Today, we are discussing acquiring digital properties: WHY, WHAT, and WHERE to buy.
I have been buying digital properties, websites, SaaS platforms, e-commerce applications, content publishing websites, and so forth, for the past nine years. Some of these properties I buy are very cheap, ranging from a few hundred bucks to a couple of thousands.
Buying digital properties has definitely been one of the endeavors that I have been enjoying quite a lot.
Some of those deals have actually turned into great opportunities for the business or just tangible investments that have actually led me to tap additional skills, talent, or whatever it is, into our broader business initiatives.
But only some purchases have been a hit. Some brought little to the table or were more challenging to manage than expected. However, even those experiences were valuable because they taught me what to avoid in future deals. So, whether a buy turns out to be a winner or not, each one teaches me something new that I can use going forward.
I have had good and bad deals. I have had some that didn’t make sense and some that I thought were strategic decisions, and some that weren’t. Out of all these practical experiences, allow me to take you through the WHY, the WHAT, and the WHERE to buy.
Why Buy a Digital Property
Well, there are several things that you can do with your life, and different ways, of course, that you can live your life—and, more importantly, different initiatives that you can invest in. You can invest in yourself by taking up courses, undergoing training, and whatnot. You can invest in fun and entertainment, travel and cars; or, whatever it is that is definitely worthwhile.
Try to diversify by launching a training program. Buy real estate, stocks, crypto, art, and gold. Invest in angel investments or any form of crowdfunding, which is also a great idea (I have great recommendations there, too!)
But one of the best options that you could possibly have if you want to grow your business, diversify your investments, and navigate your way to success as a solopreneur without risking too much money and having some money saved aside is buying a digital property.
Another one of the core reasons why I do prefer to buy a digital property and not build is that I want to take advantage of the following things:
- Domain Authority and Credibility – Existing businesses, unless they have just started out like three months ago, have domain history, and high domain authority, which nowadays is hard to acquire. Their domain history, internal and external links, and even stories have built their credibility over time.
- Content Assets and Solutions – These assets could be actual products or solutions that come with the website, or simply content that rank well and have already been tested to do well with SEO and do not need to be built from scratch.
The thought processes in making a decision on investing in a digital property usually entail knowing the following:
- The type of investment – I can either pick among stock, real estate, leads, or any of the other endeavors
- The purpose for the investment – Will I use that as a diversified channel? Or should I focus on that to grow the strategy? And if I’m about to grow that strategy, it is either complementary to what I do for a living and must serve as an additional source of income. I also recommend that to people who want to work on something, but can’t really build or don’t have the skills or strategy to build an entire portal, platform, strategy, and so forth.
Indeed, it is easier to spend a few bucks and get something going from what is already out there and has been started. Deals can vary quite a lot. There are some turnkey solutions that literally cost a couple of hundred bucks and there are actually profitable deals that cost tens of millions. There are a lot of deals and it all depends on what you are looking at for the moment.
What Digital Property to Buy?
Now, this is a segmentation of two different types of stories. We have business sizes and business categories.
In terms of business sizes, there are some bootstrap, turnkey, and very cheap solutions out there that normally are a combination of an existing solution that is being resold dozens of times.
For example, now, ChatGPT and OpenAI, are pretty popular. And existing solutions on the market allow you to actually tap into them, connect them to a website and install WordPress, then connect the third-party provider, and have a service that generates content for you that is connected to OpenAI or like Copy.ai or Jasper, or any of the other solutions.
It is fairly easy to build with these existing solutions, like when someone puts up a website, installs WordPress on a $5 per month host, connects that solution, writes a landing page, and then sells that solution for a couple of hundred bucks or 300 bucks. They can do that as a business model, just flipping or creating websites.
It is even more popular because some of those vendors also resell services such as SEO, PR, and email marketing. Imagine they are Asian businesses selling low-cost solutions, high volume. They actually create their marketing site, so that other businesses can use them as affiliated resellers. They sell the site, then other businesses send business to them, which is pretty smart actually. That’s one type of solution.
Mid-sized businesses are normally operated by one to five people, like $5,000 to $50,000 or so. They are solutions that make some money. They generate some revenue and then you have to decide whether it is worth acquiring that digital property. It is normally based on different multipliers. And professional deals, especially with the largest category based on EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) a more complex financial formula unless you’re in the PE investment world. Smaller deals often trade for a multiplier of revenue or profit.
