E-Commerce Websites

Posted on October 10th, 2011 by Andrew Knibbe

This is a guest post by Dave Hermansen, the seller in the recent PitchingMachinesNow.com case study and an all-round whiz on buying and selling e-commerce websites.

Back in 2005, I built a little e-commerce store that sold bird cages. My site ranked “okay” in Google and I was turning a decent profit, but certainly not enough to quit my day job over. I liked the bird cage market and knew it well, but to get to the next level I knew I needed a site that got more traffic than mine did.

I knew in time I could greatly improve my rankings and traffic volume. However, I’m not really the patient type, so I decided to look around and see if there were any “high ranking” websites for sale within the bird cage market. I found a site that ranked #2 in Google (much higher than my site ranked) for the phrase ‘bird cages’. I knew that with a site ranking that high, I would be KILLING IT! I bought the site for $1,800, spent a year and a half “fixing it up” (and making a lot of profit during that time), and then sold it on Flippa (still SitePoint Marketplace) for $173,000!

Why was the previous owner crazy enough to sell it for only $1,800? And how was I able to turn around and sell the same site for $173,000? Read on, and I’ll tell you.

When it comes to making money with an online store, profitability really comes down to 3 things:

1. Traffic – obviously, you need to have visitors coming to your site.
2. Profit Margin – there needs to be a decent-sized gap between what your customers pay you and what you pay your supplier
3. Conversion rate – the number of visitors you “convert” into paying customers. Visitors are worthless to you unless they actually place an order.

If you take away any 1 of these 3 things, a site’s profitability AND VALUE goes way down.

Finding Sites with Traffic

So why was the previous owner of this bird cage site willing to let it go for so little? You guessed it, 1 of the 3 factors was missing. The site had high rankings and got a ton of traffic; that wasn’t the problem. And, being in the bird cage market, I knew the profit margins were good. The problem was that the site’s conversion rate was in the toilet. Even though the site had a ton of visitors, very few of them placed an order! Low SALES means low PROFITABILITY which means low VALUE. That’s why I was able to snatch it up for only $1,800.

That’s STEP 1 of this little website-flipping formula: find a website that ranks well and gets a lot of traffic but isn’t very profitable because of its LOW CONVERSION RATE.

Of the three factors, conversion rate is the easiest to fix. It takes a lot of work, time and patience to improve your rankings in Google. But you can easily double or triple (or more) your conversion rate overnight!

Take this bird cage website I bought, for example. No offense intended to the previous owner, but the site looked awful! It honestly looked like a 7th grader had made it for her website design class project. It just didn’t build visitors’ trust and confidence to persuade them to pull out their credit card. And then, even for the few customers who were ready to buy, they couldn’t even make payment online. They had to mail in their order! Very awkward!

Focus on Conversions

That brings us to STEP 2 of the formula: make improvements to the website to boost your conversion rate. A higher CONVERSION RATE means more SALES which means more PROFIT which means more VALUE. That’s all I did! I made the site professional-looking. I made it easier for customers to find what they wanted. I re-wrote product descriptions. I did everything I could to build visitors’ trust in the site and the products I offered. And I allowed customers to pay by credit card on-site.

There are all kinds of different ways to boost a store’s conversion rate, but there are two big keys. First, put your store on a first-rate, cutting-edge, professional shopping cart platform. Using the right store software makes all the difference in the world. And second, always accept credit cards right on your website.

Cash in Your Work

STEP 3 of my site-flipping formula is to sell the site on Flippa, which I can honestly say is the ONLY place I’d consider selling a website. After boosting my bird cage site’s conversion rate, profits soared (and I made a lot of money)! After showing consistent profits for several months (to establish an ongoing track record), I listed the site for sale on Flippa and ended up getting $173,000 for it.

So to re-cap, here’s my 3-step formula:

1. Find & buy a site that gets a lot of traffic but isn’t very profitable because of its low conversion rate.
2. Make improvements to the website to boost its conversion rate, which in turn boosts its profitability and value.
3. Once you’ve established a good track record of consistent profits, sell the site for a huge profit on Flippa.

Dave Hermansen is an ecommerce expert who has been involved in over 50 successful ecommerce stores. His success in ecommerce led to him being interviewed on Fox News and featured in an article about ‘website flipping’ in The New York Times. Dave’s free ecommerce training course at StoreCoach.com teaches people how to make serious money in ecommerce!

