WES S02E03: Should I Start With Building Or Buying Sites?
If you’re just starting out, you might have asked yourself the question, “Am I better off building or buying sites?”
It’s a fair question – one we attempt to help you answer in this podcast episode.
We look at some of the advantages and disadvantages of each approach and break down the Money-Time spectrum to see which might be a better fit for your situation.
While we can’t answer the question for you, we hope these insights will help you make a more informed decision on building up your online portfolio.
If you’re liking this show and want to give us some love, make sure to stop by iTunes and leave us a review! That’s the best way to support the show and helps us spread the word.
Listen To The Full Interview:
Podcast: Play in new window | Download
What You’ll Learn From This Episode:
- Required Skillsets For Buying A Site?
- Internet savvy + Google-Fu search skills
- Buying and setting up domains, hosting, WordPress
- Intermediate skill in at least one (more is better) traffic channel
- Basic understanding of the different monetization methods and ups/downs of each
- Intermediate understanding of at least one platform you’ll be primarily using
- The Website Buying Spectrum
- Point 1: No money, lots of time
- Point 2: Some money, good amount of time
- Point 3: Good money, some amount of time
- Point 4: Lots of money, no time
Featured On The Show:
- Empire Flippers
- Michael Henman @ Return on Conversion
- Pat Flynn @ Smart Passive Income
- Spencer Haws @ Niche Pursuit
- Dominic Wells @ Human Proof Designs
- Anton Kraly @ Dropship Lifestyle
- Jon Haver @ Authority Website Income
- Tung Tran @ Cloud Living
- Ace Chapman
- Tropical MBA
Justin Cooke: There’s no quicker path to getting income than buying a site.
Speaker 2: Buying and selling businesses just got a lot easier. Welcome to the Web Equity Show, where thousands of successful entrepreneurs go to learn about buying, growing and selling online businesses. Your hosts, Justin Cooke and Ace Chapman share their real life advice, examples and expert interviews to help you build and grow your own online portfolio. Now, to your hosts, Justin and Ace.
Justin Cooke: Welcome back to the Web Equity Show. This is season two episode three also known as the 19th episode. I’m your host, Justin Cooke, and I’m here with my co-host, Ace Chapman. What’s going on man?
Ace Chapman: What is up Justin? I’m loving this, the second season so far, man. I’m excited to hear what people think about it.
Justin Cooke: Yeah, buddy. I’m calling in from Manila, Philippines. You’re in where? Tennessee right now?
Ace Chapman: I just got back to Tennessee literally this morning. Did the red eye from LA.
Justin Cooke: Yeah. You were telling me you were digging LA, man. I’m not an LA guy. I’m kind of a northern California guy. I love San Diego, but I never really connected with LA, but you’re telling me you’re digging it.
Ace Chapman: Yeah. I’m spending some time. As some folks know that there may be a possible rituals show about flipping businesses that some folks are working on out there. I dreaded having to spend time in LA because I’ve heard so many bad things. I lived in San Diego for about six months and loved it and popped up there a few times, but I’ve just never spent a lot of time in LA just going back and forth. But I’ve really enjoyed it. There’s a cool little scene there, meeting some guys there, I’ve got some clients there. So far so good. We’ll see maybe like three months from now, I’ll be like, “Oh my goodness, get me add this place.” I will say the traffic is just on another level. I’ve heard people complain about it, but it is on a whole another level like anything I’ve ever experienced.
Justin Cooke: LA traffic is bad. I’ll tell you though, I really think Manila traffic might have them beat, man. It is crazy [crosstalk 00:02:08].
Ace Chapman: You could be right.
Justin Cooke: It’s horrible. At least in LA, the freeways are nice and five lanes, six lanes wide. But yeah, man, I can get pretty sketchy out here. Anyway …
Ace Chapman: We’ve been stuck in that Manila traffic together as well.
Justin Cooke: Yeah, for sure. All right man, let’s get into the episode. We’re talking about answering the question, should I start with building or buying websites? This is something we hear quite a bit.
Ace Chapman: Yeah, man. And after my episode 16 I started getting a lot of questions about this whole debate of build versus buy, and for those who are gonna go back and check out that episode, the real point of that was that I would set aside a small percentage of things to test because you should always be experimenting and testing. But I’m excited to dig into this debate a little bit.
Justin Cooke: Yeah. There’s an easy answer for the people who don’t have any money. If you don’t have any money, well, you know where you got to start. You got to start building. But for everyone else there’s a lot more nuance there. And I think sometimes I’ve given answers and for certain people I’ll give one answer and other people I’ll give another answer and I’ve had that thought through in my head a bit, but I really wanted to kind of get into the weeds here and talk about what type of situation might be a better fit for you. We’re gonna to do that through, you know, explaining the spectrum of people that are in the buying side space.
Ace Chapman: Yeah, and it really is based on who you are. I don’t think, with any of this stuff, there’s an end all be all, here’s what you should do and here’s the business and here are the exact steps. Being an entrepreneur, being a business owner, being a business buyer is very dynamic. So yeah, I think that’s a great way to break it down.
Justin Cooke: Yeah, buddy. So, we’re bringing it basically in two pieces or two parts. The first thing we’ll look at are the skill sets you’re gonna need or are you gonna need to learn to run an online business or a website that earns money. We’re gonna talk about the basics. We’re gonna talk about what you just absolutely have to know, and then we’re going to get into the spectrum and where you are along that spectrum and give you advice or guidance as far as we see it on where you should be in terms of building sites or buying sites for your portfolio. Before we do that, buddy, let’s do some listener love. First up, we’ve got an iTunes review man, five stars.
Ace Chapman: Five stars.
Justin Cooke: Yeah, man. It says, “Great podcast, just what I need to hear.” It’s by Emmy Bear 23. “Awesome podcasts. I’ve been following Justin and the Empire Podcast for a while. I recently started my own web portfolio by buying two online businesses from the Empire Flippers this year. The show’s exactly what I need as I started to scale up my own online empire and these guys know what they are talking about.” Well, I really appreciate that Emmy. I wish you the best of luck with your portfolio. We’ve got a Twitter mention, buddy, from Brad W., said, “I have four content sites that I’m interested in selling. Would I be able to sell all of them as a package to increase value?” What do you think about the Ace? Package four sites or sell them separately?
