Full Video Interview with Joe Burrill, A Website Investor

Published: August 30, 2017

Video-nterview-with-a-Professional-Website-Investor

Ever wonder what it’s like to be a professional website investor? We recently invited Joe Burrill down to our Melbourne office for an exclusive interview on what it’s like buying and selling online businesses as a career.

Sidenote: Joe is the only person on Flippa to hold all three seller badges on Flippa: Gold star (for 2+ years of positive feedback), Super Seller (recognizes number of sales and the sale value), and Premium Seller (for selling multiple high-quality assets).

As Joe Burrill has plenty of experience in both buying and selling websites, the video dives into many topics, spanning from performing website due diligence, valuing a website, and what steps you should take before selling a website you own.

Check out the full interview:

The video is broken down into separate segments, so if you’d like to view a certain segment of the video, you can pick from below:

If you’d like to follow Joe Burrill’s listing on Flippa, you can navigate to his seller page here and hit watch to get notifications on any new listing he posts.

Below is the full video transcript:

Tony: Hi everyone. My name’s Tony Barrett. I’m CEO on flippa.com, the world’s leading marketplace for websites, mobile apps, and domain names. I’m really excited to be joined today by Joe Burrill. Joe is a professional website investor and portfolio owner, and he is also the only person who currently holds all three seller badges on flippa.com. Very exciting to have him today. Joe, welcome and thanks for joining us.

Joe: Thank you so much. It’s a pleasure to be here.

Tony: Fantastic. I wonder, Joe, if we could start by getting from you a little bit of your background, and in particular, how you got started in websites.

Joe: Yeah, sure. It all started about seven years ago, when my older bought us, the family, a board game named Cashflow by Robert Kiyosaki. That basically taught me the basics of investing in just everyday return on investment and that sort of thing. At the time, I was working full time in my day job, earning a decent wage and just getting by. I was always fairly good at saving and so I had about 10 grand saved up in my bank account, just sitting there not doing anything. So, after learning a little bit about investing and realizing that’s an option for me, I started looking at all sorts of different investment opportunities, things like shares and property and so on.

In the end, long story short, I ran into a couple called Matt and Liz, Matt and Liz Raad. Went along to their three-day workplace, and was instantly hooked. I just knew that that was exactly what I was looking for. Signed up for their high end mentoring course and then the rest is pretty much history.

Tony: Matt and Liz, we know them well. They’re fantastic, aren’t they?

Joe: Yeah, yeah.

Tony: What was it about websites in particular that attracted you as opposed to shares or property or other ways to invest your money?

Joe: I have had a background in tech type stuff, like I did a diploma in multimedia design. That’s much more of design stuff, and to be honest, I learned pretty much nothing. Nothing usable anyway. I built a few sites in the past, although they were pretty terrible. I learned more with Matt and Liz than in my diploma, or anywhere else. That was what it was that interested me. Obviously the return on investment seemed to be out of this world and it was even better back then than it is now, which it still is really good. Yeah, I suppose that’s why.

Tony: Okay. Perhaps digging a little bit more to the way that you do operate your portfolio, how many websites might you be owning and managing at any one time?

Joe: It fluctuates a fair amount. I generally go through buying and selling phases. At any one time, it’s pretty much between 5 and 15. I like to keep it at 10 or less if I can, but I can manage up to 15. Out of those sites, I’m usually renovating or working on regularly, about maybe two or three of them. The rest are sort of sitting there, just being maintained, you know what I mean?

Tony: Yep.

Joe: I look at them maybe a few times a month and that’s about it. Usually don’t have to do that much more with them.

Tony: Is that a full time job for you? Does it take you 40 or 50 hours a week to manage those websites, or less than that?

Joe: No. It usually takes me about 10 to 20 hours actually maintaining those sites. The rest of my time I spend looking for new sites to acquire, generally. That actually takes up a good chunk of my time, because it requires lots of research and stuff which we’ll get into probably later on.

Tony: I think we will.

Buying Websites and Performing Valuations

Tony: What I’d really like to ask is, when you’re looking for a website to buy, what are the things that you look for in a website?

