🦅 Sales Multiples Set to Soar
Sales multiples going up, finding your ideal asset type, growing site revenue 50x, and much more below.
Welcome to Website Investing Weekly, bringing you up-to-date with what’s going on in the world of website investing and alternative related asset classes.
🆙 Multiples Going up…and Up
As Covid-19 started to impact the world, Richard made a prediction that website multiples would decrease.
This week, reports from several sources imply that the opposite is happening. As numerous buyers flock to invest in online businesses, the market is heating up.
And so are the multiples.
In Empire Flippers' latest podcast, they suggest that multiples of 40 - 45x will become more common heading into 2021.
This indicates that their aim is to attract high-value sellers. It makes sense; as the multiples increase, sellers are keener to list their businesses.
It could also be a simple supply and demand situation. If there are more buyers looking for quality sites than there are available websites, this will drive prices up.
Do Empire Flippers know something that other marketplaces don’t?
To find the answer, we reached out to a couple of experts. We asked the CEO of (arguably) the biggest website marketplace on the planet for his opinion. We also chatted with the CEO of a members-only marketplace that's growing fast.
Here's what Blake Hutchison (CEO of Flippa) had to say about sales multiples. (slightly edited)
We do see multiples moving up.
It obviously comes down to a number of factors but asset maturity has a lot to do with it.
But, multiples are most stretched when there's a quality site or online business that has yet to be fully realised. If buyers see a unique untapped opportunity they are obviously willing to pay more.
As for the actual numbers, the September quarter saw content businesses on Flippa sell for 3.33x (we talk annual), SaaS assets sold for an average 2.35x and eCommerce assets sold for 2.19x
Andrej Ilisin (CEO of Investors Club) had a slightly different take on the situation:
We're not really seeing a shortage of quality content sites.
Inflating the multiples may encourage sellers to list, but I seriously doubt that most buyers will get on board with that model (and pay 15%+ in success fees).
The website investing industry is growing and maturing - which is great. Sellers will go where the buyers are, and I think the majority of buyers are savvy enough to figure out that they don't have to overpay for an asset just because someone said that it could be done.
Let the market dictate the terms, not your wallet.
Given that the focus of this discussion is on buying for value, the question remains:
How do you find a quality site that's good value, and within your budget?
According to Empire Flippers, this will be more difficult if you're spending between mid 5 figures and 250K. In this range, you're competing with others who have cash on hand and where deals are happening faster.
At the other end of the scale, there are plenty of buyers in the 1M+ range.
Businesses in this bracket are targeted by small private equity groups and funds who are regularly purchasing sites valued at 2 - 3 million or more.
Apparently, the best opportunities right now lie in the 300k to 1M range.
These are the sites offering lower multiples, where there are less buyers, and where you get the best value. If you can't stretch to this price range as an individual, then you might consider partnering with someone else to make your ideal purchase.
Do you agree with Empire Flipper’s summation?
Take a listen to their additional comments on buying for value, and then let us know what you think.
✴️ Finding Your Investment Opportunity
Not all website investments are created equal.
There are numerous deals offered in a variety of business types. Your task is to figure out whether it's a content site, affiliate model, e-commerce store or something else that offers the best fit for your skills and goals.
We don't need to tell you that online businesses are a desirable investment. You might already have one or two that you're working on.
Empire Flippers' recent article states that there was a 179% increase in total sales, and, in 2019, a total sale value of over $50M for online businesses.
In his post, Max Lapit goes on to note the numerous benefits of online business ownership, but states that no high return investment is without increased risk. The objective is to find good investment opportunities at minimal risk.
His process to achieve that is based on reverse engineering your goals and performing a skill audit.
Understanding how to reverse engineer your desires and perform a skill audit are valuable tactics that will put you ahead of the majority of other investors, allowing you to not only acquire businesses quicker but even identify value in businesses no other buyer wants.
Reverse engineering identifies what type of asset you need to be purchasing and the skill audit highlights what you need to learn or outsource.
