Ed Dale is the man when it comes to buying and selling websites.  After selling his first major website in the late nineties made him a millionaire, he did it again creating and selling 28 websites for a total of $5 million.  When he talks about what’s possible in buying and selling websites, he knows what he’s talking about.

Last weekend Ed Dale launched a new product called Dominiche, it’s meant to be the Encyclopedia Britannica of website buying and selling.  I was going though the marketing material on WhatIsDominiche.com, and have become convinced about the benefits of buying and flipping websites (on the condition that you have the internet marketing skills to improve sites)

The first thing to note about flipping websites is how similar it is to real estate.  Except for several key differences:

1. There’s a bigger market, you can buy and sell from/to anyone anywhere in the world.
2. The price range is really broad. Sites can be had for $100 at the small end, and Billions at the high end.
3. If you’re planning on flipping, there’s no down time,  the site continues to make money as long as it’s online.

It’s similar to real estate, but it’s also similar to buying/selling businesses.

When pricing a business, you look at the profit, growth potential, and assets together to determine a price.  The same goes for websites.  A website may make $1000/month profit, but how much traffic do they get, and how much is it worth?  Is there a product or service that comes with the business that has some value?  Does the site have enough page rank to be useful for SEO purposes?

Right now websites can be bought for really cheap.  Ed uses the estimate of two times annual earnings.  Of course that’s just an estimate.

This kept me up all night earlier this week.  You know those times when your mind starts going and won’t stop?  That happened to me, I was daydreaming about the finances and came to the realization that it just makes too much sense to sell sites that make good cash flow.

At first this doesn’t seem to make sense.  Why would you sell a site that takes very little time to maintain yet makes $5000/month?  Lets examine the math.

Lets assume you have a site making $5000/month which has an estimated value of $120,000.  If you sell the site now, you’ll have $120,000 in your pocket.  Lets then take half that ($60,000) to buy another website with growth potential that makes $2500/month.  Over the following 12 months you double the monthly profit to get it up to $5000/month.

Here’s a month by month breakdown of income:

Pretty remarkable.

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This entry was posted on Sunday, October 14th, 2007 at 8:20 pm and is filed under Business. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.