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Thread: Hello - Another Website Buyer Here

  1. #51
    aka "meathead1234" Thomas is a Premium Member
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    Quote Originally Posted by Clinton View Post
    Ken, it isn't that there's nobody experienced enough to help people with their goal of buying a web businesses at the lower end. At some point you'll appreciate that it's not the people with experience that's lacking, it's the opportunities. And the opportunities are lacking because of the humongous volume of noise (and "fraud") in those price brackets and the incredible number of new entrants, in those price brackets, willing to risk money on bad bets. I'm not saying the cut-off is $1M or $100K, but the higher the budget - even $10K - the better the chance of getting a business (rather than something with just the appearance of being a viable business).
    The other issue is time. If you're looking for a site to buy with a budget of $20k then it's going to take just as much time (likely more) than trying to find something decent through a broker, for say, $200k.

    RE: Ken -

    I'm sure there are opportunities at the lower end, but anyone "experienced" enough has moved up the value chain. When I am buying a site for myself, it might take me a month to complete start to finish. Other experienced buyers will be the same. Therefore, if someone wanted hand-holding through the whole process it's going to cost a lot of cash. You certainly wouldn't be able to hire me for a month for $20k, and that would be an entire site budget. As Clinton mentions, you're also competing against more experienced buyers and idiots - experienced buyers are more desirable to a seller as they don't mess around, and idiots are willing to pay more/make rash decisions. So the rational and inexperienced buyer, basically has *no* chance in the <$50k market. Possibly the only way to beat an experienced buyer (who will be disciplined on multiples) is be willing to overpay vs. the market when buying your first site (e.g. offer asking price straight away rather than trying to negotiate).

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  3. #52
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    Quote Originally Posted by Clinton
    it isn't that there's nobody experienced enough to help people with their goal of buying a web businesses at the lower end. At some point you'll appreciate that it's not the people with experience that's lacking, it's the opportunities. And the opportunities are lacking because of the humongous volume of noise (and "fraud") in those price brackets
    I'll admit my assertion wasn't (completely) fair; I'll qualify it. Experience exists for those buyers able to undertake the pricing levels and costs associated with large acquisitions. The skill levels required to do (real) DD come at a very high price. For those with said skills, it is never worth their efforts to bring their expertise to bear on a sub-6-figure property.

    The same holds true of those brokers who know what they are doing. They and their companies will gravitate to the higher end of the spectrum to cover their overhead and maintain viability as a company. Their experience level dictates representation of higher priced properties.

    I do understand. By the same token, I cannot accept opportunities at those prices are nonexistent, but concur the noise level is so high on some sites that it will kill their marketplaces. I've seen a couple fall so far; The future is predetermined for other marketplaces following the same path.

    I relate to the demand at 4 and 5-figures because that's my preference. I would sooner throw a dozen against the wall to see which ones stick than risk all in a one-shot or nothing deal. Uncontrollable variables after purchase alone prevent that exposure level.

    [Edit]

    Thomas, thank you for your reply. I posted the above prior to reading your reply. I do understand the cost of proper expertise for lower-priced acquisitions is too great.
    Last edited by KenW3; 19 June 2014 at 6:26 am.

  4. #53
    Administrator Clinton is a Premium Member
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    The skill levels required to do (real) DD come at a very high price. For those with said skills, it is never worth their efforts to bring their expertise to bear on a sub-6-figure property.
    If only those without the adequate skills are competing in the sub $1K/$5K/$10K market and that's the market that's most loaded with crap ... isn't it sound advice to newbies at the lower end to get the hell out?

    I relate to the demand at 4 and 5-figures because that's my preference. I would sooner throw a dozen against the wall to see which ones stick than risk all in a one-shot or nothing deal..
    And out of a dozen $1,000 sites if even 2 of them "stick" and you've paid 15x monthly earnings for each purchase your effective multiple over the whole exercise works out to 90x or 7.5 years' of earnings for each of the sites that turns out to not be a dud. OK, on the bad ones you may make a few dollars before you scrap them, but the core point remains - this isn't a lucky dip. Most buyers would lose money on all 12 purchases. I know of numerous cases of intelligent people, people with extensive web and business experience, who've been there, done that and lost a lot of money before learning the lesson.
    Find the right business brokers to maximise the value you extract from your business and improve the chances of selling your business.

