The Ultimate Guide to Flipping Online Businesses for a Profit
A Google search on how to become wealthy will bring up far too many methods. Trading stocks is a classic approach many empire builders recommend while another favored approach is flipping real estate.
What do both of these things have in common? The underlying principle of buying at a low price and selling at a higher price.
Your profit ceiling with stocks largely depends on how good you are at reading markets and financial data, since you don’t have much control over the price of stocks themselves. With real estate, you can take active steps to improve the property you buy so it becomes more valuable.
Let me introduce another lucrative way to make money: fixing and flipping online businesses.
Flipping Businesses: a New Type of Trading
It’s much easier to renovate a single room than to build an entire house from scratch. Starting a business from the ground up is hard for similar reasons. Putting in long hours and not seeing immediate results can be discouraging. It’s even more disheartening when your focus is on creating a “unicorn” – a product that disrupts the market and changes the game completely (think Facebook, Amazon, etc).
However, many of us would be happy to create a profitable business that requires little input from us to maintain.
Instead of spending time, energy, and money creating a business, you can earn healthy profits flipping businesses. This is why we’re seeing commercial real estate investors frequently visiting our online marketplace to pick up digital assets. An existing website that’s making money is an attractive prospect for many investors.
Fixing and flipping businesses is all about finding distressed businesses, fixing them up, and selling for a profit. Online businesses are especially prime for flipping as there are many things you can tweak, such as generating more site traffic through different sources.
Generally, you will be aiming to increase a business’s value through repairing and adding features, with the goal of selling for a profit in 10-18 months. You could work on this venture full-time or in your spare time.
“This sounds profitable…but I’ve never run an online business before and I’m not sure I know how to get started.”
Even if domain names, hosting, backlinks, and SEO are unfamiliar terms to you, don’t worry – we’ve got you covered. We’ll go through the best practices in this step-by-step guide to follow so you can flip websites or online businesses.
There are three steps when it comes to buying and selling businesses for a profit: Finding, Fixing, and Flipping.
Finding: How to Spot and Secure a Good Deal
This type of trading is more than just website flipping since there are so many types of online business models with different monetizations.
Having a hyper narrow focus on the type of business you will buy will increase your chances of success in your journey of fixing and flipping businesses. The first step to finding a good deal for all website flippers is to create a due diligence checklist.
Proper Due Diligence Reaps Due Rewards
This process is important for filtering out all the businesses that don’t meet your criteria. That way, you can find the perfect deal quicker by taking options off the table. It’s much quicker to cross off potential businesses than it is to find the perfect deal; a due diligence checklist saves you time and energy in the flipping process by narrowing down your options from the start by looking at criteria which indicate if a business is distressed, and therefore present an opportunity to fix.
Start by registering on our marketplace to get access to a full suite of useful tools that will help you start your due diligence process and gain a competitive advantage over other investors for free! From there, you can unlock the listings to reveal the domain names, proof of earnings and more information to help you decide if this is the right business to buy.
For online businesses, look for proof of earnings and traffic, just as you would check for revenue and number of customers that a brick-and-mortar business generates.
Distressed businesses may have plateaued or downward trending traffic and revenue. You can also find a good deal if someone needs to sell their profitable business quickly due to unforeseen circumstances.
Then there’s the issue of what a business is in the business of, otherwise known as its “niche”. In general, you’d be looking for a business in an industry that’s not keeping up with the competition. For example, a business might be centered around a site with blog posts that review tech. The owner may not have updated the content in over a year, so most of the reviews are outdated.
Buying websites or online businesses in a niche with constantly changing trends can be a quick and easy flip. You can create a content schedule to stay on top of these new trends to keep a steady flow of traffic, while updating older content so it’s evergreen and still relevant.
A common mistake we see people who want to flip businesses and sell websites make is buying an online business because of a bias that a specific industry is profitable.
In fact, we found that niche doesn’t matter very much when determining the success of an online business. There are definitely profitable niches with higher earning potential than others, but you can still run an online business that draws a monthly net profit to replace your income easily in any niche you pick.
The key is to find a niche that you have some interest in.
For instance, someone might buy a content site that’s focused on insurance because of a preconceived idea that it is a very profitable niche to be in. While there’s some truth to that, the subject is also incredibly dry and unless you really love to talk about it, you’ll lose interest in it fast. You’re much more likely to find success if you pick a business that’s in a niche you have some interest in.
Raising Funds to Seal the Deal
A common worry for budding entrepreneurs is that they don’t have the right amount of money to get started. The good news is there are plenty of ways to raise capital for your acquisition outside of the age-old bootstrapped approach. You can reach out to venture capitalists, set up a crowdfunding proposition, or ask for a personal loan among friends or family.
