Flipping Easy

While going to the “school of hard knocks” is often seen as a badge of honor, attending means making and learning from a lot of mistakes. Unfortunately when it comes to buying and selling websites, making mistakes almost always means losing money and all of the sudden the school of hard knocks doesn’t sound so glamorous.

While you should always learn from your mistakes, in flipping being able to learn from the mistakes of others can literally pay huge dividends. To help in that endeavor, I’ve compiled a list of 5 common mistakes people make when flipping sites that will absolutely cost you money.

1) The White Elephant

If the website in question is being sold to you and your purpose is to re-sell it, remember that there is always a reason the site is up for sale. It may be that the site is not and never has been profitable. The site may be more work to maintain than it’s worth. The sale may be the current owner’s last-ditch effort to recoup some of his or her losses.

Whatever the reason, it’s important for you to know as many of the risks and challenges that you’ll face with a site as possible. Doing your research, reading up on the site, and asking the seller questions will help you avoid buying someone else’s white elephant.

2) Dead on Arrival

To measure the potential value of a site you must ask yourself these questions:

• “What market share does this site have and how difficult would it be to gain market share?”
• “Is this subject already saturated?” or “Do we really need another [fill-in-the-blank]-type site?”
• “What would make someone interested in (the site’s niche) visit this site?”
• “Can the site’s traffic be monetized more effectively?”

The answers to these questions may sometimes talk you out of a good investment but they will most certainly talk you out of many more bad ones, and you don’t want to be the “greater fool” (See #5 below). The last thing you want to do is buy a site that’s “dead on arrival” and has no chance of being resuscitated.

3) Starting Low

When selling a site, if your asking price is too low it can suggest to potential buyers that you see no value in the site and will let it go at any price just to be rid of it. Any product for sale must be presented to display worth, but also within limits (See #4 below) to appear to be delivering value. Obviously a price of $100 implies much more value than a price of $1.

As such, you must think carefully about where you start the bidding for your auction. I usually start my auctions at 75% of the reserve price to give people at least a ballpark idea of where I’m hoping the auction will end up. Others start the bidding lower to attract bidders’ interest and get the action moving on the auction. There are pros and cons to each approach, just be aware of the implications your starting price might have on perception and participation.

4) Starting High

On the other hand, starting the bidding or your asking price too high can often deter potential bidders or prevent your site from selling all together. Remember, the value of a product is not determined by the price asked, rather, it is determined by the price one is willing to pay for it. Obviously you want to get as much as possible for your site but you also have to be realistic.

Before listing the site for sale, ask yourself what a reasonable final sale price would be. Decide before hand what your best and worst case scenarios will be, and then stick to your guns during the auction. It’s easy to get caught up in the heat of the moment and suddenly decide that your site is worth more than it really is or panic and accept less than your site is really worth.

5) The Greater Fool Theory

The “Greater Fool” theory is often used to justify questionable investments, assuming that no matter what, you’ll always be able to sell to the “greater fool.” This theory is popular among momentum investors and plays on the fact that as more and more money is made, there will be people jumping on the bandwagon hoping to make an easy buck. Even if the property you’re buying isn’t worth the price you’re paying, as long as you’ll be able to sell it for an even higher price, it’s a good investment.

The problem with this theory is that you’re relying not on the quality or value of your property (in this case a website) but instead on the gullibility of others. While actually works quite often, I for one like to be able to stand behind my product. I’d prefer to have buyers so happy with the transaction that they become repeat customers.

Also, bubbles always burst, momentum always shifts and if you’re caught on the wrong side of that swing, the greater fool theory will have once again been proven true, but you’ll be playing the part of the fool.

These principles are not absolute rules, they simply offer a guideline to success when buying and selling websites. As with any learned skill, you’re going to make mistakes while flipping sites. And, you absolutely should make sure you’re learning learning from those mistakes and getting better with each and every transaction.

However, if you can learn from the mistakes of others and avoid these 5 common flipping mistakes, you’ll learn the ropes of this industry while making money, not losing it.

If you enjoyed this post, please subscribe to the blog (it's free!)
by way of RSS or Email. And, you won't want to miss the exclusive content in The Flip our (also free) newsletter!