Table of Contents
Learning to identify red flags and negotiate better deals when buying websites
Hey there! Shlomo here. As someone who’s been in the business of buying and selling websites for a while now, I’ve seen my fair share of good and bad deals. Today, I want to share with you my experience reviewing a website that claimed to be generating $10,000 per month in passive income. Spoiler alert: it wasn’t exactly what it seemed! Let’s dive in and see what we can learn from this experience.
Want to see me break down this deal in real time? Check out the video above, where I go through the listing and share my thoughts on what makes this a bad deal. Don’t forget to subscribe to my channel for more website acquisition tips and reviews!
The Website in Question
So, I came across this website on Flippa, a popular marketplace for buying and selling websites. The website, itbriefcase.net, was listed as a SaaS (Software as a Service) business, which usually means it’s a subscription-based software product. The seller claimed that the site was making over $10,000 every month, with a profit margin of 92%. Sounds amazing, right? Well, as I started to dig deeper, I realized that things weren’t quite as they seemed.
Red Flag #1: Inconsistent Information
One of the first things I noticed when reviewing the listing was that there were some inconsistencies in the information provided. For example, the seller mentioned that the website had a 70% net profit margin, but earlier they claimed it was 92%. This discrepancy made me a bit suspicious, so I decided to keep investigating to see if I could uncover any other red flags.
Red Flag #2: It’s Not Really a SaaS
Despite being listed as a SaaS, it turns out that itbriefcase.net is actually more of a digital marketing agency. They offer services like lead generation, content syndication, and sponsored content. While there’s nothing inherently wrong with running an agency, it’s definitely not the same as a SaaS business, which typically has a more predictable and scalable income stream. This misrepresentation of the business model was another red flag for me.
Red Flag #3: Unclear Revenue and Expenses
When I looked at the revenue and expenses section of the listing, I noticed that the numbers were all suspiciously rounded, like $4,000, $6,000, etc. This suggested to me that they probably had a small number of clients paying for their services, rather than a large, diverse customer base that you might expect from a successful SaaS business. Plus, there was a significant drop in revenue at one point, which made me wonder what caused that and if it was a sign of a larger issue with the business.
Evaluating the Opportunity
Despite these red flags, I didn’t want to write off the opportunity completely without doing my due diligence. The website did have some strong points, like a large email subscriber list and a decent amount of organic traffic. However, I knew I would need to do a lot more research and dig deeper into the financials and operations of the business before even considering making an offer.
Tips for Buying Websites
If you’re thinking about buying a website, here are a few tips to keep in mind to help you avoid bad deals and make smart investments:
- Always do your own research and due diligence. Don’t just take the seller’s claims at face value. Investigate the numbers, the traffic sources, and the overall health of the business.
- Look for red flags, like inconsistent information or unclear revenue streams. If something doesn’t add up or seems too good to be true, it probably is.
- Consider the type of website you’re buying. A SaaS business is different from an agency or a content website, so make sure you understand the unique challenges and opportunities of each model.
- Don’t be afraid to negotiate on price, especially if you spot potential issues or areas for improvement. Remember, you’re not just buying a website, you’re buying a business, so you need to make sure the numbers work for you.
- Have a plan for how you’ll grow and improve the website after you acquire it. Look for opportunities to optimize revenue streams, cut expenses, and scale the business.
Conclusion
In the end, after weighing all the factors and considering my own investment goals, I decided to pass on the itbriefcase.net opportunity. While it might have been a good fit for someone else, it just didn’t align with my criteria for a solid, passive income investment. The key takeaway here is to always do your homework, trust your gut, and be willing to walk away from a deal that doesn’t feel right. With a bit of patience and persistence, you’ll find the right website acquisition opportunity for you!
If you found this post helpful, be sure to check out my other content on website acquisition, due diligence, and online business growth strategies. And if you have any questions or want to share your own experiences with buying websites, leave a comment below or reach out to me directly. I’m always happy to chat with fellow entrepreneurs and investors!