What you need to know before you buy or sell a website
If you ever see websites for sale on the internet and you take a deeper look at the specifications and income from these websites, you discover that this website has a passive income of approximately €2,000 per month for what appears to be very little work. The income could be from Adsense, affiliate sales, selling t-shirts or bookings for hotels or even a mixture of everything.
The website looks to be in autodrive all the owner has to do is make sure that the website is keep online and the money just flows in so you ask yourself. The asking price for a site with a €2,000 income is valued at €60,000
Why do people sell those sites, if they make such a good profit with hardly any effort?
Then the dangerous part in case of a niche site: What prevents the seller (after the sites was purchased) from just restarting a new site in the same niche with all his experience?
That would mean there is an instant competitor with a huge advantage out there to simply take over traffic/customers from the old site over time?
Thousands of people are in the same boat as you.
They both don’t understand the valuations, or the motivation to sell.
Let me offer my opinion on this.
The valuations are spot-on (30x monthly profit) for a website that is solid. “Solid” is open for interpretation, but let’s just say it boils down to a website that is relatively aged (2 – 3 years or more), with predictable revenue and a way to reach customers without expensive advertising as a primary acquisition (think email list, organic rankings, .etc).
The big question is “If you’re making so much on autopilot, why sell!” – The question has many answers and they’re all relative to the website, however it can typically be answered like this.
- The business owner wants to cash in. Regardless of their excuse to sell, they’ve hit the point where putting in more work is prohibitive. Not exactly “law of diminishing returns”, but definitely more work than they can afford to give the business.
- This what they do for a living. Just like house flippers, there are many successful people that can take a website in short time, build predictable revenue and flip it for 30x. Why not? It’s less work for them. You get what you want, they get what they want.
Ultimately it comes down that.
Whatever reasons you’re given, or hesitation you have behind believing it, just remember it truly comes down to cashing in.
It’s typically no more underhanded than house-flipping. You can do a lot more with $60,000 in a lump sum than €2,000/mo and they’ve decided to go after the lump sum.
Whether that means they reinvest, or quit, or decide to focus on something else, they’ve analyzed their business enough to know it’s a good time to sell.
Now, I really don’t want to drag this on and on, but
There are some other reasons to sell that a little due-diligence can help root out.
- The seller’s industry is falling apart.
- Competition is killing margins.
- They’re tied to a platform that’s getting more restrictive (Apple, Shopify, Amazon, .etc) or decreasing payouts (Amazon affiliate is a great example of this).
- They’re losing traffic. This is an easy one to spot.
- The consumer demand for their product is in a bubble that’s about to blow (fidget spinners, anyone?)
There’s so many other tiny things that can disrupt a business and ultimately lead to a seller looking to “sell high”, but you can spot a lot of that just looking at the numbers and doing some analysis on the website.
Buying a website is very different from buying a property.
Suppose a website has some good keywords near the top of Google organic search results and is making good money, it only takes those words dropping a few places to devastate the profit.
So you have to be very careful when buying websites. The older the site is the more stable the income is likely to be. If a site is just a year or two old it can easily drop down the rankings.
Another thing is that you have no idea how the backlinks have been built so you need to check those carefully. If the site later gets penalized by Google, all your profits would be gone.
But with most sites there are regular work that needs to be done. You can’t really just leave a site and hope the income will come in with zero work. With affiliate marketing for example, products change, so you’d need to review new products, remove obsolete ones, etc.
It’s not a case of buy, sit back, and watch the money rolling in forever. Work is needed. But worth buying if you don’t want to start from scratch, as that would take time and money also.
At any rate. Hopefully this helps answer some questions of intent from the seller’s perspective.