If you want to start buying websites on Flippa and feel like you know what you’re doing – make sure you watch the video below.

Because even though investing in websites is a smart way to diversify and add stability to your income while creating a valuable asset for your future and your retirement – if you don’t know what you’re doing, the chances of your website working out are slim.

Matt and Liz Raad have been buying websites on Flippa for over 10 years and investing in websites for over 15 years. They’ve personally looked at thousands of deals to grow their own portfolio of online assets. They’ve also taught their students how to find quality websites, helping their students to rapidly grow their passive income streams.

So today, Liz is going to take you through the 3 biggest mistakes that you need to avoid when buying websites on Flippa. Following these steps will help you to start investing in websites today with confidence. You’ll also learn the importance of website purchase due diligence, and how this should fit into your overall portfolio strategy.

Watch the video and/or read the article below to see the 3 mistakes to avoid when buying websites on Flippa

With Big Money coming into the online market, we are faced with an incredible opportunity to make money online when buying websites on Flippa

Liz Raad: Hi again. Today, I want to talk about some of the biggest mistakes that beginners make when buying websites on Flippa.

The buying of websites is an exciting world, and it’s a really high growth marketplace right now. There’s a lot of websites coming online for sale. The marketplace is definitely growing. We’re seeing a lot of big corporate buyers coming into this marketplace. We’re seeing venture capital and private equity coming in and realizing how much money there is in the online world and there’s the opportunity to invest in these high growth assets.

Making simple mistakes when buying websites can leave you feeling disheartened and miss out on these amazing deals…

Liz: This also means there’s a lot people coming into the online marketplace who are at the starting phase. There are a few mistakes that can be made at this early stage, which is a shame. If you make these mistakes, it probably means that you’ll be disheartened by this incredible world of opportunity. You may not realize that actually, if you didn’t make those beginner mistakes, you would have probably made a lot more money or a whole lot of money.

The Top 3 Mistakes People Make when Buying Websites on Flippa

Liz: Let’s have a look at what those three mistakes are. We’ve been in this marketplace for almost 15 years, and teaching people how to do this for 10 of those years. So, we have a bit of experience in this area!

It takes a bit of experience and we see this happen all the time – especially, with our beginners. When people are first get into the marketplace, we want to save people from making these mistakes.

Hopefully what you learn in this article will save you a heap of money and also make you a bucket load of money in the website investing world.

How to make passive income by buying websites

Mistake #1 – Not Having A Strategy When Buying Websites on Flippa

Liz: Big mistake number one is that a lot of people run in and jump on Flippa and go, “Yeah, I’m going to buy a website!” They have absolutely no strategy or thought about what they really want. So the big mistake here is going in with no strategy.

This is the same with any investment. If you were going to go into property investing, do you just throw half a million dollars in some random house? Would you throw a dart and say, “Yeah, I’ll chuck my money at that house over there.” But, you have no idea of what suburb that is. Is it a growth suburb? Do we need to invest near public transport? Or do we need to invest near the beach? What’s the best house for this particular area?

Determine your strategy BEFORE you start searching for websites to buy on Flippa

Liz: It’s that same sort of concept of investing. We need to figure out what’s our strategy here? What do we actually want? In a property strategy, you might say, “Well, do I want the higher returns of a commercial property? Or do I want more the more secure income of residential property?”

We need to think the same way in the website world, because there’s a lot of different websites that you can buy, and they all require different inputs. There are different levels of work and different levels of staff and different levels of experience needed as well.

TIP: Understand how the website works and makes its money…

Liz: One of the biggest mistakes we see beginners do is jump in and buy a website that they don’t really understand how to run. So of course, when the website’s running beautifully, it’s a really great investment. But when they get in there and don’t know what to do – it may not succeed the way that they’d hoped. They might then realize that it actually takes a lot more work to operate the site.

We teach our students that if you want to buy something, you need to understand the type of website that’s going to meet your needs. For example, if you want active income and want to be involved in the business – that’s one type of website. But if you want to be as passive as possible without a huge amount of time from your part, then that’s a different website buy again.

For Passive Income Online, focus on Content-Based Websites

Liz: That’s why Matt and I have always focused on content websites.

We know that there’s huge money to be made in eCommerce, and there’s huge money to be made in SaaS (software as a service), programming functionality etc. But I’ll quote Austin Powers here, “That’s not our bag baby!”

