Need Advice

bobbuilder

I am currently in the process of buying a website,its for sale at €280,000,Myself and my accountant feel its a very good purchase with potential earnings of over €800,000 per annum.

Am i making a good move??????????

PCPhoto

are you 100% certain it has regular traffic at the moment ?

280K is a fair chunk for a web domain name.... you might be better off creating a new one and promoting the website - will probably cost less.

bobbuilder

Yes there is around 3-4 thousand visitors a week ,i really like the layout and the ideas for the site i feel i can achive well over 1mil per annum.there is an new attachment being built in and it will be the first website in ireland that does wat it does.


are you 100% certain it has regular traffic at the moment ?

280K is a fair chunk for a web domain name.... you might be better off creating a new one and promoting the website - will probably cost less.[/QUOTE]

stcstc

figures seem a little hot

I worked out that if everyone who visits, spends. they all need to spend 3.85 each

to me that seems a little high

SolarNexus

I would hope that you asked the opinion of someone who is more knowledgeable about the web space than your accountant.

Other than that, your asking for an opinion on an unknown quantity. Without further information it would be hard to know what to suggest.

Edit:

Potential earnings are worthless, what is it earning *now*

SolarNexus

stcstc wrote: »

figures seem a little hot

I worked out that if everyone who visits, spends. they all need to spend 3.85 each

to me that seems a little high

that seems totally unrealistic, typical call-to-action is 1%

D.W

Thats mad money for that sort of traffic IMO. Few things to bear in mind

-changing ownership and hosting of a domain can in certain cases effect certain aspects of a sites "trustability"
-could the seller simply repoint any links pointing to the site elsewhere thus potentially losing you rankings/traffic
-whats the age of the domain
-has it good organic rankings
-have you access to view the sites analythics
-what exactly are you getting for 280k?

Personally I have sold sites that ranked top of Google for highly competitive keywords and had more traffic than you mention but I got nowhere near that figure and I actually think I was lucky selling. its a buyers market not a sellers.

You could simply build a new site, copy the model and throw a few quid at PPC to see if there is actually a demand or not and potentially save yourself 280k?

tomED

3-4 thousand a week!?!?!

I'll sell you my blog for half that price and you'll get that amount of traffic a week!!!

Are you buying the domain, the website or the whole business for this? If it's the business or website, have you had a proper look at the statistics and what their current turnover is?

How are you working out your potential earnings?? Seems to be an extremely high figure for a site with such little traffic. Even throwing adsense on a site like that is only likely to earn you about €20 a day if you're lucky.

If you have that much money to invest in a web idea, I'd suggest that unless this site currently has substantial business, you invest the money in building something similar and using a large chunk of the cash to market the business.

Kinetic^

bobbuilder wrote: »

I am currently in the process of buying a website,its for sale at €280,000,Myself and my accountant feel its a very good purchase with potential earnings of over €800,000 per annum.

Am i making a good move??????????

I get that your accountant is generally the person that you would speak to about financial decisions but I'd recommend speaking with a few people in the development/seo/e-commerce industry to get some feedback on this. Please don't do anything until you've done so.

MrMatisse

assuming its 3/4k hits your getting a week, unless you have a really high hit to sale conversion rate, or your selling really high value goods, it does seem expensive. Its not hard to get 3/4k hits a week.

jonnybravo

Also ask yourself if this site has so much potential why is the vendor selling it in the first place?

TheWaterboy

I too think its a crazy valuation based on only 3-4k visitors per week.

It doesnt matter if you have a million visitors per week if you aren't converting them to sales or making money from them some other way. You do not mention what the website does etc.

I read somewhere that Amazon has a conversion rate of about 12% - so for every 100 visitors this would mean that 12 make a purchase. This would be considered an extremely good conversion. As far as I know the average conversion for an e commerce store is between 3% and 5%

I would do alot more investigating if I were you.

SolarNexus

TheWaterboy wrote: »

I too think its a crazy valuation based on only 3-4k visitors per week.

It doesnt matter if you have a million visitors per week if you aren't converting them to sales or making money from them some other way. You do not mention what the website does etc.

I read somewhere that Amazon has a conversion rate of about 12% - so for every 100 visitors this would mean that 12 make a purchase. This would be considered an extremely good conversion. As far as I know the average conversion for an e commerce store is between 3% and 5%

I would do alot more investigating if I were you.

I'm pretty sure the average conversion rate is 1% at most. Amazon is unusual in pervasive presence and brand identity, which would not be the case for most websites/affiliates, whatever their CTR may be.

wikipedia wrote:

Banner ad click-through rates have fallen over time; when they first started to appear, it was not uncommon to have rates above five percent. They have fallen since then, currently averaging closer to 0.2 or 0.3 percent

tomED

SolarNexus wrote: »

I'm pretty sure the average conversion rate is 1% at most. Amazon is unusual in pervasive presence and brand identity, which would not be the case for most websites/affiliates, whatever their CTR may be.

Average conversion rates can be anywhere from less than 1% to 3% - it really depends on the industry you are in.

The conversion rates you've used as an example are of banner ads, which are now less than 0.8%.

SolarNexus

tomED wrote: »

Average conversion rates can be anywhere from less than 1% to 3% - it really depends on the industry you are in.

The conversion rates you've used as an example are of banner ads, which are now less than 0.8%.

Sounds about right, still for OP, it doesn't sound like a very profitable aquisition.

tomED

SolarNexus wrote: »

it doesn't sound like a very profitable aquisition.

ABSOLUTELY NOT!!

thirtythirty

bobbuilder wrote: »

I am currently in the process of buying a website,its for sale at €280,000,Myself and my accountant feel its a very good purchase with potential earnings of over €800,000 per annum.

