Buy Big or Buy small for the noob?

[thibbert]

I hope this hasn't been discussed elsewhere, I'm brand new to this fantastic forum and I've been through all the 101 posts and didn't see it covered.

I'm interested in buying and income from an online site. I have no aversion to putting in work, but I'm wondering what the pros and cons are of spending a lot of money ($50k) to buy an income from one site or spend it on buying a bunch of little sites ($1-3K).

To start the ball rolling, I think the biggest benefit of the big site is being able to focus. The biggest benefit of the little sites is that you can start small and learn the hard lessons early, and diversify your portfolio so that you don't put all your eggs in one basket (especially if you are planning to live off the income).

Any thoughts or help is greatly appreciated

[Dreich]

Before I say anything should point out that I'm also a newbie so I can't really give advice. The only thing I have to say is caution, maybe it's just my Scottish tendencies but I personally would aim to buy one small site first so that you can't lose too much and will allow you to get experience with the buying process so you can sniff out scams easier. As I said though I'm new too so have no real idea.

[petertdavis]

I think it depends on what that $50K means to you. If your net worth is in the eight figure range and $50k wouldn't even get you into the car you park in the driveway, then I wouldn't think you'd be too fussed. On the other hand, if the total loss of the $50k would push you into bankruptcy, I wouldn't recommend you either buy one big site or many small ones.

Assuming you're somewhere in the middle, Dreich's suggestion is sound. Do be cautious, there are many people out there waiting to part the naive from their money. But, buying a small site isn't always as straight forward as it seems either, and if the experience isn't relevant to your future plans then it would likely be a waste of your time, not to mention putting the cart before the horse.

Now, to go back to start, don't worry so much about if you're buying a big site or a little site. That's not what you should focus on. Think about what kind of business you want to buy. Do you want to be a web publisher? Do you want to get into ecommerce? Some kind of service? What about your personal background? What could YOU add to a web-based business? We assume you want to buy something and enhance it with your own unique qualities, right?

When you've thought about what kind of business you want to run, then take some time to do some research. Read. Look at what other people have built with similar ideas. Some of them might be prospects for acquisition. Think about whether you'd be better off using your money to build something new, or buying an existing business. Talk to people who have more experience than you.

The worse thing you can do is take your $50k and go on a shopping spree at Flippa. 99.9% of the sites there are a waste of your money. No, 99.999% of them would be a waste. For sure. You might win the lottery before the right business for you comes up for sale on Flippa, so if that's your plan just go and pump it into the Powerball. If you have a clear concept of what you want, no harm in scanning Flippa to see if there's anything there. I buy forums, and once in a while a decent buy comes up on Flippa. But, I know what I want to buy, how to value them, and can for the most part avoid wasting time and money. You don't know that yet.

Hope that helps!

[Clinton]

thibbert, welcome to experienced-people.net.

Peter's made some excellent points.

Let me try to provide a different perspective. When it comes to businesses, given the choice of big or small, big is usually better. Online businesses are no different. Larger businesses mean you can get better deals with advertisers, preferential treatment with other partners, more effective use of the time you're investing and larger dollar term profits.

If it wasn't for the downside of unfamiliar territory enhancing the risk, you'd be better off going big. Even if you're investing your life savings and would be bankrupt if this didn't work, you've got to balance that against the certainty of the opportunity. History has many example of players who've chucked everything they've owned at something they believed in. I don't know how many went bankrupt - I'm sure there are many - but a few came out quite well indeed.

When going it alone, the very small is the safest bet. When partnering with someone you trust explicitly it may be worth making a bigger investment. Partnerships can take many forms - from joint investment ..to buying from someone on a payment plan that's connected to the site's performance ...to hiring someone to do the due diligence for you and spot risk areas you may have missed yourself.

In short, I would treat it on a case by case.

[Ajeet]

No, 99.999% of them would be a waste.

