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How I Judge Potential When Looking to Purchase Online Businesses

For today’s episode, Richard Patey, owner of the website investing.io, talks about his experiences in website investing and how it can quickly grow your capital. Richard is one of the first group of investors tackling exchanges of marketing startups, who share their background and operating processes in getting to the top.

Starting Up with Website Investing

According to Patey, he did not enjoy the client-based work. He tried to find ways of making money, so he started with a muse business. He got a tiny niche but did not hold into dealing with customers and product shipping. However, this made him realize what he wanted to do, which is running and optimizing content.

Upon buying one of Patey’s websites, one client wanted to keep him as an operator to build up that asset. They flipped the sites a year later together, leading to him experiencing working with other investors doing similar management and organizations. They ended up reporting on the space as a media play at a publication. He had a podcast and some newsletters that are being released for free subscribers and paid ones.

He got into software reviews and started working with other companies. Over time, Patey got interested in investing outside the digital associations; he enjoyed raising generally, but domain investing sparked him until it became an opportunity for Patey to get into the cryptocurrency industry.

Finding the Niche

People investing in alternative asset classes do not stop there. While they are keeping and going into non-mainstream asset classes, some investments get astonishing results. That is why Patey needed to find something underrated to grow his capital. And once he already reaches his goal, he would focus on being traditionally diverse and going into real estate with low yields.

Right now, Patey is focused on things with significant upsides, such as digital assets, websites, domains, and crypto. Nevertheless, Patey also considered limiting the downside as well.  Once individuals learn to manage the downside, they would be able to play in and serve and build some wealth.

When Click Finals launched around 2014 to 2015, he utilized it, selling lots of sales finals and earning commissions. For Patey, this business is more sustainable and foreseen. Also, it is relatively easy to get people into the software. Later on, he sold the company with a brokerage.

Doing different forms of client work with SEO eventually led Patey to find his niche in software management. Aside from testing various other issues with keywords, he also came across with recurring commissions. And he thought it was more sustainable and more predictable while being an actual asset.

After nailing the sales processes, some people did a similar association, eventually becoming his competitor. The website investment has become a new type of industry, wherein many people wrote financial review articles about it. Investing in powerful domains was convenient for brand searches term as well.

Key Tips for Startups

People can generate revenue if they have some cash flow. Some sell receivables with massive invoices on their balance sheets, then sell it to investors to get the cash upfront. And as per Patey, this was a level of creativity people rarely approach.

According to Patey, once you realize that you can sell, trade an asset you have built digitally. It would enable you to generate even more cash compared to the two years of accomplishing something.

Most first-time sellers are unaware of many things, such as not knowing how much the potential of an asset they are selling. The upside is not monetizing the traffic or optimizing the pages for SEO, which could be improved quickly.

Speaking from an investor’s perspective, Patey suggests the seller respond to queries. Going on various sale processes made Patey realize that there was definitely more he could have done, and as a seller, he recommended you to become honest as possible. The seller should be unbiased and reliable in giving legitimate answers. Most importantly, there should be potential for seller financing.

Fun Deals in Website Investing

Everything he does as a buyer and a seller is always in cash, and there is nothing creative with website investing. Patey’s strategy is to pick up micro assets, such as 5,000 or 10,000 deals. He does not care if these micro assets are generating revenue. Patey gives primary importance to potential and ranking.

Patey buys sites based on how he values the back link profile and how well traffic is spread across the area. Then he would optimize existing content, add new elements, or combine a couple of domains. How well the traffic is spread across the sites also mattered to him. Also, he suggested that you should diversify and build an audience of people who will return to your website, so it would be convenient to contact them.

Currently, Patey does not operate e-commerce sites or digital products. His main business is the publication with paid subscriptions, serving as a business model.

