My brother, Matthew, and I have been internet entrepreneurs for over 12 years now. In that time, we’ve learned a lot about what works and doesn’t work for making money online. We’ve also learned that what worked yesterday might not work today. But one area that has remained fairly consistent is buying and selling internet properties. We’ve found that, as when buying any business, you must complete your due diligence and consider several key factors when looking at a website for purchase. Most people who want to sell a website are honest, but to avoid the others, and to really determine a fair price, take a look at some of the criteria we consider when we find a website for sale. Every one of them affects the long-term value of a website.
1. Income: This is pretty obvious, but there’s more to it than just a number. Take a look at the pattern of income over the past year. Has it had a sudden spike? It’s possible that the owners planned some special efforts to make it look better for selling. Is the income trending upward? If not, make sure it’s not a one-trick-pony without a real long-term source of income. Is the income generated in more than one way? If you have product sales, Google ad revenue and banner ads from more than a couple of advertisers, that’s a sign of staying power.
2. Age: If you want to make sure that the site will continue to hold its value over the long-term, past performance is the best measure of future performance. Look for a site that’s been in play for more than a year. SEO optimization efforts also show their best return at that point. Check out the sites history to see whether it’s been active for that long and to make sure it hasn’t had any problems.
3. What you’re buying: Are you getting everything that the site offers currently? This may include proprietary software, all of its content, the graphic package and long-term contracts for the ads currently running. All of those add to the potential cost of a site, but also add to its value.
4. Traffic: This is an area where quality might be more important than quantity. 12,000 hits per day may sound great, but are those potential revenue generators – either through ad revenue or product purchasing – or browsers with zero actual value to you? Issues such as demographics, country of origin, and interest to potential advertisers affect the value of traffic much more than numbers.
5. Current and potential competition: Does this site offer anything unique enough that it would be hard for someone to create a quick-and-dirty competitive site? This type of barrier to entry is a critical benefit when purchasing a website – actually potentially more important than when buying a brick and mortar business because location is irrelevant. If there are any current competitors, make sure your potential site stacks up well compared to them.
6. Time and dollars needed to maintain the site as is: Issues such as how much new content the current owners add every week, order fulfillment and responding to queries can affect the real value of the site. Ask about maintenance time and responsibilities, and do your own estimate of how long the same efforts will take you. For example, if you are a fast and competent writer, three new blogs a week may be easy, but if you have to find and hire writers, how much will that cut into your profits?
7. Potential improvements: Does your special expertise enable you to see untapped potential in the site? Your ability to add value may make a site purchase a bargain in your eyes. Take advantage of that when choosing a site to purchase.
Just as when you buy any business, there are no guarantees. But with some careful homework, you can find a site that meets your requirements. And if you’re willing to commit to strengthening the site, you can generate some serious income and have an asset with value when you’re ready to sell it to someone else.
Now that you know what we look for when buying a website, do you have a site you want to sell that falls within our guidelines? If so, click here to tell us more about it!
Adam Toren is an Award Winning Author, Serial Entrepreneur and Investor. He Co-Founded YoungEntrepreneur.com along with his brother Matthew. Adam is co-author of the newly released book: Small Business, Big Vision: “Lessons on How to Dominate Your Market from Self-Made Entrepreneurs Who Did it Right” and also co-author of Kidpreneurs.