Here are 3 things you might not know about website investing.
So you want to put your money in an online business? We really can’t pin the blame on you.
It’s a pretty attractive proposition-something that is picking up steam of late.
Yes, it’s only fair to say that things are gaining momentum in this domain on account of a rapid adoption rate and a digital real estate market that is still fairly unformed and untapped.
Even though picking the best assets is not a cinch, making an investment in a successful website means that you could yield between 20x to 50x returns.
Now that’s impressive.
That’s a fact. I’m not making it up.
As with traditional investments, investing in this hot asset class can be a crapshoot and you cannot afford to disregard the inherent risk in buying web properties. So before you decide to jump in, there are certain things you’d better know about website investing.
In no particular order, here are three things to consider.
Digital businesses come in different flavors and sizes. Some important categories to be familiar with are e-Commerce, advertising, lead generation, software subscription/SaaS, and affiliate marketing. As such, each category is different in its own right. They have their own pros and cons, and set of skills for successful operation.
As you consider investing in websites, be sure to identify which category will serve your interests well. Figure out what ticks for you. No matter the category you pick, maintaining any digital asset requires some basic skills, characteristics so knowing what to expect is the first step to investing successfully.
Keep in mind that determining the right type of online business opportunity for you should be based on your investment criteria, personal preferences, and skill-set.
When looking for an online business, being a little flexible, though, is very important- if you’re narrowing your options down too much, your search is more than likely to go forever.
One compelling reason why many people from different walks of life consider websites and digital assets as a potential avenue of investing is because there is a great potential to make money passively. For instance, by putting your money in a content website that has a lot of great content, you’re simply taking advantage of a passive income stream wherein advertisers pay you every time your website visitor clicks their ad.
This doesn’t work the same way for any other business model you may choose.
As highlighted earlier, each business is different in its own way, and, therefore, supporting one may take more time and effort on your part than the rest. For instance, eCommerce and dropshipping websites require you to purchase items and ship them in order to fulfill orders.
As you know by now, there is a significant difference in terms of time and effort required when it boils down to the level of passivity involved in investing in websites. While some investors, realizing the potential to improve their earnings, are ready to spend more time and effort so as to push their revenue higher, some choose to just enjoy the passive income stream of the asset they invested in.
What type are you?
Although picking a website with a great potential for generating passive income is key, you cannot go far with it. Inexperienced buyers that settle for assets generating passive income often find it tough to keep up with the competition in and satisfy their tribe of customers.
One thing that often goes unnoticed is that there are quite a few valuation methods you need to focus on.
For starters, one of the major valuation methods in practice is the use of multiples. This is how it works: The valuation of the business is arrived at by multiplying its monthly cash flow by a multiple that is suitable for the business. Some key factors that undermine what should affect a multiple are financials, operation, traffic, market and customers.
Checking the worth of a web business is now easy thanks to several website valuation tools available online. All you need to do to know how much a digital asset is really worth is to enter its URL into it. Voila. The automated tool will do the valuation, which includes calculating revenue using traffic stats publicly available and applying discount rates based on key metrics such as number of backlinks, domain age etc. Relying too much on these tools to give you a thorough valuation is not advisable since they don’t consider a business’ financial performance and the hard cold data necessary to determine overall business performance.
Traffic valuation is a good method to estimate the value of online businesses that have yet to be monetized but have steady traffic coming in. Although it is a good indicator of a web business’ worth, on some occasion, it does seem to put a too much emphasis on how traffic alone is crucial to the value of business.
Give yourself the best chance of picking up a digital asset with great value by making sure you have a solid decision making framework or selection criteria that includes multiples, price range etc.
Understanding how sale of an online business works could be a little overwhelming to investors who are new to the world of website investing. That said, it is important to carry out the right due diligence on the asset, market, competitors, and buyers to mitigate risk.
Many companies and brokerage firms, which are committed to helping customers buy and sell online assets, have a clear and transparent sales process in place to ensure maximum protection to both the seller and investor.
At BlackBook Investments, we help investors make great returns by investing their money in potentially rewarding digital businesses. We perform a thorough due diligence process of the asset and deal only with people and online businesses that have a proven track record. Each seller and their assets have to go through a rigorous background check in order to be considered.
If you’re ready to enter this hot asset class, you can count on our experience and knowledge to help you choose the best online business for you.
Mohit Tater is the founder and CEO of BlackBook Investments through which he helps people invest in online businesses and digital assets. Apart from advising clients on SEO and marketing he also blogs at mohittater.com.