Joe: I mean, there are a lot of factors. Lots of things that I really like to see. In general, it’s high margins. I like any site that has high margins to it. Low expenses, high profit, or high income. What that does is it gives me room to reinvest that money into the website to grow it. There are a lot of other factors like domain authority, history, and more obscure type stuff that’s sort of not really possible to put an exact value on, but yeah. That’s usually what I’m looking for.

Tony: Do you subscribe to the Warren Buffett approach of invest in what you know?

Joe: Invest in what you know? Yeah, yeah. Although having said that, I am in plenty of niches I know pretty much nothing about, so not always.

Tony: Do you have particular favorites, I guess, in terms of the types of niches you look at, or the types of sites that you like to invest in terms of how they’re monetized or how they operate?

Joe: No, actually, I don’t. I definitely have favorites. Not niche, but favorite monetization methods and generally the content type sites are the ones I like the most. Advertising or affiliate revenue, because the passive ones that don’t require my attention 24/7.

Tony: Fair enough. Do you believe in terms of return on investment and that sort of thing? That they’re the best ones for you to invest in as well?

Joe: Yes. Return on investment is pretty much everything, when it comes to this. When I invest in a website, I always intend to make that money back through the website if I can.

Tony: Absolutely. Why wouldn’t you?

Joe: Exactly, yeah.

Tony: You mentioned before that you tend to renovate some sites and work on some sites, and others are more passive. When you’re buying a site, are you always buying it for resell value and to resell it in the past? Sorry, resell it in the future. And, how often would you typically hold a site when you do buy it?

Joe: Yep, okay. So a few questions there. Let’s see. I hold a site generally between 6 and 24 months. I will hold it for longer than that if I can see that there’s potential, but usually when its made its money back, I’m looking, “Okay, when should I sell? When’s a good time to sell?” Then, it’s never really set in stone. It depends on the trajectory of the site and so on, things like that. But every single site that I buy, I have the intention to sell eventually, yes.

Tony: Okay, so you wouldn’t look at investing in a site and holding it for a long period of time just to generate revenue through that?

Joe: Yes.

Tony: It’s not really your game?

Joe: Maybe eventually. At this point, no, I’m not doing that yet. I do own a couple in my portfolio I know I’m going to hold for more than 24 months, so there are definitely ones that are exceptions.

Tony: Is that something that you can recognize upfront? You know when you’re buying it that it’s going to be one of those ones you might hold for a longer period of time?

Joe: Yeah, I can tell.

Tony: You can tell?

Joe: Yeah, I can tell. They usually have a lot more established business. They’ve got history that is consistent or slowly up trending. Yeah, I can usually tell, but I mean, you set a plan and then those things generally change over time anyway. Never know 100%.

Tony: No, exactly. I imagine as someone who is buying sites for resell value, you’re always on the lookout for really well valued sites, so sites that you can buy at a lower price and then sell for a higher price later on, right?

Joe: Absolutely, yes.

Tony: So can you tell us a little bit about the evaluation process that you use? How do you value a website that you’re looking to buy?

Joe: All right, so it pretty much … Because we’re looking mostly at ROI, a lot of it does come down to the profit, the monthly profit. I look at the expenses that I’m going to incur, not what the seller is incurring. The seller will sometimes have expenses or won’t have expenses that I will have. Whether it’s because I’m outsourcing something that they’re not or my hosting is going to be a little bit more, or if I’m going to intentionally post more content, whatever.

Tony: That’s a really important point, right? That what they do might not be the same as what you do, depending on your skills and your contacts and all those sort of things.

Joe: Exactly, yeah.

Tony: And as someone who runs 15 sites at a time, you don’t necessarily have the time to put 20 or 30 hours a week into one site, so you might incur more costs to outsource that?

Joe: Yes. What was the other half of that question? I’ve forgotten.

Tony: I just wanted you to walk through a little-

Joe: Evaluation process.

Tony: … bit of your evaluation approach, yeah. How do you-

Joe: Yeah, sorry.

Tony: … value a site?

