4 Red Flags to Watch For When Buying a Website

Posted on December 5, 2011 by benjamin

The market for buying and selling websites is growing every day. As a big-time (or excited amateur) investor, you can find tons of opportunities to pick up a cash-generating site and monetize it even further.

That said, the possibilities for making a bad website investment grow just as frequently. If you don’t know what you’re doing, as well as take the time for some essential due diligence, your money might be put to better use investing in Enron stock.

Here are some major red flags to look out for when considering buying a site. Whether you’re looking at a site that allows users to post their own sites for sale, or going through a top-level web broker and considering a top-tier web property, keep an eye out for the following tell-tale warning signs.

1. Financial History Isn’t Well Documented…or At All

By purchasing a website, you’re making an investment. But when you get down to it, you’re actually buying a business. Now, if you were to go purchase a laundromat or a restaurant, you’d want to know how much money it’s making, spending, and/or losing on a regular basis. Why wouldn’t you do the same for an online business?

You’re ideally looking for detailed records; bank statements, Quickbooks or Freshbooks ledgers, etc. Just something that shows that this business has kept track of HOW their business has done.

This is true even if you’re planning to take a low-performing site and raising its traffic and monetization levels; you should still have a good sense of where you’re starting out.

2. Can’t Substantiate Traffic Claims

We’ve seen it claimed a hundred times a month…
“This website has the potential to bring in 100,000 unique visitors a month!”

Right. So what is it bringing in NOW?

Anyone can make a prediction about what their traffic will be if you do X, Y, or Z to get it there. But just like the financials, you want solid proof that this site has a well-documented history of consistent traffic.

Different site owners use different types of analytics. Server statistics from your web host are one thing. But the industry standard is Google Analytics, and that should be the first piece of info you ask for. If they aren’t willing to hand it over, run for the hills. You need proof.

3. Baby Sites

No…that doesn’t mean sites about babies. We’re talking about sites that are less than a year old.

If a site owner tells you that their site is making $50k/month, you need to know for how long. If a site is less than a year old, or less than 8-10 months at the VERY minimum, you probably don’t have enough proof that it’s going to stay that way. If you’re buying a site that has capitalized on a fad or trend that’s popular that year, who’s to say it’s going to stay popular (and profitable) much longer?

Bonus Tip: Google Trends is a great way to check out what’s trending now…and to get a sense of how long it might stay that way. You can access it through Google’s website, or through keyword tools like Market Samurai.

4. Undue Pressure from the Seller

This is true when you’re buying anything. If you are talking to someone who’s pushing you to buy, not coming clean about what’s included in the sale, not letting you kick the tires and check out file structure, etc. (after signing a non-disclosure agreement, of course), or just being pushy in general, they might be hiding something. And if that’s the case, what are you going to have to deal with once they turn over the keys?

You’re better off to find a site that might not be performing as well, but the owner is very amiable and cooperative in showing you everything about it. That way, you’re establishing a partnership that is likely going to be easier in the long run, and if you need any help or advice after the sale, odds are you’re already dealing with someone who’s going to be there for you.

Like any business deal, a website purchase is not something to undertake on a whim. It’s easy to get caught up in the rush of grabbing what looks like a gleaming gem of a site that will yield you a windfall of cash. But without taking the time to really check it out, you won’t know what you’re getting into. And for that, you might as well just flush the money down the toilet. Or even worse, you could dump the money into your 401k. Blech.

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October Market News- Trends & Expectations moving foward

Posted on October 28, 2011 by admin

As the year comes winding down we take a look back at the past year, what the current trends are, and what we anticipate seeing moving forward into 2012 . As a whole, 2011 has been a very busy year on the Internet. Although both the US and global ecomonies are having their issues, we have seen a high amount of buying activity from investors throughout the world. Many investors who’s backgrounds are in more traditional investment vehicles such as Real Estate or Brick and Mortor stores are deciding to try their hand on the internet. Knowing that the Internet provides a 24/7 global marketplace, along with the flexbility of location we have found a lot of investors who are quite excited by the prospects that an online business can provide.

In 2011 we have seen group purchasing/deal of the day websites show hyper growth, and become a very popular and profitable business model. Sites like groupon.com and livingsocial.com have seen unprecedented growth in their subscriber base, and are moving towards an IPO in the coming months. Consumers love the idea of significant savings to both new places, and ones that they frequent, so its a perfect marriage for both the consumers, and the owners of these group purchasing websites. As far as how beneficial this arrangement is for the vendors, this is someting that is debatable. The entire model focuses on lowering your margins, or often taking a loss on serving these new clients today with the hope that they will turn into long term loyal customers, who will tell all of their friends and family as well. Many vendors have reported that this was not the case and they are struggling to retain these consumers, but every business differs, and we feel that the jury is still out on this as only time will tell since this business model is still in its infancy.

