Website flipping seems cool, and lucrative. And it can be.
It can also be risky.
I’ll share with you the economics of a website I bought in 2018 for $36,000 and sold a few months later. Yes, I did make a profit. But there was a lot of work that went into it.
Here’s a video I did a while back on it. I may cover more details in the vid.
Where I Found This Website For Sale
There are probably a dozen market places of websites and online businesses for sale. Among my least favorite is Flippa, but that is exactly where I found this website.
I tend to find low quality, junk sites on flippa. Websites with just a bunch of rehashed content blasted with shit backlinks to get some traffic. But there are some gems, which is where I found this one.
It was in a sub niche of personal finance — think like personal finance for people that live in RV’s. The site was owned and content written by someone that was involved in the space, so it was quite high quality. I am also fairly knowledgeable on finance topics and enjoy covering them — although I didn’t plan to write any of the content myself.
The site also had a little bid of branded search — in other words, people typed the name of the website into Google to go directly to the site.
Between the existing quality of content, and branded search, I know this one was for me.
>>> Finding a good website for sale and doing due-diligence in an extensive process I have covered in a few pieces:
- How To Audit A Website Before You Buy It (avoid a bust) [blog post]
- Buying A Website: Be Cautious of Pump & Dump Affiliate Websites (even brokered listings) [blog post]
- 9 Point Preliminary Due Diligence When Buying An Online Business [Youtube Video]
Financials of the website I bought
The website had an average earning of about $1,000 per month for the last 6 months and a buy it now price of $36,000. That’s a simple 36x (monthly) multiple.
All of it’s earnings were from affiliates in the fintech space.
A quick word on website valuations
Websites are valued on a multiple of their monthly profit. In the internet business world it is commonly 6 months. I personally think that is a bit short as offline businesses use a much longer time horizon. Nonetheless that is market method.
These days in 2022, content website business get valuations between 30x 60x. On the low end would be a low grade affiliate site and the high end would be a site with a good bit of brand recognition and quality content. While I paid a 36x in 2018, at current valuations it would likely sell for close to a 50x.
Improving the website
Buying a website and planning to do nothing is a loser move. The business world is always evolving and online business evolves even faster. My golden rule for acquiring any business ALWAYS HAVE A PLAN TO IMPROVE AND AD VALUE.
My plan for this was simple,
- Add a little bit of content and rewrite some of the old content ($5,000)
- Improve Website Design ($500 & some Time)
- Improving Conversion Elements To Increase Revenue ($0 but a lot of my time)
Doing these steps would increase revenue and increase traffic.
One thing I need to stress, is that the value of my time is not accounted for. A lot of thought and ‘mental work’ went into this project on my end.
The sale of the website
In the first few months of owning the site, my traffic actually dropped a bit; this was disheartening, but revenue remained the same due to improved conversions.
In month 4 revenue and traffic began to grow and positive trend was clear in month 6.
Here’s the monthly revenue break down while I owned it (before listing for sale).
- $1,850 — While site was for sale
This gave me an average 6m revenue $1,216.66. I listed the website on Flippa aggressively priced at $50,000 — a nice round number.
After 5 weeks for sale, I made a deal with a buyer at $47,750, basically a 39x multiple.
Breaking down my net gain (or loss)
Let’s factor in all my costs to see exactly how much I came out ahead.
- Acquisition cost ($36,000)
- Investment In Content ($5,000)
- Design Improvement ($500)
- *Cashflow Through Sale $10,150
- Cashflow From Sale $47,750
- Broker Fee Of Sale ($4,775)
Net Gain From Website Flip: $11,625.
While I came out with a gain, making $11,625 over 7-8 months didn’t really seem like a huge win, especially considering all my personal time invested in it.
*$1,850 was made in month 8 while the site was for sale
Takeways if you are thinking about flipping a website
So what should take away from my experiences.
Always buy a website that has a brand. Websites that have no brand, are simply leeches reliant on Google. While a brand along may not sustain the revenue and profit, Google tends to reward brands. Possibly building a could be an improvement but it takes a long time.
Buy a website you could hold and grow for a few years. Growing an online business takes time; not months but years. I bought this website with the intention of flipping it in a few months and 7-8 months was really longer than I wanted to hold it anyhow. Practically speaking though I’m very confident I would’ve done better improving content and cashflow over another year turning this into a 2-3 year project. Also over that time my own personal time would be minimized as most fo the planning and figuring things out happens early on.
So I guess this means that going forward I am more of website investor than a website flipper.