Thoughts on Buying Websites
Someone asked Robert from 30 Days to X about buying established websites and maintaining them as a strategy as opposed to starting them from scratch.
I dropped in with this wallet-saving wisdom:
Sorry to jump in. This depends on your experience. If you have experience and can work out whether a website is undervalued and know how to make it better to get your money back, then do it. If you have no experience/skills then you’re just wasting money on a depreciating asset
And our guy replied:
Even if it’s one that requires very minimal effort to maintain? Besides SEO, some web programming language, copywriting, and sales, what other skills do you feel are required?
And because being concise enough for Twitter isn’t really a strength of mine, here are my thoughts on this.
Should You Buy a Website Versus Building One?
To answer @dread_game, here’s my reasoning.
It’s not about the effort it takes to maintain a site. It’s not about the skills you have – although they play a part.
Success with buying and selling websites is the same as with any investing.
Think of buying a site in the same terms as buying income generating real estate of any sort.
I wouldn’t buy a commercial property, because I don’t know about it.
But let’s assume I did want to go into commercial property.
I wouldn’t buy a commercial property unless I knew the following:
- It was at a reasonable/undervalued price
- I could maintain the income it generated
- I could maintain the value of the property overall
- If something were to go wrong, I could fix it in a cost-effective way without massively draining my funds
- It’d need to generate an income/appreciation that covered worst/best/medium case scenarios.
- Oh, and I’d know what I was getting into RE: maintenance before I started.
Most people don’t think of websites this way, because the values are lower and the answers to the questions aren’t so tangible.
Back To Websites…
Let’s talk about websites now.
Let’s say you went on Flippa and found a website for sale for $1200. It earns $120 a month right now, so you’re going to make your investment back within a year.
Or are you?
Without me saying any more – could you look at that listing, tell if it were legitimate, tell if you could improve the site’s value and performance, and tell if the price with all those things considered is correct?
If the answer to all of that is no then you are going to burn your money.
There are plenty of websites for sale because the owner can’t make them profitable.
Why would you buy a website for $1000, $5000 or more when it isn’t profitable, or the profit isn’t worth the effort?
You can build your own website that doesn’t make any money if you want a website that doesn’t make any money, and it’ll cost you less than $50.
If a website is making $100 per month right now, it could make $1000 a month in a year, or it could make $0. Do you have the skills, knowledge and experience so you can ensure your purchase will be the former and not the latter?
Again, if not, then why not start your own website?
If you’re going to buy a website, you want to check the details out, make sure it’s legitimate. Then you want to be able to say, “This website is worth $X right now but I could do A, B and C better and it’d increase the performance. Then it’d likely be worth $Y where Y>X.”
Maybe you can do this. Great. But if you can’t, then here’s what’ll happen.
Assets Aren’t Static
No asset keeps its value as a constant store forever.
A lot of people go on auction websites, see websites for sale, “PASSIVE INCOME MAKES $400/m”
And assume they have to spend their $5000 to get a $400/m passive investment.
But if you do a minimum of maintenance, chances are that site will depreciate.
- Your site loses traffic due to inactivity
- A new competitor pops up and takes your rankings
- The search algorithms change and your sites lose ranking
- An affiliate program is no longer available
- Your web host messes up and that site goes down for a few days
These things can go wrong and if you have skills, you can deal with them. If you can’t – then your $5000 investment is worth $4000 and your income drops from $400/m to $300 a month.
Case in point.
I’ve had a post on another website for about two years now. It sells an ebook/report type thing. It costs about $70 and I get $15 per commission.
Or, I did…
I got an email the other day from a commenter on said site.
“Your link isn’t working.”
So I check it out, and it turns out the guy selling the ebook has taken it offline.
He’s also taken it offline and taken the money I earned for him with him. I’m out hundreds in commissions.
And that site is a whole lot less profitable for it.
Now, I’ve already worked out how to counter this, but that site could have been worth, say, $3000 if I sold it last month. This month, the guy I’d sold it to would wake up to that site being worth $1000.
He’d have lost $2k value overnight through no fault of his own.
Are you ready for that?
How To Fix This…
I’m not out $2000 out of $3000 on that website, because I built it for the grand total cost of $10 of a domain name.
And I can build the value of that site back up by writing a competing ebook and rewriting the successful sales page to link to my work instead of that guy’s.
If you have the skills to build a successful website, then you should build your own.
If you think you have the skills, then you should definitely build your own.
And if you’ve built multiple successful sites, chances are you’ll recognise a site for sale that’s a good asset, and you’ll be able to see what a person is doing wrong and how you can improve it.
For instance, if I saw a site for sale that made $100 a month, was valued at $1200 and it checked out as legitimate, (I’d check the traffic figures and income details before buying,) then I’d look and see what I could do better.
If the articles were poorly written, SEO was bad, there were better affiliate/monetising opportunities, then I could say, “This site is undervalued,” and buy it. I’d then correct all the errors and hopefully turn that $100 into $200 or more.
And I’d make a return on investment, increase the value of the site and go about my business.
If I couldn’t do this, I’d rather not spend my money.
When it’s so easy to build websites and get their value up, buying them should be a last option.