EFP 27: How To Use Website Brokers To Buy And Sell Websites
Being website brokers in the buying and selling website space, we’ve got tons of connections and relationships with others doing the same. In episode 27, we had the pleasure of interviewing Thomas Smale from Flipping Enterprises, the #1 website broker on Flippa in 2011. In only a few years, he’s been able to climb through the ranks and make connections with buyers and sellers that has put his brokerage on top.
Using Web Brokers to Your Advantage
Thomas got his start just a few years ago, buying, improving, and then selling small sites for a profit. We had three main topics we wanted to discuss with him:
- The building, buying, and selling of websites
- The business of website brokers
- His experiences running Flipping Enterprises
Thomas did not disappoint and gave us some juicy info about his business. Check out the interview here:
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Topics Discussed This Week Include:
- Our upcoming trips to Manila, Puerto Galera, and Bangkok
- Swapping all of our niche site hosting from GoDaddy to HostGator Profiling
- High-end buyers/sellers of websites and best practices when considering a sale
- Site valuations, buyer/seller value, and fiduciary responsibilities for website brokers
- How to become a broker, find a partner, and scale your website brokering business
- A quick tip on how to put a valuation on your site
- Flipping Enterprises – Contact Thomas here if you’re looking to sell a higher-end site or group of sites.
- Social Media Day Davao – A great opportunity for us to reach out to some local bloggers and help them use social media (the RIGHT way!) to drive traffic to their sites.
- FlipFilter Website Valuation Tool – This online tool allows you to value your site with metrics including domain age, traffic, pagerank, etc.
- Pocket – Allows you to quickly snip and save sites for later, offline reading.
Now…over to you! Have you had good/bad experiences with website brokers? What do you think about that side of the business in general? Let us know in the comments below or feel free to say hi on Twitter! Or…you can leave us a message below and have a chance to be featured in the next podcast!
Narrator: Welcome to the AdSense Flippers Podcast. Are you sick and tired of gurus who have plenty of ideas but are short on substance? Worried that ebook you bought for $17.95 won’t bring you the personal and financial freedom you long for? Hey, you’re not alone. Join thousands of others in their pursuit of niche profits without the bullshit. Straight from your hosts, Justin and Joe of AdSense Flippers.
Justin Cooke: Welcome to episode 27 of the AdSense Flippers Podcast. I’m your host, Justin Cooke. I’m here with my business partner extraordinaire, Joe Magnotti. What’s up, buddy?
Joe Magnotti: Hey everybody!
Justin Cooke: We’ve got a fantastic episode lined up for you this week. We’re interviewing Thomas Smale from flippingenterprises.com. He’s a very high level broker so he buys and sells websites and connects buyers and sellers. He’s did a great interview with us, we went over how to build sites, how to become a broker. We went over some of the specifics about his business, we got some really good meaty details from [inaudible 00:00:57].
Joe Magnotti: Yeah, very interesting stuff.
Justin Cooke: So anyhow, we’ll get to that in a minute but first we’ve got our news and updates. First one, Joe is heading to Puerto Galera in August.
Joe Magnotti: Yeah! Probably gonna head up to Manila for a couple of days first, maybe as long as a week. And then over to Puerto Galera to see the tropical MBA guys and their summit, their little workshop thing that they’ve been doing over there. We missed the one in June so I want to try to hit this one.
Justin Cooke: Yeah, man. I really miss the intern thing. I love the fact the tropical MBA was all about the internships but I didn’t think I had a good thing going now. Basically they’re bringing out entrepreneurs that want to get their startup off the ground and they’re meeting in Puerto Galera for a couple of weeks and just knocking it out. I know the first one was a big success so I know you’re really looking forward to going to the one in August. I’m gonna be heading up the tropical MBA in October most likely. They’re doing a third one this year and I’ll be there for that and then shortly after we’re going to Bangkok in mid-October for a meetup.
Joe Magnotti: Yeah! It’s gonna be a lot of traveling between now and November.
Justin Cooke: I know, it’s been so quiet, man. We did the Cebu thing and we just kind of been chilling down here in Davao. We got a lot of travel and then I think we’re going to Manila again in November for another meetup with some sharp guys there. So, we will see our buddies there.
Joe Magnotti: Yeah, should be fun.
Justin Cooke: John, Paul, and Matt, that would be cool. Hang out with you guys a bit. Next thing we’ve been switching all of our niche sites from the old GoDaddy hosting account over to HostGator.
Joe Magnotti: Yeah, you know I just had to bite the bullet. Even though it’s several hundred sites, Justin. Man, I just can’t take the slowness of the sites. I can’t take GoDaddy’s terrible cPanel configuration, it’s not even really a cPanel there. They call it hosting control center. The HostGator is just so much better.
Justin Cooke: Yeah, I didn’t know any of this and I was actually surprised. I was like, dude what are you doing switching over to HostGator? And we’ve had some problems but I guess we’ve just had problems with AdSense Flippers, adsenseflippers.com. And that’s due to our [inaudible 00:02:47] PopUp Domination plug in, right.
Joe Magnotti: Yeah, and it’s all on a virtual private server where runaway processes speak to that pop up. So, you know, that’s been a problem but we’ll get that corrected and fixed and should have that with anything else.
Justin Cooke: Third point, a couple of weeks ago I went to the Davao bloggers social media day and was asked to be on the panel there. So, I got to talk to a bunch of young bloggers here in Davao city about how to monetize their blog, how to make it really niche down to something that’s really good, how to use Facebook and Twitter. And that was really exciting, that was fun to be on the panel there. I was there with some other interesting guys, one of them was [inaudible 00:03:21] and a couple of Filipinos, just talking social media, it was cool.