  5. #54
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    Quote Originally Posted by KenW3 View Post
    I'd love to get some input from other new members about this discussion and what they'd be comfortable spending for a purchase. It would be very helpful to everyone if some dormant members would come and give updates, and learn if they pursued their dreams and goals.
    I suppose I qualify on both counts (new and somewhat dormant). For my first purchase, I was prepared to spend around $10K. What ended up happening was that two different sites (both sub-$10K) came on my radar at about the same time which were appealing. One was an online service, the other was an ecommerce store. I bid on, and won, both with transactions ending within a few days of each other.

    I've taken possession of both sites and have been working on them.

    The service site ended up being broken in some ways that were expected and others that were only discovered later. A lot of things turned out to be broken and I'm optimistic that now that I've fixed numerous bugs and opened the site up to new markets that it didn't work in before revenue could improve significantly. Some features that were advertised just plain didn't work, and I've identified many potential things to be done to improve beyond where things claimed to be once I've fixed any remaining issues. That being said, customers have been coming in and financial performance has been as advertised by the seller even during the time of fixing things.

    The store had issues with listing products that have been discontinued, not listing products that are available from suppliers, having unrealistic prices in some areas, some bugs that would have produced SSL/insecure mixed content warnings (possibly scaring away customers during checkout) and generally had not been advertised or well-maintained. Getting this one up to speed, supplier accounts setup, etc. has been significantly more time consuming and is something I'm still working on. It has so far not met revenue/net profit performance advertised by the seller; but, a full month has not yet passed and it appears that in recent history sales have tended to take place at times of the month that have not yet been reached when I've had possession.

    Quote Originally Posted by Clinton View Post
    If only those without the adequate skills are competing in the sub $1K/$5K/$10K market and that's the market that's most loaded with crap ... isn't it sound advice to newbies at the lower end to get the hell out?
    I think, at least speaking for myself, it has been worthwhile to start in the sub $5K/$10K market (but, definitely wouldn't be worth staying there). In the process of completing the transactions and accepting the sites, setting up supplier accounts (on the ecommerce store), fixing bugs (on the online service) I learned things that I couldn't reasonably have known beforehand. Some of that is lessons in how to do cross-border banking more effectively (in theory I could have looked this up online first, in practice, it turned out that the information online or when calling the banks before to ask questions actually ended up being different than what happened when trying to do things for real). For what I wanted to get out of it, more an education/lesson than an immediate payback, it has already been effective. I would say it's been more effective and useful for me than what I would've gotten out of say spending money on an MBA. There's still a long way to go with both sites to get them to where I want them; but, already I've learned some lessons. It has also helped to establish reasonable expectations/timelines for what acquiring a more expensive site would be like. It has also helped force me to learn more about US law and taxes (again another place where the forms/details provided by suppliers don't match reality when actually doing things). Some things in the US are just different enough from Canada to cause what I've known before to not quite apply.

    Thomas' number of about a month start to finish reflects my experience so far as well. Doing two sites of these types at very nearly the same time turned out to be a bad idea. Both have needed significant work (in different ways) some of which was unanticipated and I would have been able to be more focused and faster with only one at a time. Some things went well, other things I would do differently in the future (especially banking things, as everything has ended up being 2.5% more expensive than it needed to be due to some banking limitations regarding currency transfers from one place to another that I ran into but couldn't work around in the time I had for closing the sales, escrow.com fees were higher than they would have been had I had a US bank account, etc.). On a more expensive site these sorts of issues would have been much more painful.

    For someone else (coming from a more business background rather than a technical one), or, who didn't need to learn all the needed rules/systems for a country other than their own I think sound advice might be different from what worked for me.
    Last edited by Kay; 20 June 2014 at 10:31 am. Reason: Promoted to front page article

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  7. #55
    Administrator Clinton is a Premium Member
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    Excellent post, timginn, thanks. May I ask if these were MFF sites i.e. did the sellers have dozens (or hundreds) of completed Flippa listings under their belt?

