Liz and I recently held our 3 Day Digital Investors Summit, and we had a very special guest join us, Justin Cooke from Empire Flippers.
Empire Flippers is a leading online website broker, and in the first half of this year alone, they have turned over more than $80 million dollars in sales.
Today, Justin’s going to share why the marketplace for buying and selling websites is so lucrative right now, even for beginners. And how you can get started and buy your first or next website while the opportunity still exists.
If you’ve been sitting on the sidelines, wondering if you should be investing in content sites, then the insights that Justin shares in this interview should spur you into action!
Click to watch the video, or read the transcript below, to see what’s hot right now in selling and buying websites.
Justin Cooke from Empire Flippers shares some incredible opportunities that’s happening right now with buying and selling websites…
Matt Raad: I want to say a big welcome, Justin. Thanks so much for coming along.
Liz Raad: Yes, a big welcome!
Justin Cooke: Thanks for having me, I really appreciate it.
Matt: For those of you that don’t know who Justin is, he is the founder and CEO of Empire Flippers, which is one of the world’s largest brokers. And a lot of you are going to get to know Empire Flippers over the years, because these guys do the bigger website deals.
We know the market’s running hot with FBA sites, e-comm sites etc right now. So, we’re talking to Justin today to share some insights with everyone. He’s also going to share what the next direction is for Empire Flippers, which is really exciting.
The Growth of Empire Flippers in 2021
Matt: So, let’s get into the exciting stuff. You’re out there at the front line, and you’re doing the biggest website deals ever. What’s super-hot at the moment?
Justin: Well, we started off pretty small. It was just me and my business partner Joe, back in 2012-2013, brokering some small sites. And as you said, we’ve gotten larger and larger. To the point where, we did $80 million in total sales last year. And then the surprising thing is, we’ve done now $80 million in the first two quarters of this year. So we have done what we did all of 2020, just in the first half of 2021. Business is booming!
One of the things that’s really booming right now is Amazon FBA. And the reason this happened is because private equity got interested in these e-commerce businesses. They were cruising along and we were selling a lot of content based sites, Amazon associates sites, and AdSense sites. And we’d done that for a very long time, in addition to e-commerce, and other types of businesses.
Matt: For those of you that don’t know what private equity is – let’s just call them big corporate buyers, with pretty much unlimited budgets.
Private Equity has been buying up Amazon FBA businesses, now the attention is on Content Sites
Justin: For one reason or another, a couple of years ago private equities got really interested in Amazon FBA. And that’s really ramped up in 2020. Now, in 2021, we’re seeing these massive companies, such as Thrasio and Perch, swallowing up as many e-commerce and FBA businesses as they can. As a result, multiples for FBA businesses have shot through the roof. They’ve increased significantly, particularly in the last 12 to 18 months.
Now, a lot of the content site guys were left behind. They’re like, “Why did I get into this? Why didn’t I do e-commerce or FBA? I would’ve hit the market, that’d have been great”.
Well the funny thing is, a lot of those guys are getting into content sites now. They’re still swallowing up the FBA, but they’re looking for legion that can help them sell their products on Amazon.
“Content sites are now the new hot market. They feed the aggregator, e-commerce businesses on FBA.” – Justin Cooke, Empire Flippers
And just for those readers who are brand new – FBA is, “Fulfilled by Amazon”. They’re the e-commerce sites that sell a product, that are fulfilled by the Amazon platform. So it’s e-commerce, based on Amazon.
Matt: And I also want to say to our readers – we don’t teach FBA or e-commerce. Our background was with manufacturing businesses, so we’re not interested in businesses that own physical stock. We only have what’s called “content sites”. These sites are all about advertising and getting affiliate commissions.
Empire Flippers are seeing websites sell for 24-38 times their monthly profit
Matt: Justin, to give everyone an idea of what Empire Flippers does – can you tell us the price range of websites that you would sell for people in pre-Covid times?
Justin: So, just say you have an Amazon Associates site or a Content site. Maybe it’s got 30 pages or 50 pages or even 100 pages of content, and it’s cruising along. Let’s say you’re making $1,500 a month in earnings, over the last 12 months. That’s a nice, solid site. That would be the entry-level.
To get in and sell a site with us, our minimum is generally $1000-$1,500 per month. And last year, those sites were selling for 24-28 times their monthly net profit. But we’re seeing that multiple creep up this year. You’re more likely to now see a 33-38 times multiple, if it’s a really solid site.