In addition, Max covers how to find highly-targeted investment opportunities within these 5 parameters:
Quick Return Investments - may be overlooked by many people
Hands-Off Lifestyle Investments - identify assets with stable earnings
High-Performance Assets - for investors with large amounts of capital
Leveraging Paid Ads - use an ads expert to optimize ads and boost profits
The Business is Too Time-Intensive - hire the right people and build systems for growth
We agree that matching your investment to your available resources, skill set and even your lifestyle allows you to spot opportunities that you may have missed in the past.
For an in-depth look at the methods mentioned, you'll find the original article here.
🦄 SEOs with Skin in the Game
Smash Digital - a growth agency, filled to the brim with unicorn images and SEO memes. A team of SEOs with actual skin in the game, ranking their own portfolio of profitable businesses, and offering the exact same services to clients. An agency with so much link juice you’ll need a mop and bucket to clean it all up.
⬆️ Domain Magnate Grows
What do you know about Domain Magnate?
If their name doesn't ring a bell, then here's a quick overview of their operation.
Domain Magnate was founded in 2008 by Michael Bereslavsky. He's an experienced web entrepreneur, having completed hundreds of deals with millions of dollars in value.
Domain Magnate describe themselves as a 'Micro Private Equity' firm that builds, buys, and sells established websites. What interests them most are established online businesses under $1M, mostly in Content and SaaS.
Their operation is international with a team of around 20 people located in Europe, Asia and the US.
If you're selling a business, they have a straightforward process that begins with a call. An experienced deal manager takes all your site details and conducts the due diligence.
They have set criteria for evaluation and if your business makes the cut, you receive a direct acquisition offer.
For those in a hurry, they offer an immediate cash purchase via an accelerated process. These deals are done in just 1-3 days.
When you're looking to buy an established online business, you'll require around $100k to get started. This not only buys your website, but also provides the resources of their team to operate and grow the business with you. When it's time to sell, you split the profits.
Domain Magnate are continuing to grow in their niche of the online business market. In fact, they're hiring.
The role is for a Communication Manager who can be based anywhere in the world.
Of course, there are a few prerequisites:
Native English speaker
3+ years experience in SEO or Online Marketing
Rich networking experience, sociable, enjoys connecting with people and keeps a large network of contacts.
If you know someone who fits the above description, then send them to this link for a detailed outline of the role.
Don't forget to mention that you heard about it here!
💵 Optimize and Monetize
Successful website investors often surprise us.
Stacy Caprio is one of those investors.
Desperate to leave her day job as a marketer specializing in paid search and ad campaigns, Stacy started acquiring and improving online businesses.
Although she made a few rookie mistakes, Stacy now owns a portfolio of sites that have typically returned her investment after 10 - 20 months.
In fact, one of her sites gave her a 379% return on investment in less than 2 years.
If you're a relatively new investor, we guarantee you'll learn a trick or two from Stacy.
🥬 E-A-T Your Way to Success
While most people shy away from the health and fitness niches due to their competitive nature, Matt is always up for a challenge.
About 2 years ago, he purchased two websites in these niches: one for around $4-6k and the other for about $40k. The businesses had little traffic and generated barely $1,000 in revenue between them.
Today, those sites are on track to earn $100,000 per month by the end of 2020.
In his interview with Spencer Haws over at Niche Pursuits, Matt discusses how he used E-A-T (expertise, authority & trust) to prove to Google that the sites could deliver valuable information in those niches.
Among his tactics were:
Building a "real" site. Too often affiliate sites are centered around pushing products and don't give the appearance of a trustworthy business.
Reaching out to influencers. Matt used a targeted approach to influencers in order to establish a face for the brand.
Sharing images in exchange for links. Creating custom images and uploading these to aggregators. Matt and his team followed up personally when others used their free image, kindly asking people to give them credit with a link.
Link building with reviews. Most people ask for reviews when an article is complete. Matt reached out before to ask about the features and highlights on the product. At that time, he would ask for a link back.
Pitching journalists for links. This started with a survey of moms and their fitness challenges during the Covid pandemic. Next, they put together a comprehensive study with infographics and quotes from experts. Matt optimized the page as an exclusive news story, and, with the help of a PR firm, this was featured on the top news sites.
Spencer digs deep with his questions and uncovers many tips and strategies that are working well right now.
Watch the interview - or read the transcript - here.
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That’s it for another week. Hit us up in the comments at the bottom of the web version.