Does the Bolt-On Strategy Actually Work?
Large companies acquiring smaller companies to grow their empire is a story as old as the hills. Think of the likes of Proctor and Gamble (P&G), a conglomerate of hundreds of brands.
There are now aggregators of brands in the online business space who are acting like P&G to build their own portfolio of online businesses. The question is, how does brand aggregation work in the online business world?
You might have seen that we’ve already produced content on how to execute what’s called a bolt-on strategy. The crux of this strategy is that owners of online businesses acquire smaller content sites to act as media companies in order to expand the reach of their brands and boost the profits of their businesses. It’s a nice theory, but well-established content sites are expensive, and online business in general is a volatile market, so is this type of acquisition strategy actually profitable?
It’s up for debate.
On the one hand, the idea is solid: acquire a site and use its audience to grow your current brand. On the other hand, could that actually work in the real world, all things considered?
While large companies often make these types of acquisitions, could it make sense financially in terms of scaling a small business with a low budget and a content site that isn’t even making money?
There are certainly some unanswered questions that need to be addressed, which is what this article attempts to do. Let’s start by looking at when the strategy definitely doesn’t work. Then we’ll dig into how the strategy works well at the low, middle, and high budget levels with some practical examples.
If you’re not familiar with the bolt-on strategy and how it works, go check out our previous articles on what it is and how it is being executed before reading on.
Five Situations Where the Bolt-On Strategy Doesn’t Work
There are some situations where the bolt-on strategy doesn’t make sense in terms of the type of acquisition you plan to make. First, you need to know what you’re buying.
1. When You Buy a Business Model You Don’t Understand
Contrary to some beliefs, a content site cannot run forever without any input; it’ll eventually die out.
In a study we conducted on the return on investment (ROI) of content sites, the content site buyers who didn’t make an ROI were the ones who left their site untouched.
That said, it doesn’t mean you need to spend 10+ hours a week on the site to keep it running. Content sites can be maintained with just a few hours of simple work a week. You also don’t need to be an expert in website coding or content creation, as those tasks can be outsourced if needed.
However, to keep your site ticking along, you need to understand the fundamentals of how the business model works. The main areas in which you need to know the basics are search engine optimization (SEO) and how affiliate marketing and Amazon Associates works. Keeping your content updated and occasionally adding new content, checking your website for bugs, and checking to see that your affiliate links are still active are some of the basic tasks you should be doing to keep your website generating traffic and revenue.
Finally, understanding Google’s and Amazon’s policies will help prevent you from breaching their terms and, potentially, dramatically affecting your business.
It’s these points of failure that you need to take into consideration when you are deciding whether you can afford this type of acquisition’. Which leads us to the next situation in which this strategy doesn’t work.
2. When it Doesn’t Make Financial Sense
Buying a site that is much larger than your business doesn’t make sense financially because too much of your capital and resources are going to be required to maintain the new site and implement this strategy effectively. The same is true for a site that is too small; if the site you acquire doesn’t drive enough traffic to your ecommerce store and products, you will struggle to make an ROI on your investment.
Similarly, if the success of your strategy relies on the profitability of the content site and you acquire a site that doesn’t make enough money relative to how much it cost to acquire, then you will find yourself in the red.
This is why it is important to do the math before making this type of investment.
Finding a site that fits perfectly with your brand and portfolio is key to the success of the bolt-on strategy, so make sure you dedicate some time to finding the right business to act as a media company for your brand, as a site that doesn’t match won’t work for you.
3. When You Buy a Site That is Irrelevant to Your Niche/Brand
You might be considering branching out your business to a shoulder niche and so think it might be a good idea to acquire a content site in that niche. Unfortunately, without an established brand backing up the content site, this strategy probably won’t work in that scenario.
This ties into the financial viability of executing this strategy.
When you spend five, six, seven, or more figures on a website to act as a media company for your brand, that brand needs to be established enough for that media company to be able to increase your business’ revenue.
For example, if you’re driving a ton of traffic to products that have no reviews and that you haven’t tested yet, then if the audience doesn’t take to that product, you might not make the ROI you were expecting. Another example is if you were to acquire a smaller content site to drive traffic to a second content site you’ve developed that doesn’t yet have any content. If there’s nothing for the visitor to do on the site, it doesn’t make much sense to pay a huge sum of money for that audience.