How to Make Money Flipping Websites on Empire Flippers
Matt: Now, a lot of our readers are total beginners. So a great spot for them to start out with buying and selling websites would be with Flippa. You can buy these little tiny sites and learn how to work and renovate them for profit.
But, as you become more experienced, then you’ll need to be looking at the website listings on Empire Flippers as well. Justin – what’s the difference with Empire Flippers? What do you guys bring to the table with your website brokerage?
Justin: There are quite a few people that will buy a site on Flippa. They will work with it, tinker with it, improve it, and then ultimately, end up selling it over at Empire Flippers. And they do that because we’re really strong when it comes to selling websites valued above $100,000.
We do sell smaller sites valued at $20,000 – $40,000 etc. But really, our bread-and-butter for content sites is the $100,000 – $1 million range. And then, of course, we also sell sites valued at greater than $1 million.
Justin’s Formula for Flipping Websites for Profit
Justin: If someone is able to buy a site on Flippa, let’s say they’re buying it at 20-25 times monthly profit. Then they renovate the site and are able to grow that 2-3x in profit. They could then come over to Empire Flippers and sell it for 35-38 x profit. Not only have they increased the value (i.e., they’ve double or tripled the earnings), but they’ve also increased the multiples of the site on the sale by 4-5 times.
Liz: I think you’ve hit on something there that a lot of people don’t realize. One of the real keys to wealth creation is being able to leverage something like multiples. And this is exactly what they do on the stock market. A business that is trading and making a million dollars profit, may sell for 4-5 times that. But if it’s rolled up and listed on the stock exchange, it can sell for 25 times. It will be valued at 25 times that amount. And it’s still the same business, but just in the right value market.
Justin: Yes! And so, that’s what all of these roll-up companies are doing. Just say they’re able to buy at 3-4x annual earnings. But they’ve actually valued themselves at 10-15x earnings. I will do that all day long. All. Day. Long!
If I’ve got a site that’s earning $100,000 a year and I could buy it for $300,000 and then add $1 million to my valuation (because I’m 10 x that $100,000), I’ll buy those sites all day.
Empire Flippers explains why Private Equity (Big Corporate Companies) are buying Content Websites
Justin: When we talked earlier about private equity with the big, limitless funds – that’s what they’re doing in our space. They did it with the Amazon FBA e-commerce businesses. And now, they’re moving into the content site businesses, and swallowing those up. They’re doing this for a couple of reasons.
- Firstly, they can send all that traffic from those content sites (all those eyeballs and all those visitors), to products they sell on Amazon. So, that’s super valuable to them.
- The other thing they can do is, they get to see all of the products that people are buying with Amazon associates sites.
Then they can target those particular niches. It’s another way of niche research for them. They can identify what kind of e-commerce products they can add to FBA, and what kind of content they should create around that. So, that’s massive in our industry. It’s a no-brainer. And that’s why private equity has gotten into this space.
Liz: And I think it’s only just begun, there’s so much more growth there to happen.
Content Sites are Increasing in Value because of the Leverage they provide Private Equity
Justin: One of your audience just commented that they essentially get to “double dip” on the content sites. That’s exactly right too. Why would you not buy a content site earning say $10,000 a month? You get those earnings automatically. But you get the additional sales when you’re sending all that content (all those eyeballs), to your e-commerce products.
Liz: You’re recommending your own product.
Justin: That’s an absolute win. And those guys that are buying those sites, can buy them for more money. Because they’re not just relying on the earnings, they’re getting the sales from the e-commerce products, from the FBA products they’re selling. So, a regular content buyer might buy it at 3x, where an aggregator is able to buy it 4-5x because it’s worth it to them.
Matt: Can you see what Justin is saying? They’re instantly creating money out of thin air, literally. They’re 10x’ing their money straight away, because they’re a publicly listed company.
That’s our background. That’s what we used to do. We were spotters for publicly listed companies. We’d help them buy up manufacturing and wholesale import businesses (what Liz and I were experts in), with EBITs of $1 million or more. So, we used to do that with bricks and mortar businesses.
And we’ve been saying it for years to all of our students too. For those who have been around us for a long time, it’s now coming here to websites. And the obvious advantage to all of our community (and for Empire Flippers as well), is that selling content sites is booming. It’s going to be here to stay now.
Liz: This might just give you some ideas for niches that you could potentially focus on.
