How to Buy & Sell Websites Like Some Kind of Mogul
by Perrin Carrell
You probably know this by now, especially if you’re in our Pro community, but on the off chance you've been living under an internet marketing rock…
...I sold my site.
HerePup, the site I’ve blogged about for the last few years and the asset that made up a bulk of my business, is gone.
And overall, everything about that site -- building it, learning from it, growing it, and eventually selling it -- has been an amazing experience.
Truthfully, it’s been sold for a while.
I sold the first chunk of it (70% equity) in late 2016. I let the new owners grow it, took home 30% of the profit during that process, and ultimately sold my remaining equity about a year later.
That’s what I want to talk about today: buying and selling sites.
I want to tell you about how that process worked for me and, perhaps more importantly, why I decided to go that route.
I also wanted to tell you how to go about buying a site or selling your own site.
However, although I've both bought and sold sites before, I'm far from an authority.
They're going to be chiming in throughout. However, because these guys turned in such amazingly detailed interviews, I also highly recommend reading their interviews in full (about 5,000 words in total), which we've published separately. You can read Thomas's full interview here and Greg's full interview here.
The first thing I want to do is talk about the business models that revolve around building, buying or selling sites.
Because you can create business models around each of them. Or two of them at the same time. Or even all of them.
The more I grow as an internet marketer (and the more capital I have to play with), the more I seem to be preoccupied with thinking about how to leverage all the benefits of these different business models.
Because when you start out in this game, most of us can only afford to build sites. And, as we’ll see below, building can usually offer the highest raw-dollar ROI. But is it the most scalable? Is it a good way to grow into a 7-figure operation?
The Site Selling Market is Evolving…
Man… I remember when website marketplaces looked like this…
That’s Empire Flippers, by the way.
It’s a snapshot of their marketplace way back in 2013 -- back when Perrin was earning his very first dollar from his very first “niche site.” Can I get an “awwwwwwwwww”?
Can you believe those prices?
It’s almost like nobody was earning over $1,000/mo and nobody was getting more than 20x their monthly profit for a sale price.
Compare that to now…
From my vantage point -- that of someone who has been building sites since 2013 and has managed to sell one… twice (more on that below) -- the site buying and selling market has absolutely exploded.
People are building more and better sites. There are more buyers with more money. There’s a much greater variety of business models. And sales prices are trending way up.
To me, this is very exciting.
It represents the maturation of a market we’re all getting into at exactly the right time. That seems to be especially true if you can build authority sites that generate money, which is what most of us do.
But don't take my word for it. Here's what Thomas Smale from FE International has to say.
"The market has evolved significantly..."
"The market has evolved significantly over the last 5 years. Both buyers and sellers are becoming more sophisticated and knowledgeable, which has resulted in:
- Sellers having a better understanding of valuation
- Buyers being more confident in making acquisitions quickly
- Buyers being more confident in paying cash (vs. seller financing) for a deal
Through FE International, deal structures have only gotten better for sellers, as the majority in recent years have been all cash. In deals over $1,000,000 it is more common to have a “reps and warranties” hold back, which is 10% of the sales price held back to protect against minor issues with the business that may be unknown upfront.
Sellers work with M&A firms in order to get out of the business and take as much cash as possible. There has been a recent rise of “funds” buying privately, but many will not pay cash and look to tie sellers in to the long-term performance of the business. Generally, the smaller the investment firm you work with, the worse of a deal you’ll get when it comes to cash upfront vs. seller financing."
THOMAS SMALE // FE International
Greg (Empire Flippers) has also seen the market -- and the Empire Flippers' business -- evolve significantly in the last half-decade, not to mention the type and quality of the assets changing hands.
"As far as prices go, they're going up..."
"Content sites are starting to evolve away from just your typical affiliate site where they have the LONG homepage article (usually their main keyword they're gunning for) and then a few support articles. We still see these, but typically these are not your six-figure+ content sites. For sites with a higher valuation (around the $200k+ range), buyers are more interested in seeing the content site having a good brand and more of an authority site style design. None of this is probably news to your audience as you guys talk about it quite a bit.
As far as prices go, they're going up. A few years ago we were the "20x" guys because most people were only valuing content sites at 20x their net monthly profit. Now, we've sold a site as high as 52x of their net monthly multiple. That was a rare case in a super hot niche but still shows that these sites have grown in value a lot over the last few years with what investors are willing to pay. I would say a good authority site with high-quality content would have their average today at around 28-33x. [...]
One interesting thing we're seeing with the buy side is more and more people are starting to pool their money together to buy more content sites and have an entire portfolio of sites going at once. We tend to call them "institutional investors" because they're not just a solopreneur anymore, they have entire teams of operators running the sites they acquire and scaling them up. A lot of these organizations originally started as sellers too who used the capital they gained to buy other businesses from us.
Some of these organizations also are creating an investment angle here where people who want to get the ROI that can come with website investing but don't want to even touch the website can invest some money with the company and that company will pay them dividends they earn from the sites they acquired. Probably the most complex and more well-known company that does this is WiredInvestors but we're seeing a ton of others starting to populate the marketplace. "
GREGORY ELFRINK // Empire Flippers
The long and short of it, boys and girls, is that this is a very good business to be in, and it's a very good time to be in it -- whether you're a buyer or a seller.
And the market's not just evolving on its own. It's evolving...
...because buyers are evolving.
When I first started building sites about five years ago, most of the site acquisition deals I heard about were between two individuals, and they were straight up cash deals.
That's not the case anymore -- at least not always.
There are still plenty of individual buyers out there, but Thomas and Greg also see more "serious" (e.g. institutional or grouped) buyers coming through the door.
"Buyers generally fall into three main brackets..."
1) Private Investors. These could be individuals, partnerships, and small teams. At the lower level, these buyers could be looking for extra income to supplement a job, a business to replace (even if eventually) a job, or a way to make more money in general. These are the buyers who vary most in their criteria. Financial performance is not always their key metric, and often businesses will be acquired based on personal interests and they could be happy to do work to improve a business.
2) Private Equity/Funds. These funds have been entering the market at a consistent pace over the last 5 years and are becoming more and more sophisticated. While the funds vary in their setup, they are generally founded on the principle that they will raise money from private investors, pool the money, buy a business, run it and deliver a return to investors. As such, financial performance is usually their most important metric. Additionally, funds tend to specialize, so it would be rare to find a fund that buys businesses of varying sizes with entirely different business models.