Another very popular space that is showing significant growth is the coupon space. We have sold a number of websites in this space, and the demand coninues to be very strong from investors. These sites specialize in providing consumers with various coupons both printable,and ones that can be used online. Typical coupons would are offered on everyday household items such as : groceries, online retailers, clothing , books, baby clothing, and much more. New technology is making it possible to no longer have to clip a coupon from a flyer but instead simply display the coupon digitally on your iphone. Moving forward into 2012 and beyond we expect to start seeing the use of NFC ( Near Field Communication) grow to the point where you don’t even need your wallet or a credit card, you can simply touch your phone to a piece of hardware at the store’s checkout and pay for your goods securely and instantly. We anticipate that both the coupon and the deal fo the day space will cotninue to see signifacnt growth for the next 5 years at minimum. Consumers are becoming more savvy, and undersatnding that the internet provides them a wealth of information, and comparision, and a result retailers have to come up with more creative ways to connect, and engage consumers.

We anticipate that moving forward we will cotinue to see above average growth in the coupon and group purchasing space . We also expect that in 2012 we will see even more investment dollars being spent on intenret based based business as the US economy continues to improve, and increase the confidence and overall sentiment of investors and business owners. As new technologies such as NFC, GPS, and Smart phones continue to become more mainstream we expect to see even more targetted, and localized offers being shown to consumers. You could be walking down the street, and pass a local WalMart, and recieve an alert on your iphone of a current sale that walmart is offering. For cosnumers this will ensure that we take advantage of the maximumt amount of savings possible, and for webmasters it presents a great opportunity to monetize a mobile app, or website.

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Seller Financing – Part 2 of 3

Posted on May 19, 2011 by admin

Part II:

Seller Financing: Buyer Benefits

Seller financing can be of mutual advantage to both the seller and the buyer of a business. Here are six ways, in our experience, that seller financing can directly benefit the buyer of a business.

1) Ability to Afford a Business a Buyer Couldn’t Qualify For With Traditional Financing:

With seller financing a buyer will generally have more relaxed qualifications to receive a loan.

In the case where a buyer’s debt-to-income ratio is too high, or, if a buyer’s credit is not perfect, or, if the buyer has a poor credit history, a business owner may still finance the deal so that a buyer can meet the purchase price, and/or upfront payment.

2) Better Terms From a Friendlier Lender:

For a buyer, the terms of a seller-financed loan will be easier to negotiate than a loan from a traditional lender. With seller financing a buyer may be in a better position to negotiate lower monthly payments, smaller down payments, a lower interest rate, or set up a longer term to repay the loan to the seller.

With seller financing a loan can also be better tailored to suit a buyers specific needs, for example, to reflect the earnings of a business with an uneven, seasonal income.

3) Ability to Financially Position the Business for Building, Improvement, and Expansion:

In the case where the buyer does have the necessary capital to purchase the business but would like to work to increase profits or add substantial value to the business, seller financing may allow the buyer to free up capital to expand, improve, or to build up business.

4) Increased Speed of Transaction:

With seller financing a buyer will not have to go through the process of trying to qualify for a loan from an institutional lender. In most cases, a buyer will go through the qualifying process only to find that they did all that work and did not receive the acquisition funding. With seller financing, there will be less paperwork to do, and so, a significant amount of time and energy saved.

Also, with seller financing, possession of the business will tend to happen more quickly. Thus, the transition period for the business may be shortened or decreased which will allow the buyer to get right to work with their new business earning an income as quickly as possible.

5) Improved Relationship Between Buyer and Seller:

Since with seller financing a seller has a vested interest in the continued success of the business, a seller is much more likely to be helpful and accommodating to the new owner, especially over the course of the financing period.

6) Proof of Confidence from the Seller in the Continued Success of the Business:

Seller financing shows a buyer that the seller has confidence in the business and that, in the future, the seller believes that the business works as it should and will allow, over time, for repayment of the financing.

Seller financing can also be seen as proof, perhaps as a warranty to the buyer, that the promises made by the seller during the sales process were made in good faith and with the best intention for seeing the continued success of the business.

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Seller Financing – Part 1 of 3

Posted on April 26, 2011 by admin

Seller Financing

The majority of small business sales are financed with at least some seller financing. With the current difficulty of obtaining a small business acquisition loan from a bank or traditional lender, it is reasonable to believe that at least 80% of small business sales include at least some form of seller financing.

