You’ve heard the stories about website flipping, right?
The idea of buying an affiliate site, working on it, and selling it again for profit seems daunting to most. Especially when you have to stump up capital for the purchase out of your own pocket with no promise of return.
However, having been a part of over a thousand deals, we like to think we’ve built up some expertise in this area. Read on to discover why this process starts with valuation, and an effective due diligence checklist is your best tool to becoming one of the success stories.
Why Buy an Affiliate Site?
There will always be the building vs. buying debate when it comes to affiliate websites. There is not necessarily one that is better than the other, but there are distinct differences.
The common question is, “Why would you buy a site when you can just build one?”
This is a fair question, and there are some good reasons for buying instead of building. The best reasoning is usually the time it takes to build a new site. By the time you plan the content, have the content written, and wait for the content to rank, six months probably will have passed. Plus, the sandbox effect that Google reportedly places on new sites means it could take even longer than that.
That’s why many entrepreneurs choose to jump ahead of the building stage and acquire a site that’s already ranking and generating profit.
How to Value an Affiliate Business
Understanding how a valuation works will allow you to assess that the businesses you’re interested in are being priced fairly. In the below example, a monthly multiple is being used. Some brokers will choose a monthly multiple, and others will opt for an annual multiple.
Whichever multiple is chosen, the valuation formula is pretty straightforward:
Average net profit is used as a standardized indicator of how well a website is performing. This gives a much clearer picture of how much money you can expect to take home each month.
It’s very unlikely that any buyer will buy a website on revenue or growth potential alone. These factors are not reliable measures of success, so always assess the net profit over anything else.
The period over which net profit is measured to calculate the valuation is known as the pricing window.
When it comes to pricing windows, 12 months is seen as the gold standard. This is because it allows the average to account for any spikes or dips in profit. A longer pricing window is seen as a more reliable indicator of how a business is doing long-term than a shorter pricing window.
Sites that are in a period of high growth or decline may be valued using a shorter pricing window. For a site that’s growing quickly, the first six months’ net profit might not represent the current six months.In this case, a shorter window will be used when it’s believed to more accurately represent the current state of the business.
This typically falls anywhere between six and twelve months. Sites like this can still be a good investment, but they should be approached with more caution. You have less concrete data to go on, so it’s more difficult to predict where the earnings will level out.
Due to this uncertainty, websites that are valued using a 12-month window will receive a higher valuation multiple because it attracts the widest pool of buyers.
What Goes Into a Multiple?
The first part of the formula should be easy for you to understand. However, what generates the multiple often creates confusion.
The multiple is made up of a number of factors:
- Site age
- Traffic volume and diversity
- Income stability and diversity
- Email subscribers
- Social media following
As a buyer, you’ll have to weigh up how valuable these things are to you. This is why it’s important to set up a due diligence checklist before you start looking for websites to buy.
How to Set Up a Due Diligence Checklist
A thorough due diligence checklist is the key to acquiring the best possible asset for your needs. It will allow you to assess websites based on a set of criteria to ensure you can efficiently analyze the suitability of a site.
To set up a checklist, you first need to establish what kind of affiliate site you want to buy. There are many qualities you can look for, and we’ll go over some of the most common.
Obviously, the price is going to be the main factor in deciding whether a site is suitable. Before you start looking for a site, set up a price threshold that you must stick to. Remember to have some money leftover for work that needs to be done on the site.
One of the most important parts of performing due diligence on a site is ensuring that the claims of earnings and traffic are correct. If you decide to use a broker, then you have an added layer of protection as they will have vetted the business first and should offer protection should anything not be as it seems.
It’s nearly always recommended that you deal with a broker for at least your first website purchase. The added protection gives you peace of mind that what you’re looking at is at least legitimate. Unfortunately, there are scammers out there that will try to spoof their traffic and earnings to trick buyers into parting with cash.
With this step out the way, you can turn your attention to other factors that will be more aligned with personal preference.
Number of Hours Worked Each Week
How many hours does the current owner spend working? This will show you how much time you can expect to put into the day-to-day tasks of running the site. Ideally, you’ll want to be focusing your efforts on high-return tasks so you can maximize the earnings potential.