Ace Chapman: Obviously, one of the things that people try to do with that is increase the sales price because the larger the site, the more money you’re gonna get. But the truth is, until you get pretty big, it’s not gonna make that much of a difference. And the biggest downside to packaging is you may lose out on somebody who’s interested in the strategic value of one or two of the sites. So, I would say if they’re in a similar niche, doing similar things and it makes sense, then that’s something to consider. But at the end of the day, if you got an eCommerce site, you got an affiliate site, you got an AdSense side and some other content blog or something, just that doesn’t make sense to force them all together. He’s got the four content sites, I would be curious if they’re the same niche or not. But the more closely aligned there are, the more it could work.
Justin Cooke: Yeah, I agree. The more closely aligned, the better your chances are and the more reason there is to package them together. Totally agree with you. If you have an eCommerce site and drop shipping site and an AdSense site and an Amazon site, those are your four sites? I don’t know, especially if they’re worth different values of one worth 70 and the other one’s worth $6,000 right? Like it might not make sense to package them. So, the best answer I can give is it depends.
Now, the content based sites and the Amazon affiliate sites and they’re all worth somewhere between $5,000 to $20,000-ish and you want to package those together, I think that does make a lot of sense and that’s probably going to be what you should do. We had an email man, from Mike ,H. He said, “Hey, Justin and Ace, I just wanted to say a huge thanks for all the inspiration and great podcast. In the past, I bought and built websites on the side, but listening to your show this last year has really pushing me to do it full time. I’ve made some big gains over the last six months following Ace’s mini-mogul business strategy and I’m looking forward to the next season of your podcast. I recommend it to everyone I know who asked me about what I do. Thanks again for everything you guys do and this is Mike from returnonconversion.com. Thanks Mike. I really appreciate it.”
It’s good to hear your mini-mogul business strategy is working out, man, maybe that wasn’t so badly named Ace. Maybe you’re onto something there.
Ace Chapman: The mini mogul business strategy. I love it. A lot of people that I talked to that are following that process and speaking of building or buying, I think that’s one way that if you’re starting from something small and want to grow into something big, that’s something to check out on the Empire flippers podcast as well.
Justin Cooke: All right. Ready to get into this?
Ace Chapman: Let’s do it.
Justin Cooke: Ace, the question is should I start with building or buying sites. As we said at the top of the show, we get asked this question a lot. I get asked this question a lot. I give different answers depending on where people are and that’s what I try to draw out of them and I give different advice. I wanted to give a framework for understanding the answer to that from my perspective. I really want our listeners here to be able to walk away from this episode, know the position they’re in and get some good ideas in terms of what approach they should take for either building or buying sites.
Ace Chapman: Yeah. People end up in this making it a lot tougher decision than it has to be. You can start with one and then move to the other. You can go out and buy a site and then try to start one from scratch. You can build and then by, so it’s not an end all be all. But I think this episode will help people in making decision of what they want to do first.
Justin Cooke: Yeah. One quick note Ace, I think you might find this interesting if you didn’t know that, but we’ve been doing this for years. We’ve had sellers that have been working with us. They build sites from scratch and they build them up and sell them. Some of the sellers have done hundreds of thousands of dollars with us. What we’re finding is that some of those sellers that just started off as like build from scratch and sell, are turning into buyers. I think that’s interesting. So, it seems like it’s a progression. Not for everybody, but I’ve seen this happen enough times where it’s interesting where they built enough sites from scratch and now they’re like, “You know what? I’ve got the capital, why don’t I just invest in sites are already doing well and make improvements to them to make them do even better.”
I think it comes down to an ROI on their time. They’re just like, “Look, I don’t want to work a ton of hours on a brand new site or business for the next 18, 24 months to get up to speed. Why don’t I just take over one that’s already making three, four grand a month?”
Ace Chapman: This is probably as you can do a spoiler alert, but there’s no quicker path to getting income then buy a site. If your goal is, “Hey, what’s the quickest and easiest path to just getting some money coming in, it’s going to be buying a site and so yeah, that makes a lot of sense that guys would end up doing that.
Justin Cooke: Yep. So, let’s talk about the skillsets that are required for buying a site. So your grandma Ace, she’s like, “Ace, I know what you’re doing. I want to …” I’m trying to be your grandma where that’s totally not working.
Ace Chapman: Oh my God.
Justin Cooke: That’s horrible. Maybe you should do it. I don’t know. But either way, so she asks you. She said, “Ace, I want to buy a site. I like these like earning site businesses. Let me get involved.” And she wants to know what kind of skillsets she needs. I don’t know about you, but my grandmother, even my mother would struggle. She does not have the skillsets that are needed and could not buy a site out the gate. There are some things that she would need to learn.
Ace Chapman: Yeah, I cannot imagine my grandmother or my mom, and honestly not even my sister. My sister owns offline business, and I started talking about this stuff like, “Man, we should …” and I’m a partner in the business. “We should go out and we should roll up some businesses. You’ve got some employees you can start to run. They can help out during the down periods of running some of these online businesses.” And we get into the nitty gritty. And she’s like, “Oh my goodness, this is crazy.”
Justin Cooke: She’s like, “Yeah, I can run this type of business. I can run that type of business, but I don’t know what the hell you’re talking about your websites.”
Ace Chapman: Yeah.
Justin Cooke: Yeah, so let’s get into some new skillsets. The first one is not a very objective measurement. Let me just give it to you. It’s being internet savvy and having some Google Fu when it comes to your search skills, you’re being able to research stuff. I know this sounds a little vague, but being able to figure out how to do things on your own and where to look for good information, how to discard bad information is critical for anyone that wants to run and own an online business. Being able to decide whether or not this bit of advice is good advice, where this bit of advice is bad advice and really getting to the meat of the things you need to know, I think it’s really critical.
Ace Chapman: It is. And there is so much information out there, which is a part of the problem because you can find answer to anything. But the question is being able to figure out what answers to actually trust.