Yes, there’s multi-millions of dollars to be made in those systems if you get that right and take a good path (and add in a little bit of luck perhaps…). But there’s also a lot of money that you need to invest and a lot of time and it’s a different business structure.

“What we’re looking for is a portfolio of websites that can be managed by our team with as little input from us as possible.” – Liz Raad, eBusiness Institute

We’re the strategy. We guide the ship, but we don’t want to be down in the bows of the ship shovelling the coal in, if that makes sense. That’s why we have a very specific strategy about which websites we would choose to buy.

Shortcut your Success by learning from the mistakes Matt & Liz have already made when buying websites on Flippa…

Liz: Now, in another article, you’ll see our four biggest mistakes we’ve made when buying websites for profit. One of the biggest mistakes we made at one point in our journey was buying an app. It was hugely profitable, and incredibly high growth. But oh my goodness, it was a lot of work! It took a lot of management, a lot of coding, and a lot of updates to keep it running. And that just wasn’t our bag! So we ended up selling that.

So, it’s really important to go into this marketplace understanding what you want. You must have your strategy in place.

buying websites on flippa
Matt & Liz Raad teach their students how to avoid costly mistakes when buying websites on Flippa

Mistake #2 – Purchasing Big Websites Too Early In Your Online Investing Journey

Liz: The second biggest mistake that we see beginners make is that they go too big too soon. They hear about this marketplace, and they might already have a bit of money ready to invest. It could be tens of thousands of dollars, it could be hundreds of thousands of dollars, or it could even be a million plus.

They see the phenomenal returns that you can get in this marketplace and they just chuck their money in. They buy a website, and really don’t know how to run it:

  • They don’t have the systems in place.
  • They don’t have the team in place.
  • They really don’t understand the marketplace yet.

This can be a really big mistake.

Use the Website Due Diligence Checklist when Assessing How Much to Spend

Liz: When it comes to the due diligence process, if you go too big too quickly, you probably don’t yet understand all the questions you should really be asking when you buy a website.

We use a 17-page Due Diligence document. This provides us (and our students) with a list of questions, and important points that we always check off before we buy a website. For us – most of this checklist is now internalized. We can look at a website and within quite a short amount of time, and we can make an assessment of it.

But initially, when you don’t really know what to ask, that can be pretty tricky. So going in and spending tens of thousands or hundreds of thousands of dollars on a website when you really don’t know what’s going on is a dangerous move. So that’s one of the biggest mistakes and that’s something that we help a lot of our students with is learning that due diligence process.

Have a Portfolio Management Plan in Place – Diversify your Website Portfolio

Liz: The other important thing is understanding portfolio management. If you had $100,000 to invest into this marketplace, I would not be recommending to you to buy a $100,000 website. That’s just putting all your eggs in one basket. We’re very much into diversification.

Diversification of different places where your money is working for you:

  1. Diversification in niches.
  2. Diversification in monetization.

When your diversified, you’ve got whole range of websites, and a whole range of different income streams. This is what we find the most secure.

Now, maybe you don’t, but there’s all sorts of different strategies. Different strategies work for different people. But if you’re like us (and you value security), then I would suggest a portfolio strategy would be much smarter.

Going in too big on one big website, that’s higher risk than say 3 or 4 smaller websites that you can renovate and grow, and end up probably making the same amount of income anyway.

See how our students are diversifying their portfolio of websites for passive income online…

Liz: Actually, if you remember from our student success stories, you’ll see Mark’s story. He actually ended up investing $50,000 in buying websites for passive income and he’s grown that portfolio to be making $10-20,000 per month now. So from a $50,000 investment, he’s now got a portfolio worth probably upwards of $500,000.

By buying smart, Mark’s $50,000 investment covered 3 or 4 websites. I think that was a much smarter way to do it than trying to throw $50,000 at one big website. It certainly worked out for him.

Gain experience by keeping your first website purchase under $1,000…

Liz: So that’s mistake number two – just going too big too soon. It’s okay to start small. We get all our students to start off under a $1,000. Get in the marketplace, understand how this thing works, renovate a website, and see some results in the smaller scale.

You’ll find that the biggest scale is just a bigger version of that. It’s just more zeros. That means that you’ll have your team in place, your strategy in place, and you’ll understand how things work. So that’s a smart way to do it.