Joe Magnotti: Yeah, I missed it but from what I understand you guys did really well and it was really interesting.
Justin Cooke: Yeah, they have one of those workplaces there where you can like rent the desk by the day, kind of places. And it was really kind of nice and modern, it was kind of a cool thing to see in Davao. I mean, I can see this place turning into a startup type town for Filipinos, it hasn’t and it’s not there yet but I can see that happening in the next couple of years.
Joe Magnotti: Interesting.
Justin Cooke: It’s much, I mean, Davao is much different than when we first moved here, right?
Joe Magnotti: Yeah, I mean we just had a meeting tonight with an outsourcing customer and we were telling him about how when we first started coming here in 2008, it’s changed so much.
Justin Cooke: Oh my god, yeah. Like trying to find a good restaurant in town and just like …
Joe Magnotti: I mean just the roads, now every time it rains it doesn’t flood out completely.
Justin Cooke: You knew all the foreigners here because they came over here to retire. Like those are the foreigners here and it’s crazy, man. Yeah it’s really changing. We’ve got some younger, entrepreneurial types down here, people passing through. It’s getting better, man.
Joe Magnotti: Yeah.
Justin Cooke: Last point is, and I don’t know, I don’t know how to say this. Basically we’re considering adding a section on AdSense Flippers to allow others to sell their sites on our buy our sites page. This is something we really bounced back and forth on. I think there will be value, right? Because there are people that wanna buy sites that are looking for places to buy sites and if we allow them to purchase there it would be great. A little worried though, I don’t want people selling crappy sites to people that read and listen to our stuff.
Joe Magnotti: Yeah, the betting process would have to be very strict and we’d have to clearly say that these are not AdSense Flippers sites, that these are from I don’t know …
Justin Cooke: So and so, and this person, that person, yeah. I want to be clear and we’ll have to make sure that we check them out pretty closely. It will probably be a couple people that we know and trust now, and we’ll kind of see how it goes. I think it would be cool, I mean, it’s offering value where we can’t. We don’t always have sites available for sale so if we’re able to offer that to people and then help other people that are trying to sell their sites out, I think that could be useful.
Joe Magnotti: Yeah, and from a technical perspective there are a couple of hurdles to overcome but I think more of a marketing message needs to be done.
Justin Cooke: Well that’s it for the news and updates. Let’s get right into the heart of this week’s episode.
Narrator: The AdSense Flippers Podcast.
Justin Cooke: Alright, so getting right into the heart of this week’s episode. We have Thomas Smale with us, he owns and manages a company called Flipping Enterprises. In 2001, his company sold over 2 million dollars worth of sites and was the number one seller on Flippa with more than 1 million in sales. Thomas, welcome to the program.
Thomas Smale: Hey guys, thanks a lot for having me on.
Justin Cooke: Good to have you. So I know a little bit about your backstory, you know from looking at some other interviews you did. But let’s talk about this for a bit. So you were in university and you were like many of us, looking to make a little bit of money online. What got you started, what really drove your buttons back then and got you going?
Thomas Smale: So I started out like many college or university kids when it’s making a little bit of extra income. But in the city I was in at university there weren’t really that many jobs going so I thought it might be a good idea to look for some other things and I’d always been quite interested in the online world but never really got started. So I started messing around buying a couple of sites. But I never had any technical background or anything like that so I was kind of relying on my major as business so I was relying on my business skills to grow the site rather than technical skills. So I started out buying/selling small sites and then after a while I got quite good at it and started … got quite profitable quite quickly.
Justin Cooke: By small sites you’re talking about a couple hundred bucks, right?
Thomas Smale: Yeah, I mean I was selling out 1-2 hundred dollars, I think I bought my first site for a couple of hundred. And then after a while I became reasonably successful at that, did that for a while. And then the thing that kicked off Flipping Enterprises as a company was of course we released on buying and selling sites which happened to do really well and then that kind of was the catalyst for the company growing and our reputation.
Joe Magnotti: Yeah, that’s interesting.
Justin Cooke: Cool.
Joe Magnotti: What made you guys put together a corps [inaudible 00:07:20]on buying and selling rather than just stick to buying and selling yourself?
Thomas Smale: Yeah, well I mean, we were at the time, we were, this partner and I had both written a few articles, been on a few blogs talking about buying and selling sites and there’s a lot of demand there. We found that especially as we were at university, we really didn’t have that much cash despite the fact that we were quite profitable. We were only making a few thousand a month so we thought well, if we launch the course and sell it for $97 like we did, we can probably accelerate our income a lot quicker than we could buying sites.
So a lot of people out there might have 10-20 thousand dollars and with the use of our course they could then multiply that into hopefully even more. So I think at the time it was a lack of cash flow, and just the fact that we thought we could accelerate our growth by launching of course.
Justin Cooke: Well there’s also the fact that buying a site and then building it up and then flipping it takes some time, right. So you’ve got that three or four month kind of no cash coming in … and this was meant to help that a bit.
Thomas Smale: Yeah, absolutely I mean it was yeah, partly cash flow and just the fact at the time there were only two of us. I was still full-time at university, my business partner was doing all the things so it was also a time thing. So, yeah we had limited resources so it made sense to accelerate it by launching of course.