When setting your budget, make sure you have enough resources to acquire and fix your new business. If you don’t have enough money to invest in improving your online business, it’ll take longer to generate positive results and prolong the fixing period.
After you’ve settled on your due diligence checklist, the next step is finding a business that meets your criteria.
Acquiring a Distressed Online Business
Knowing where to look for a business can be challenging if you don’t have a large network of buyers. Online marketplaces where people buy websites or online businesses are a safe bet.
Once you’ve found a business that meets your criteria, make an irresistible offer that everyone is happy with. There are different types of deal structuring and financing plans so you don’t have to pay everything up front.
To learn more about a business and its seller, you can listen to seller interviews on our Real Money Real Business podcast to see if a seller is open to earn-outs.
After the seller accepts your offer and you’ve acquired your new business (congratulations!), then it’s time to turn your acquisition into an even more valuable asset.
Fixing: Make Lemonade out of Lemons
So how do we turn your asset into a profitable website or online business?
Like renovating a house, fixing a business requires sweat equity and hands-on care. If you don’t have the time to learn the skills, it’s possible to outsource this step. For instance, you could buy a Software as a Service (SaaS) business despite not being a developer yourself.
Even if you don’t have the necessary skills to fix up the business, it’s worth knowing what you need to do to get your asset in tip top condition to flip for a profit.
Common Tips for Fixing Online Businesses
Straight off the bat, here are some quick ways you can start fine-tuning your online business.
An online business is inherently at the mercy of being found on search engines. That’s why you need to improve your site’s search engine optimization (SEO) so it ranks higher on search engines. A higher domain ranking means your content will appear in front of more people when they search for certain keywords, which will help you generate more traffic.
There are two ways SEO affects your site’s ranking: on-page and off-page.
On-page SEO refers to things you can influence directly on the site, such as image quality, content type and quality, and the loading times it takes to browse between pages.
Off-page SEO is harder to play around with as it’s mainly concerned with how many sites leave a hyperlink that refers to your site or one of your articles, which is known as a “backlink”. You can reach out to site owners and request backlinks via a one-for-one exchange.
Some owners use public blog networks (PBNs) for their link-building strategy in order to grow their site. PBNs are basically a collection of expired domains that each have a high domain ranking. A backlink from site with expired domains can increase your site’s authority in Google’s eyes.
However, PBNs can cause more harm than good if you aren’t familiar with how they work.
Another quick way to renovate your site is to improve conversion rate optimization (CRO) so people click on your advertisements and site more frequently.
If you aren’t sure which versions of copy improve your CRO more, you can use split-testing (also known as A/B testing). As the name implies, you create two versions of a page or ad and compare which version attracts more views or interactions.
While split testing allows you to experiment with your content, the look of your brand plays a big part in its reputability. High quality aesthetics go a long way towards increasing a brand’s trustworthiness, which is why it’s a good idea to improve the quality of your business’s web design (like banners, logos, and product labels).
If your online business sells a product or service, consider the price point amidst the market. If your product-market fit means your online business has something unique to offer, you could sell at a higher price. Otherwise, lower your prices so you have a more competitive stance, but you’ll need to put in more work to stand out from the competition.
One way to do that is by offering limited time discounts and exclusive offers. People will snatch up these offers due to a fear of missing out.
Setting up an email list is an underused method of creating another traffic source and increasing your revenue at the same time. Through an email list, you can notify and update your leads of limited time offers, if you’ve created new content, or provide a curated product list.
Another great way to increase the value of an online business by applying for different monetization methods so you can diversify your income sources.
When your business earns money from multiple monetization channels, it lowers the risk if a single channel’s profitability suffers for reasons beyond your control. The more even the distribution of revenue, the lower the overall risk and the higher the perceived value. Win-win!
Here are more nuanced tricks to improve the quality of your asset, depending on the type of online business you’re trying to fix and flip that all online business and website flippers can put into practise.
Content sites are usually built on WordPress as it’s one the easiest and most-used platforms to start a blog.
Typically, we find content sites are monetized through display ad networks, such as Google Adsense, and affiliate programs, such as Amazon Associates. An easy way to improve a content site is by applying for both to diversify revenue streams.
If there’s not much content, focus on bulking that up. Adding quality content is key, but it isn’t the only thing you will need to increase revenue, as we discovered in our data-driven content site ROI study.