Sourced & published by Henry Sapiecha

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ASK some of Australia’s best-known entrepreneurs for tips on earning extra cash and they are likely to tell you to get flipped.

Don’t be offended. It is sound advice because ”flipping” – buying rundown websites, sprucing them up then selling at a profit – is, apparently, where it’s at.

It is the digital equivalent of renovating a house before putting it back on the market at a higher price, only without the back-breaking labour, dust mite-infested carpets and massive cash outlays.

Matt Barrie built his career on renovating and reselling websites. Photo: Patrick Jones

”Unlike flipping real estate, it’s easy to add value to websites,” Melbourne flipper David Jenyns says. ”To add value to real estate, you must do something significant, labour-intensive and, usually, expensive, like building a new bathroom.

”But with websites, you can make small changes such as building links from other sites or improving the overall look for little cost.

”That result can be a significant increase in value.”

Jenyns, the owner of MelbourneSEOservices.com, has made hundreds of thousands of dollars online through flipping and ”domaining”, buying keyword-rich domains, stuffing them with content suited to search engine optimisation (SEO) and selling at a profit.

Among his success stories is forextradingstrategies.org, which he bought for $10 and sold for $10,000 after spending $100 to have SEO-friendly articles written for the site.

The Jenyns domaining repertoire includes wrestlingmoves.org, which was sold for $2000; WoodWorkingProjects.org ($1495) and fireplace-design.org ($997). He paid $10 for each domain and about $150 to set up the accompanying websites.

”Flipping offers the lowest barrier to entry compared with virtually any other business out there,” says Jenyns, who in 2001, aged 19, made a name for himself – and $70,000 – selling pieces of the old Ponsford stand from the MCG as memorabilia.

”You only need to be able to see the diamond in the rough and have a plan of how to unveil it,” he says.

”Even if you haven’t got the technical know-how, you can hire a freelancer from any freelancing site, who can make it happen.”

Award-winning Australian entrepreneur Matt Barrie, one of Australia’s brightest digital stars, runs such a site, freelancer.com, a source of freelancers for the digital projects needed by flippers, such as logo design, website programming and Facebook app development.

Freelancer.com is one of the biggest flips of all time. When Barrie bought the site in 2009, at the time called getafreelancer.com, it looked, in his words, ”grey, utilitarian and horrible, like a high-tech Ukrainian prison”.

Nearly three years later, sporting a revamped interface and new name, it has signed up more than 2.8 million employers and freelancers and the range of people making money, either by selling their services or hiring them, is diverse, from programmers and graphic designers to, last week, a scientist in the jungles of Africa needing a poster designed to extol the virtues of saving a rare breed of hippopotamus.

In fact, many of Barrie’s freelancer.com staff of more than 100 come from the site, a situation he says represents a ”seismic shift in the world’s labour markets”.

”It’s never been easier to start a business and it’s never been more cost-effective,” says Barrie, whose own flip turned over more than $US40 million ($38.6 million) this year and has dispensed about $100 million since the original site opened in 2004.

Barrie came upon the getafreelancer.com site while building a shop site.

Needing 1000 pieces of data entered into a spreadsheet, he was unable to find anyone to do it and reluctantly placed the job on getafreelancer.com.

Within three hours, he had 74 tenders ranging from $2000 to $100 from a team in Vietnam.

He picked the Vietnamese team and the spreadsheet was returned three days later.

”It was perfect,” says Barrie, who realised the world’s labour-market model was potentially on the verge of dramatic change and immediately set about building a similar site before discovering getafreelancer.com was for sale.

He sought funding, bought the site, tweaked it and made it more friendly to Western users. ”The site’s revenue doubled in 24 hours once we changed the graphics and, over time, we’ve incorporated other changes, including rebranding and renaming the old site,” he says.

And what of arguments about the West exploiting Third World labour, albeit digitally?

”A very large portion of the world’s population live on $10 a day or less and now they can jump online and earn in one day what they would earn in a month and why shouldn’t they?” Barrie says.

”They are just as smart as us, just as motivated and want a job just as much as we do.”

Barrie cites the example of a young woman in the Philippines who now makes $400,000 a year turning out logos for businesses and websites around the world.