Joe Magnotti: I have to tell you, I’m really excited. I really wanna talk about your business flipping enterprises but first we’re gonna talk about basically three sections. So building, buying, selling websites, the first section. Second section will be the business of brokering. And the third section will be all about Flipping Enterprises because I have some questions I really wanna get to you about your partnership and how your business is set up and that kind of thing.
First, I know that you guys buy and sell some websites yourselves still and your brokerage but you also still do that on your own. What kind of websites do you look to purchase, like what is there about a website that you say this is good buy for us, like what kind of methodology do you put into place when you’re looking to buy a site.
Thomas Smale: Yeah, I would say we’re probably different from the average investor in that we like taking risks when it comes to our own purchases. So we tend to look for not necessarily a high risk site but a site that may not have had that much history. It may have a lot of traffic but not monetized very well. We look for sites that we can clearly identify a way to improve the site. We’re not passive investors, we don’t have hundreds of thousands of dollars lying around to buy an investment that makes a return in a couple of years. We’re looking for sites that we can buy for a couple of thousand and then have some turning over four or five figures a month within a few months.
So yeah, we look for high risk sites, sites that are quite new that we think we can grow. Sites we can improve the monetization on, and anything where we see the owner may have been … it’s quite common for an owner if they maybe own 10 or 15 sites, they’ve got a site that sits around and they’re like well, I haven’t had time to sell advertising or whatever. So we’ve got sites in the past where they say they can sell banner space but they’ve never done it so we’ll buy the site, go and sell the banner space, and then make the most of that new income.
Justin Cooke: And most of these guys are coming to you through your business right, because you do have a brokerage, they’re looking to sell their sites and then the ones that you think you’re interested in or fit your particular needs you’ll snatch up yourselves, right?
Thomas Smale: Yeah, I mean we have got away from that a little bit lately because I would rather have more sites to sell to my buyers. But yeah, the majority of the sites we buy do come to us as leads I guess.
Joe Magnotti: So you don’t actively try to get out there and look for sites, because I would imagine you would find some really good value out there but I’m not really sure how you would go about finding them. I mean, do you do that at all?
Thomas Smale: No, we don’t. But I mean, we could. But I mean, to be honest we get enough. We get tons of leads a day so we don’t really have the requirement to go and do that.
Justin Cooke: So Thomas, let’s talk a little bit about like the kind of person that builds and sells high end sites. Is there a profile that person kind of fits, is it usually like a one off or are they chugging these sites out a couple times a year, dozens a year. What does that person look like? Is it a partnership, a business, what’s the profile for that?
Thomas Smale: Yeah, I would say there’s a variety but if you’ve got an individual that is selling like large sites. Like when we say high end, I would say six figures plus. So if you’ve got an individual I would say they might only have one, two, ore three sites. It’s very rare for an individual to be literally working by themselves. They might have freelance help, they might have a virtual assistant, they might have a partner. When it comes to companies, companies are slightly different in that you get some companies where you have very large portfolios and it’s quite common for them to have actually bought the sites in that portfolio and then built them up. Whereas I’d say individuals tend to, the individuals tend to be the entrepreneurs who build it from scratch whereas the companies tend to be companies who have invested in 5-10 sites, built them up and then looking to offload them for whatever reason.
Justin Cooke: So your buyers are often business whereas like you know, the ones that are looking to sell that build it up from the ground up are more individuals or partners? Someone who’s looking to spend let’s say $150,000 on a site, is that normally a fund? Is it a group? What does a buyer look like?
Thomas Smale: I would say, I mean we have a variety but I would say at that level it tends to be a small investment group or a company who already owns a portfolio. You do get a few individuals but generally speaking if they’ve got that sort of budget they’ve got some sort of infrastructure behind them.
Joe Magnotti: Interesting, interesting. Go back to these leads that you say you get tons of leads a day. Do the people when they come to you, do they have their shit together? Do they have proof of their earnings, their accounting, all that kind of stuff assuming this is something that we always preach about. I imagine from your perspective it would be interesting to hear.
Thomas Smale: Yeah, it really varies. I mean, sometimes I do, sometimes I don’t. One thing we that we have is when, if they want to put in brokerage for request for us we’ve got quite a detailed form and they can add attachments and stuff like that. Because most of the fields are compulsory we don’t get, it’s not like we have a two field form that they can just fill out speculatively, they’ve actually got to put some sort of effort into filling out the form. So generally speaking, if they’ve got past that level, they’ll be okay. And then based on the information we have we’ll then put them in touch with a broker who will then go over … and the first questions we ask to make sure that they’ve got everything in line so do you have your income documented? Do you have your traffic documented? And obviously every now and then you’ll get a seller who will come to you and go ‘I made $100,000 last year’ and then when you ask them if they can prove it they can’t, so that’s an instant reject.
It really does vary, it’s rarely perfect so it’s very rare to have a deal where the seller has literally everything perfectly in line. So quite often buyers have to look around that and just accept the fact that especially young sites under the $100,000 range, you’re not always gonna have a seller with an accounting department and perfect counts. You’re not gonna have perfect systems. You might have some self coded things, you might have self written content. So I mean it really does vary.
Justin Cooke: Yeah so I heard another interview where you were talking about what investors look for in sites, especially in let’s say the $50,000-$200,000 range which is a pretty big range. That’s kind of outside of our area of expertise and I know a lot of lower sites or smaller sites that sell for less are based on Google traffic. What do the mid to high level investors value about a site? Is it like social engagement? Is it the back end programming that was put into the site? I know if you have earnings it’s easy to say okay, well the site’s going to be worth this over a period of time but how do you value all those other things?