Joe: Yeah.

Tony: You talked about the expenses side which might be different from what the seller has.

Joe: I generally get the profit and then figure it out, monthly multiple based on that. There’s lots of other factors, like I said before, history and so on, like that. General rule of thumb, though, is I only spend less than what I think I can sell it for. If a site I think I can sell for 20 grand, the seller is offering it to me for 15, that’s a good deal for me, because I know that I can get that. That’s something that I’ve built up over time through experience. It’s not something that you can, a newbie can come along and know. It’s something that I just know from myself, “This is the sort of site that I think I can sell. I know that the [inaudible 00:10:03] value around this is this, and so on.”

Tony: But you know that because you’ve been doing this for a number of years, so if you were talking to someone who was looking to get into this space, then is experience the only way for them to get to that point and to learn it? Or, are there other things they might be able to do to get up that experience curb more quickly?

Joe: In terms of buying and selling, no. You just have to do it, because it’s a different world. Like, you can be at an expert at building sites but have no idea how to sell them, or have no idea how to buy them. There’s a lot of things that you don’t really think about if you haven’t done it for at least a year, I would think, which is why one of the biggest advice that I would give to anyone starting out is to start small, very small. Never, ever invest, for your first website, never invest more than what you are prepared to lose. If you’re happy to take that money and flush it down the toilet, that’s a good sign. You should get that one.

Tony: Not that you want to do that.

Joe: No, no. Obviously your intention is to make money with it and eventually make your money back, of course, but when you’re new at something, you make mistakes. That’s just a fact of life. So long as you’re aware of that and you keep moving forward, that’s fine.

Tony: Joe, I just want to close out a little bit more on evaluation. You spoke a little bit before about how the expenses that a seller who’s selling you a site might incur might not be the same as the expenses that you incur when you take over the site. Does that apply to revenue, as well?

Joe: No, it doesn’t. The reason being because it takes a fair amount of knowledge to know exactly how it’s going to perform. I don’t ever presume that it’s going to make X amount once I’ve bought it. I always take previous revenue as my base. Because that’s how much I know that it can make. Anything passed that is a mystery, and I’m not going to take a bet on that. I’m always going to say, “Okay, this is how much it has made. This is proof, this is obvious.” Even if I plan to make some changes in the future, I don’t know what those … It could be worse for all I know. I don’t know, and so that’s part of the testing and measuring, and so if it comes down when I was expecting it to go up, and I’ve paid as if I was expecting it to go up, I’ve made a bad investment. Does that make sense?

Tony: It does. You might look at a site and say, “I think there’s opportunity on the revenue side there,” but you’re not going to take that into account in your valuation and how much you’re prepared to pay for it?

Joe: Exactly. Absolutely, exactly, because you just never know. You just don’t know.

Tony: If you’re taking historical revenue and you’re looking at the cost base and saying, “What am I going to have to spend on this site?” How do you then, at a high level, take that into account in your valuation? How do you then arrive at what you’re willing to pay for that site?

Joe: Okay, so when it comes to potential, like I said, I never buy based on potential, but it is a factor. I’m very well aware of that. If I can see that the person has neglected a site, for example, for a long period of time, and they’re not doing anything with it and it’s still performing well, then I know that someone … If I was just to jump in and start giving it some love, it will no doubt go up. Scenarios like that, it will bump up my multiple a little bit, but a little bit. It’s conservative for sure, because like I said, I don’t know what’s going to happen.

Tony: In terms of multiples you put a multiple on the profit that a site makes?

Joe: Yes.

Tony: What are the range of multiples that most websites would go for? Can you talk a little bit about a couple of the things that might impact on that multiple?

Joe: Okay. Generally speaking, I cap my multiples at 15 times.

Tony: That’s monthly?

Joe: Monthly profit, so if a site’s making 1000 a month, that would be a max of 15. I have broken that rule a couple of times. If it’s a site that I can see has got some seriously good history, it’s got clear potential, things that, like it’s under monetized. There are a few sites that get sold that are clearly under monetized. You can see that there are obvious ways that you can just literally make a couple of tweaks and it goes up like that. Those generally are fairly obvious. Like say for example, if they’re monetizing with Adsense, they have one Adsense block on each page.