Justin Cooke: Yeah. So, let’s say I have a site, I want to add an email opt in to it and I want to connect that to something that allows me to send out automated emails, an auto-responder. Let’s say I’m gonna use something like AWeber, which is a company that does that. I need to be able to go to YouTube and look up a walk through on how to set up an AWeber account and how to get that first opt in on my site. If I’m not able to find that information on YouTube or write up or whatever, then I’m going to struggle. Now, you don’t have to be total Internet dork. You don’t have to be a mod on Reddit or something. That’s not required, but you gotta have some skills.
Ace Chapman: Yeah.
Justin Cooke: All right, man. Second thing is buying and setting up domains, hosting and WordPress. This is a skill you either have to have or you have to have someone that can do it for you. Right?
Ace Chapman: Yeah. This is the one, unlike the first one, this is one that you can outsource. At the end of the day, I’m not setting up my own domains, I’m not handling the transfers and hosting, even once we bought a site, quite honestly, we’ve got people that are doing the editing and the WordPress and all that stuff. The first skill you need to be able to do those things because you have to figure out the strategy and understand what’s going on in your business with setting up the things like this, it’s more technical and it’s honestly something that is very … it’s an inexpensive skill. So, you can go out and quickly, easily hire somebody and they’ll be able to do this efficiently and easily for you.
Justin Cooke: Yeah, I think there’s some value in understanding how it works at least because for example, let’s say I’m buying a site, and I don’t actually have the domain name in my account or under my ownership, I could get pretty badly screwed on that deal. So, if they’re like, oh, let me put it in this other account that they actually own or control, they send me confirmation via email from that account that it’s in, well, I could still be screwed because they own that GoDaddy account or whatever. So, there are some things you need to know in terms of how it works, and if you have someone that you trust that you’re working with, I think they can do it for you. But having some understanding of how that works I think is important. And then, I think, again, this relates back to number one.
If you’re Internet savvy, if you got some Google Fu, you can look up how to do these things. There’s a zillion tutorials on how to get your domain set up, even from specific companies. How to set your hosting, even with specific companies. Same thing with WordPress, how to add WordPress the site. I hadn’t done this, Ace, for quite a while, and I had to go back and buy a domain set up hosting, buy a theme, get it set up on WordPress on my own. I was doing it for my girlfriend, helping her get her site set up, and I’ve forgotten a bunch of this stuff. I haven’t done it for years. I was like going in the GoDaddy account. I was like, “What did I do here again?” I’d Google search that real quick and figure it out.
Oh, have I [inaudible 00:14:54] WordPress? I need to know how to do that. So I could talk my way through it and figure it out. But I think you’re going to need some of those skill sets if you want to run an online business. The third thing you’re gonna need, I think this is really important, is you’re going to need at least an intermediate skill and at least one or more traffic channels. Let me explain what that means. You can build it and they don’t come right? It’s not a feel the dream situation where you just build it and all of a sudden the traffic starts flowing in. You’ll see that’s probably the number one problem with newbies is they build a site and or they buy a site and the traffics coming in, but let’s say the traffic starts to decline, how do they get more traffic? That’s a big question that they have.
So, you got to have at least one kind of traffic skill set in terms of bringing in the visitors.
Ace Chapman: Yeah, that’s a tough thing to decide on because it’s always changing. It’s not like you can go out and get a single skillset, and you learn everything and then you’re good to go. Once you get that foundation of knowledge, it’s always changing. I mean, even down to what you were just talking about, Justin, one of the things with putting a domain name and uploading WordPress to a GoDaddy hosting account is they’re always changing. Everything, and all of this stuff, it’s always changing. So, when it comes to that skillset, you wanna pick something that isn’t one, just a fad, where you’re like, “Oh, there’s this inefficiency in this market right now and I’m not going to be able to take advantage of that tactic later.” And makes sure that you’re focusing on strategies over tactics that are gonna be around for the long haul.
Justin Cooke: Yeah. We’re talking generally here, so let’s get a little more specific. What do we mean by a traffic channel? One of the biggest, and probably most widely known would be organic search traffic from Google. So, to get that traffic, there’s a bunch of things you needed to, you need to get good at keyword research and by research and keywords you start to figure out which keywords are highly searched and you can find out the exact searches for that exact keyword per month. You can find out what the competition is like, how difficult it looks to get on the first page based on the other people that are there. And then, you can start to figure out how to sculpt your SEO both on page and off page to help you get to that first page so you can start getting some of the traffic from the x amount of searches that are done per month.
Proficient at that one traffic source is of value. Now, there are others. There’s, let’s say social media traffic in general, Facebook, Twitter, Instagram, that kind of thing. Maybe it’s a paid traffic on Facebook, maybe it’s even another one would be Google AdWords paid traffic. So, bidding on certain search terms. It doesn’t really matter to me which one you get good at. I’d say SEO is definitely the most common. If you have that skillset, you’ll find more sites to buy that rely on that skill set that you can build on with that skill set. If for example, you only paid Facebook traffic as the one traffic source you wanna learn first as the most important, you might have less options out there in terms of the sites that are available for sale that get paid Facebook traffic, if that makes sense.
Ace Chapman: Well, and the one thing that I would add to that really quickly is you can find these opportunities to buy something that uses one strategy, and you see the opportunity to grow it. Actually, we just bought a business from you guys, Justin, where all of the traffic is social and that’s a new thing that you can get such a powerful amount of traffic from social and that’s the whole business. And so, to be able to diversify that, we’ve got somebody to network that’s just amazing with Facebook ads. And so, he’s able to continue to the strategies that the seller was using for social, but then add on top of it the PPC. So, yeah, picking one channel and getting really good at is powerful.
Justin Cooke: Yeah, dude. I think one of the reasons you want to pick one channel and really learn that and get to know it really well is because there are so many different traffic strategies out there that are different. And so, they take different skills. If you take a shotgun approach to this, you’re gonna be slightly okay at like five or six different strategies. But that’s really not helpful. If you know a little bit about a bunch of different strategies, that’s a lot worse than knowing a lot about one strategy. And over time, you’ll pick up the rest, but get really good at one. In this particular area I’d say shotgun approach is not as good. Really focusing on the one and getting good at it, it’s gonna be much better for you. But a side note.