Freelancer.com’s top freelancer earns a whopping $1 million a year creating small $65-$100 websites and selling them to businesses that want quick and affordable web presences.

Another spectacularly successful flip is Flippa.com, the king of the internet’s domain-flipping destinations.

The two-year-old Melbourne-based digital marketplace will this month clock up more than $60 million in website sales and hosts more than 1000 potential buyers and sellers of domains and websites every minute.

Though the digital offerings on Flippa range from $1 domains to six-figure websites, most of them are flipped websites that sell for less than $10,000, on average about $2000 a pop.

Flippa last year hosted the sale of FaceMash.com ($30,000), Mark Zuckerberg’s Facebook predecessor, famously created during his time at Harvard University, as well as Retweet.com, which was sold for $250,000, and BlogTopSites, which went for $117,000 in April last year.

Flippa may now be the world’s biggest website marketplace but it, too, started as a flip.

”I’d found this little site, called webmaster-resources.com, run by a guy named Matt Mickiewicz out of Canada,” says co-founder and former Sausage Software programmer Mark Harbottle, who this year made his debut on the BRW Young Rich List with an estimated wealth of $40 million.

”I was buying advertising space on his website for some software I was selling and, eventually, he asked me if I could help him with the site’s promotion and marketing.

Despite a $500,000 offer of sale from a third party, Mickiewicz, then a 16-year-old working from his bedroom, decided to partner Harbottle and the duo spent the next year rebuilding and rebranding as sitepoint.com, which quickly became a popular place to sell websites, particularly flipped ones.

After achieving several years of 150 per cent growth, the pair, still living in different hemispheres, decided to spin out the website sales arm into Flippa.com.

Today, Flippa.com and its three allied websites (99designs, sitepoint.com and learnable.com) employ 110 people on three continents and hosted about 20,000 website sales last year.

”I had no idea if it was going to be three months or three years when I started but today I get to do what I love and this whole experience has allowed me to do lots of cool stuff, especially helping others with great ideas,” Harbottle says.

”And it all started with a $400 investment in a little Canadian website.”

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Six tips

1 Unless you just want a pretty site or to bulk up your digital portfolio, don’t just buy a site simply because you like it. Be sure to take the trouble to do your due diligence before handing over any cash and find out if it is capable of turning a profit. Check the site’s Alexa ranking, look at the revenue and potential revenue, as well as what technology your site is built from. If it’s in an obscure language and you won’t be able to find people to code it, there’s little point.

2 Go for premium domains. You can always fix the content but if the domain is worthless or irrelevant, you’ll have to work doubly hard. Domains that contain natural keywords are best.

3 Look into the quality of the user base, how many users (and how many of them are active), where they’re coming from and how they are being acquired.

4 Pay for quality content to be written for your site (if you can’t do it yourself). You can then use these articles to post to other sites in exchange for links to your site. This will markedly increase the SEO on your new site.

5 Be sure to ask the seller all your questions before sending the money: what is included (all the code, original, editable graphics) and what is not included (installation, changes); will you be selling this site or a site like it again; why are you selling; is the content unique to the site or created specifically for the site?; how much ongoing support will the seller supply?

6 Start small. There’s a lot to learn and you won’t be able to learn it through just reading about it. Buy a small website with as much money as you can afford to lose and have a play. Try a $50-$100 site and learn about what works and what doesn’t. Experience the buying and selling of a site, what is involved, what you get and what you didn’t.

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Flipping resources

Flippa.com

THE world’s No.1 marketplace for digital goods is crammed with more than 100,000 potential sellers of flappable sites and buyers of flipped sites.

YouTube

IF THERE’S anything you want to learn about flipping, YouTube is an invaluable teaching tool. Check out Google’s Webmaster Channel in particular for search engine optimisation basics (and some advanced tips, too).

Google Analytics

SPEND the time to master Google Analytics (or any alternative analytics you may choose to use). At first it will look like gobbledygook but once you learn what all the numbers and squiggles mean, you’ll start to see through the haze and learn what people really want on your sites.

Digital Point

A FANTASTIC resource for anything to do with the internet and websites as well as marketing. Among the 15,565,000-plus posts, answers to almost anything you could ask are already there – and if they’re not, just ask one of their 492,000-plus members. See forums.digitalpoint.com.

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THE RIGHT CHOICE OF A DOMAIN NAME CAN BE A POWERFUL ASSET

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