Mitigating Risk Exposure

In mitigating risk in terms of owning a range of sites, it is crucial to focus on traffic resources. One underlying trouble that Patey discovered early was that Google being the primary driver of a business transaction and operations. There are sorts of intricacies to the wide range of business types, that if you have a good diversification of traffic, you can compare it to each other.

Therefore, if you are holding for the longer term, Patey recommends expanding the content. You could create an audience of consumers who you would prefer to re-market the website and directly communicate with them through an email. It is not suggested to rely on certain sites for income, but you would need a sizable portfolio if you do. If an individual or two gets hit by Google update, you have enough income from the other sites. After all, content sites rely on google—it’s the game website investors play.

PODCAST TRANSCRIPT

Steve McGarry:

Hello and welcome to The Exit presented by Flippa. I’m your co-host, Steve McGarry. This is a 30 minute podcast featuring amazing entrepreneurs who have been there and done it. They’ve built businesses, they’ve bought businesses, they’ve sold businesses, and we get to learn front row as to some of the tricks and the tips that they have to share. On this special episode, I sit down with Richard Patey and we talk about everything from website investing to podcasting and content creation and how he’s gone there into Flippa and done an incredible job of now teaching people how to buy and sell businesses on a podcast in a newsletter. But before we jump into this interview, definitely check out my previous interview with Jeff Wiener. He was an incredible guy, talking through post acquisition, what it’s like mentally and how we can work through it together, and talking about that kind of topic is really important.

Steve McGarry:

So definitely check that out with the links, wherever you’re listening to this on, Spotify, iTunes, SoundCloud, YouTube, definitely check that out. So on this episode, sitting down with Richard Patey. It was really great to go through some of the things that he’s learned in buying and selling all of these different businesses and now teaching other people to do it is a really fantastic way and a very fulfilling way of making your dream a reality. So I really love having entrepreneurs on like Richard, because he can sit down and say, “I started from scratch here and now I am here teaching people how to do what I did, which was scale up and portfolio of all these amazing online businesses.” So without further ado, let’s dive into my interview with Richard.

Steve McGarry:

What’s up guys. I am here with Richard Patey, the owner of investing.substack.com. How’s it going, Richard?

Richard Patey:

I’m good. Thanks for having me on the show. Is this going to be one of the very first episodes?

Steve McGarry:

Yeah. Yeah, you’re going to be in the first run, the first group of people –

Richard Patey:

All right.

Steve McGarry:

– who have touched the world that is the Flippa community. So it’s very exciting to have you on and share your story.

Richard Patey:

Good stuff.

Steve McGarry:

So diving in, I think one of the things that I really wanted to touch base on at first is what your background is. What brought you to website investing, buying and selling websites? What kind of led you to here?

Richard Patey:

Well, a background in SEO and quickly realized I did not enjoy client work, so tried to find ways of making money myself and did the four hour work week thing, started trying to create a muse business. It was a little e-commerce store. I needed to get traffic to it, so applied what I was doing with client work to the website to get some organic traffic. Realized it was a really tiny niche that I went into and also realized that I didn’t enjoy dealing with customers and shipping products. And so I thought, okay, well I now know what I do enjoy doing, but I’m able to rank [inaudible 00:03:20] and convert people. So affiliate seemed an ideal place for me to focus on, and then focused on building content sites, ranking in Google, sending to affiliate offers, and ended up focused on an area which is software review.

Richard Patey:

And that’s where I’ve had most success, and that’s how I got into building and selling sites. I then started working with investors. One of the guys that bought one of my sites wanted to keep me on as the operator and continue building up that asset and we would split the upside, and we did that and we flipped the sites a year later together. I then had experience of working with other investors doing similar things, and yeah, ended up kind of now reporting on the space as a media play at the Substack publication, have a podcast and have some newsletters that go out for free subscribers and paid subscribers. And that’s the short story, in the sense of how it got into the website investing.