In order for your media company to grow your brand, your brand needs to already be established in the niche. This is why it’s best to acquire a site that is directly related to your current brand. And don’t forget—the site you acquire has to be established too.
4. When You Buy a Business That Isn’t Sustainable
There might be a content site out there that fits the bill in terms of the niche they’re in, but that doesn’t mean it’s a good site to acquire. The content might even be high-quality and suited to your brand, but you need to consider whether the site is driving enough traffic, whether its operations, finances, and analytics are organized, and if it’s being monetized.
If the site isn’t yet established and requires 40 hours per week to run, then it’s not going to be a good acquisition.
Although you don’t need to acquire a site that’s profitable for this strategy to work, it’s better for those who have the budget to acquire a monetized site, as it will earn whether you’re ready to bolt it onto your brand right away or not. Also, you’re more likely to be motivated if you see it adding earnings to your portfolio.
The opposite can also be true: It is possible to lose sight of the bigger picture of this strategy and get too focused on the core aspects of audience and profit.
5. When You Focus Too Much on Audience and Profit
There are other highly useful benefits to implementing this strategy outside of acquiring an audience and profit generator.
- Gathering data for research
- Acquiring patents
- Acquiring trademarks
- Making acquihires for talented individuals
- Gaining useful technology
Domains alone offer many scaling opportunities for businesses, as a domain’s presence in Google is highly valuable, not to mention the brand strength it can build if you buy a short, memorable, and unique domain, which is hard to come by nowadays because of the volume of competition in the online business market.
It’s clear how well the big-picture of the bolt-on strategy could work. Now comes the question of whether it really does work. To answer that, we’ll look at some detailed, practical examples of the strategy in action.
A Detailed Example of the Bolt-On Strategy in Action: Low Budget
As you’ll know by now, one of the main goals of acquiring a content site is for its audience, not just its profits. Therefore, it is possible to scale your business with a content site that isn’t monetized.
To do that, you start by finding a neglected site in your niche that’s ranking for keywords you would like to target; you can further assess the health of the site in terms of SEO using tools such as Ahrefs and Google Analytics.
A simple way to find this site is through a Google search for a keyword you’d like to rank for. If a site you find that ranks for this keyword doesn’t have any affiliate links in the content, ads on the site, or it doesn’t sell any digital courses, then you can be fairly sure that it isn’t being monetized.
If you find that the content on the site is a good fit for your brand, your next step is to reach out to the site owner offering to acquire their site.
Unmonetized sites at this level are typically worth $500 up to $10,000, depending on its SEO strength. It’s not possible to say how big the audience needs to be for this acquisition to be worth it, because it’s about the quality of the audience that counts; a large audience might not be very active, but the site might have a small, highly-dedicated audience that will be much easier to sell your products to.
For example, if site A gets a ton of traffic but the site has a high bounce rate and the visitors don’t engage with the site, and site B has a smaller amount of traffic but visitors stay longer on the site and engage more with its content, then you should probably be willing to offer more money for site B, as that audience would likely be a greater asset to your business.
Once the site owner has accepted your offer and transferred the site over to you, it’s time to implement the bolt-on strategy.
You add the content that is most relevant to your brand onto your site and set up 301 redirects; a 301 redirect is where a site link redirects to a page that is different from the url.
For example, if there is a link on your newly acquired site to a piece of content that could be good for promoting one of your products, you would take that content and put it on your site and replace the link with a 301 redirect, which will send the user from the site you acquired to the content that is now on your site.
The benefit of this is that you get traffic for your current website that you can use to grow its Google rankings while increasing sales with a new influx of visitors.
This is a great strategy for generating extra traffic to your site, but would it work out financially to acquire a site that isn’t making money?
Costs Break Down Example
Let’s say you sell a low-ticket item for $5 and you acquire a site for $5,000 that is getting 250 visitors a day. Your conversion rate on your current store is 2.8% (which is about average) and you’re getting 800 visitors a day. That’s 22.4 sales a day from your store, which equals $112 a day and $3,360 a month, and with profit margins of 23.81%, let’s say you keep $800 of that in net profit.