This is the key to finding the answer. In principle, having one (or few) sites is much better then having several I learnt that the hard way, and am presently liquidating MANY of my low value sites, literally hundreds Despite that, buying high value sites is really scary owing to the 99.999% rule described by Peter!

In the past 1 month alone, I seriously considered buying two sites, one for 48K and the other for 60K. I loved the sites, and did not find anything wrong with them. BUT, based on my history of failing with purchased sites (except in one case), I did not have the guts to go ahead with either of them. (For your reference the lead for one of them was presented right on this forum by Clinton, so you are at the right place.)

My solution to this is not something that too many people agree with, but I am going to be building sites (2-3) from the ground up and investing that 50K in them over 1.5 to 2 years.

[thibbert]

Thanks for the advice. The one thing I'm sure of is that I've come to the right place. I was up til 2am last night reading the forums and am getting a great education.

Dreich - The only thing I have to say is caution

That's something I haven't been great at in the past (investing in bricks and mortar opportunities) but I'm determined to do it differently this time.

petertdavis I think it depends on what that $50K means to you.

Very true! I am somewhere in the middle. If I lost $50k I wouldn't jump off a bridge or go bankrupt, but it's still a LOT of money for me (think life savings). The truth is that I'm a consultant and I'm on the road a lot... too much. My wife and I want to start a family and I want to be home to do it, so I'd like to end my consulting career (or at least minimize it to 1 week a month) in 6 months. Any suggestions for what I should do in the next 6 months? i'm thinking I'd need to buy something in the next 4 months so I know it would work before making 'the switch'.

if the experience isn't relevant to your future plans then it would likely be a waste of your time, not to mention putting the cart before the horse.

The worse thing you can do is take your $50k and go on a shopping spree at Flippa. 99.9% of the sites there are a waste of your money. No, 99.999% of them would be a waste.

These are the things I am deathly afraid of.

Now, to go back to start, don't worry so much about if you're buying a big site or a little site. That's not what you should focus on. Think about what kind of business you want to buy. Do you want to be a web publisher? Do you want to get into ecommerce? Some kind of service? What about your personal background? What could YOU add to a web-based business? We assume you want to buy something and enhance it with your own unique qualities, right?

That's a darn good question. As a consultant I have had experience in a lot of different industries including finance, health care, technology, manufacturing, golf, video security, telecom, and cancer (if you can call that an industry) to name a few. From the perspective of capabilities, my background is mostly in strategy, entrepreneurship, process development, and business intelligence. As for personal interests, I love any activity on the water and anything to do with cars (I actually have a few people every year ask me to help them buy cars). I'm being as open and honest as I can so that I can get the most help.

When partnering with someone you trust explicitly it may be worth making a bigger investment ... ...to hiring someone to do the due diligence for you and spot risk areas you may have missed yourself.

I am leaning this way... and Clinton you are already at the top of the list of people to help me. At what stage is it best to ask for your help? I don't want to waste your time. I plan to learn as much as I can on the forum first so that I can be a good customer. What decisions should I make before consulting someone such as yourself? I'm guessing first order of business is to answer Peter's main question -

what kind of business you want to run

I have read posts about people focusing on their passions, and other posts about people being opportunistic (most income per $ invested). Any thoughts on that given my situation (broad experience, will need to count on the income)?

I know I'm asking a lot of questions but I appreciate your help... this is the type of forum I was hoping to find as I start on my journey.

[petertdavis]

I have read posts about people focusing on their passions, and other posts about people being opportunistic (most income per $ invested). Any thoughts on that given my situation (broad experience, will need to count on the income)?

Maybe it would make more sense for you to focus on the platform first. For example, I focus on the platform, forums in general and vBulletin forums in specific (forums that I buy, if they're not on vBulletin if I'm going to keep them, I convert them to vBulletin, because that's the platform I'm comfortable with). So, I'm always on the prowl to buy forums. Topic is secondary, but it has to be a topic that makes sense to me or I won't buy it.

