Few Farewell Questions

[lee]

This is my second (and probably last) post on EP. In my earlier post, my problem was sort of an "internal" one. I was trying to ensure that I was ready for this undertaking, in terms of identifying my interests and the like.

With your advice and guidance, I figured that I can surmount that hurdle, and that the best course of action is taking action and engaging in "on the job training", so to speak. However, when I delved deeper into Due Diligence details, I was flabbergasted.

Time and again, your posts painted a very bleak picture of the website buying business, particularly when Flippa is concerned. Clinton himself, the Administrator, pointed out in one of his posts that today, the chances of him getting scammed stand at 90% for websites in the < 1000 range, and 50% for those in the < 10,000. I've also read many horror stories of people who got ripped off mercilessly.

So, I decided to pack my bags and move away from this world. But before bidding farewell, I decided to ask few questions.

First, is there any hope for complete newbies? Being a newbie, I can't "swim" properly. In such a case, it's only intuitive to first master swimming in shallow water. But then they are so muddy and murky, and If I try and go beyond that, the sharks will annihilate me in no time!

Secondly, I've came to a conclusion that Flippa is, to a large extent, the epicenter of this mayhem (maybe they are wrongfully demonized by EP and others? I really don't know. Too much confusion). My question is, are there any alternatives to this "evil behemoth"? I know that one can conduct a Google search and contact website owners directly. I also know that it could be a pain in the neck to sift through all the SERPs. But will that reduce the risk of getting scammed and in turn reduce DD? Are these people less inclined to engage in scam or fraud? Are there any other downsides to this approach, apart from the forgoing ones?

Finally, I saw somewhere that one can use "option contract" to acquire a website rather than making a payment instantly. Could anyone please elaborate on Option Contracts in website buying/selling context?

Apologies for writing too much, and thanks in advance!

[Thomas]

1) Of course. We all had to start somewhere. I don't think you'll find anyone around here who hasn't learned the hard way with a few bad deals starting out.

2) It's not really Flippa, more the people who list there. Other marketplaces are just as bad. The safer bet is a broker, but even then, you're still responsible for due diligence.

3) I've never heard of an option contract when applied to buying a website. Not on a small scale (<$500k) anyway.

I would say don't give up, but it sounds like you already have. It's a tough business and certainly not for the faint hearted - but it can have some great rewards once you start making some good deals

[akirk]

There are also plenty of people on here who have never bought a website in their lives (e.g. me...) but who create and build websites - for others / for themselves / for income / for sale...

So plenty of other options in this world - and plenty to learn on here anyway...

Alasdair

[KenW3]

Well... Finally there's somebody here with a healthy sense of dread, whose feet are getting cold after getting a good ways up the mountain of a learning curve, willing to be apprehensive and shrink away from the legions of self-proclaimed experts professing easy roads to riches if you simply follow their formulae.

Lee, You actually have a significantly better chance of success after reaching the realisation detailed in your OP. Congratulations. Not everyone gets to the level of understanding you have arrived at You've been studying. Kudos! Accolades even

How many people text and drive? drink and drive? do not possess the same level of skill behind the wheel? Why do driver's education courses show horrific films to teens when teaching them to drive? Given that knowledge, how many of the kids wanting their first driver's license curl up and die of fear, never to face the certain death that awaits them behind the wheel?

[Clinton]

Hey, Lee, sad to know you're leaving.

2) It's not really Flippa, more the people who list there.

That's exactly what I thought when I read the OP. You can't blame the marketplace for the scammers who operate in it. But then, I think about the history and who encouraged all those scammers. I think about where the trail would lead if I followed the money. And I'm not so sure I agree with you. It's partly Flippa and partly the opportunists who jumped on the "Make Money Selling Websites" bandwagon.

As a broker I know that you screen listings before taking them on, something Flippa doesn't do. However, it would be wrong to conclude that these listings are safer bets because of that screening. A broker screening is done to assess the sell-ability of a site. It's done for the seller's benefit, not the buyer's. It's long been my opinion that buyers should place no value on the work / filtering / screening / DD that a broker has done as it wasn't done with a buyer's hat on.

Options contract: As meathead1234 says, this doesn't happen at the lower end of the market. We've discussed it in other threads. The terms you want to search for are "seller's note", "seller financing" etc.