With the new site you have acquired, let’s say you take 150 of those 250 daily visitors it is currently getting and send them to your site to increase your total site traffic to 950 visitors a day. Keeping with just your current conversion rate, and bear in mind that it could be higher as you’ll be getting traffic from a higher-quality audience, you increase your daily sales to 26.6, which is $133 a day and $3,990 a month in revenue, which would be $950 net profit.
In this conservative example, you’ve instantly increased your monthly net profits by $150!
Although there are maintenance costs associated with the content site you acquire, they are usually minimal, and the site won’t need much time to maintain because it has already established itself with Google.
With the extra capital you’re generating from the site, you can reinvest in adding content to it to increase your traffic and profits in a perpetual cycle.
As for the higher price range for content sites, these will be monetized. Acquiring a site that’s monetized comes with extra financial benefits, but with the considerable increase in cost, would it still be a profitable acquisition?
A Detailed Example of the Bolt-On Strategy in Action: Mid Budget
When you have an FBA business operating in the high six-figure to seven-figure range, product launching is a main growth strategy. The only problem is knowing which products to launch.
While research tools can help with this, they’re limited in that their data comes from the entire industry as opposed to a specific audience that would bring much more targeted insights.
If you were to acquire an Amazon Associates site, you would get access to the analytics dashboard showing you which products are selling within that site’s audience; this is a lot more targeted research than the alternative of searching for the products that are selling overall.
These data insights are also highly valuable to a larger content site, as you would be able to carry out the same approach of seeing which products sell the most and create content around that product.
When you can see which products are selling and you have the audience in place, you can go into your product launches with a powerful two-pronged approach.
To acquire this audience and the data that comes with it, you’ll be looking for an affiliate site that is monetized and earning between $2,000 and $10,000 net profit each month, which would put the value of the site between $80,000 and $400,000.
A key difference between a monetized site and an unmonetized site is that the monetized site will rank for money keywords and will therefore have affiliate revenue-generating content. The keywords are called “money keywords” because the audience searching these terms are showing intent to buy a product. They’re actively searching for information like “best product” and “product review,” so you’ll see higher conversion rates compared to content for keywords like “what is X product?”
With this affiliate content, you can swap out the links to other products—maybe there are ones to your competitors in there—and add in links to your products to make the content generate revenue for your business.
However, with the price of content sites reaching $400,000, it’s important to assess whether buying a site for this type of content would be a profitable acquisition.
Costs Break Down Example
Let’s say you sell a mid-ticket item for $250, and you acquire a site for $200,000 that is getting 2,000 visitors a day. The conversion rate on your current store is 3.5%, and you’re getting 1000 visitors a day. That’s 35 sales a day from your store, which equals $8,750 a day and $262,500 a month, and with profit margins of 26.67%, let’s say you keep $70,000 of that in net profit.
With the new site you acquire, let’s say you take 800 of those 2,000 daily visitors it is currently getting and send them to your site to increase your total site traffic to 1,800 visitors a day. Keeping with just your current conversion rate, and bearing in mind that it could be higher as you’ll be getting traffic from a higher-quality audience, you’ll increase your daily sales to 63, which is $15,750 a day and $472,500 a month in revenue, which would be $126,015 net profit.
In this conservative example, you’ve instantly increased your monthly net profits by $56,015!
Now let’s add the profits generated from the site into the equation.
A site at this price range would likely be earning $4,000 a month in net profit. If we add that $4,000 to your profit increase, you’re now making a total of $60,015 in extra profit.
With this acquisition, you’d get an ROI in less than 4 months! And this is just scratching the surface of the potential you have with this new audience. You would also get their email list and social media audiences to use for promotions and to drive even more traffic to your store or boost your Amazon product listings if you’re selling on Amazon.
However, there is always risk with online business acquisitions.
It’s important to understand that business in the online world doesn’t always work out as planned. While it’s smart to do the math and make sure you’re making a financially viable acquisition, you should never acquire a site that is out of budget or that you couldn’t afford to lose.
