February 12, 2015
Is it better to build or buy websites?
It’s amazing to me how adamantly each will argue their case. Some can’t believe paying $20K, $50K, or more for a site they can build from scratch. Others can’t imagine spending all of that time building sites (and failing) to (hopefully) create one profitable site.
In this episode, Joe and I sit down to discuss some of the advantages and disadvantages that come from both sides of the table. We hope you enjoy!
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“Let’s not use up all that time in education that never gets utilized” – Joe – Tweet This!
“It’s not just getting to where the site is currently, it’s getting to where that site would be in a year” – Justin – Tweet This!
So – do you find yourself in the buy or build camp? Which is the better choice for YOU? Would love to hear your thoughts in the comments!
Justin: Welcome to the Empire Podcast episode 126! Some argue that the return you get on building sites from scratch out ways anything you’ll see in a purchase. Others argue that buying sites provides a dramatically better ROI on your time. Today we’ll take an in depth look at the advantages and disadvantages that come in the build versus buy arguments. You can the shell notes and all links discussed in this episode at empireflippers.com/buyorbuild. Alright let’s do this.
Speaker 4: Sick of listening to entrepreneurial advice from guys with day jobs? Want to hear about the real successes and failures that come with building an online empire? You are not alone. From San Diego to Tokyo, New York to Bangkok, join thousands of entrepreneurs and investors who are prioritizing wealth and personal freedom over the oppression of an office cubicle. Check out the Empire Podcast! And now your hosts, Justin and Joe.
Justin: The divide between the build and sell crowd and the buy crowd is fascinating to me Joe. On the one hand you have an audience of people that are adamant about the fact that they can spend a couple hundred dollars buying a domain name, adding some content, getting the word press site up but within twelve to eighteen months, they can have thirty, fifty, seventy thousand, a hundred thousand dollar website, inside of a year, year and a half.
And they’re like “There’s no way I would in turn buy a fifty thousand dollar website and try to build that out to go through the process.” And on the other hand, there’s people that go “There’s no way I would get involved in building a site from scratch. I have to pick the niche, I have to hope that the niche is a good one, I have to build the site out, I have to watch some of them fail, I have to put all that time, effort, and energy upfront not knowing how it’s gonna be or how it’s gonna turn out, when I could just buy a successful site and spend some time expanding that site or improving the monetization methods, which I already know how to do.” So it’s interesting that there is such a big divide because you have some people on both sides of those arguments that just cannot see the other side.
Joe: Yeah, no I think that honestly there’s been a lot of fuel added to this fire in the last five years because you had guys that were exclusively builders, guys like Spencer and Chris Guthrie that have switched from an exclusive, sort of, build philosophy to now a buy-and-build-out philosophy, or you know they still build some sites too but they definitely added the buy online businesses as well. So, yeah I mean I think things are heating up in this area of the online business world.
Justin: In today’s episode, we really want to cover whether it’s better to buy sites or build them but we want to talk about your situation and see if we can lay out a few points that nail where you’re at in terms of your site development and what you’re looking to do and see if there’s one that fits you a bit better. Before we do that buddy, let’s get into our featured listing of the week. Whatcha got?
Anncr: We’re talking about listing number 4-0-1-6-4. It’s an AdSense monetized site based around flash games and these flash games are targeted towards the Latin America niche so it’s very interesting site. It gets a hell of a lot of traffic so almost six hundred and fifty thousand page views a month, has a monthly net profit approaching nine thousand dollars and we have it listed for just over a hundred and seventy-five grand so it is one of our more expensive sites. We’re moving up the value chain and that’s good news but I’ve spoken to the seller at length about this site and it’s a very good site, very stable site that doesn’t need a heck of a lot of intervention on the owner’s side. The owners added one flash game in the last year so it’s not like a lot of content needs to be added so it’s pretty much set-and-forget. Now, someone could take it and add a whole bunch of flash games and maybe really take it to the next level or someone could simply add it to their portfolio as a good AdSense starter.
