At Onfolio, I often get asked how much room larger sites have to grow. I’m a bit of an evangelist for buying larger sites with more stability, greater track records, and more cashflow to play with.
As such, growth isn’t always the most important thing for me. At least not when considering the size of the website that I’m looking to acquire.
But for those who want to buy a site, grow it, and sell it for a large profit later on, where should you be focusing your efforts?
Assuming you have a large budget, should you spend it all on one site, or is it a better investment to consider multiple smaller sites?
Taking diversification out of the equation for a minute, let’s discuss the opportunities that each asset size typically has for a big flip.
DO smaller websites have more room to grow?
Well, yes. In general they do, but there are other things you need to consider besides size and upside. It’s important to understand how achievable that growth is, along with what risk might be present.
In fact I’d put those factors above growth potential on the hierarchy.
The enemy of website investing, is not failure to grow a website. Instead, it’s buying a website and watching its profitability erode over time (sometimes a very short time).
Naturally then, you can understand why I said earlier that I don’t always focus on growth. Does that mean I don’t want to grow sites at all? Of course not, I love growing sites, I do it for a living.
It just means that website investing is a game you usually win by not losing. In fact, that applies to most investing.
But let’s get to the topic at hand.
What do you think is easier, buying a $50k website and turning it into a $100k one, or buying a $500k website and turning it into a $1MM one? In both cases, all you’ve done is doubled the website’s income, but one is obviously easier to achieve than the other. Now apply that to a $5k website, and doubling your money seems even easier still.
Last year, we bought a website with one of our “buy and run” clients, and by changing up a couple of monetization methods, were able to increase its profit by 75% almost instantly. You can’t do that with a larger site, because many of those quick-wins have been done already.
It’s not a pure percentage comparison though. You take a $50k website and achieve 100% growth, and you’ve only added $50k to its valuation, or about $1,500 monthly profit.
Achieve just 10% growth with a $500k website, and you’ve got the same numbers. That in itself makes things interesting.
Let’s ask the same question again; do you think it’s easier to add 100% to a $50k website, or 10% to a $500k website?
It’s not as easy to answer this one, and that’s because it depends very much on the website itself. Maybe a $500k website has buckets of traffic and no display ads, so there are quick wins to be had still. Maybe a $50k website just ranks well for 1 keyword, but has no chance of improving its traffic due to a competitive niche. I see websites like this for sale all the time.
Equally, a $50k website is only giving you $1,500 per month in cashflow, which means you have to deploy more of your own capital to grow it. A $500k website pays for its own growth.
You should also consider what you’re trying to achieve and what your budget is. If you have $500,000 to invest, then it might be easier on paper to buy 10x $50k sites and double each of them than it is to double just 1 $500,000 site.
The problem is that owning 10 sites and trying to operate them is not only going to result in less focus, but more expenses. A $500,000 site is definitely not 10x the work to run than 10 $50k sites.
What Leads To Growth
Rather than just relying on an arbitrary factor like asset size, you should look at what things actually contribute to the growth of a website. These are things like, ability to add on an additional traffic stream, additional monetization method, or performing some simple conversion rate optimization wins.
Maybe there’s no email list, or there are a bunch of pages that get traffic but aren’t monetized. These kinds of opportunities exist at all sizes, although naturally you’ll find more money left on the table at lower levels.
I’ve operated a lot of websites in my time, and based on experiences, I would say that yes, smaller sites have more upside. As mentioned above though, I don’t think that is the sole thing you need to consider.
Smaller sites can also come with more negatives too. I’ve seen plenty of small sites that are more susceptible to Google updates, have fewer levers to pull in general (they generally don’t have good email lists or multiple monetization methods), and less cash flow to reinvest on growth.
If you have plenty of additional funds to spend on growing a site, then the sweet spot could be the $30-100k range, and then spend an additional $20-50k on content, link building, and opening up new monetization methods (which is beyond the scope of this article).
Another strategy though, could be to buy a larger site, and then reinvest the cashflow into buying a second site and a third site. This takes longer of course, but is less dependent on your ability to grow a site.
Final Thoughts – And A Bonus
To summarize, while it’s naturally going to be easier to double the revenues of a smaller site, the overall gains that you could achieve are similar at different price points, and if you want to create a large sum, adding 10% to an already large site may be easier than adding 200% to multiple smaller sites. It’s not a zero-sum game.
You also need to be aware that there are other considerations, such as operational capacity, risk, and overall stability of the assets.
As a final parting gift to you for reading this post, I wanted to extend an offer of this free Upside Checklist. Download it and use it to evaluate the potential growth of any website you’re evaluating, so that you can focus more on the finer details rather than using purchase price as the sole consideration.