What was your background before you started operating in the website/online business space and how did you make the switch to being your own boss?
I worked for IBM as a Project Executive, operating 9-figure outsourcing deals for Fortune 100 companies. Then I took a totally opposite direction moving my family to a small central Asian country where we served students and families in a humanitarian role.
While overseas I started some small businesses that needed websites, so I got my feet wet in the internet world for the first time. Soon I discovered that websites were not just marketing channels for brick and mortar businesses but could actually be income-generating businesses in their own right.
Seven years later when we moved back to the United States I had started generating cash flow from my websites. I decided not to reenter the corporate world, and instead to grow my online portfolio primarily through buying websites.
What prompted you to make the jump?
When I bought my first successful website – Note: my first website purchase was NOT successful – I discovered I could make a couple of thousand dollars a month from a relatively simple online business.
I didn’t know exactly how to do it at the time, but I knew that if I could make $2K per month, I could probably grow that to $10K per month. That was the magic moment that convinced me it was possible to do this full time.
What does a typical day look like for an online business investor?
I think it is different for everyone but I start every day at Panera Bread which is a coffee shop/bakery about a mile from my home. I work from my laptop and sometimes I stay there all day, but usually, I hang out in the morning and work from my home office in the afternoon.
I don’t have an official office because I use freelancers to do all the day-to-day operational tasks. Although I’ve had websites using almost every business model, I tend to focus on content websites that are more passive.
Depending on the phase, there can be plenty of work to do, but it is almost never urgent. That gives me the flexibility to take days or even weeks off to do non-business projects. It also lets me meet with friends, family and other entrepreneurs any time during the day that they are available.
When did you first discover Flippa?
My Flippa profile says I made a purchase 9 years ago. I probably had an account before that.
What is your favourite monetization method?
I love non-transactional monetization because it doesn’t require customer service or personal selling. Display ads, lead generation and affiliate monetization methods fit these criteria.
I’ve done dropship, FBA, SaaS, eCommerce for digital products and straight services business. All have pros and cons.
What are the first three things you look for on a website?
I start with the fundamentals.
Traffic and income graphs should be flat or going up. If there are peaks and valleys, there should be good explanations for those. Age and consistency are important.
I look for inappropriate concentrations. Too much traffic from one source, too high a percentage of traffic landing on one page, too much traffic from the wrong geographies, an unusual mix of device types, concentrations of expense or revenue – all of these are potential negative signals.
There needs to be a well defined and understandable process for customer acquisition. If I don’t understand a repeatable process for getting traffic or customers, I back away.
Why do you buy websites?
I try to identify opportunities that have the potential to be held for the long term. Occasionally something will turn up that is riskier but has some strong upside potential. These deals have to come at a lower multiple to offset the risk. They typically either do well and lend themselves toward a flip, or don’t do well and hopefully at least pay for themselves before going to zero.
What are the steps you take to grow websites that you’ve recently purchased?
The quickest wins are usually in the financial realm. On the revenue side, adding entirely new monetization sources using existing traffic usually increases revenue by more than it cannibalizes. A classic example is adding display ads to a site that is monetized only with affiliate links.
You can also easily increase revenue by patching holes in the funnel. Adding upsells and downsells, optimizing conversion rates, making additional touch points to prospects and following up with existing customers can all yield revenue growth.
Another financial move is eliminating or reducing expenses. Business owners often spend money on non-critical functions or overspend on basics like webhosting or freelancer support.
Traffic improvements often take more time. Basic on-site SEO improvements can sometimes result in substantial traffic growth. Things like site speed, title optimization, heading optimization, and content updates make a difference.
How did you learn how to run and operate a website?
I learn from anywhere I can. The basics of WordPress and setting up a website were all self-taught. But I’ve taken many courses over the years to learn methods and systems. I’ve also hired coaches along the way and pay for membership in high-level mastermind groups. Spending money on mentoring and networking can help you focus and speed up success.
You’ve been focusing a lot more on teaching and coaching recently, even writing a few articles for us talking about website multiples and another discussing how to make one of your website investments passive. Do you still actively buy and sell websites or is most of your time spent helping others acquire and grow their own portfolios?
The vast majority of my time, energy and resources is spent on growing my own website portfolio. I negotiated the sale of two of my sites this morning. While I really enjoying teaching and coaching, my main focus is on growing the value of my website assets for an eventual exit.
You also have several courses and webinars over at FlipMinds. Can you tell us more about what Flipminds is?
Flipminds is a community of entrepreneurs that Sunil Jaiswal has developed over a period of more than 10 years. They are investors in property, traditional business and online businesses.
In the early days, most of the group were property investors. As online real estate became more compelling, I joined the Flipminds team to help train entrepreneurs on how to develop cash flowing assets in the world of web businesses.
Now we have an active member community, mentoring resources and training in topics like paths to Financial Freedom, Website Investing, Property Investing, Online Business and Content Website creation.
When it comes to making mistakes when buying websites, what’s one thing you wish you knew sooner?
It is natural to think that putting less capital at risk is safer than putting more capital at risk. That would be true if all businesses had the same intrinsic risk profile.
But the truth is that older, more established, higher quality online businesses are much safer investments than their less expensive but lower quality counterparts. So I would have avoided many mistakes simply by focusing on businesses with better fundamentals.
That is not to say that it is impossible to find good websites at lower price points. It is also not to say that all, or even most, larger online businesses are low risk. That isn’t true. Even very high-income sites can have attributes that make them bad bets. Websites generally have high ROIs and with those ROIs come risks that have to be accounted for and mitigated.
Compared to 5 years ago, is it easier or more difficult to find a deal when looking for a website? How does the future look for this?
It is more challenging to find underpriced deals today than it was 5 years ago. There are more buyers now and the buyer community is better educated and has more resources for making informed investment decisions.
Additionally, price levels are going up. Multiples are growing not only because more buyers are entering the market but also because website assets have attracted the interest of private equity groups, larger private investors and institutional investors.
Despite the fact that big-money investors have entered the fray, there will continue to be opportunities for buyers and sellers at every price point because there is a market for websites at every stage of size and maturity.
As technology evolves, online apps take on different forms, adapting to a variety of devices and platforms. This creates new business models, new niches and new ways to deliver online solutions that will continue to create opportunities for anyone willing to master a little corner of the market.
I am very optimistic about the marketplace for online business. Economies grow by increasing the productivity of their workforces and websites and internet technologies are key elements of that productivity growth.
If you want to learn more about buying an online business, you can sign up for Jeff’s free training course via Flippa here.