Investing in Websites

Whilst we are well beyond stating the obvious fact that the business arena has fundamentally changed as a result of the growth of the internet, there are still plenty of existing or aspiring business owners who still consider the prospect of buying an internet business as a bit daunting.

One of the most recognizable investors on the planet, Warren Buffet is renowned for stating that he hates gold as an investment because he believes that productivity builds wealth, not gold.

The relevance of this to buying an internet business, is that if you are looking for an income-generating asset that starts working hard for you from day one, acquiring digital assets such as profitable websites would be more in line with the Sage of Omaha’s line of thinking, and we all know how successful he has been.

Think big

Whether you are starting out in business or looking to grow what you already have, the internet provides the platform to allow you to think big and turn a small business into a big one.

The build or buy question used to be based around the size of your existing business. Small companies tended to favor an internally-focused organic approach to growing their business, whereas large corporation’s often have the financial resources to embark on a series of acquisitions in order to grow their turnover and add market share.

The beauty of the internet is that it is much more of a level playing field in many respects and growth by acquisition is now a strategy that can be pursued by small business owners, allowing you to think big and instantly increase the size of your business empire by acquiring web-based assets.

This method of expansion is much more cost-friendly and achievable than physical off-line expansion, which used to involve opening another retail outlet in order to grow your turnover.

Fast-track your online business

Big businesses are certainly making their presence felt in the digital marketplace and the philosophy that the best way to fast-track your online business is by buying one that already exists, is one being pursued by many global internet brands.

Facebook recently spent $1 billion on acquiring Instagram and Zynga spent $200 million to buy Draw Something maker OMGPOP. All of these big-money deals demonstrate that there is considerable activity and a strong market for buying online businesses at the moment.

You can apply that same philosophy, albeit on a much smaller scale and more modest acquisitions will still offer you the same benefits.

Buying an established online business instead of trying to build one from scratch, will give you the instant gratification of having new customers from day one and instantaneous traffic – and unlike big tech acquisitions, the website you acquire will also likely have revenue. This also offers you a much faster rate of return on your investment and you can grow your business through online acquisitions, using the same business model that the multi-nationals use.

Hit the ground running

You have worked hard developing your existing business or getting the finance together to launch a new venture, so from a cashflow and sanity perspective, you ideally want to hit the ground running and start generating a return on your investment straight away.

Using search criteria that fits what you are looking for, you can seek out an existing online business that is currently for sale.

Relevant information can include search engine rank and scalability, the number of unique visitors to the site each month and financial data such as cash flow, price-to-earnings ratios and profit margins.

Scalability is important to consider, as it is an indication of the ability of the site to be able to cope with an increase of demand and whether that growth is sustainable.

Search engine optimization is another important aspect of any online business and any website that you are buying will have an existing ranking, which confirms how frequently the site appears in the search results list when keywords are entered into search engines like Google.

The number of unique visitors to a site each month and the turnover being generated are strong pointers to how visible a website has managed to become on the search engines. A high-ranking will certainly have an influence on how much a domain name and ready-made website can be bought for, although you can consider the option of using a digital market agency, to improve this aspect once you have made your acquisition.

Fundamental reasons for buying an online business

The way we shop and do business in general is evolving and the number of consumers online is growing at a significant annual rate, embracing eCommerce will enable you to grab a slice of this explosive growth.

A look at forecasts and figures produced by eMarketer, demonstrate the level of growth and confirm the opportunities that exist to trade in a global marketplace, attracting customers from around the world.

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The internet is now firmly established as a popular purchasing channel and from a marketing point of view, you can often get a much quicker and clearer understanding of your customer using real-time results that allow you to analyse the decision-making process of customers and fine-tune your marketing accordingly.

Buying a ready-made site

Having outlined the reasons why you might want to acquire an existing online business and what it can do for your expansion plans, here are some steps to follow when buying a ready-made site.