To better understand this common small business selling and buying practice, we will explore seller financing in three parts.

In Part I: We will look at five potential benefits for the seller in financing their business sale.

In Part II: We will look at six potential benefits for the buyer in using seller financing as a helpful tool to purchase a small business.

In Part III: We will show the basic mechanics of seller financing in order to provide for our sellers a few guidelines for considering how to best structure your sales deal, while exhibiting for our buyers some of the financial agreements, arrangements, or payment structures which may be available to you as you look to purchase a business.

Part I:

Seller Financing: Five Seller Benefits

Many sellers may view seller financing as the “last hope” to sell their small business, however, in our direct experience, we have found that seller financing may potentially offer five benefits to the seller that an all-cash deal does not.

1) Getting a Better Sales Price:

Since a small business is generally not large enough to appeal to traditional lenders, buyers will sometimes have difficulty coming up with a large down payment. If a seller provides financing, the seller is more likely to receive a selling price more in-line, or closer to their asking price. When a buyer makes an offer of an all-cash 100% up-front payment, they will generally be looking to purchase the business at a steep discount.

2) Increase the Potential Pool of Buyers:

By providing financing for their business sale, a seller increases the number of potential buyers by letting in on the sale buyers who might not otherwise be in a position to purchase the business.

Three potential groups of buyers who may be included with a seller’s offer of financing include:

- Buyers who may be “credit challenged” for various reasons not related to their want or desire to buy a business, and, most importantly, not related to their ability to successfully run a business once purchased.

- Buyers who have a sizable down payment but who could not otherwise afford a business within that specific price range without the help of seller financing.

- Buyers who might consider buying a business if it required a lower down payment.

In offering financing a seller enlarges the pool of potential buyer prospects. With more buyer prospects, the chances are greater that the seller will be able to obtain an acceptable offer for their business.

3) Increase the Speed of Sale:

If a seller provides financing the deal will in general get done more quickly.

Even in those rare cases where a traditional lender will approve a small business loan, a bank tends to move much more slowly than a seller-financer can, (anywhere from 30-120 days to approve and close the loan). In most cases, seller financing can be done as quickly as the terms can be agreed upon between the seller and the buyer, and as fast as an attorney can get the financing agreements prepared.

4) Potential Tax Benefits:

Business sellers do not always consider the potential tax consequences of their business sale. By financing the sale, and with payments for the business spread out over a number of years, a seller can potentially reduce their tax burden especially for the year of the sale of their business.

Also, there may be potential tax breaks when a seller finances the sale of their business which can be explored.

5) Increasing Buyer Confidence:

A seller who shows a willingness to finance their business sale, in effect, tells the buyer through their financing that the seller has confidence that the business will continue to run, will run well for years to come, and that the business will, over time, pay for itself.

As the seller has day-to-day, direct knowledge of the business, and therefore direct knowledge of the businesses’ true finances, the seller is in the best position to know exactly how much can be taken out of the business to pay back the seller-financed loan, and approximately how much income the business will still be able to provide and produce for the new owner on which he or she can make a living.

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Due Diligence!

Posted on November 3, 2009 by admin

Buyers beware! There are many webmasters on the web looking to make a quick dollar by flipping their websites. They build sites within a matter of weeks, drive traffic to the site within a matter of months & make a few dollars after the first year. They then turn to “investors” to buy in to the great opportunity they have for sale. On the surface, the website seems like it can make money and provide a return, but any keen buyer needs to do proper due diligence to uncover any holes in the offering. If a website has only been turning a profit for a couple of months, there are some key items to look out for to determine if the investment seems plausible.
See if the website has the potential to be profitable over a prolonged period of time.This can be done by asking a few simple questions to the seller. Where is the traffic coming from? Is the money being made from the sale of product? Ad revenue? Is it a subscription service? Is it a website based on a fad?
Every website that is offered up for sale will have different questions that will need to be asked, but just be sure to ask as many as possible. At the end of the day, if the seller wants to sell the website, they will provide the buyer with as much information as possible. So ask away!
In a proper due diligence period, one must not only look at the financial feasibility of the website investment. It is very important to uncover EVERYTHING about the site. How long has it been running for? What are the growth opportunities available? Who are the competitors? What are the competitive advantages of the website? Is there any contracted labor? What type of marketing is being done?

As professional e-business brokers, we deal with sellers all the time and know the right questions to ask to help out our buyers and to make sure we are dealing with legitimate websites as investment vehicles. A website broker will help tremendously through the due diligence process and will most likely provide key information that buyers would not have uncovered on their own. Conversely, any sellers that are not sure how to handle tough due diligence questions from buyers, can turn to a website broker at wesellyoursite.com for assistance.

