How to buy websites for passive income

31st Mar 2019
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In this article, we will go in detail, on why, how and where to buy websites. We focus on buying an online business which is generating a revenue stream that to some extent is passive.

Why buy a website or an online business?

The internet gives you access to a worldwide market. A website or an online business is a platform that allows you to sell to anyone with an internet connection. The world is your playground. A website has the advantage of being a self-service shop with automated check out and no need for shop assistants.

This setup

  • Frees up your time, you can work on the site whenever you want
  • Makes it easy to delegate certain tasks to others.
  • Makes it easy to scale
  • Can create a stream of revenue which does not reuiqre your constant input.

There are a few entrepreneurs who have managed to develop their own digital real estate into a business that can support the lifestyle they desire. Many seek the benefits of working for themselves rather than selling their time to your corporate master.

What is the difference between buying and building an online business?

An online business is an ideal shop to sell digital products. The advantage of digital products is that they require little or no logistics in terms of transporting them to the end clients.

There are two options to acquire a passive income online business. Buy it or Build it.

Any online presence has some the potential advantage of free traffic coming from organic search results. This is traffic is hard to ramp up in a short amount of time because a new site will not rank well in the organic search results. Established sites who are a number of years old have more authority and thus rank faster for the keywords of the website niche.

Building it: There is nothing passive about building an online business. It takes a lot and then some more. Today the competition is super tough, corporate and well funded. The risk that all your work ends up being washed away by a tough competitor is high. An online business is made up of both the free content and the monetisation of that content which can be either ads or digital info products.

Buying it: An established online business will have has a suite of info products, a history of sales, happy clients and google rankings. In addition of course, it will have revenue, the coveted passive income stream.

The most important thing is Google rankings though. It is easier to defend a position than to build one from scratch. The main challenge with any online business is rankings, this is basically free advertising. Google takes it’s time to list new pages in its search results, it takes years to get domain authority in a niche.

What is a passive income business?

A 100% passive income business does not exist, there are 99% passive investments but these are not a business. There are some online business models which are more passive than others. The rule of thumb is that the more custom and complex your products are the more time you will need to manage the business. If your monetisation involves physical products rather than digital ones this will add more management time to your business.

The monetisation of an online passive income business

For an online business to create profit it needs to sell something. Online business can be monetised either through digital products and services or physical products. Digital products can be

There are several ways to monetise free content or create info products these include:

  • Online Ads using Google Adsense or another advertising provider
  • Selling Ads Directly to advertisers. Sponsored guest posts
  • Subscriptions and Newsletters
  • Affiliate Links

The most passive monetisation system is Online Ads manage by Google’s Adsense, this system handles all the ad placements sales, collection and payment which means you will need less time to manage all this making the business more passive.

An Affiliate based website promoting several deals needs work in optimising of offers, doing A/B testing and making sure you are being paid. Some of these tasks can be delegated, but the owner is still responsible for them. When buying an online business you need to budget in the time needed to manage it.

Types of online business deals.

Niche site which has excellent rankings for niche keywords. Each niche will have different revenue potential, consider a site on jumping kittens vs one on mutual funds.

Sites with future potential: Technology is advancing at a rapid pace and this brings with it new consumer products. These products will be researched and could have tremendous traffic potential. Some sites focused on future tech or products may have been created too early or have little monetisation in the present.

Community site: A community site is one which acts as a coordinator between individuals who share similar interests. These communities tend to be sensitive in changes to management, especially if the new owners primary objective is to extract as much revenue from the community as possible. Learn the culture of that community well and be open about your intent. Gauge their reactions and change you’re accordingly. The same applies to the niche site, the topic must have some monetisation potential to have value.

Flip it. Buy a site optimise it and then sell it again quickly. A risky strategy which can be perfectly executed by those with experience.

Domain name: In this case, a site’s value is only in the domain name rather than the content.

Choosing a potential  online business to buy

The first things you need to identify before buying an online business are

  • Your financial commitment, budget
  • Your time commitment, to run the business
  • Skill sets needed to run the business

Price: Assuming that you are a complete beginner in running an online business, there is a likelihood that you will not be able to keep up with the competition and they will eventually outrank you. Sorry to be the bearer of bad news, but this is a real risk. The price, in this case, will come down to how much you can afford to lose.

If you are a hardened web promoter, you know all about Google rank changes which can decimate a site’s traffic overnight, new highly funded corporate competitors that can afford to make losses for years much longer than a lone web entrepreneur can. With this info in mind, you can judge your entry investment according to the risks of failure.

Time: If you treat a business passively it will reciprocate the favour by lowering your passive income over time. At first, you have to budget in an industrious number of hours. Eventually, the business will require more passive management and certain tasks could be delegated to others.

