Escrow.com Transaction

$42,000 Escrow.com Transaction

Last month I sold one of my websites for $42,000 that I had previously purchased for less than $15,000 roughly 20 months ago.

In the time I owned the website I also made just under $30,000 from running the website as well. After factoring in the expenses from running and selling the site I made about ~$55,000 in profit.

The best part?

I did this with a niche I knew little about and I never wrote a single piece of content for the site.

Let me tell you how I did it

Let me start by saying that for this specific sale I can’t share the URL or niche of the website. Sure that would enhance the financial voyeurism on display here, but this is one of those deals where I can’t share all the details. (Want more real life examples? Read example 1 and Read example 2)

How to make money buying and selling websites

To make money from buying and selling websites you’ve gotta first find the right websites worth buying. Next you’ve gotta take the website, work on generating more traffic and making more money from the traffic you receive.

I’ve found it’s much easier to make more money from existing traffic than it is to generate more traffic to a website. This is partly due to the fact that quite simply just adding in a new revenue source can increase how much money a website generates (a single line of JavaScript sometimes). I’ve been making money from websites for over half a decade so I’ve gotten pretty good at just looking at a website and instantly identifying a wide range of new revenue generating opportunities. On the other hand, increasing traffic takes a little more effort but is also doable as well.

Now I’ve alreadyΒ written a book and several blog posts detailing the ideas behind buying and selling websites, so instead of rewriting what I’ve written before I’d like to instead spend more time discussing the specifics of this sale. If you’d like to learn more here’s where you can start:

My book on buying and selling websites (includes real life examples etc):

Buying Websites – How To Invest In Online Real Estate

 

My first six figure website sale (still working on a seven figure sale):

How I Sold A Website For Six Figures

Six part blog series detailing a website I bought:

Introduction – How To Buy A Website
Part 1 – Two strategies to employ after you acquire a website
Part 2 – How I drastically increased the income
Part 3 – Long term income case study results
Part 4 – $4,000 Investment Paid Off
Part 5 – How to buy websites and profit in less than 12 months

The Story Behind My $42,000 Website Sale

I’m more of a buy and hold style investor as I prefer to find great websites and grow my monthly income as I grow my portfolio of digital assets.

But occasionally I will sell some of my websites. Earlier this year for example I sold off almost all of my websites that were making me only a few hundred dollars per month (those primarily came from earlier times when I wasn’t as focused on bigger projects). It probably wasn’t worth the effort but cutting my total domain portfolio nearly in half over 2013 has helped me focus on my remaining more lucrative websites and projects.

Here Are The Numbers:

Purchased for less than $15,000 in early 2012

Sold for $42,000 via Escrow.com transaction

Earned ~$30,000 in profit while I owned it

Average income for past 12 months: $1,511.93 per month (when I bought the site the income avg was about half that)

Income sources: Google Adsense, Amazon Associates, Other display and affiliate revenue

Total net to me ~$55,000 in profit

URL: Can’t disclose

Niche: Can’t disclose

Buyer: Can’t disclose

Now I’d like to cover some of the main questions people had for me which can shed some light on this transaction and the mindset behind how I negotiated this deal and some of the nuts and bolts of the sale.

Please do ask questions at the end and I’ll update this post with more information.

How I Sold The Website:

In this case the buyer found me. I wasn’t looking to sell because although it was a smaller source of income in relation to my overall business at “only” $1,500 per month it was a nice asset to have in a niche unrelated to anything else I was doing (and it more than pays the mortgage on the cheap house I bought last year).

The buyer initially offered me $25,000 over the phone without knowing a lot about the site other than traffic numbers. Even though I knew that was low (and so did the buyer) I proceeded to put together some financials for the site to better justify the price I wanted to get.

Website Multiple

Part of the spreadsheet I used in negotiation.

I created an Excel spreadsheet of all of the income sources and sent it over while at the same time explaining in the email response that a $25,000 offer would be under 1.5x yearly earnings and not high enough for me to justify selling the website.

The buyer then came back to me with an email offer of $35,000 (up from $25,000). Before this point I never told the buyer what I wanted for the website other than that the first offer was too low.

