Buying a Website for the Right Price

If you’ve decided that buying a website is a good approach for you to take to either start earning money on the Internet or to grow your Internet business you’ll want to take steps to ensure that you’re buying a site at a good price. What’s a good price is hard to determine and actually varies widely from one buyer to the next. Most valuations that a seller will quote are nearly useless (automated valuations are completely useless) and rules of thumb like 12 months earnings are also of limited use.

Evaluate Current and Future Income

The first step toward determining a good price for a website you’re looking to purchase is to carefully evaluate it’s current and future earnings. The common pitfall here is looking at gross revenues (before expenses) vs net earnings (after expenses). It’s important to look at what the current site owner is spending on advertising, hosting and any other expenses. If a site earns $1,000 a month but spends $500 a month on advertising and $200 a month on hosting it’s worth a lot less than a site that makes the same but spends nothing but $10 a month on hosting. You should also look carefully at how the expenses may change - if you have an existing server with excess capacity you might be able to eliminate the hosting expense. More importantly look at how the income may change. Perhaps you have existing relationships with advertisers in the niche that you can leverage. One of the best ways to purchase a site for a great site is to purchase a site that’s worth more to you (because it will cost less and earn more) than the site is worth to others.

Market Determines Price

photo credit: Petrick2005Valuations for a website are worthless because the real value of a site (or any business) is what some purchaser is willing to pay for it. In commodity investments (stocks for example) the market is very efficient because there is a lot of supply and demand and a centralized marketplace. In purchasing a site the market will very often come to an improper valuation of a site. It may be because a sale draws a lot of attention and in the excitement the purchase price is bid up. It could also be that a site goes unnoticed or people fail to anticipate the potential of a site and so it sells for less than it would in an efficient market. You can take advantage of these inefficiencies to get a good price for the site you want. Sometimes a lesser traveled forum will draw less traffic and less competitive bidding for a site. Look for times of the year (Christmas season or summer vacation season) when there are fewer buyers and the sales aren’t getting as much bidding.

A particularly good way to get a great price on a site is to approach the owner of a site before they know they want to sell it. If you find a site that looks like a good starting point for you but it doesn’t appear to have a lot of recent development the owner is often going to be willing to sell a site they’ve neglected for some short term gain. Without the competitive bidding you can often purchase these kinds of sites for less than a similar site listed in a popular marketplace.

Build vs Buy Costs

photo credit: billjacobus1It’s probably counterintuitive but another great way to buy a site at a great price is to avoid buying it and build it instead. If you’ve decided to purchase a site in the first place it’s likely because you’re unable to build the site yourself but you may come across a great site idea that’s not getting a lot of traffic. Rather than buy the existing site, check to see how much it would cost to have freelancers build a similar site for you. If you can have it built for less than it would cost to purchase the existing site you’ll have some extra dollars saved that you can apply to promotion.

The Deal is Out There

Buying a site can be a great way to start or expand an Internet business. It’s important though that you do that work that it takes to ensure that you’re getting a great price. Don’t be disappointed if a site you’re interested in gets bid out of your price range. If you do the work you can find the site that’s selling from a great price for your situation.