Justin: Yeah, one of my concerns in taking this on, Joe, when I first showed up, I was like “Well, you know there’s probably not a whole lot of people that are going to be able to add these flash games, right.” They’re not going to be able to go out, like I don’t know how to create a game and add it to this site and talking to the seller, it looks like the processes for uploading these new games will be included and it is something that could be outsourced to a VA so if you’re not terribly tight [inaudible 00:04:18], I think it’s something that you’d be able to outsource to someone else and the process will come along with the sale.
Joe: Yeah, you’d be amazed how many free opensource flash games there are out there and they can easily be found and added to the sites so it’s pretty cool. It’s based on WordPress so it’s very easy to use and yes, you can absolutely teach a VA how to find and add the flash games.
Justin: Alright man, enough about that. Let’s get into the heart of this week’s episode.
Speaker 4: Now for the heart of this week’s episode.
Justin: Is it better to buy sites or build them? That’s the question we’re going to be looking at today. I think this is really interesting because it definitely goes along with our time versus money spectrum Joe, right. On the one hand, you have people with lots of time and really no money so they don’t really have much of an option to buy sites or to get into that and on the upper end of that spectrum, you have the people who have tons of cash and no time, right. They don’t really have any options either. They can buy the sites but they don’t really have any time to put into running them but all on the middle, in this bell curve that we’re kind of describing, there’s a bunch of people that have a fair amount of cash and they do have some time and they do have an option. Do they want to be the people building from scratch? Should they buy and try to expand those sites? And I think this podcast is really targeted toward them to give them an idea on where we’re coming from in terms of buying or building sites.
Joe: Yeah and I think you’d be surprised. People that say they have absolutely no cash, they could have access to cash via some sort of lending platform, whether that’s peer-to-peer lending or using credit cards, something like that, as long as they are getting an effective ROI, that would be worth it. So, and then people who have no time need to probably look at their schedule and try to determine if freeing some of those hours up would be worth it depending on what kind of income they’re going to make back. So, I think a lot of people do fit under that bell curve and they just need to take that snapshot of their life.
Justin: Alright, man. Let’s get into it. The first problem we have here is do I ease into the water or do I cannonball into the pool? And this is basically regarding the learning curves. So, someone’s that’s looking, let’s say that you have some cash where you’re thinking “Well, I should probably build a site out from scratch so I can kind of ease into it, figure things out, figure out word press.” And I think that’s valuable for people who don’t have as much cash. They do want to kind of step into it and learn, especially if they’re not familiar with things like WordPress or AdSense or Amazon, kind of walking your way through it I think makes sense.
Joe: Yeah but at the same time, I don’t want to see people who read every eBook and every strategy out there and never take any action. So, let’s not use up all that time in education that never gets utilized.
Justin: The other thing is, is that if you have, let’s say you have eighty thousand dollars potentially to buy some websites with, you don’t have to spend all eighty thousand dollars upfront. You can buy a site and test with that. So, if you bought an eight thousand dollar website, which is not much, right. You’re not gonna get great ROI on your time but at least you know it’s already earning, it’s already established and you can kind of reverse engineer what was done to the site and I think you can learn pretty quickly by doing that, right, because you’re gonna see already the monetization set up, you’re gonna see how it’s working, see how much it’s earning, see what the niche is and get a lot more information than when you’re just starting from scratch. You have no idea. You have no idea if the site’s gonna be success so you might be building it and three months down the road realize you totally [inaudible 00:07:47] something up and you’re three months behind.
Joe: Yeah and I think the other interesting thing about buying a site to is again. we see this kind of deer-in-headlights look from some buyers where they look at a bunch of sites and they just can’t pull the trigger. They can’t make a decision and I think like you said, easing back on the budget a little bit to something that’s a little bit more acceptable, get your feet wet, test things out but make it at least sizable enough that it, the money matters to you so that you’re interested in site but make sure you have a back-up plan to buy site number two and site number three.
Justin: Yeah with either [inaudible 00:08:23] here, whether you’re gonna build or buy actually taking the action is the most important so if you’re gonna start building, quickly decide on a niche and just go for it. Buy the domain, set up the hosting, get yourself started. If you’re going to buy sites, you wanna start off easing your way in a bit. One of the things you can do is buy a six thousand dollar site, eight thousand dollar site. Now, that’s not gonna make you enough money to retire next year or two, but it will kind of get your feet wet and it will get you started. I mean is there an argument, Joe, for buying a eighty thousand dollar site out the gate?
