Buying WebsitesWhen my wife goes to our kids’ activities she often works on our e-commerce business from her laptop tethered to her mobile phone. Invariably, someone will ask what she’s working on. She used to say that she “works online” but that almost always led to a very long conversation.  

It seems like everyone would love to have the ability to ditch their office job while attending their kids’ activities and still earn a living.  Go figure!

Today she will just reply that she’s “working on a project.”  But sometimes she will tell them, “My husband buys websites and I work on them.”  This leads to her fiendishly planned response: “You’ll have to ask him and here’s his number.”

More times than I care to count I have told the story about looking at hundreds of sites before taking the plunge to buy our first website. With one broker alone I had made and retracted over 50 deposits. I scoured Flippa daily. I was on the list of every website broker and read every prospectus from them.

For sure I learned a lot. I did conference calls with sellers and brokers and learned the lingo. I prepared by listing as many questions as I could think of and I spent hours looking at the site I was interested in. I also really learned who their competitors are.

Yet I always found an excuse not to act.  

Obviously there is no rush to act and you can look forever. Only you know when the time is right for you and when you are mentally prepared. The problem comes when you hear that little voice in your head tell you that you should act, but you can’t seem to pull the trigger.

You’re prepared to lose all your money on the investment.

First, I decided I was prepared to lose all of my money on the investment.  I could handle losing the roughly $20,000 this site cost. Heck, I was even told there were other buyers bidding, a great lie that works like a charm. But the site was being offered by a reputable broker and was 8 years old, so I didn’t really think it would be the case that I’d lose all my money.  

But I wrote down on a piece of paper all the negative outcomes from an investment. This physical act of staring at some pretty lame excuses worked pretty well and very quickly.  I committed to moving forward after only a few days of mental debating.  

Coming from the corporate world worked against me in this regard. From my early school days I was always rewarded for “not failing.”  Corporations reinforce this.  I was 57 and spent my life building businesses inside companies for my employers.  

The ultimate shame for me is I’m a professional investor in the stock market. I’ve made 7 figure bets on stocks many times. I’ve lost big money on both public and private market investments before, but they were more in my wheelhouse as I was never the operator.

You know this website is different from the rest.

Second, I had seen enough sites to know this particular site was unique.  Looking at a few hundred sites and having had several calls with brokers and sellers bolstered my confidence. Coming up this learning curve had consumed hundreds of hours of my time and I’m a trained investment professional who is very facile at reading prospectuses.  

The site was in a relatively safe niche of items for babies. It was 8 years old and had great organic sales. While it was quite reliant on one brand, I was only paying 22 times monthly net income. My entire investment should be recouped in under 2 years.  

Suppliers don’t usually care who the owner is and I had no reason to suspect any of the suppliers would in this case. In any event, I was indemnified if I did not get approved by the suppliers.  Alternatively, I thought about the potential for other brands I saw on competitors’ sites.  There was definitely opportunity.

My conclusion was that I would not get rich on this site, but I could learn a lot and finally get in the game. This was my “college tuition” opportunity.

You have a strategy to handle the business functions.

Third, I had built a strategy to handle the five necessary business functions. This took preparation and forethought but could mostly be done before I made my move.

I have always believed that in business you need to start with the end state firmly in mind. Life will throw you curve balls, but you must be able to handle the known business functions before you make a move.

The operations and the general customer service my wife and I could handle ourselves at first (to learn the business). The legal aspects of our corporate account structure were in place and so were our bank accounts and credit cards, the critical financial component. 

The final piece was sales, widely believed to be the most important function when starting a new business. When buying an established website it’s a bit less critical at the outset. But you need a solid plan longer term.

During the transition, the seller will introduce you to the necessary supplier relationships. You will have a lot of basic questions the seller should prepare you for. You should always have a commitment from the seller for this transition. My experience has been quite good in my many transactions, but it’s a real red flag if the seller does not know the suppliers well or is not cooperative.

The second piece of the sales equation is answering customer information inquiries. Suppliers are invaluable sources of information, as is the internet. I will also admit to leaning heavily on competitors’ sites. Most inquiries can be handled quickly using these three sources.

Internet sales success today is differentiated by great information that is delivered quickly and accurately, followed up by problem solving customer service.  Solve for this and you’ll win repeat business and happy customers to whom you can charge a full price.

Final Thoughts

Working up the courage to commit to buying our first established website took preparation, but not extraordinary courage. I could become familiar with the moving parts of a business model totally unknown to me after about only a year when I was 57 years old.  

Looking back, I was far too conservative before I made a move. But that’s ok.

I was fortunate to have time to commit and a background in investments, but not in this operating business model.  While there is not a major, investable asset class I don’t know well from my day job, operating a business is a derivative of this that was not part of my initial skillset.

I was horribly disadvantaged because information for buyers was so poorly organized. While this is getting better and more content is continually being pumped out, buyers’ groups are poorly organized.  

For example, websites are more frequently grouped by price than monetization method. This makes no sense at all, but in a nascent asset class these are the types of anomalies that create opportunity.

Our community is built around physical products ecommerce—buying, operating, and scaling businesses. Selling is a natural part of the “buying” conversation too.

My mantra is, “You’re just a deal away.” This could mean quitting a job or creating a new lifestyle. The point is the inherent leverage in today’s technology allows for enormous potential returns. In fact, I’d argue the skew is asymmetric and enormously in favor of buyers/investors.

All you need to work up the courage to buy your first site is immerse yourself in the right community and make necessary preparations.  

The very good news is that the secret of website investing isn’t out yet.  Most people my wife refers to me never follow up. Like anything in life, you only prosper if you risk taking action and work hard to solve the inevitable problems that will arise.

We liked owning and operating this site so much we bought another one just a month later. We now own several sites and have a real business that will support our dreams. The same can be true for you.

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