Website Due Diligence Checklist

Mistake #3 – Not Understanding Website Purchase Due Diligence when Buying Websites on Flippa

Liz: The third mistake (and I’ve touched on this just before, but I think it’s worth mentioning again), is not asking the right questions, and not understanding due diligence. For any investment that you make, you want to know what you’re getting into.

What due diligence is about is asking the right questions to make sure that investment is going to get you the return that you would like to get.

This is also our strategy about understanding, “Okay, can I renovate this asset? Can I add value to it? Can I make it worth more? Can I get it making more money?” Once we get the website asset, and it’s making more money – now it’s paying itself back to us faster.

Use the Website Due Diligence Checklist to know the right questions to ask

Liz: Ideally, if we can get a website to pay itself completely back to us within 12 months, that’s a really nice position to be. Once we’ve got our money back, we can now invest in another website. Then that website is there paying for itself. We can either use the money to pay for more content, to grow, feed it back into the website to grow it. Or we can take the cashflow, whichever way we’re strategizing for that website.

But to know that, you have to understand the questions to ask when you’re looking to buy these website assets. It’s like anything, if you going to buy a property or if you’re going to buy shares, there’s certain questions you need to ask before you buy them, or any business, of course.

Use the website due diligence checklist to identify potential red flags…

The due diligence process helps us to understand what are the things that are going to make the biggest difference here? What red flags do I need to watch out for? Sometimes there are simple little things that aren’t necessarily a a deal breaker, but it’s definitely something you need to ask the seller about.

A simple example of a red flag would be a large drop in traffic. That’s an obvious one, isn’t it? If suddenly if a website’s traffic is dropping (or just slow decline of traffic) you’d want to know about that. On the other hand (but equally just as important), a sharp rise in traffic is just as much of a red flag. We would want to know what made that rise happen, and am I going to be able to do that again? Or is that something that’s unsustainable? It’s going to go up here and I’m paying for it up here and then it’s going to drop back down again.

A lot of the time, it’s just about having a conversation with the seller about how they’ve built the site and what they’ve done (how they’ve structured it etc). Also, have they done any dodgy backlinking? It’s things like that we definitely want to find out about.

Website Buying Due Diligence helps you Determine the Level of Risk you’re willing to Accept

Liz: There’s certain things that you will start to identify when you know what you’re looking for. You’ll see certain things and think, “Okay, I’ve got to ask about that.”

In the end, due diligence is actually about figuring out the risk profile of this investment and figuring out, “Okay, the higher the risk, the less I’m going to want to pay for it.” That’s because, if you have to take higher risks, you don’t want to be spending as much money on it.

So due diligence is actually not about Yes or No. It’s about identifying, “What’s the level of risk of this investment? And how much am I willing to pay for it considering that level of risk for me?”

Knowing your own personal level of risk is important. There’s a lot of due diligence services popping up now. Yes, you can get the fundamentals of website due diligence from a broker etc. But what you really want to know is what’s that website worth to you for your own situation? Look at it from your level of expertise, who’s on your team and who you’ve got around you. Everybody’s valuation is going to be slightly different.

The biggest mistake beginners make is to jump into a deal without asking the questions that they need to ask. You need to do this just to make sure that the deal (i.e. what’s being said), is correct. Also, taking the time to see if this is the right deal for them at the right price.

Want to Learn More about Buying Websites on Flippa?

Liz: So, there you go. These are three things to be thinking about when you’re getting into buying websites on Flippa. That’s of course what we teach people. This is our passion. We love helping people understand this process. Using what we teach – you can get into a marketplace, understand the valuations and find yourself some really good deals. Then you’ll be able to renovate and keep cashflow or renovate and sell the website for profit.

If you want to see how that works, then have a look at the student success stories area of the Matt and Liz Raad YouTube channel. You’ll see there’s some really cool inspirational stories there. You’ll see how this works in practice and what people have achieved with it. And if you want to hear more of this content, make sure you subscribe. We’ll see you next time.

buying websites for profit matt liz raad

Liz Raad
Liz Raad

Liz Raad is a website investor, Angel Investor and leading educator on Digital Investments, and is recognised as the Australian expert in buying, renovating and selling profitable websites and businesses. Connect with Liz on Facebook, or LinkedIn.