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Buying and Selling Websites

What is an Internet business?

There are many changes that have taken place in business in the past two-hundred years, but none have so profoundly changed our concept of what a business is as the Internet and the World Wide Web.  Until the advent of this electronic forum that reaches into almost every home in America and many throughout the world a ‘business’ was primarily thought of as a building with employees, resources and facilities, and people who bought and dealt with such businesses could easily identify their worth by the materials and net worth of the resources and personnel those facilities contained.

This all changed starting in October of 1969 with the introduction of a military construct called “ARPANET” created by DARPA to allow a rich communications network that should stay up even in the advent of major breakdowns in our telecommunications networks.  At first this fledgling Internet was used mainly to communicate text streams and message boards.  Starting in 1990 it was renamed the “NSFNet and began to be loosely managed by the National Science Foundation which oversaw the extension of the Internet into the CSNET throughout universities across the USA and Europe.  When usage began to expand due in no small part to the TCP/IP protocol developed by Bob Kahn and Vinton Cerf (which is still in use and the standard today) the government opened the net up to privatization in about 1995, and the first online business sites began to appear.

Back then online sites were pretty clunky and used primarily for advertising and showing contact information – but as HTML and other formats became widely accepted allowing use of graphics and dynamic web pages to accomplish more and more in this new medium the sites became more sophisticated, and  eventually became ‘storefronts’ in their own right.  Much has been written about how the World Wide Web (WWW) ‘changed the nature of business’ but in reality shake-ups in business are nothing new, and this new medium, while exciting and certainly unprecedented is not that different from the industrialization or the creation of communication devices like the teletype and fax machine.

Business has always gone with what works fastest so long as it is efficient and affordable – and this new medium was both of those! Many of the companies who started such as Chemdex once a Wall Street darling have since faded into obscurity or failed because they didn’t recognize that not all of the rules for business had changed just because there was a new format available to market to the public.  Just as with traditional business models the basic rules of supply and demand and profitability still held true: there is no such thing as a free lunch!

There is a tendency for people to get ‘caught up’ in things that are exciting and new, and when the hype and excitement exceed the marketability a ‘bubble’ can occur just as that which came about when the dot com boom of the mid 90’s gave rise to any company which went public and had an exciting description or business plan becoming an overnight success story.  The problem with bubbles is that they are prone to breaking.

At first the exciting concepts for using the new Internet medium in fields such as advertising, mail-order and online sales proved irresistible to venture capitalists, and the increasing number of easy access to online trading sites which allowed the ‘common man’ to become an investor drove waves of investors to IPO’s that otherwise might not have had a chance of being successful based solely on the plans the company had and not any true business model or market share factors.  The bubble reached a peak in late 2000 and early 2001 before fundamental flaws in many companies models forced a succession of failures and then the bubble burst.

The early concept of most Internet companies was that if you got the customer base (i.e. lots of people coming to your site) that you could make money selling advertising and other ‘link’ data based on that throughput.  It was a sound-enough concept in theory but failed to consider that the modern consumer who was in love with the Internet might simply transition from one site to another once fees or advertising began to hamper their use of the site.  With rare exceptions sites that relied strictly on these ‘advertising revenue’ models failed, sometimes spectacularly and often in rapid succession.  A few of the successes managed to keep their customer base by careful adherence to a few simple rules:

Provide value and ease of use
Make any advertising and marketing non-intrusive
Target ads and information to people who would want to see it

Of the companies who succeeded at this one of the true greats was Google™ whose search-engine concept was so loved and carefully structured to meet the needs of it’s user base that people gladly put up with a few advertising links related to their searches in exchange for easily finding the information they wanted.  Other companies, even huge software companies with deep pockets such as Microsoft Corporation were unable to match the blend of usability and customer friendliness that Google™ offered, and even if their search returns were ‘better’ from a technical standpoint the value offered by the leading search engine was so great that the very term for searching the Internet for information began to be called “googling” … but this was one of the rare exceptions and not the norm.

Today when most people think about e-commerce and online businesses they think of the great ‘dot com boom’ of the early to mid 90’s and the remarkable success stories like Google, Yahoo and e-Bay. They often don’t consider the early 2000’s when so many of the dot.com business failed or had to drastically restructure.  It is with good reason that the winning names leap to mind however - millions have been made both on and with the companies in question.

Admittedly many other sites failed or have yet to become fully profitable - but the billions and billions of dollars spent yearly on online sales is not relegated to just a few big names, nor to those companies who have gone public: in fact any web site that sales products has value. Sometimes just a name itself is worth a remarkable sum of money in fact – and identifying and taking advantage of the business opportunity companies that may currently be losing money but which have the potential to become profitable is what this course is all about.


Ecommerce

There is more to the Internet and e-commerce then just online search engines, auction sites and online business though.  The term e-commerce refers to the transfer of funds or goods across an electronic medium for profit.  Most e-commerce sites today are horribly undercapitalized and run by individuals from their homes, perhaps with a good product and even a great web site or domain name but without the public awareness and marketability necessary to make a true success of it.  These types of e-commerce sites are ripe for a budding entrepreneur to purchase, turn around and either run for a profit or to sale to someone entering the online sales arena.