I was interviewing for a content manager positions and one of the guys, a young guy, and he gets a lot of traffic via social media to his blog or his own site. He gets like a ton of traffic from Instagram and just social. He’s really young, like a millennial. It just seems like understood to him that that’s where the people are and that’s how they get there. And I’m like, “God, I’m getting old, man.” I think like what’s understood is Google search, like Google search is the way you get traffic. He didn’t think about it. He was like, “No, I get it from social, Instagram mostly.” I was like, “Whoa.”
Ace Chapman: Yeah, man. I have to second that. I’m looking at the business that we just bought from you guys and I’m like, “Wait a minute. So, all of these eCommerce transactions are coming from Instagram? What’s going on here?” Yeah, it’s pretty awesome.
Justin Cooke: Yeah, it’s crazy. That guy’s a travel blogger. But yeah, depending on, especially depending on the type of eCommerce business you have, Instagram is just as fantastic for that. It can drive a ton of traffic. Yeah, getting back to the point, yes, get really good at, at least one traffic channel, more is great over time, but really focus and double down on the one, get good at that. And that’s to help you pick the sites that you’re gonna want to buy later on. The forth I wanna mention is you need to have a basic understanding of the different monetization methods and the ups and downs of each. I said no shotgun strategy when it comes to traffic.
I’m saying a bit more of a shotguns strategy when it comes to monetization methods. So, you should have a basic understanding on how the following work, things like AdSense, things like Amazon affiliate program, other affiliate programs, drop shipping, eCommerce, product ties services, software as a service or SaaS, paid forums or communities. Understand what each is and how it makes its money and how they vary in terms of a business model or a monetization model.
Ace Chapman: Yeah, there’s nothing scarier than getting a call from somebody who is considering a site, they want some advice and they started to talk to me about the deal and I realize they don’t really understand what drop shipping is. You got to understand the basics if you’re gonna get into this stuff. It’s a dangerous thing to even just get a basic understanding and not know what the intricacies are. It can be really punishing. I was talking to a guy who just started working with us, and in this last deal he ordered some products from China in the business and didn’t understand basically the requirements were coming through customs and all that stuff and almost faced a $20,000 fine. So, you got to understand what you’re doing when you’re in this stuff.
Justin Cooke: $20,000 off. There goes your profit margins right there.
Ace Chapman: Gone. Literally, that was the profit margin on that delivery.
Justin Cooke: I’ll be working for free on this shipment on this shipment, on this container. Yeah, I think understanding or be able to answer questions like how would my site content be different if it’s an AdSense site versus a drop shipping site. How would my sales funnel be different? To the point of, on the drop shipping site, and you’re actually trying to get them to purchase something. So, it is copy. You’re writing sales copy, whereas an AdSense site, you’re not really driving them to do anything. The ads are like mixed into the content. The content is there for content sake. Whereas, a drop shipping site, you’re driving the to purchase. Understanding that, there’s gonna have to be some kind of a cart abandonment funnel. Like if someone gets the cart, they don’t actually purchase. Like do you have their email? Can you contact them? How can you follow up to get those sales done?
So understanding the sales funnel for one type of business versus the other I think is important as well. You don’t have to be an expert on any of those. But I think to have a basic understanding, you’re gonna be in much better shape to buy a site because you’re gonna know how one makes money over the other. The fifth thing I’m gonna mention is, you’re gonna need at least basic, maybe intermediate understanding of at least one of the platforms that you’re gonna be using. I’m going to say 90 plus percent of the time, what this means is you need to know WordPress. You need to know how to add content on WordPress, you need to know at least basically how a WordPress set up works on the site, just general stuff with WordPress is gonna be important.
I think if you’re eCommerce, that price switch from WordPress, you’re probably looking at Shopify. That’s the major player. So, you’re gonna need to know how to add products in Shopify, how to upload spreadsheets of products, these kinds of things are … you’re going to need to know where you need to learn really quickly.
Ace Chapman: Man, I just have to say on this one, I feel like right now we are in a golden age of being able to buy and sale sites. A lot of people don’t talk about this, but years ago every site was basically custom built. Every time you were doing an eCommerce deal you had to figure out, okay, is my program are gonna even be able to work on this? How much of the coding or are we going to have to get in and change? If we do any changes, we’re probably just gonna have to totally scratch this site and build it from scratch. It’s amazing. And so, now to have these standards where most of the sites are on WordPress, and so immediately, you can take that thing over. You already have the skill sets on the technical side to be able to run that thing. That’s amazing. Or it’s eCommerce and on Shopify, and immediately, we’ve done a few a Shopify deals this year. Immediately my guys know exactly what to do and it’s the simple transfer, simple management.
I think it’s one of the things that will lead to multiples and just all that stuff going up and more people coming in. But understand that that is a very new thing to take advantage of.
Justin Cooke: Ace, you are absolutely 100% right. In addition to that, I know that there’s at least one tech guy that’s listening to this, and he’s like rolling his eyes. He’s going, “You guys are putting a crappy, bloated WordPress on your sites. I could make it so much faster and the speed is gonna be five nanoseconds faster and then I’m gonna get your two positions higher in Google.” I get it. I totally get where they’re coming from and there’s a lot of truth to what they say. All that being said, WordPress changes the game for the non-tech geeks. For everyone else, WordPress is really straight forward and very similar thing with Shopify.
You can mix and match. You can change colors and styles or you can totally change your site. And think, man, like my buddy and I had a site, this is back in like 2002 or something. We thought it was a huge deal. We had to pay this guy and try to figure it out. It was really, really challenging. All that stuff’s gone. It’s so much easier today. And you’re right. I think you’re right. That’s why it’s like ushering in this new era for people to be able to buy, run and sell all my businesses. It’s completely changed the game, particularly WordPress, man.
Ace Chapman: Yeah. WordPress is huge. Don’t even start to compare it to what we go through with offline businesses and figuring out the systems and all that stuff. This is a very unique thing and pretty exciting.