Different online business models require different skills.

Choosing an online business to buy is not that different from choosing a long term partner. A business has needs and you need to make sure you can meet them before committing to taking care of that business.

If you cannot understand the needs of the website, then it is best to take a step back. If you can understand the skills needed, but you do not have them or they are out of your reach, then it is also time to reflect on your choice.

A passive income asset should not only be considered because of its potential ROI, but also on its needs. The skills you need to run an online business fall into 3 categories.

  • Marketing, Web Marketing, SEO
  • Technical website maintenance and upgrades
  • Niche Specific, Specialist knowledge on the subject of the site.

The relative importance of the above skills depends upon the specific online business you are considering to buy.

Specialist topic knowledge needed to run an online business

Info business models give out information for free and then monetise the traffic that comes for the free info. The free info can be either highly specific or cover general subjects.

Websites with specialist information will require a high level of specialist knowledge to maintain. You will need to create content such as Blog Posts, Ebooks, Subscriptions and Newsletters to keep your readers engaged and convert them into paying clients. The alternative is to hire specialist writers, but they do not come cheap.

Info business models focused on broader subjects are easier to manage. Most people could write about beach apparel or sunglasses reviews. Online businesses which need minimal specialist knowledge are attractive to many and this means more competition. As a consequence, you will need more marketing skills, time and money. These resources will be deployed to rank higher in the SERPs, get click-throughs and convert that traffic.

You can ignore the skills aspect of running an online passive income business, but once the deal is done, and the honeymoon period is over, with the thrill and rush of making the deal gone. You will discover that for you, the cost of maintaining this business is far greater than the potential revenue.

Analysing an online business

Before buying a business you need to understand it inside out.  To do so you need information, there are two types of information internal and external. Internal is data which is owned by the website owner and external data is data which you can get from third parties about a specific website.

Your ultimate objective is to analyse the traffic, it’s details, the income and the expenses of the potential business you are considering to buy.

A quick overview of the site can be done in three steps.

  1. Browse the site, you can gather a first impression of the top keywords, the niche, the audience, the target market, the products on sale and their prices.
  2. Check out the competition. This comparison is done in order to evaluate what and who the site is up against.
  3. Analyse what the internet thinks about the site. This you can do with checking the links pointing to the site, what are the customer comments on the review sites, comments about the site on Facebook, Reddit and other social media.

When performing this quick overview, you should be thinking about.

  • The needs of the business and if it matches your skills and time availability
  • The strengths
  • The weakness
  • The potential revenue
  • Room for improvement
  • Do they have a moat? (Some feature which is hard to reproduce)
  • The state of alternative products and services.
  • Is the nice new, something that has just sprung on the market?
  • Is the niche an attractive one for corporate competition?
  • What supply chains are the revenue streams dependent on?

If the site passes the first filter, then you need to do a more in-depth analysis. To analyse.

  • Incoming links
  • Traffic origin
  • Traffic types
  • Keyword rankings
  • Age of domain
  • Revenue Streams

Understanding passive income business models can make it easier to analyse business who have any of the following aspects.

Analysing a website listing.

There are marketplaces for selling and buying online business and apps. Their quality and policies vary. It is very tempting for sellers to put in fake information. Or just inflate the price to get attention. One needs to take this information as indicative until proven otherwise.

Some marketplaces hide the URL of the business, in order to limit exposure of commercial secrets to competitors or copycats. The ones that hide the URL require a deposit in order to expose the URL. This has pros and cons, but I do understand why a well-managed business would not want to give out their edge. Incoming links and keywords are very important sensitive data.

If interested, you need to get access to google analytics, be sober, lucid and vigilant. Even this data can be gamed, traffic can be bought and faked. The scammers are out there trying to exploit your gaps in the knowledge. In between,  there are some genuine deals to be made from well-meaning sellers.

Analysing the seller

Why does the seller want to sacrifice the golden goose? A profitable passive online business is a treasure, understanding why they want to part ways with it is part of your job in understanding the deal and your leverage.

This is an important question, which you will never get a 100% verifiable answer.

Why would anyone be willing to sell a passive income asset? The basic premise is that they need the capital now, rather than the slow trickle of income. But why? Are there risks to the business which might affect the long term passive income potential? What does the seller know that you do not?

  1. Organic traffic is at risk from Google changes?
  2. A morewell-fundedd competitor is entering the niche?
  3. There are products or information which can no longer be sourced ahead of the competition?
  4. Incoming regulatory changes threaten the business model?
  5. The business is being sued?
  6. The products or services being sold are being replaced by others or are no longer in fashion?
  7. Loss of important incoming website links?

