belchfire.com which was a site that provided Windows themes. We also in that same space, about a year ago, sold a site called LogoMe which provides digital downloads of custom made or existing logos that you can license or purchase. Then going into the, you know, ecommerce drop ship business we had one called Flowers-by-Design.com and they sold and drop ship silk flowers from Chicago to many different places and that was a great business. Just recently in the normal ecommerce space, we sold one called Bobizzo.com and Bobizzo is a high end website that sells headphones in the higher end scheme of things. So your Monster headphones, your WeSC, Skullcandy and so forth. So we do a bunch of different stuff out there. You know, we do some softwares like phpMyRealty.com and a bunch of different stuffs. So we’re all over the map. It depends, you know. It really comes down to how that business model works and a lot about what that business is, not specifically what they’re selling but how it works and how someone thinks they can grow with it.

Chris: Okay. And so, those are some good websites too. Everyone listening go ahead and check those out and I’ll have them listed in the notes on the blog post for this podcast as well. So you can look at them. But I’m curious to you know – what type of range do you typically sell these websites for? I mean are they always, kind of, in the six figure range or what kind of price ranges do you typically work with?

Justin: Well, we typically for our clientele looking for anything that starts around the – you know, at the very minimum $80,000 and our sweet spots from, you know, $250,000 price point all the way up to about $5 million. That’s where we’d like to best see with our investors, really like that bar and you know, because it’s hard, people who want a less expensive site are looking at putting everything they have into it or not sure of what they are doing online. So it takes a lot of work to do a smaller site as well as it does to do a bigger site. So it just depends on your ability to purchase and your capital that you have. They are all important to learn about and due diligence is always the key, something that we do a lot of over here.

Chris: Yes, you can say that’s another thing too, when you’re buying website, I guess there’s different you know – it’s kind of tough sometimes really to be able to verify the numbers. So, that’s something else you kind of help with? And, I mean, other things I guess you could do is you could do like Gotomeeting webinar where they log into their accounts, show you their earnings, etc. Are there any type of things that people can do to try and help verify earnings before they buy a website?

Justin: Well, certainly there are. And this comes back to there’s often a need or there’s why people use the brokers because we know a lot of different ways and we know when someone, you know – we hear a lot of stories all the time and all of the sites we don’t sell or don’t even list we go to the people who can verify and that comes down to things like, do they have tax returns for that specific business, can we talk to their vendors, can we see credit card statements, can we log in and see their Authorized.net or whatever processor they are using. There’s a bunch of different ways that we go in but we want to see it first hand, we don’t want to see a screen shot of it, anyone can play around with that stuff. We want to make sure we can see historic information going back as far as your systems go. You know, if your Adsense has nothing – don’t hide anything, give me your Adsense, let me go look at. I mean pull my own reports. By just saying no you can’t have that, well then you don’t really want to sell your site. You got to be an open book because no one’s going to spend their hard earned money on your baby unless they can verify that what you’re saying is true. So, always having the right information, being honest and open will allow us to do our job which is sell your business sort of vice versa. So it’s really important.

Chris: Yeah, definitely. When I sold my first site in six figure range last fall I had to provide so much information about the website and where the earnings came from. I had to even give some information just about my business in general just to try and help prove that I was actually making the money that I was and then I even did like a Gotomeeting webinar where I logged into my Amazon account, showed them the earnings to the site and did a lot too. So it’s definitely – and I think to even going back with the broker and this is probably what even attracts buyers is that you kind of deal a little bit of that early stage work before they even see the property. So you can kind of make sure that, you know, when they’re looking at websites through you they’re most likely going to be, you know, much better quality than just kind of looking just randomly for them.

Justin: Absolutely. It comes down to the fact that I probably only list or my company only list under 10% of what comes across our desk. We probably get, you know, in a week 30 to 40 requests to list their business but either they’re too small or they’re unverifiable or you know, someone I don’t feel providing accurate information for me or is not going to helpful in a sale. So we really only work with people who want to work under the best light and work with us to make something a reality for them. So you want people – we’re here to – you know, it’s not our job to fight against you as someone who’s listing a website. We need to work with you and the buyer. The buyers are the ones with money, they’re always going to have requests. And you don’t just need to give something away as a business owner but you always have to want to compromise to make a deal for it to happen. Fighting against each other will just mean it doesn’t happen and that’s why deals fall apart all the time. It’s not because of someone has the money or not. No one’s going to come up here that doesn’t have the money that they said they’re going to have to. It comes down to do you want to make this work as two parties together because you’re going to be in a relationship. When you sell a business you still are going to talk to that person. You still are going to have a training for a period of time. You want to make sure you can work with them in a good, you know, in a good way so that it works out best for everybody.