Like, obviously if you put two even, then it’s going to increase the revenue. So, stuff like that does impact my valuation, but I mean, I’ve bought sites for as low as eight times, just recently as well. It depends a lot on the site.

Tony: So there’s still a lot of bargains out there that you come across?

Joe: There are bargains out there yes, if you’re looking, for sure.

Tony: All right. We might come back to that a little bit later.

Selling Websites on Flippa

Tony: Joe, we’ve talked a lot about what it’s like to be a buyer and in terms of buying a website. I’m interested also in what it’s like to be a seller. Do you have any key tips for someone who perhaps might have built a site and are looking to sell it and have never bought and sold before?

Joe: Okay, yeah sure. A few tips, number one is definitely documentation. You have to make sure that you don’t document pretty much as much as you possibly can about that website, so that it’s ideally in a package that you can just simply hand to every buyer that comes across. It eliminates a lot of questions that get asked of you and it just lays it out. You want to make it almost to the point where the buyer doesn’t really even need to do due diligence. Like, “Everything is in this document,” so it’s fairly comprehensive.

I use Google Sheets for this. I call it “My KPIs for this” and then you’ll have a profit and loss in there, make sure that’s accurate, 100% accurate. That’s very important. If you’ve got screenshots that are different than what’s in your profit and loss, that’s a red flag and a bit of a problem. Your top keywords that are bringing in traffic, most popular pages, how much traffic coming, bounce rate, time on page, all those sort of metrics. If you’re selling your own product, then conversion rates and things like that also go a long way to help. Return rates and so on.

That’s documentation. The next thing is to answer everyone’s question as if they are your buyer. So, if someone is coming to you and asking you a lot of questions, or even if it’s just one question, “Can you add me to the Google Analytics?” Or whatever. You can elaborate on that. You can say, “Added” and so on. Answer every single response as if they’re your buyer.

Tony: Is that because any one of them could be your buyer?

Joe: Exactly, partly. Also, it shows that you are willing to put in the effort when it comes time to close the deal. If they give you one or two questions and you answer 15, not that you have to do that, but then it shows the buyer that you are someone who’s good to work with, and they will be willing to pay you more just simply because they’re working with you.

Tony: That goes back a bit to what you were saying about the seller before when you were doing due diligence on the seller. You’re trying to prove yourself as a really good seller that people will be happy to buy from and trust. I imagine your experience as well as a buyer allows you to then set up the sale more effectively because you know what they’re looking for. Helps to be working on both sides at different times.

Joe: Yeah, you can definitely organize all sorts of different business structures … Sorry, what’s it called? Structures for the deal, so you can have [inaudible 00:17:46], and those sorts of things, as well. Most common is just a buyout, though, especially if it’s a smaller website.

Tony: Just a straight payment for the site, yep. You also mentioned before that one of the really important things you do as a buyer is due diligence on the seller to make sure that you trust that person and you’re happy to buy from them. Does that work the other way as well? Do you do due diligence on a buyer as a seller?

Joe: No, I don’t. I don’t know if I should or shouldn’t, but generally speaking, there is significantly less risk as a seller that the buyer will drop out. Usually, especially if you’re using a platform like Flippa, there are a lot of buyers. There are a lot of people there willing to spend money on your website, so generally, it just goes to the highest bidder. If things don’t work out with that person, that’s okay. You can just either go to the person who was second and just say, “Look, the first person fell through. Would you still be interested in it?” If that doesn’t work out, you can just relist it. It’s not that much of a [inaudible 00:18:49].

Tony: Does that change at all if there is an earn out involved? You said most are straight purchases, but if there is an earn out involved, then you’d want to know more about the buyer in that case?

Joe: Absolutely. Yeah, it’s definitely more risky when there’s an earn out and it’s not just a straight transfer. I don’t do that very often when I’m on the seller side. In fact, I don’t think I’ve ever done that, but I am open to the option.