Some key aspects of a successful e-commerce site include:

Having well organized and defined business models and practices
A focus on meeting customer needs and expectations
An understanding of their customer base, product capabilities and market base
Methods to ensure customer acceptance and security
Quick and reliable shipping and tracking methods

Finding a company that has at least two of these five concepts well established but which is under funded or lacks the ability to correct problems in one or more areas is when an opportunity exists.

Another vital aspect of any ecommerce site is how they handle their transactions.  There is a host of ways to accept payment both online and directly and this can be a major bottleneck for many smaller companies.  Concerns about online security and having personal information stolen are rampant and can cause an otherwise avid customer to shy away from placing that order and instead to go to another site.  When bargain hunting for an online site to purchase and improve this can be a key area to focus on for just that reason – even the best product at a great price can’t entice customers to go out and buy a money order and ship it off if they can simply click to another site and for a few dollars more buy the same item online.

Consumers have accepted the e-commerce business model less readily than its proponents originally expected. Even in product categories suitable for e-commerce, electronic shopping has developed only slowly. Several reasons might account for the slow uptake, including:

Concerns about security. Many people will not use credit cards over the Internet due to concerns about theft and credit card fraud.
Lack of instant gratification with most e-purchases (non-digital purchases). Much of a consumer's reward for purchasing a product lies in the instant gratification of using and displaying that product. This reward does not exist when one's purchase does not arrive for days or weeks.
The problem of access to web commerce, mainly for poor households and for developing countries. Low penetration rates of Internet access in some sectors greatly reduces the potential for e-commerce.
The social aspect of shopping. Some people enjoy talking to sales staff, to other shoppers, or to their cohorts: this social reward side of retail therapy does not exist to the same extent in online shopping.
Poorly designed, bug-infested e-Commerce web sites that frustrate online shoppers and drive them away.
Inconsistent return policies among e-tailers or difficulties in exchange/return.
Determining transferability

With normal businesses when you purchase a business you often purchase it’s debt as well as its assets, but even then you may or may not have the right to the company name and marketing already in place.  At first glance this may not seem like such a big deal since after all, the product is what you are selling – and when it comes down to it a good burger is still a good burger no matter what name is on the sign, right?  Maybe - but imagine if you bought out McDonalds™ and then had to change all the signs and flyers and any trademarked item that identified it as having been a McDonalds: would you consider that a worthwhile investment?  Of course not!

The principle value of stores with such wide public acceptance and market share is that they are known already, they have what is called an ‘installed customer base’ and that in itself has a value that often far exceeds the true monetary value of the buildings and equipment itself.  This is why it is so important that when you are researching an e-commerce site you understand what is and is not included.  What may be a great buy can turn into a huge loss if the domain name can’t be transferred to you or they won’t allow a redirect from the existing host site or perhaps wish to keep their list of customers private.  These things all add value, and knowing what is and is not going to be included is vital when you make an offer!

Assuming that the site has online acceptance in a secure format and takes credit cards you need to know the details of their agreement(s) and what company they are dealing with.  Sometimes such arrangements are simple to change over to the new business owner, and sometimes extensive web site revisions or legal proceedings have to occur: any indication of a long-term agreement tied to the business itself needs to be carefully reviewed to determine how that contract will affect a new owner once the business is transferred.

Customer Contact Information

Of all the elements a business has to have to succeed the one that they simply cannot fail to have is customers - having the best product at the right time at the right price will due you no good at all if you don’t have anyone to sell it so.  This is why it is so important that companies have a good method of tracking and maintaining customer lists and contact preferences, and that such information is included as part of their business model and in any sale of the business.

There are many different ways to track customer sales and many different formats to store them in too – be sure to find out what method(s) the existing owner has used since some are more difficult then others to transfer over.  If they use QuickBooks Pro and you plan on using that same program then you can get a copy of their database and utilize it directly with no real effort – but if they simply keep email records and type in the data as needed some manual data input and manipulation will be called for: often at your expense, so be sure to consider that in any offers to buy the site that you extend.

Summary

Online businesses or e-commerce simply refers to any business that sales or makes available to sale a service or good across the World Wide Web or the “Internet.”  Many of today’s success stories such as Amazon, eBay or Google are the exception rather then the rule, with the vast majority of online sales sites being run from home either part-time or as a secondary source of income.  Since so many of these sites are personal businesses a new opportunity has arisen for the canny and shrewd investor, much like the common trend in ‘house flipping’ where a home in need of sprucing up is purchased, renovated and then sold for a profit these mom-and-pop web sites can be purchased either stand-alone or along with their associated goods or manufacturing capabilities, converting into profit-making centers and then resold to other investors looking for an online business to run but unable or unwilling to start one from scratch themselves.