Justin from Empire Flippers shares which Niches are seeing the most Growth
Liz: Justin, we’ve just spoken about our content strategy and scaling up content. And even from building from scratch, and targeting something around those FBA, those e-commerce niches. Are there particular niches that you’re seeing growth in or interest in?
Justin: There’s a guy, Matt Diggity, I don’t know if you’re familiar with him or had him on. He’d be a great guest for you guys. But he just did a nice data report of all the affiliate website sites Empire Flippers sold over the last couple of years.
Liz: Wow, that’s great.
Justin: Just some of these interesting niches included:
- Home Furnishings
Health is a really good niche. The problem is that SEO can be very difficult in the health space.
Home furnishings could be really profitable. There’s a lot of home furnishings sites.
Even More Opportunity Ahead as Private Equity Companies buy Content Sites Pre-IPO
Justin: One of the reasons home furnishings are interesting is because a lot of the aggregators, a lot of the e-commerce, private equity guys who are buying a lot of the home furnishing’s FBA businesses. They’re looking for content sites in that space.
Liz: Yes, because there’s big acquisitions happening too. Is it Temple and Webster?
Matt: No, that’s a publicly listed company.
Liz: Well, they’ve just bought someone else here in Australia.
Justin: Yes. The public companies do it, because they already know their multiples. They know where they’re at, and they can do that all day too.
But a lot of the pre-IPO companies (private companies that are planning on going public), will do it too. Because they know that IPO is coming. So with that coming up, they won’t talk about it, because they’re not allowed to. But they’ll be swallowing companies whole as they lead up to their IPO, so they can have a big release.
Matt: That is awesome. And it’s so exciting for our audience, and particularly for me, because that’s our background. But to me, it’s a no brainer to just be constantly having a portfolio of websites. And obviously, you can be selling them off for really high multiples… because I know people freak out at the prices.
Should you be Paying Full Price when Purchasing a Website?
Matt: Here’s one of the strategies that I like in a market like this. If you’re buying a website at the smaller end of the scale; then I’d personally say there’s merit to paying full price (asking price), for that website.
And I know I’m biased, and I know obviously you’re biased too Justin. But do you want to tell us why that can work so well? What’s your observation of people that do that, in this sort of a marketplace?
Justin: With the full knowledge that I want you to pay more money for websites. But the huge grain of salt is, generally, the price you’re paying (or the multiple you’re paying), is a measurement of risk. If you find a fantastically low multiple, that’s okay. But understand that there’s going to be some high level of risk. And I’ll just give you an example.
Empire Flippers shares an Example of Risk Assessment when Purchasing Websites
Justin: Take the marijuana industry for example. A couple of years ago (before marijuana broke out like it did in the U. S), you didn’t know what the legal ramifications are going to be. You didn’t know which way it was going to go. So, if you’re buying a site or a business in the vape or marijuana niche, it was risky. And so, you were paying lower multiples for those businesses, because you weren’t sure what the legislation was going to do.
And so, whenever there’s some risk, it’s going to be a lower multiple. For example, the risk could be:
- The SEO is a little sketch.
- It could be because the industry is in question.
- It could be because it’s a fad niche.
Whereas typically, you’re going to pay a higher multiple for something that’s established. You’ll pay more for something that:
- Has a longer track record.
- That’s less temporary.
- That’s less faddy.
Those websites you are going to pay a higher multiple for. That’s the general rule. The higher the multiple, means the lower the risk.
Empire Flippers Explains why it’s a Seller’s Market Right Now
Matt: Solid sites (that are selling on higher multiples), are selling between $30,000 – $100,000 sale price. On Empire Flippers, how quickly are they going at the moment?
Justin: Those types of websites are selling really quickly.
Increased Demand means that Websites are Selling Fast on Empire Flippers
Justin: We do put people through a process when they’re listing their website for sale with us. So, there’s a vetting process. We want to verify the information, and make sure it’s legitimate. So, it will be a couple of weeks before they get listed.
It’s not like they just contact us, and they go up right away. It takes a couple of weeks process to get vetted. But once they’re vetted, those can sell inside of 1-2 weeks. That’s pretty common.
If the site requires specialized knowledge (for example, scientific), where the buyer would have to really be into that niche; then that type of site might take 1-2 months to sell. But just your Plain Jane, common niche site will sell within a week or two, when valued under $100,000.
Liz: That’s really important to know.
Justin: And there’s no goofing around, or heavy negotiations, with sites of this size either. Someone might make an offer. For example 42x multiple in cash, when your sites listed for 48x multiple etc. Then you’d take that of course! But you don’t see that a lot because there’s a lot of buyers out there. There’s just a lot of people who have less than $100,000 to spend on websites. There’s a lot more of those than there are people with $5 million to spend.