It could also be genuine. The seller is good at creating traffic and content but does not have the skills to monetize it.

Negotiating the price of an online business.

The price of websites is based on multiples of current yearly or monthly provable revenue. This is the basis of pricing. However for the risk reward ratio to be titled in your favour you need to estimate the actual potential revenue of the site, after you implement all your planned improvements.

When buying the top performing site for a specific niche, there is little room for growth, they are already on top, and the only way is down. There is much more room for growth if you are buying the  10th biggest market player in a specific niche.

If you are almost certain you are buying the property, you need to ask for as much info as you can such as, not all information will be provided. If a buyer is genuine and so is the deal, there is no reason why the buyer should not be transparent about providing the info to back up his revenue and traffic claims.

  • Bank Accounts
  • Access to affiliate accounts
  • Any online advertising sites / Google Adsense
  • All Mailboxes
  • Google Search Console
  • Log files on the site, going as far back as possible
  • Accounts

With this information, you can then verify the data with the top customers, suppliers and service providers.

Shadowing the seller on a typical day’s work will yield a treasure trove of information. Issues such as urgent, pending issues, frustrated contractors and delayed decisions could all float to the surface. If you do this in person you have the advantage of monitoring body language.

If you cannot be physically present, as this is usually the case, have as many phone conversations with the seller, if you can also with his subcontractors.

Your gut does could have a role in this sensitive time, it can deduct things that your brain cannot. If some primal alarm bell starts ringing, it is time to dig deeper and find out why your instincts are sceptical.

If you can keep the seller on board to help with running the site, have everything done in writing and in as much detail as you can muster. Penalty clauses are a must, to protect yourself, in case the seller does not uphold his side of the bargain.

Consider adding a non-competitive clause to the sale contract. Meaning obliging the seller to contractually not create another similar business in the next 3 years.

It is always important to have a lawyer to make sure you have covered all the legal stuff.  The higher the price the more important this is.

Migrating The site from the seller to the buyer.

You close the deal. Meaning the domain name is in now in your account name and the money is in the seller’s account.

You have two priorities at this stage.

  • To migrate the site or get complete ownership without disrupting the business
  • Get control of all revenue streams and accounts.

Some sites offer a migration service, and this can be considered in the case where the cost justifies the work. Be warned they ain’t cheap!

Transfer of

  • Pages and products which are still in production
  • Social media accounts
  • Lists of subcontractors
  • Production agreements
  • Affiliate account
  • Adsense accounts
  • Software licenses
  • Subscriptions to PayPal account (all subscribers might have to re-subscribe)
  • Backup email lists.

If some accounts cannot be transferred directly in your name, you need to double check that you would be eligible to create an account. Some affiliate programs have strict requirements, such as the location of the seller, KYC and AML.

Improving your new site

Focus on the quick wins first, what are the actions that you can take on your new online businesses which will deliver the most results? These are some areas you can focus on:

  • Marketing
  • Product range
  • Social media presence
  • Errors on site such as broken links
  • New content
  • Optimising old content
  • Geolocating affiliate links according to visitor location.

Finding a passive income business for sale

It is very hard to find an online business for sale which matches all your criteria perfectly. You need to go around shopping and depending on your time horizon find a best match. Buying a second rate online is not worth it.

You can buy either directly from a seller which is risky or you can buy through a dealer. There are listed opportunities and others which you can try to bid for directly even if they are not listed for sale.

Another option is to find abandoned websites and try to buy them directly from the owner.

Conclusion

Building an online business from scratch is hard and time-consuming, on the other hand when buying a passive income asset such as an online business you are putting the capital invested at risk. There are many pitfalls in buying an internet-based business and it is difficult to do so in 100% security

Bonus: Free tools to analyse an existing site.

There are a number of free tools to do this

Depending on how much the money you are investing is worth to you, you can take your analysis a further step. You can hire an expert to do an analysis for you. Or you can use tools like

Not investment advice. Not financial advice. Consult your financial advisor. Not a recommendation to buy, sell or hold. The staff of this site may own these digital asset/s mentioned on this page. Investing is risky and you may lose all your capital. See full disclaimer.

Keep in mind that we may receive commissions when you click our links and make purchases. However, this does not impact our reviews and comparisons. We try our best to keep things fair and balanced, in order to help you make the best choice for you.

Author: Jim Reynolds
Jim Reynolds. Is passionate about finance, passive income and cryptocurrencies. He writes about his passions on NodesOfValue.com. He has worked in the tech and financial industry for a few decades. He holds a masters in business admin and a bachelors in IT. All his writings are not investment advice.


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