Chris: Yeah, I think, that something to mention too is that most people might think that when you sell a website you just kind of handover the reigns and then they’re doing it and you’re out of the picture. But, most likely, and you can verify this as well, the original owner is going to be still on for a certain period of time, you know, providing some additional training or helping to run the website. And the people that I’ve met that have sold websites in large price ranges, they’re always involved for at least a certain period of time.

Justin: Absolutely. Whether it’s just specifically for a training period which is in every deal. You know, minimum at 60 days we typically see 90 days. Sometimes more depending how big the purchase is or what’s involved in running the website. You’re going to be involved in that way plus there’s creative deal structure. You know, if you ever say that’s non-historically long in age and it doesn’t have a lot of information you might be kept on as a small partner for a period of time with a buyout clause or a vendor hold back in the way of earnings. Things like that. So there’s always some time towards it. So working with that person, doing a good deal that makes sense for both of you is going to be the best thing in the end. You’re going to be working with that person one way or the other.

Chris: Definitely. I know you mentioned earlier that you only list about 10% of the websites that you see come across. I mean I know you mentioned a few of the reasons, whether the site was just too small or whatever. Are there certain types of websites that you actually look for and would love to sell because they sell well and this is just something that can kind of help our listeners who are trying to think about what sites they would be willing to put their time and energy into really building out a huge website for?

Justin: Well, it’s a super question. I kind of thought you’d ask me that before we go on this phone call and I tried to think about it. But my long and short answer of that is, no. People buy sites in every genre, in every different way for tons of different things. It comes down to quality, is what it comes down to. I have people who only buy content sites that only have Adsense on them. I have people who only buy ecommerce sites that do $2 million plus a year and half the whole inventory because they have a good fulfillment process. So this is, it matters on the buyer what they are looking for. At the end of the day it comes down to looking up how long you site’s been around for. And this kind of comes into how to value your site as well. I know we want to talk about that we discussed it earlier but – so they kind of play into each other. So you’re looking at the history, how long that site’s been around, what kind of financial proof you have and you know, how well, how much long you want to work on that deal and be involved in it in the future. Those all play a big role into why someone would want to buy your websites. What we do love to see today is, you know, it’s always hot, they’re always good but they sell for a little less is whatever is hot right now. People want those sites. They don’t want to start from scratch. They want to have some income, they want to have some momentum. So if you’re in a group deal space a lot of people like that right now. You’re not going to get here for, you know, multiple on it then you might get for a three year old business or a five year old business but you’re going to get what it’s worth. The coupon space, that’s really big right now. When MySpace was big it was MySpace. Apps are another big thing right now. We have lots of buyers who are looking for growing apps in the iTunes market as well as android and so on and so forth. So it’s all over the map. There’s no real distinct answer. Just bring us a good product, a good website, a good service. All that combined with history. Make sure you have the books, you know, you have all the proof, you have all the history. And it’s easy to look at and very simple for someone to understand. That’s the most important part.

Chris: And, I think, actually you touched on it really just good suggestion in generally is that if you can ride the trends that you see going on around the Internet then you might be able to able to make good money that way. I know that back when Yahoo! used to have their old cost per click platform people were getting paid way more than they were with Adsense and they’re just crushing it with these websites and then before Yahoo! eventually shut it down. But, there’s always these different types of trends that come along in the history of the Internet and if you can really look at them and see what you can do to build in that space then you can make a lot of money. Whether it’s group buying as that’s the type of thing it is right now or in my case net books back when no one had even heard of a net book and that’s just a good suggestion, is that to look for the trends and what’s hot now and build that.

