Need Some Warrior Advice About A Site I'm Buying

[matthewd]

Monday night I agreed to purchase a site.

It's an affiliate site that has been averaging
$3,000/month in profit for the past 5 months,
so after some negotiation we met at $28,500
for the price.

I am going to meet the person and give him the
check on Friday evening.

Now here is where I want to see what Warrior's
have to say:

The site has been averaging like 2 sales/day
but for some reason hasn't had a single sale
yet this month now.

I know the product is still converting b/c I actually
sell this same product with another site of mine
that has been converting just like normal this month.

Now, this site also makes almost all of it's money
off of it's SE rankings... but today it dropped down
to the 10 spot all of a sudden for it's biggest phrase.

This is probably due to the owner neglecting link
building for the past few months... but now within
a few days I went from agreeing to buy a site that
was pulling $3k/month profit to one that will be lucky to
gross $1,500/month.

So, what would be running through your mind right now?

Focus on the future and the fact that I could spend
almost $30,000 based on the faith that I can get it
back to the top of rankings within a couple months?

[Davion Wong]

Hi, normally, it would be fair to pay 3 to 6 months the monthly revenue. If it works out to be $3000/mth, then the reasonable price should be $9000 to $18000.

Ask the seller why he is selling? Is it because it is no longer making the same kind of money? Or he needs it urgently for some reasons.

Also, it is best to have a buffer. Assuming it will only make you $1500. In that case, you may not want to pay more than $1500 X 6 which works out to be $9000.

$30,000 could be too high a price but then again, the decision is yours, friend.

[matthewd]

Thanks, but I have never seen a site go for 3-6x... I have seen more like
9-12x for normal sites and 12-18x for the much bigger sites.

He is selling b/c he wants to focus on a new project he is working on and
has been neglecting this site for about a month or 2... it is a friend of mine
that is selling it actually, so I know for a fact that the income and traffic
and everything is accurate.

I am just wondering what people in my situation would be thinking now
that the details of the site have all of a sudden changed.

[Davion Wong]

May I know what niche it is so that we can have a clear picture? One very important factor would be the potential earnings in future. It's just like buying over a business.

I have seen sites sold for 3 to 6 month's revenue and you will find the sellers to be normally young and just want some fast cash.

[Chris Reeves]

I can't say I have much experience with site buying/selling. But if I were in your shoes, I would not pay for 12 months revenue for it unless I was 100% CERTAIN that it could keep up it's earnings for that period and had potential for growth.

From what you have said it seems like the site may be a little high maintenance and not very stable in it's income. I wouldn't buy a site just to work on it all the time and get it back to what it was earning in the past.

Maybe save the $$ and create something of your own if you are already prepared to do some work anyway. With that kind of money you could put something together that will make far more money than $3,000 per month. That's what I would do...but I don't know your exact situation.

Just my thoughts. Whatever you decide to do, I hope for the best!

Take care,

Chris

[artwebster]

If this was a business on the high street, the premium in the price would be what is recorded as 'goodwill'. The level of goodwill can be an indicator of the likelihood that incoome and expenditure would not drastically alter in the short term.

This business has no goodwill and is already demonstrating that income and expenditure have drastically altered.

At the very least you should renegotiate the price but, since you already have a site promoting the same product, wouldn't you be better off using your time and energy developing your own site?

[Matt Maiden]

How sure are you that there was not some sort of traffic and sales inflating for the sake of selling?

What "stats" did you get to see? Hope it was more than a screen capture.

[Bill Farnham]

I sounds like you plan on paying him for the effort YOU will be putting in. That's not a win-win situation.

Perhaps you could renegotiate the price based on what the site is currently doing. Or hold a fair portion in escrow to be paid out based on the return of the proforma numbers you negotiated at.

If the site is on a downward spiral you may need to put in more effort than you are anticipating.

KJ

[derekwong28]

I say don't give him a cheque, go through escrow even if you have to foot all extra cost.

The fact that he wants you to pay by cheque makes me very suspicious. Sites of this value normally go through escrow.

If you but a site that is completely reliant on its SE rankings, it is very risky. I have a number of bought sites that promptly fell out of the SERPs after a few months and I never made my money back.

Quite frankly, I would not even have considered such as site in the first place.


Derek

[matthewd]

Thanks for all of the feedback.

As for me verifying the stats, I have logged in to the
actual accounts to see for myself: affiliate account,
google analytics, cpanel stats

The reason we are avoiding escrow is because I am
purchase from someone that is a friend and we have
done business together before... we actually used
to be partners.

But you all kind if confirmed my thinking that it is
obviously not the same value it was when we began
negotiations and that changes everything.

[Joseph Then]

To be safe and to protect yourself, I believe you should insist on escrow. Business is business, even if you are friends or business partners.

When it comes to money, anything can change. Believe me when I say that, I was conned $5000+ by an 'old' friend.

Insist on escrow, make sure that it IS making money, then release the cash.