Justin Cooke: Cool man. So, the second part of this, so that I want to get into is the website buying spectrum. I want to explain what the spectrum is and how our listeners might understand where they fall on this. So, everyone’s gonna fit in somewhere along the spectrum. This spectrum goes from, you have zero money or very little money, almost nothing. And you have plenty of time. Your time is a very available resource, all the way to the point where you have tons of money and you have absolutely no time. You’re really busy or whatever. Every one of us fall somewhere along that spectrum. So, we actually picked out four different points that we’re going to focus on for this episode. The first one would be no money, lots of time. The second will be some money, a good amount of time available. The third will be pretty good money and some amount of time. And then the fourth would be lots of money and no time.
So, we’re gonna go through each, describe them and then see if our listeners can see where they are at on that spectrum and then take what we discuss. The first one man, no money, lots of time. Let’s talk about who this person might be. This is someone that, let’s say they just got out of school, they just graduated college. Maybe they’re between jobs. Maybe they were laid off or they quit their last job, don’t have a new one. They have a very strict or tight budget. They don’t live in a very expensive area with a low paying job and maybe there are middle class and like a developing country, Philippines or Vietnam or something, and they just don’t have the cash really to buy much of a website. What do you think, Ace? Is that pretty good a description?
Ace Chapman: Yeah, and I see a lot of these folks man. It’s exciting to see some of them growing some incredible businesses that, especially the people that are overseas maybe in developing countries. The money they make is very … it’s amazing for the country that they’re in. And it may not be a big deal to us. I see a lot of this online now, and it’s starting to open up and go to those countries, but a lot of times they’re gonna start out with a budget of less than $1,000. Bottom line is they’ve gotta bill. It’s smarter to build when you’re in that situation.
Justin Cooke: Yeah, they’re stuck. They have a budget of less than $1,000 bucks. Maybe they have 500 bucks, they have 600 bucks, they’ve got plenty of time. They got virtually no money and there’s really no other choice from … they got to pick a niche, they’re gonna have to get to work and that’s it. So, they’re going to have to look for a monetization model and a traffic source. Where, as we said earlier, pick one traffic source and get familiar with most monetization models and then whatever it is they pick or they run with, they’re gonna have to stick with it. This is where a lot of people that are building get thrown off as they start. Let’s say they pick organic SEO traffic, which means your traffic from the search engines and the drop shipping model.
And then, two months down the road when things get a little confusing, or a little difficult, they go, “Oh, you know what? I don’t like drop ship anymore. I’m gonna create an Amazon affiliate site. That seems to be popular. I read this blog that talked about it.” You see people bounce around on this monetization model ’cause it seems kind of cool, and they abandoned the previous skills they had and when really they were just going through the dip. Like they were just learning it, they were about to pull out, they saw the light at the end of the tunnel, or they didn’t see it and they got distracted and started chasing after some other squirrel. Right?
Ace Chapman: Yup. What I tell people is if you’re gonna do this strategy, one of the greatest things you can do is cancel your subscription to everything else because something’s gonna come in your email and yeah, it’s gonna be like chasing the squirrel. It’s, “Oh well, this is really what I need to be doing.” You read the sales copy, and you started to go down that rabbit trail and only to be distracted a couple of months later. And that’s the number one reason that a lot of people that try to go down this path of building not only just don’t have success, they never make their very first dollar because they’re jumping from thing to thing to thing.
Justin Cooke: Yeah, I think that tunnel vision that like absolutely I don’t care. I’m ignoring it. You talked about unsubscribing from emails. I think that’s a good idea. Just totally focus in on what they’re doing. And really the goal here, like you said, a lot of them don’t make their first sale. They don’t make even a few dollars. And that’s really their goal. It’s just make a few dollars and get a few sales online. It’s a psychological thing too. They have very little money, probably skeptical overall on whether they’re going be able to make it work, but forget about all that. Just put your head down, get to work, make your first goal to make a little bit of money.
And then there’s just like shift that happens where they make their first sale, they make a few more sales and they start to realize, wow, you can actually make money. People are paying money or they’re paying me for advertising or whatever online. This is legit. It actually works. And so, I think they need to get over that, it doesn’t work or I can’t make it work to start seeing that success. By success, I’m saying 30 bucks, you know what I mean? Just something, any dollars. Then they’re like, okay, now I see it. Let me expand these efforts.
Ace Chapman: Yeah. So, the next one is, you’ve got …
Justin Cooke: Really quick.
Ace Chapman: Okay.
Justin Cooke: Really quick. A couple of resources for the person with no money, lots of time. I think this would be helpful, and they’re tried and tested and true. I mean, smart passive income, Pat Flynn over there, smartpassiveincome.com is a really good site. He’s got a really a lot of good information on there. He’s around a long time and I think is helpful. Another one is Spencer over at nichepursuits.com. If you’re looking to get started, he’s got years of content that can help guide you and help you get started. I think both of those are really helpful. All right man, What’s point number two? Let’s get into it.
Ace Chapman: Yeah, so the next step in the spectrum is the folks that have some money, and they have a good amount of time. So, when you’re looking at the people that are in this situation, most of the time they’ve got a decent job, they’ve got some income. They may not be banking a ton of cash right into the bank, but they’re paying bills, they may be early in their career, but they’re making a little bit of money. Other folks, they may be working part-time and so they’ve got a ton of extra time outside of that and their part-time job is covering their bills. And what we’re also seeing is a ton of people that are moderately successful consultants. They’re not making millions of dollars a hundred thousand dollars each month, but again they’re saving a little bit of cash, they’re paying their bills. A great thing about the successful consultants is they’re building some skills that they’re gonna be able to leverage in their business.
Justin Cooke: Yeah. This is a pretty wide range of people. They’ve got some money, they put a little bit of money away, but it’s not enough to where, they’re not balling, they’re not banking a ton of money, but they’ve got a bit of a budget where they can kind of get started. So, they’re not starting with absolutely nothing. And they do have some like requirements in their time. Let’s say the people in this range, let’s say they have somewhere between a thousand bucks and $10,000 to get their online business going, I think some good options for someone in this situation … The problem is they don’t have enough money to buy a really quality established earning site.