Richard Patey:

And then I’m interested in investing elsewhere, outside of digital, but also, domain investing I’ve been looking into and starting to enjoy. So yeah, investing generally is something that I like. And I’ve also done a bit of crypto. I know you’ve also got a podcast in that, you’ve got a background, and I got into crypto in 2017 or just before. So that was a fun time. So interested in investing generally. Website investing is still something that I’m doing. I’m doing less and less of that because it’s pretty active. Maybe we can talk about that. Other assets require a lot less operation, but yeah, that was … my way in was SEO, as the person operating, building them, yeah.

Steve McGarry:

Nice. Yeah, I found that a lot of people that start investing in alternative asset classes, they don’t really stop. They just kind of keep going into all of the non-mainstream asset classes. After they find one where they’re like, “Whoa, this has really explosive returns. I need to find something else that people aren’t really paying attention to right now.”

Richard Patey:

Yeah. It’s just a way of more quickly growing your capital, and that’s what I’m focused on. If I’ve hit my capital goal, I probably wouldn’t be as active in these asset classes, I would be more traditionally diverse and go into real estate and things with a very low yield. But right now I’m focused on things that have very significant upside, and then I also like to limit the downside as well. So yeah, digital assets, websites, domains, crypto, they all have very high upside. And if you learn to manage the downside, they’re very good places to play in and to build some wealth in, yeah.

Steve McGarry:

So that first jump that you had where you were doing client work with SEO and things like that, and then you started kind of seeing some traction on the affiliate side of things, I’d like to talk a little bit about that. In terms of you found your niche in the kind of software side of things, talking about these different types of products through Amazon affiliates or different affiliate programs and offers, what was that process like? What led you to eventually find that niche? Were you testing various different niches with keywords that were the most trendy at the time? Or how did you kind of come across that?

Richard Patey:

Yeah, so after … I moved away from SEO clients around 2013. I sold my SEO clients to another agency, but then soon needed to build cashflow quickly again, and so I needed to come up with some kind of other service offering. I didn’t want to do SEO again, and at the time I was learning about landing pages and sales funnels. So this was around 2014-15. ClickFunnels had just launched and I got in as an early user of that and sold a lot of the sales funnel services to customers and clients, anywhere from $500, thousand dollar funnels on the low end. So I did one high ticket twenty-five thousand dollar funnel on the high end and really got into that. And this was all using ClickFunnels as the software. And I was offering a service element on top of that. And so every customer, every client that I built a funnel for, I was earning an affiliate commission on ClickFunnels.

Richard Patey:

They were paying 40% at the time. I’m not sure if it’s that high anymore. And so that started just building up. That started to become material, because affiliate commissions, they’re occurring, they compound, and that can start to become significant. So I probably started focusing on it when I was getting into four figures a month in recurring commissions, and I thought that this is more sustainable, more predictable, and this can actually be an asset, whereas service work, I was doing it myself. I hired someone to fulfill the funnels, but it was just not a business that I wanted to do, but every month that went past, the affiliate commissions kept increasing, so I then [inaudible 00:08:56] out. I stopped all the service offering. I turned the site into an affiliate site. So the home page became just a big squeeze page. I offered free funnel templates.

Richard Patey:

That page converted at 40%, which sounds insane, but if you’ve got a good offering and you set up a good squeeze page, you can kind of get this high conversion. So I was building a sizable email list and adding hundreds of new people a month and a percentage of those were signing up to ClickFunnels. And I did that for a couple of years and then sold the business, sold the affiliate accounts. And that was the way into it. I was working with ClickFunnels. I focused on that one. I added some other offers. I was promoting [inaudible 00:09:41] as well, added a couple of others, and then sold the business with a brokerage. And so that was the way into it. And so at the time I was one of the first sites focused on SalesFunnel review software. So that helped. The competition was very low. So it was relatively easy getting people into the software at that time. So yeah, it wasn’t too deliberate, it was just where I currently was at that time, yeah.

