Following my plan, I started building my first niche website a few weeks ago. No, not like this. I outsourced the building process of my first niche website. This is a…
Website Broker Review: 5 Businesses That Can Help You Get Your Own Business
For buying a website I have closely monitored offerings from two online business brokers: FEInternational and Empire Flippers.
Reads my website broker review to find out whos’s the best among them.
Why Using a Website Broker?
I decided to use a website broker for one simple reason: I am very new to this business and I do not know all possible caveats of the online business world. Websites can be expensive, and the fraud is easy to commit. I do not have (yet) enough expertise to detect the fraud, so I decided to use a mediator. Especially given that it wouldn’t cost me anything.
A website broker works as a guarantor between the seller and the buyer and makes sure that both parties get what they ask for. It makes the deal much safer.
A good website broker also does an initial due diligence and weeds out the crap from their listings. This is a definite plus for buyers since no one wants to buy a website that plummets from the 1st page of Google to the last the next day the deal was made.
Given all that, no wonder I wanted to use a website broker.
How the Website Price Is Calculated
In order to properly understand the difference between the brokers, we should understand how usually the website price, one of the most important properties, is calculated.
From what I have seen so far on the website brokers, the standard way is to take an average revenue based on the last 3 months, multiply it by a special number and add the price of the assets coming with the website.
The special number is called multiplication factor and it depends on various factors: the website ranking, the backlink profile, the keyword search volume, the potential, etc. Each broker defines the multiplication factor based on their own internal rules.
The multiplication factor is essentially the payback period of your investment, in months.
Payback period in capital budgeting refers to the period of time required to recoup the funds expended in an investment, or to reach the break-even point (Wikipedia)
If a website comes with an inventory (in the case of e-commerce websites), its cost is included in the price.
Personally, I do not think that it is a good idea to calculate the price based on the 3-month revenue. The revenue may be seasonal, and the website sellers may use this fact to inflate the price of the website.
Apart from the price, it is important to understand how a website broker picks what businesses to sell. Both Empire Flippers and FEInternational, which I will talk about further down in the post, carefully veto their offering, so usually a buyer can trust the information and descriptions they provide.
Empire Flippers (FE) was founded in 2011 by Justine Cooke and Joe Magnotti. Since then they sold a lot of websites in various price ranges totaling in whopping $5,428,386. Check out their listings.
This is the website broker I used to buy my new website.
To define the price of a website for sale, they usually use an average net revenue for the last 3 months and a multiplication factor that usually ranges from 18 to 25 and sometimes up 30. It means that the website should pay back in 18 – 25 months (or up to 30) if its current state is preserved “as is.”
Sometimes the evaluation is based on the period longer than 3 months – for example, when the last 3 months do not properly represent the website earnings. This period is always stated in the listing.
As I said, the website revenue may be seasonal, but EF does not always reflect this fact. Because of that, some prices may be inflated, and it is often up to the buyer to figure it out.
EF explains how they calculate the price in the FAQs, but the info looks outdated to me.
They claim they do a thorough review of each website they put up for sale. But it seems that their review process may miss some issues. For example, the website I bought was receiving a part of the revenue from the Amazon Affiliate program. However, some posts had prices hard-coded, and this can potentially lead to being banned by Amazon. I noticed it only after making the purchase. Frankly speaking, I would expect EF to catch it before putting the website for sale.
In order to see the website URL, a buyer needs to pay a 5% refundable deposit.
Prices: $1,000 – $1,000,000 with the median range $3,000 – $30,000
While the range of the prices is quite large, I would say that the majority of the websites they sell falls within the $3,000 – $30,000 range.
The websites <= $5,000 are hugely popular and they usually get sold in 3-4 hours after being listed.
- the websites have affordable prices;
- the websites are well vetted;
Almost all cons of EF come from the fact that the cheaper websites (<= $10,000) are in a very high demand.
Because of that:
- a buyer may not have enough time to do a proper due diligence;
- an established atmosphere of rush;
- the prices are rising – while 6 months ago the highest multiplication factor was 22, now it often reaches 25 and sometimes 30.