Joe: Well I mean I think you and I have disagreed on this kind of stuff. I normally say, especially for first time buyers, that I would like to see them split a large budget like that into as many as many as three sites because we could get them three well-earning properties. They can fool around with one and keep the other two as test cases they don’t do much to and they also have, just by sheer numbers, they have the lucky factor. One will go up, while one might go down a little bit and it equals things out.
Justin: Yeah I disagree with you there on…look I’ll say this, that let’s say I have a hundred thousand dollar budget to buy some websites, right. If I don’t have much experience with Amazon, if I’ve never owned or run a drop-shipping site, if this is really new to me and I’m getting started, I don’t think I would put it all on one site. I’d probably get a much much smaller site with maybe ten percent of the budget and kind of test through that, play with a bit, learn the process, learn the experience and kind of get a feel for it first and then I would buy a much larger site.
I wouldn’t split it up but my reasoning for that is, is that generally larger sites are just worth more. So, if buy a eighty thousand dollar site, first off, all of my time, effort, energy invested in one site, yes I’m not…maybe I’m not diversified with that one particular site but I think I have more opportunity. Yes, you’re diversified with your perspective but I think if I turn that into a…let’s say I doubled earnings. It wouldn’t go to a hundred and sixty thousand dollar site, normally your multiple will go up so it might go to a two hundred thousand dollar site if I doubled earnings. Does that make sense?
Joe: Yeah, no you have a good argument there and it’s hard to counter-balance that. The only other thing I’ll say is, is that if you have three sites, you have the ability to create clear winners and really test out processes that you might be able to use on the other two that might be a little dangerous so something that you don’t need to worry about all your eggs in one basket.
Justin: That’s a fair point. Yeah let’s say you wanted to use some crazy hair-brained back-linking strategy, I definitely would not do that on my one eighty thousand site, whereas I might on a fifteen thousand dollar site, one of many in my portfolio if I thought that it might improve the other one. That’s an interesting point Joe. The second point we wanted to mention is what else could you be doing with your time, right? And this really comes down to opportunity costs. I think if you have…let’s say that you’re working on a main project, something that they think is where your really value ad is, you know whether you’re gonna build a site from scratch or you’re gonna buy a site, is that really a good spend on your time? Are you gonna have the time, effort and energy to put into it? I think, especially if you’re building from scratch, the fact that you’re going to be working for pennies or for nothing in the beginning makes that a real time drain, whereas if you buy a site that’s already established, you’re gonna have to put much less time into it.
Joe: Yeah I mean I think I see this as a problem for the high-powered executive or professional, you know the dentist, who’s getting into the online business area, he has disposable cash to invest in his program and he’s just not gonna put in the six months working for pennies to get this site that may or may not work. That’s…
Justin: He can afford to.
Joe: Yeah he just…well, I mean maybe his practice is on autopilot. He has junior dentists taking care of everything so maybe he does have the time but he’s just like “My God, I’d rather be playing golf than sitting there writing articles for my Amazon site.” So, I think guys like this, they need to step it up a little bit, because the money needs to be worth….like you said the opportunity cost needs to be worth it for them, right. Otherwise, they’re not gonna be able to make the leap.
Justin: The other thing is this, right, and whenever you’re going to buy a website, you need to think in your head…this is one of the checks you need to do, is like, I’m buying a hundred thousand dollar website. Can I build this hundred thousand dollar website from scratch? How much would it cost me to do it? And how long would it take me to do it, right? To get up to a hundred thousand dollars. Basically, that’ll tell me (a) it’ll tell me whether I can do it for less than I can buy it for, right. And that’s…sometimes is the case. I’d say many times it is but (b) they’ll tell me or give me an idea on how much time I’d have to spend to get there.
That’s the first thing, right. So, if it took me a year and five thousand dollars spend and out of that year I’m spending half my time, I need to determine whether my time is worth that or not, right. The other thing you have to remember, is that it’s not just getting to where the site is currently, it’s getting to where that site would be in a year, right. Cause if I bought it today at a hundred thousand dollars, where would I have it if I put that same time, effort and energy into the purchase site? Does that make sense, Joe, so I could take a hundred thousand dollar site to two hundred thousand dollars or I could take a site from nothing up to a hundred thousand dollars in the first year. I’m already behind a hundred thousand dollars.