After I got the $35,000 offer, I countered back in an email response explaining that based on the age of the website, income history, traffic history etc that I believed the website should be valued in the 2.5x yearly ($45,357.90) to 3x yearly ($54,429.48) price range.

Caveat: I didn’t pick up the phone to counter verbally because I’ve found that in negotiating situations most people prefer to avoid hashing it out over the phone and to instead work towards getting into the same ball park price wise first. (I actually don’t mind battling it out over the phone when you can get instant feedback on what the other party is thinking).

The buyer replied back via email thanking me for my feedback and set a time to discuss the offer the next day. When we got on the call the next day the buyer offered $40,000. Because the offer only went up $5,000 and based on the tone of the conversation I could tell we at or near top range for this deal.

I still felt that I could get a little better offer so I basically said while I felt the site was worth the price range I shared in previous emails that at $42,000 they had a deal. It was only an extra $2,000 but I’ve found that in negotiating when you’re close to a deal and on the phone you should always ask for a little more most people just want to be done negotiating. That’s why I prefer to finish final negotiations on the phone in part so that I can feel the other party out and also so that I can ask for a little more.

I don’t think I’m an expert negotiator or anything, the above are just based on my observations in business over the past several years and from my past experiencing negotiating all kinds of things in my business.

Did You Use A Lawyer?

After I signed the letter of intent (which is basically is a good faith document that says both parties are working towards closing the deal and typically includes a provision that the seller can’t go out and try to sell elsewhere) there was actually quite a bit more back and forth with regards to the asset purchase agreement.

The buyer put together the initial asset purchase agreement and my lawyer went through and had a lot of changes but we eventually came to an even ground.

In total I paid my lawyer $1,295 but that is money well spent.

I’ve been using the same lawyer for the past several years. Nate Webb at FocalLaw.com. I’ve also worked with Venkat Balasubramani at the same firm as well but not on this deal.

I wasn’t compensated or offered reduced services for mentioning FocalLaw, I’ve just had a good experience working with them and wanted to share with others. Now if I happen to receive a random Xbox One on my doorstep for Christmas from Nate/Venkat I’ll update that in this post. πŸ˜‰

What Would I Have Done Differently?

At the beginning of this post I mentioned that I was able to buy this website for under $15k, pay someone else to write the content, make ~$30k while I owned it for 20 months before selling for $42k to net me ~$55k in profit.

I believe this site could have been a six figure exit in different hands than mine, but the problem is that as I said before I knew nothing about this niche. I only bought the site because I knew there was some opportunity to improve it with minimal effort on my part.

Even though I didn’t do any of the content for the site, the fact that I even owned the website still placed some level of burden on my mind of “Hmmm what else should I do with this website?” “Do I need the writer to finish up some more articles?” etc and those types of questions could distract me from larger opportunities. This is again part of why I decided to sell was to focus in on bigger things in 2014.

I stopped buying websites for less than $10,000 a while ago and moving into 2014 perhaps I need to up my price as a buyer to $50,000 or more so that effort I put in can provide me even greater returns.

I already made an offer on another website to buy for $175,000 but the owner wasn’t looking to sell at that price. If we could have got a deal done for around $200,000 I would have brought on another investor to go in on the deal though because I’ve yet to buy a website for that much money but it didn’t work out.

Overall

With ~$55,000 in profit altogether I’d call this a pretty solid base hit deal and while I’m still working on hitting my first home run ($1MM+ exit) or grand slam ($10MM+ exit) if I can keep stringing together solid base hits like these while living well within my means at the very least I should be able to retire if I want to ahead of my 40th birthday in 10 years.

I structured the details of this post differently than I have in the past in part because I can’t share the niche, the URL or a whole lot more about the sale but I hope this was still useful for you to read. With that said, I’ll be updating this post with answers to questions that you share below so please do ask away.

Note to the savvy prying readers: The website I sold is not and has not been on the server that my blog is hosted on. Obviously I have multiple hosting accounts so a reverse IP lookup will only reveal websites I don’t care anyone knows about.

Update: I posted a video logging into my Escrow.com account to quell any doubts

This video was included in my November 2013 income report where I revealed that I had earned $86,401.31