The online business world is volatile and quickly changing, so keep in mind that an acquisition like this might not work, even if you’ve put all of the pre-planning in place. That doesn’t mean that you shouldn’t plan the acquisition or choose not to implement this strategy. The chances are very much in your favor if you understand how the bolt-on strategy works and how to plan for its successful execution.
Now that we’ve looked at the core audience and profit acquisition examples for how to scale your business or portfolio, let’s take a sideroad and look at a different portfolio scaling tactic within the bolt-on strategy.
A Detailed Example of the Bolt-On Strategy in Action: High Budget
As I’m sure you are aware, when you have a portfolio of online businesses, one of your biggest problems is deal flow.
While we’ve talked about how the bolt-on strategy can be used to scale businesses within your portfolio, you can also use it to increase the size and quality of your deal flow and add more profit-generating assets to your portfolio.
This strategy gives you the opportunity to expand your portfolio to include other business models related to the core business model your portfolio is built around. For example, if you have a portfolio of ecommerce businesses, you could acquire a SaaS that deals with inventory management, a 3PL warehouse, and a marketing agency that works with seven-figure plus ecommerce brands.
By owning these additional assets, you have access to the ecommerce companies who are using those services. You can even see how a business is performing in their marketing or inventory management because your companies are the ones managing them.
Using the bolt-on strategy, you can build up your own internal deal flow system of quality ecommerce businesses. With this system in place, you get instant access to quality businesses because you only need to use one of your companies that is managing an aspect of a business and start conducting some due diligence into the asset.
While you’re now aware of the many scaling potentials of this strategy, you might still have some hesitations about the capital and resource commitment required to implement it successfully.
While it does require considerable commitment in those areas, when you compare it to the alternative ways of building your own audience from scratch, you might find it a more viable option.
Three Alternatives to the Bolt-On Strategy
There are really three core online audiences you can build: search engine, organic social, and paid advertising.
If you’ve built a business from the ground up, you’ll know what goes into building one or more of these audiences. If you’ve only ever acquired already-established businesses, then you have been able to skip the audience-building process, which is the main benefit of the bolt-on strategy.
Either way, these are the three alternatives to acquiring an audience.
1. Build Your SEO-Based Audience From Scratch
It can take months, even years to build a presence for your brand on Google. It’s a laborious process of researching keywords to target, consistently pumping out content, and optimizing your content for searches to increase its ranking.
If you don’t have the necessary time and skills to dedicate to this audience-building operation, then you will have to pay SEO experts and writers to build your organic search channel. Needless to say, the work of these experts comes at a price, so make sure you have the disposable capital to invest in this type of project.
If you opt for a social media-based audience, you’ll likely face the same roadblocks.
2. Build Your Organic Social Audience From Scratch
As with an SEO-based audience, it takes months to years to grow organic social traffic.
Also, social media is one of the weakest traffic sources. The audience on social platforms isn’t actively searching for products like they are on search engines like Google. Having said that, statistically, Pinterest has shown to be a profitable channel.
However, even to utilize a channel like this, you’d need a graphic designer to design your posts as it is a visual channel. And that goes for any social channel: you’d need an expert to build that channel for you or show you how to do it, which would take a lot of your time and money.
There is an option to speed up this audience-building process, but that option also comes with its own costs.
3. Run Paid Ad Campaigns
Though paid advertising campaigns are the fastest audience-building channels and can be the most profitable if optimized really well, they are tremendously costly, time consuming, and you will lose a lot of money in the experimental phase of building your campaigns.
Like the other traffic channels, it takes a lot of expertise to build an audience from scratch. You would have to develop this expertise through your own learning or pay a hefty price without any instant wins.
By acquiring an already-established audience, you skip this building phase and are instantly rewarded with new traffic and profits.
Ready to Use the Bolt-On Strategy to Grow Your Business or Portfolio?
The first step is to find a content site that is right for your business. This is a site that is in the same niche as your business or businesses, one that is affordable, scalable and easy to maintain, and one that is profitable, if that is part of your strategy.
To find your ideal bolt-on site, register for a free Empire Flippers account and use our advanced marketplace search filters to sift through our many quality businesses and find your ideal site in minutes.