Most online sales sites will be listed with search engines already, and should have at least a year or so pre-purchased on their Domain name, but these facts should all be confirmed prior to any actual transfer of funds.  It is also important to have contracts and a clear understanding of everything that is included in the sale, both debts and assets and when and how the transfer will take place.  In many cases since you will be dealing with smaller and possibly less capable business owners you may also need to guide them on terms and aspects of the business to ensure they can provide you what you need in a format that you can use.

As with any investing knowing the market, timing and most importantly of all doing your homework to make sure you do not run into any unforeseen problems is key to a successful e-commerce site flip: but if you follow a few basic rules and understand what it is you are buying the opportunities for success are immense!


Buying an Internet Business

Location, location, location the old saying goes is the key to success for any business.  But does that even apply to an online business? YES – the most important thing any online business needs to have is exposure.  If you can’t find the site when searching using keywords commonly attributed to the site then it is underexposed, which may be a key point you can use to your advantage if you are looking for a bargain and hope to correct and then sell a site for a profit. But just as with any business arrangement there are several things that simply have to be done to cover your bets and ensure all the legal ramifications are taken care of.  In terms of buying and selling an online business which may have a small profitability to start with it is best if you can handle most of these tasks yourself rather then hire professional firms and lawyers: if not for the cost savings but also so you can identify first-hand any existing issues that provide you an opportunity both to ask for a lower sell price and to correct to make the site more sellable.

Business Basics

The main concept of any business is actually quite simple: find and fulfil a need as cheaply as possible to earn a profit.  The thing to keep in mind is that is someone else can do the same thing cheaper or with higher quality then you can at the same price point then you may not do as well as you could, but you can STILL make money.  Having a ‘gimmick’ such as designer-label clothing selling at a higher price-point due to perceived value can often put you over the edge, but principally having a competitive price, being where customers can find you and managing repeat business sales is the recipe for success.

There is more to running a successful business then just making sales however – any successful business whether online or standalone needs to have an understanding of marketing, finances and shipping. We’ll go over all of these in more detail later, but every business has an approach that works best for it and their consumers and identifying this and making it part of your business is vital to success.

Understanding your market

One of the most important elements of any business is the customer – it is important to know the types of people who buy your product, what advertising and contact methods they prefer, and why they purchased from you rather then someone else.  This is a skill but it is one that can be learned – some great resources including the Fred Pryor “How to please your hard to please customers” help you identify various personality types when viewed as customers, how to work with them and which methods of problem handling work best for each.  Having such training is invaluable for any business owner since how you handle your customers plays a large role in what they think of your business and whether they will be repeat customers.

Besides the customer themselves you have to identify the market for the goods and / or service that you are marketing.  If you are selling a one-time purchase such as a car, luggage or home you will not likely see the exact same customers over and over and will need to target your expectations accordingly.  This is not to say that you can afford to alienate your customers, since word-of-mouth is one of the best references possible – but tricks like incentive programs and sales marketed to past customers will not be viable ways to enhance the business for some items.

With sales that can be repeat sales such as vitamins and supplements, foodstuffs and consumables however keeping close tabs on your customers and letting them know about upcoming specials and sales is a valuable way to enhance the web site and profitability.  Keeping some form of “Customer Relation Management” software or system in place is vital to such practices.

The solutions are as varied as the businesses, from simple Outlook Contacts groups to dedicated CRM software the sky is the limit, but keeping in touch with and keeping customers involved with your business is a sure way to help make them feel like they are part of your success and thus enhance that all-important bottom line.  Bear in mind that not every customer is worth the investment of a mailing or even an email contact but certainly customers who have already been repeat buyers and those who have purchased in larger quantities should be targeted.  Things to consider when looking for customers to track and communicate with include:

The customer’s past purchase patterns and profile
Costs to contact them
Likelihood of a return on the investment

Customers who fill out a profile or agree to ‘log in’ to your site are much more likely to be repeat buyers then someone who simply places an online order and declines to be contacted as part of an ongoing email notification process, so having those options on your site are great ways to create profiles on customers spending habits and contact preferences.


Nuts and Bolts of Buying

When you are buying a pre-existing business for many people the temptation to neglect considering all the steps you would go over when starting from scratch is great – after all, surely the existing owner(s) have already been through this, right?  Not necessarily – and even if they did go through it you should take this opportunity to identifying whether the business model and company type they chose was really the best for the business in question.  For instance they probably have a Sole Proprietorship since that is the easiest to set up, but benefits as well as marketability may well justify starting a corporation or at least a Limited Liability company.

A few of the things that you should do once you identify a business that you want to buy and then compare to the existing models and plans of the company include:

Business Plans

These include:

The marketing concept
Financing strategies
Operations guides and procedures
Necessary assets and capital equipment to succeed
Market research details
Available and any outstanding financing
Necessary permits and licenses, and the status of any current one(s) as well as transferability of the same
Lists of all current assets and debts
Details of any insurance policies

Research the Product Segment

To create a valid business plan much of the following steps including this one need to occur first, identifying and documenting the product or service that is being marketed, checking out competitors and pricing models for the product as well as availability of alternative suppliers and drop shippers etc. all play a large part in the creation of a business plan.  Locations to use to gather this information include but are not limited to:

Libraries
Internet searches on competitive companies
Training in business or self study
Paying experts
Researching government and industry reports

Identify Cash Flow Management and a budget

Having cash on hand to make changes, advertise or purchase the expertise necessary is vital to a successful flip of an internet business.  Some funding beyond the initial purchase simply will be required – having an idea of how much and where it will come from before you buy is vital to a successful venture.