Someone’s got six grand. This guy, Mike, let’s say Mike has six grand. He can buy a small starter site, but he’s not gonna be buying an online business like a full on online businesses. It’s gonna be small, it can be small to be small order. I think one option for Mike is he can buy a no or low earning starter site and tried to reverse engineer it. So, let’s say $6,000 I buy an Amazon affiliate site that’s making 250 bucks a month, 300 bucks a month, not a ton of money, but I’m going to buy that just knowing I’m gonna pull it apart.
I’m gonna buy this site, I’m gonna just dig into it, pull it apart, see how it’s actually working and then build it out from there and see if I can duplicate the success that I’d had. One of the benefits of this approach is that it jump starts your learning curve. So, instead of starting from scratch like the last guy, like your goal is like to make the first $5 sale or make it a $5 clicks or whatever, this guy already has earnings right away. That’s out of the picture. The site’s already earning. It’s just seeing if you can reverse engineer it and duplicate the process.
Ace Chapman: Yeah, I feel like this is a great hack because most of the people that are in this stuff, they literally have never made their first dollar, or especially not made profits. They may have made a little bit of their costs back, but they’re not making consistent profits. And so, to be able to buy even a $6,000 site that is making positive cash flow every single month and be able to reverse engineer that, I feel like there’s more valuable than even going out and paying the $6,000 for a course, that you may end up in the 80%, 90% of people that never make the first dollar.
Justin Cooke: Yeah, I agree. Because this one, you’re actually kind of digging into it yourself. You’re the one that is getting your feet wet by digging in. So, you’re gonna need some time. That’s the thing. The strategy is gonna take a bit of time and hopefully you’ve got that. I’ve gone back and forth in this, man. I beat up some of the course people, they’re selling info for 500 bucks or 3,000 bucks or 800 bucks or whatever. It’s like really, come on. It’s crazy margins. You don’t need to do that. But the truth is, is that most of that information out is out there for free somewhere. So, someone could go get it if they wanted to, but it saves you time. And if you’re not good at digging through what’s legit and what’s not, you don’t know if this would really work or if this coming from someone who’s actually done it before or they’re just making stuff up, generally if you pick a good course from someone that’s recommended, has been around for years, you’re gonna be in better shape.
Again, for the last guy, if you pay for a course, let’s say I’ve only got a budget of 1,500 bucks. That’s not a lot. I can’t buy much in terms of sites, but 1,500 bucks would give me a good start on a particular path or model in terms of course, if I can put my head down, if I can focus on some tunnel vision and really just do that and stop bouncing around from different monetization models, I think I’m gonna be in much better shape to making it successful. Now, I don’t get the advantage of starting off with a site that’s already profitable, but I’ve got a blueprint or a path I can follow in terms of building a site that other people have had success with as well.
Ace Chapman: Yeah, and at the end of the day, if you’ve only got $5,000, I’ve seen people that go and buy a bunch of courses, and again, they’re distracted, they’re doing a lot of different things as opposed to saying, “Okay, here’s what I’m gonna do.” And then going down that path. So, there’s some great resources here. If you’re in this range, the $1,000 to $10,000 budget range where you’ve got some cash, it’s sitting in the bank and you’re trying to decide what to do next.
Justin Cooke: Yeah, one of them is human proof designs guy run by, his name’s Dominic. What he does is a cool quality clean sites from scratch. They’re not earning anything, but they are good sites and built in a way that will over time get them traffic. So, if you don’t want to mess with completely doing it yourself from scratch, but you can’t afford to buy a site, let’s say you don’t have $8,000 you’ve got $1,500, this is a way to get a site, get it started and save the hassle on the front end of setting up all this stuff and getting all that done. I know him, I know that’s a legitimate source for you to check out. Another one that I know is a legitimate course is Drop Ship Lifestyle. And I don’t recommend a lot of courses because, we talked about this before the show, Ace, right?
You need be pretty careful in recommending courses. This one I know is good. Show actually went through the course, my business partner went through this course and vetted it. I know people personally that I’ve had some success with this course. I won’t guarantee you or anything and it’s not necessarily gonna make you successful, but it is a viable business model that you can follow start to finish. Some other websites you can check out is a guy named Jon over at Authority Website Income. He has a lot of really good content. I think if you’re building these sites, or you’re looking for info, he’s great. I think Tung Tran, over at cloudliving.com, has a really good site in terms of content. He’s actually gotten an authority site case study he’s been working on for the last few months that I think is really interesting, so you can check that out too.
Ace Chapman: All right, let’s go to the next group in the spectrum. These are the folks that have a good amount of money, and they’ve got some time that they can invest in a deal, so people that fall into this category, they’re going to have a strong career, they’ve got a pretty good income, they been saving for a while. It’s enough to get started doing the deal, but they may not go into that business and be able to work in it full time. So, you’ve got to take that into consideration. How much time they’re able to invest versus how much money they’re going to get from the deal. Most of the time, the budget with these folks, and these are a lot of posts that I work with as people that are in that $10,000 to $100,000 range.
Justin Cooke: Yeah. They’ve got a pretty strong career. Maybe they’re lower middle management, they’re middle management. They’ve been doing their job three, five, seven, 10 years. They’ve been able to put some money away. They’ve got a bit of cash, and they want to get into this. They don’t want to just start with nothing. They understand that they have to put some investment in, but they’re wondering, let’s say, “I’ve got 60 grand, do I have to go all in on my first deal was 60 grands. Do I test the waters with five grand? How do I do this without blowing this cash I’ve saved for the last five years?” So, this is an interesting position and with more money, you have more options, and your options get a bit more interesting.
But we have to remember that this person doesn’t have a ton of time. They weren’t just laid off. They’re not like crazy busy, but they don’t have a ton of time. So, some good options for someone in this position, one of the options is to buy a smaller or more passive earning site and again learn as they go. So, we talked about the previous person buying a $6,000 site and reverse engineering it. This is similar, maybe they buy a $5,000 site, a $10,000 site, all the way up to $20,000 site. And they again, they’re DIY with this. They’re doing it on their own. They are figuring it out, the reverse engineering.
They’re not going to buy this really complicated online business. It’s probably gonna be an AdSense or Amazon affiliate type site. Something really pretty straight forward, pretty well known, pretty well discussed online so that it’s not … there aren’t too many moving pieces, and it’s something they can sink their teeth into.