Joe: Yeah that [inaudible 00:13:43] interesting way to look at it and I’ve never thought about it that way but absolutely, especially if you have the skills to take a site from a hundred thousand to two hundred thousand dollars, it absolutely makes sense for you if you’re gonna do the work anyway, why not have a headstart, as long as the site has the capability to go to that level. If it ranks number four right now and it’s making a hundred thousand dollars, then it’s definitely something that if you could increase rankings to just number two or number one, absolutely you can make that kind of extra cash.
Justin: So I think this is important to you, to think about, in terms of how much your gonna spend and how long it’s gonna take you, with a regular site…Amazon affiliate site or a non-branded drop-shipping site, I think it’s even more critical if that business has some pull in its industry. So, if it has any attention in the industry, if it’s known at all as a name brand, I think that becomes even more critical because the good will that comes with that name brand and the space is, I think even an added bonus and so trying to get up to that, you may not have the same name recognition when you build up your own site.
Joe: Yeah absolutely. Brand recognition and branding is very tough when you’re starting from zero.
Justin: Alright so our third point I want to talk a little bit about risk. It’s losing your time, your money or both. When you’re starting out, trying to build, let’s say from scratch, there’s not a whole lot of money you’re investing, right, and you’re buying domain name [inaudible 00:15:06] posting, you might order some content but it’s generally not terribly expensive, unless you’re building say an E-commerce site and you get crate in from China or something and buy a whole bunch of inventory first, it’s not terribly expensive. So, if you’re building a drop-shipping site, content-based AdSense site or Ad Revenue site, it’s starting to cost you but you are going to spend quite a bit of time on this.
Joe: Yeah and I think that’s the attraction for a lot of people, right, is that they see it as wow I don’t [inaudible 00:15:32] a few hundred or maybe just a couple thousand dollars and I could have a money making online business so I think for a large segment of the population that definitely clicks with them.
Justin: It’s a hobby. It’s a side gig that in the next twelve to eighteen months, I can make ten thousand, twenty thousand, fifty thousand dollars on this site I’ve created.
Joe: Yeah it’s like poker, right. I mean you go there and you basically make money for free but people don’t think about the other bad parts about poker, which is that you could lose money too, right, and that’s kind of like when you’re working on a site is that you spend all this time and effort and energy and you realize at the end of the day, that although you have a money-making asset after you’ve completed all this work, maybe you coulda had a better one had you done some different things int he beginning.
Justin: Yeah, Joe, I think if you’re building a site from scratch [inaudible 00:16:24] you stand to lose a lot of time, right, and what time could that have been better spent on. Let’s say that the site just doesn’t work out as successfully as you would have planned. You are losing a lot of time. Yes, you’re learning some things along the way but there’s a big time factor there. But, there’s a financial factor. There’s a financial risk that comes with buying sites. I mean this is your first site purchase and you don’t understand due diligence. You don’t know how to evaluate a site. I mean you run some risks, right. Let’s say that you’re buying a drop-shipping site and that supplier stopped supplying the main product that was getting most of the money. A bigger risk, I think, is let’s say that your Google rankings go away. You dropped, you get penalized or whatever. Googled changed their mind that week and you lose rankings, which generally turns into you losing money.
Joe: Yeah I think there has to be a balance there. I mean we’ve talked about this before. If you spend weeks or months doing due diligence on different sites and never buy anything, you coulda spent that time just building a site.
Justin: Yeah for sure.
Joe: There’s definitely some sort of time to be lost in buying a site as well, if you don’t pull the trigger but at the end of the day, I’d rather put a little bit more of my money at risk, I think, than my time and this comes from someone that’s done a lot of building out there just because the failure rate with building nowadays is so high that it’s a very big turnoff for me and getting that headstart, I think, is just huge capital.