Research Shipping and Receiving

Knowing common sizes and weights of goods sold, delivery methods and any deals or arrangements currently in place is important.  Consider drop shipping if inventory is purchased directly right now – any way to keep inventories low will minimize the risk as well as any handling costs associated with shipping and storage.

Be aware of your options when it comes to shipping. The USPS (Post Office) is not the only choice and in many cases is not the cheapest or best option for your customer.  Depending on your product and market other options such as online downloads, FedEx or UPS can be more economical or a benefit worth investing in. Many vendors such as FedEx, UPS or RPS will make special deals with small businesses which can further reduce the costs – ask about these options when researching the Shipping and Receiving plans.

Sign non-disclosure agreements

This is often overlooked and may not be an issue but having signed non-disclosure agreements can really help assure the seller that supplying you with the information you need to make an informed decision on their business is safe, and that you are a professional.

Make certain that you use form(s) that provide clear descriptions on the liabilities and possible penalties to both parties since any offers or information that you supply may also be best kept private.
Estimate Profitability

With the information supplied and your research make a rough estimate of what the potential sales and market share of this site could be and what needs to be incorporated into your business plan to gain that share. Resources and software are available and will be discussed in more detail later.
Make a budget, then make an offer
Bearing in mind the total costs you are likely to incur in transferring the site and updating it to profitability create a budget that should ensure a profit even if costs go over by 15% or more.

Make an offer to the owner, detailing everything you need to have included in the deal, the pros and cons of the site and business as you see them (in case he has additional information to offer) and set a deadline for acceptance or rejection.

If accepted, refurbish, implement business model and plans and put up for sale.

These are the ‘nuts and bolts’ of the process of which we’ll go over in more detail later, as well as supplying you links to some readily available online forms and legal assistance.  As with any successful business venture the amount of work and effort you put into the planning and research stages will ensure or decry success – but if you can handle most of the work yourself without having to pay for research or consulting an investment of your time can have wonderful returns in future profits.


Dealing with Owners

I’ve mentioned in passing some training on negotiation with customers and identifying personality types, but it is worth mentioned here that the owner of an existing Internet business needs to be approached just the right way as well.  Most likely they are proud of their business even if it is not a roaring success, and they will be distinct individuals with responses all their own that you may inadvertently trigger if you take the wrong approach.  To this end I highly recommend that you have a clear understanding of personality types and how to deal with each, and that you follow a few simple guidelines to ensure a professional and successful outcome.  Some tips I recommend include:

Contact them directly and ‘in person’ for the initial contact

Calling someone and hearing their voice allows you to understand the tone and ‘feeling’ behind the words they speak, as well as make a correct assessment as to how they are responding to you and your tone.

Introduce yourself

Let them know who you are and supply contact information up front so they will fell at ease and not fear that you are perpetrating some type of ‘scam’ or trying to sell them something.

Explain your past successes

Knowing that this is your business and that you think you can make a profit by buying their company and investing some capital to make it profitable can be seen as an insult to some owners, so explaining that you “buy ugly businesses” may not be the best approach, but be sure they know you are in the business of taking moderately successful business and making them worth more, then selling them to people who are looking to start their own online sales.

If you have specific websites and success stories you can point them to this may help, be sure not to violate any non-disclosure agreements however and point out any existing as an example of your trustworthiness so they will feel comfortable dealing with you.

Gauge their interest

If they simply are not interested leave them your contact information and then follow up with a ‘thank you’ email just in case they change their mind. If they seem interested proceed to the next step.

Explain the Process

Let them know that while you are interested there are a series of questions you need answers to before you can accurately judge the state of their business and make an offer.

Explain that you always get and sign non-disclosure agreements up front to ensure any information they share is safe, and that you will not be asking for valuable information such as customer contact lists (although details such as number of customers, and CRM methods etc. may be included) and that you guide them through everything you need.

Get their information and promptly respond

If you can’t review it all and get an assessment immediately at least contact them and let them know you have the information and will be reviewing it and will make a determination by a specific date.

Make certain you meet the date you set and that you update them as you proceed with any financing or checks that are necessary so they will know you are still interested and ‘there’ for them.

Create a formal offer and contact them

Again contact them in person and let them know that you have come up with what you think is a fair offer for what the current market value is for the site and any resources you will be asking to have included.  Ask them to review the offer with their lawyer and let you know by a set date if it is acceptable and if not to formally request any changes.