Steve McGarry:

That makes sense. Yeah, you nailed the funnel space and the sales process, so you figured, okay, there’s going to be other people coming in to do something similar and they need to see a review site, which makes perfect sense to address the hole there. Love that, where you’ve kind of learned the space by operating in it and then figuring out, all right, how can I actually … as this space scales … because ClickFunnel really kind of sparked a whole new industry with all these different sales funnels.

Richard Patey:

Yeah. It really blew up, yeah. Yeah. I think we’re very competitive. Everyone’s writing a ClickFunnels review article and now it’s pretty hard to rank on the first page. You need a very powerful domain and you need to invest quite a bit into it at the time. It was relatively easy. I was also ranking for ClickFunnels brand search term as well, so that helped. So if you can get in early with a new product, that definitely helps, but software –

Steve McGarry:

Can you –

Richard Patey:

Yeah?

Steve McGarry:

You briefly mentioned that you had sold clients to an agency, and I often tell people about all different types of ways, as a business or even as a contractor, you can generate revenue if you have some cashflow, just in lump sums. So I’ve heard of a lot of people that during this whole crazy global pandemic, they’ll sell receivables. If they have quite a lot of invoices and receivables sitting on their balance sheet, they actually sell them to investors that get the cash upfront at a discount and then they can move over the kind of debt to an investor and things like that. So I like that you touched on it, where you had sold customers to an agency. And I think that that level of creativity, a lot of people don’t really think that way. When they’re thinking about ways that they can generate some cash flow in, let’s say a pinch like currently, with small businesses suffering all over the world –

Richard Patey:

Yeah.

Steve McGarry:

– I think that that’s a really cool thing that you touched on, where you kind of bundled together all these clients that are paying and you say, “Hey guys, I’m done with this business. Take this over.” I really like that.

Richard Patey:

Yeah. Yeah, a lot of people would just … if they had enough, I think would just kind of cancel the retainers and close the website and close the business. I was working with an agency at the time who was actually fulfilling it for me, so they may have even … I think they even started the conversation, “Could we actually just take them on?” Because I was paying them half and they were interested in scaling, but yeah, a lot of people that get their own clients as a solo operator may not realize that they actually do have an asset that they can sell. You can sell the business, the name, the website, or you can sell your monthly retainers to a bigger agency. So maybe that was the first time that I built and sold an asset, and thinking back, I haven’t really thought about it like that. But the e-commerce store that I started, that was the first one that I ended up selling, through Empire Flippers. That was the one that kind of kick-started everything else and I realized I could build and sell online businesses.

Steve McGarry:

Yeah, it really opens up Pandora’s box, once you realize that you can sell an asset that you build digitally to somebody at at a multiple. It really kind of gives you that aha moment, where you can start generating even more cash than you would over the course of two years with something, and that’s a really empowering feeling. So anyone that’s listening that’s brand new, they have a blog, let’s say a content site … you mentioned that you worked a lot with content and SEO. Let’s say someone listening has a blog that they have been working on for five years, generates $500 a month. What do you think, from a buyer’s perspective, from an investor’s perspective, what are the key things that you would want to see? Like me as a brand new blogger, I’ve never sold anything before in my life that’s a business of any kind. What would you want to see in terms of as a package when you’re messaging with me?

Richard Patey:

In terms of a private deal or on a marketplace?

Steve McGarry:

On a listing on Flippa, for example.

Richard Patey:

Okay, yeah.

Steve McGarry:

If you went through there or even through a brokerage, anywhere. It could be a private deal, it could be a marketplace. It could be anything.

Richard Patey:

Yeah. Yeah, I mean as a buyer, as an investor, I would want a responsive seller. So any questions asking to get back in a decent timeframe, and honest answers. You’re trying to figure out whether the seller is legitimate, whether you can trust them. Obviously assets are taken in escrow and that helps, but you want to have a good feeling about the seller. But as an investor, I mean, you want a clueless seller. You want a seller that is not aware of the potential of the asset that they’re selling. So maybe they’re not monetizing the traffic too well and you can see upside with that. Maybe they haven’t optimized the pages for SEO and you know that you can improve traffic and therefore improve revenue quickly. So you’re looking for under optimization.