Tony: But you have done it on the buyer side?

Joe: Oh, actually no. Yes I have, no I’ve done it on the seller side, not on the buyer side. Anyway, so yeah, I mean, pretty much any site, usually those sort of earn out ones are with bigger sites and require a little bit more of back and forth. Yeah, getting to know them is a big point then, but I don’t go looking into their LinkedIn profiles and all those sorts of things. I don’t usually bother with that. Because there’s usually so many, as well. There are a lot of buyers on there, so I’m getting messaged on an average listing by up to 50 different people. I’m not going to look into every single one of them, and I don’t know who’s going to end up being one of the highest bidders anyway, so I just let it play out.

Tony: We do find from some of our sellers on the Flippa marketplace that they are interested in doing due diligence on buyers from time to time, but it is usually, as you say the higher quality or … I shouldn’t say higher quality. Higher value websites. It’s also usually where the seller has built the website themselves and they feel like it’s their baby that they’re passing over to the next person, so they have a high level of interest in who actually takes that over and what they do with it. I think in your situation, where you’re buying with an intent to sell, then it’s probably less important so that makes sense.

Joe: Yes, exactly. I’m a little bit more objective, but I see that all the time as well with people. They’ve built this amazing thing usually around themselves, and it’s hard for them to let it go. As a buyer, those are the ones that you definitely want to make sure that you develop some trust and that you care about the business as much or at least as close to as much as they do.

Tony: One question that I’m interested in in relation to that, too, is do you have people that you’ve bought from or sold to multiple times? People that you come back to?

Joe: Yes. Actually, I do. I’ve had a couple of repeat buyers and sellers in particular. I go back to sellers quite a bit and just say, “Hey, have you got any new sites available?”

Tony: Because it’s someone you’ve already done the DD on and you trust them to an extent, and it went well last time?

Joe: Exactly. Successful site sale went once, so it stands to reason that another one would also work out fine. It’s definitely worth it to keep in contact with those people and reach out to them every now and then.

Website Monetization

Tony: Great. One question or one topic we haven’t really covered so much so far is monetization. I’m interested in your views on monetization of a site. Obviously there’s multiple ways to do it. Do you have preferred or favorite ways you like to do it? Both in terms of taking a site and trying to increase the revenue, and also in terms of what you’re looking for in a way a site’s monetized.

Joe: Yes. I’ve said already that Adsense and affiliate type sites are usually my favorites. I’m looking for opportunities where there’s say you can tell that they’re being under monetized for whatever reason. That’s definitely number one. Those are the simple quick wins. A lot of the time, there will be an email list as well, with the site, that is being very underutilized. Usually most sites that have an email list, there is an opportunity for a digital product. Whether that’s an eBook, a course, or just something just simple that you can just digitally transfer through to the buyer. Sorry, through to your customer, and sell it on the platform.

I think that in terms of generating more revenue, digital products, if you can, depends a lot on the site, but digital products definitely go a long way. That’s a massive, big win. If you can see that … Like, a good example. Recipe type sites. If you’ve got an email list of 2000 people and they’re getting emailed every single time you post a new recipe to the site, don’t you think that if you went through your archives, compiled all of your best and most popular recipes and sold it to them as an eBook, they’d be willing to buy that? So that’s an example of what you could do.

It’s literally you don’t even need any new content. Maybe a little bit in between the paragraphs and stuff, but compiling it so that it’s an easy built for you package that you just go, “Here you go.” That’s fantastic, I love doing that one.

Tony: Great tip. Yeah, I’m sure you could do quite well out of that. On the other side of that, are there any monetization types that you don’t like or that you avoid?

Joe: Yes, there are. eCommerce. Physical eCommerce sites. I’ve never owned and maybe never will own. Just simply because the margins are usually a lot lower, so your expenses are really, really high, your profit … Sorry, your income is then also really high but your profit’s only this, which means you only have this much room to play with. Also, it requires quite a lot of work. You’ve got customers to deal with, you’ve got orders to fill, and actually sending those physical products to where it is that they live, returns, and all sorts of inventory type things, warehouses to store the inventory. All those sorts of issues are just, I don’t know, I don’t like it personally.