Ace Chapman: This is one of the strategies that we’re getting pretty aggressively into, and it falls under that whole mini mogul category, which is going out buying one of these smaller deals and taking the income from that, over time, adding a little bit of money and going out and buying another one and building a portfolio of income producing properties. That’s something that somebody in this range could get started with and not have to one, focus on it full time, but also not have to worry or wake at night that they’ve put all $100,000 of their cash into a single deal and they’re nervous that their life savings could disappear if that site disappears off the face of the earth.
Justin Cooke: So, you’re saying roll your cash loan to new … Let me ask you, I’m sorry. Let me dig into that a bit, Ace. I have $50,000, I buy a strong Amazon affiliate site making, let’s say two grand a month. I buy that site. Now, what do I do with the cash? I’m make a 2,000 bucks a month. You’re saying that I basically just bank that cash. Let’s say for a year I banked up $24,000, so I roll that and a little bit more money into a new business.
Ace Chapman: Well, what you’d really do is you start out with 50,000 let’s say. The first deal that you do may be a $20,000 deal. And you get used to running that, you get … whatever in place that you need to as far as the systems and just make sure you understand that business. And then you’d go out and you find another one six months later. Let’s say you bought that just to keep numbers simple at a 20 multiple. So, you’ve got $6,000 that is added to your other $30,000 so you take 20 out of the 36. Now, six months later you own two sites and they’re earning $2,000 a month and. It goes on from there, so six months later, you’re adding that to the 16 and obviously after that you’ve got three and it just continues to go quicker and it’s the snowball effect.
We’ve been using that strategy with some really quick and fast results to grow a large portfolio. It’s a lot more long term, but it’s powerful because of two things I mentioned. One, not having to invest a ton of time up front and two, having some diversification.
Justin Cooke: Ace, it’s so funny, I was listening to you talk about the numbers and like maybe five to 10 seconds then I got totally lost. So, like six months and then 20,000 … it’s just so hard to do numbers on a podcast when you’re trying to explain it and then all of a sudden, you said the snowball effect, and I’m like, oh, I get clicked. I was like, “Oh, I get that. Yes. Yeah. Okay. I totally see what you’re trying to do there. But I was like, [crosstalk 00:45:04] and then 500-
Ace Chapman: I was talking to one of my closet the other day who’s … I’ve got a couple of guys who are accountants and I’m like, they’re my favorite clients ’cause it’s like we’re gonna talk through the numbers and they add them up. Some of this stuff, it’s fun to talk through different scenarios, but it’s better if you put it on paper.
Justin Cooke: It’s funny. Financial guys in general with your clients and I’m guessing, and then with people that we talk to obviously, the numbers are phenomenal ’cause they come from different asset classes. And so, when they get into this, they’re like, “Wow, this is really crazy.”
Ace Chapman: They get it.
Justin Cooke: Yeah. No, it totally makes sense to me when you start thinking about it from an investment perspective. But yeah, it’s really interesting. The other strategy we wanna talk about, I think for this person with the good amount of money and some amount of time is you can partner with or hire someone to run the site or the sites for you. And then you can have regular meetings with them to learn as you go. Now, this one’s a bit challenging to partner with or hire someone, like who do you partner with?
I can’t put an ad out and then just hire someone and then have them run these sites either. So, you have to know someone or know someone who knows someone who can then get you someone that has some experience with this. Or maybe you know someone already you can work with. Sometimes there’s an option to hire an employee that’s coming along with the site, or you can work into the deal to have the seller stay on for a longer period of time to get you up to speed. So, instead of like a 30 day turnover, maybe it’s a three month or a six month turnover, maybe you’re paying a little bit more for the business or you’re paying the seller for their time, but they stick with it a bit longer.
Honestly, maybe you end up paying a bit more, you’re paying 115% of the ask price or something, but they agree to stay on for four months or six months and you may find that that’s way more than you needed. You didn’t really need that much time to get up to speed and put processes in place. But for that piece of mind, it was worth it.
Ace Chapman: Yeah. This is a powerful strategy if you can master a finding the partners or people to invest in or work with. One of the main reasons that seven years ago I started this whole business buyer network is to be able to invest in other people deal, to find those great partners and be able to invest in their businesses. That’s a lot of what we spend time doing now is connecting people that have these complimentary skillsets so that they can work together on deals or just complimentary deals and that kind of thing. So, it’s really powerful to partner and hire and connect with other people to be able to get more deals. You know? Right now I’m in 27 deals. There’s no way I could do that by myself.
Justin Cooke: Yeah, absolutely not. And if you’re looking for resources, you’re in this position, you’ve got good money, you’ve got a bit of time. Obviously we’re a little biased here, but empireflippers.com, obviously acechapman.com, we both definitely operate in this range. We’ve got this podcast, obviously the Empire Flippers Podcast or blog. Another good resource I think is really interesting and I think is helpful for people in this position is the tropicalmba.com. I know the guys over there. They run a really good business and they speak well to people I think in this position.
They don’t give you great ideas in terms of investment strategy, but they’ll really help you in terms of spending less time in the business to help you with automation, standard operating procedures and hiring. I think if you’re buying a $50,000 businesses and don’t have a ton of time to put into it, they can provide some value.
Ace Chapman: Well, unlike Justin, I have no qualms about it. I am awesome at what I do.
Justin Cooke: I can help you. Come over to my slide. I will hook you up. We are really good resources for it.
Ace Chapman: We are. It is what it is. If you can pay us, say look around, you’re like, “Man, okay. Yeah, I’m a good resource.”
Justin Cooke: Pretty good. Yeah, all right man.
Ace Chapman: Pretty good. I’m curious who’s listening that gets that one.
Justin Cooke: I know, for sure. Let’s talk about the fourth point. These are the people with lots of money and not much time at all. To describe this person, they may be a senior management, they may be an executive, they may be a business owner themselves, an offline business or an online business, they may be an entrepreneur, they might be a professional. Maybe they’re a designer, a lawyer, a programmer, something like that, and they’ve got a ton of things on their plate and they really don’t have much time to learn the basics.
This is someone with a budget, let’s say somewhere between $100,000 dollars and $1 million or up. So, what do you think, man? We’ve got some of these people in our audience. We’ve got some of these people as customers as well. I know you do too. That sucks because they are just limited on the time they have available. Right?