3) Strategic Buyers. Strategic buyers generally have an existing business/investment in the same or complementary niche. They may view an acquisition as a bolt-on to their existing assets and will look to benefit from synergies and economies of scale across the two (or more) businesses. Strategic buyers often have the most unpredictable criteria as their reasons for buying are not always financial. For example, they may be interested in an email list, SERPs, advertising partners or existing team more than the underlying profitability of the company. If these buyers have cash, they often work the fastest as they will already be largely familiar with the business and the industry it operates within.
THOMAS SMALE // FE International
Greg sees some of the same, although he mentions a few types solopreneurs who tend to buy sites, who, in view, also seem to have evolved from the type of dude who was buying them five years ago...
"There are a few different groups of people we see..."
"You have the middle management/executive still working their 9-5 who wants to get some skin in the game and they'll buy a business from us, often it'll be their first.
You have solopreneurs who have probably built out a lot of sites and maybe even sold some with us come back and buy sites from us. We see this one quite a lot where an SEO might build a $200k site, sell it, buy two $50k websites and use their same process (plus the extra $100k) to scale those two sites to the moon with content/links. Sometimes they'll do CRO on the sites too which can increase the revenue pretty quickly that a site is earning. Some of these guys will hold onto the site, but often they'll come back and sell that site with us 12 months down the road for sometimes double what they bought it for. I believe there is one site like this in particular that has been on our marketplace 4 times that we've sold over the years, which I find pretty funny and kind of cool.
Institutional Investors - These are the people I was talking about above. A lot of them will raise money from investor clubs, Family Offices, and other communities to then go and buy digital assets with and they'll pay these people dividends from the website. Usually, they have a "deal maker" that buys/negotiates the deal, a "money raiser" who actually raises the money from investors so they can buy different deals, and a few operators that will actually run the websites they acquire. "
GREGORY ELFRINK // Empire Flippers
So the market is evolving, buyers are evolving, and it's a good time to be making deals.
But the question -- at least for me -- is: how?
What's the best way to operate in the world of buying and selling digital assets? Should you build sites and sell? Or is there more money in buying?
Before we get into the ins and outs of buying a site or making a sale, I want to do a bit of theorycrafting on what I see as the possible business models in this space.
Ready to geek out with me?
Business Model Theorycrafting: Building vs Buying vs Selling Websites
Let’s talk about site building, buying and selling business models.
I want to investigate these different business models because I was somewhat blinded during my first site sale; the seduction of a huge payday may have kept me from really understanding the value of building and buying.
Maybe I could have made more money in the long run. Maybe the payday wasn’t as worth it as I thought…
I’m being a bit dramatic, of course. There are lots of reasons to sell a site (I’ll tell you more about mine below), but deciding between building, buying and selling is a big decision.
So let’s hash it out.
#1. Building & Holding: Cash Flow Snowball
This is probably the most basic business model of anything here, and it’s likely the one most conducive to bootstrapping.
In this business model, you build sites and then hold them, letting them produce cash flow.
Instead of selling a site after its established or buying more sites with the capital your assets produce, in this model, the growth mechanism is just… building more sites.
Or, of course, instead of building more sites, you could expand one (or a small handful) of sites that are already producing revenue.
The defining characteristic of this business model, though, is that there are no site exchanges.
No one buys your sites. You don’t buy anyone else’s.
You simply build your own and let them earn.
Here’s a hypothetical scenario for building and holding websites.
You’re a new site builder. You don’t have much budget. You have a little bit of money -- say, $2,000 -- to invest but certainly not enough to buy a whole website.
So you decide to build one using a system like the one we developed.
The rest you spend on link building and prospecting tools like Mailshake. Maybe you spend a chunk on a VA to help you prospect as well.
But at the end of 6 months, the entirety of your $2,000 has gone into building the site.
Around this time -- the 6-month mark -- you make your first affiliate commission. A few months after that, you’re sailing at a cool $100/mo. And by the end of the year, you’re making $1,000/mo.
At this point, you’re still in the hole about -$500.
Obviously, that won’t last long.
If the site just stays where it’s at, you’ll make about $12,000/yr, which means at the end of year two, you’ll be +11,500.
But let’s assume your site takes a trajectory similar to HerePup’s (a site I built).
You start gaining about $500/mo in revenue each month during the second year before the site finally plateaus (as sites without huge amounts of resource sometimes do).
At the end of the year, your site would be making roughly $7,000/mo, and you’d be up $62,500.
If you’d spent $10,000 to help your site grow over that time (about what I spent on HerePup), you’d still be $52,500 in the black.
That’s an ROI of 2,625%.
Of course, few scenarios work out that cleanly.
However, even if you started three sites before finding one that sticks (a $6,000 initial investment instead of $2,000), the ROI would still be 875%, and you’d be up $46,500.
At risk of being too obvious, you’d probably be really excited at this point (I know I was). Because every month, without doing much work, the money keeps coming in, and your ROI keeps increasing.
Advantages of Building & Holding
In a nutshell:
- Extremely conducive to bootstrapping
- Building continuous recurring revenue is often more attractive than a big payday
- ROI is crazy if a site continues to respond well to investment
By far the biggest advantage with the building-and-holding business model is that it’s so conducive to bootstrapping.
Being able to build a revenue-generating asset -- especially one that generates something like $7,000 -- is an amazing deal no matter who you are, but it’s especially crazy when compared to “traditional” entrepreneurship.
It’s important to point out that this is a cash flow model.
However, I’d count that among the advantages. Internet marketing is inherently risky, but if you build your sites white-hat, cash flow can be long-term or even indefinite. We have a lot of people in the Authority Hacker Pro community who have been enjoying cash flow from their sites for 5 years, 10 years, or even more.
Yes, I did sell my site, but currently, cash flow is more attractive to me personally.
Finally, some sites just… keep responding to investment.
Each new batch of content results in a bump in traffic. Ads continue to optimize. New business opportunities open. And so on.
If you end up with a site that responds well to continued investment, you can make a lot more than $7,000/mo.
In other words, while you can certainly build new sites to grow, being able to continuously build onto an existing site is a massive growth lever. This is one of the reasons Health Ambition, our flagship site, has done so well.