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Position your website to sell!

Posted on October 29, 2009 by admin

I receive countless emails from site owners who would like to sell their website. Many of them have a website that gets traffic and some even make money off of that traffic through ad revenue and the sale of products. The biggest problem that these site owners face is that they do not have the proper metrics and systems in place to position their website to sell for a profit. At the end of the day, a website is only as good as the sum of its parts, but when it is difficult to add those parts together, it is challenging for any prospective buyer to evaluate the business. When you cannot evaluate the business, you certainly cannot buy it and site owners are left keeping the site for themselves.

So how do you make sure that you position your website to sell? What metrics need to be tracked and what systems need to be in place to ensure buyers can evaluate your website effectively and make a realistic offer for purchase.

Here are some key tips to position a website to sell:

1) Financial Records

Keeping track of finances is by far the most important practice one needs to do to position their website for sale. Buyers want to know how much money is made, how much it costs to make that money & is the money being made sustainable over time. Monitor revenues, expenses and profits as accurately as possible. If possible, it is recommended to have those financial audited to ensure accuracy

2) Full Disclosure

When positioning a site for sale, make sure to have all your ducks in order with regards to current operations, business processes, client issues, analytics, etc. The worst thing that could be done is to have an interested buyer make a bid on a website after reviewing the financials and then have the buyer pull out because the seller of the website forgot to mention that a couple of its major customers are unhappy to do poor customer service. Whether the information provided to the seller is good or bad, it must be disclosed to ensure everything is out on the table and the buyer has a complete picture of the business.

3) Growth Opportunities

Buyers are interested in web businesses that have the potential to do more than what they are already doing. Make sure that the website for sale is scalable to account for potential growth. Identify key growth areas and put a plan in place to present to potential buyers.

4) Prospectus

It helps to be organized when selling a website. Creating a document that outlines the entire business, from start to finish, will give the potential buyers a complete picture of what they are considering to purchase. A prospectus would have the following things outlined:

- Finances
- Traffic Information
- Business Processes
- Growth Opportunities
- Company History

Site owners who simply put together what I have mentioned here will have a giant leg up on the competition. A broker can help even more if a site owner is organized and has the appropriate information ready for prospective buyers. It will save plenty of time and will increase the value of the website to ensure a higher selling price.

If you are a site owner and need help putting any of this information together, contact wesellyoursite.com and we would be happy to help you!!

Posted in Selling a website | Tagged , , , , | 7 Comments

What websites make the best investments?

Posted on October 22, 2009 by admin

So you are probably wondering what types of websites make great investments? There are so many sites out there that may look good or have unique idea or concept, but are they worth your time & more importantly, your money?

Websites need to be monetized properly in order for them to be considered a good investment. You need to see a steady stream of income coming in to make it viable. Sites can generate revenues in a number of ways. Here are just a few:

-Subscriptions for a service
-Pay Per Click Ads
-Product Sales
-Affiliate Marketing Programs
-Banner Ads

So what types of revenue streams make the best investment? Ideally you would like to have a combination of all of the above. Having recurring subscriptions in place combined with a solid marketing campaign that has several aspects to it would be an ideal situation.

It all starts with traffic. The more traffic the website generates, the more sales are made and the more ads are clicked on, etc, etc,. In my experience, websites with over 2,000 visitors per day can make excellent money via pay per click ads and affiliate programs, whereas e-commerce sites that sell products may only need 40-50 visitors a day as they are making money by the sale of the product itself and not on ads. In both cases, these websites are worth looking at as investments if they generate some profit on a monthly basis. Obviously the amount of profit differs from site to site and that will determine the investment amount. A website that profits $5000 per month may be worth upwards of $100,000 if that profit can be proven over the past couple of years. It really comes down to analyzing each website, figuring out where the traffic comes from, where the revenue comes from and to determine if the current revenue model can be sustainable over a longer period of time.

As a buyer, you should first figure out how much capital you have to invest, then go searching for websites that would fit within your range. At wesellyoursite.com, we can help you find a website that fits your budget. From $50,000 to $3 million, we have a business that may just be the right investment for you.

Posted in Buying a Website | 4 Comments

Why use a website broker to sell your website?

Posted on October 20, 2009 by admin

You may be wondering what the point is of hiring a website broker to sell your site. If you have sales skills yourself, is there really a point to having someone else do the work? The answer is yes. Website brokers do many things that help you get the most out of the sale of your website. Chances are website brokers will be able to get a higher price for the website you have for sale. They have a network of buyers and sellers and work out deals on a daily basis that benefit all parties involved. They may have buyers on mailing lists that you would not have access to yourself. These buyers invest in web properties all the time and represent excellent leads for your website. They also negotiate with these buyers which takes a considerable amount of time. Brokers are able to help close your website deal by structuring the financing of the sale, keep things confidential between you and the buyer, and provide drafts of documents such as contracts, letters of intent and purchase agreements.