Richard Patey:

That’s what you are looking for. A lot of first time sellers are not aware of the upside that they’re leaving on the table, and every time I’ve gone through a sales process, it has made me realized that there was definitely more that I could have done. So yeah, as an investor, you just want an honest seller who hasn’t gone through the process before, who isn’t as clued up, maybe isn’t pricing it as aggressively as they could. But yeah, you just want to deal with someone who’s genuine and is honest and if you see upside, that that’s what you’re looking for.

Steve McGarry:

And are you looking for … I think one of the amazing things about buying and selling websites is that there’s all these different potentials for seller financing. I think that’s something that a lot of people skip over, where you don’t have to necessarily have all of this two years of revenue, let’s say, upfront to purchase a business. It could be one year of cashflow that you’re doing that’s upfront, and then let’s say 50% of net profit each month to pay back towards the principal that you’ve offered. Have you worked on any deals with kind of clever financing that you could talk about or any kind of fun deal structures that beginners could use as a competitive edge?

Richard Patey:

I have not. Everything I’ve done as a buyer or seller has just been in cash.

Steve McGarry:

Got it.

Richard Patey:

So yeah, nothing creative to share. You typically see that larger asset value when you’re dealing with anything six figures and above, but below that, it’s probably not something that’s going to work out too well for you, because there’s all the people with a lot of cash at that level who will just come in with an all cash offer. So I like picking up micro assets, real small deals, 5k deals, 10K deals max, buying for the content, buying for the ranking and some potential. But yeah, when I’m selling, I also just want all cash.

Steve McGarry:

Got it. So 5k, 10 K deals is your sweet spot where you’re always looking, and in terms of what would the monthly gross profit be for something that was 10k, let’s say?

Richard Patey:

Yeah. I mean, ideally nothing. So I’m looking to pick up what Flippa would call starter sites. It doesn’t matter whether it’s generating revenue or not, I just care about the fact that it’s indexed in Google, it’s ranking, it’s showing some potential. I buy sites based on how I value the content, based on the backlink profile, and then how well traffic is spread out across the site. So I ideally, very little to no revenue is what I like to pick up. And then you optimize existing content, you add new content, you add some new backlinks, or maybe you combine a couple of domains together. That’s the area that I play in, yeah.

Steve McGarry:

Got it. Got it. So content focused specifically. Have you experimented around with e-commerce or any of these other sort of niches?

Richard Patey:

No. So everything I do for the last few years and currently is still content websites. So making money from affiliate, from ads. I don’t do any e-commerce or SaaS. I’m not doing any digital products either. So my main business now is the publication on SubStack, and that is a paid subscription. So paid media and subscribers I really like as a business model, but in terms of buying and building and selling assets, it’s still all content websites. I can see a time in the near future where I’m going to try e-commerce again, but that’s only because I’ve recently fell in love with specialty coffee and I’m buying a lot myself and I’ve been learning a lot about it. And I think it’s pretty likely that I’m going to set up a subscription coffee business at some point in the near future based in the UK. So it will be a UK one, for no other reason, maybe, than just to business expense coffee would be a good thing, because I’m buying too much. But right now yeah, it’s just content and affiliate. That’s what I do, yeah.

Steve McGarry:

Nice. Yeah, and I think with content sites, I’ve had quite a few and relatively smaller deals. And I think that one of the sort of underlying risk exposures that I realized early on was Google being the main driver of a business like that. And I think that if they changed their algorithm, very similar to an e-commerce company that’s overexposed to Facebook ads as their main driver of revenue, I think there’s all these sort of intricacies to each business, that if you have a good diversification of traffic, you can definitely scale it up, I think, and in terms of your experience with the ebbs and flows of Google and the organic traffic coming through, is there any sort of tips or tricks that you’ve learned that could really be beneficial to somebody that’s like, “Okay, I love what Richard’s talking about with a content site. I want to get started on gymnastics apparel,” or something like that, how would you mitigate that risk, that exposure to Google? Or can you?

