NEW to Flippa but feeling unsure? See HOW TO Make Your Flippa Buying Experience Safe and LEGIT
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Be an Owner NOW
Business ownership is commonly thought to be a vehicle for financial stability and wealth building. According to the Small Business Administration (SBA), on average, the self-employed are wealthier than the not self-employed and are significantly wealthier than workers and retirees. According to 2019 data from the Federal Reserve, business ownership represents 34% of non-financial assets. As net worth increases, so does the probability that families have business equity.
You and your family can now become business owners overnight without the usual startup costs and headaches of finding a building, ordering inventory, or hiring employees by buying an existing online business. (This isn’t to say that buying an online business is without headaches, but it’s definitely simpler than the traditional way.)
Business trends can be fickle creatures, indeed. Here’s how to use Flippa to both buy online businesses and spot latest trends.
Hunt Down Successful Business Trends
You can also use Flippa for investment research and to steer you to the right (or wrong) businesses (online or not) and to understand the current trends in tech and more. While you are researching trends, you might find a business you want to buy, or while looking for a business to buy, you might run across some important trends in tech or retail.
6,190 Sale Listings
Flippa is an online platform for selling and buying online businesses, websites, Amazon stores, domains, apps and more. It’s been around since 2009. The range of digital assets, businesses, and accompanying valuations is quite large. (Note also that you can buy alternative assets like real estate or precious metals on Alts by Flippa.) At the time of writing this post (February 2022), there were 6,190 listings, with asking prices ranging from $0 for starter sites to $14 million for a presumably very famous men’s jewelry brand. Yes, that’s million and yes, that business is listed as confidential.
How Does Flippa Work?
Flippa has two main methods of listing: Auctions and Timed Sales. You can tell the difference on the listing itself by seeing the number of days left (if any).
I have been tracking and analyzing online businesses for sale for years on Flippa, mostly for my own information about which ideas are profitable these days. There are other online business selling platforms and brokers such as Empire Flippers, but I personally prefer to use Flippa, for its ease of use, reasonably quick and transparent access to business information, and, like I mentioned before, its broad range of digital assets and businesses for sale.
I primarily use Flippa to analyze apps and online websites–as opposed to Amazon stores—and I use it to figure out not only which business ideas I might want to pursue but also which business ideas I definitely don’t want to pursue. After all, Flippa is displaying businesses for sale, meaning that someone has decided they no longer need that business in their portfolio, they no longer want to support it, or they need some quick cash. It can be a game of “hot potato,” for sure.
There are also a fair number of sellers who sell only domain names or make easy starter sites and then turn around and “flip” them as a business (as in “flippa”), sometimes in large numbers. You may want to discount some of these easy sites as not relevant in your information-gathering as they do not have any traction and are often just “feelers” sent out without a lot of thought. Here’s a favorite of mine:
How Does Flippa Work On the Buy Side
On the buyer side, note that Flippa caters not only to the individual investor, but also to institutional, merger and acquisitioners, aggregators, investors, and high-value buyers. In fact, the CEO of Flippa, Blake Hutchinson, just gave a talk in January about how digital assets and online businesses are a growing asset category for institutional and individual buyers/acquisition entrepreneurs “looking to expand and diversify their investment portfolios.”
For an individual investor like me, Flippa gives me a wealth of trend analysis, and occasionally inside information about how businesses are marketed, managed or mismanaged, and sold. It’s a microcosm of a larger digital world. By analyzing businesses that are for sale closely, and in some cases analyzing the sellers just as closely, I am able to observe certain trends in the bigger online investing and business world.
Since Flippa is a big universe, you need to break it down into digestible pieces. Using the filters helps to home in on price, profitability, and other important factors. I usually run several scenarios.
Establish Your Parameters
Do you want an established (revenue-generating) asset or a starter?
–I run scenarios for both, but usually prefer to see some revenue, even if a little amount.
What Asset Type are you looking for—Website/Online Business, Amazon Store, IOS or Android App, Domain, or Other?
–I choose Website/Online Business or Apps.
For websites: Do you want a Content site (blog, directory, review, or forum/community? Ecommerce (dropship, digital products, Shopify, inventory holding) site?
SaaS, Digital or Physical Services site? Transactional/Marketplace site?
–I look at all for research. For buying, I look at Content Sites and iOS apps. (There are WAY too many Android apps for sale—a trend?)
–I look at all.
Monthly Users, Pageviews, and Downloads
–I look at all.
–I usually look for a Min of $1 and a Max of $2,000/month. That’s my sweet spot for actually buying a business. If I am doing research, I keep this open.
