January 23, 2014
There are tons of websites for sale and you can find them with little effort. The difficult part for buyers is sifting through the poorly performing sites and finding a seller that knows how to sell a business. As a seller, hopefully you’re taking the right steps and you’re planning well in advance for a sale.
Today, Joe and I talk about how to prepare and maximize your chances of a successful sale by doing all the right things and avoiding the mistakes other sellers make. We list out what you should be doing 6 months in advance in preparation for the actual listing.
Even if you’re not thinking of selling your site for a while you should still listen to this episode. We cover subjects that are applicable to any website owner looking to properly manage a profitable site.
What are some actions you take well in advance of an actual website sale? Leave us a SpeakPipe message or comment below to let us know.
Voice Over: Welcome to the Empire Flippers Podcast. Are you sick and tired of gurus who have plenty of ideas but are short on substance? Worried that eBook you bought for $17.95 won’t bring you the personal and financial freedom you long for? Hey, you’re not alone. Join thousands of others in their pursuit of niche profits without the bullshit. Straight from your hosts, Justin and Joe, from Empire Flippers.
Justin Cooke: Welcome to Episode 79 of Empire Flippers Podcast. I’m your host, Justin Cooke, and I’m here with my business partner extraordinaire, Joe “Hot Money” Magnotti. What’s goin’ on, buddy?
Joe Magnotti: What’s up, everyone?
Justin Cooke: We have a great lineup for you this week. We’re gonna be talking about how to prepare your site for sale. We’re gonna look at six months out, three months out, one month out. The different steps you need to take when you’re selling your sight, whether it’s eCommerce, an AdSense site, Drop Shipping. We’re going to go through it. Before we do that, let’s do updates, news and info, buddy.
Joe Magnotti: Hit me up, man.
Justin Cooke: Hit me up. First thing we got on the docket, Flippa made a big change. I thought we should probably talk about that as our first update. They sent out an email and they have blog post talking about a listing decrease. They were decreasing their listings. For example, they took their listing fee from $29 down to $19, which was pretty significant and a lot of people are like, “Okay, that’s a great deal.”
Problem is is that they’ve bumped their success fee from 5 percent to 10 percent on established sites. That’s a pretty big difference. For example, if I was selling a $20,000 site, instead of having to pay $1,000 for a success fee, I’m now paying $2,000 for a success fee.
Joe Magnotti: Yeah, why do you think they did that? Why even bother lowering the listing fee by 10 bucks? Isn’t that just gonna encourage more people at the very low end to list kind of garbage sites?
Justin Cooke: I think so, but their answer was that people were asking for this. They were asking for lower listing fees. The really kind of tricky part is that they didn’t mention in the email or in the blog post that they were changing the success fee. So, it looks like it’s cheaper to list, which technically is true, but they’re actually raising it if you’re successful at selling the site. At 10 percent, that’s higher. You’re getting into broker territory at that point.
Here’s another key point that I think wasn’t mentioned in the email. Success fee is now at 10 percent but it’s not capped. It used to be capped at $3,000. Let’s say you were selling a $60,000 site. It caps out at three grand. Now, if it’s an $80,000 site, it’s not capped, so it’s still 10 percent and it goes up no matter how large the site. So, you’re selling a $200,000 site, that gets awfully expensive. An $80,000 site used to be 3,000, so you got a success fee, it would now be $8,000 success fee which is a significant difference.
I don’t understand why they’re doing that. Flippa’s always been a great DIY option, a do-it-yourself option. I don’t see why they’re moving into broker territory, especially with their fees.
Joe Magnotti: Yeah, that’s exactly what I was thinking. Ten percent seems really high, especially because you have to do all the work. You have to create the listing, you have to field all the questions, you have to promote the listing, you basically have to do everything. All they have is the platform.
Justin Cooke: Look. Obviously, clearly it’s great for us. It’s a great opportunity for us as we head into that $10,000-$100,000 space this year, but it doesn’t really make a lot of sense. I’m not really sure who their audience is for that. Who’s asked for this and who’s happy to get it? If you look at their blog post and threads in the forum and Blackout World, there’s not a lot of people that are happy about it.
While we’re talking about this, I should just give a shout-out to FE International, previously Flipping Enterprise. They’re the guys that turn me on to this change. I read one of their threads and was like, “Wow, I can’t believe they’re doing that.” Really interesting.
Second point I wanna talk about, Joe. You’ve been playing around. You’re a social media guy now, buddy. What’s going on? You got a little Pinterest love.
Joe Magnotti: I don’t know if I would go that far but a good friend of mine named Nate Ginsburg has turned me onto a Pinterest process, which I’m playing through in order to provide more stable traffic to our next site. I’m wondering if we can wind it up with the rest of our process as kind of something that helps a niche sites along.
Justin Cooke: Yeah, it’s gets them additional traffic and relevant traffic ’cause it’s based on the same searches and same information.
Joe Magnotti: Now, it’s something you have to maintain and do all the time. It’s almost like adding content. You would have to come up as a cost when selling the site and it would have to be clearly advertised, but if we could do it to some of our larger sites and there was a little bit of an ROI there, I definitely think that both our people that are interested in building sites and people that are interested in buying sites that are just not reliant on Google, it would be very interesting to them.
Justin Cooke: So, if we can add … It’s $200 a month. We can add $100 a month in value, it would only cost us $50 a month. That’s $50 a month in net profit, which ultimately in a sale for us, is a thousand bucks.
