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How to Buy a Website

The whole process – spanning research, website valuation, negotiations, due diligence and payment – can be done from your computer.

Building a successful website from scratch is not easy.

It’s tough to get any traction traffic-wise until you’re on the first page of Google results for popular search terms – and that takes a lot of time and resource.

Buy an existing website, however, and you’ll inherit some measure of domain authority and recurring traffic, plus, in some cases, revenues and a database of members or subscribers.

Types of website

Unlike with bricks-and-mortar businesses, your search for websites for sale needn’t be geographically limited to your city or town, although you might prefer a .za domain if you’re mainly targeting users within South Africa.

Website

One obvious way to thin the field is by zeroing in on a particular type of website.

Ecommerce websites are comparatively demanding to run, requiring regular maintenance and the delivery of products, but successful operations can be highly lucrative.

Websites can sell services too. Software-as-a-Service (SaaS) sites like Slack, Dropbox or Evernote have become multimillion-dollar operations by providing cloud-based applications in return for annual or monthly subscriptions. But such businesses are not generally cheap to buy since they need a team of programmers, marketers and other experts to operate.

Content-based websites are typically less profitable than ecommerce sites but require less regular, less substantial maintenance and can generate revenues while you sleep.

That revenue most often comes via display advertising, but also through subscriptions or memberships or through affiliate marketing – where commissions are earned for referring traffic to ecommerce websites with related content.

Forum websites can offer sizeable traffic numbers and user-generated content, but monetizing these strengths isn’t easy and many forums achieve only modest returns from display advertising.

Content-based sites are generally inexpensive compared to most businesses, including other internet businesses, since you probably won’t be buying premises, staff and stock too. Prices can be as little as R500 but the price obviously rises along with domain authority, traffic levels and profitability.

Valuing a website

A business broker can help you with the buying process, including due diligence, obtaining and scrutinising paperwork, and negotiating the terms of purchase.

They can also help you value the business.

Website valuations usually include some multiple of annual profit – generally between 2-4 times depending on the favourability of several other metrics that can offer solid evidence of a website’s revenue-generating potential: namely domain authority, traffic, numbers of subscribers or members and social media followers, among other variables.

value-website

But many websites struggle to convert favourable metrics into cold, hard cash. If you can see a way to do so you could land yourself a bargain. It’s worth asking any internet entrepreneurs you know and even the website’s current owner for recommendations for how you might increase traffic, subscribers or revenues.

Website due diligence

Once you’ve agreed on a non-binding price with the vendor (ie, you can renegotiate later), it’s time for due diligence.

First, understanding their reason for selling might give you leverage in negotiations (for instance if they need the cash quickly to buy another website) or cause for concern (they’re struggling to generate revenue). With (probably) no need to visit physical premises, you can find out most of what you need to know while sitting at your computer.

Ask the seller if they can provide you with data from tools such as Moz or SEMrush about its overall domain authority, where it ranks for popular related search terms and how it performs against competitors.

It’s also worth looking into the plethora of other SEO tools, such as Beam Us Up, SERPROBOT and SEO Web Page Analyzer, that you might use to gauge the site’s performance on various metrics. The data you collate can feed into a SWOT analysis: assessing the website’s strengths, weaknesses, opportunities and threats.

Also ask the vendor for evidence of their earnings and website traffic, copies of profit and loss statements, and paperwork related to expenditure on freelance copywriters, coders or SEO marketers. The seller should furthermore prepare a document outlining all activities required to maintain and run the website and how often they are undertaken.

website die diligence

Also clarify whether the sale will include related assets such as a database of subscribers, social media accounts and intellectual property. And request evidence that the website is compliant with Google’s terms of service and not embroiled in any legal disputes.

Your broker might also recommend that you ask the vendor to agree to a non-compete clause preventing them from running a website that competes directly against you for a specified period after the sale.

Paying for the website

If due diligence throws up any undeclared problems then you’re within your rights to renegotiate the price downwards or abandon the deal altogether.

Once final terms are agreed, a contract of sale is drawn up and, once signed by both parties, dictates that agreed funds should be transferred in the manner and time frame specified.

An escrow payment service – where the funds are held by a third party until the assets are transferred to your ownership and you’ve verified that everything is in order – offers you and the seller a secure means of completing the purchase for a modest fee.

Then it’s time to put into practice your plans for boosting traffic and revenues – perhaps with a view to eventually selling the website on for a hopefully sizeable profit.



Bruce Hakutizwi

About the author

USA and International BusinessesForSale.com Manager for BusinessesForSale.com, a global online marketplace for buying and selling small medium size businesses. The website has over 60,000 business listings and attracts over 1.5 million buyers to the site every month.

@BizForSaleUS

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