Also, it’s a lot harder to sell. They’re really difficult. I’ve seen a lot of sites on Flippa that are eCommerce and they usually sell. It just seems like there’s far less activity on them. I don’t know that for sure, but maybe that’s just my perception, but it just seem to be that they are harder to sell. Because you’ve got inventory, you’ve got something that’s extra. It’s not just a website then. It’s more of a traditional business type thing which is not what I signed up for.

Tony: Fair enough. Keep it simple. Keep it focused, makes sense.

Using Flippa to Buy and Sell Websites

As the only person who holds all three of our seller badges on Flippa, you’ve obviously spent quite a lot of time buying and selling on Flippa. Can you tell us a little bit about how you found Flippa in the first place and how you got started on the platform?

Joe: Yeah, sure. It was through Matt and Liz. They were the ones that enlightened me and showed me how to use and operate the website. It’s changed a lot over time and stuff, but that’s where it started.

Tony: Can you tell me a little bit about why you continue to use Flippa? What are the things about Flippa that you think make it easier for you to do what you do?

Joe: Yeah. Number one, above probably anything else is that I have full control over my listing. I have the ability to pretty much put whatever I want in that listing description and I can address every single issue that needs to be addressed in there. If you were to sell it through just a usual broker, they don’t know your website or your business the way that you do. It makes them difficult to put together a document that explains that. With Flippa, you have full control over that, so you can attach documents, attach screenshots, attach anything that you need to to help that buyer understand that business 200%.

The obvious ones are there’s lots and lots of buyers on there, and there’s lots and lots of websites that go up every day, as well. Every time I go on there I see new sites that I can potentially look into. Bit of a no brainer.

Tony: And you’re still finding plenty of good value deals as both a buyer and a seller on Flippa?

Joe: Yes. Absolutely, yeah.

Tony: Great. The other question I wanted to ask you about Flippa was we do get new people who come onto the site who can be a bit nervous about the whole payment process, particularly people who’ve never bought and sold a website before, so they’re worried about, “I’m handing over my website” or, “I’m handing over my money to someone who may be anywhere else in the world.” Have you ever had any issues with money going missing or websites going missing or anything like that?

Joe: I’ve never, ever had any issues with that. Never, nah. In fact, I don’t think I’ve ever had a sale fall through due to any of those reasons before. The reason for that, well Flippa has just recently made it even easier with the escrow platform. It used to be that you had to go outside of Flippa once you finalized the deal inside Flippa, you’d go outside Flippa through Escrow.com or PayPal, or wire transfer, God forbid. Those would be the only ways that you would be able to close that deal and send that money to the seller, or vice versa.

Now, Flippa has a Flippa Escrow service where they hold the money for you. You transfer the assets and then when you finish transferring the assets, they send the money, or you, the buyer, tells Flippa, “Okay, I’ve received the assets, you can release the money through to the seller.” It takes out all the risk pretty much, so long as you’ve put it clear in writing what you’re actually getting. You shouldn’t have any problems using that service at all. Yeah.

Tony: Fantastic. It is something that new people can be concerned about so it’s good to know that someone with your experience that’s sold so many websites and bought so many websites on the platform has never had an issue. It’s great to hear.

Joe: Maybe I’m lucky, I don’t know.

Tony: No, no, I think you’re pretty typical.

Joe: Okay, good.

Website Due Diligence

Tony: What we have been talking about in terms of the profit and the revenue sort of leads a little bit into due diligence. I imagine that as a buyer, that the due diligence process is very, very important in terms of your process for buying a website?

Joe: Absolutely. It’s probably the most important part. It baffles me how many people don’t do it, buy sites. It’s like, “You don’t even know what you’re buying.” Anyway, so-

Tony: What are the most important things you look for when you’re doing your due diligence? What are the two or three key things that matter most to you?