Joe Magnotti: Yeah. Also, for the buyer, it’s great because now they’re not just dependent on Google for the traffic.
Justin Cooke: Oh, yeah. Diverse find the traffic sources. That’s an extra idea you can use to build out sites that you’ve purchased, your own sites that you’ve built out, so I hope that’s a winner, man. I know that you got … This is pretty cool. You actually took one of our team members, our supervisors actually, and had them doing a little competition with you.
Joe Magnotti: Yeah. I’m trying to have her follow the process and create accounts and have me follow the process and create accounts, just seeing who can do it a little bit better.
Justin Cooke: That’s cool. I don’t care who does it better, I just want it to be better so that we can have a nice little win there. That’d be awesome.
Joe Magnotti: Well hopefully she does it at least 50 percent of what I do because let’s just say –
Justin Cooke: She’ll be running it in the future so we wanna make sure she understands the process. Gotcha.
Third point I wanna mention is we can now accept credit cards directly. For our prox and services, for the longest time, we were only accepting PayPal payments. You can now go there and either pay via PayPal or there’s now a dropdown where you can select your credit card and enter it. It goes through our merchant account, through UltraCart and all that.
Joe Magnotti: Thank you, UltraCart, for finally getting on board with this. It works, you can pay directly. If you don’t want a PayPal account or never had a PayPal account or don’t wanna use PayPal, I understand. You can pay us directly via credit card and in fact, I’d be very interested to see, ’cause we haven’t got one successful credit card payment yet.
Justin Cooke: I tested it today. I put in the fake “44443322.” It worked out, it went through. Hopefully it’ll work. We’re still getting PayPal payments though, right?
Joe Magnotti: Yes.
Justin Cooke: We’ll see.
Last point we wanna mention, Joe. You’ve got a funny story. Since our last podcast was on storytelling, why don’t we sit down the chair and hear what Papa Joe has to say. This is a funny one.
Joe Magnotti: Well, all right. I’ll just give you the quick rundown. Last night, I’m actually going out for a couple of beers with Dan Andrews and a couple of other people. Right before we get to the bar, I get a frantic phone call from my assistant and our HR manager who are down at City Hall renewing out business license. They say, “Sir, there was some incorrect amounts for our 2013 licensing and we need extra cash.” So, I blitzkrieg over to the bank, pull out 600 bucks or whatever, and go to City Hall. Well, apparently, the payments need to be done by midnight and we’re not the only one waiting in line. There were literally 5 thousand other people there. It was so bad that on the way over there, on the radio in the taxi, I hear the guy, and I only understand half of it because it’s all in Visaya, but he’s saying “Get down to City Hall right now if you need to pay your business license because it’s a 25 percent penalty if you pay after midnight.”
Justin Cooke: This is the crazy part. You’re talking about 25 percent. It’s 25 percent of your expenses for the previous year you have to pay in a penalty. If you don’t pay it by midnight, dude, that is ridiculous. I’m glad you decided to stop by City Hall and our HR manager and give him some cash. That was nice of you.
Joe Magnotti: Yeah. Unbelievable. They had been literally standing in line since about 4 p.m. and this was about 8-8:30. They finally got up there.
Justin Cooke: So, they got up there and they said, “Oh, you owe extra money,” ’cause we owed from quarters for last year, something we didn’t pay. In addition to the money you were already paying, you had to pull out some more cash and give it to them. Can you imagine if they sent you to the back of the line? “Go around the corner over there and just go hang out for a bit. We’ll see you in a couple of days. Pitch a tent.”
Joe Magnotti: What a mad house it was. Just imagine the DMV on crack. That’s what it was like.
Justin Cooke: All right, man. Enough about that. Let’s get right into the heart of this week’s episode.
Voice Over: This is the Empire Flippers Podcast.
Justin Cooke: All right. We’re talking today about how to prepare your site for sale. We’re gonna go six months out all the way up through the listing. It’s basically a checklist that we’re gonna kind of go through and describe and explain as we walk you through the process.
Joe Magnotti: We should mention that this is not just for our marketplace either. This can be for any type of sale, whether it’s for private sale, flipper sale, gonna put it on some other platform. Doesn’t really matter. These are just general steps that if you’re looking to sale your website you should think about.
Justin Cooke: Also, some are gonna apply a little differently depending on the type of site you have. We’re gonna cover that as we go through it, but let’s start it off, man. So, six months out. This is gonna be one of the last chances you have for changes to the site. If you wanna change the link-building structure, you wanna change the internal/external SEO, anything like that, you’re gonna wanna make changes to the site. Changes to the content on the homepage, for example, or any of the content, some of the internal links that you’ve built for the site, you’re gonna wanna make those changes at this point.
The reason is, as you get closer and closer to the sale, any changes you make may drastically affect rankings, may affect earnings and it makes the site look unstable. So, you’re gonna wanna make sure you do that at this point.
Joe Magnotti: Yeah. You want time to adjust, right? If it has a negative impact, you want time to go back to the old permalink structure. Maybe you change from one permalink to another and that had some negative impact, so you wanna go ahead and switch back. You’re gonna need time for Google to reindex the site and for things to come back.
