Daniel Scocco here, and this is the Daily Blog Tips newsletter.
Today I want to talk about buying websites, and why it's a really
good time to do it.
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If you browse around the web you'll mostly find people talking
about selling websites, and about how profitable it can be. While
that is true, the opposite is also true. That is, buying websites
can be quite profitable too, and here is why: valuations of
websites are still small when comparred to offline investments.
Let's illustrate this point with some examples. If you buy real
estate (e.g., a house or an apartment) as investment, you'll
probably be able to rent it for 1% of the price you paid for it
(the percentage will be higher in some regions and smaller in
others, but 1% is a good ballpark number). This means that a
$200,000 apartment would produce a return of $2,000 monthly, and it
also means you would need 8.3 years to recover your investment.
If you buy a small business, similarly, you should expect to have a
return of 20% yearly or so. This means that a $200,000 business
will produce around $40,000 in annual profits, or $3,300 monthly.
In this case the pay back period is 5 years.
What about buying a website? Most website owners are willing to let
their babies go for 1 or 2 times their annual revenues. For
instance, you could probably buy a website that makes $2,000
monthly anywhere from $24,000 up to $48,000. For the sake of
simplicity let's use the middle point and assume you could buy it
for $36,000. This means that your annual return would be 66%
(compared to 12% on real estate and 20% with a small business).
Additionally your pay back period would be 1 year and a half,
compared to 8.3 years with real estate and 5 years with a small
business.
Sounds like a good investment to you? You bet it is.
Now don't get the wrong idea. While buying websites can be quite
profitable, you'll get burned if you don't have experience in this
market and if you are not willing to do your home work (i.e., spend
enough time shopping around, veryfind all the stats before buying
and so on).
The strategy I recommend is to start small, and then build your way
up. For example, you could start buying a small site that makes
$100 monthly (paying around $2,000 for it), and then once you learn
the ropes you consider larger deals.
Good luck,
Daniel Scocco
http://www.dailyblogtips.com
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2972 Columbia St. Suite # 8161 - Torrance, CA 90503 - US
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