Set their expectation(s) up front on which if any areas may be subject to change either in their favour or yours pending unexpected market fluctuations or changes in the business: for instance if your offer is contingent upon existing stock and they sell most of it before accepting how much per item will be deducted from the offer should be listed in the offer or some provisions to allow for setting it before acceptance should be in the wording.

Set up an escrow service and make the transaction

Be sure all your legal documents and forms are in place before money changes hands.  Use only known and respected escrow services and provide full contact information to the owner, encouraging them to research the business to be certain he is comfortable that this is real and legit.  If the owner is comfortable or prefers direct payment be sure to cover yourself for any potential problem or scam as well.

Ensure all selling points such as transfer of the domain name and any resources are done before final payment is made.

If all goes well you should now be the owner of an online business and its resources – the next step will be to make it profitable and in our case, then to sell it for a profit and move on to the next site!

Identifying a bargain

To be successful in buying and selling online businesses just as with any other “flipping” (whether a home, a car etc.) you need to keep several concepts in mind to ensure success.  First and foremost is that there has to be value in whatever it is you are buying.  Yes you can get something ‘cheap’ and if you are just owning it that may be enough, a very inexpensive home that is ratty and really ought to be torn down for instance may still be okay for someone who just needs a place to stay and hates to rent – but if you want to fix it up and make a profit bringing it up to par may cost more then it will be worth when you are done.

The same problem can occur if the location of the home is bad – even a house with great bones just needed paint and polish can be a bad investment if it is in a declining or bad neighbourhood.  The same is true for businesses – especially online businesses!  There has to be value to the business, or at least the potential for profit or it simply is not worth bothering with.

For online businesses the ‘storefront’ is the website itself, and most of the time the actual site is not of any real importance – the domain name and the search-engine penetration is really what counts.  Finding a site that shows up with all related keywords on several search engines that has a poorly planned or laid out front-end is actually a great find – even if the products are not up to par the ‘bones’ are there and it is in a good location.  Having a great domain name or one that is easy to remember is also a plus, although aliases can be purchased and linked to the site if necessary.  Just as in flipping homes finding a bargain in an online business means you need to:

Know the market
Identify the strengths and faults
Understand the costs involved and be able to fund it
Be certain of a reasonable return on your investment

If you can’t meet these criteria then you aren’t looking at a bargain, you’re looking at a potential money pit and you should keep browsing.  Even hot items go out of vogue (remember the beanie baby craze?) and if you can’t make money on it does it make sense to get involved even if it IS a hot commodity?  Just like a certain stock commercial showing someone buying an item at auction then asking to put it back on the block turning over businesses is not the name of the game: making money is the game and that means passing on more sites and businesses then not until you find the ‘right one’ for you.

Appraising the website

One of the most important tools you have to appraise an online business is their web site – not just the way it looks and how functional it is but how well listed it is and whether it shows up on various search engines when queries are done against product it contains.  It is not always a ‘bad’ thing if a web site is under par however, when you are looking for a bargain – many times small businesses have lower quality sites and rely on word of mouth for their sales, which may have restricted their growth and is easy to repair.  The key items you should plan on learning about a business from appraising their website include:

Overall look and ease of browsing the site
Search rankings and how stable they are / have been
Average costs vs. revenue generation
Size and unique content of the site
Current and past revenue
Any affiliate, contact and link relationships and what agreements if any have been made. Judging the ‘value’ of existing links is also vital to assessing the value of a site
Domains owned (.com but what about .edu or .gov or .biz?)

On paper there really are only two major factors you consider to value a website: the cash flow projection and historical revenues, and the costs to recreate the existing site.  There are many other tools and data points that can be used and some very involved processes can be applied to identify many other attributes but when it comes to buying an online business the historical and future value of the website itself is all you are interested in.  And when it comes to bargains it is hoped that the actual ‘site’ value is poor, but that the links and cash flow projections will be good enough to indicate the potential for real success.

Web site rankings and search engine algorithm statistics are also vital to the value of an existing site versus recreation as this is the principle way most users find products, by searching on the product name or manufacturer on a search engine and browsing the links that show up.
Sample Questions

Ideally the business owner will be able to answer the following questions regarding their website, although you may have to explain some terms to owners that represent the true ‘bargains’ in online businesses since many of them really are running the site more as a hobby then as a business.  Questions that you need details about whether from them or from available tools include:

The type of revenue model used on the site
Historical and current revenue
Existing liabilities and debts / commitments
Assets
Keywords in use and how many are unique
Number of competing websites / vendors
Alexa ranking of the site
Value of the domain name / brand
Current and potential search engine traffic
Convertibility of the site / tools used to maintain or create it
Costs to recreate the site

Top Criteria To Use

There are no ‘hard and fast’ rules when it comes to evaluation the website for a business, but  the two primary criteria should always be:

1.Profits:
A common valuation is to multiply by 10 times the net profit so a web site that brings in $20,000 a year could conceivably be worth $200,000.