Justin Cooke: Second thing you’re gonna want to do, if you haven’t done it already, you’re gonna wanna start tracking your revenue, your cost and your time. Your revenue you should probably be tracking any way. I’m sure it’s something you’re tracking on the site, but your cost, you’re gonna wanna start taking a look at the cost. Any external tools you’re paying for, any spend at all, you’re gonna wanna start making sure you’re tracking that month over month.
Joe Magnotti: If you have a large organization and you use some sort of bookkeeping like QuickBooks, please make a project for that. Make a code for that in QuickBooks and assign that to all the things that are just used for that particular website. This way, your bookkeeper were able to run a quick PNL to tell you what costs and revenue come directly from that site.
The third aspect here, the time aspect –
Justin Cooke: Yeah. Sellers always underestimate the time required. I think it’s really important, especially six months out, to start tracking the time you’re spending on the site. This will be more apparent when we get to three months and one month out on why that is, but you’re gonna wanna start knowing how many hours per week, per month, you’re spending on the website.
Third point, I think this is an interesting one, is picking up a due diligence report on the site that you plan to sell. This wouldn’t be as important for a smaller AdSense site I think, especially six months out. But I think it is important for any site that’s earning, let’s say $1000 a month or more. Picking up a due diligence report, let’s say from Centurica.com for example, it’s gonna give you some of the red flags. You’re gonna be able to see is there a busted link-building structure, should I change my traffic sources, is there anything that I’m not reporting or something I can change in the next six months that’s gonna make this more sellable and give me a higher score, a more trustworthy score?
Joe Magnotti: And again, this is gonna give you enough time. If you do it six months out, you’re gonna have enough time to collect the data to fix the problems that somebody like Centurica would need to give you a higher score.
Justin Cooke: And Centurica isn’t the “end all, be all” of due diligence. They definitely do their best but I think for someone who hasn’t sold a lot of sites before or for a higher earning site, it’s gonna make a lot of sense to go ahead and get that and see if you clean up some of the things that are fixable over the next six months.
The other thing you wanna do is cut your expenses and maximize profit. A lot of times with businesses, especially small businesses, you end up with all these costs, all this bloat cost. One of things you’re gonna need to do is cut some of those expenses, the ones that aren’t critical to maintaining or growing the site. You’re gonna wanna cut that.
Another thing you can do is look at your paid traffic. A lot of times with AdWords or other forms of paid traffic, we get creative. We start to test different keywords and see if we can get traffic from these different keywords. Cutting down to the core and the maximum ROI is gonna give you the highest profitability for the site and ultimately it’s gonna be based on a multiple of net profit. If you can cut out the costs that you’re not getting great ROI on and really cut it down to the core, you’re gonna improve your margins and you’re gonna improve the value of your sale.
Joe Magnotti: I really love this point. It’s so important, especially if you have your bookkeeping in order. It should be pretty easy to find those expenses that are related to the site and are just completely unnecessary. I could see a lot of little, recurring software things that kind of add up. Maybe they add up to $100 a month and if you have a site that’s making under $1,000 a month, you could cut those software costs and therefore have another $100 in revenue.
Justin Cooke: Or a VA or a software developer. They’re still kind of cleaning the nitty gritty, but they’re not required long-term for maintenance. Anything that’s required to keep the site alive and well, you’re gonna need to keep on as a cost, but kind of the extra stuff. You don’t need to be doing any project work on that site, kind of like fixing the details. I’d say cut out those costs if at all possible.
The reason we’re talking about this one specifically is ’cause we’re talking about our outsourcing company. We’re looking at some of those things, some of those additional costs that we could probably cut out and improve our profitability.
The other point I wanna mention was it’s a good time to start optimizing your sight for speed. If you can speed up your site, make it faster, you can improve your search engine rankings that may require going with a different host. You may be on a low-end, shared hosting platform where you’ve got a major, massive site with a ton of traffic. You’re gonna wanna speed that up, go over something like WP engine. Alternatively, if you’re with WP engine, if you got a small, little niche AdSense site, that’s probably overkill. You can probably downgrade your host and keep the speed up.
Justin Cooke: Another thing that’s important is you can start to look at your link profile. We’re talking about both your external and internal links. If you run a tool like MAZ.com for example, you’re gonna see all your 401 errors that you have. Over time, a site tends to get errors, link errors. You can get those cleaned up. You can start cleaning those up today for the six month point.
You’re also gonna wanna make sure that your external links aren’t over-optimized so that you’re not 50 percent plus with anchor text for particular keywords or anything like that. You’re gonna wanna make sure the link profile’s clean. If not, you can start cleaning it up either by adding more links that are valuable and useful or disavowing some of the links that are in there that are not.
Joe Magnotti: I’d also add checking webmaster tools to this. The link profile, webmaster tools, that’s something that any seller worth of salt is gonna ask about. Having that as clean as possible and having no errors in these kinds of things and no Russian porn sites pointing to you because somebody did negative SEO a long time ago or you did some bad link building –
Justin Cooke: Or you like Russian porn or whatever. But yeah, those Russian porn sites are tricky, man. They’re tricky. What you’re saying I think totally makes sense. You’re gonna wanna make sure you’re cleaning up your link profile.
One thing you mentioned before the show and you wanted to make sure we put in here was to check for duplicate or problematic content and go ahead and remove that at this point, right?
