This is a guest post from Yaro Starak from entrepreneurs-journey.com.
Several years ago I decided to take some of the money I was making from my blog and reinvest it into purchasing more sites to create a stable cash-flow source. I wanted to diversify my income and grow it.
For many years I was familiar with the Sitepoint forums, in particular the buy and sell websites forums that would eventually grow to become what Flippa is today.
I began a habit of watching the marketplace at least once a day. I believed that to beat the competition, I would have to spot the good deals on Flippa early. I quickly became familiar with what sites were selling, what information to look out for and how to determine what a site was worth to me.
Since my goal was to create a near-passive income stream, I decided that my investment strategy would focus on acquiring two different types of websites:
- Blogs (because I knew how they worked)
- Forums (because they run off community generated content so could be very passive)
Step One: Act Quickly on a Good Deal
Over the next few months I missed out on a couple of sites because I was outbid or too slow, but eventually I found what looked like a good deal.
It was a collection of three websites – two forums and a small video sharing site – all about miniature motorcycles. I had no clue what exactly miniature motorcycles were, but the data on the two forums was good:
- The sites collectively made about $1,000 a month, mostly from AdSense (and almost all of it from the forums)
- The forums appeared relatively active (I checked how many new threads were started each day for a number of days)
- The Google Analytics and Google AdSense account information looked legitimate and realistic
My only concern was the buy-it-now price. It was at $12,000, which was a bit over my budget. I did some quick due diligence, asked the seller a few questions, and everything looked pretty good.
I made an offer at the buy-it-now price, since it was reasonable to pay $12,000 for a website that made $1,000 a month, especially since I could see plenty of ways to increase the income. I didn’t want to risk missing this one. The deal was done smoothly and I was in charge of some miniature motorcycle forums.
Step Two: Get Help If You Want Passive Income
I still had a lot of work to do. I had to transfer the sites to my own servers, then I needed to perform the “renovations”, which included some slight design changes to the website layout to include more advertising (the lowest hanging fruit in my mind for increasing the income was optimizing the advertising).
To get this done I needed a tech person, which I already had because they helped look after my blog. I also needed a manager, someone who could oversee the renovations. To perform this role I hired a college friend of mine, who had helped me with a previous blog I owned.
With these two people in place the only job left to me was thinking of ideas about how to improve the sites, which I had plenty of (more on this next step).
Once the sites were transferred over to my servers and everything was running smoothly, I told my website manager to begin some tests to increase the income. To pay for and incentivise my website manager, I told him I would split the AdSense revenue with him 50/50 every month.
Next, I will explain what I did that eventually led to doubling the cash flow from $1,000 to $2,000 a month from my miniature motorcycle forums…
Step 3: Test Ideas to Increase Income
The first change we made was placing the AdSense ad boxes in “hotter” areas in the design of the site. We used an AdSense Heatmap to strategically place the ads in the areas of the site where they were more likely to be clicked.
We also added an extra ad box into the design, since I felt it could handle one more ad without looking too crowded. I instructed my website manager to run some tests running different AdSense ad styles.
We kept things simple at first, changing the color of links and borders. I also asked him to do some research online to find out what AdSense ad designs were working well for other people so we had more things to test. After a month of testing we found a good combination of ad placement and ad design, and managed to grow the AdSense income to almost double across the two forums.
I instructed my website manager to set up direct advertising on the forums. This meant we would sell banners to paying advertisers for a monthly fee.
While AdSense is good, often you can make more money if you charge a monthly fee for a banner, and then sign up several sponsors. You never know until you try whether this will be more profitable, and in this case it was.
We used free ad management software to rotate banners and collect statistics about impressions and clicks. I asked my manager to search online for stores that sell products related to miniature motorcycles. He found several retailers who sold bikes and parts for the bikes, and emailed them all.We weren’t sure how much to charge per banner, so I decided to start on the higher end of my scale, and then lower the prices until we had enough sponsors.
I believe we started pricing at around $250/month for a banner in one of the prime areas of the site, and eventually found $150/month to be the sweet spot to get the most advertisers.
I didn’t want to take more than five paying sponsors at once to make sure they all received adequate exposure. Most of the time we had three active paying advertisers who stayed with us for many months. To make the banners fit into the design, we had to remove some of the AdSense ads.
Given with three or four paying advertisers we could make $500 to $600 a month from just one ad spot, that’s a lot more than we made from AdSense in just that area.
Plus we still received a good amount from AdSense in the other areas of the site. We also did one more monetization test. I suggested we look at Clickbank and see if there were any good affiliate products we could promote to the audience.
My website manager found an ebook on how to repair miniature motorcycles, which was a perfect test. We used one of the affiliate banners and tested it in on the site. For each sale, we earned about $15 commission, so if we could sell ten to twenty copies a month it would make us more than AdSense did. The ebook didn’t sell quite as well as hoped, but I liked how it looked on the site and since it did about as good as AdSense, we kept it running in rotation with AdSense.
Step 4: Maximize And Stablize Income
Although it took several months to find the right combination of monetization methods, ad placements and pricing structure, once we found a good mix we pretty much left it as is. Once we hit $2,000 a month in income I was happy with the result.
I ended up paying my website manager around $400 to $500 a month depending how well we did in AdSense income that month. This left me with about $1500 a month in cash-flow from my miniature motorcycle sites. Thanks to the increased cash-flow, within eight months I had recouped the $12,000 I invested and then had a $1500 a month passive income stream coming in.
As a recap, we used a combination of the following methods to increase the income from the forums:
- Optimization of AdSense and adding more ad zones
- Adding direct paying advertisers
- Testing affiliate product offers
Thanks to the manager and the volunteer moderators on the forums, there wasn’t much work to keep them going. I did have more plans to expand the sites, including adding a blog and an email newsletter, which I will sell advertising and do affiliate promotions in. However none of this happened as I decided to sell the forums to raise some capital to buy a house of my own to live in.
Step 5: Selling Out for $25,000
To sell the sites I wrote out a prospectus document, which included information about the forums, such as:
- How the sites received traffic, including Google Analytics data and forum membership statistics
- How much money each site makes and where the money came from, including reports from Paypal, Google AdSense and Clickbank
- What role the manager performed and what role the new owner should plan to do
- How to grow the sites in the future, costs to run the sites and more
I hoped the document would answer most of the questions a potential buyer would have. Although I planned to take the sites and sell them on Flippa, a friend had a contact who was looking to buy some sites, so I ended up doing the deal with him.
I sold the sites for $25,000, more than double what I paid for them and giving me a nice deposit for a house. I was very pleased with this website deal. Although it took quite a bit of testing to grow the income, by working with a website manager it made the job very hands off for me. I hope you take a few ideas from what I did to help you double your return on any websites you buy from Flippa, and turn them into passive income streams.
Now I have to tell you about a special competition I am running in conjunction with the guys at Flippa where you can win one of three copies of my new guide package -
How To Enter The Competition
To enter the competition and win one of three free copies of my new e-guide, all you have to do is leave a comment reply to this article telling me:
Why do you want to get into buying or selling websites?
With the help of the guys at Flippa I will choose the best three entries, who will win a free copy of the guide and the four bonuses that go with it.