Again, there are a lot of different reasons why you would buy a digital property.
Some of them are strategic decisions. For example, you want to bring a team inside. Or, you want to diversify and expand. This is usually called a strategic acquisition.
Sometimes, it is purely a financial decision. You want to make sure that buying the deal is probably a market that you don’t understand very well or so, but it is diversified. You want to generate recurring revenue.
Now, there are different ways to calculate and organize that, but I’ve closed and sold several deals within 18 months for monthly recurring revenue. And especially for profitable businesses with a growth curve, even if It has slightly up to the right. If It has a growth curve, it actually allows you to buy a digital property and make the money back in 14 to 18 months, which is great.
I have three digital properties that I still have right now. One of them is a CRM system, the other one is a publishing website that has already repaid back whatever I have invested in them in about 14 months on average. And everything else since then has profit because they have been great deals and they have been traded out this way. We have done that with other digital products and also sold other digital products. Some deals are two years or three years, or four years of annual recurring revenue.
Sometimes, it’s worth it.
Maybe, you can just really fast-track the growth curve or maybe it is a very innovative product, maybe It has a great community, and you have access to data. There are other reasons to do that. But again, that is some ballpark that you can work with.
So, these are the sizes:
You have the small ones, which are normal turnkey. You don’t have traffic, you don’t have revenue generation.
The second one is normally generating some revenue. It is a little bit. If you buy a business for 5 or 10 grand, it has probably done a couple of hundred bucks, 200 to 300 bucks a month. Maybe there are some expenses. Maybe the owner is managing this. It really depends. Sometimes, it makes sense. Sometimes, it doesn’t. And sometimes, it has fake traffic or so, so you definitely need to do your due diligence.
But, again, some of them are purely legit businesses generating revenue, or agencies or e-commerce businesses, like drop shipping or selling actual products, or publishing businesses that are generating revenue for months. Lots of opportunities and stuff. So, this is a good idea.
And then, there are larger businesses. There are actually larger teams that can buy an extra business with 20, 30, or 40 people, or just a company with 10 people running serious, solid operations, some branding efforts, PR relationships, networking, and lots of other opportunities, which is normally, over $100,000 or $250,000.
There are SaaS solutions at half a million or a million or like e-commerce, actually commerce platforms at 2 million and more, marketplaces, and so forth. So, this is a little bit more ambitious. In some cases, some of those deals make sense if you have some money set aside and if you can get a loan or investment or funding. In some of those cases, you can actually get a loan similar to how you take a mortgage for real estate and get that and invest in that business. And that business will repay that mortgage maybe two or three times so that you’re actually making a profit off of the rest, even with the interest rate of a personal loan compared to a mortgage.
So, there are some ways to make it work then repay, then refinance, and so forth. So, some of those deals could be debt-based, but that’s a little bit more complicated. But in any case, those are some great ways that you can diversify as to what product category size you can buy.
Then, we get to the type of business.
First off, we’re talking about digital properties, but there are some marketplaces where you can buy an actual property like from a brick-and-mortar or a local service business with a local presence such as a print shop, or a coffee shop, a restaurant among others. There are some onsite deals and I’ve been looking at some of these myself even though it is a little bit more complicated with extra house and rental, and some of them require licenses for cleaning fees or anything like that. So, it is a little bit more complicated compared to buying digital properties.
In terms of digital, it is essentially what you can buy online that would make money.
1. Domain Names
A great domain name with domain history and so forth could be a great brand asset, could come with existing links, and so on. You have mobile applications, e-commerce, any form of shops, publishing sites, software service platforms, again, marketplaces, service-based agencies, or anything along those lines.
There are several different categories, maybe more, where you can actually tap into and get access, and some of them may be aligned to the type of business that you want to deliver, and some of them are not.
For example, I personally don’t invest in e-commerce businesses, because they require warehousing and logistics and just invest more money into production and more money into stack and inventory unless you are doing traditional drop shipping, which is a little bit different.
But, that sort of logistics, shipping, and transfer fees, overseas, customs, and all that is just the type of trouble that I’m personally not interested in and it is not the field that I’m very good at.
I have a lot of experience in publishing, but some of the deals that exist are tied to a specific publishing provider. For example, some were national businesses and they work with an international network. And when you buy internationally in a different country, it may work differently or they require businesses to operate in a specific country, which is stricter.