Joe Magnotti: Yeah. Sometimes we get sites submitted from sellers that are completely clean except there’s some page that they paid a VA to make for them and they never checked the content and the content actually turned out to be spun or duplicated content. I usually tell that seller, “Hey, look. You need to remove that page and then we’ll put that site up for sale.”
Justin Cooke: We’ve also seen sites where they have duplicate content and it’s all written by them, but they just need to no index those particular pages because they’re duplicate across that in a wide range.
Joe Magnotti: Yeah. It’s something really simple like their privacy page which is a template thing or something like that. We see these little, tiny changes once in a while but definitely something to look at. If you have 2,000 pages of content, I’m not saying to check every single one of them. But I am saying to have a good idea of what could be duplicate content on your site.
Justin Cooke: I was thinking maybe just a three month or one month thing, but you brought up the point that you’re gonna wanna make sure you do it well in advance because removing that duplicate content may have a negative effect on the traffic you get, on the earnings you get. You’re gonna wanna make sure that that’s very clear heading into the sale. Any effect that that has, let’s say at the five month mark or the four month mark, you still have a good three or four months of stable, steady traffic and earnings that you can use. So, that does make sense to me.
Joe Magnotti: Yeah. Any of these changes, any physical changes to this site, doing them six months out, is gonna be a good idea so this way you have time to adjust.
Justin Cooke: Last point that we wanna mention on the six months out is to install Google Analytics.
Joe Magnotti: Please do.
Justin Cooke: No crazy –
Joe Magnotti: I don’t even know the names of them anymore. I can’t think of them on top of my head but there was some crazy analytic programs out there. They don’t provide any information or they provide very limited information. They use a UI that looks like it’s from 1998.
Justin Cooke: Yeah, I know what you’re talking about. I forget. Statcounter.
Joe Magnotti: Yes. They’re terrible. And then buyers, when they see these kinds of things, they automatically discount it and they say, “There must be something wrong with this site,” ’cause they’re used to seeing Google Analytics. They wanna see Google Analytics. They know where to look for the stuff that they look for in Google Analytics.
Justin Cooke: A lot of times to the seller we say, “Go with monetization sources that most people are familiar with or know.” It’s the same thing with analytics software. Go with Google Analytics. Everyone knows how to read it, everyone knows how to use it, so buyers, they’re gonna get the warm and fuzzy with analytics that they wouldn’t get with some crazy software use ’cause you’re anti-Google.
Joe Magnotti: And it’s free, so there’s really no reason not to use it.
Justin Cooke: Right. So, that’s it for the six months out. Let’s look at three months out, buddy.
One of the points, one of the main points we have under three months out is to document any and all processes that you have. A lot of times, your business grows and you have all these processes that are kind of despaired. You have the customer service kind of doing their thing, you have the sales team doing their thing, the production team doing another thing. You’re gonna wanna make sure that all these processes are documented. This is especially important when you have Vas or employees working on it but also the process that you do as well.
Joe Magnotti: Yeah. We sold a site recently that was based on designing a special type of logo. The seller was involved up to a point. He had to take in the sales, he had to process them and he had to give them to his designer. But he didn’t have that process well documented. He spent a lot of time with the buyer reviewing the process and showing him doing all that. Man, if he had a simple screen cast or he had it written down in a Google doc, it would’ve been so easy to transfer to the buyer.
Justin Cooke: Second point we wanna mention is that three months out is a good time to start cutting out your time. Wherever possible, you can start to replace yourself with either employees or Vas. This is especially true for buyers that are the Portfolio Paul archetype. These are the guys that don’t want to do a lot of work. They want that work documented, they want that work paid, they don’t wanna do much themselves. If you can cut your time out, you’re gonna make this a more interesting acquisition target for a Portfolio Paul that’s looking for sites where they don’t have to put in a bunch of their own time. It comes with employees or people that are already working on the process.
Joe Magnotti: Look, you might increase cost slightly if you’re only dedicating four or five hours a week to it. But putting in a VA that does that automatically, it makes the sale so much easier because everything’s just taken care of. It’s a passive income sort of site and that’s really what buyers want.
Justin Cooke: That’s really want Portfolio Paul wants. Some guys don’t mind getting in there and digging into it, but let that time be expanding the site. Let that time be advancing the site and not maintenance. If you can get the maintenance taken care of, that’s a much better target. It’s much more interesting.
Joe Magnotti: Or if he wants to make ut upside for the buyer and he says, “Wow, that cost would be something I could discount because I already have the infrastructure. Take care of that.”
Justin Cooke: Yeah, but let that be their potential fix, their potential to get the multiple up. Yeah, for sure. Or the multiple down basically to get it paid back.
The other thing you wanna do is you’re gonna wanna start reviewing your financials. You cut your useless expenses at six months. How did that turn out? What are your margins looking like? Is your profit verifiable? This is another one, too, that we see. You’re gonna wanna make sure that you have something more than just a PayPal screenshot. I can’t tell from a PayPal screenshot where that money’s coming from. Is it verifiable? Third-party verifiable is a better way to put it.
Joe Magnotti: Yeah. Ideally, you should have some sort of a profit and loss statement to go along with your screenshots or a screen cast, something like that.
Justin Cooke: Depending on the site, depending on how expensive the site is.