I also know that it could be a pain in the neck to sift through all the SERPs. But will that reduce the risk of getting scammed and in turn reduce DD? Are these people less inclined to engage in scam or fraud?

Yes, they are less likely to scam you. The biggest scammers are the ones who know the system well, the "career" site sellers (though there are some good eggs in that basket).

First, is there any hope for complete newbies? Being a newbie, I can't "swim" properly. In such a case, it's only intuitive to first master swimming in shallow water. But then they are so muddy and murky, and If I try and go beyond that, the sharks will annihilate me in no time!

You have three options if you want to swim in this water.

1. Come up with an idea, start a site and work on building it and making it profitable. Lots of people have done it and I bet some of them are not as smart as you.
2. Find the capital to buy a large, established website business where the figures justify hiring the lawyers/accountants and DD experts to help you
3. Start small and buy sub $10,000 sites and build a portfolio or develop those sites

Your biggest risk is with #3 because you rely entirely on your own expertise, an area where you've identified weaknesses. #2 is not an option open to many (and is not without capital risk). #1 is still definitely worth pursuing!

[crabfoot]

If you want an analogy, I've bought some really bad second-hand cars in my time, but I've learned from those experiences and got some really good deals in later life.
I've also accumulated some knowledge that allows me to write articles related to the subject.

The point of buying a revenue-generating website is that it is easier to buy one than to make one. Having said that, it is also easy to wreck a money making site when your intention was to improve its revenue. Buying anything second-hand has risks attached, but the idea behind E-P is to reduce those risks.

The princess had to kiss more than one frog to find her prince. If she had refused to kiss a frog, she would still be a spinster - and you might get lucky with the first frog you kiss. Anyhow, frogs don't have bad diseases, mostly ...

[Saul]

Nothing that is worth pursuing is easy... I don't know any kind of venture online or off that would not come with its risks. So yes, this business also has its risks you need to deal with but it's also why it is rewarding in the end. The point is not in looking for cushions but embracing it and learning the skill to eventually succeed and reap the rewards.

[David S]

Although due diligence is very important, I find that a very significant factor is the character of the seller. In a bricks and mortar business, you typically know or at least can learn of the reputation of the seller. In significant transactions involving the purchase or sale of an internet based business, the same thing is true. You may misjudge the character or be duped, but at least you have a chance to evaluate not only the deal but the party you are dealing with.

One of the more significant drawbacks to smaller online deals is that you never really know the seller. Even you have a name and not just a Flippa username and email, how do you know its a real name? And even if you have a real name, how do you know you can trust the other party? It can be done, but those things take time, and on a small deal, it is often hard to justify the time required.

Contacting website owners directly will often (not always) make evaluating the character of the seller simpler. In many cases, the identity of the owner of a going website is known to his or her users and you can tell from the website itself what they think of the seller. Too, if the website is not listed for sale, the give-and-take of even getting the seller to consider selling will teach you things about the seller's character. Finally, the owner of a website that is not on the market may not have the short time frame that often makes due diligence in an auction a quick and more superficial review.

[dsieg58]

I'd also say Flippa is good for one other thing. That is, to buy a cheap website and get a feel for this business. Before jumping in with big bucks. Spend $25-$50. Deal with contacting the seller, asking questions, etc. Do due diligence if for no other reason than the practice itself. (Or better choose a website you LIKE TO BUY, meaning an expensive one, and do due diligence on it) Take part in the domain name and file transfer systems and uploading them to your site and getting them going. Set up adsense and Google analytics. That is CHEAP education! If it was a college course, you would pay thousands. Of course, don't expect to make millions off of any of the sites. In fact, don't expect to make any. But the "on the job" education alone is worth the price of a cheap website. If you get taken, you didn't get taken for much and once again, the price was well worth the education of "what to watch out for" and a "scam seller looks like this". The point is, accept the fact that you're in a learning curve and embrace the potential of that learning curve without risking a lot of money.

But if you're looking for a short cut to buying websites...this isn't it, and I don't know of one.

[David S]

In fact, most of the sites I have bought were for exactly the reason dsieg58 outlined. They were very inexpensive and had a feature or aspect I wanted to learn more about, so I basically bought them "to look under the hood." I don't really expect to make money on most of them but keep them around to try things that I would not want to risk trying on my one good site.