Buying and Flipping websites as a business model
The process of buying and selling a website has many similarities to the process of buying and sell real estate, including the "flipping" business model. Similar to how investors buy real estate, improve that real estate and then sell the real estate as a "flip" for a profit, there is also a similar business model for "flipping" website businesses.
When most people buy an internet business, they usually aren't thinking about when they plan to sell that internet business. However, with investors that buy and flip website businesses for a profit, when they buy an internet business, they usually immediately implement their strategy to sell your website for a profit.
Our website business brokers work with many professional investors that focus solely on buying and selling websites for a profit using the business flip model. The key to this strategy is to find a business that is not performing a maximum capacity or finding a distressed business that is performing poorly. The business could be performing poorly for a number of reasons, including poor management, inadequate marketing strategies, large shift in the business model of niche as whole, etc.
Investors that are looking to buy and then sell your website for a profit look for weaknesses in internet businesses they evaluate to identify areas where there is room for immediate improvement. For example, if an experienced website flipper finds a business that is selling at a discount due to poor performance, the website flipper will correct the problems that are causing the poor performance and then sell your website for a profit.
Consider the following scenario:
John Smith has a business that makes $100,000 per year in net profits for the current TTM, but this business has only relied on SEO rankings, which are beginning to drop in the search engines. To maximize the current value of the business, John agrees to sell the business for 2x current earnings, which equals $200,000. Kevin (a professional website flipper) acquires John's business for $200,000. Kevin then implements a comprehensive marketing strategy that includes PPC, email marketing, affiliate marketing, etc., which are marketing strategies that have never been used for this business. In only 12 months, Kevin has managed to grow annual net profits from $100,000 to $200,000 as a result of the new marketing efforts.
Kevin can then sell the business 1 year later at a 2.5x earnings multiple (higher multiple because of the growth), which means the new listing price is now $200k * 2.5 = $500,000.
Following that example, Kevin invested $200k to buy a business that was not operating a maximum capacity, grew that website business over 12 months, which resulted in the company's value increasing to $500,000.
In other words, Kevin turned a $200,000 investment into $500,000 in 12 months, which nets Kevin a $300,000 net profit in only 12 months. As experienced website business brokers, we routinely help website flippers find great opportunities within the market, that offer generous upside for overall return on investment. Ultimately, buying a business is an investment, just like buying a house is an investment. The key to being a successful website flipper is working with a knowledgeable website business broker that can help find businesses that are not operating at full potential, and thus offer better upside for ROI to the right website flipper who has experience in growing website businesses.