Joe Magnotti: Yeah. Even if you don’t have QuickBooks and you don’t have a bookkeeper keeping track of this stuff, you should at least have a basic spreadsheet that shows the number of sales, how much revenue came in, the cost –
Justin Cooke: And have those matching spreadsheets. Have the spreadsheets matching these screenshots you’ve taken and that’s gonna make it really clean and really straightforward for buyers. You don’t want them to have to work at digging through the data because that’s the time where a buyer may go, “You know what? I want something cleaner. I want something more straightforward where I can verify it.” You wanna make it very easy for them to match this to that.
Joe Magnotti: Yeah. Again, if you do this at the three month process, if you do it in the three month timeline, you’ll have enough time to adjust and make sure you start collecting this necessary data in time for the sale.
Justin Cooke: This is taking part for Joe. I’ve seen some people beat us up about this one. This is a requirement that we have, and I think it’s really important for any seller, but you need to start getting an online presence. I mean, it’s 2014. You gotta have a Facebook, you gotta have a LinkedIn, a Twitter account, doing the tweets. Something, man. Something.
Joe Magnotti: We had a guy recently, he wanted to sell a relatively large site with us, and he had absolutely no presence online.
Justin Cooke: You couldn’t verify him as a real person.
Joe Magnotti: Then when I asked for his driver’s license, he sent his driver’s license in with it all blurred out. Could he have been the real person? Yes. But in the end, it makes it so much easier to say, “Look, this person has a blog, this person has a Twitter, this person has a LinkedIn.” They’re gonna have some information about them.
Justin Cooke: This person works at XYZ company. It’s legit. You have real friends on Facebook. Real stuff. You’re right, Joe. Our answer is that we miss out on opportunities, good opportunities on legitimate sites, but we save ourselves so much hassle by dumping anyone that doesn’t have a legitimate online presence. It’s just such a quick and great check for us. Yes, we probably miss out on opportunities and some people have complained about that. But ultimately, I think it saves us a ton of hassle and it saves us from some of the sketchier stuff.
I think if you’re a seller, whether you’re selling with us or on Flipper ow wherever else you’re going, having that online presence just makes your listings stronger. It makes your ability to sell that much stronger and will probably improve your multiple if you’re going somewhere where there are variable multiples.
So, the three month point is also the time where you’re going to start looking for strategic buyers. Obviously, this is more important if it’s a small-knit site. It’s not as critical. But if you do have competitors, if you’re making $500 or $1,000 or more a month in net profit, you may wanna start talking to some of your competition. Let them know that you are looking to potentially sell the site and see if there’s something there. Your site is likely to have a much higher value to a competitor in a strategic acquisition than it is to a portfolio investor. A portfolio investor may only pay you a multiple of X, but the potentiality for a strategic buyer from your competition may give that much more weight in terms of your multiple.
Joe Magnotti: I mean, we’ve heard about these kind of things before where I rank number two and I contact the guys that are ranking number five and say, “I wanna sell my site to you,” and the say, “Absolutely.” So, it does work and it’s an easy sale. You don’t have to go through a whole marketplace.
Justin Cooke: They know you. It’s likely they know you as the competition so they’re gonna know how to vet you much better than a portfolio investor is ’cause they already know the industry and the niche.
Joe Magnotti: And you don’t even have to look ranking down. If you rank number five and they rank number 2, they might wanna increase their traffic that way as well.
Justin Cooke: Yeah. If you’re an eCommerce site, and it may not necessarily matter on one keyword of rankings, but it’s gonna matter on who’s the niche and who’s selling cat furniture that’s very similar to yours or whatever.
Another thing you’re gonna wanna do at the three month point is you’re gonna wanna review your traffic from the changes you made at the six month point. Is your traffic stable? Is it growing? That’s good. Is it declining? Can you fix it? You’re gonna wanna see what you can do with your traffic. Make sure that you’ve stabilized or normalized your traffic and it’s not all over the place.
Also, you’re gonna wanna make sure that your traffic is diversified. You wanna make sure it’s not all coming from direct traffic or referral links or something. You wanna make sure that it’s relatively mixed ’cause that’s gonna make it a safer purchase for the buyer.
Joe Magnotti: Yeah. I’ve never seen a site that has increasing or stable revenue that has declining traffic. I don’t think I’ve ever seen that before.
Justin Cooke: That’d be damn rare. You’d have to optimizing the hell out of it on decrease traffic. Your conversions would be going through the roof. We had a bunch of Reddit traffic come in and we’re still getting some of that residual Reddit traffic that doesn’t convert for us at all. So, that might be a case where it’s declining a bit ’cause it was such bad traffic. It was just not helpful or useful traffic we were getting. That situation, maybe, but that’s an anomaly, man. That’s not normal.
Joe Magnotti: That’s a short-term anomaly. You need seasonal peaks and stuff like that. Short-term stuff, maybe, but I would say in general, if you see declining traffic, it’s a red flag.
Justin Cooke: Our last point in the three months out is you’re gonna want to get clear on the terms of service with you affiliate program or your affiliate provider, with any vendors or suppliers you have. Just kind of reestablish or rekindle that fire, that relationship. Make sure that everything’s smooth so that when you do sell the site or the business, you can transition that relatively smoothly. You might wanna look at whether those accounts are sellable, whether they’re gonna allow you to transfer, what kind of terms or agreements they’re gonna give the buyer, so that you have all the information available.