Conducting a search

If you already know the desired business or industry that you are interested in, you could consider canvassing the chosen web sites that match your criteria directly or search the online marketplace and contact a broker to be made aware of any suitable website that is available.

If you decide to make a direct approach to several websites, you should be aware that this approach is not dissimilar to trying to find your next house purchase by knocking on every door of each house that fits your search criteria, in the hope that they might be willing to sell.

This labor-intensive approach is hardly the most streamlined approach to growing your business and your time would be much more productively spent, letting a broker find all the websites that fit your desired criteria and that are available to buy.

Securing a domain name

It should be remembered that domain names and websites are basically the equivalent of real estate, but on the internet.

Similar rules and caution needs to be applied when buying domain names, in the same way that you would not consider buying a property without thoroughly checking out all the documentation and confirming you are buying exactly what you think you are being sold.

Navigating your way around the world of domain names is one aspect of the purchasing process which many buyers tend to find one of the most daunting and any mistake you make can be costly.

If you are buying ownership of an existing domain name get a lawyer or suitably-qualified person to check out the details and confirm who owns the site and whether this matches with the person who is trying to sell to you.

You can carry out a quick check yourself by using a resource like whois.net, and not only verify ownership details but also see the history of the domain name, which can reveal problems like the domain owner violating a Google term in the past and getting banned from searches, which would be critical to know before investing.

Domain owner and administrative contact

A classic but potentially expensive mistake that some business owners make, is to not ensure that whoever registers their domain name, uses your name and administrative contact details.

If you hire a web design team to create a website for you, insist that they register you as the administration contact and owner for the domain name. If you don’t do this, you can sometimes find that if the web designer has used their own details, they will be considered as the owner and it could cost you money to get it back when it has a higher commercial value at a later point.

Think carefully about the domain name

If you are going to try and buy a domain name rather than an existing website in order to grow your business organically, make sure you think carefully about the domain name.

Best advice would be to try and avoid abbreviations, dashes or numbers in your domain name, as these can often be misspelt or difficult to remember, which will make your website harder to find than it should be.

If you are wondering how much of a difference this can make to the success of your website, take the example of a business called blanklabel.com as an example. The owner originally bought a cheaper domain name of blank-label, but when he subsequently purchased the easier blanklabel.com, he was enjoying a 25% upswing in website traffic within just a few months of the change.

The value of extensions

You will probably find that when you register your chosen domain name, you will be offered numerous different versions of the domain with an extension like .net and .co for example.

If you are running a relatively small business, you will probably be fine just sticking with the universally popular .com extension and not spending extra money on buying up different extensions for fear of a competitor riding on the back of your success.

Treat each scenario on its merits and if you think that it is possible that a competitor might try and buy the .net version of your main domain name, then do consider buying it as protection, but generally, extensions other than a .com, become more important only when there is a patent or a trademark to protect.

Buying checklist

If you are going to buy a website or income generating web asset, you should consider working your way through a buying checklist to help you methodically identify, evaluate and purchase a business successfully and with minimum of fuss or complications.

First step is to identify the acquisition opportunity using a qualified channel like a broker. You should then review each opportunity presented to you carefully and diligently, and compare it against your specific chosen criteria, so that you know it is a good fit.

Take time to learn about the business and consider all your options and what you want to do with the site and what it can achieve for you, before you make an offer.

Make sure that you or an appointed person acting for you, carry out extensive due diligence on every aspect of the business from financial figures to web traffic statistics.

Always consider seeking professional counsel for drafting and reviewing the proposed contract of sale. Also ensure that you use a secure payment service when it comes to making the transfer and completing the acquisition process.

Brokers can often act as a useful conduit between buyer and seller and whilst they will be acting in the interests of the seller they are representing, you should find that a good broker will also offer a good level of education and support to the buyer, if they need it.

Buyers who are relatively inexperienced in acquiring an online business should not be fearful of the process and with the right help along the way, can soon be taking advantage of the incredible opportunities that await those that seek to expand their business online.