Liz: Yes, so the competition on the buy-side is much higher for sites under $100,000. People can’t goof around and try to get negotiated terms with you, say to pay 50% now and 50% over 24 months etc. They just can’t play that game as much for a $50,000 website.
Matt: The good thing for our community to know is this is the time to be a seller. Go and speak to Justin’s team at Empire Flippers. It is definitely a seller’s market at the moment.
A lot of Sellers on Empire Flippers are now becoming Big Buyers
Justin: Oh yes, and here’s another thing for your audience to know. We’ve seen this a lot where our clients get in the habit of building up and selling websites over 12 to 18 months. And they get to the point where they have enough capital built up, and they’re ready to level up their game. And so, a lot of our sellers ultimately become buyers.
They’ve put in the money, and they start to acquire other types of businesses. A couple of friends of mine did this for a couple of years. And they would sell sites $40,000, $120,000, $70,000. They do this for $500 000 or $600,000 to the point where they were like, “Look, we can keep doing this.”, and they did.
But they realised, “Why don’t we start investing in businesses that are recurring, that are longer term? Let’s get out of just the content space, and level up our game”. And that’s something they started doing.
So, in addition to building the content sites, they were acquiring on the other end, some of the recurring business models. It’s really cool.
Introducing Empire Flippers Capital….
Matt: I wanted to talk about this current marketplace, it’s opened up a big opportunity for everyone, actually. A common question we get asked from our high-net-worth clients is, “Can we pull together some money and get an investment together?”
Liz: How can we invest in this?
Bridging the Gap between people with money and people who have website experience
Matt: How can we invest in this passively? And that’s a niche that you guys have seen at Empire Flippers. Did you want to mention to everyone about EF Capital, and what you guys are doing there?
Justin: At Empire Flippers, we started tracking liquidity. We ask all of our registered platform users (on the buy side) to verify if they have funds available. We do this because, if you’re going to be looking at a $1 million to $2 million business, we want to verify that you have the funds.
To do this, you can connect your bank account, or you can submit financial documents. Doing this, we can see how much funds you have available, and give you access to look at deals in that range.
When we started doing this about a year and a half ago, the numbers started soaring. We now have $4.3 billion of verified liquidity on the platform. This is verified income. About 40% of that, is directly from people’s bank accounts. So, we realised that there’s a ton of money in this space.
The problem is that a lot of these people don’t have the skills to buy a business outright. They need to go through courses, they need to get their feet wet, they need to go through practical skills of running a content business, etc.
This is a good problem to have! There’s all this money, and it’s not paired with people that have the skills yet (or interest maybe), in running these businesses. We should solve that problem. That’s a high-quality problem for us to solve.
How EF Capital pairs Investors with experienced Website Operators
Justin: There’s a lot of money and they want to spend it. How do we help them do that? So we put together something called EF Capital. This is where we pair operators that are experienced people:
- That have sold through our process.
- That have acquired businesses through our process.
- That have the digital skills.
And we pair them with investors who are looking for a passive investment in these businesses. They want exposure to the market, but they don’t have the time or the skills (or want to have the time or skills), to run the business themselves. And so, we’re matching investors with operators.
Now, this is a new program, so we’re taking your credit investors only. It’s $20,000 minimum per deal. We’ve done one round already, and we’re launching the second round in early September 2021. So, we both have the investors we’re looking to raise. And the funds range from $1 million to $2 million per, and accredited investors only.
Empire Flippers Capital are currently seeking Website Operators looking for bigger deals
But we’re also looking for operators. We’ve got the operators for round 2. But for rounds 3 and 4, we’re going to be looking for qualified operators that have some experience. You can point to a proven track record of sites they’ve owned and run, and had experience building up, to run the operators. And we basically want to match them with money.
There’s a bunch of guys out there that have the money, and they want to give it to you. We want to leverage you up. Have you put in a little bit of money, and leverage up to a lot more. And you get a deal going. So, that’s the long-term vision there.
Liz: Wow, that’s awesome!
Matt: Justin, I can recommend to you straight off the cuff, a bunch of people already. I’m happy to be a referee for our Champions community that I have personally trained. And two people that come to mind straight away are our awesome Champion graduates, Nathan and Alexa, who have been really successful in buying and selling websites for profit.
