Why flip a site for only 10x profit?

by jswift
23 replies
I've noticed this many times on sites like Flippa and Sitepoint. Why are websites typically sold for 10x monthly revenue?

Why not just hold on to it? The ROI would be easily over 100% and that is a fantastic investment by any measure.

These are fully developed, profitable sites. And once it's profitable, presumably the site will generate recursive income. Surely that has to account for more than 10x monthly revenue.
#10x #flip #profit #site
  • Profile picture of the author Taniwha
    *You break your leg walking down some steps* *You need $4000 for your surgery which you don't have* *I have to sell my website*

    *You have a new venture you want to start up, but you don't have enough money*
    *I have to sell my website*

    Make sense?
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  • Profile picture of the author ru83n
    The big factor of this is about TIME.
    Sellers do not want to wait to 10 months to get the same amount now.
    Added to this is that this flipping thing is their business model.
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  • Profile picture of the author hustlinsmoke
    Besides the market changes constantly because of the search engines and other factors. What you make for the next ten months may not be what you will make after that. Plus Most sites I sell it's because the thrill is gone. I like to build, I have a desire when its first started then I want something else.
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  • Profile picture of the author Goxbee App
    Because a bird in hand is better than 2 in the bush! How about all the work you put into it makes it worth monetizing for a good profit and the ability to build more sites and make more money.... This is internet marketing 101.... Hope that helps....
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  • Profile picture of the author briteday
    Or... Buyer Beware? Is it possible to "cook the numbers"? That is make traffic seem great... but have bought it? And, sure made revenue with affiliate, clickbank, or adsense that looks great... but it cost more in PPC and such to get the sales?

    I agree that if a Buyer could trust that a website was only being sold for 10x a reliable expectation of continued or improved income (oops, let's make that profit) that it would be a great investment (especially in the current sucky investment environment), but is it a legitimate item? I am not saying they do not exist, only that fraud and misleading presentation would not be too hard. And, THAT may be part of their business model.

    I am not just blathering either. This subject concerns me as there is a sizable chunk of funds in my future that would best be invested and buying profitable websites may be very tempting... if the risks can be properly managed.
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    • Profile picture of the author AlexCN
      Originally Posted by briteday View Post

      Or... Buyer Beware? Is it possible to "cook the numbers"? That is make traffic seem great... but have bought it? And, sure made revenue with affiliate, clickbank, or adsense that looks great... but it cost more in PPC and such to get the sales?

      I agree that if a Buyer could trust that a website was only being sold for 10x a reliable expectation of continued or improved income (oops, let's make that profit) that it would be a great investment (especially in the current sucky investment environment), but is it a legitimate item? I am not saying they do not exist, only that fraud and misleading presentation would not be too hard. And, THAT may be part of their business model.

      I am not just blathering either. This subject concerns me as there is a sizable chunk of funds in my future that would best be invested and buying profitable websites may be very tempting... if the risks can be properly managed.
      Really great points here Briteday...

      Never bought a website with 'income proof' before but have been considering it recently... What are some ways to manage this type of risk...?

      How can you be sure for instance a site making $800/month was not the result of $1500 in PPC traffic.... Hmmmm...
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    • Profile picture of the author wizzard74
      Originally Posted by briteday View Post

      Or... Buyer Beware? Is it possible to "cook the numbers"? That is make traffic seem great... but have bought it? And, sure made revenue with affiliate, clickbank, or adsense that looks great... but it cost more in PPC and such to get the sales?

      I agree that if a Buyer could trust that a website was only being sold for 10x a reliable expectation of continued or improved income (oops, let's make that profit) that it would be a great investment (especially in the current sucky investment environment), but is it a legitimate item? I am not saying they do not exist, only that fraud and misleading presentation would not be too hard. And, THAT may be part of their business model.

      I am not just blathering either. This subject concerns me as there is a sizable chunk of funds in my future that would best be invested and buying profitable websites may be very tempting... if the risks can be properly managed.
      This is where due diligence comes in. Never trust the figures given by the vendor.
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      • Profile picture of the author jswift
        Originally Posted by wizzard74 View Post

        This is where due diligence comes in. Never trust the figures given by the vendor.
        I agree. Selling a website for 10x sounds too much like a scam.

        I wonder, has anyone here set up a revenue stream by buying a bunch of these sites?
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  • Profile picture of the author johnes4th
    There are 2 reasons that I sell sites (to be fair I only sell one or two per month max).

    1. To get start up funds for a different website - this was particularly important when I transitioned from a full-time freelance writer into internet marketing

    2. To test a niche, I will normally set up a smaller sniper-style site. After a few months, I sell it. If the site wasn't doing well, then I am just cutting my losses. If the site was doing well, then I expand my keywords and build a larger authority site using the money from the sniper site.
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  • Profile picture of the author CDarklock
    Originally Posted by jswift View Post

    I've noticed this many times on sites like Flippa and Sitepoint. Why are websites typically sold for 10x projected monthly revenue?
    Fixed that for you.