Drawbacks of Building & Holding
In a nutshell:
- Building sites is hard
- No big paydays
- Cash flow is risky if you don’t build them right
If building sites were easy, everyone would be doing it all the time.
Building sites is the amalgamation of lots of different skills that take time to learn. Unless you have a good system to follow, it’s relatively rare to land on a $7,000/mo success your first time at bat.
Personally, I built four failed sites before I found my first success.
Because I was essentially learning on my own -- by trial and error -- that process of failing my way to success took about three years.
Lots of people consider this a major disadvantage: building sites takes skills.
Secondly, if you’re committed to holding onto sites to build cash flow, you’re not going to see the massive paydays that other business models might afford.
This might seem like just… less fun… and not a real disadvantage, but if you consider that you can lose any website-based business overnight (especially if you’re delving into grey/black hat practices), it’s easy to see that holding onto sites can carry some risk.
Who should build and hold?
Here’s how I see the three basic profiles of someone who would be building websites and holding onto them for cash flow.
- Profile #1: the student. This model is great for anyone learning to build profitable websites -- mostly because it’s so bootstrappy. You do still need to invest money, but it’s a bajillion times cheaper to make mistakes in this model if you’re just learning.
- Profile #2: the cash flow return guy. This is also a great model for anyone looking for the best combination of ROI and cash flow. You can get a great ROI with other models. You can get great cash flow with other models. But this is probably the best combination of the two.
- Profile #3: the passionate builder. Lastly, some people just love building sites. I know plenty of them. These folks were made for the buy-and-hold business model.
Building & Selling: Extreme ROI
This is what I did with HerePup (although I admittedly didn’t plan on it).
The idea here is similar to building and holding -- except that (of course) instead of holding your sites for continuous cash flow, you offload them after they’ve gained traction and started earning revenue.
If this sounds like a churn-and-burn business model, believe me: it’s not.
The site buying market is wising up to what makes a good asset and what makes a risky one. From my vantage point, it already seems to be much more difficult to sell a site if quality standards aren’t up to par or if grey/black hat tactics were used, and I suspect it’s only going to get harder.
Building and selling sites these days requires the same set of skills as building and holding for yourself.
If anything, this business model requires a more robust set of skills, since finding a buyer is so critical.
It’s also something of a gamble (more on this below).
That said, the ROI here makes this model really attractive if you possess both the skill set and testicular fortitude.
Here’s a hypothetical scenario for building and selling sites.
You’ve built a site or two before. You understand the game. You have the skills. Now you’re chasing a big payday.
Because you’re chasing that pot of gold at the end of the rainbow, you want to get there as soon as possible, and you’re much more willing to invest a bit of money up front.
Instead of starting with an initial investment of $2,000, you throw in for $5,000.
You spend the rest of your cash hiring a VA to help you with the legwork of building links, which is your bread-and-butter skill set, your competitive advantage.
Because you hired a content agency, the content’s finished in just under two months, and you’ve been posting as it comes in.
At the 60-day mark, you’re ready to start building links. You run a few successful campaigns, and traffic slowly starts to tick up.
One hundred articles is a lot of articles, so the incoming links have a lot to work with, and traffic starts to snowball pretty quickly. A few superstar articles rise to the top and start bringing in serious traffic.
You cross the $1,000/mo threshold around month four.
By the end of the year, you’re rocking a solid $4,000/mo in revenue.
You could sell it now, but the site’s still showing growth, so you decide to hang onto it for another six months or so without investing much into it.
And it does grow, but not by much, plateauing at around $4,500/mo at the 18-month mark.
There’s loads of potential, but your job’s done, so you list it at some brokerages.
Because you built the site the right way, it only sits on the marketplace for a few weeks before a serious buyer bites.
They offer you a 30x multiple, or $135,000.
You spend a month or so letting the buyer do due diligence and tying up loose ends before finally closing the deal. You own the brokerage a fee for brokering the deal, which takes out -$13,500 and leaves you with $121,500.
Remember, though, you were earning money while the site was growing and you were selling.
We’ll estimate that number $45,000 in accrued earnings over the pre-sale life of the site -- or 40,000 after the $5,000 you invested at the get-go.
In just over 18 months, your take-home for this site is $161,500.
For an initial investment of $10,000, your ROI is 3,230%. You also enjoyed a big*ss payday.
Advantages of Building & Selling
In a nutshell:
- The paydays can be huge
- Your average earnings per year can be huge
- ROI can be huge
- With capital, you can start multiple sites at once
Clearly, the main benefit of building and selling is that everything is huge.
Perhaps most obviously, the paydays can be really big. As soon as a site crosses $3,333/mo in net profit, you’re generally looking at a 6-figure sale.
Every site can flop, and not everyone has the skills to generate that much revenue, but for lots of marketers, $3,333 is not a super high bar to set for a year’s worth of work.
And because the payouts can be huge, your ROI can be huge.
And because your ROI can be huge, your average earnings per year can be huge.
Here’s the real kicker, though: because this model is a capital-rich model, it becomes easy to start multiple sites at once.
If you make a six-figure sale, you can use that money to start, say, four more sites. If half of them get to $3,333 or more, you could sell for $200,000+. And then you could repeat.
If you have a system that works, it can become really easy to leverage your sales build more sites, sell them, and repeat.
Drawbacks of Building & Selling
In a nutshell:
- Sites can flop
- Niche ideas
Every site can flop.
That’s not news. But it’s a particular problem for the build-and-sell model because it often takes a while to know if a site has flopped. And it especially hurts if you’re starting with just one site (most people only have the capital to start with one site).
And if a site does flop (and if it takes you awhile to “see” the flop), you’ve lost a year or two with no return on your investment, not to mention having to invest in a second site if you want to keep at it.
The other major drawback of building-and-selling is non-compete agreements. Almost every site sale I’ve ever heard of has required the seller to sign a non-compete agreement.
So, if you sell a site, you’re typically shut out of that market for at least a couple years, but often for longer.
And that makes sense, right? No one wants to buy a site from someone only to have them turn around and start a competing site with all their established connections in the niche. That would suck. Still, it makes it tougher to jump right back into the building game.
This problem compounds if you’re starting lots of sites.
There are certainly tons of profitable niches out there, but if you’re really going at this business model hard, you might find yourself with fewer and fewer options.