However, a website that has high owner involvement could be available at a lower cost. Meaning it might be an opportunity if you’re willing to spend time outsourcing some work. This is something you’ll have to weigh up.
The diversity of traffic is another factor in deciding whether the site is the right fit for you. Most sites will use search engine optimization (SEO) to bring in the majority of their traffic. Although social channels such as Pinterest can also be large drivers of traffic.
You should also analyze which pages are generating the most traffic. If one page is responsible for the vast majority, then this is going to be a riskier investment than an even spread of traffic. Perhaps there are a few pages ranking just outside the top three on Google. Getting them into the top three could bring in some big wins.
This brings us to the next point, a content audit should be performed to assess the quality of what’s been created. Improving poor quality content is one of the most popular ways to optimize an affiliate site.
Last but not least is the backlink profile. Using a tool like Ahrefs, you can view the backlinks the site has acquired. The site owner should tell you any backlink building techniques that were used. Anything paid for should be disclosed, especially if a PBN has been used. To double-check, use Ahrefs to analyze if any of the sites are interlinking to one another. This tends to be a sign that a PBN has been used.
You should also look at the referring domains section to see if there are any big spikes or dips. If there are, then ask the seller why it might be.
What kind of site you buy will usually come down to the skillset you have. If you match up your skillset to a site that’s lacking in that area, then you could be onto a very profitable acquisition. Due to the nature of affiliate sites, there are a multitude of ways they can be created, but getting too detailed on your checklist might limit your opportunities.
Now that you have a good understanding of what you should be looking for, it’s time to start finding some deals.
Where Do I Find Great Deals?
There are two main choices when it comes to finding affiliate sites for sale. The first is a private sale, and the second is using the services of a broker.
A pro of opting for a private sale is you can reach out to any site owner and try to negotiate a deal. You aren’t limited by what’s available on a marketplace; you can cast the net as wide as you wish. The downsides to this are obvious: it’s time-consuming, and there’s no promise of a deal at the end of it.
As mentioned previously, there are fewer protections that come with a private deal. For deals in the tens of thousands and above, it’s recommended that you use Escrow for a private sale to give yourself protection when sending payments.
When you work with a broker, you’ll be afforded the luxury of having the traffic and earnings of sites verified for you. You should still carry out the rest of your due diligence, but it’s a lot easier to create high-quality deal flow. You can also work with a broker to have them find deals on your behalf. This cuts out a lot of the work on your end.
As a buyer, you get to use the benefits of a broker without having to pay commission. The seller pays the commission so this is a big plus, especially for your first few deals where you might not be used to the sales process. Some brokers will also include migration services, which will transfer the website over to you.
Registering for a free account on the Empire Flippers marketplace will give you access to search filters and the ability to save listings to your watchlist to help make the overall process more efficient.
When’s the Best Time to Buy?
There’s no real way of timing the market. When’s best to buy will largely depend on when’s right for you.
You should first establish that you have enough capital to spend. Websites can be a volatile investment, so you should only use an amount that you’re comfortable with. Set a price range and stick to it.
How Do I Make Sure Revenue and Traffic Don’t Drop?
When negotiating a sale, it’s important to include some kind of seller support post-sale. There’s no better person to tell you the ins and outs of a business than the person who created it.
They’ll be able to tell you what’s working currently and what could be improved upon. This can be a great insight into where to take the site in order to improve it. They’ll also be able to troubleshoot any problems you run into to keep things running smoothly. Affiliate sites don’t tend to be too complex, so 30–60 days of support should be enough.
Having completed your due diligence check, you should also have an idea of what needs to be done. A plan should be created focusing on the quick wins and how you plan to maintain or grow the site.
Some common growth tasks include:
- Posting new SEO optimized content
- Optimizing old content
- Implementing a link building campaign
- Growing and monetizing an email list
Which ones you decide to implement first will depend on the state of the site you purchase. All of them can be hugely profitable, and it’s not uncommon to see buyers of affiliate sites double or triple their monthly net profit in the space of a year. That alone should be all the convincing you need to consider buying an affiliate site.