–I look for a Min of $1 and a Max of $5,000. Again, my sweet spot. Again, if I am only doing research, I keep this open.
–I look for all.
–I look for 2x or less.
–I look for 30 days or less. I am not interested in those offerings which go on for literally years.
–I look for Open (I look for Recently Sold offerings for each Seller using Seller Profile Listings option)
–I look for either Auction or Classified.
Be Clear About Your Goals
For example, on the buy-side, I am currently in the middle of a buy transaction for a content site. My goals are simple. I am actually not interested in the stated “facts” about the domain or the site at all. I simply want the contact information for the email marketer and the suppliers. The site is icing on the cake, and since it doesn’t quite fit my style or quality bar, it’s OK.
For research, your goals are different. Are you trying out a new business idea or product and you want to see what competitors are doing? You can get more inside information by reading a Flippa offer about a company in the sector you are interested in than an internet search which will only give you the PR-facing info.
Maybe you are looking for future trends that might help steer your tech investments. Which markets are saturated or underperforming? Where is the “juice”? If there are lots of “text-to-speech” apps for sale (there are), this could lead your research on the technology behind it and where it is going in the future. On any given day, there are at least three or four. Why is there such a wide range of sale prices ($75 to $5,000) when the underlying technology is the same (AWS)?
A Back-of-The-Envelope Business Trends Analysis
Flippa is good for getting a fast understanding of a sector. Once you’ve looked at several listings over a few days, you begin to be able to read between the lines and eliminate certain businesses or ideas immediately.
Are dog shoes still an easy sell? Perhaps not if a company with a decent monthly profit ($2,984) is willing to sell with a less than 1x multiple (further research needed, of course). How about dog bandanas? There are 175,561 vendors on Etsy right now, so NO. But here is a $2,000 starter site that claims to make it easy to sell them.
Of course, you can also get a SemRush report on any business. I usually don’t do that because I can see a lot from what’s already revealed on the screen. However, if you’re doing a large transaction, you should consider ordering one. It’s only $10.
What’s Your Value-Add?
When buying, one very important way of evaluating a business is whether you think that you could add value to it by either creating more content, changing the content, or optimizing the SEO for example. For this reason, it’s often good to stay within a particular industry that matches your skill set. I usually look for businesses that have to do with finance, writing or marketing.
Is Flippa Safe? Watch for These Red Flags: Buyer (and Researcher) Beware
Watch for these Red Flags to ensure your experience on Flippa is a positive one.
- Offerings that are listed more than once.
- Several bad comments from buyers about a particular seller (not just one).
- No credible proof of profitability or revenue. In some cases, no Google Analytics information for a site that should have it. You can ask the seller for a GA login to doublecheck everything.
- Claims that are unrealistic or inflated, for example, a seller saying that the domain rank is high when it is not. Sorry, Mr Seller, a domain rank of five is not very high (!)
- Out of date information or information that’s from several years ago with no new updates.
- Over reliance on Godaddy’s domain appraisal tool, which is only a fair tool at best. Godaddy’s domain appraisal tool looks at sale information, length of domain name, and whether it uses a.com or not. Domain extensions have gone way past .com a while ago and don’t matter like they used to (do you bat an eye at .io or .net anymore?) The tool does not take into account slang or natural language use.
Is It OK To Do Buy Transactions Off the Flippa Platform?
Of course, Flippa wants you to stay on the platform, that’s how they make their money. I have done two transactions using escrow.com and so far, I’ve been happy with them. Your money is held in escrow until you are satisfied with the sale. And then it goes through with seller approval. The fees for escrow.com are either a wire fee depending on your bank or a credit card fee of X. You can decide whether or not the seller or the buyer pays those fees. For my smaller transactions, escrow.com works fine for me. The only downside I’ve found with escrow com so far is they take a long time to process payments over a day or more.
Is It a Good Investment? What’s the ROI for a New Buyer?
According to a study by Empire Flippers, 47% of all buyers in our study saw an increase in their net profits, 36% experienced a decrease, and 17% encountered no growth or decline after their acquisition. 36% were first-time buyers having never owned or operated an online business prior to this acquisition
Have on an Exit Plan (If You Buy)
You don’t really want to buy a business unless you have some idea what your exit plan is (even if your plan means keeping it “forever”). Is this something valuable you will want to pass down as part of your legacy? Or is it something you want as part of your legacy that’s simple and easy to sell? I have a 5-year timeline personally, at which point I will reassess my online business holdings.
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Disclaimer: All the information provided above and on this site is for informational purposes only and should not be considered as professional investment, legal, or tax advice. You should conduct your own research or consult with a professional financial advisor when investing.