Joe Magnotti: Yeah. If you can’t transfer it, at least knowing when it takes a sign-up. We’ve had sellers before that use very strange affiliate programs and they don’t know the terms of service for signing up ’cause they signed up years ago. Now, when the buyer purchases the site, we have to go through the approval process and nobody knows what it takes to sign-up.
Justin Cooke: Yeah. Does it take a week? Is it a three month process? Having that information readily available for the buyer is gonna kind of soothe their soul as they’re looking to purchase the site. They don’t wanna get stuck with some site that they can’t earn from for the next couple of months or potentially ever. So, getting that cleared up is helpful.
Joe Magnotti: Especially very true if you use an odd affiliate program that most people are not familiar with.
Justin Cooke: Let’s start getting into the one month out process, what you need to do when you’re about 30 days from selling your site. You’ve already contacted some potential strategic buyers. Now you need to start planning for the training for the site turnover. You’re gonna be turning the site over to a buyer and making sure they are fully up to speed on how to take it over and run with it, maybe write down the top two, three, four things you would do to expand the site if you were keeping it or if you were potentially buyer because you understand the niche likely better than the buyer does.
Joe Magnotti: This is where you use those documentation from the three month step of having all those processes documented, maybe the Vas that you hired to replace yourself. All that kind of stuff you have in a nice, neat, little package that you can hand to them.
Justin Cooke: This is also the time where you’re gonna start to shop for the broker or the selling platoform you’re gonna choose, whether it’s Flippa, BizBuySell, it’s a broker like Flipping Enterprises or Quiet Light Brokerage or a marketplace like ours at Empire Flippers. You’re gonna want to determine which is probably the best fit for your site and where you think you’re gonna be able to get the most value and get the transaction done correctly.
Joe Magnotti: We could probably do a whole podcast on what are the plus and minuses for different platforms but shop around and see what gets the best deal for you.
Justin Cooke: The other thing you wanna do, and this is an interesting point you brought up, Joe, was the privacy. Turning privacy off and making sure that you’re able to verify your who is record so that the buyer will know that you actually own the site. This is especially important for a private transaction where the buyer may not be as up on that, so you can easily prove that you own the site without having to try to do screenshots. It can be faked or whatever.
Joe Magnotti: If you’re gonna do something like Flippa, they have their own way of confirming that you own the site. That’s not such a big deal. If you have a small site that’s not easily defensible, I understand why you wanna keep privacy on. But honestly, if it’s a large drop shipping site or a large eCommerce site, or something else like that, there’s no reason to have privacy turned on. Turn it off one month before and this way everybody knows you own the site.
Justin Cooke: Especially in a private sale. You’re gonna wanna make it relatively easy for the buyer to determine that’s you and you that owns the site, not a partner or somebody else.
Joe Magnotti: Yeah. Or if you have a corporation that owns the site or a partner that owns the site, you need to have that clearly explained. So, that’s even a better time to have privacy turned off so that they can see who has record straight up and you have that all transparent.
Justin Cooke: Another thing, I think this applies more for affiliates or eCommerce sites, but you’re gonna wanna make sure that you find alternative providers for the product or service if required. If you’re drop shipping from a particular company and they have a particular rate, you’re gonna wanna make sure that you have a second or third backup for the buyer. They’re probably not gonna want to get involved if there’s only one drop shipper and that’s the only one the provides that particular product. That’s more of a risk or a bit more dangerous for the buyer. What if that vendor raises their prices? What if that vendor is you? So, you’re gonna wanna show that there are alternatives they can use to make sure they’re still able to source that product.
Same thing goes for affiliate offers. If you’re a particular affiliate offer, you’re selling six pack abs or whatever it happens to be, make sure there are alternative vendors that you can turn to in case that vendor dries up and blows away.
Joe Magnotti: I have to say I don’t like this one as much. I don’t know if you have to dedicate a whole bunch of time to this one. Don’t get stuck on coming up with a list of a gazillion other affiliate programs or other drop ship type programs that will help you out. You could just confuse the buyers. But yeah, it’s always good to have some sort of backup.
Justin Cooke: All right, so that’s it for one month out. Let’s talk about actually listing your site. Here are some of the things you’re gonna wanna do as you’re preparing to get your site listed up and sold. One of the first things you wanna do is have your financials completely laid out. You’re gonna want a clear picture with a third-party verifiable earnings. I mentioned this before but just a screenshot of PayPal isn’t really helpful. I’m gonna want to know that it’s that particular site that’s drawing the earnings. There’s some scams out there where let’s say you have 10 sites and you list all the products on those 10 different sites at the same exact price point so that I can go into PayPal and show you, “Look how well this site is doing.” But it happens to be from 10 different sites that are selling at a similar price point so it inflates the earnings. You’re gonna wanna be able to prove or verify that those earnings are coming from this site and this site only that’s for sale.
Joe Magnotti: That’s gonna be definitely a big thing to have. Make sure the PNO, the screenshots, use video if screenshots are not good enough.
Justin Cooke: Video’s helpful because it’s much harder to fake. People could still fake it but it’s gonna be more helpful. You can also do a screen share with potential buyers. Now obviously, that’s gonna take more time. I would do the video to hopefully head that off with a pass and make sure the buyers comfortable with it.
Joe Magnotti: Some things like Amazon and AdSense actually allow you to add other people. You could add verified or trusted buyer to these kind of things so they could check and run their own reports.
