As a buyer, how do I transfer payment and be sure that I’m protected?
Flippa is not a broker. It is a marketplace.
Flippa is a peer to peer environment where you can look for listings, decide what you want, negotiate, and finally, safely transact. It’s this safe transaction space that is extremely important to us and something that we’re continually inspecting and improving so that you can have the safest and smoothest experience possible.
Once you’ve won an auction or had your offer accepted by a seller, you’ll find yourself in the Sales Completion Area as seen in the image below.
One of the most helpful aspects of this page are the document templates on the bottom right column. These are downloadable agreements that you can update with your own information and any specific complexities that might be involved with this purchase. While this might be absolutely unnecessary for smaller purchases, as you begin to look at larger and larger deals, you may want to have very particular terms that need to be stated and agreed upon. Be it the “Letter of Offer” or the “Sales Agreement” they are both methods of communicating and contracting so that each party fully understands what they are responsible for through the transaction.
When creating an agreement, one of the most important aspects is to list out everything that is expected to be included with the sale. This can be source code, domains, inventory, supplier agreements, virtual assistants, trademarks, and really anything that you believe should be a part of the sale.
It’s important to maintain a steady line of communication throughout the sales process to ensure that everything goes smoothly.
Communication doesn’t end when the bid is accepted. This area is where you might discuss when the payment will come through and how the assets will be delivered. You can also ask the seller for a few weeks of help as you transition the business. Gain as much insight as you can so that you can, if nothing else, keep the business running at status quo as you begin to learn the ins and outs of the operations.
Payment through Escrow.com
This is the safest and most secure way to transfer assets purchased via Flippa. While there are options to use Paypal for lower valued assets, our integration with Escrow.com has been integral in creating an environment of secure, safe transactions for both the buyer and the seller.
The process takes a bit longer than you might be used to with something as instantaneous as Paypal, but the Escrow.com platform is designed specifically for these sorts of transactions – guaranteeing that funds are available to the seller and that the assets have been received by the buyer before the transaction completes. You can feel absolutely safe with Escrow.com and their processes are completely transparent, sending you updates as the process moves along.
Questions & Answers:
We took a few questions from the audience during our live webinar. Here they are.
1. If I’m not very tech savvy, what key metrics should I be looking for on Google Analytics?
Organic traffic. This is like gold as it is free traffic coming through search engines. It can’t be faked or cheated and means that there is valuable content built into the site that is bringing customers when they are searching for relevant keywords.
Direct traffic is intriguing as well as it can mean that you’ve built a strong brand that people are driven to without even the need for search. This can also imply loyalty.
Social and referral traffic can be a bit confusing as you don’t know if it is paid for or really how the traffic is flowing between social and the website.
Most importantly, don’t be afraid to ask the seller for a bit of training during the hand-off period. Most sellers are happy to help you out, show you what they’ve been doing to drive traffic, and be sure that their company is in safe hands as it transfers ownership.
2. Should I be paying based on a profit multiple or revenue multiple?
Well, there isn’t an exact answer to this as it all depends on the business, but typically we’d suggest that you go off of net profit. This is because revenue can be extremely inflated compared to the profit. It’s quite common for businesses to spend quite a bit of their revenue on marketing or in an eCommerce business, much of that revenue might actually be going towards the cost of goods sold (COGS).
To understand this: a company that sells 100 items at $10 each is creating $1,000 in revenue, but if each of those items costs $9 for them to purchase at wholesale, they are only profiting $100. You don’t want to be paying on a revenue multiple in this case as it would take ages to recoup your investment.
3. How do you catch small instances of fraud in the numbers?
How do you know what to look for if someone is trying to fake numbers, buy traffic, etc? The easiest thing to look for is anomalies. If there are spikes that make no sense, this might be purchased traffic that isn’t sustainable. This certainly isn’t “fraud”, but it is something to look out for as it might not make sense for the new owner to continue running ad spend at that level for continued growth.
4. How many websites does a typical buyer own?
In our studies, we see that the average buyer has 3+ websites, but these numbers skew drastically from entrepreneurs who own a single asset to customers who own 50 or more. The exciting thing about online businesses is that you don’t need to be a millionaire to get started. If you own a single site and it’s doing well enough to satisfy your itch, then that’s great! If you have a goal of eventually running an entire conglomerate of digital enterprises, good on you! There is no right or wrong way to get involved.
5. Can you get your money back if the agreement doesn’t go through for whatever reason?
Yes. The great part of Escrow.com is that your money is held in their digital “wallet”, protected by Escrow.com while the transfer is taking place and if anything doesn’t feel right to you, you can notify Escrow.com and cancel the transaction and have your money returned.
6. What other resources are out there to learn about this space?
There are loads of tutorials and user insights available via our blog and Youtube. The one thing we’d say is that it’s not a rush. If you don’t feel comfortable, take your time. Browse our site as much as you can and start to understand the nuances of each listing. You’ll be amazed how quickly you start to see opportunities once you get used to looking at Google Analytics, finances, and the seller’s notes. Each listing tells a story, but as a new user that story can feel a bit like it’s in a foreign language. However, just like with a foreign language, if you drop yourself into the environment and immerse yourself with people who are speaking similarly, you’ll pick it up quite fast.
7. Thoughts on negotiating a lower price?
Everything on Flippa is open to negotiation. Do your due diligence, comb through the financials and the traffic, and approach the seller in a friendly manner with notes on why you believe that your valuation makes sense. Sometimes you can leverage other similar listings as examples of an over-valuation.
8. Will there be a replay of the webinar?
You’re looking at it!