Thomas Smale: Yeah, I mean when it comes to evaluation itself it really is down into the income, that really is a key variable. When it comes to desirability I would say that obviously the more desirable a site is, the higher multiple you’re gonna get because you might have more competition in the bidding or whatever.
So I guess you would have two sets of buyers. You would have the buyer who is buying the site for a strategic reason and then a buyer who’s buying it for a revenue reason. So if you’ve got a media company and they want to buy a site in a certain niche, they might only be interested in the traffic and the content and how it has monetized might not really bother them. But then you might have an investor who is buying an e-commerce store and it’s really important the seller has a good system in place. So someone who is shipping products out of their garage in Florida is not gonna be as desirable as a drop shipping agreement where there’s four or five suppliers who keep up with that then.
Justin Cooke: How are your buyers split up? Is it like, are we talking 50/50 on those that are looking just at income or those that are looking for a strategic purchase? Or is it heavily one way or the other?
Thomas Smale: I would say it’s probably 90% of our actual sales would be based on the income. We do have a number of buyers but the buyers who are looking for strategic purchases tend to have very specific criteria, so the chances of a site popping up that would match their criteria is quite rare. So I would say the actual sales that go through tend to be based off revenue or profit multiples.
Justin Cooke: Yeah, they’re like I want a women’s shoes e-commerce site that makes to this amount of money every year, that kind of thing, right?
Thomas Smale: Yeah, exactly. So I mean, we have them sitting on our books and if something comes up then yeah. As we don’t proactively look for leads, the majority of our sales tend to be based off income.
Joe Magnotti: Thomas, I have one quick question you know, that’s really interesting to me. With this big portfolio of sites that you are brokering or have as leads, how are you tracking all of that? Do you have like a CRM for that or some sort of system to make sure that you can match up buyers and sellers?
Thomas Smale: Yeah, that’s why I’ve got my partner Brian [inaudible 00:17:05], he manages mainly the tech and operation sites. We’ve got internal databases we’ve built up over the last, I would say it’s about 18 months old now. So when a lead comes in, it drops into our database and then we can allocate it to, there’s myself and two other brokers. So it will get allocated to one of us and then we keep all of it internally with notes so from an admin perspective I can see where all our leads are at a certain time. So it’s a custom developed [inaudible 00:17:32]
Joe Magnotti: Very cool.
Justin Cooke: Cool, Thomas. So you know, keeping track of your data is pretty critical and we’re still Google Doc, we joke about that but we really should of went to a CRM quite a while back but we keep putting it off though.
Thomas Smale: When we started, it was really just like they would fill out a form that would go into a really basic database. But now we’ve got things like we can extract data and see which monetization method is the most popular site, which countries are our main customers. So we can break down a lot of data that can be quite useful.
Justin Cooke: Cool. That kind of leads into our next section which is getting into the business of brokering. Let’s set the scene a little bit. A university grad, you’re buying hundred dollar sites and flipping them for a thousand bucks, you’re making a little bit of pocket change, right. And then you continue to grow from there and you decide to start brokering, how did you go from doing it yourself to getting people that want you to sell their sites or are looking for sites to buy, how did you move from doing it yourself to actually doing the brokering.
Thomas Smale: Yes, I think when I started brokering the biggest site I sold was, I think it was mid to high four figures, I can’t remember exactly. So it wasn’t massive but it was in the thousands. To be honest, when we launched our course that’s kind of what started our reputation and I think someone from there just contacted me and said, hey can you sell my site for me and I thought hey I would give it a go. And I think that the first site we brokered, I think sold for I think it was about $18,000 off the top of my head. And that was about two years ago now.
Justin Cooke: I like that. It’s interesting you know, Joe, we do the free model where we give all the information away for free, right. But then we get a ton of buyers coming to us. They did a similar thing with a paid course and then I think there was a membership site attached to that too, right.
Thomas Smale: Yeah, it wasn’t membership site. It was support forum effectively.
Justin Cooke: Okay, so you have a group now, a group of people that have bought that are previous buyers of yours that are now in this group and can bring you deals or ask you to sell their sites, or ask for advice and I think that’s really interesting. I mean, they did a paid version of what we’re doing which is pretty cool. So I see that, it was the course basically that got your leads initially. If someone was looking to get started in brokering today, what do you think would be the best approach? Would you do that again or what would you do differently starting as a broker today?
Thomas Smale: Yeah, I mean I would say that built a reputation I wouldn’t necessarily say that the people who bought the course at the time then turned out to be clients but I mean it certainly was some public exposure. If you’re starting out, there are quite a few in recent years, have been quite a few individuals who have started brokering. I would say probably the most important thing is having experience actually buying and selling your own sites. The last thing you would want to do is start messing with a client’s money effectively if you’re gonna sell their site and you’ve never actually done it before.
You do get some causes that will tell you to just go approach people and say, hey I can sell your sites, buy it and flip a listing, sell it, as simple as that but it’s really not. You need … I mean I didn’t start when I had years of experience but I did have some live deal experience selling my own sites. I understood how to run sites. So actually having the understanding is really the most important thing. If you don’t understand the site then you’re not gonna be able to sell it. And then I would say probably the way we went is probably the best way to go. So start small, get some experience, and then just start building yourself a reputation up.
Joe Magnotti: Yeah, it’s always better to have some direct experience before you start consulting to customers because otherwise you’re really faking it at that point. So, I kind of see where you’re coming from. But let me ask you what do you think is more valuable in your business, the buyers or the sellers?