And, if you're really as income driven as you seem to be by your words, I'd probably steer you towards an ecommerce platform. You don't even have to get specific yet, but many people will point you toward Magento. You can easily take that out for a spin. Just get a domain and hosting and for just a few dollars you can play around setting up your own site. No need to buy crap on Flippa.

So, where I'd say to take your broad experience into play is with looking at what you're going to sell in your ecommerce store. Maybe you don't even need to buy an existing site, maybe you came across an interesting product or line of products in your experiences and you could negotiate a deal to be the exclusive online source for those products. Then, you'd take your investment and put it into building out a site and getting someone to help you market it.

Alternatively, you can start looking for existing ecommerce sites in your price range. It might be difficult, I think that $50k is a price point you're not going to find really a lot of good stuff to buy. Most of the things you'll find listed at that price point will be startup sites with no customers, and you don't want to be spending your money on that.

[Clinton]

I will reply to your post in more detail later, thibbert, but I want to address something else first.

(Clinton) At what stage is it best to ask for your help? I don't want to waste your time.

If you want someone to help in private and on a paid basis you need to choose people from that thread I linked you to, I'm not taking on any private work. There are some very smart cookies there as you'll figure yourself if you follow their posts.

I plan to learn as much as I can on the forum first so that I can be a good customer. What decisions should I make before consulting someone such as yourself?

That's actually an excellent question and it's worth starting a thread about. Having worked with a fair few people I have some opinions on what makes a good client and I'd drop into your thread to say my bit.

[meathead1234]

I think Peter and Clinton have made some extremely good points here - and I'm certainly not going to try better it. You've definitely come to the right place to ask and you'll get a lot of good advice here.

There are a few ways you can look at it, but my opinion is that you should start with a small site just to get an idea how things work online. As Peter said, pick something you want to do (either a platform or a type of business) and buy something low end (<$2k) in that area. You'll quickly learn by experience which is far more useful than what you can read or be told and will be in a far better position to choose the business you want to build and/or buy. Your other option would be chat to a broker (I know a few of us on here who regular broker sites) and discuss your needs - often they will be in a better position to find something that would suit you due to their experience and/or contacts.

In your situation, I think I would lean towards e-commerce for a long term income, pick an evergreen industry/product and either acquire access to the market with a takeover or build something from scratch. If you want to build it, you'll want to hire some people who know what they are doing. A decent Magento (e-commerce platform) solution will cost you low-mid XXXX and you can start out drop-shipping to reduce your exposure early on and switch to buying wholesale as you grow.

[Clinton]

I was up til 2am last night reading the forums and am getting a great education.

I am very pleased.

If I lost $50k I wouldn't jump off a bridge or go bankrupt, but it's still a LOT of money for me (think life savings).

Given your situation, I wouldn't invest the whole lot in one go. I'd probably go up to $10K or $15K. But I'm the extra cautious type and very risk averse. That's what I blame for not being in Carlos Slim's shoes today

These are the things I am deathly afraid of.

We may be scaring you unnecessarily. 99.999999% (call it decimal creep ) of the sites in Flippa may be junk but you'll recognise most of the junk straight away. Anything with a $500 bin or that's been around for only a few weeks is something you'll know to avoid. That accounts for 99% of Flippa listings. Of the other 0.99999999%, pick out ones that look interesting and start a thread here in the due diligence section and we'll have a look at the site for you. If it's $20K or above, I promise to drop in and do a bit of public DD myself.

Remember also that Flippa isn't the only place to buy sites. In fact, of the quality sites available for sale a very, very small percentage end up at Flippa.

I have read posts about people focusing on their passions, and other posts about people being opportunistic

This forum and experienced-people.co.uk are hobby sites. My money sites are in industries that I have no passion about. Passion is important if you're building a business, I believe it's less important to have if you're taking over an existing business and injecting efficiencies, contacts, technology, automation...