Justin: I think it’s interesting you bring out the time spent vetting siting, right. If you’ve gone through twenty different looks and you still haven’t found a site to purchase, maybe you would have been better off spending that time building out a site from scratch but I also think it’s important to look at the time you spend vetting versus the size of the site you’re looking to purchase so if I’ve looked at ten, twelve, fifteen sites and I’ve spent a hundred hours doing that and I’m doing that on a eight thousand or twelve thousand or fifteen thousand dollar site, relative to how much that site makes, that’s a more expensive process, right. It becomes really expensive, whereas if I’m spending all those hours vetting a hundred thousand dollar site, hundred fifty thousand dollar site, at least at the end, hopefully, if I find the right site, there’s a payoff on that and there’s a payoff that’s valuable.
Justin: The fourth one I want to mention is selecting a niche versus finding one that’s proven. So, some of the build crowd, their argument would be that “We’re buying a site, you don’t get to pick the exact niche.” Right, it’s already created. It’s already there. It’s already up and earning. If you’re going to be messing with the site long term, you’re going to be working on it, then you should at least have the opportunities to select the niche yourself because it’s [inaudible 00:19:06] be something that you’re particularly interested in and if you’re looking to buy a site and you’re very limited in your focus and scope of the types of sites you want to buy, it’s gonna take your forever to find that site.
Joe: I was just gonna say those are the buyers that are very tough to work with. You know, they like…
Justin: I only want to site about soccer.
Joe: Yeah I only want a race car pajama site and it has to be monetized by Ecommerce and you’re like okay I’ll put you on the list but I just don’t think it’s gonna happen,
Justin: Good luck . Don’t hold your breath for that one, yeah. I think it’s really difficult and we’re talking about the time you spent waiting for the site. It’s difficult but if you’re looking to build a site, you can make your race car pajama site from scratch and target the exact niche you want. It doesn’t mean it’s necessarily going to be successful but it’s…least it’s in a niche that you’re interested in and you really want.
Joe: Yeah and that’s the key I think is that you don’t know it’s going to be successful so when you’re building and you have a niche in mind and you’ve done your research and you think it’s going to be successful, you don’t know but when you’re buying, you’re not guaranteed anything but at least you have a headstart to say “Hey, this site has some income, here are the flaws of the sites, here are the risks of the site but here are the opportunities as well.” And so, I think that that sort of niche selection makes it a little bit better. As long as you can expand the types of niches that you’re interested in, then when you’re making a purchase decision, that headstart could lead to some very good opportunities.
Justin: Yeah if I’m looking for a website to buy, even if…let’s say that it’s relatively close and I think that I can port it or change direction into a niche that I’m more interested in and gives opportunity there, plus just because I’m not interested in a niche, doesn’t mean I wouldn’t be interested in making a hell of a lot of money with a site and I think a lot of people are looking at it that way. There are a few that say “Look, no I want a very tight, specific niche.” There are a bunch of other people…everyone else is just saying “Look, I just want to make money. I want a nice, proven way for me to expand the site out and cash in on this.” Alright man, enough about that. Let’s get in some news and updates.
Speaker 4: You’ve been listening to the Empire Podcast. Now some news and updates.
Justin: So, the first bit of news we got, Joe, is we are on the last week of apprentice interviews. We’ve got almost all of them done. We’re going to be choosing someone next week and I’m excited to get someone out [inaudible 00:21:26].
Joe: Yeah! I think this is going to be awesome. We really do need it in our company. We even talked about, perhaps hiring two of the candidates cause it’s been such a great pool of candidates this time so I’m very excited for it and I can’t wait to make the announcement.
Justin: Yeah we’ll let you know as soon as we have that out and who it is and what the deal is with that. The second point I want to mention is we’ve actually got more listings now than we’ve ever had before. We have close to thirty listings [inaudible 00:21:52] just over one point eight million dollars dude, That’s massive.
Joe: Yeah I mean we have a site approaching five hundred thousand dollars, which I think is a solid site. We should probably talk about it next week as our featured site and obviously the one I talked bout this week, which is a hundred and seventy-five thousand dollars so we are starting to move up the value chain there and getting good solid six-digits kind of sites so that’s gonna help that number and also we just got a lot more submissions. I mean I…probably looking at ten to fifteen sites a week right now.