Thomas Smale: Yeah, that’s a difficult question because obviously they’re both valuable. So we’re technically hired by the seller to sell their site. We’ve got a number of regular buyers so I want to keep them both happy. And obviously the business only works if we’ve got both so if you said which is most valuable and I had a thousand sellers but no buyers or a thousand buyers and no sellers, then neither of those would work very well.
So, they’re both equally important. I would say that buyer wise you probably tend to get more regular buyers than you get regular sellers. Just because what we were talking about earlier, we might have an individual that only owns one or two sites but the companies who are buying might buy … I’ve got a buyer at the moment who buys five or six sites a month so it really depends. But I would say yeah, they’re really cool but they have, there’s merits of both.
Justin Cooke: We wrote post recently, we called it ‘The Problem with Flippa’ and one of the problems we mentioned was the fact that Flippa seems to put a higher value on their sellers than they do their buyers. And that may or may not be true but you know, in your situation you said that you normally deal with the sellers. You don’t act as a buyers agent, is that right?
Thomas Smale: Well, it’s only do occasionally. Obviously we have to work it a bit differently. I’ve done a little bit of work recently. The first thing, if we’re working on behalf a buyer I would never take a deal if there was a conflict of interest, I’m also representing the seller. That could obviously cause problems. But I mean recently I had a buyer who came to me who was looking to purchase a site off Flippa and they just wanted a bit of advice so I charged them an hourly rate, gave them obviously impartial. One thing I don’t do is have a success fear anything as a buying broker because you don’t want to have any incentive to tell them to make a bad decision. If they [crosstalk 00:22:43] due diligence, you want to be able to pick up on the negative as well as the positives.
Justin Cooke: Of course, so yeah if they’re asking you to research the site for them, or try to get some due diligence on the site that makes sense. So when you’re acting as the sales you’re [inaudible 00:22:55] responsibility is basically towards them. What protections do you put in place should a deal go wrong? I know Flippa tries to do this, what do you do as a broker, what kind of due diligence do you do on your sellers to make sure that the sites are legit and everything is as it should be?
Thomas Smale: Yes, so due diligence wise is a difficult one. One issue with Flippa is I think they overly emphasize their due diligence towards actual due diligence but in reality that’s not real due diligence. So I mean, we don’t, I make it quite clear that we’re not responsible for the due diligence but I would say as through acquired experience you’re gonna pick up on the majority of red flags quite quickly. And also if there are red flags, you’re not gonna take it on. And due diligence is quite subjective as well so what might be an issue for one person is not necessarily an issue for someone else. So for example, the other day we sold a site where it was an article business and part of the due diligence came up that the site required an editor to look at the articles before they go out to clients. So for one client, that could be an issue. But the guy who ends up buying the site is actually an editor himself. So in that situation it’s quite subjective.
So we leave it down to the buyers and we keep it as open as possible from the due diligence side and then when it comes to actually executing the deal we use escrow.com for the majority of our deals. We can also help them out with contracts but we do advise buyers and sellers to seek independent legal advice so we don’t legally represent them or say, hey this is contract, this will be legally binding. We get them to run it past their attorney or lawyer.
Justin Cooke: We’ve had the problem of, you know we have plenty of buyers who buy from our buyer of sites page or whatever. The problem is that we’ve had a lot of sellers come to us and say, hey can I sell my sites through you? And our issue with that has always been this, is that we don’t know how they created their site. We don’t know what they put into it or what sketchy stuff they’re doing with it so we’ve been hesitant to do that and we know that if you ruin your name with buyers that could be problematic. I think that’s part of your guys’ success is that you buyers that like and respect the deals. I’ve seen the deals you guys are selling on Flippa and you sell some great sites so I think that’s probably a good portion of your success too, is that your business is trustworthy.
Thomas Smale: Yeah, I mean it’s all about trust. I’m not saying that every single deal that we do goes perfectly but I think as long as you’re transparent most buyers are aware there can be issues. I think one of the most important things again is communication so the majority of disputes never have to escalate to any legal problems. Most problems in my experience can be sorted out literally with a phone call between buyer and seller. There might be some compromises there and sometimes the good thing about us is that we’ve got our own sites and our own infrastructure, is we can often help buyers or sellers so if they’ve got an issue transferring the site we can help with that. If they need some fresh content or if they need someone to fulfill orders for a week, then we can help on that side which is saying that I guess it’s quite a good value to add.
Joe Magnotti: Yeah, that’s the thing your post sales support. Something that I’m always big on when people say that they’re going to get into the buying or selling business so do you have a set process for that? Or I guess with your kind of sales it must be different every time because you don’t really know what you’re getting into.
Thomas Smale: Yeah, no we don’t have a set process. It really depends. I mean, we don’t offer anything by default. If they need help, then we don’t have a problem with that. As long as it’s within reason we don’t have a problem. But yeah, I mean every deal is different, every buyer is different, every seller is different. Some buyers like to do everything themselves and you never hear from them again, others need a little bit more hand holding. It does really vary.
Justin Cooke: I know that you guys generally handle sites of a value of $10,000 or more. I know that your average is about $50,000, you had mentioned. There’s quite a bit of information out there about how to sell your sites yourself, right. I mean there’s plenty of free information out there. Why would someone go to to a broker? Why is that a good option?