Who should build and sell?
These are probably the people who could get into this model.
- Profile #1: the second-time builder. I’m talking about someone who built a site, learned all the skills, failed a few times, finally found some success, made a profitable exit, and now has some capital to play with. This person typically understands the process and has enough money to bump the odds in their favor.
- Profile #2: the business person with a team. If you’re a business owner who understands site building and -- for whatever reason -- have a team of employees who can help you, this is likely the model that can generate the quickest turnaround on an investment.
Buying & Holding: Lazy Long-Term Profit
Here’s where we start to get juicy.
The title of this business model is actually a bit of a misnomer; it’s not lazy. There’s a lot that goes into it.
But it is the business model that probably (or at least can) requires the least work on the actual site.
The idea here is that you buy a very stable website that earns very stable money. Then you sit on it and maintain it until it’s paid itself back, after which the revenue it generates is mostly profit.
Of course, you could also build out the site and improve it. But it’s not required.
This business model can work if you simply engage in a bare minimum level of maintenance.
Here’s a hypothetical scenario for someone who’s buying and holding sites.
Quick note: I’m not going to talk much about brokerage fees etc. here because they typically vary by both broker and price. I’m also not going to dive into non-cash deal structures. We’ll just keep the math simple for now.
You hate building sites.
You’ve done it, and you made some money, but you hate it.
You don’t mind playing the long game, but at this point in your career, you’d rather invest money than time.
So you start looking for sites. You’ve got about $150,000 to spend.
After a month or two, you find a few websites that are in your price range. One makes $5,000/mo and the other makes $4,000/mo.
They both have a solid history of steady revenue. They both were built using purely white hat techniques. Neither of them requires much work to maintain.
However, one monetizes primarily with affiliate programs, while the other is a display ad-based site. The display ad site also relies on social media for a good chunk of its traffic.
On one hand, that’s good because it diversifies traffic streams, but you don’t know much about social media, and while you have some experience with display ads, you’re much more comfortable with affiliate monetization.
You settle on the SEO-driven affiliate site making about $4,000/mo and make an offer. It’s listed at a 32x monthly multiple. You negotiate down to an even 30x, and the buyer accepts, making the total sale price $120,000.
The broker helps facilitate the deal and technical transition, and you’re now the proud owner of an asset that generates $4,000/mo.
You’re also -$120,000 in the hole.
Now, even if you do nothing (or basically nothing), and the site just holds steady, it should pay itself off in two and a half years.
Of course, you don’t want to do nothing. You don’t want to treat it like a job, but you definitely don’t want to do nothing.
The site doesn’t require much maintenance (it’s one of the reasons you liked it), but you do see a few opportunities for some quick wins: low-hanging-fruit keywords with super low competition. So you fork out another $5,000 for about 50 pieces of content, which puts you at -$125,000.
After a while, your content starts to rank, and the earnings slowly climb to about $6,000/mo.
You’re now at a point where the site will pay itself off in about 18 months (accounting for the first few months in which the earnings were still around $4,000).
Still, you’re already enjoying the cash flow, and you always have the option to resell the site at a 30x (more on that in the next business model).
Here’s where it gets fun, though…
Suppose you didn’t spend any of the cash your new site brought in. Suppose you just stashed it for 18 months.
And then… you bought another site.
And then maybe you used the cash flow of both of those to buy a third…
I hope you can see where this is going. The cash flow snowball could get out of control pretty quick...
Advantages of Buying & Holding
In a nutshell:
- Established sites reduce SEO risk
- Cash flow can snowball hard
In my view, the big draw of buying and holding sites is that you know they already work. Not only do you know they already work, they have an established, verifiable history.
And this really can be something of a game changer.
In the above building-based business models, the math may have looked clean, but it’s possible for any site to flop, and you don’t necessarily know the reasons. And if a site does flop, it can take a long time -- like, maybe even a year -- to figure it out and decide it’s time to move on.
And even if a site does work, you typically have no idea how much it will earn and/or how much it will cost to grow.
Buying a site with an established traffic and revenue history sidesteps this.
The other major benefit is that buying businesses can create a cashflow snowball that can get really out of control. Using the cash flow of businesses to buy other businesses -- and then using that cash flow to buy more -- can add up quickly.
Drawbacks of Buying & Holding
In a nutshell:
- Takes cash to start
- Greater financial risk
- Sites worth buying aren’t cheap (and are getting more expensive)
Clearly, you need money to get started here.
Even if you’re going with more of an earn-out structure, you’re going to need to come up with a sizeable amount of cash, since a bank typically won’t loan you enough money to cover the full cost of a website.
Because you need to fork up some cash, there is (obviously) much greater financial risk.
It’s great to see an established traffic and revenue history, but any site can tank at any time, and I’ve heard more than one horror story of sites tanking shortly after purchases.
Lastly, as Greg noted above, sites are getting more and more expensive as people wise up to the ROIs available in our space. So the math won’t be this juicy forever.
Who should be buying & holding?
Here are a few profiles of who could make a solid run at buying and holding.
Profile #1: successful site owner looking to grow. This is the person who has a successful site, has saved most of their capital, and wants to expand by buying instead of building for the reasons above.
Profile #2: the investor who wants to dabble. If you’ve got money to spend, and you want to learn the game, buying a site and learning just how to maintain it from the previous owner (owners typically offer help for 30-90 days after a sale) is a good way to get into the game and start making money immediately.
A Special Case of Buying and Holding: Buying and Merging
There's a really cool version of buying and holding I've seen a few people do and have a lot of success with: buying and merging.
In this instance, you already have a working, profitable site. Instead of expanding your portfolio by buying some other random site, you buy another site in your niche and merge it with your current site.
One of our members, Kevin Espiritu did this in the home and garden space. Not only did he get the site for a steep discount, but after he merged it, the 301'd articles' traffic shot up because they now lived on a site with lots of established authority, good site structure, and other relevant content.
Kevin was kind enough to stop by and answer a few quick questions about this process.
"Honestly, it was an accident..."
1. What was the basic process of finding the site?
Honestly, it was by accident. I was doing some research for an article I was promoting and came across the site. It looked a bit out of date, but Ahrefs had some good data on it, so it sparked the idea that instead of outreaching to it, I should probably just...own it.