Richard Patey:

Yes. I mean you can. You can focus on other traffic sources to try and diversify, you can do social stuff. If it’s a visual niche that you’re in, you can diversify with a bit of interest. You can build an email list and bring back people that way to your sites, but in essence, a content site is reliant on Google, and that is the game that we play. It’s also why I don’t like to hold assets. I like to flip as soon as soon as possible. As soon as the majority of the upside that I can generate is realized, that’s what I like to sell. So I do like to hold because of that risk, but that’s the game that we play. So if you are holding for the longer term, you will want to diversify, you will want to build an audience of people that will return to your website, of people that you can re-market to, that you can directly communicate with an email list. All of these things are good things, but in terms of a pure affiliate play, I would say just focus on Google, know that that’s a big risk, and obviously don’t rely on these sites for income. If you do, you need to have a pretty sizable portfolio so that if any one or two gets hit by a Google update, you’re going to have enough income from the other sites.

Richard Patey:

And that’s the nature of it. If I do do this e-commerce coffee play, I’m probably not going to try and rank any content, it’s probably going to be paid acquisition, but with content sites, we are reliant on Google traffic. That’s the majority traffic source, and yeah, the Google updates over the last year have been pretty aggressive and often they can make not a lot of sense. So yeah, you need to mitigate that risk in terms of owning a range of sites or holding them for the shortest amount of time, and you can buy a website of Flippa, you can improve conversion rate, you can add some tweaks and you can flip it six to nine months later. And yeah, there may not have been a sizeable Google update or anything that could have negatively hit your site in that time. So, yeah, that’s my perspective.

Steve McGarry:

Yeah, I love the comparison to real estate as well, where you buy, let’s say a not so good house currently, and then you fix it up and you can sell a vision on it and then flip it in six months, three months, whatever it is, however long it takes to buy a house and flip it. I think that there’s so many similarities there in terms of the mindset that an investor has to have coming into it.

Richard Patey:

Yeah.

Steve McGarry:

And one of the things that … I interviewed Codie Sanchez and she did a great job of articulating if you’re buying, let’s say a six-figure deal in a niche, one of the things that you can do, and you touched on this briefly, that seems to be a consistent trend amongst investors that I like is that when you have, let’s say a core business, like in her case, it was a cannabis business. I don’t remember if it was a new site or not, but it was a core business that was a big portfolio, part of her portfolio. So having these additional businesses that could be bought at a low, let’s say, four or five figures add to that business.

Steve McGarry:

So you could buy something that’s generating a ton of traffic from Google, and then you could add it to your portfolio and even 301 redirect to your main business, or have it linked to your main business and create your own little ecosystem around a core business and have all of these together. So in your experience, you mentioned it briefly, that you could buy a four figure site that has a good backlink profile, and you’re kind of adding it to different businesses. Could you give us an example of something that has really worked well with that in the past where you’ve had a core site that was generating some revenue and then you added to it with other ones, or are you mainly just flipping it before that even is an opportunity?

Richard Patey:

No, I’m doing it with one software review site right now. So I’ve done a number of 301 redirects, but never on a site that has any significant revenue. So I would do it at the beginning, and that’s what I’m doing right now. I’ve got a good three to four different domains with good link profiles in the software reviews space. And I’ve got one 301 through a main site right now. It’s only got about 10,000 page views a month. It’s got very good content. So I commissioned a good amount of content on this … I guess maybe I’ll do the full history. So the main site was an abandoned site in the SERPs. I picked it up for just $2,000, no revenue, 50 pages, also in the Google index. No great content, but I bought it for the link profile.