Justin: And that being said, that’s – we both talked about that point but realize too when I touched on it if you’re riding a trend you clearly don’t have long history. Think about that when you want to sell it. Someone is not going – if you’re making $1,000 a month then you grew to $2,000 the second month, $3,000 the fourth month and you’re only five months old. No one’s going to give you $1 million for that website because you see it’s growing. You have to be reasonable in what you want for it. So, if you built a site it’s five months old and you’ve made, you know, a couple of good bucks on it, you want to sell it for a year’s worth of revenue, that becomes more realistic or if it’s a year old sell it for a year and a half. Those become more realistic sells to people. I never, you know, I’m a kind of person and this is just the kind of broker that I and my firm is. We’re very honest with people. We’re not going to, you know, give you unreal expectations. If you have an old website with lots of history, we’re going to get you more money for it. A newer site, we’re going to get you less for it. You have to be realistic. Or, you’re going to sit there with a site that whether you want or not is not going to sell. So, it’s really important to think of those things when you’re, you know, playing that game, building up sites. We sell a lot of new sites out there that doesn’t say, that’s not saying if you have a great site that’s building we won’t sell. We will when we can. But just be more realistic of what you’re going to sell it for. Don’t think that your site is the next best thing. If it was then when why aren’t you making it the next best thing, is everyone’s first question.

Chris: Yeah, definitely. And, actually, that’s something else I want to talk about too is just how do you typically price websites. I know you mentioned before just an older site will sell for more and the younger site will sell for less. That definitely makes sense and that’s something that even when I talk to people that asked me questions about selling websites. They, you know, they think, you know, my site’s this, it’s five months old, I’m making $1,000 a month, I want to sell it for $50,000 and I’m like well, it’s probably not going to do that but you know, is there some type of a formula and I don’t want – it’s just the best word I can use for, because I know that every case is different but just some type of guidelines that you can, maybe, give to people just for sharing some advice.

Justin: Yeah, absolutely. I love to, you know, this way it makes my job easier to understand what it might be worth. It isn’t a formula that’s correct. But there are some things that we can look at. You know, your financials. What kind of state that they’re in. Do you have full financials? Can we see your revenue proof and expenses very easily? Do you have P&L statements? All very simple at today’s day and age if you use FreshBooks, if you use QuickBooks, if you use any of those type of products you have – they produce those for you. You don’t have to sit there in Excel and do them. Make sure you have that as well as, you know, your account proofs and things like that. That’s a big thing. Your model. Obviously we look at every different model whether it’s ecommerce, you know. There are people who’ll spend a little more for business that does drop shipping in the lower end of things. So if you’re doing $100,000 a year and you’re selling for a multiple, they want to have drop ship. If you’re talking in the millions of dollars a year they like to hold inventory so it’s worth a little more to them. Do you have recurring billing? That’s another huge thing that someone looks at, that offers more value. Are you doing digital delivery where you don’t have to worry about, you know, using shipping and having shipping costs. That’s really good. Are you selling leads? So we look at the model. The model plays a big role into it. Again, we talk about history and age. How long it’s been there? Just for a couple of reasons that plays into search engine optimization, it plays into you know, your organic traffic which comes from that all that sort of good stuff. We look at URL. Does your URL hold value? Everyone thinks their URL’s worth a million dollars or $100,000 because they like it. Well, it’s only worth what someone’s willing to pay for it and how useful that can be. So we look at that shorter, that were keyword rich. Always see that holds value. We look at goodwill. Is there a large job site on this? Is there opportunity? People don’t pay for opportunity but if they can see that they can put something into it they are willing to pay a little bit more versus oh, we don’t have any ideas but we like where it’s going. So goodwill plays an influence. There’s a whole bunch of different things that we look at, all the way from the top to the bottom to make that valuations. Those are just a few things that people might want to think about when they’re listing or pricing their property.

Chris: Okay. And I know this whole kind of conversation is centered around the idea of selling through a broker or buying through a broker. Is there any reason, you know, beyond – rather, let me restate that. I mean, I know, you mentioned Flippa and I’m kind of curious. Is there any reason why you think people should avoid selling through Flippa. I have my own reasons but I’m just kind of curious to see, you know, what you’d say. Even though you’re, kind of, coming with a broker perspective.