Thomas Smale: Yeah, so I mean there is certainly some good information out there. Quite a lot of that we’ve done ourselves so we’re well aware that the information out there is quite solid. There’s quite a few reasons to use a broker. It does depend on the person selling. For some people they are perfectly capable of selling themselves so they do. But I would say if your site is worth more than $10,000, especially $50,000 and up I would say a broker is almost definitely the best option. One thing to bear in mind is the broker only gets paid on completion, so it’s in their best interest to sell the site.
I would say, if I had to say three reasons why people would come to me over doing it themselves. So A, you’ve got the peace of mind in going through a broker. You’ve got our infrastructure, you’ve got our help, we’re gonna be around we’re not gonna disappear. We’ve got a reputation to uphold, utilizing our experience in general. So it’s highly unlikely you’re gonna come across a seller whose executed more deals than us. Some ones we might not have done hundreds and hundreds of large deals, we have done deals on lots of different platforms, lots of different monetizations, lots of different buyers, lots of different sellers. I guess the main thing is the fact we’ve got the contacts. We’ve got the list in place. We’ve got existing relationships with buyers who trust us. And if you’re a seller who never sold before then you don’t have that trust. I would say the fee you end up paying a broker, you probably end up making back in the fact that a broker will be able to get you more money for the site. Mainly from just the trust perspective.
Justin Cooke: Yeah, you know I know as a seller that anything in the 500 to like maybe, four or five thousand range I’d feel completely comfortable doing myself. But if we’re talking an 80,000, 100,000, 150,000 dollar site? That’s pretty outside of my area of expertise, plus that’s a totally different buyer pool, right. So I was talking to Chris Guthrie about this, he sold one of his websites for $100,000 and that’s one of the reasons he didn’t sell it himself. He went to a house that does that because they have the investors, they have the buyers at that level that he simply wouldn’t have had. He doesn’t have those connections so that’s a pretty good reason to use a broker on the high end.
Thomas Smale: And to be honest, if you’re only selling one or two sites it’s really not worth the time and effort trying to get those relationships. Some of them take like years and years and many lunches and dinners and drinks et cetera to build so they are not saying you can build overnight just by slapping a site up on Flippa and hoping it’s suddenly going to be trust by everyone. They do take time.
Justin Cooke: Yeah, a brand new seller on Flippa prize, they’re gonna flip $150,000 site very well.
Thomas Smale: Well, what you could do. But I mean, with a broker fee, let’s say for arguments sake if you sold it your site, you might sell if you make it $100,000. Whereas if you’re with a broker, they might get you, they not might get much more but they might get $120,000 which will easily cover their commission plus the fact that they’ve done all the work for you so you save money there.
Justin Cooke: Let’s transition a little bit into your business specifically. Let’s talk about Flipping Enterprises a bit. Now Thomas, I know that you met your current business partner on a forum. Now I see this all the time, I go to the Warrior Forum and I see these joint venture offers and I see some of them are just really kind of bad. How did that work for you? How did you find your future business partner in a large venture on a forum? That sounds crazy to me, how did that work out?
Thomas Smale: Yeah, I mean it was weird. I mean I must admit before then I had a couple of bad experiences with bad partners, lost the money. So when we started out we didn’t actually actively seek a joint venture but we were both quite active in the site flipping niche, or the buying/selling niche. So we had like seen each other around and I think at the time the way we got together we were actually both selling similar sites on Flippa and I think we got in contact about, we said hey why don’t we sell a couple of sites together rather than competing? And then we got onto the topic of, hey why not write an e-book? And at the time we honestly had no idea how many it was gonna do, I mean we thought if it made a couple of thousand dollars we would’ve been delighted.
And then what we did, is obviously we had never met in person so we just set a revenue target for the product and as soon as the product had hit that level of sales we would fly over and meet each other and we thought that was the stage where we officially registered the company. So before that it was very much just a left release of course, see how it goes. And then when it did well we thought, hey we’re onto something here, we work well together so let’s formalize it.
Joe Magnotti: That’s actually a pretty good approach. I mean, too many people get caught up in the paperwork before any sort of money is on the table. Speaking of which, do you have any investors or any other kind of silent partners in your country?
Thomas Smale: No, we actually when we started it, I think when we launched of course we probably had about $50 each into the company so we had no [crosstalk 00:31:42]. We really like built up literally from nothing. We are actually, so in terms of ownership split it 50/50 and in terms of silent investors, no. We are thinking about bringing someone else in, in the next few months with some experience. He might buy into the company a little bit, but that will more be as someone else to help run the company rather than actual purely the cash.
Justin Cooke: Have you guys considered, you said right now you’re spending your own cash, your own cash reserves to buy sites, have you considered actually building up that fund to buying up six figure sites and even seven figure sites? Is that a business path you would take?
Thomas Smale: Yeah, we did actually work with one of our buying clients who I’ve known for a while on a low six figure deal recently where we basically did everything for him. He put the cash in and now we run the site and we split the profits. So that is something that we do but it’s not necessarily a core business. We’re trying to … one of the problems we had when we first started out was we had five, ten twenty projects on at a time, we just never focused so we thought let’s focus on brokerage. So I really do try and avoid taking on projects on core but we don’t have any issue, especially if it’s a buyer we have a good relationship with who might not understand or might not be that familiar with the online world. We’ve got the infrastructure to run it so it can be a win-win in that situation.
Justin Cooke: I feel your pain, Thomas. Deals come across your plate and you’re like, this isn’t my thing, this isn’t what I should be doing right now but it’s good! Right? It can be so frustrating sometimes when you’re like, it doesn’t fit my core business but I like it. You know what I mean?