Am i making a good move??????????

Questions that need to be asked:

- 800,000 potential earnings. Do you mean "potentially for you" i.e. it is currently earning that for the present owners, or "potentially in the future" i.e. that is the projected earnings in a specific future period?
- What is it currently earning? Does the valuation of 280,000 match it's CURRENT revenue generation, not the projected.
- What are the market trends in the space that it's in; is there a new tool or service that has come out that people are starting to / will start to use?; who are the market competitors - what's the USP of the site you're buying, and is it sustainable?; Who is going to manage the growth and evolution of the site you're growing - websites can grow stagnant very quickly.
- Why is the incumbant owner/operator selling? Have they spotted something on the horizon that will make your site defunct in a year?

If you're spending that much on the site, you perhaps need to spend a few K an ecommerce consultant and get their opinion on it's long term viability.

TheCostumeShop.ie: Ronan

bobbuilder wrote: »

Yes there is around 3-4 thousand visitors a week ,i really like the layout and the ideas for the site i feel i can achieve well over 1mil per annum.there is an new attachment being built in and it will be the first website in ireland that does wat it does.

Actually I'd disagree with most of the above comments. We don't know what the site sells or its business plans. Although those traffic rates are low it is possible to run the figures and make profit if the sale values are high. The other thing about an online business is you can leverage it up very fast and 10% - 35%+ growth rates per month are achievable if you know what your doing.

The question is here do you really know what your doing?? What worries me is you talk about the "layout" which is fairly irrelevant to the acquisition process any site can be given a face lift very easily. In fact if you didn't like the layout it would be a better buy signal as its a user experience that could be improved. Maybe I'm reading into this too much, but you're a plasterer by trade not an IT coder so i wanted to air on the side of caution.

Also your talking about buying a "site" rather than a business. Remember the seller probably cannot sell you the IP that the site is created on and all successful websites need constant improvements and work done on them to stay current. Also you wont be able to lock out competition so you might have to battle for your place once the industry develops.

Have you read and understood all the analytics and income sources, because its very very easy to fake stats to over value a business. I suppose the questions are you qualified to 1. make the purchase at this level and 2. bring the company to the next level. This isn't an invest money and stay silent partner type investment at all.

Solar nexus - a call to action of 1% would be well below the general average of conversion rates.

Anyway best of luck with the acquisition and if you buy it drop me a pm and i'll give you some basic cro tips to get you started.

tomED

TheCostumeShop.ie: Ronan wrote: »

We don't know what the site sells or its business plans. Although those traffic rates are low it is possible to run the figures and make profit if the sale values are high.

At the moment, all we know is that he is buying a "website" with 3-4k visitors. Bob doesn't say if this is unique visits or just visits. That's all we have to go on so far.

I've asked Bob to elaborate already but he hasn't been back on yet by the looks of things.

So until Bob clears that up, I don't think many people's opinions here have been too far off the mark in fairness.

TheCostumeShop.ie: Ronan wrote: »

Solar nexus - a call to action of 1% would be well below the general average of conversion rates.

Would love to see where you get that statistic from Ronan - 1-3% is considered the average conversion rate of the majority of websites.

What's interesting about Bob's post is that he mentions a new feature down the line which will offer something no other does. This leads me to believe the site is some sort of ASP - which means the likelyhood of the conversion ratio being anywhere near 3% is hugely ambitious.

TheCostumeShop.ie: Ronan

tomED wrote: »

Would love to see where you get that statistic from Ronan - 1-3% is considered the average conversion rate of the majority of websites.

I have my sources, general averages are for the mediocre lol.

Agreed though, we dont have enough info here at all to give any real advice on the deal.

bobbuilder

Thanks everyone for the advice all i can say is its a site similar to yourlocal,it has only been built,the current owner builds and sells he has sold other sites for over 1mil and i have seen the paper work,i wish i could say what it is but i cant breach anything,yes im a plasterer by trade but also was very lucky with the property boom,

But i will get further advice,the advice on here was great a mate told me to do this and im glad i did thanks everyone

tomED

bobbuilder wrote: »

Thanks everyone for the advice all i can say is its a site similar to yourlocal,it has only been built,the current owner builds and sells he has sold other sites for over 1mil and i have seen the paper work,i wish i could say what it is but i cant breach anything,yes im a plasterer by trade but also was very lucky with the property boom,

But i will get further advice,the advice on here was great a mate told me to do this and im glad i did thanks everyone

That's fair enough that you can't say what it is - but what's the business model if it's like "local.ie" - advertising???

bobbuilder

Yes tom advertising

tomED

bobbuilder wrote: »

Yes tom advertising

Ok Bob, thanks for letting us know.

But just to put that into perspective for you.

If you were to sell advertising on your website going through the industry standard CPM model, you would earn max €12-13 per 1,000 impressions of a banner.

Let's say you have 3 banners on every page of your website, a visitor to a website (not a blog) will view on average 3-4 pages. That means your potential exposure for adverts will be max 48,000 banner impressions per week.

After a weeks work in its current form, you should expect to earn not much more than €624 per week (if you are very lucky). At that rate, it will take 448 odd weeks to pay pack the initial investment. And that's being hugely optimistic.

You also probably need someone to sell this advertising for you, unless it's an extremely worthy brand of selling itself. These advertising agencies will want you to have at least 500,000 page impressions per month.

I think you need to bring these figures to the guy you plan to buy the website from and get a massive discount!!!

If you were to base the price of the business on 2 and half times the companies turnover, you shouldn't be paying more than €100,000 - with €100,00 investment you could probably set up a business with a better business model and much more potential.

Just my two cents.