2. Cost of Replicating:
Just as with other businesses why buy a ‘pig in a poke’ if you can buy another the same size with no problems?  Once a clear understanding of all assets and debts is done if you can create the site, get it listed and a similar domain name registered etc. for substantially less then purchasing the existing site the value from profits should be reduced by this much since no ‘unique value’ exists.

In addition to this are of course some costs that are difficult to stratify such as:

Target acceptance and brand recognition
Domain name
Availability of a ‘non-compete’ clause
Site Potential

For our purposes the place we live and die is the last one: the POTENTIAL.  The idea is to find sites that are undervalued due to one or more oversights on the owner’s part that can be quickly turned around.


Tools for website appraisal

We’ve mentioned several tools in passing already, and many of the bargains out there will be run by site managers who don’t fully understand the importance of tracking their logs and financials so they probably will not be aware of those tools.  Many site creation and management tools such as Microsoft’s FrontPage can create log files and financial reports, but other tools which may be needed to obtain useful information include:
 
Alexa
Overture bid tool
Aaron’s KW tool
Domain appraisal tool (free)
ClickBank Valuation Spreadsheet (fee based)

Link Valuation

Having links to your page is generally a good thing, but to add value they need to be on older, high-traffic sites with a similar interest to the product or products you are focussing on.  Questions you need to ask and consider when evaluating a site and seeing what links to that site exist include:

How closely does the site linking to you associate with your niche?
Are there many or only a few links from that site?
What does the link look like, i.e. does it have a logo, just text, a description etc. and does it encourage viewers to follow it?
Is it an older well established site?
Does the link go directly to a subsite or to your homepage

Getting an idea of what links exist and where they point as well as the value and traffic of the originating site will let you know if there is added value there or whether.

Identifying revenue model

One important aspect of evaluating any business is to understand the finances, assets and debts of the business.  In the case of a website to fully understand the value of the site requires an understanding of what revenue model was being used for that site since that will play a key role in deciding if the site has value as a web-based business, or just a domain name.  The types of revenue models a site can have include one or a mix of the following:

No Model (informational only)
Product based
Donation
Subscription
Advertising
Service

Identifying the revenue model, links and search engine ratings and customer base provide you most of the value of a web site.  All that is left now is to understand any debts and expenses of the site.

Evaluating Debt

Any value an online business has needs to be offset by its’ outstanding debts, and an understanding of which if any of those debts is assumed by a new owner.  Some agreements are binding to the business itself with a term stipulated in a contract, be sure to get and review any such contracts during your evaluation phase to see what the terms, time-limits and costs are.  Some typical expenses that you may wish to query about include:

Web site hosting
Merchant and Credit Card acceptance fees
Advertising Expenses (online, printed, mailers etc.)
Any “Pay Per Click,” listing or link fees
Administration Fees

Determine What is included

Obviously as you do all this research you need to be preparing notes on each aspect of the business, the website and products, and leave a “yes” and “no” checkbox on each as to whether or not they are to be included with the purchase on any offer you make.  Items that you will of course need to obtain any value include but may not be limited to:

1.Domain Name registration transfer

2.Non-Compete agreement

3.Details of the status and agreements for any:
a.Leases
b.Contracts
c.Web Hosting
d.Administration services
e.Web Linking agreements
f.AdSense or other affiliate programs

4.Included Intellectual Properties such as
a.Logos and artwork on site(s)
b.Trademarks and Phrases

5.Functionality including
a.Any code or ‘back end’ programs used on the site
b.Animations or custom forms
c.Passwords and necessary programs etc. to update or maintain the site

6.Physical goods

7.Source resources such as
a.Contracts with vendors
b.Supplier information and pricing

8.Details of existing business plans and financials

Many resources are available both to review existing filings of contracts to purchase and sell and to create custom forms that detail specifics, and of course it is recommended that you have a lawyer well versed in the laws both in your state and the state in which the business is founded to review any contracts before signing them but once you have a clear understanding it is possible to use a ‘boilerplate’ contract and change the specifics as needed thus reducing these costs.

How to determine Marketability

The appraising of the value of the site should have provided you with examples of ‘low points’ that you are using to decide that this site is a bargain and one that you can and should flip – the key is to understand the costs of correcting the problems with the business and the potential profit margin.

The best approach to determining marketability is to perform a survey or study to see how well the product would fair within its target audience.  The costs of this of course needs to be balanced against the value of being able to show the potential to potential buyers for the site after you improve and correct the underlying flaws.   Steps you can use to test a market include:

Identify existing customer base either from previous owners records or
obtain a list of potential buyers from a marketing firm

Create a survey asking them to rate and rank
Their experience with the product(s) in question
Happiness or dissatisfaction with the process
Preferred price point
Any preference to contact methods
Amount spent on this or similar product in the past year
Satisfaction with
The product itself
It’s packaging
Shipping and handling
Follow up from vendor
Areas of interest to them / hobbies
Personal data (age, ethnicity etc.)

Using government statistics you can now target the number of people in similar ethnicities and with related hobbies and interests, multiply that potential number of customers by the average price they are willing to pay to project a target market range.