Justin: Yeah that’s pretty interesting. I think it has a lot to do with our paid traffic strategies, which when we talked about this, we want a nice lever because we’re a marketplace, right. If we can crank down on the sellers right now and crank up the buyers, I think that’ll be a really valuable thing for us to be able to do. It sucks to do that from a [inaudible 00:22:40] marketing perspective, right. We can’t just stop the train on kind of where we’re heading. That has to be a bit more balanced. But I think with paid traffic strategies, we can really pull the levers and I think that’s what we’re working on so we can get more buyers.
It’s funny though, Joe, we’ve had this problem in the past where we get a bunch of listings in and we’re like “Oh my God! Are we going to have the buyers to support this?” [inaudible 00:22:58] We have enough buyers to buy these sites and then they always turn around and surprise us and go buy the sites up. I’m a little nervous now man. This is the most sites we’ve ever had, the most money we’ve ever had out there. I want to make sure these all go to a good home.
Joe: Yeah I mean I think we’ll do it. It might a little bit longer than usual but that’s okay. I mean one point eight million that would put us well towards the goal of 2015.
Justin: Cool man. I see some listener shouts on Twitter. We had NoHatDigital said in response to Doug, “Thanks Doug. We’ve just listed two more sites with the Empire Flippers. Such big fans of their marketplace. Fantastic service.” And that was in response to a blog post, a guest post he just did laying out a website sale that he had with us for more than ten thousand.
Justin: We have John on Twitter said, “Just want to reiterated how pleased I am with Mike at Empire Flippers. Taking all the guest work out of this for me.” I think I tweeted him back and said, “Man, what’s Mike paying you over there? What’s going on here? Why are you so hot on Mike?” It’s like the second time he mentioned him so Mike’s really kicking some ass over there apparently.
Justin: Leno said, “Thinking of buying an online business with Empire Flippers.” She kind of laid out the site she was looking at. It’s a newer site so she said, “Is that a risk?” And I said, “Yes, it is. The risk reward is higher generally on newer sites because they are less proven. The risk reward is lower on the sites that are a bit more established because they’ve been there longer and may have less opportunity.” I said you know but definitely take a look at it and see if you think it’s a good fit for it.
Joe: Yeah Leno and if you want to talk to us about your strategies or possible opportunities that you have with Empire Flippers, please drop us a line and we can set up a call and we can talk.
Justin: Got a couple of mentions in Zen Dash [inaudible 00:24:34] couple of responses. First one’s from Jared. It was a eight thousand dollar site buyer and he said, “Keep up the good work.” So, he’s really happy with his purchase. We got one that was not so good, buddy. It was not satisfied. It was bad unsatisfied. I won’t say his name but he mentioned that he reached out and asked a question only to be told to ask someone else: “If the person didn’t know, they could have passed it on to the proper person. I’d moved on and decided you were not the right place for me. Just got the satisfaction email and decided to respond though.”
This was a situation where someone had a question about his business so like a local service business and I think one of our agents didn’t know how to respond, sent them a message saying hey you can set up a call with Mike, just click here to pick a time to call and I think that this person was looking for more of an answer, so if Mike could have got back to them that might’ve been better but yeah it did kind of leave them hangin there. I wasn’t really happy with that and I think our new apprentice position will help clean up mistake like this. I’d say like missed opportunities to wow our customers.
Joe: Yeah I think what he has to do is get that person on the phone right away in order to answer their question but it’s something we’re looking to improve and we apologize about that and I hope you do come back and try to do business with us again and give us a second shot.
Justin: We got a nice mention over on the WP Curve blog about being a remote worker and dealing with some of the challenges. I’ll leave a link to that in the show notes. It’s wpcurve.com. I’ll put a link to the particular article. In addition to mentioning us, it also mentioned our previous apprentice, Vincent, over there as well with his new company so that was pretty cool. And that’s it for episode 126 of the Empire Podcast. Thanks for sticking with us. We’ll be back next week with another show. You can find the show notes for this episode and more at empireflippers.com/buyorsell and make sure to follow us on Twitter at EmpireFlippers. See you next week.
Joe: Bye bye everybody.
Speaker 4: Hope you enjoyed this episode of the Empire Podcast with Justin and Joe. Hit up empireflippers.com for more. That’s empireflippers.com. Thanks for listening.