Thomas Smale: Yeah, that’s exactly what we did with this site. I explained some things I felt could improve on it and had been a solid earner through Thoughtwell. Then if we split the profits he’s happy he’s getting a return, we’re happy we’re getting a fair return on our time so it makes sense on that.
Justin Cooke: Cool. So Joe and I with our partnership, you know we go through periods where he’s doing more work and he gets frustrated or I’m doing more work and I get frustrated, it’s not split as evenly as we’d like it to be but we do have some core areas or responsibilities, how do you guys split up the work in your business? Who takes on what and how did you decide that?
Thomas Smale: Yeah, I’m sure if you speak to Brian he will probably tell you that I’m lazy and I don’t really do much and he does all the work. But I would say over time it probably evens out. So we have our main office is in Riga in Latvia where Brian lives at the moment so he manages our Riga office. I guess his main responsibilities is he looks after the finances so he tells me how much or how little money we’ve got to spend on new things so he manages that. He manages the operations and the technical side so the database, working on a few software products, anything on the technical side, anything on the operational side, and anything to do with finances.
And then the brokerage is really me, I head up brokerage. I’ve got a couple of brokers in the U.S. that I manage. We’ve got a couple of products we sell and I tend to cover the sales of them. And then marketing as well is on me, but I mean I tend to be the public face of the company but that doesn’t mean Brian is not behind the scenes doing stuff and it’s not necessarily all me. I’ve got infrastructure behind me if I need so Brian tends to work … Latvia has got a time difference of 2 hours ahead so Brian tends to be up hours before me and probably finishes a little bit earlier but then I tend to, the nature of having a lot of clients in the U.S. might not work solid all day, but I’m usually around quite late.
Joe Magnotti: Interesting. That split sounds a lot like what me and Justin have but we’re in the same time zone so that makes it a lot easier to work for sure. One thing I’m really interested in is, what do you think is your biggest accomplishment with Flipping Enterprises so far?
Thomas Smale: It’s difficult. I wouldn’t say it’s anything specifically but I think if you asked Brian the same question that you asked me I think that the main thing we’re proud of is our reputation in general. We get a lot of business from referrals, it’s not like we’re buying leads or anything like that. We’re proud of our reputation, we’ve got a good reputation. I guess we’re proud of the fact that in general, the fact that we managed to build a profitable business from scratch with no cash in quite a heavy recession so that’s good as well.
Justin Cooke: In a pretty short period of time, and we’re not talking about ten years you’ve been doing this. When were you in university going, how the hell can I make money online? That was four years ago?
Thomas Smale: Yeah, I think I probably started messing around four years ago and then we’ve had Flipping Enterprises for about 26 months now, we started in May 2010.
Justin Cooke: So that’s, let’s say two years you’ve really been kind of like running Flipping Enterprises. Where do you see you taking the business in the next two to three years, what are some of the, where is your longer term, I guess your mid-range vision for the company?
Thomas Smale: Yeah, so brokerage wasn’t really a thing we started until about a year ago probably and then at the beginning of this year we decided that it would be more of a full-time focus. So our focus the next couple of years is just gonna be continuing building on that experience and I had mentioned we were thinking about bringing someone else into the company whose got slightly more formal experience brokering so maybe we would like to start working on some slightly larger deals. Right now, like I said, like you mentioned our [inaudible 00:37:04] is probably around the 50,000 mark. We would like to get to the stage where we’re covering deals from 10,000 all up to say, five million. Whereas at the moment we probably cap out around half a million.
Justin Cooke: Yeah. So it sounds like you want to kind of move up the value chain when it comes to brokering which seems to be a pretty smart move. What’s the angle, what’s your, are you looking for an exit or do you want this to be a good 10-15, 20 year business? Where do you want to take Flipping Enterprises?
Thomas Smale: I think we should reach it as a long term business and I think the reason we got into brokerage as well as the fact we knew what we were doing and it’s quite nice cash flow is we love getting exposure to all the business owners. I think from a personal perspective, I’d quite like to get into angel investing or venture capital so maybe moving away from selling businesses but actually helping people get their own businesses off the ground. Maybe investing in businesses with people and obviously with the seller leads we have, we’ve got quite good exposure to some great businesses so in a couple of years we now have a pretty good idea of what works and what doesn’t.
Justin Cooke: You guys have done really well over the last couple of years especially for such a short period of time. I mean, that’s pretty expansive and aggressive growth. Looking back on it though, are there any things you go, mmm, wow that was a path we shouldn’t have had down, that probably wasn’t the best move for us at the time. What regrets do you have about any particular things you guys have done so far?
Thomas Smale: I would say this is a bit going against how I would advise my clients but I think when we launched our course in May 2010, we sold it in September so we were kind of went for the stereotypical build up a business and then flip it, so practicing what we preach so to speak. At the time it was the right thing to do, to sell it but I would quite like to still own that now because it was always good for the reputation.
For example, the main regret and you would get exactly if you spoke to Brian is we’ve taken on probably way too many projects that we shouldn’t bother with that we might have ten projects and then eight of the sites we just completely forget about and don’t go anywhere. So that’s one of the main reasons we sat down and focused on brokerage. We’ve always been profitable so we’ve never really had issues on that front but I think just lack of focus from the beginning but I don’t think that’s anything we would have changed if you go back because you’ve got to try different things until you figure out what works and how you work best together.
Justin Cooke: Well Thomas, it’s been great talking to you. It’s great having you on the AdSense Flippers Podcast. If someone wants to get a hold of you, if they want to reach you, what projects you’re working on right now, where can they get in touch?