Ace Chapman: Yeah and a lot of times they are business owners and entrepreneurs and those are some of the toughest because they do love being involved. They do have some expertise. I’ve got folks that have built some really huge businesses and they’re just really bright guys and awesome guys, but it is tough for them to get into this and have to let go and not be involved. It’s for those folks, you really want a situation where you’re leveraging your money as much as possible because you don’t have the time. And so, that has to be the focus for these guys.
Justin Cooke: It’s interesting when they are not used to doing that too. Someone’s got $500,000, $600,000, they’re looking to roll that into online businesses. It is money they made offline or whatever, and they’re used to having getting their hands dirty, like being able to like be in on the business. And so, this is kind of a different strategy. I think the first question they would ask themselves are, “Am I just an investor in this deal or am I taking this deal over and going to put my input, put my blood, sweat and tears into it?” To answer the question, the first thing they need to know is that any acquisition, any of these website acquisitions or online businesses they’re looking to purchase, they’re gonna require some amount of your time. Basically nothing is completely passive when it comes to these things.
Especially if you think over a longer period of time, sure, maybe you can back out for three months and do like a strategy call with the manager or something. But that’s not a great long term strategy for growth. You’re gonna need to be more involved in that unless you can build it out the right way. I think that’s the first thing to note. Let’s talk about two different strategies. The first one is to buy a business that has management or staff. If you’re buying a business and it is a one man show, it’s being run by the seller, that’s gonna be challenging because not only do you have to take that over, learn the processes, but then you have to hire someone to take those over. So, it’s gonna take a big amount of your time upfront. That may be the only way to get that deal done. The deal is you may want to look for the ones that already have management or staff in place that come with the business.
Ace Chapman: Yeah, and knowing that you’re taking over a business that does have the management there, you still need to build a relationship with those folks. You can’t just buy the business and say, “Okay, go off and just send me checks every month.”
Justin Cooke: Go forth young Pattawa. [inaudible 00:52:41] is not working.
Ace Chapman: Yeah. Like you said, it’s gonna take some time, you gotta be able to build those relationships and then you got to be able to come up with your strategy forward. The other one is what you guys are working on. Investor programs, we’re seeing that a lot more now. I’ve had guys like folks in this category that just invest in some of the deals that I’m doing. You guys have created a formalized investor program, which I’m excited to watch and seeing how that’s been going. Talk a little bit about that.
Justin Cooke: Yeah. If you’re not buying a business with management in place, with staff already in place and you just say, “Look, I am gonna be a passive investor in this.” We wanted to solve that problem in our space. There are people with a ton of money with no time that just can’t buy a business. Even if they bought one with management, it’s just a distraction from their core business, but they want to get involved. So we said, “Look, we need to give them an opportunity to get in. We know a bunch of people like that.” So we said, “Look, let’s create this investor program where basically people can put money in, our team will pick, purchase takeover and then run those businesses as a portfolio and we’ll have a team of investors in on that portfolio, we’ll do quarterly payouts, basically dividends to the entire group and they get paid based on the level they’re it out.
So, it was a $3 million portfolio and you’re in for $300,000 you’re going to get a 10% of whatever the profit is at the end of the quarter. So, we’ve been doing this and we’re been for the last year or so we’ve been working on it. We’ve got our first kind of beta portfolio running and we’re launching it like publicly and widely here soon. So, we’re going to have a bunch of people getting involved on a much larger portfolio, probably 3 million plus. So, we’re really excited about that. But the cool thing is this isn’t just us. Anyone can do this, and other people are. In fact, there are a lot of people that are kind of doing this on a smaller scale and just like a private group. So, they get three or four people together that know each other. They put in 50,000 or $100,000 each. They know a guy who runs an online business and they partner with him, work out the equity split, and then he kicks them out payments every month and gives them a report based on how it’s going.
So, there’s a ton of people doing that with three, four, 10, 15 people on a small scale. And I think this is a great, a really interesting model.
Ace Chapman: It is. I think it’s gonna grow as a lot of people out there that want to get involved in the space that are … in this category. This is going to be a great option for those folks. So, I’m excited. We’ve been doing it a little bit over the years. and we’re getting a lot more interest. I know you guys are getting a lot more interest, so it’s gonna be a big resource for the people that are in this category.
Justin Cooke: Some risks there, obviously if you’re thinking about doing this with somebody, make sure it’s not Bernie Madoff situation. This is like a pretty unregulated space.
Ace Chapman: Very unregulated.
Justin Cooke: So, they can take your money and run. So, that is a possibility. Make sure you’ve got your Google Fu out and you can figure out who these people are. Make sure you know them well, and can do business with them. That’s a big fat warning for anyone listening to this. All right, man. We talked about the required skillsets for anyone buying a site, what a builder is gonna have to learn as they go along. It includes Google Fu, includes like the basic tech stuff and setting up domains and hosting, getting some traffic skills, basic understanding of monetization methods and then understanding like WordPress or Shopify or whatever platform you’re going to be getting into.
We talked about the website buying spectrum all the way from someone with no money and lots of time, all the way to the person with lots of money and no time and gave some examples and some resources on different kind of paths they can take. I hope that was interesting to our listeners. I hope it was helpful for our listeners. I hope it gives them some idea on what they can do moving forward. What do you think, buddy?
Ace Chapman: Yes, man. There’s a lot of options. I think this clearly breaks down different situations, and for those who should be considering building those who should be considering buying and some of the things to consider before you do either one. So, I’m glad that we got this episode out there.
Justin Cooke: Absolutely. And for anyone listening to this that appreciates this episode, really digs it, feel free to contact us. You can go over to webequityshow.com. You can leave a message for us. If you want to get on the show, you can shoot us a message there. If you really liked the show, I’d really appreciate if you head over to iTunes, give us a nice review, and we’ll make sure to give you a shout on the next show. Thanks so much.
Speaker 2: Thanks for listening to the Web Equity Show. Now is your chance to be a part of the action. Go to www.webequityshow.com/gift, and send us your business acquisition or exit questions and have it answered on the show.