FP - End of the Road for Turnkey Website Sellers?

[Thomas]

http://flippa.com/blog/end-of-websit...-success-fees/

In my opinion, this is another big move by Flippa to eat into the margins of the turnkey sellers. Where before, you could dump the success fee on the buyer, you now have to pay it yourself.

If you're selling a site for $XXXX+ this usually isn't an issue, but for small/new sites around the $150 mark this is another 5% off your margins that will definitely add up.

This is a great move from the perspective of buyers, but is also good for those of us who sell sites in the $XX,XXX range as it will reduce the number of competitors who are squeezed out the market due to a narrowing profit margin.

Definitely another step in the right direction for Flippa and it's likely to bring more serious buyers and sellers onto Flippa as the quality of sites naturally increases (in proportion to turnkey sites).

[iFlip]

This is great!!!

I have long waited for the "Buy my site with huge potential for only $99.99" listings to finally disappear.

Flippa is definitely moving in the right direction with this kind of changes!

[BrettM]

Forgive the ignorance... what's considered a turnkey site, with respect to buying and selling websites? Thanks in advance!

[Thomas]

Forgive the ignorance... what's considered a turnkey site, with respect to buying and selling websites? Thanks in advance!

A site with no traffic AND no revenue

[BrettM]

Wow... completely different then what I know a "turnkey business" to mean. Turnkey to me is "turn the key and let it run" -- i.e., little to no work required to keep it going .

Thanks!

[GreyWolf]

Wow... completely different then what I know a "turnkey business" to mean. Turnkey to me is "turn the key and let it run" -- i.e., little to no work required to keep it going .

Thanks!

Well, even with "brick and mortar" businesses it's never really "little to no work required to keep it going."

More accurately a "turn key" business is one in which you can just "turn the key to unlock the front door and be open for business." In other words all the construction and painting is done, the racks and appliances are in place, and the store is stocked with merchandise. It never means that customers will actually be ready to walk in the door and start buying though. That still takes advertising which isn't included in the "turn key" price.

For a brick and mortar store that isn't usually as big a deal because there's an actual physical location that people can see. As long as you selected a good location such as a mall or busy street then customers will see the store and "stop on in". It's going to take a lot of work for the new owners to run the new business to make it successful, but they only needed to know how to run the business, not how to set up the store.


With a turn key website it's the same idea...
A new website in which all the start up things are already done. The domain is purchased, a hosting site is selected, the site graphics and content is all in place, any scripts needed are installed, all the onsite SEO is done, and if it involves selling products then all the inventory is loaded or advertising links in place. Everything needed to set up the website is done and it's ready to "turn the key and open the front door". On the internet though what that means is it's ready to start promoting.

Now the new owner will need to start generating traffic in order to run the business. That's the real work that the new owner needs to be prepared for. Many "turn key" websites even include a certain amount of traffic for the new website. Unfortunately for the new owner that's usually just "traffic package" type crap traffic that won't really convert.


So, whether it's a brick and mortar shop or an online website, a "turn key" business is never something that will have "little to no work required to keep it going." In either case the new owners need to be prepared to learn their business and work many hours to make it become successful.


edit -
Most turnkey sites, (especially the ones sold at places like ebay) never really amount to anything. The buyer is a new "i wanna make money online" buyer who has no idea what it will really take to get real traffic. They'll buy the site, pay the hosting for a few months while they try to figure out how to actually get any real traffic that can make them some money. A few will learn how to make it work and then most will just let the hosting expire and they'll abandon the domain.

Some of the better domains from the "turn key" sellers might get bought by real flippers, who will then do some real promotion for the site, get some real traffic to the site and then try flipping it. Those sites will go for little more money than the $30-$50 ones selling on ebay, but the eventual buyers will have more of a chance that they can make the site work. Even with the additional work done by the flipper though most of the buyers of those sites will still be new to online marketing and many will probably fail.

[BrettM]

Gotta change my definition of 'turnkey' now... . Thanks all.

[wptheme]

I came from Flippa via this post to this forum. so it should be appropriate for me to comment here first. I am not the kind of seller who create startup sites and sell it in 2,3 days but actually like to keep it and develop it as much as I can. When it reaches the establish mode then usually I will think whether to sell it or not. It seems like with the abundance of new websites (just using a script/ template), websites with serious potent and real revenues is washed down to quickly.
This is good news to the sellers and Flippa in general.

[J1218]

Personally, I think this is a stupid move on their part. I'm all for getting rid of all these startup site sellers that just pollute the market, but at the same time, this isn't fair to those of us who sell sites at higher amounts ($X,XXX - $XX,XXX).

Let's look at the math here. I'm going to use $5,000 as an example price that a site sold for.

Listing fee: $19
Feature fee: $40x2 = $80 (I almost always Feature twice if it's a site worth a higher amount).
5% Success fee: $250

So far, we're at $349 that we had to pay as a seller. But it doesn't stop there....

I know Paypal charges 2.9% of the transaction amount as their fee and that's if the buyer is in the same country as you are. If they are out of your country, the fee is higher and they charge for the currency conversion. But, just to make the numbers easy, we will go with the 2.9%. So 2.9% of $5k is $145. I forgot the exact % that Escrow charges, but I believe it's also somewhere around the 3% mark. So whether you use Paypal or Escrow, you will be looking at about $145-$150 in transaction fees.

Now we're at a total of about $500 that came out of our pockets. So instead of getting close to the $5k the site sold for, we only got roughly $4500. Sell a site for $10k? Now the numbers double and you lost a whole $1,000 in fees. I think it's BS.

Flippa says they want to "get rid of surprises for the buyers" but when you view an auction, it clearly states "The buyer is responsible for the 5% success fee" and I believe it also tells you again when you place a bid. There's no surprise there.

I think this hurts sellers with quality sites more than it hurts the people selling crappy turnkey sites that will never make a dime. If you sell a turnkey site for like $150, the 5% fee is only going to be $7.50. The $5k site example I used above has a $250 fee. Huge difference there.

This also hurts sellers more because most serious sellers list sites frequently so these fees really start to eat into their profit, whereas a buyer may buy a site occasionally and only have to worry about the buyer success fee once in a long while.

There are obviously going to be differing opinions on this, but I for one am kinda pissed about it and think it's a step in the wrong direction for Flippa. I wish they didn't have such a monopoly on the website selling market so we had other options. If one of my private buyers isn't interested, I have no choice but to list on Flippa if I want it to sell for a good amount.

[Bryan]

Flippa says they want to "get rid of surprises for the buyers" but when you view an auction, it clearly states "The buyer is responsible for the 5% success fee" and I believe it also tells you again when you place a bid. There's no surprise there.

I'm not going to dive into a debate of whether the change in ruling is beneficial to us or not (especially as in our case we almost always pay the $149 flat fee - did it before and keep doing it after the update), but wanted to comment on Flippa's possible motives behind this change.

Obviously, Flippa are keen to get rid of junk listings and this was probably one of their main reasons for the change in fee structure, however another aspect that might have played an important role with regards to this decision is that Flippa are probably having a hard time getting people to actually pay up their due fees, and as unfair as it may seem, there's far more one-time buyers (who don't care whether their account gets banned or not) than one-time sellers, meaning that sellers are far more likely to pay up their due fees than buyers.

Obviously, this is merely a speculation.