There was a huge advantage to not going through a broker - I honestly don't think I'd ever use one. If this had gone through a broker, I'd have had to pay about 10x what I paid for the site.
2. How did you make the offer?
I did a standard whois search, found the owner's name, did some research on his name, found his Twitter account, and sent him a message. He'd forgotten he even owned the site, so was happy to sell it to me. I asked him what he felt was fair, and he said he'd like to be compensated on the basis of $xx per article.
3. How did you do the deal?
The deal was done through Escrow.com and was pretty simple - transferring the hosting, logins, etc. took a day or two, and ironing out the rest of the details another day or two. The site was entirely in my control within a week, after which I could start improving and 301-ing over the content.
4. Overall, would you recommend buying and merging?
Definitely would recommend the approach, but you have to be really good at sourcing the right sites and being patient. It's very much a waiting game until you come across a site that has the right combination of metrics, price, and ease of sale.
KEVIN ESPIRITU // Authority Hacker Pro member
Buying & Selling: Rockstars Only
Now we’re getting serious.
This is where the big boys play, and to be honest, this is the business model that seems the most fun to me by far.
It’s also a bit more of a play for a string of big deals rather than building a portfolio of revenue generating assets.
It takes a much higher risk tolerance, but if you’ve got a preference for really strong short-term gains (and if you have money to spend), this could be a solid way to go.
The caveat with this model is that you can really only maximize its potential if you have serious skills in some part of internet marketing.
Maybe you’re a CRO whiz. Maybe you’re a killer link builder. Maybe you’ve got a dedicated content team or a special relationship with a potential affiliate.
Whatever it is, this business model usually works best for folks who can drastically and immediately boost a site’s revenue.
Here’s what I mean…
For whatever reason, you’ve got some money.
You’ve also been in the internet marketing game for a while now. You understand what makes sites tick. You’ve built a few. And you’ve developed a solid set of skills along the way.
For the sake of brevity, let’s say that you find and make an offer on the same site we talked about in the last section -- the SEO-driven affiliate site making $4,000/mo in profit.
The buyer accepts an offer of $120,000 (a 30x multiple) and transfers the site over to you.
One of the reasons you bought it, however, was that you noticed there were some really easy CRO wins -- and CRO happened to be one of your core skillsets.
You also know of a few different affiliate programs that pay more than Amazon, which is how the site is currently monetized.
You open an account with the other affiliate program, change out some links, and start doing some aggressive CRO testing.
Revenue dips for a week or two, but as the CRO starts to weed out bad iterations of your affiliate pages and optimize itself, revenue slowly starts to increase.
The CTR improves from 25% to 40%, and the new affiliate program bumps the average commission up by 20%.
All of this takes about six months but together doubles the revenue to about $8,000/mo.
You keep the site for another three months or so to see if you can make any other easy gains (and to enjoy some of the earnings for a while) before you decide to sell it again.
The site sits on the marketplaces for two months before someone makes an offer, and it takes about a month to iron out details.
But you finally sell.
At this point, accounting for the time you were optimizing CRO, you’ve earned roughly $80,000 in revenue in the year you’ve owned the site (which puts you at only -$40,000 in the hole at the end of that year). And because the site now makes $8,000/mo, the sale value is $240,000.
At the end of the day (again, not taking into account brokerage fees or the like here), you’ve come out $200,000 on top.
You could have kept the site another year, but you wanted to buy another site as quickly as possible, so you could do the same thing again.
Advantages of Buying & Selling
In a nutshell:
- Big paydays
- You can turn a site around quickly
- The $/hr can be insane
- More capital = more money
The obvious win for buying and selling sites is the size and immediacy of the paydays.
It’s worth mentioning that even if you fail to go increase a site’s revenue -- or if you only increase it by a little bit -- you can still just hold onto it and sell it for a profit.
For example, if you buy a $120,000 site, let it earn $48,000 passively for two years ($96,000), and then sell it again, you’ve still made $96,000 for essentially just hanging onto the site.
There’s also the possibility of drastically improving a site’s revenue and selling it just a few months later. In our example above, it would have been possible to double the revenue and sell it immediately.
Because of this, the $/hr of your time invested can be astounding.
Lastly, if you have more to invest, you can make a lot more. If you buy, say, a site in the $500,000 range (which would roughly mean it was generating 15,000/mo), you could hold it for two or three years until it pays itself off and sell it again, effectively earning $500,000.
These kinds of crazy benefits are why I feel like we’re on the cusp of a huge influx of capital in the site buying and selling market.
Drawbacks of Buying & Selling
In a nutshell:
- You need skills to manufacture serious home runs
- Can be difficult to find sites with that much opportunity
- Greater financial risk
Lots of the drawbacks here are essentially the same as any buying-based model: you need capital, and you’re investing capital in a relatively risky market (relative to stuff like, say, real estate).
With this model in particular, though, maximal success depends largely on your skill set.
The people who crush it here are the people who can make big, easy wins.
And I probably don’t need to tell you that it’s not necessarily easy to find highly profitable sites that also have massive opportunities for growth that happen to line up with your personal skill set.
Who should be buying and selling?
This is not a business model for your average joe. There are pretty much only two buyer profiles here.
- Profile #1: highly skilled internet marketer with money to spend. I’m talking about the person who has been deep in the game for a few years and, because of their skills, has made a lot of money.
- Profile #2: investing groups. These are few and far between, but I reckon they’ll become more and more common. These groups have lots of disposable capital and teams dedicated to increasing traffic and revenue.
What about other business models?
Are there other business models?
But we only have so much space here, and most everything else either fits into these or is some version of them.
How to Buy a Site (the Authority Hacker way…)
There are lots of ways to buy a site, and there are a lot of reasons people buy sites.
As Greg puts it, “Some buyers love buying sites with PBNs because they know they'll win on the price of the site, and to them, they only need 1-2 out of every 10 sites to really work to be making great returns. Other buyers love sites with a lot of penalties because they know how to fix it and will also get a good deal on the site.”
Of course, at Authority Hacker, we have a very particular set of skills, and we like to get our hands on sites that tick some very particular boxes. So here’s what we would look for if we were buying a site.
Prep: Understand the Type of Site to Buy
I mean, buy whatever you want, but these are the prerequisites I’d put on any site before taking the plunge.