At the end of the day, most website brokers do not get paid unless they sell your website. Therefore, there is no harm in testing the waters with a broker if they can potentially get you more for your website than you first thought.

At wesellyoursite.com, we are website brokers who constantly entertain offers from clients looking to sell their website and buyers looking to purchase a worthwhile investment.

Let wesellyoursite.com help you out and generate a return for the sale of your website.

Get your site sold, contact us today!!

Posted in Selling a website | Tagged , | 3 Comments

Why is buying a website a good investment?

Posted on October 19, 2009 by admin

There are so many investment vehicles today that it is sometimes difficult to decide where to put your money to get the best return. Investments can come in the form of stocks, bonds, businesses, or even people.
When talking about buying a website as an investment vehicle, it is just like buying a business, but the website investment industry as a whole is still fairly new, so there are less hoops to jump through to get a decent website that produces a return.

We have been buying and selling websites for over 5 years and we know that websites with a good track record will produce a return for us. That is why we got into the brokering business. We cannot buy every money making website that comes by our desk. We have capital for sure, but we do not have the time to purchase everything we want and run them all successfully. That is why we line up interested buyers with money making website opportunities as an investment vehicle. It just made sense for us.

Websites can be great for long term or short term investing. The Internet is always changing and more and more people are coming online everyday. This makes this 24/7 global marketplace the largest market in the world and it only continues to grow. With a market so large and very minor barriers to entry, the Internet is a hotbed for investments that can turn huge profits in a short amount of time.

Here are the top 10 reason why buying a website make a good investment:

1- Low start up costs
2- Global marketplace that never sleeps
3- lower marketing costs than traditional mediums
4- Free promotions (organic traffic rankings, viral marketing, etc)
5- Low maintenance costs
6- Less staff than traditional businesses
7- Can easily automate your business and receive payments from people all over the world
8- Work from anywhere!
9- Market growth – Internet has more users coming online everyday…largest market out there!
10- Potential for exponential growth in a short amount of time

Let wesellyoursite.com help you find a website that makes a great investment for you!

Until tomorrow….

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What makes a website worth selling?

Posted on October 16, 2009 by admin

Many people have approached our company asking us to sell their website. Some people have websites that were built 5 months ago, getting lots of traffic but not making any money. Other people have sites that have been running for years, make a lot of money and has a lot of traffic. And still other people have sites that have been running for quite some time with little to no traffic and also are not making any money.

So which scenario produces the highest return when selling a website? Well, the easy answer is that a site with lots of traffic making good money will produce the highest return when selling it. That being said, this is not always the case. Sites that make a lot of money in a short period of time usually draw red flags. We come across websites that all of a sudden are making $2000/month after only being up for 4 months. How is this possible? It could be because the site was linked in a very popular website, or that the content of the site is only popular for a short period of time (a website related to the 2010 Olympics is a great example). The truth is that sites like these are great for a short period of time, but is not a website that will sell for a large return.

If you want to make money from the sale of your website make sure that the following criteria are met (in most cases)

1) Have a lot of traffic to the website that can be proven over a 1-3 year span.
2) Have recurring revenue via ads, affiliate programs, selling content (digital or physical), etc. for at least the last 2 years
3) Proof of profit over the past 2 years
4) A solid domain name (the shorter the domain the better)
5) A solid business model that has the potential for longevity.

Now, you can still make money on your website if these criteria are not there. You will not get as much, but you can still recover some or all of the costs you incurred to build it. There are many people out there looking for turnkey website solutions. These solutions usually do not have any traffic or make any money, but if the site is built on a solid platform and the business model makes sense, they can be sold for some decent money. The actual amount of the sale really depends on the type of website being sold.

As well, if you have a website that has a lot of traffic but does not make any money, we can help you turn it into a site that produces an income. We have done that with many websites in the past and have turned websites that produce a 1000 visitors per day and make nothing, to websites that can sell for $500,000 after a year or two of $15,000 in monthly income. It is amazing what a solid marketing campaign can do to make a website successful.

Are you not sure what your site is worth or need help turning your website into a money maker? Have wesellyoursite.com appraise it for you and give you some guidance on how to make your website profitable. We will take a look at all the angles and give you a realistic figure as to what you can get for your website. Simply email broker@wesellyoursite.com for more information.

Posted in Selling a website | Tagged | 12 Comments