Justin Cooke: That’s another point. I think some sellers aren’t familiar or don’t understand that you can add other users to your Google Analytics account. They can check out the site, they can dig through it and it won’t hurt you in the least. You can add them as a user and they’ll be able to totally verify all the analytics data without actually messing up your account or viewing all the other sites you have in there.
Joe Magnotti: This is a big one. I don’t know of any other analytics program that allows this kind of thing. Multiple users. Maybe they do, maybe they don’t. But Google Analytics makes it really easy. If somebody has a gmail address, which is a free address, you can add them and they can do all of their own reporting. This, for most experienced buyers, is going to be critical for them to do their own sort of vetting and verifying.
Justin Cooke: And again, it goes back to using a familiar source. Google Analytics, which everyone’s really familiar with and can easily find their way around.
The other thing you’re gonna wanna do is you’re gonna wanna fully explain any of your referral sources, any paid traffic you have on the site, you’re gonna wanna be able to explain and use that. In fact, for most buyers, they’re gonna see that as valuable because you have different referrals, you have people linking in, you’ve used paid traffic and it’s effective. I’d say that’s a value add, so make sure to mention it. If you try to hide that any way, a lot of times that’s gonna get caught. It’s gonna get found out by any experienced vetters, experienced due diligence process. They’re gonna find that out so it’s gonna be questionable and you may lose the deal by simply not disclosing.
Joe Magnotti: In the beginning of the show, we were talking about Pinterest and using that as a referral source for traffic. There might be a small cost associated with that but as long as it brings a positive ROI, if you’re using AdWords or you have a Pinterest strategy or you have traffic coming from Twitter of Facebook, no problem. Be clear about it, show them the process, tell them how much it costs and that will actually encourage more buyers to be interested in your site.
Justin Cooke: Well, here’s the fun part, too. At the six month or three month mark, if that Pinterest process you had was crap, you weren’t getting an ROI from it, you’ve dumped it so it’s no longer there anyway. That cost would no longer be included because it was a bad ROI and you wanna make sure you’re heading into listing the site with the best margins you can.
You’re gonna wanna make sure that all of your financial information in the listing matches top to bottom. If you mention net profit at the top of being X dollar amount, you’re gonna wanna make sure that if you read down the listing further on, it might take gross revenue minus expenses, it comes to the exact same dollar amount, net profit dollar amount, that you mentioned above. It’s a simple thing and the problem with this is if a buyer’s coming along and they see that you donked it up, it’s a totally honest mistake. They’re gonna either think you’re lying and you’re hiding some information or you’re an idiot and can’t do simple math. It’s true.
Joe Magnotti: I’m laughing a little because we see this all the time.
Justin Cooke: I’ve actually made a mistake before and I’m like, “Oh my god,” but I’m overly careful about it so it’s rare. It’s important to double check, even have someone else check your math.
Joe Magnotti: We see this all the time in Flippa where Flippa has that little graph on the right-hand side and people input those numbers in the listing area and then they actually have things in the body of the listing that don’t match that little graph. People call them out in the comments and they have fights back and forth. Then the seller can’t change that stuff because it’s not changeable once you put the listing up.
Justin Cooke: You go, “Look, it’s an honest mistake. I totally screwed it up.” But now the tone has been set. Now you have people commenting. They’re going, “What’s going on with this?” They’re gonna start digging at you and you really don’t want that for your listing. It’s gonna turn some buyers away, even if it was an honest mistake. Some are gonna go, “Eh. Even an honest mistake. I’ll go to the next listing.” That’s not good for you.
Another thing you’re gonna wanna be honest about are any penalties the site’s incurred. If the site’s been deindexed, any down size the site has. It’s not necessarily gonna kill it. Let’s say that you were banned from AdSense for the site. It’s still may be sellable if you’re on Flippa or whatever, but you’re gonna wanna make sure that you disclose that so that you don’t hurt any future buyers. Any buyer that potentially calls you out on that and you didn’t disclose it, you’re gonna get hammered for the same reasons we mentioned above.
Joe Magnotti: Yeah, I’ll tell ya. If you wanna incur my wrath, just submit a site and then add me to your Google Analytics and let me see some huge drop offs six months ago that you never disclosed when you first submitted the site because you got penalized by paying late or something like that. We see these guys submit their sites to the marketplace and they think that we’re not gonna catch it. Then I ask them about it and they’re like, “Oh yeah, I got penalized.” Well, why weren’t you just upfront about that to begin with when we still could list the site? It was so far long ago that it doesn’t make it a big deal, but now it seems like you’re hiding something and I have to dig further to make sure you didn’t hide anything else.
Justin Cooke: Same thing goes for Flippa. If there’s a problem, just list it out. Same thing goes for successes. If you have any press mentions, if you had someone promoting your product, if you had a celebrity mention or something, go ahead and shout that out. It’s not bragging to talk about the successes that your site’s had, the successful brand mentions you’ve had. It’s really good thing to mention in your listings so that other people can check that, verify it via links or look you up.
Joe Magnotti: Yeah. Even if it was just a brief peak period or something like that.
Justin Cooke: So cool, right? Some buyers are like, “Ah, that’s awesome,” or, “Oh, I’m really familiar. I can’t believe Rand Fishkin mentioned this site. That’s so cool,” or linked to it or whatever.
