How do I invest $10k-$20k

[powerrock]

Hello,

I am technology entrepreneur and really good at building technology products. I created a visual search engine and sold in 2010 and a mobile app and sold recently. They were not big sales. I have also raised over $5MM in venture capital funding for my company (that we burnt through).

I want to invest $10-$20k on a web business that can generate passive income. Since it is my own money, I am extremely careful. My initial instinct is to build something on my own - I am good at this. But I want to do something different this time. I think it might be better to buy something that is already generating revenue.

What is the best way to invest $10-$20k? What would you do if you were in my situation?

Thanks for your help and advice.

[Clinton]

It's difficult. There's the school of thought that suggests buying cheap, sub $500 sites to get a feel for the market, and that makes sense for someone completely new to being a webmaster, but it has its flaws. You can't learn the ins and outs of due diligence on $20K sites by buying templates.

If you're looking to invest $20K, I would suggest partnering with someone you trust to do the due diligence for you. Bear in mind though that there's still no iron clad guarantee.

The opportunities to buy sites with "passive income" are far less than all those MMO and siteflipping "experts" would have you believe.

[Slowdive]

I would decide where my interests lay, passive income is a broad stroke.

Do you want to run a tech blog as a hobby that generates money? Do you want a site that resells an existing product or upsells a solution? Do you want to buy a proven lead generation site? So the questions continue. The other thing to take into account is that as a decent site may be valued between 12 to 14 months of revenue at $20k you are investing that money for a return of somewhere in 1 - 1.5k a month range. Which is nice pocket change, but you would want to make sure it was in a niche you felt comfortable to grow the site with a long running plan for maintaining and growing revenue.

In the current market I would be looking for something with an existing user base, be that proof of returning clientèle or a membership that keeps paying/returning, always good rules. Beyond that a few more points to consider are:
An ever green product is always good watch out for things that are trendy now and redundant next week.
Sites with under 30% of the traffic coming through the major search engines (However those can be hard to manage in themselves as their is likely some very creative marketing going on to bring that traffic)
A service, product or offering that has a high entry level either because of being unique, expensive to produce or specialized. Be cautious of sites off loading because they now have five competing, comparable sites syphoning business away.

There is so much more of course, in your position I would probably look for an interesting concept or under monetized traffic rich site in the 5k region and dabble a little. If I was going to spend 20K now I would start putting out feelers to brokers and pinning down websites I really liked and conduct mock DD on them to get a feel for the market in general. I would avoid flippa like the plague and be extremely patient.

[akirk]

I would agree with Clinton - the concept of passive income is widely encouraged and more rarely realised!
In reality - there is usually a need to work for the income

If the need to be passive is important I would look at splitting your money into two (your choice of balance) and:
- some into small sites to start your education on site ownership
- the majority invested into someone else's online business / a partnership with you - where you are able to put in the cash and they can put in time

Alasdair

[mikeb]

I think you should cut your teeth on something small probably in the $1000 range.

And think portfolio. "eggs in baskets" - I suggest you divide your "Pot" into at least four parts, firstly to diversify risk: even with best practise google can take a dislike to you in an inastant. Secondly because at least one of the "pots" needs to be a development fund to pay for improvement.

As regards what to buy:

Validating the commerciality of the niche. Is it a niche people buy stuff? And the source of traffic are the two key issues. More or less anything else on site can be fixed.

On traffic - avoid "ppc" driven sites which are too easy to copy. Best to buy are probably search traffic + list.

Don't take anything else at face value. Google analytics - each of the tools even can only tell you so much. Traffic can be faked to look like good search traffic. So for SEO traffic, don't just look at the traffic for example take a hard look at incoming link structures which are the roots that hold the tree up. And tools like keyword spy that can tell you about the competition. Look hard at competing sites too.

The best people to buy from are people who have hobby sites who have no internet marketing background. But they are rarely found on site sale sites.

Don't be in any rush and be aware that many of the courses on all aspects of internet marketing including site flipping and due diligence are in the main standard stuff which tells you enough to be dangerous, not enough to keep you safe

The idea of "partnership" is good, but the practicalities can make it painful, and I for one have never found a formula that really works.

[Clinton]

Hi mikeb, welcome to experienced-people.net

The best people to buy from are people who have hobby sites who have no internet marketing background. But they are rarely found on site sale sites.

Too true. I avoid internet marketers selling sites; these are most usually the sites that tank one month after you've paid your money!