1. Buy a site that fits your skills.
If you’re primarily an SEO, you should probably be looking for sites that generate traffic primarily through search. If you’re a social media rockstar, look for socially-driven sites. If you’re an ecommerce whiz, look to buy stores.
2. Make sure it’s “clean.”
Due diligence could be a blog post of its own.
We’ll cover it a bit below, but the point here is: before you even seriously start looking for a site, you should have a good understanding of what “clean” means to you.
For the most part, it typically means the site doesn’t violate the terms of service of any traffic- or revenue-essential platforms and that everything is legal.
3. Look for under-optimization.
Lastly, no matter what business model you’re going after, any site you buy should generally have some growth opportunities available -- and preferably ones that align with your personal skill set.
What kind of site of site would I buy?
I’m an SEO who cut my teeth in affiliate-based business models, so that’s what I’m most comfortable with. So that’s what I’ll use if we need any examples below.
When it comes to actually buying a site, there are really two ways to go about it...
Method #1: Find Your Own
This is a site-buying method I don’t see discussed very often.
It’s many times more labor intensive -- and it typically entails quite a bit of rejection and disappointment, which we IMers aren’t always the best at dealing with -- but you can win big in price.
The idea is to go find sites on your own and make an offer.
Here’s how you might do it.
1. Browse the web for under-optimized sites.
This is the most nebulous of the steps here.
I’ve tried, and I really can’t figure out a good, systemized way to do it.
But the one thing I ‘ve really settled on here is that you should be mostly looking for sites that are under-optimized.
One way to do it is to look at sites ranking for affiliate-style keywords that are missing some key best practices
Here, I googled “best camping stove” and found ActiveJunky.
This is nice, well put-together site ranking on p.2 for a really juicy affiliate keyword. Similar Web shows it generates about 250,000 visits/mo.
However, looking at their affiliate articles, they’re missing a key CRO best practice for affiliate sites: they don’t consolidate recommended products into a group of affiliate links near the top of the article, which is where the majority of my links have always come from.
After checking quite a few articles, I can’t find any that consolidate affiliate product links at the top. To me, this indicates this site may be under-optimized and is likely not making as much money as it could.
Because of this, it might be worth reaching out to.
2. Approach the owner.
If you’ve ever owned a site -- or, on the flip side, if you’ve ever done outreach -- you’ll know that just getting people to open an email can be a serious hurdle.
Because finding these kinds of prospects takes so much time, and because the deal potential is so huge for both parties, I recommend diving deeper and really going the extra mile when reaching out to potential sellers.
Find emails for as many decision makers as you can.
3. Make an offer & negotiate.
So, here’s where we can really earn some money; however, we want to make sure the seller gets a fair deal, and we certainly don’t want to lowball people so hard that we turn them off.
I can’t even remember all the bullsh*t offers I got on HerePup over the years.
No, I won’t sell you my $8,500/mo website for $20,000.
So be reasonable.
Really, if I found a site I really liked, I’d just be trying to get it for less than the 30x I’d expect to pay at a brokerage.
I’d start the bidding at 20x the current monthly profit and go right up to 28x if I really liked a site (roughly a 30x monthly multiple minus a standard brokerage fee).
At this point, I’d want to chat when them on the phone, but you can always get started over email. In the deals I’ve done, I’ve adopted a very straight-forward approach.
4. Do due diligence.
This is something else you’ll have to handle yourself if you don’t have a brokerage to verify things for you.
Honestly, due diligence could be a blog post of its own.
Here’s a quick example of the checklist I would run down for an SEO-driven affiliate site.
First, I’d look at traffic history .
Does the site have a long history of steady or growing traffic? Are there any obvious dips? Is it trending down? If so, why?
Obviously, you want to get Google Analytics access from the seller; however, traffic data can be faked, so I like to verify traffic trends with third-party tools like Ahrefs.
Ahrefs only estimates data. You will not see the same exact numbers. I just look for the same trends.
I’d cross reference this with a few other traffic estimation platforms -- mostly because they all pick up different stuff, but also because traffic can be faked, so it’s good to use multiple sources.
I don’t use SEM Rush often, but they are good for looking at historical traffic, especially because they also display Google algorithm update dates, which can help you identify penalties. In this case, SEM Rush corroborates Ahrefs.
Then, I’d look at their link profile.
I wouldn’t necessarily worry about the curve since some sites (like Active Junky) do link building in spurts.
Instead, I’d look at a sample of, say, 1,000 referring domains and see if I found any evidence of grey or black hat tactics (PBNs, comment spam, etc.). That may sound like a lot, but it’s really not.
Many sites don’t even have 1,000 referring domains, and Ahrefs gives you a really easy way to look at them (Backlink Profile > Referring Domains).
In this case, I can see evidence of strong editorial relationships (they either own a large network of sites or have lots of corporate friends), but that’s fine, and nothing else seems all that suspect.
Next, I’d look at their revenue history.
Most of the time, this is going to constitute a spreadsheet combined with some sort of verification -- typically screenshots of the backends of payment platforms, receipts, or video walkthroughs.
In a really good buying and selling case study published on eCommerce Fuel, Shakil Prasla, who owns SZ Ventures and buys up to three sites every year, mentions that he prefers to look at tax returns, but he also says that’s caused problems in the past because savvy business owners may also have tax minimization practices in place.
In my case, it was a spreadsheet that looked like this…
...combined with screenshots of Amazon earnings and Media.net earnings, most of which you guys have seen before.
I’d be looking for any anomalies, seasonality, or unexplained hiccups, and I’d ask the seller about those things. Checking the financials would also entail making sure existing affiliate (etc.) relationships would be transferable.
That’s really the mission-critical stuff.
I’d also like to see that:
- Processes are documented
- Key employees will stay on or there are training documents for new hires
- Other business relationships (content, etc.) will be transferable
- The asset is more or less technically sound (although tech improvements could be an opportunity as well)
Pro tip: If you really don’t want to do any of this yourself, a company called Centurica offers third-party due diligence specifically for website purchases. I’ve never used them, but their process looks sound (although I’m not sure what the level of their SEO expertise is).
4. Hire a lawyer & draft a contract.
After you verbally agree on a price, you’ll need to take care of all the logistics a brokerage would normally handle for you.