Joe: Yeah, okay. I think it’s worth noting that it usually takes me between five and six hours to do full due diligence on one website. It’s a significant time and obviously I’m not going to cover every single step of that. A lot of it has been built up over time and I add to it, and so and so. Some of the key things, traffic. You want to look at where the traffic is coming on the website, where is it coming from, how long they’re spending on the website, and all those sort of metrics.

Along with that, if it’s getting traffic through Google or organic search, you’re looking at SEO factors like backlinks. Where are the backlinks coming from? Those sort of factors, as well. Next thing is obviously profit. You want to verify every single cent of profit through screenshots, screen shares, and those sorts of things. Along with that goes with the expenses as well. Some sellers are a little bit dishonest when it comes to expenses, because they’re trying to make it look better than it actually is.

You have to be careful, which is one of the reasons why I value sites based on what my expenses are going to be, not what theirs. The next thing is the seller. Traffic, profit, seller. The seller generally is covered by just having an interview with them, just talking to them over Skype or whatever.

Tony: You want to buy from someone who you trust or someone who is trustworthy generally? Is that what you’re looking for when you’re talking to the seller?

Joe: Yeah, absolutely. I’ve walked away from plenty of deals because I just get a bad vibe from the seller.

Tony: Wow, okay.

Joe: Plenty. It happens a lot actually, because it happened literally just a few months ago. If you can’t trust a person, you don’t know what’s going to happen, it’s a big risk. Because you’re dealing with people. There’s another person on the other side of that computer that’s … Anyway. It’s definitely a massive factor.

Tony: Yep. Just to dig into the other ones a little bit more, so in terms of traffic, you spoke about how much traffic there is and where it comes from. I imagine that not all traffic is created equal in terms of valuation?

Joe: No. Definitely isn’t.

Tony: I mean, organic versus paid is an obvious one, so organic traffic would be more valuable than paid traffic?

Joe: Absolutely, yeah.

Tony: There’s some more nuances in there as well, I imagine.

Joe: Yeah. Like I said, the main metrics is like bounce rate, time on page, or time on site in general, page speed is actually another one that’s become a big thing recently. If it’s a slow website, in some ways it’s an opportunity, if it’s ranking fairly well and it’s slow. But yeah, I mean, traffic from … Another big thing that’s sort of started happening or has been happening for a while is Facebook traffic. Can generate a lot of traffic to your website, and Pinterest and those sorts of things. Each one, they have a certain attention span, so to speak. The users have an attention span and that’s usually reflected in your bounce rate, in your time on page and those sorts or things.

Tony: In terms of profit, obviously verification of revenue and expenses and those sort of things, I imagine there’s a few difficulties and pitfalls in that. You’re relying on the seller to provide all that information to you through screenshots or walkthroughs or whatever. I know on Flippa, we do have issues sometimes with people who have multiple sites who aren’t actually very good at separating the revenue or the cost between their sites, so it’s hard to tell whether it applies to this site or another site, right? Have that problem all the time?

Joe: Yes. Disorganized sellers is a very common thing, unfortunately, and yeah, it’s just something you have to deal with, you know? That’s why having screen share, actually talking with them on Skype helps a lot. There are some sites out there that literally have 10 or 15 different sources of income, and verifying that, I mean, that’s going to take a long time. But you’ve got to do it. Figure out where all that money’s coming from and what can be improved and so on.

Tony: I’m sure as a seller you organize your profit and your-

Joe: Yes, oh gosh. Yeah, every single one of my sites, I do a KPI spreadsheet that I compile. It has all sorts of information, not just profit. Not just income and expenses, it has main keywords, popular landing pages, all those sorts of things in there, too, and I give access to every buyer, to that.

Tony: Fantastic. Love to buy a site from you in that case.

Joe: Anytime.

Tony: Just to round out the due diligence a little bit, do you have any key tips for people who are looking to do due diligence on a new site? Anything that you’d recommend for them to watch out for?

Joe: To watch out for?

Tony: Other than what we’ve already covered.