Justin: Absolutely. I think Flippa is good for a certain type of site. I never take away; I love the guys over there. We speak to them; we talk to them; we work on them with their brokers program. I have nothing bad to say about Flippa in the way of what the service they offer. The sites that are listed there and typically do well are ones that, you know, are smaller sites or, ones that are just growing. They are not your typically long running site and you have a group of buyers over there who spend their days and enjoyment trying to rip apart the listing which I don’t like in any sense. If someone has listed something, something that you’re not interested in, well, sure, move on. If you’re a truly interested buyer, you’re going to look at what someone has to offer, you’re going to offer – you’re going to make an offer or bid on that company and that bid’s going to be based on that information. During due diligence if it’s not there and it doesn’t add up or lineup, well, then you know, that’s when you say sorry I can’t make this deal happen. So I don’t like that people are trying to nitpick particularly. So this gets into more of why someone should use a broker and you know, outside of selfish reasons of I love what I do besides anything else I just really enjoy it and I think I can help make people happy in selling their business or finding a new business. We can step away from the process, we can listen to what you have to say on buying or selling and we can process that, we can think about ways to strategically get what you’re looking for and take emotions out of a deal. We’re not emotional about your baby, we’re not receiving six, seven figures for it. There’s things that you go oh, you know, I don’t want to lose this deal; I don’t know how to say it. We know how to say that properly. You can tell me to do something and get mad at me or whatever it may be and I can translate that differently to the other side where I can hopefully bring what you’re looking for to the table. We also work with people who have the money and the ability to buy these websites and don’t want to go and take the time to read through a Flippa auction. They want to speak to us. They want to know that we’ve done our research that we believe it’s a good website before they go take a look at. These are the guys with a bigger amount of money or the corporations or the Shell accounts or the Fortune companies who are looking to, you know, invest and make their portfolios larger. They use us to do the work for them and really get us involved in due diligence. We know when something smells fishy, maybe a little earlier than someone else does. And that’s really important. They use our expertise. And it just makes it an easier, safer process for everybody. At the end of the day the most important part is, we are going to get you, even though there is, you know, fees are involved in doing that, nothing upfront but on a succession just the same way it is on Flippa or some other website. We’re going to get you the most dollars for your website. That’s what’s the name of the game. You’re going to find the right investors who are looking to pay proper dollars instead of the guy who is trying to chop you down at the knee, chop you down at the knee, chop you down at the knee when you’ve been sitting on Flippa for three months because no one really wants to spend that amount of money. So bring you the right buyers, which in the end of the day is going to bring you the most dollars. And, that’s the most important part of it all.

Chris: Yeah. And I think that’s just something in general people should think about. You know, if you have a website that you’re looking to sell. You should really consider whether or not it’s going to be – you know if it’s a really big website you can probably sell for more using a broker. I mean I know that’s why I ended up using a broker when I sold my website. Just because I thought that it was kind of outside the price range of Flippa. I am a fan of Flippa, I’ve used it before for looking for websites or other types of things but yeah, I mean, it is just good advice. So, we’re about near our time and I just want to say thanks again for coming on, Justin and sharing your expertise. For people that want to follow along and see, kind of, more of what you do is, the best place to just go to, WeSellYourSite.com and check you guys out.

Justin: Absolutely. WeSellYourSite.com, my email address, if anyone wants to email me direct with questions I’m always open to that. I like speaking with people and helping them out. It’s Justin@wesellyoursite.com. I look forward to hearing from them and hope that we can help you get your sites sold one day or just answer your questions. And I thank you, Chris, for taking your time today. Sorry we could only take on little bits and pieces but I have lots more to offer for everybody.

Chris: And that was the show. As I mentioned during that podcast my largest personal sale came from NetbookReviews.com, which I sold in a deal worth six figures in the fall of 2010 and since that time I’ve purchased several other websites and I have a goal this year to buy at least $100,000 worth of websites. So this is something I’m definitely focusing my business on and one thing I’m actually going to be talking a lot more about on my blog.

Now, I generally keep the websites I buy secret but I’m currently documenting one of my website purchases on the blog. So you can find out the URL and more details when you visit MakeMoneyOnTheInternet.com and visit the blog section.

Finally, part of the reason why I wanted Justin to come on today and share some of his expertise is because I’ve actually partnered with him and the other brokers at WeSellYourSite.com to create a comprehensive training program designed to teach you the ins and outs of buying and selling websites based on our collective of experience. You can find out more about out course on Chrisloves.com/VirtualMoguls.

Now, before you ask I know that isn’t an affiliate link. I’m just going to start using the URL redirects on my podcasts so I can better determine how active you, yes, I’m talking directly to you, and the rest of the listeners are in my podcast. Thanks again for listening through the entire thing and I’ll see you on the next episode where I’ll be talking about how one mother makes her living running kids activity websites along with a few other website projects. It’s very cool stuff so miss out on that. And finally, for one last time, you can learn more about how to build a successful online business by visiting my blog, MakeMoneyOnTheInternet.com.