The Complete Guide to Investing in Websites

Investing in websites can be a rewarding experience, both personally and financially. With the right approach, acquiring a website can be a great way to diversify your assets, create more freedom for yourself, and generate a strong ROI.

Unlike certain other investments, however, buying a website requires thoughtful research and planning. Therefore, before diving in and acquiring a new site, it’s important to establish an effective strategy that can help you achieve your goals.

In this article, we discuss everything you need to know about investing in websites, including:

• Why you should consider investing in websites
• The pros and cons of acquiring websites
• How to establish the right budget
• What you should consider before purchasing a website 

Why You Should Consider Investing in Websites

There are several compelling reasons why you may want to consider investing in website properties. Some of these are personal, while others are based on financial considerations. 

High growth potential

Compared to most other investments, many websites have enormous growth potential. This enables them to generate a high ROI, often surpassing 30 percent. While it’s rare to experience the same growth as a successful social media start-up, this is still roughly three times what you might expect from index funds or real estate.

In order to realize significant growth, it’s important to identify websites that show promise for the future. Indicators of high growth potential include:

• Untapped SEO opportunities
• Content gaps
• Operational deficiencies

Affiliate marketing websites can often benefit from improved offer selection and email marketing integration. Additionally, like any business, the overall market plays a big role in determining a website’s growth potential. For example, let’s say you acquire a website that serves a quickly emerging market. In such a case, you’ll have significantly more growth opportunities than a website that serves a declining market.

“In order to realize significant growth, it’s important to identify websites that show promise for the future.”

Lifestyle independence

Another key benefit of buying a digital property is the freedom that website ownership allows. When you own an online business, you typically have complete freedom over when and where you work. This allows you to work from home, travel, and spend more time doing the things you love with the people you care about the most.

Not surprisingly, the desire for freedom is what draws many individuals to become digital entrepreneurs. With a laptop and an internet connection, you can do virtually all the activities required to run your website. This doesn’t necessarily mean it’s easy, but it does mean you have greater control over how you live your life. 

“When you own an online business, you typically have complete freedom over when and where you work.”

Embark on an exciting challenge

If you’re like most people, it’s important for you to feel fulfilled in your work. For many individuals, owning a website is a wonderful way to enjoy work and experience significant fulfillment.

Of course, the degree to which website ownership fulfills you will depend on what website you acquire. If you’re not passionate about the specific online business you acquire, this point may not apply. If the website operates in an industry you care about, however, you may find it immensely rewarding to run the business. This is especially true if you enjoy marketing, creating content, or carrying out any of the other activities that the website requires. 

How Much to Invest in a Website

Like you would do when acquiring all digital assets, one of the first steps to acquiring a website is determining your budget. 

Like any budget, your website investment budget should be based on your individual goals, values, and expectations. Setting a budget is a highly personal decision. However, there are a few key considerations that can help you establish what feels right for you.

Assess your skills and confidence

Unlike the stock market or index funds, your website’s performance is heavily dependent on you. In other words, when you acquire a website, its profitability and growth will largely be a result of the effort and expertise you put into it.

“When you acquire a website, its profitability and growth will largely be a result of the effort and expertise you put into it.”

Know your risk tolerance

Another key element to consider is your risk tolerance. 

As mentioned above, the risk associated with acquiring a website is heavily dependent on your own abilities. Even relatively stable websites, however, are generally considered riskier investments than bonds, index funds, or real estate (i.e. rental property).

There’s no universally right or wrong answer when it comes to determining your risk tolerance. What feels like an acceptable level of risk for one person may provoke chronic anxiety for another. Therefore, it’s important to be honest with yourself about where your risk tolerance lies.

The higher your risk tolerance, the more capital you may be willing to invest relative to your net worth. If you have a lower risk tolerance, you may be willing to invest less capital. 

What’s your financing strategy?

Your financing strategy is another important factor that informs your budget. If you plan to use your own funds to acquire a website, then you’re limited by your personal capital constraints. If you plan to use an SBA loan, on the other hand, you may be able to afford a significantly more valuable business.

With an SBA loan, you may be able to put down as little as 10 percent of the purchase price. Not only can that allow you to purchase a more expensive business, but it can also help you allocate more funds to activities that generate a high digital marketing ROI, such as paid advertising in some cases.

“Your financing strategy is another important factor that informs your budget.”

Considering your personal financial goals

Most website acquisitions represent a significant financial decision that impacts all aspects of your life. Therefore, it’s important to consider the broader financial implications that buying websites will entail. 

Before moving forward, think about any other expenses that could conflict with acquiring a website. Do you plan on purchasing a family home in the near future? How would acquiring a website impact your retirement savings or emergency funds? Each person’s answers to such questions will be different, so it’s important to assess your own financial situation on an individual basis.

By carefully considering your skill set, risk tolerance, financing strategy, and overall financial goals, you should be able to establish the right budget for yourself.   

“Most website acquisitions represent a significant financial decision that impacts all aspects of your life.”

Pros and Cons of Investing in Websites

Like in any significant decision, it’s a smart idea to weigh the pros and cons of becoming a website investor before moving forward. Let’s start with the pros.