Joe: Let’s see. Well, there are a lot of red flags that come up for me. Nitty gritty stuff like backlinks and things like that, it’s a bit difficult to say, “This is a good backlink profile, this is a bad backlink profile.” My number one piece of advice for people buying sites is to just ask lots of questions. You’re buying a business from someone and it’s your responsibility to find out as much about that business as you can before you buy it. Whether it’s big or small. By asking lots of questions, you will learn a lot more about the site, and have a clearer picture about whether or not that’s something you actually even want to take on.

That’s definitely an important thing and it’s not really due diligence per se, but it’s just use your head. If it’s something you don’t feel like you can run or you don’t want to run, or you don’t want to learn to run, then maybe you should pass on that one, you know?

Tony: Sounds very sensible. The last question on due diligence is do you have any tools, particular tools that you use that help you with the due diligence that some of our viewers might be interested in looking at, as well?

Joe: Yeah, yeah sure. When it comes to traffic, get Google Analytics guest access. That’s number one. You need to have access to Google Analytics. SEMrush is another tool that I use. Ahrefs as well, but I don’t use that one as much. SEMrush I like quite a lot. That gives you some fairly detailed organic search metrics. For backlink profiles, Majestic.com. There are, again, I think Ahrefs also does that. Domain Authority and MozRank, those sorts of things that come from Moz.com, and Skype, of course, to just jump on a Skype call.

Tony: To talk to the seller, to have run throughs and that sort of stuff.

Joe: One other thing, for content based sites, Copyscape is another good one. Copyscape basically just you grab a bunch of content from the website, paste it into Copyscape and it will tell you if there’s duplicate content out there somewhere.

Tony: Ah, of course. Yes, unique content versus duplicate content, big difference.

Joe: Exactly. You’d be surprised how often content gets duplicated on sites..

Tony: I’m sure.

Joe: You have to be careful for that.

Tony: I’m sure. I imagine in your seven years of experience of doing this, you’ve had a lot of wins, a lot of misses.

Joe: Oh yeah.

Tony: Can you tell us a little bit about one or two of the not so good investments that you’ve made?

Joe: Yeah, sure. Sure. The very first site that I ever bought, I bought it for $700 US. It was a significant chunk of money for me back then and the site was called BlackLaceDresses.org. Basically, I owned it for about maybe three months and then it got hit by a Google update, the exact match domain update. It was ranking quite well for the keyword, “black lace dresses,” and “black lace dress” and then that update rolled out and the traffic went down. I tried to fix it, being my first investment I’m like, “Oh, I’ve got to try and fix it.”

It went up for a little bit, I made it better, but it wasn’t anywhere near what it was when I bought it. In the end, I just let that one go. Yeah, I mean, definitely happens, and there was one other one. I used to be in the desktop wallpaper niche. I’m not anymore after what happened with this one. I bought it, it would have been easily three or four years ago now, for sure, and this site had literally tens of thousands of images on the site, none of which they owned copyright to. Of course, I didn’t know much about copyright back then and one of the photos on the website was done by a photographer and they contacted me and said, “You’re not supposed to display that.”

They essentially threatened to sue me. They sent me letters and stuff like this and I’m like, “Okay, what do I do?” In the end, I ended up losing $1000. I had to pay them a bit over 1000 US to them, just to make them go away. Yeah, that was the end of that niche. Not to say that you can’t do it, like there are plenty wallpaper sites out there that are doing it properly, but it’s definitely a bit of a risky niche for sure.

Tony: So with a bit of experience now with those two sites in particular, is there anything you’d do differently that you’d be able to protect yourself better now or you’d just avoid them?

Joe: Well, I definitely know a lot more now than what I did back then. That is for sure. I wouldn’t probably invest in those websites now. Like I said, I’m not even in the wallpaper niche anymore. Usually you can tell, generally if the site has got good content, you can see that it’s been built, it’s a proper business, you can tell that it’s got some authority, and you can tell just by looking at it that it looks real, that’s a good sign just right there. So, those two sites that I bought that I just mentioned, they did not tick that box.

Tony: Fair enough.

Hope everyone enjoyed the interview as much as we did creating it!

If you could ask Joe a question, what would you ask?

Topics:Case Studies • Websites