On top of that:
- many websites are less than 1-year-old; this increases the buyer’s risks since it is not possible to track down the website’s history and predict how well it will do in the future;
- the seller’s questionnaire is minimal, so a buyer has to be well prepared in order to do their own due diligence.
That’s what FEInternational (FEI) says about themselves: “FE International was founded in 2010 to provide brokerage services for mid-market online businesses. The company has become the pre-eminent advisor within the industry and enjoys a well-earned reputation for integrity, creativity and delivering results. To date, the firm has successfully executed an industry-leading 300 transactions.”
Check out their listings.
When a buyer requests an information about a business for sale, FEI asks them to sign a non-disclosure agreement. It is a one-time thing and is valid for two years. Once it is signed, the FEI sends the buyer a PDF with a questionnaire filled by a seller. FEI does ask to pay a deposit in order to see the URL.
I did not buy anything from FEI, but I have requested the information about two websites they listed. In each time, I got a long PDF file with 11 pages which contained questions from FEI and answers from the seller. Since I did not buy anything, I did not have a chance to verify how well the questionnaire represents the actual state of the business.
To find out about the other aspects of their operational process, read their FAQ.
Prices: $15,000 – $2,450,000 with the median range of $30,000 – $200,000
Often the price is calculated based on the gross revenue rather than on the net one. For me, their prices look inflated, and indeed, I often see how they reduce the prices of some websites that have been for sale for too long. They are being honest about it by putting a word “reduced” next to the price of such websites.
On the plus side, they seem to use a yearly revenue to define the price of a website. So the price reflects the seasonal changes in the traffic and revenue.
- the websites are thoroughly vetted;
- the websites offered seem to be on a higher quality end comparing to the websites from the Empire Flippers;
- no rush;
- enough time to do a due diligence;
- sellers have to fill a well-rounded questionnaire, so a buyer does not need to come up with their own questions (thought doing a proper due diligence is still very recommended);
- the majority of the websites are older than 1 year;
- the price is calculated based on the yearly revenue to take into account seasonal changes.
When it comes to the cons, the FEInternationals has one significant downside: the amount of money to pay. I think it is a bit too much, but I guess the buyer get more confidence for the money.
- the websites are evaluated with the multiplication factor mostly of 30 and higher;
- often the price is calculated based on the gross revenue thus not taking expenses into account;
- a buyer has to pay extra fees when closing a deal:
- a buyer transaction fee is 2.5% of the final sale price of the business up to a maximum of $1,000;
- an Escrow.com fee which is approximately 1% of the transaction size and is split between buyer and seller.
Other Website Brokers
There are many other website brokers. I did not use them, so I cannot judge from the experience. I searched the internet for the reviews and compiled a list for you.
This is one of the most well-known website brokers and also probably one of the oldest. According to Wikipedia, it was established in 2009. But does it make it any good? No. The websites are not vetoed at all, and the level of fraud is very high.
Dom from HumanProofDesigns wrote a great review of Flippa here. In short, even if their prices look attractive, do not buy from them because they sell mostly junk.
This is a website by Ryan Kaufman. Ryan seems to be a real person who reads the same famous niche website blogs as me 🙂
I am not sure how his website selling business goes – currently he has only 2 websites for sale, and both of them are quite expensive ($40,000 and more). I could not find any reviews of his business, but at least Ryan is a real person hehe. Knowing that there is a true human being behind the page increases my trust to the business.
Ryan also used to sell websites on flippa.com with 100% positive feedback.
According to their website the company was founded in 2007. Ther team includes
In terms of pricing, this broker is similar to FEInternational and even more expensive. The cheapest offer at the moment of writing this is $135,000.
In my website broker review, I have covered five brokers and revealed which one I used for my purchase.
When it comes to buying an online business, the price is an important factor for me. I do not have a lot of resources to spend, and they all come from my personal savings.
Finding a non-expensive website can be difficult. It seems that there are a lot of offers on the premium end of the market while the low end is under-represented. That explains the popularity of EmpireFlippers as well as Flippa despite the fact that the latter is full of fraud offers.
In my next post, I will write about how I bought my website from EmpireFlippers. Stay tuned!
Photo credit: Got Credit