Considering buying an ecommerce site. Where would you value this?

[artracer]

.net domain
The domain name does NOT contain the product’s main search phrases/keywords.
Google SERPS of 20 for main product search phrase.
Google SERPS of 1 for each of two secondary product search phrases.
Current owner says he’s done much SEO work to rank for the secondary search phrases, he admits it’ll require lots of work (getting backlinks) to rank in top 10 for the primary search phrase.

Figures are US$, for the previous 12 months...
$7,200/annual gross
$5,000/annual expenses
$2,200 annual profit before taxes
135 drop ship items sold @ average $85/annually
3 years of stable, consistent but unspectacular earnings
All organic traffic, 1,600 visitors/month
Site owner would provide SEO training to me as part of the sale (SEO is something I want to learn) site owner is knowledgeable in SEO.

The site can be maintained as-is doing minimal site & SEO maintenance and just processing orders, this would take 4-6 hours a month.

I have another source of income from print/web design.

Site was listed on flippa at with an unreasonable opening bid & buy it now, the listing expired with no bids.

The value to me is:

1. Current profit
2. SEO tutoring
3. I see modest potential to better the sales/profit through better site design and proactive customer campaigns.

[benitez17]

What value do you place on the SEO training?

What do you see as the maximum earning potential for the site, and what would you have to invest to get it there?

[Clinton]

artracer, welcome to experienced-people.net.

When buying a site I run some due diligence checks. It's important I form my own opinion on what the prospects of the site are, where the risks lie and the extent of the risks. The last person in the world I am going to trust to provide me that information is the seller himself. Even if he has the best of intentions his opinion is biased.

The site can be maintained as-is doing minimal site & SEO maintenance and just processing orders, this would take 4-6 hours a month.

If you aren't an SEO expert how do you know that it will take you only 4-6 hours a month? What happens if the SEO techniques he's using cease to work and the site loses all SE traffic (an entirely possible scenario)?

What percentage of his traffic is from SEs? (I reckon that 20-30% is reasonable. Any more and the site is over-optimised and at risk of a fall)

[squeezywheezy]

Hi there
Just throwing in my tuppence but I have an ecommerce site. Mine prob has many more orders than this one but most are dropshipped and it still requires about 10 to 15 hours of my time per week.I'm sure I could improve the seo much more and devote time to more newsletters etc for customers but I would need many more hours. Even when our site was earning around the figures you say I had put a lot of hours in to keep it at that level. It of.course depends.on.the product and the particular arrangements the site.has.in place you may need to.spend.less.time. maybe think about 10 hours per month and think how much you would want to get paid for.you ten hours and work.out what you think is a reasonable price from there?

Sorry for rambling, best of luck!

[KenW3]

Does the domain name contain real words? Does it have any parts of the ranking keyphrases? If so, the name has value as a keyword domain.

A SERPs result of 20 has little value, if any. The GAKT (Google Adwords Keyword Tool) will show how difficult it is to rank for the other two phrases. The number of searches for exact local for the keyphrases ranking 1 will indicate value.

SEO education does not add to value. I would certainly expect him to tell you what he is doing to promote the site. For SEO, it is unlikely his knowledge could come close to what you can learn on the net for free, from SEOmoz.org for example, or in a $35 book from Amazon.

Are any of the customers repeat buyers? Is the product used up, or a one-time purchase? Will it become obsolete at some point (technology), where product sales will slow or die off completely? The 135 items sold is less than a 1% conversion rate. That does not indicate a properly designed site, nor a properly targeted audience. You are correct in suggesting there would have to be room for improvement on this.

You did not mention whether that $2,200 annual profit included his salary for running the business. Are his business costs in that $5K, or is that cost of product only? If he is not paying himself before that $2,200, then the business does not earn much. That answer will greatly affect the amount you should pay for the site.

[golles]

KenW3 is totally correct on this. especially the conversion.

if there is only 1% conversion on secondary terms, then you are likely to get get less on more generic, primary search terms.

Questions i would be asking myself:

1) What can I do to improve the profitability of the site right away - assuming time is not factored into your figures the site is already a liability and not an asset. You need to quickly reverse that if your are buying.
2) What can I do immediately to bump the conversion rate? The conversion rate on secondary key phrases is low. This is OK if there is massive margin in the product.
3) Are the primary terms indeed terms that convert to PROFITABLE customers - quite often this is not the case. Are there any conversion figures at all for the primary search phrases?
4) Longer tail, more product specific terms are usually the best at converting PROFITABLE customers - as you already rank for those phrases and are getting a 1% conversion rate - what else can you do to increase traffic, diversify traffic sources, etc?
5) Discount the SEO tutoring - it is worthless. Reason - the seller has not proven he/she is a good SEO (i.e. not ranking anywhere for primary phrases). This might be too harsh, but I am just making the point.
6) Is this a repeatable sell - i.e. a product that people buy more than once? Are there cross sell potentials with other products?
7) Can I grow the product range?
8) What is the supply chain like?
9) How big is the customer base in total?
10) How big is the email list in total?
11) Can I increase average order value with upsells / accessories?

And then I would dig into the finances....

Hope this helps

[artracer]

TY all for your comments!

benitez17

What value do you place on the SEO training?

$500 (I expect 10 hours of coaching via phone & email over 3 moths. I’m looking for a relationship where I can call or email a guru and ask “Will this idea I have/saw work, what do you suggest?”))

What do you see as the maximum earning potential for the site, and what would you have to invest to get it there?

2x current profit
Guessing 4 hours a week of my time for design & SEO (that works out to $15/hr :-(


Clinton

If you aren't an SEO expert how do you know that it will take you only 4-6 hours a month? “

A pure guess on my part

What happens if the SEO techniques he's using cease to work and the site loses all SE traffic (an entirely possible scenario)?

FAIL, I’d close the site and loose my money. (or list it on flippa ;-)

What percentage of his traffic is from SEs? (I reckon that 20-30% is reasonable. Any more and the site is over-optimised and at risk of a fall)

SE 76%
Referring sites 17%
Direct 7%
I'm not familiar with the term "over-optimised", wouldn't a SE of 76% be evidence of good SEO?


Here’s where I am today on this...
The current $2,200 profit is all the earnings there are, the owner does not take a salary.
It’d be worth my professional time only if I spend 4 hours or less a month on it, I figure that’d be enough time to process orders and do extremely minor design tweaks.
Given all this, I’m valuing the site at $800, the SEO training at $500 for an offer price of $1,300, and a ceiling of $1,750 or so.
I have not decided whether or not I'll make an offer, I should be fishing for sites at least 10x larger, however at $1,300-$1,750 this one seems like a low risk way to gain experience.

[Clinton]

I'm not familiar with the term "over-optimised", wouldn't a SE of 76% be evidence of good SEO?

This post of mine answers this question. The rest of the thread may be worth reading as well.

[benitez17]

$500 might be a reasonable value for his time, or it might not. I think KenW3 had a good point about the owner already owing a buyer most (if not all) of this information when the site is transferred.

Are you interested in buying an asset that will pay you $15 an hour (before taxes) in the best case if you maintain it? It sounds like you aren't.

Could you hire someone else to do that work for that price?

[crabfoot]

I looked at this thread when it was first posted and thought the site looked like a lot of work for the return. But how much of what the current owner does could be automated? Can it be automated by easy means, DIY bots and suchlike?

From the current description, it looks like hard work, because it looks like a lot of things are manually handled. Automate a lot of those procedures and handle the exceptions manually, and it might be a valuable investment.