For example, if you live in the states and you need to buy an Irish business, which is exactly what I looked into last week, or a business in the UK, the Netherlands, France, or Germany, or you’re in Europe and there’s the US business, you may not necessarily have access to all those same commission rates or all these services even if you’re working with a vendor such as Amazon. So, even if you’re in Germany where Amazon.de exists, it doesn’t mean that you have all the opportunities for Prime Day or all those deals that a US publisher would get accordingly.
The valuation of the business is going to be different because you are going to make less money due to the need of working with a specific vendor that works in a specific country.
And in some cases, some of the things that are fairly specific are deals that require and depend on recurring subscriptions, but these subscriptions cannot be transferred. And we have had that actually happening especially with PayPal. Transferring subscriptions via Pay Pal was pretty hard. Stripe was also hard, but PayPal just never made it work, unfortunately.
We had to ask people to resubscribe and some just bounced out almost half. And with Stripe, we managed to transfer, but it was a grind, it was a lot of work with support and their systems and that was probably three years ago, so it could be better now. But, sometimes there definitely the importance of due diligence, because sometimes, money is there, finances are real, your assets are there, and everything is legit, but you just cannot take advantage of the same business in the same way.
In other cases, such as with most of the businesses that are coming from word of mouth, changing ownership means that you don’t have the same access to the same network or the same contact. So, the recurring revenue is just going to be different.
Where to Buy a Digital Property
There are different networks but I’m not going to dive too much into that. On top of my head is Flippa, which is probably the easiest and the cheapest. Flippa also monetizes the broadest number of deals, and one that is the cheapest deals actually that is easier to browse and start with, but also has some great deals.
MicroAcquire, which is currently being rebranded as Acquire.com is another one for microenterprises and startups and all that.
One specific one for WordPress is FlipWP. Even though honestly, they rarely get any deals, and more often than not, I’m just encountering more deals on Flippa or the other marketplaces.
Empire Flippers is also another source among others.
But then again, there are a bunch of different websites selling these. Sometimes, you could stumble upon Facebook groups, Reddit, or just businesses sold on Twitter.
One of the deals that I got earlier was the one I actually saw on Twitter when someone tagged me in and I connected with the founder selling two businesses. It was not even on Flippa or so. It was earlier in the process when we got access to that deal, like first dibs. That is definitely something that I would recommend, definitely a great way to make it work.
To sum up, buying a digital property may not necessarily be of interest to you, but my personal experience in terms of return on investment is that it is a great opportunity to recoup your money in a predictable period of time—18 to 24 months or so on average or even grow it further. And then, it has immense potential to generate solid revenue.
In some cases, you want to retain the money and be more conservative, like with bonds.
In 2022, even the stock market is down, crypto’s down, real estate is down, and almost everything is down, so it is pretty tricky. Some of the other alternative deals like real estate are just more expensive. And unless you live in the state, you just do not have access to the same opportunities to be able to repay your mortgage with the rental. Because in many places, rental income is just not even covering the mortgage, which is disappointing.
What usually works is using a business or acquiring a business that runs on autopilot or taps into your skillsets such as copywriting services and you can buy a business working with the same target audience like a small hosting company with 200 clients, just an example. You can upsell that service to that set of clients and you can actually profit off of two verticals at the same time. Or, you can upsell or cross-sell hosting to copywriting or SEO, or whatever you offer. There is a great symbiosis between both, whether there is a publishing site and you have another publishing site, then you can merge and grow the domain authority.
Some of those deals, once again, are strategic.
In some cases, you could be a freelancer and you just need a brand. You just need a portfolio, logos, clients, or whatever you can acquire just to use that clout and that existing business so that it almost looks like you started a business three years ago, and not creating, or founding a company right now. There are different reasons to make it work. And yes, that is why I’m fond of acquiring digital businesses.
Note that this is not a piece of financial advice. This can actually be risky. You need to know what you are doing. You need to understand the semantics of business. But then again, some of those deals are just a few hundred bucks or a couple of thousand bucks.
While every cent matters, there is an opportunity to choose to skyrocket your business or grow something out of the blue with digital properties, which is great.
Let me know if you have any questions in the comments, and I would be happy to expand on that.
In the next series, we are going to talk about the different types of deals such as flipping, how to run SaaS or e-commerce, how to grow these financial versus strategic deals, and some of the other opportunities out there.