Pro: High ROI potential

We mentioned this point above, but it’s worth reemphasizing. Acquiring a website can often lead to realizing a high ROI.

Generating a high ROI on a website acquisition can allow you to live off the cash flow it generates. Alternatively, you can choose to invest the cash flow into other asset classes that don’t require active management. 

“The high ROI that website acquisitions offer can provide many benefits that other investment choices simply can’t match.”

If you buy a website using a loan, it’s often possible to pay off that loan in just a few years thanks to the high ROI generated by the website. For example, if you buy a website for $350,00 that generates a $100,000 income per year, you could theoretically pay off that loan in less than four years. This is assuming it continued to generate the same earnings and you used 100 percent of the cash flow for loan repayments. Compare this to a commercial real estate investment in which you might get a 12 percent cap rate. In the latter case, it would take at least eight years to pay off the loan.

In summary, the high ROI that website acquisitions offer can provide many benefits that other investment idea options simply can’t match. 

Pro: Work whenever and wherever you want

Owning a website allows you to work from wherever you want on whatever schedule suits you the best. Perhaps this makes the difference between staying home with your children instead of commuting to an office. Or maybe you choose to use your freedom to travel the world or live abroad for an extended period. Whatever your personal aspirations may be, owning a website might be able to help you achieve them.

Con: Acquiring a website entails some risk

With the enormous ROI and growth potential that websites offer comes a certain degree of uncertainty. In other words, there’s no absolute guarantee that a website will continue to generate cash flow in the future. Therefore, individuals who are risk averse may want to consider avoiding website acquisitions.

To minimize risks of website investing, it’s important to know what to look for when evaluating listings. Additionally, as mentioned above, you can dramatically reduce risk by having a thorough understanding of what you’re getting yourself into (more on this below). 

“To minimize the risks of website investing, it’s important to know what to look for when evaluating listings.”

Con: Some websites have rigorous ownership demands

Different websites place different demands on their owners. For example, you might find a content website that only requires three hours per week of owner involvement. Or, you could find a portfolio of Amazon businesses that necessitates nearly constant monitoring and oversight.

If you decide to acquire a website to experience freedom, the last thing you want is to feel constantly burdened by your responsibilities to the business. Headaches and frustration can certainly be a major “con.” To avoid this pitfall, it’s especially important to choose a business that is the right fit for you.

Things to Consider When Investing in Websites

Before you start reaching out to sellers or making offers, it’s smart to come up with an effective strategy. There are several key elements you should consider in website investing.

Determine your budget

Just as you wouldn’t look for houses without determining your budget, you should always know how much you’re willing to spend when buying a business.

As discussed, your budget should be determined based on several factors, including your skill set, risk tolerance, financing strategy, and overall financial goals. Together, these elements along with other variables can help you determine how much you want to spend to purchase an existing website. Your budget will help inform what size businesses you consider.

Establish your acquisition criteria

Establishing your acquisition criteria is a critical step that will impact your entire experience as a buyer. Like other individual investors, your criteria should address several factors, including:

• Budget
• Personal strengths and advantages
• Interests and passions

Using the framework discussed above is a great starting point for establishing your criteria. Once you have an idea about the size of business you want to acquire, the next step is to consider your strengths and advantages.

To maximize your chances of success, it’s important to think about what your unique strengths are that can help businesses grow. For example, let’s say you’re an expert when it comes to business operations and supply chain management. If that’s the case, you might want to look for an ecommerce business that has a strong product line but has operational deficiencies. If you’re able to improve supply chains and operational efficiencies, that could be an easy way to boost sales and realize a strong ROI. Other strengths could include paid media expertise, content creation skills, an affiliate marketing strength, or any other personal skillset that can add value to the business.

On the other hand, if you’re an expert at SEO and content marketing, you may want to find a content website that has room for improvement within those activities. If you can quickly rank for additional keywords and increase website traffic, potential customers, and monthly profit, it would wind up serving you well.

“To maximize your chances of success, it’s important to think about what your unique strengths are that can help businesses grow.”

Or if you’re knowledgeable about paid advertising, perhaps you should consider looking for a profitable business that hasn’t yet implemented paid ads. Similar to the above, you might be able to step in and add immediate value based on your skill set. In summary, it’s always a smart idea to think about the unique strengths that you can bring to the table, and then find businesses that could benefit from what you have to offer. 

Buy a business that excites you

Like in any career decision, it’s best to acquire a website property that excites you. For example, if you’re passionate about personal finance, you may want to look for a finance website. While this may not be a strict requirement for some people, it will certainly be easier to stay motivated if you’re passionate about the business you purchase. The more motivated you are about the business, the more likely you will be to stay consistent and achieve success.  

This point is pretty straightforward. When you look at a business listing, do you feel alive and excited? Or does the idea of working on the business feel boring and meaningless? As any motivational coach will tell you, work is more fulfilling when you enjoy what you’re doing. Not to mention, you’ll likely be much more effective if you love your job.

“It will certainly be easier to stay motivated if you’re passionate about the business you purchase.”

Unlike buying index funds, acquiring a business requires thoughtful preparation and execution. By following this framework and doing careful investment research, you’ll be in a great position to acquire a website that brings you both personal and financial returns.