Liz: For our readers out there, you can step up your game. There’s opportunities out there to level up. I love that word that you said, Justin.
Matt: Yes. This is the perfect timing. This is so cool to hear. I’m excited about the idea that we can finally say to people (especially high net worth clients), that just go and speak to Empire Flippers Capital.
But also, there’s a lot of you out there who are good at building websites. You’ve been around for years, and you’ve got a proven track record. If you want to level up and get into some bigger deals, I will strongly recommend you have a chat to Justin.
What would being a Website Operator on EF Capital look like?
Liz: But like Justin said though, you’ve got to back yourself. It’s not just a free deal, you’ve got to invest in it as well.
Justin: Yes, there’s some skin in the game for the operators. For example, if they’re looking to raise $2 million, they’re putting $100,000 of their own money. The thing is, we’re going to leverage that up. They’re going to get 30% equity in the business.
Ultimately, they’ll have a $600,000 stake based on that $100,000 investment. Now, obviously the investors have got to get paid back first, and there’s a whole bunch of things to it. But effectively, they’re getting a 6:1 return in terms of their leverage on the deal.
Matt: That is awesome. So this is what happens in a booming market. And you’ve got to remember what’s happening at the other end. I don’t think some of you comprehend just how much money is out there, particularly with these big buyers. They’re the ones that are paying for these sites, okay?
You can do it too – Justin from Empire Flippers started right where you are now…
Matt: You’re leveraging up your money six to one. If you’re a good operator, that’s the sort of thing you can get into. I should give a shout out to Empire Flippers, Justin and Joe have been around. We’ve watched them over the last decade or so. They started out just like all of us did, building AdSense sites. Exactly the same background as Liz and myself.
Justin: Yes, we started out by building $50 a month AdSense sites. A whole bunch of us did, that’s where a lot of us came from. And so, for your audience to realise, there’s a lot that’s possible in this space. We were building websites earning $50 a month, $100 a month, and $200 a month. And we were selling them at $1,000 – $3,000 when we started out.
Matt: That is so cool. So guys, you’ve got to realize, that in any new industry or space – we all start at the grassroots.
EF Capital are raising their next round of funding with solid Website Broker foundations
Matt: At EF Capital, are you going to do four different rounds Justin?
Justin: We’re on our second round right now. If we hit just the minimum raise on all of them, it’s about $10 million. If we hit the maximum raise, I think it will be around $20-22 million, in just this round.
The last time we raised $7.5 million, and our minimum to run this time is 10. But it could go up to 22, we’ll see. But I know, isn’t it weird to talk about this? Honestly, it’s a little cringy. But this is where we’re at, this is what we’ve done, and this is the truth.
Liz: That’s awesome.
Matt: That is so unreal. For our audience – if you’re interested in EF Capital, then obviously Empire Flippers are very transparent about what they do. Go and have a read about how they turn active online businesses into passive income. You’ll see what I mean, it’s very transparent. They talk about it, warts-and-all. And what you can expect from it. That’s what we love about these guys. And they’ve been around for 10 years.
Empire Flippers are definitely one of the most highly regarded brokers on the planet. So, if anyone’s going to manage your money, if you’re into that sort of thing. And these guys are brokers, they’re doing deals every single day. They know all the operators, they know all the deals, they know the valuations. And most importantly, they know all the buyers.
So, if you want to be an operator, it’s probably a really good opportunity I would suggest. Because I think the exits are going to be particularly nice. From what I can see, I think it’s just such a big winner of an idea. A big congratulations to you guys. It was a really smart move.
Justin: Thanks guys.
So, there were three things we wanted to test in the first version of this:
- Can we raise the money? And yes, we have raised the money.
- Next, can we acquire the sites? We were able to acquire those sites, for portfolio one.
- Then, can we give a return to our investors? And that’s what we’re working on right now. That’s the big test.
Can you see yourself as a Website Operator for EF Capital?
Justin: And we talked about limitless pools of money. If we can get the third one proven, there is literally limitless amount of money behind this. There are people looking to pour hundreds of millions of dollars into anything that is getting above 2-3%.
Liz: Totally true. That is so cool Justin.
Matt: So, we’ll train you up the operators. Cool.
Liz: All right come on guys. We’re going to train the operators.
Justin: We need it.
Liz: Awesome. Okay, Justin. Well, thank you so much. Always fun to have you, and incredibly insightful there. I think you will have inspired a lot of people into action there. Thank you so much. And, we’re going to look forward to seeing you guys in the next step of the game.