Last week, I discussed how you could peruse and buy a website in order to “flip” it for a profit. That subject was explored in the post How to Flip Websites for Fun and Profit, Part I. This week, I will continue exploring the subject of website flipping with a focus on selling and making a profit on your website.
Part II: How to Sell your Purchased Website
A. Assess your “new and improved” website
In my last post, I briefly touched on renovating a newly acquired website by performing search engine optimization (SEO), adding content, installing plugins and the like. Every website is different and, as a result, will require different improvements. However, you have (hopefully) assessed the particular strengths and weaknesses of your website prior to purchasing it and know what needs to get done. If you’re looking for even more ideas on how to upgrade your latest purchase, here are some great tutorials for you (personal disclosure: I helped write the last three resources):
B. Run the metrics
Become familiar with programs like Google Analytics, which many website-selling sites (e.g., Flippa) will ask you to access so that potential buyers know first-hand about your website metrics, and specifically those that they will pay top dollar for. What metrics am I talking about here?
Traffic: This is arguably the most noted metric that will determine your website’s value in the eyes of potential buyers. To find out just how well your website is doing in terms of its traffic, try inputting its address into Google Adplanner, Alexa, Woopra or Quantcast.
Conversion rate: If you have Google AdSense, pay-per-click (PPC) or an affiliate program running on your website, potential buyers will want to know how well your site generates leads/sales. This can be reported through site earnings, but a better metric for your purposes is the site’s conversion rate. The following formula best describes how you can calculate conversion rate:
Total Conversions/Total Views X 100 = Conversion Rate
Revenue and income: Revenue is the raw amount of dollars that your website generates from advertising, product sales, referrals, etc. Income is the amount of money you “take home” after paying off expenses such as hosting, merchant fees, commissions, etc. It is imperative that you know both your site’s monthly and yearly revenue and income numbers. Also, find out if there are any seasonal fluctuations in these numbers; for example, a website offering winter coats probably undergoes a revenue spike from November to January.
Source(s) of revenue: Where does the majority of your website’s revenue come from? If it’s one major advertiser or program, then your site’s revenue is unstable and could disappear the minute that advertiser or program goes bankrupt. If site revenue is generated through several advertisers and/or programs, then you have a more stable moneymaker on your hands.
Visitors: It’s always a good idea to further analyze your site’s incoming traffic by looking at the number of unique as well as returning visitors. Unique visitors indicate that your site is placed well enough in the search engines to attract new interest. Returning visitors indicate that people like the website and have either bookmarked it or subscribed to your newsletter. And speaking of which…
Email subscribers: Much like a salesperson’s biggest asset is his/her client list, a website’s email subscriber list is a very valuable commodity. Email subscribers that receive your website’s content in their inboxes are more likely to read that content and click through to your website. They are also more likely to convert, whether that conversion involve buying a product, clicking on an ad, etc.
Now that you’ve analyzed your website’s parameters and know what it can offer to the potential buyer, it’s time to take the next step:
C. Calculate how much your website is worth
Just like a baseball card, your website is worth whatever someone is willing to give you for it, right? While that may be true on a basic level, there are some formulae you can use to figure out how much to charge for your website. The numbers that you plug into these formulae are derived from the metrics that you were asked to assess earlier. Here is one of the most common formulae used to price a website:
Value = 2 x Net Income (last year)
This is a really simple formula that asks you to plug in your site’s income over the past year and multiply by two.. I used this formula for pricing my own website when I listed it on Flippa.
BuySellWebsite uses the following formula to determine a website’s value:
Value = Net Income (monthly average) + (1/2 average of top 15 keyword PPC x number of unique visitors (monthly average)). This more complicated valuation is explained on the BuySellWebsite formula website.
EbizBrokers, meanwhile, estimates a website’s value as 3-6 times its yearly revenue.
If your site also comes with its own in-house inventory, then it is typically evaluated by using the following formula: Value = 10 x Annual Profit + Cost of Assets.
The only problem with using many of these estimators is that you don’t know which metrics are being used to assess your website’s value- and which ones are being overlooked. This is why you need to do one more thing:
D. Write some killer sales copy
Most website-selling websites (reviewed in How to Flip Websites for Fun and Profit, Part I) will ask you to describe your website and what makes it such a great buy. Here is your chance to highlight some of the best metrics your website offers, especially those metrics that didn’t make it into the final website valuation. Also, there may be some additional benefits to your website, such as its high Page rank or its incredibly active member forum, that potential buyers would be very interested to hear about. This is no time to be shy, so prepare to brag about anything that you consider to be a major selling point of your website. Complete your ad with a sentence or two describing how much you were involved in the improvement of your website and why you are selling it now.
E. List and sell your site
At this point, there’s not much left to do except list your website. Websites like Flippa will help you import your website’s metrics and assist you in setting a reserve price. Other sites will ask that you post a starting bid and provide revenue and income numbers manually. Most sites will offer you the option of featuring your listing for an additional charge; whether or not this helps you sell your website and/or get a higher price bid is a matter of debate. Regardless of how your website gets sold, there are some post-sale tasks you should complete:
The money transfer. You and the buyer could agree to have him/her transfer 50% of the money up-front, then the remaining balance once website transfer is complete. Alternately (and preferably), you could have the buyer work with an escrow service and park the funds there until the end of the sale.
The legalese. If you are selling a website worth 5, 6 or even 7 figures, definitely get a lawyer involved and have a contract drafted and signed by all parties involved. Even for smaller website sales, you should generate and send a document to the buyer detailing what the website sale entails in terms of files, subscriber lists, assets (e.g., software), post-sale support, etc. Make sure that the document is signed by the buyer and returned to you. In case something goes terribly wrong post-sale, at least you’ll have this document to fall back on as proof of the buyer’s cognizance of and agreement to the sale.
Once the sale has been completed and you’ve made a tidy profit from your work, what is there to do but start the process all over again? And this time, given your experience and know-how with flipping at least one website successfully, you’ll be ready to double or even triple your profits on the next flip.