    It appears that your strong technical skills allowed you to make a success of these two sites. Well done for cleaning them, sorting them out, fixing them and opening them to new markets. It seems to have taken a lot of time, some of which paid for itself in the lessons you learned. However, if you put an hourly value to your time how would you compare the cash value of that time to the cost of the sites? What advice would you have for other buyers looking for sites in this price bracket?
    Find the right business brokers to maximise the value you extract from your business and improve the chances of selling your business.

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  9. #56
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    Neither were MFF sites; so far, I avoid those like the plague. The service one was from a completely new to Flippa seller, who had written the site as a prototype/proof of concept on the side related to one of their other businesses. The store was from a seller who had sold unrelated sites there before. It had previously been sold on Flippa by the original owner and at that time was doing much better (profit wise, and in terms of being looked after). A lot of customers ended up being lost in a transition from one software platform to another by the seller I bought it from. I've been able to recover the customer account details from a backup (he couldn't) and have both the original site on the original platform (not currently in use, but, potentially of use for marketing later) and the new one (which is actually in use). The seller (to me) had basically abandoned the site in favour of others that his company was running which started to take off. He does this as a family business, runs several ecommerce stores only, fairly similar in structure to what I'm eventually hoping to accomplish myself with my wife except we're going for a bit more diversity than just ecommerce.

    The current hourly value of effort put into these sites hasn't yet exceeded what it would have taken me to build the sites on my own; but, I think by the time they're how I want them it might. This could push one of them into the > $10k bracket, but, likely not the other one.

    There are components of the service site that I could viably reuse on another project later. I've also been developing (today) some software to help me look after the e-commerce store that could be very helpful in future store acquisitions of the same type. I've learned that some suppliers are either very disorganized or don't provide data in a format that would be ideal for importing/updating products with. I've started writing some custom software to deal with that when the supplier does have a good website (code to spider their site and get things into a CSV file that can be imported with references to images, downloaded images named/sorted, etc.). This seems worth the effort for suppliers that provide a large number of products (I did one supplier with 500 products today, much would be reusable for the next supplier I try). If I were doing this on a bigger scale, it might be the kind of work that's eligible for SR&ED funding from the Canadian government (they provide support for doing experimental development/prototyping, etc.). For smaller suppliers, what my wife and I have decided to do is pull in some local help. The good part about being in China right now (and between my wife being a native speaker and me having connections to tons of university students desperate for work experience) is that this is affordable and makes sense for small suppliers or those that aren't in a format I can automate easily. All of this has taken a while to setup. What I'm trying to do is get a system worked out for going start to finish on acquisitions and bringing things up to date that is repeatable and scalable across bigger sites.

    As far as advice goes, I think this price bracket is tough. I definitely spent a lot of time searching. For those looking on Flippa, use the filters... I dropped anything that wasn't making at least $100 a month in revenue and that eliminated a lot of garbage (but, does still leave in a good number of scams). Watching what's happening on sites in that bracket, I've definitely seen shill bidding, inaccurate listings, revenue being confused with profit and a number of sites of poor quality along recurring themes (such as reselling Facebook likes/Twitter followers, reselling "bulk" traffic that's actually spammy hidden iframe things on popular sites where real users technically go to the site but obviously don't interact with the 1px x 1px square that the site is boxed in on the page they really want to be on or reselling outsourced services). It took weeks to find a single site I thought was worthwhile pursuing that was <= $10k. Otherwise honest sellers do make mistakes, a lot comes down to knowing the questions to ask and what problems you can/can't fix yourself. One thing I've learned to look out for is sellers copying/pasting from previous listings they've had and forgetting to change certain details (sometimes critical details). I don't put much stock in Twitter or Facebook follower numbers, they're very easily faked (even when the sellers say they aren't, and, not necessarily through any fault of their own... some of the spammy paid Facebook like bots are automatically liking random pages to make themselves harder to detect, Twitter is the same).

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