Perhaps most importantly, you’ll need a lawyer. Specifically, you’d need to draft:
- Letter of Intent (LOI) - optional, and
- Asset Purchase Agreement (APA)
The LOI is optional but can be nice if you want something in writing while you hammer out an APA, which can sometimes take a while.
If you don’t have a lawyer you use regularly, you can use UpCounsel, which is a marketplace that lets you post jobs, take bids, and hire lawyers.
There are places you can buy templated APAs, like Rocket Lawyer.
This could be a good starting point, but you should still probably hire a lawyer for at least a couple hours so you can put in other stipulations I’d consider essential for buying a website:
- Technical transfer details
- Ongoing support from the seller
- Any less-than-straightforward deal structures
You’ll want to make sure an APA includes anything else you’ve negotiated. For example, some buyers like to request extended support from the seller or additional documentation. All that stuff should be covered in the agreement.
5. Hire an escrow company.
Escrow companies are essential with private sales this big.
They hold onto money and assets until both parties are satisfied.
The tricky part is that lots of escrow companies are old school and don’t fully understand digital asset transfer.
So, while it doesn’t matter much which company you use, you should make sure that they:
- Are an accredited escrow company, and
- Understand digital assets
Reputable companies will list their licenses on their site with links to the state databases in which you can find them.
7. Make the transition.
If everything is kosher, you’ll want to start the transfer of the asset. This typically includes:
- Transfer of hosting
- Transfer of domain ownership
- Changing out ad/affiliate information on the site
- Verifying traffic and revenue
The escrow company should be involved in this process. When both parties are satisfied, they should be the ones to finalize ownership of assets and transfer funds to the seller.
I hope this goes without saying, but the site should be fully backed up before you start the transfer, and I’ve you’re a technical boob like I am, it’s probably worth hiring someone to help.
Method #2: Use the Brokerages
This is probably the route I’ll go the next time I buy a site -- mostly because it’s just so much easier. In addition to being able to browse sites for sale like you’re strolling through a shopping mall, a lot of the stuff that causes major headaches in private sales (legal stuff, negotiation, migration) is handled by or facilitated by the brokerage.
Of course, every brokerage and every site is different, but here’s a basic process for buying a site through a brokerage.
1. Browse brokerages.
At risk of being too obvious, the first step is typically to just browse the brokerages to see what’s for sale. The top brokerages are:
As the market expands, there seem to be more and more listings, and inventory at any one brokerage can change by the day, so it’s worth browsing over the course of several weeks -- or even months -- to scope out sites that really fit your skill set.
The major advantage of buying through a brokerage, of course, is that the sites listed there are usually verified.
For example, if I were in the market to buy, I’d be getting pretty excited about listings like this one:
...or this one.
If you have the stomach for it, you could also look through Flippa. Flippa is more of a marketplace than a brokerage; as such, the verification process isn’t nearly as robust.
Less nicely, it’s full of dog sh*t and scammers.
That said, I have seen some very legitimate sites sold on Flippa to buyers who I know made out very well on the deal.
So it’s a diamond in the rough situation, and it takes time, but there may be some gems here and there.
Pro tip: most brokerages (including those outside the “big four”) also list on Biz Buy Sell. Biz Buy Sell started as a marketplace to buy and sell primarily brick-and-mortar businesses, but there are loads of online businesses listed these days.
Plus, private sellers list sites here, too, so it’s a great place to find consolidated online business listings.
2. ...and/or contact brokerages to let them know you’re in the market.
If you’re a serious buyer (you’ve actually got the cash to make a serious offer on a business), you could also contact the brokerages directly.
If you let them know what your budget is and what kind of site you’re looking for, it gives them the latitude to offer you a business directly without going through the hassle of listing and marketing it.
Just shoot them a simple, direct email.
3. Submit an offer through the brokerage.
This is going to work differently at every brokerage.
Some, like FE International, require you to contact them for more information first.
Empire Flippers gets real gangster with it, allowing you to wire the full amount if you want to. If you don’t want to wire a million dollars without asking a few questions, you can also make a deposit to view the site and set up a call with both the seller and an Empire Flippers representative.
I’ve learned over time that there’s typically room to negotiate when you make an offer, but you have to remember: this is a brokerage, and they are not in the business of selling at a discount. Still, most brokerages do facilitate a negotiation process.
4. Have a call.
If your offer is serious enough, and everyone’s ready to move to the next step, you’ll typically have a call (well, multiple calls, really) with the seller and/or the broker.
This is the time to:
- Ask questions about the business
- Get live verification
5. Kick the tires.
Due diligence isn’t going to be different if you’re using a broker except that they’re going to help verify traffic and revenue claims.
Some brokerages, like Empire Flippers, also ask sellers to disclose the use of PBNs, which is either a pro or con depending on who the buyer is.
The important thing to remember is that due diligence is ultimately up to you.
6. Make the transfer.
Most brokerages of a site migration team to help with the technical transition of the site. Most brokerages also act as an escrow. In the case of Empire Flippers, for example, when the buyer verifies traffic and revenue, they’ll transfer cash to the seller and push the domain to the buyer’s registrar.
Notes on buying from the brokers themselves.
Since I've only ever bought relatively small sites and having leveraged the full power of a brokerage, I wanted to ask Thomas and Greg to chime here as well.
Here are some notes from Greg on what you should have in order before you submit a serious offer on a business through a brokerage.
"They should have the core competencies to run the business...."
"They should have the core competencies to run the business. Luckily, content sites tend to be pretty easy businesses to run for the most part in comparison to SaaS businesses or full-fledged ecommerce stores so this usually isn't much of an issue for content sites. A buyer obviously needs to have the money ready to buy the business, and that money shouldn't be a rainy day fund either it should be money they're 100% okay if they lost it. After all, this is a volatile industry and while there is high ROI to be had, it is also risky.
A buyer needs to make sure the site has checked all of their due diligence boxes. We can't really tell you what is the best due diligence because it varies wildly from buyer to buyer. Some buyers love buying sites with PBNs because they know they'll win on the price of the site, and to them, they only need 1-2 out of every 10 sites to really work to be making great returns. Other buyers LOVE sites with a lot of penalties because they know how to fix it and will also get a good deal on the site. Other people might want 100% clean links, or a certain link portfolio or certain content quality standards.