That being said, having lots of content means you can focus on updating articles and outreach to get more backlinks. This might involve guest posting or cold emailing relevant companies in the same niche or similar niches with offers of backlink exchanges. Check out this comprehensive guide by Content Marketing Institute on how to gain backlinks through guest posting.
With eCommerce businesses, you’ll mainly focus on reducing expenses in as many areas as possible. For example, reducing package sizes saves money on materials used while lowering overall weight. A few hundred grams doesn’t sound like much, but it quickly adds up as you ship out more orders for fulfillment.
To save you time, consider hiring a third-party logistics freight forwarder to manage stock transportation from the factory to your designated warehouse.
Also think about sourcing a better product from a different manufacturer for your eCommerce store. You can hire a local guide in an industrial region with many manufacturers. A local guide who’s familiar with the industry can recommend the most reputable manufacturers, then order a range of samples to check for quality. You might find matching products of similar quality that are cheaper to produce, or better quality at the same price.
Software businesses for sale are highly sought after because of their inherent money-making engine in the form of monthly recurring revenue.
One of the most common challenges all SaaS owners face is figuring out how to keep their churn rate as low as possible. Learning how to keep this number down will significantly increase your business’s value.
Another challenge is generating the right types of leads. Tweak your lead generation strategy so your marketing efforts target the right potential customers with a higher likelihood of subscribing and will have a higher lifetime value because they’ll find your product invaluable.
To make your product as accessible to as many people as possible, consider expanding your available pricing plans.
Freemium models are popular because they give people a taste of a SaaS’s Minimum Viable Product (MVP) with the most basic features, while offering glimpses of the true power of the product. After using it for a short while, you can convert freemium subscribers to take out paid plans once they realize how useful the additional features are.
If you purchase a service-based business, like lead generation or productized services, you want to generate as much interest in your service as possible.
Ask for feedback on the current product range from your current customer base. You can tailor it to better suit their needs, especially if they are giving you feedback on how it is (or isn’t) helping them.
As more people visit your site, you want to try and get as many people into your marketing funnel as possible. Improve the CRO for lead capture forms on your landing pages through A/B split testing. If you’re not confident in your copywriting skills, you can hire freelancers on Upwork or Fiverr to help you with that.
As far as marketing goes, you might be surprised to find potential customers responding better through previously unexplored channels.
Use a mix of organic and paid advertising channels; if your site primarily generated traffic through organic search, experiment with search engine marketing to increase your brand’s exposure, or build a social media presence to diversify your organic reach.
Flipping for a Profit
At last, it’s time to reap the rewards of your labor. This is the fun part of online business or website flipping – selling your asset that you worked on for the past year.
If you want to flip your business, you can sell websites or online businesses through a private deal or through a broker.
If you don’t have a wide network of investors and parties interested in buying these types of assets, you can reach out to potential buyers on LinkedIn, Facebook groups, or forums.
Or you could also use a broker like Empire Flippers. We’ve helped thousands of entrepreneurs buy and sell businesses for a profit.
One of the great advantages with using a broker is having access to a large base of interested buyers looking for a good deal. Some of the people registered as buyers include venture capital companies and private equity firms.
Just as with the buying process, it’s advisable to create a due diligence list of the types of offers you’re willing to accept. You’ll want buyers to show proof of funds as a sign of serious buyer intent. Many tire kickers will express interest as first, but can waste your time when it comes to negotiating the deal.
When you list on our marketplace, we make sure buyers have verified liquidity so future conversations will be meaningful and if a buyer wants to progress further, you can rest assured that they’ll have the money to back up their intent.
On your side, think about how much support you’re willing to provide.
It’s generally advised to offer some help to the buyer so they can get to grips with the business during a transition period, which in turn increases trust in you, the seller. If you don’t want to be involved with the business at all in the long-term, it’s recommended to avoid an earn-out deal structure.
How Brokers Accelerate Your Website Flipping Trajectory
Finding the right business to buy and flip can be overwhelming since there’s three skill sets to master.
But once you’ve had experience flipping a couple of businesses using similar business models and in closely related niches, it’ll become easier to repeat the process. You’ll create a more streamlined approach to buying and selling online businesses as flipping becomes second nature.
Use a website broker to help you start your flipping journey. Our marketplace rejects over 75% of business submissions each week because we hold a high standard for the listings we feature on our marketplace. We vet for proof of traffic and earnings and list a wide variety of online companies, like software businesses for sale.
Not only do we help with vettings to help you with your due diligence, but we’re the only online broker that assists with migrations.
Register on our marketplace to start looking at listings for free. If you have specific criteria in mind, check out our handy guide on how to maximize the filter function to find your perfect deal in minutes.