Thomas Smale: So at the moment we’re working on a lower end cause just to help people who have got smaller sites to sell them as we just can’t, we reject I think looking at the stats probably about 95% of our income and leads get rejected for whatever reason. So we’ve identified I guess a demand for a product. But the main way to get a hold of us if you just jump on our flippingenterprises.com website, we’ve got if you follow the things we’ve got a link to our buyer list, we’ve got a link to our latest listings. If you’re on a seller site we’ve got a brokerage form and then we’ve also got a contact us form if you wanna talk to me in person for whatever reason you can do that as well.
Justin Cooke: Cool. We’ll put a link to Flipping Enterprises on this podcast episode as well. Some people can check it out. Anyway, anything else, Thomas? Anything else you want to say?
Thomas Smale: No, that’s everything for me. I just want to say well thanks again for having me on. I appreciate the time you guys have taken.
Justin Cooke: It’s been a blast talking to you, man.
Joe Magnotti: Yeah, thank you, Thomas. It’s been so good talking to you.
Thomas Smale: Yeah, no worries. Thank so much guys.
Justin Cooke: So it was really great having Thomas on, Joe. I mean, I really appreciated having him on the podcast. I know you got some great information. The only thing is, I mean he brings together buyers and sellers at a fairly high level, like 10,000 plus. It seems like there’s a real gap there between the $500-$10,000 sites, right? If someone could fill that it would be great. The only problem is as a broker, do you want 10-15% of a $1200 site?
Joe Magnotti: Yeah, I think that would be tough to do. Like he said, eluded to at least a little bit in the interview, I think setting up a marketplace is probably more effective for something like that.
Justin Cooke: Or just selling yourself on Flippa, right? I mean that’s the other route. Why deal with a broker, just go straight to Flippa. At a higher level, it’s harder to find buyers at $50,000, right, there’s not as many as them so it makes sense to kind of use someone who has those kind of buyer contacts. But yeah, if you’re selling a $1500 site, you’re better off probably just selling it yourself, right.
Alright well let’s get right into the ninja marketing tips, tricks, and our plans for the future.
Narrator: The AdSense Flippers Podcast continues.
Justin Cooke: So here’s the first one we got for you today. It’s from a site called flipfilter.com, Justin Gilchrist over there we’ve spoken to a few times and had some great chats with. He has a website evaluation tool. So we talked about monthly multiples and how much your site is earning but that’s not always the best way to judge how much a site is worth. How old is it? What’s the page rank? How many visitors do you get? There’s value there too so if you have this awesome blog that’s getting a hundred thousand visits a month and you just don’t have it monetized properly, that doesn’t mean that it’s only worth 20 [inaudible 00:42:14] earnings. So I want you to check that out, I’ll put a link to it in the show notes but yeah it takes into account things like traffic, page rank, how involved your audience is, it’s pretty cool.
Joe Magnotti: Now still, I will put in the one caveat that your site is only worth as much as people are willing to pay for it. So like it said that AdSense Flippers was worth how much?
Justin Cooke: Like $105,000 or something.
Joe Magnotti: Yeah. I mean do you really think that someone out there would buy it for $105,000?
Justin Cooke: Absolutely.
Joe Magnotti: Really?
Justin Cooke: Yeah! You don’t think so?
Joe Magnotti: I don’t know, I don’t think somebody would buy it. We’re so entwined in the business, you know they would have to have us on still on the [crosstalk 00:42:51]
Justin Cooke: Well here’s the thing, we wouldn’t sell it for $105,000. Right? I mean we wouldn’t sell it for $105,000 and we’d want more and there’s some level, the level at which someone would be willing to pay us, we wouldn’t be willing to sell it for. And much more than that, it wouldn’t be worth it to them because we’re so ingrained into the business.
Joe Magnotti: Right.
Justin Cooke: It’s so us.
Joe Magnotti: Yeah.
Justin Cooke: Right. Yeah, that’s the problem. The next tip we have for you is something called Pocket which Joe is going to talk about because I have no idea what he’s talking about here.
Joe Magnotti: Well, I guess it’s a lot like Evernote except you can’t take notes. Pocket just allowed you to basically temporarily bookmark a page and then you can view it on your mobile device or on your computer, whatever your other Pockets are synced up to.
Justin Cooke: Buddy, I swear to god this is like the third tip you’ve mentioned where you’re like dude, I found this really cool thing. I’m like, yeah, it’s called Evernote, dude. They have that! No, it’s cool I mean Evernotes are where like you push a button and it will like just take the text on the page, like not even the advertisements or images or whatever, and just take the text so you can read it later but Pocket is kind of like that. Anything else?
Joe Magnotti: It used to be called Read It Later so you guys might know it as that but yeah, check it out if you’re the kind of person that likes to, you know, you stumble across stuff all the time but you don’t want to read it right now, you want to read it later and you want to read it at the source, not some sort of copier or something like that.
Justin Cooke: Cool. I’ll put a link to it in the shout outs.
Joe Magnotti: Alright.
Justin Cooke: Alright, that’s it for episode 27 of the AdSense Flippers Podcast. We appreciate having you on. Make sure you check us out on Twitter at AdSense Flippers and we’ll talk to you again soon!
Joe Magnotti: Bye-bye everybody.
Narrator: You’ve been listening to the AdSense Flippers Podcast with Justin and Joe. Be sure to hit up adsenseflippers.com for more. That’s adsenseflippers.com. Thanks for listening.