A buyer should define what it is they are looking for before they start looking for it. A good way to think of due diligence is to think "How can I eliminate the choices I have to choose from quickly?". This lets you filter through hundreds of deals way faster leaving just a handful of deals that you can do deeper dives on before making a buying decision. "
GREGORY ELFRINK // Empire Flippers
Thomas has some great points about due diligence and the attitude you need to really be able to work with both a buyer and a brokerage. For my part, I'll say attitude (both mine and my buyer's) was one of the primary drivers of the deal, since we were pretty far apart when we started negotiations.
"...do any due diligence you can upfront..."
"As a buyer, before making an offer you should do any due diligence you can upfront. Quite often buyers will leave basic checks until after their offer – such as looking at link profile or traffic growth.
You should also ensure you can provide proof of funds. If you are not able to prove you have the ability
(and cash) to buy a business, you will not be successful and your offer will be declined.
The key beyond this is to be friendly and easy to work with for a seller. Sellers generally have numerous options when it comes to buyers so being someone they like always helps. No-one wants to sell their business to a buyer who is not well organized, hard to deal with and constantly asking questions that could have been known in advance.
The best buyers have a balance of a strong offer, speed of execution and are easy to get along with. This does not mean you cannot ask questions or do due diligence, but always think of it from the seller’s
perspective and remember that the best deals are a win-win for both parties, not just the buyer (or vice versa)."
THOMAS SMALE // FE International
Now I want to give you some boring but critical advice for selling if you see even a whisper of a chance you'll ever do it. Because man... there are some really simple things I could have set up at the start that would have saved me hundreds of hours when I went to sell. So let me help you out.
How to Sell a Website (the Authority Hacker way…)
A lot of the process of selling a site is more or less the same as the stuff we just talked about -- only in reverse.
So, instead, I’m going to walk you through how to prep your site to be sold.
Specifically, I’m going to tell you how I now build my sites so they will be easy to sell fast.
Because let me tell you…
I had not prepared HerePup to sell, and getting it ready to sell sucked more than just about anything I’ve ever done in my professional life, and I work with Gael every day (kidding kidding -- just making sure Gael actually reads this).
But seriously, it took me almost 100 hours of work to organize that site to be sold, and it was awful.
I now do the prep work way in advance -- most of it when I set up the site. Here’s how it goes.
1. I brand sites nicely.
Branding is important.
It makes a site feel like a real business, and good branding can give a buy lots of latitude to expand into other areas of the market.
I pick a niche, broad, catchy brand name that fits the market and for which I can find a .com TLD.
I pay premium for a logo and color palette, and I usually get a quick consult on my site design.
HerePup has changed a lot, but you can still see my fingerprints on the homepage.
2. I make a separate LLC for each site (when it earns).
I don’t do this right off the bat, but if a site starts earning some respectable money, it becomes its own company with its own hosting account, bank account, EIN, etc.
This isn’t essential, but when I was running HerePup, it was completely commingled with my personal finances and personal accounts for everything, which was a major obstacle in the sale.
It’s 500x easier to be able to just offload everything in one fell swoop.
3. I create a Google Suite account for each site.
Here, I can store everything for the entire history of the site, and I can hand the whole thing over if I ever decide to sell it.
- An email account for myself and any employees
- Profit and loss statements
- Tax returns
- System documentation
- Content orders and deliveries
- Receipts and expense info
- Market and keyword research documents
- P.O. box & registered agent details
- LLC documentation
- Anything else I’ve created for the site
This was another one of those things that HerePup didn’t have, and it was a complete and utter nightmare tracking all this sh*t down.
4. I make site-specific SOPs.
You need to do more or less the same kind of stuff for every site you create, but if you’re at all serious about your authority sites, you’ll know that the processes for every site are a little bit different.
Buyers want to be able to hit the ground running. A bucket of well-crafted, hands-off SOPs will make them drool and can even be leverage to ask for a higher price.
I include SOPs for:
- Content (briefs)
- Uploading and other site processes
- Any site-specific outreach processes
- Social media processes
As a caveat, I will say that I have a few SOPs that I keep to myself -- proprietary processes that I consider my competitive advantage not only in that specific niche but in the world internet marketing.
But to the extent I’m comfortable, I want to be able to give buyers what they need to run the site.
Back to My Story…
So what happened with my site?
I hope this isn’t all that disappointing, but the way I sold my site was quite a bit easier than a lot of the processes outlined here.
A lot of that, though, was because it was so public.
Tons of people knew my site. They knew the exact tactics I’d used to build it. And they knew exactly how much it made.
Long story short, I was approached by Wired Investors.
They told me they really liked the site and made me an offer.
The offer was... Okay.
If I were to have gone through a brokerage, I could have made a lot more.
Wired Investors offered me something brokerages couldn’t (at least not without a lot of finagling).
They offered to buy part of the site.
They’d own the majority, but I’d still own a really solid chunk.
This was super attractive to me. Aside from being able to retain a “paycheck” from the site while still enjoying a solid payday, I knew they had a close relationship with a very good affiliate program I was never able to get into.
So if they bought it and were able to get in, the equity I kept would likely be worth twice as much.
So I said yes.
We did the deal.
They grew the site just like they said they would. Because of this, my “paycheck” increased, which I enjoyed for about a year. And, finally, when I saw the earnings plateau, I sold them the remainder of my equity.
All in all, I made a really solid chunk of change on the site, and I’m glad I sold.
Would I still sell?
In general, I like the business models of buying sites better than selling, so I’m not sure I’ll ever sell a site again.
If that’s the case, why did I even sell HerePup?
First, my wife and I had $120,000 in student loans. They’d been an incredible burden for years. Selling HerePup allowed me to delete them in a single day. It was absolutely amazing. I was really excited to get out of debt, and that’s the primary reason I sold.
Secondly, though, I was just tired of the site. I was tired of all the copycats. I was tired of the publicity of it. Plus, I was tired of the copycats (did I say that already?). I’m glad I shared HerePup, but I’m not sure I ever would have sold if it’d been a private site rather than a public one.
All in all, I’m happy.
It was a fun project, I learned a lot, and I’m pumped Wired has had so much success with it.
What do you guys think?
If you had the money, would you buy sites? Would you scale a team and build them? Would you sell them? Would you hold them?
Imagine you're a mogul (some of you probably already are) and tell me in the comments what you would do.