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Flipping Businesses - Where, Why, and When
Everyone is always talking about how they're going to buy and sell websites, even domains, and no one ever talks about how they can flip a digital business online. Think about it, you're buying a website on flippa or from a broker in hopes to make more money with it, but did you ever stop and realize you can boost it just to sell it at a higher price tag? Where to find these businesses?
Many people see website buying as a way to build up their income streams buy getting the websites more successful than they already are. Not many people think of purchasing online businesses, making them more successful, then flipping them for a 2x or 3x profit lol.
In this discussion, I'll be going over some ways to target a digital business that has a high potential for you to flip.
It's not too difficult to find websites for sale right now because there are plenty of brokers and marketplaces out there that are letting people list or submit their sites for approval. Some of the businesses I'm about to list only accept more prominent websites into their portfolio because they're a brokerage firm while others are marketplaces that allow anyone to list, for a price of course.
You've probably heard of them since they're on most digital marketing forums. You'll see someone ask "Where can I sell my website?" and the answer is usually "Try listing it on Flippa!" because they deal with a lot of low-income websites that swap hands frequently.
The problem with flippa is that you don't have to verify anything when listing. Sure, you can add some screenshots of your analytics, but who can't fake those reports? I've heard that a lot of people will buy these fantastic websites to only have the traffic drop immediately and this is due to the seller inflating their numbers to look better and slap a heftier price tag on their site.
This brokerage firm is owned by a friend of mine, Thomas Smale, and they focus more on websites that are full-fledged businesses. If your website is making $5 a month, then I wouldn't expect to make it on their website anytime soon. The lowest net profit site they have listed right now is making just under $10,000 a year, which isn't a crazy amount, but these are some of the ones you'll want to target when flipping businesses
Quiet Light Brokerage
This company focuses on larger businesses that are more established, just like FEinternational does, but you can also find some little gems hidden away in there that can be purchased and flipped for a profit. I won't go into much detail since they do pretty much the same as FE, but Quiet Light is a site you should check out if you have the bankroll to flip higher dollar sites.
What you should look for
Ok, now that you know where to look for you'll need to know what to look for!
Established websites with a high-profit margin tend to ask for 3x their annual net profits. This means if a website is making $1,000,000 a year but only netting $700,000 after payroll, expenses, taxes, etc. you'll pay around $2,100,000 for it.
It would be 700,000 x 3 = 2,100,000
This is pretty normal since you're getting a website that will make you six figures right away, you'll have to wait a few years before you're profitable. Now, you can find some little gems that will take a one or two years multiple, which is what you want to target, and this is because you'll get businesses that are generating a higher percentage of net income compared to the more substantial listings.
Think about it, would you instead buy something that was generating $100,000 a year and netting you 50k for $150,000 or would you choose to purchase a website making $50,000 and netting 40k a year? The 40k net website is a better option because it will be cheaper, there's a lower investment cost, and you will be able to flip it for more when you build it up lol.
You will have to do your due diligence and research to make sure nothing funny is going on, and there is room to grow your newly acquired business and website over the next 6+ months. If you're throwing money around and hoping to profit, you're going to be broke and mad sooner than you could imagine lol.
In the end,
You need to be smart about your purchase and never think of what you could do with all the cash flow after purchasing the business. You need to think "Ok if I invest $50,000 and flip it for $100,000 in 6 months I will turn a 50k profit". You can't think of what you'll do with all the money you're making because you'll start buying cars, going on trips, and spending it on pointless things when you could have been using it to build up the business even more and flipping it at a higher price like I've been talking about in this entire discussion lol.
Thanks for reading
- Tommy Carey