Richard Patey:

It was DR in the 40s, strong links, genuine site, just abandoned by the owner. So I picked that up for the link profile, have commissioned 50,000 words from a writer that’s now on that site and that’s going pretty well. I’ve bought an aged domain from a company called Otis, our domain is your SEO ODYS. That was in the software review space with a pretty decent backlink profile. I’ve 301ed that to a category page on this website. And that’s going okay, but I’m waiting for it to take off. If it doesn’t take off, then I’m going to be rearranging everything. Because I recently acquired another website for $5,000 for the content. It also has an aged domain with a pretty good backlink profile, but that one was bought for the content. So in total, I’ve got about 200,000-250,000 words in this niche, three different domains with backlinks, and I’m now trying to figure out the best way of structuring it. So yeah, this is a process I’m going through at the moment. I haven’t cracked it yet. And it’s a waiting game. This is the thing.

Richard Patey:

But if any of these sites was generating any significant revenue, I wouldn’t be doing this. It would just be too much of a risk, but because there’s very low affiliate commissions being generated at the moment, most of the … and it’s a very competitive space I’m going after. If you looked it up in [inaudible 00:29:08], it’s a keyword difficulty in the fifties or sixties. It’s the space where it will take months to get to page one. The two main pages I have are currently on page two, which is good, but it hasn’t broken through yet and I’m just kind of waiting.

Richard Patey:

I’m going to wait another month to see whether it’s going to carry on and it’s going to be through to page one. If it doesn’t, I’m actually going to move all content over to just one domain in a different configuration and hopefully that will blow up. That was the original plan, but with timing, it’s ended up this way. So I’m definitely no expert with this, but I’ve been 301 redirecting sites for a while and understand the process of how to do it and I’m just waiting for the right configuration for it to take off. And it’s just a waiting waiting game. So yeah, hopefully that was useful.

Steve McGarry:

Yeah, I love it.

Richard Patey:

But building off on aged domains, it definitely works. I mean I’ve got one to 10,000 page views a month from zero within six to 12 months, but it’s still not broken out where … it hasn’t got to where it needs to get to yet. If it was a less competitive space, I think this would have been a lot easier, but this needs a lot of authority to really crack. So the content is as good as it needs to be. I’ve found a good riser. But yeah, once the main pages get to page one, I think it’s going to take off, but trying to find the right combination of domain, of where to place that content is what I’m trying to figure out at the moment. And if nothing happens in a month’s time, I’m just going to change everything up again.

Steve McGarry:

Got it.

Richard Patey:

So I guess it’s kind of like I’m hacking Google by doing this, but there’s no downside either, because I can liquidate everything that I’ve bought right now, the domains, the content, and the rankings for a similar amount or even more money than I paid for these websites. I could sell them as starter sites and someone else could take them on and look to build them out. So that’s what I mean by very little downside. I bought well. If you were to try and create the 200,000 words of content, it would probably cost more than the liquidation price for everything that I acquired. So if and when this takes off, I’m not going to be selling what I have for less than six figures. That’s the upside. The downside is I could liquidate for $10,000 pretty quickly and walk away. So yeah, that’s the space that I like to play in.

Steve McGarry:

Got it. So the raw numbers would be you’re in net maybe seven or 8,000, let’s say with your content, the 250,000 words, buying the domains, everything like that, you’re in somewhere around, I don’t know, let’s say five to 8,000. You could liquidate for 10,000, or you have this real asymmetric return where it’s just six figures up there. That’s really interesting. And I like that we can use some actual figures, because that helps people really understand, because for newcomers, they’re like, “Okay, it’s not making any money, so why is he focusing on building out this SEO profile for these businesses?” But a lot of people don’t realize that a business in that niche would be the one that would buy it at the six figure range, where they would say, all right, well this is generating a ton of revenue. And a great example was the mattress review site that got acquired by Casper years ago, where the guy was just reviewing mattresses and they bought his site for … it was seven figures. I know it was a high seven figure deal. And he was just creating great content in that niche. So that would classify as one of those don’t focus on the revenue that early on, build out this really robust link structure and then you have this insane upside where it’s a 10x potential upside.