    There's no guarantee that the site will keep making that revenue. Instead of waiting ten months to maybe get that much, it's not exactly stupid to just get the money and run.
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  • Profile picture of the author Simon Ashari
    10 times monthly earnings is the industry multiple (or industry standard for selling a web based asset).

    They may sell it for quick profit.

    Or they may sell it because they have too many good sites on their hands (a common problem).

    10 months is a long time on the internet, especially if you're dependent on SEO and google decides to tinker with an algorithm.

    -Simon
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  • Profile picture of the author YasirYar
    People get busy and don't want to maintain a site. They get bored with the niche. They want to take a nice vacation and this is a way to fund it. Many people just keep building new sites and make their living this way...
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  • Profile picture of the author BloggingPro
    I think a lot of people who flip websites do this.

    1. Build website that sells a service.
    2. Run said website for a month to build income *proof*.
    3. List website as making $XXX amount per month, with aforementioned proof.

    No matter how you slice it, $XXX is going to become $XXXX with the multiply-by-ten-month-income rule.

    To make this even easier, you can pay someone else $XX to build said website, and pay just $X for your provided service to be completed and emailed back to you, or straight to customers directly.

    What does this all add up to? People build websites for the sole purpose of flipping them because of the multiply-by-ten-month-income rule. If you know how to outsource for cheap it can be a HUGE money-making business.
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  • Profile picture of the author Nail Yener
    Originally Posted by jswift View Post

    Why not just hold on to it? The ROI would be easily over 100% and that is a fantastic investment by any measure.
    I am with you on this topic. If a website brings me passive income and requires little maintenance, I would never sell it for any reason. From the above comments of website sellers, I understand that nobody would sell a website if it is too good to sell.
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  • Profile picture of the author wakins4u
    Sometimes you just need fast cash! And u can't wait for monthly cashflow, as in, you need it urgently...

    So u sell you shizzle!
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  • Profile picture of the author megawarrior
    1) The seller may be selling it for personal liquidity reasons/issues
    2) Although it appears that the entire investment can be recuperated within 10 months, which is great by most standards, you have to remember that buying a website is more risky than e.g. government bonds. So to account for this risk, we use a lower multiple of revenue, which in this case is 10 months of revenue.
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  • Profile picture of the author cedricloi
    There is also the risk of the website not continuing to make the reported income for the next 10 months. I did buy a few sites a few years ago and they eventually all died. But they did after the 10 months so I always made my money back. However, from experience I can tell you that the real money maker websites that have a very low risk go for much more than 10 months, they go for at least 15-20 months.
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  • Profile picture of the author trilogy9013
    It is tough to answer this because there are a number of reasons. Some people do just need the money for whatever reason but I doubt this is the norm. The biggest advantage that i can see is time management. If you can get 10 months salary in a week and then utilize that money to build a couple of profitable websites and repeat the process you could easily start to rack up a lot of money very quickly.

    Also, I wouldn't trust sites that don't have actual proof of $ made!
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  • Profile picture of the author Scott Burton
    To me, the answer is simple.

    IF nothing changes, I get the monthly income every month forever.

    IF my primary traffic source dries up, I make next to nothing.

    Let's say next month the new "Panda" update hits, and my traffic goes from 10,000 to 90. I lose my income.

    If you buy my site for 10x monthly revenue, then I'm ahead, and you take the risk.

    On the other hand... If I sell the site to you for 10x the monthly revenue, and it stays a producing e-property for 2 years (24 months) and pays you 240% of what you paid me... technically, I lost out, and you made money.

    Maybe it's worthwhile. Maybe not. Some sites will last, some won't but if I get 10x in my hand today, then I don't have to worry what the site does in 2-3 months, instead I can start another (dozen) sites to flip.
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  • Profile picture of the author Green Moon
    Why do people sell sites for 10x monthly income? I've often wondered the same thing. I bought a few inexpensive sites like that (less than $200 each) just to see if it was really true. In each of the cases, I did get my money back in less than a year. One of them later dropped by 2/3 but only after I had made a tidy profit (percentage-wise but not dollarwise).

    When I asked the sellers why they were selling when they could get more money in the next year by just letting them sit there, the answer was always a combination of they wanted the money now and they had no interest in the site any more.
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  • Profile picture of the author Jonathan Joseph
    Hi there,

    Creating. Growing. And then Selling a business is the ultimate principal of business itself. To build up a strong recurring business then sell it for maximum profits. Time and energy in exchange for profit.

    It's called an "EXIT STRATEGY". You may have heard of it.

    Most business minded people like us will just 'get it' when it comes to this basic principal.
    This model free's up time, allows us to focus more of our time on something else. Perhaps another business we're creating, or our family, or perhaps to retire and travel the world.

    All in all, it's a very smart move that even Donald Trump applies.
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  • Profile picture of the author theemperor
    A: Risk.

    Most of those sites rely on SEO/PPC for visitors. If the traffic source is SEO there is no guarantee the revenue will be there in a years time. If the traffic source is PPC then there is no guarantee a load of other advertisers will come in and saturate the niches. You only get 10x because of the risk. Compare this to a tradition brick and mortar business where you may get 2-3 years revenue as a price, but such businesses have local, loyal customers and won't die because of a change to the Google algorithm.
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