Making Lowball Offers

[hooperman]

How do you feel about making a lowball offer to a seller who doesn't realise the value in their domain/site? What if you see some value that is readily apparent to anyone who's run an Adsense site, but they haven't even looked at their traffic stats?

I think I'm fortunate in that I don't have too much experience in valuing sites properly (other than putting a finger in the air) so I tend to estimate worth very conservatively. This is just so I don't end up wasting loads of money. I know I won't be able to play that card forever though.

I was thinking back to an abandoned domain that I bought in December. I had no stats to look at to help me value the domain. It was dead and there wasn't any content on it. All I did have was an image via the Wayback Machine of how the site used to look and a list of inbound links via Yahoo Site Explorer. Considering what the site now earns since I built it up, I got it for a snip at $500. But that $500 was a gamble for me because I had so little information to play with. If I knew then how the site would perform, my offer would have been much higher.

But the seller was happy with $500!

Would you be comfortable buying a site for much, much less than you thought it was worth because the seller isn't as savvy as you?

[meathead1234]

Yes, of course. Win some, you lose some. We've all had sour deals, so why not make the most of the good deals when they come around.

And if they are happy with $500 and they themselves don't see any value in it, both parties are getting a good deal. You're not ripping them off and their probably selling a site they'd just let drop otherwise.

[petertdavis]

What the site is making now is because of the value YOU added.

[TrustButVerify]

Considering how much "high-ballin" is going out there by sellers... it's almost our obligation to "low-ball".

[Michelle]

Would you be comfortable buying a site for much, much less than you thought it was worth because the seller isn't as savvy as you?

I've earned my savviness through study and experience, the seller hasn't, so I'd have no problem buying at a price lower than I thought it was worth.

[hooperman]

What the site is making now is because of the value YOU added.

That's right. I put a lot of work into updating the content (maybe 150 pages of new content), so in this case I think the price was fair.

I've earned my savviness through study and experience, the seller hasn't, so I'd have no problem buying at a price lower than I thought it was worth.

I agree. Hard work goes into getting to the point where you can look at a site and know whether it's a good investment and knowing what you can do with it.

Ultimately the seller is going to sell at a price they're comfortable with. If someone wanted to buy something from me, the first thing I would do is research what the going rate was, or at least get some general info on how I might gauge its value myself.

[Clinton]

Would you be comfortable buying a site for much, much less than you thought it was worth because the seller isn't as savvy as you?

No, I wouldn't.

How do you feel about making a lowball offer to a seller who doesn't realise the value in their domain/site?

From those two quotes I take it you meant offering the seller less than what he'd get in an auction.

If I believed (we never know this for sure) that his site would easily get $5,000 in open auction, I wouldn't be comfortable paying him just $500.

One doesn't come across the seller underpricing situation often, but as a result of all my articles and posts on website valuation, I do get people sometimes leaving it up to me to work out a fair price. That is the worst kind of situation. I don't play both valuer and buyer - that's a conflict of interest. But if I approached someone and he came up with a $500 figure for a site that's clearly worth a lot more, I still wouldn't proceed with the transaction.

[hooperman]

From those two quotes I take it you meant offering the seller less than what he'd get in an auction.

For every site you're interested in buying, there'll be a maximum price you'd be willing to pay. I suppose I was asking whether you'd be comfortable paying far less than that maximum.

If I believed (we never know this for sure) that his site would easily get $5,000 in open auction, I wouldn't be comfortable paying him just $500.

Would you aim for somewhere midway between those figures or offer the $5,000 you thought it might achieve in an auction?

Here's a quiz. I found this website recently. It doesn't look like much, does it? It looks like it was designed in the 90's, there's no PR on the homepage and it looks like a run of the mill web design shop (about/services/contact etc). How much would you offer the owner for this site?

I don't know why I even investigated this site further, but I did. It's got 3,700 inbound links from diverse sources, masses of dmoz entries and lots of .edu links too. Dmoz and .edu links for a web design company?? I had to know why this site had those kind of links so I looked further. It appears that there are portfolio pages (bogus?) on a variety of subjects that have attracted these links. My new best friend is SEMRush (not an affiliate link!), so I plugged the site into that and found that it ranks for some brilliant weight loss and dieting related terms, poker related terms(!), "chocolate chip cookies" and even "grapefruit"! If SEMRush is anything to go by, it's receiving high volumes of Google search traffic.

There don't appear to be any adverts on this site, or any other forms of monetisation.

So given the high earning potential of a site ranking highly for diet and poker related terms, and the owner's apparent monetisation naivete, now how much would you offer for this site? Only reason I ask is that I haven't a clue what the site could earn if you put something like Adsense (for example) on it. I imagine that the traffic estimates from SEMRush would be enough to get a decent number of clicks.

[kmander]

This is my preferred business model - I'm all about lowball offers. I think it's completely fair game, for the reasons mentioned above.

Not so such about the site you found though. I think your best option would be to pass this onto another web design firm with the view that they would 301 the juice to their own domain.

[Clinton]

Well, I wouldn't be interested in ascertaining the highest price he'd likely get in a well worded listing at Flippa or, even worse, a broker assisted sale at somewhere like websiteproperties.com. I'm not arguing that the seller should be paid the highest price he can get elsewhere (not least because we don't know what that price is).

With regards your example, I'd ask him to come up with a price. More typically we'd bandy figures about a bit and find a number to settle on. I'd be happy with multiples that similar sites sell for. As others have said here, the fact that I can make millions more out of it with my efforts and experience shouldn't affect the price paid. But neither should his naivety.

The "high earning potential" of the site is a big unknown. When using that potential to decide on a max bid you'll need to build in a discount for that potential based on the risk inherent in releasing that extra income.

hooperman, have you made an offer on that webterrace site then?