Richard Patey:

Yeah, it’s got to be at least 10x. That’s the goal, otherwise it’s just not worth the attention. And there will be other assets. With domain investing, domain investors look for 10x as well and there’s no work involved, which is why it’s something that I’ve been looking into, but in terms of that aspect … so yeah, with website investing, it needs to be at least 10x for it to be worth your time, but you don’t need to acquire these sites. You can build out from scratch. That’s what I started off doing. And then you can sell for six figures, but when you’re buying, when you’re investing, you’ve got to kind of get that spread. And that’s why I don’t like buying revenue generating sites, because you’re buying the Google risk. So yeah, I like to buy potential. I don’t like to buy what’s already something that someone has already got working. I like to be the person that actually gets the site to a decent revenue, because you’ve just got so much lower downside.

Steve McGarry:

Yeah.

Richard Patey:

So yeah, you can do this with relatively small amounts of capital, and so yeah, it can be a fun space.

Steve McGarry:

Yeah, that’s a great way to tie this off, is that a lot of people mistake this for something that takes six, seven figures to get involved and they just assume that it’s a very unobtainable thing to buy a business, and they assume that it takes a large amount of capital and I that’s one of the things that I really like about talking to great buyers and sellers like yourself, that really demystify that. They break down that thought of you’re buying websites for $2,000, $5,000 and you have the potential to sell them for six figures. It’s just a great thing, to allow the average person to get involved in this space. And that’s one of the things that I’m really passionate about with this space, is that the average mom and pop can get involved in this still. And I think that that’s going to slowly and gradually change these things. These things are going to go up in way more value over the course of the next decade.

Steve McGarry:

But that’s kind of it for the overview, but I really wanted to kind of lay out the red carpet. Where can people learn more about what you’re working on? I know you have a newsletter now. Where can people learn more from you?

Richard Patey:

Yeah, everything I’m doing right now is at a publication on a platform called SubStack, and it’s at investing.substack.com. So there’s a weekly Monday newsletter, which I’m going to be getting out today. We’re speaking on Monday, so every Monday it recaps what’s going on in the world of website investing, and then there’s other additional benefits for paid subscribers as well. And then there’s a weekly podcast on Fridays as well. So that’s the summary of what I do, my week and then what’s also been going on in the world of websites.

Steve McGarry:

Excellent. Well thanks again so much for coming on, Richard.

Richard Patey:

Thanks for having me. Good to talk to you. Cheers.

Steve McGarry:

Thank you so much for listening all the way through this episode of The Exit ,presented by Flippa. If you guys are brand new here, definitely hit the subscribe button and don’t forget to check out all of the show notes in the description wherever you’re listening to this, as well as on YouTube, and the show notes will have all the links to everything that Richard mentioned, his newsletter, his podcast, all of that. So you guys will get a chance to check that out and learn more about what Richard is working on. And personally, I love the idea of people scaling their businesses and teaching others how to do the same after they have reached success like Richard. So that is it for this episode. Definitely hit a like if you liked this interview with Richard, leave us a comment on people that you’d like to see on The Exit in the future. And we have some really, really exciting guests coming in the next days and weeks here on The Exit. So that is it for this episode, and I will see you on the next episode of The Exit.

Steve McGarry

Steve McGarry

Steve McGarry is an entrepreneur, content creator, and investor based in sunny Tampa, Florida. In 2015, while living in San Francisco, Steve sold his first fintech startup LendLayer to Max Levchin’s (founder of PayPal) consumer finance company Affirm. In the last 5 years, Steve has both built an online community that reaches 1.4 million people every month on social media and a portfolio of over a dozen web properties. Currently, he’s the co-founder of a next-generation fintech startup called GrowYourBase while managing his portfolio of online businesses.