Joe Magnotti: I remember one of our sites, one of our niche sites, got a little bit of a mention on Twitter and there was a little back and forth about it and there was a big peak in traffic because of that. This is something I’d probably mention to people because why? It might happen again. There’s enough content there, there was 600 pages or something on this particular niche site, that you never know. It might happen again. It’s not something you wanna depend on but I think mentioning successes, as long as you’re gonna mention the negatives, is a good thing.
Justin Cooke: Also in your listing, you’re gonna wanna use the fact that you’re a real, verifiable person. That’s gonna set you aside from the competition, the guys that are hiding in the shadows that don’t actually verify their name or their LinkedIn profile or whatever. It may hurt them by not having their information up but it definitely helps you. If I have to compare very similar sites, very similar sellers, and one person’s way more out there than the other, I’m gonna go with the one that’s more open, all other things being equal.
Joe Magnotti: If I did an eBay auction tomorrow to sell my computer and I say, “I’m Joe Magnotti of Empire Flippers,” and I say I had this podcast out there with 79 episodes –
Justin Cooke: You’re obviously a real dude they can talk to on the phone and then verify. It’s obviously you. It’s clearly you, your real name. You’re out there. That’s helpful for buyers. They wanna make sure that they are dealing with a real person, dealing with someone that verifiable.
The other thing you wanna do, and we see rookies make this mistake, is they try to oversell potential. This is especially true … This happens a lot more, I’d say, at the really lower end of the marker, site ending a hundred bucks a month or whatever. The higher up the market you go, if you got a $1,500 a month site or a $5,000 a month site … Trying to oversell potential just looks rookie, man. It looks horrible and buyers are not buying it.
Joe Magnotti: I understand having a small section dedicated to how you could expand this site or what you could do further with the site, but don’t try to include that in the financials or other ways of trying to increase the price.
Justin Cooke: Or you make it look like, “Because it’s in the ‘blah blah blah’ niche, it’s worth at least an additional $5,000,” or, “I spent 20,000 on development. That means it’s worth at least $20,000 more.” No, that’s ridiculous and buyers aren’t gonna take it. In fact, they might pass on your listing, going “I’m dealing with kind of a noob seller here that doesn’t understand what site values are based on so I’m probably gonna pass this one over,” when those are the buyers you really want. They are experienced and can step in and actually give you a fair market value for your site. Make sure that you’re not overselling on the potential. That can be a real problem.
All right, man. That’s it. That takes you from six months out all the way to listing your site. If you guys have any questions, please leave them in the comments. This would be under episode 79 on empireflippers.com. We’d love to see your questions and see what we can do to help you out.
Let’s get right into our tips, tricks and our plans for the future.
Voice Over: You’re listening to the Empire Flippers Podcast with Justin and Joe.
Justin Cooke: We’ve got a plan for the future, Joe. We finally know what we wanna be when we grow up we’ve decided. After quite a few strategic meetings and discussions and quite a few beers a few different nights, we talked about where we see Empire Flippers going and our real goal in 2014 is to own the $10,000, $100,000 site sales in 2014. We think we could really take this on. We see a real gap in the market. Some of the moves that Flippa’s been making recently is, I think, really opening that up.
We’re also seeing a lot of brokers looking at 200,000 plus, 300,000 plus site sales. They’re really reaching to the higher end of the market and I think there’s a real opportunity. It’s difficult to find quality sites in that range, so if we can help provide a marketplace that allows for curated sites for sale that are profitable and verifiable in that range, I think we can really crush it.
Joe Magnotti: Yeah, I’m excited about this because this is the range that I like working in. I feel more comfortable with both the buyers and sellers in this range. I think it’s something we just do well.
Justin Cooke: I think I’d be uncomfortable doing an $800,000 site sale. I just have trouble vetting that, I would have trouble verifying. That’s a little outside of my scope, but there are brokers out there that are great at that and so why not let them own that. Let them take that on while we can help in the $10,000-$100,000 space. I think that’s a really good fit for us and we can really help out some buyers and sellers that are looking to meetup.
We just did a monthly report where we came out to just a little over $600,000 worth of revenue in 2013, which beats 2012. We were around 420 gross I think. We’re really looking to grow in 2014. We’re hoping to break one million in gross revenue this year. We’ll definitely keep you posted. It’ll be quite the journey. Hopefully we’ll be able to do that and I think a good portion will come through expanding the marketplace and taking over that niche.
Joe Magnotti: Going back to the mortgage business days, Justin. Did we ever come close to 600,000? We had some huge revenue from some very, very big loans. Obviously very low margin stuff because we gave it out mostly in commissions, but did we break 600,000 you think?
Justin Cooke: No. I think our best month was maybe just under 100,000. Our best month. But I don’t think we broke. No, I think it’s probably our best year ever, buddy. That’s what you’re trying to say. That is our best year in business. That’s pretty cool, man. Yeah, I think so. Hopefully we can crack the million in 2014. I’m really excited. Hopefully we’ll knock it out.
Joe Magnotti: Yep.
Justin Cooke: All right, that’s it for episode 79 on Empire Flippers Podcast. Thanks for being with us. We’ll make sure we come back next week and give you another deliciously wonderful episode. Make sure to check us out on Twitter @empireflippers and we’ll see you next week.
Joe Magnotti: Bye-bye, everybody.
Voice Over: You’ve been listening to the Empire Flippers Podcast with Justin and Joe. Be sure to hit up empireflippers.com for more. That’s empireflippers.com. Thanks for listening.
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