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Whatever your reasons behind your motivation for the buying a website, I hope you find the following 5 broad tips useful in the website buying process:
1. Understand website valuation
The first step when making headway into website buying is understanding website valuation. Here's a quick overview of it: websites can sell for 1 to 3 times their yearly earnings. That translates to 12-36 times the monthly income.However, the reality is that many website owners sell themselves short, so their sites never get past the 1x multiple, with a significant number selling for much less. That means that if you bought a website making $1,000 a month at $10,000 - a 10 times monthly income multiple, you'd be able to recoup your initial investment in just 10 months. That represents a ROI of 120%.
Bigger web establishments have been known to sell for figures that are way past the 3x multiple, but as an individual buyer, you probably have your eye on relatively smaller sites that are making decent returns. The best advice in your case is buy websites with a good revenue model in place, which are selling for a 1x multiple or less.
2. Assess growth potential
Buying a website is not only about the current profits, you must look into the future to see if the website in question would still be doing well. Avoid sites built around fads that will fizzle out within no time, or sites that promote affiliate products that won't last in popularity.
Look at potential as money that's yet to be tapped. Maybe the site already enjoys volumes of high quality traffic that can be monetized in more ways than just placing AdSense units. Or the traffic is set to soar due to a gap you'll be filling in your niche. Either way, potential can be seen in how much traffic the website has the ability to attract, and how this traffic can be tapped into.
3. Perform due diligence
You'll do yourself a huge favor by doing a thorough due diligence on a website for sale before making any offers. Can the seller be trusted to be giving the true website stats? Knowing the seller well is crucial - when you know who you are dealing with, it reduces the chances of being scammed. So Google their names and ask them a few questions to know where they're from. It's also important to know why they are selling.
Due diligence also vitally involves checking proof of income, proof of traffic, tax records, bank statements, proof of ownership of the domain (through a Whois checkup), customer and supplier info, plus any other legalities. For websites that look too good to be true, this step is the most important for you; without executing it to near-perfection, you could lose all your money by buying a worthless piece of junk website with fake stats to back it up.
4. Buy privately
Try contacting the owners of websites you'd like to buy to see if they'd be willing to sell. This could land you a far better deal than transacting business on auction sites, but the buyer has to be willing to sell for this to work. The reason for a lower valuation is that you won't have any competing buyers or transaction fees to worry about. You will probably also be flattering a webmaster who hadn't thought of selling before or had no clue in the world how he would do that.
Buying through a broker can also be a much less publicized affair, and the website on sale will have been likely passed fit for sale. What's more, the transaction fees will be paid by the seller.
5. Use an Escrow service for transactions
An escrow service, if you haven't heard of it before, protects both the buyer and the seller. The model works like this: the buyer pays escrow for a product. The seller delivers the product, and the buyer acknowledges this. Escrow then pays the seller. Don't buy a website on platforms or through brokers who haven't implemented an escrow-based transaction process. If you buy privately, Escrow.com or Safefunds.com as they're the most reputable online escrow services.
Author Bio
Robin writes for valuator.com.au – find a value for your web business before buying.
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