Resources

Perhaps the most important partner you can have when dealing with business transactions is a personal lawyer with a clear understanding of e-commerce law.  All too often however the old adage of “Lawyers Kill Deals” can come true – even though the legal requirements and potential downfalls of blindly entering contracts with legal assistance is almost sure to cause you problems sooner or later relying too much on the expensive advice of legal authorities can defeat any hope of profits from e-business flipping.  They key, as with most things in life is to strike a balance.

Ideally you will target specific types of businesses and purchases on which you will focus, this will not only allow you to quickly grow your expertise in making them profitable and understanding the market potential, but will also allow you to create custom forms and contracts that can easily be changed and modified for each successive purchase and sell that you enter.  In cases like this seeing a lawyer to ‘perfect’ your initial contracts and processes can occur once, with all the costs then spread out over the life of your buying and selling of sites and businesses in the years to come.

There are many free and ‘low cost’ do it yourself sites out there as well with sample forms, listings of contracts from public sales and filings and these can be a valuable resource to use in drawing up your own contracts or in preparing a contract to have reviewed by your lawyer.  Many of these sites as well as some sample forms that you will surely need are included in this chapter.

Tools for appraising a website

We have spoken some about how to properly appraise a website and even provided a few links in the previous chapter, but it is worth mentioning the most useful tools and software commonly used in this chapter again so you can keep all of your resource links in one place.  Most sites will have been created with specific software that can provide log files and site statistics – these are important and therefore the #1 list of tools should be a copy of the existing software the site was generated with and preferably the same version as well since changes and loss of features from one version to another can cause very serious problems!  Other tools and a brief description of how they can be used include:

Alexa Data Services:

A series of tools and web site services to allow you to check current sites traffic rankings, any related links, and the top sites.  Available components include Alexa’s

Web Information Service – (AWIS) obtains information on website traffic, links, contact info etc.
Top Sites – Lists of top sites in search engines by WWW or Country
Site Thumbnails – Programmatical access to thumbnails of home page sites for use in links or analysis of related or competitive sites
Web Search – Allows embedded the Alexa web search into sites
RSS Feeds – data from the tools above in RSS feed format

Bid Tools

Tools to see what competitors are paying for advertising to specific markets suppliers of such services include:

SEO
Yahoo! Search Marketing
Adlab
MSN Adcenter
IndustryBrains

Website Valuation tools

Much of any online businesses value is in its domain and web site so correctly assessing the value and market penetration is important. Some common and useful tools to help you get started doing this include:

Domain appraisal and listing tool
DNforum
Self Appraisal Test
Zetetic Appraisal


Misc. Sites with Links and Tools

SEO Consultants Site
Keyword Tool
Domain appraisal and listing tool
Sites for Sale at SitePoint

Discussion Forums

Business Owners Idea Café
Business Talk
Captain Kirks Internet Marketing
High Rankings (Optimization forum)
Home Business Online
My Own Business
RevBoard
Search Guild (Optimization forum)
SEO Refugee
SitePoint
Small Business Ideas

Business Forms

There are many forms and contracts that you will need to have available or have custom created for you – fortunately many samples and filed examples already exist, and with a little care you can use these to create documents that should work for you.  It is still recommended that you have a lawyer look over any contracts of course, but in certain low-volume sales where profits are tight use of free or sample forms can make the difference.
Links to free and fee-based forms

http://www.urgentbusinessforms.com/
http://www.business.gov/appmanager/bg/main/bg_page_businessResourceLibrary
http://www.sba.gov/library/forms.html
http://www.onecle.com/
http://smallbusiness.findlaw.com/business-forms-contracts/business-forms-contracts-popular/
http://www.1stoplegal.com/forms/category.htm
http://contracts.onecle.com/wipro/eperipherals.sale.2000.08.30.shtml
http://www.referenceforbusiness.com/
http://www.businessnation.com/library/forms/

Play and build your Bank Balance!

Did you know that you could play and earn? Game development is a multibillion industry, we all know about that, and game developers do not want to take any risks. That is the reason audience feedback becomes important to them. Just as movie producers guesstimate their prospects through the rushes they get, game developers guesstimate the prospects of their upcoming games through the feedbacks of game testers. Also, they come to know if there are any bugs in the game that need to be fixed before it can be released.

Sounds scrumptious, doesn’t it? Well, a game tester’s job is really like that. There are both paid and free game testing sites, but it is highly advisable to go for the paid ones because there is big money involved there. You can choose your genre of gaming. Whenever there is a game coming up in that genre – which keeps happening all the time – you can apply for testing that. You will be then either given a download link for the game (it could be a demo) or you could be shipped a disk of the game. You play it and answer what they are looking for.

There’s usually a questionnaire to be filled. Of course, there’s a deadline which you need to strictly adhere to. Sometimes you will be playing under pressure, but who’s complaining?

