Sometime ago I blog about Web Investment and I thought this would be a good time for me to talk more about how you can implement this idea =) This post includes what are the least things you need to know before buying a web business for investment. I hope that you will find the following useful.
1. Realistic / Potential Revenue?
If you ever browse a listing of website auction in forums or Flippa, you will find that some listing sells base on potential revenue. This means that it is not the actual revenue generated by the site, rather, it is the projected revenue that the seller computes.
Before buying a website, it is very important to clearly understand the history of the revenue generated by the site. Rarely do people want to buy a site with ‘potential’ unless the new buyer is very confident in growing the business or is very interested in the niche.
There are pros and cons buying a website based on potential income, you will definitely pay much lesser as there are no proven revenue and if you are very interested in the niche, you can achieve profitably much faster than creating something from scratch. This listing is an example of selling based on potential.
2. Revenue Model
The next important factor is the revenue model or the types of income. There are many ways to generate income from a site. Some examples are Pay-Per-Click programs (such as Google Adsense), Pay-Per-Action programs, advertisement, selling of products and / or services.
When checking out a site that sells a product, you must check if the site owner has the rights to sell the product or is it just an affiliate product. You must be clear of how exactly does the site earns money so that you can have an improvement plan in mind so as to further increase the revenue.
3. Resources needed to run the site
Most people under-estimate this area and this is the most common reason why the revenue decreases after the transaction. I would say that most sites would need time to maintain. There are very few sites that can really generate you a strong stream of passive income without you doing anything. At the very least, you should spend time to think how to spread words about your site and reach out more to your target market.
Having said these, there are still a lot of other factors to consider before you buy a site. If you have a question, I find that the people at SitePoint is eager to help you out =) Other than that, there are several good guides that spread across the net for your reference:
Have fun buying websites!