The following links will be useful to you if you are looking at an opening as an online game tester:-

®                Games Tester (http://www.gamestester.com/)

®                Gamer Testing Ground (http://www.gamertestinggroung.com/)

®                Video Game Tester Jobs (http://www.videogametesterjobs.net/)

This is a highly legal activity, with an organization built to govern its functioning. This is controlled by the International Game Developers Association, where you can also find a lot of information about the profession.

You can expect to be paid anywhere from $10 to $200 an hour depending on your reputation as a game tester and the company’s reputation. You need to make a start here to understand the vast potential that exists in it.

Brokering – The Route to Some Online Income

Everyone knows what brokering means in the real world; on the Internet it means the same thing. Essentially, you don’t have a product of your own here, but you have a product that belongs to someone else which you promote. You find customers for it and you get paid commission for effectuating the sale. The seller pays you the commission, which could be moderated through a site.

There are many ways in which brokering happens. The commonest route is through the middleperson approach. You don’t own the product, but you just promote it and bring about the sale. Usually, when you are the middleperson, you earn commissions from the buyer and the seller both. But the main thing is that the sale has to work out to the very end. It has to close. Failed sales don’t pay you anything for your efforts.

The joint venture partner brokering is another subset within this main theme. Here you bring about joint venture collaborations between different marketers. These collaborations are the spine of most online businesses. People come together to make up for what they lack. If you become instrumental in getting the right people to partner with each other, there are various ways in which you can benefit. You can get paid for your services or you can actually get a share of the business that is to happen.

Another type of brokering is service brokering. Here you find the right service people to carry out particular services for people who need them. You could find them through online freelance sites or you could approach some people directly.

Here are some sites where you could learn more about brokering and even join into the opportunities.

®                Joint Venture Broker (http://www.jointventurebroker.net/)

®                JV Web (http://www.jv-web.com/jv_art_broker.html/)

®                JV Wisdom (http://www.jvwisdom.com/)

Brokering may not bring you a large amount of income. There is a lot of networking involved and you need to have some contacts, or at least put in the time to build contacts. However, it is a good opportunity – and a moneymaking one too – if you are able to devote the time and the effort for it.

Speak out your Mind and get paid for it!

There has always been a lot of talk about online surveys being a veritable source of income. So how good are they? The fact is that online auctions can bring in money, but they won’t make you a millionaire. If you are looking at a method of online income that can help pay some of your bills or pay for the groceries and some other utilities, then online surveys could be an interesting way to do it.

But why do surveys work in the first place? These surveys are a parameter for the manufacturers to improve upon their products. By the opinions people put in these surveys, manufacturers come to know what they must do in order to improve the prospects of their products. They come to know how they can increase the business potential of their products.

And for that reason, they don’t mind paying people who speak their mind out. It becomes almost a research subject for them, on their own product, and it helps them immensely for their product betterment. A company that conducts a lot of surveys also gets better credibility on the Internet because people speak favorably about the company. They get the impression that the company really cares for the preferences of its clients. It really helps in this world where viral marketing is slowly becoming the norm.

So, where do you get online survey sites where you can chip in your tuppence and get a lot of money for it? The answer is – all over the Internet. Just do a casual search on the Internet and you will find a host of sites waiting for you.

Here are two of the more popular ones:-

®                Free Paid Surveys (http://www.freepaidsurveys.net/)

®                Survey Monkey (http://www.surveymonkey.com/)

There are two types of survey sites – paid and free. The paid ones carry an assurance of better income and you can get surveys that better match up to your preferences and interests. However, to get into the mould, you could start off with a free site and see how it goes. Remember that this mode is not going to make you rich, but will garner some income on the side.

How Net Auctions can bring in the Money

As the name suggests, net auctions are auctions that are conducted over the Internet. These auctions are places where you sell items to the highest bidder. It works just as a real auction. A product is showcased to the audience and its features and benefits are spelled out. Then a minimum bid is marked. People who are desirous of laying their hands on this product are supposed to bid at an amount higher than this minimum bid. The auction then sells over the product to the highest bidder when the bidding time is over.

You could very well become a member of an auction site and buy and sell products for a profit. The profit comes in as the bidders will bid for sums higher than what you bought the product for. Here you need to have a discerning eye. If you are discerning about the product you purchase, you will have bought a product that has a good selling potential, which means you will be able to turn it over for a good profit.

There are many online auction sites nowadays because this genre of home business has become really popular. eBay (http://www.ebay.com/) can be classified as one too. Some other popular auction sites are:-

®                WeBidz (http://www.webidz.com/)

®                EBid (http://www.ebid.net/)

®                uBid (http://www.uBid.com/)

®                CQout (http://www.cqout.com/)

®                Shop Goodwill (http://www.shopgoodwill.com/)

Note that some of these sites cater to particular niches of products or are available only in a particular geographical area. Do some research on the sites before you decide which of them you want to go ahead with.

The online auction sites are highly secure sites and they might need approval before allowing you to join as a member. But this is a good thing because you can be sure your interests won’t be compromised on the site too. The payment is usually prompt, but some might pay at the end of the month for the products sold, subtracting their cut from the sale.