Why You Should Invest in Web Properties

Investing in websites

If I could show you how to get a 25%+ annual return on investment, would you be interested?

If you could have control over the performance of that investment, would you be interested?

Of course you would!

Please forgive the sales tactics — I had to get your attention.

I discovered a new alternative investment when I started working with Latona;s Web property brokerage. Let me just reveal that I am working in the capacity of a business analyst for Latona’s — I am not a sales rep. However, I get to look at each website that is listed by the company. I get to ask the probing questions. I get to view all the weaknesses and identify the opportunities.

And I am impressed by the potential websites have as investments.

Here are some things you need to know:

  1. Many websites make their money primarily from the advertising displayed on the site. Yes, you know websites have advertising, but did you realize how much money?
    1. I recently worked with one site that had advertising revenues of more than $1 million with approximately $800,000 left over after expenses. The site attracts more than 1 million unique visitors each month and has been chugging along very profitably for nearly 2 decades.
    2. Average sites that attract 1,000+ unique visitors monthly often earn $50,000 to $100,000+ annually with expenses lower than 10%
  2. Most websites sell for between 2X revenues and 4X EBITDA.
    1. That means your investment can pay off in 2 to 4 years, if you just maintain the status quo.
    2. Most of these Web properties can be improved to increase traffic and advertising revenues.
  3. There is a growing population of venture investors who are investing in and improving Web properties — and they are making big money.
    1. The investment benefits of Web properties has not been recognized by the mainstream — yet.
    2. The investors operate portfolios of Web properties, keeping some for revenue, improving others and then selling them at higher prices.
    3. Investors either outsource management to inexpensive offshore companies that do excellent work, or they maintain an in-house management team — usually fewer than 5 contractors for the biggest portfolios.
  4. Online advertising is growing.
    1. Here is the headline from the IAB’s October 2014 press release announcing the results of the first half 2014:

      Digital Ad Revenues Hit Landmark High in First Half — High of 2014, Surging to $23.1 Billion, According to IAB Internet Advertising Revenue Report — Mobile Jumps 76% Year-over-Year & Overtakes Banner Ads

Yes, there are caveats. Working with a reputable Web property brokerage and doing your due diligence is, as you would with any venture investment, is the best way to protect your money.

Financing is often available, but the process of buying a Web property is negotiable. Often the current owners will accept payments over time. The asking price is negotiable. The terms are negotiable.

This is a young investment marketplace, which means that there are plenty of opportunities! As mainstream investors continue to seek alternatives to bonds and stocks, they will eventually find Web properties. When that happens, these properties will become more expensive.

If you have questions about investing in Web properties, or selling your developed website, please feel free to contact me through LinkedIn.

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Beware The “New Normal” Recovery — Things Are Going To Be Different

The most important thing to remember about this recovery is that it isn’t proceeding the same way recoveries always have brought the country into full economic health. One reason is that low Fed interest rates are making it difficult for banks to lend to anyone other than the most secure borrowers. This means most of the money that normally goes into small business to get the economic recovery going, is instead going to publicly traded companies that are buying back their own stock, institutional investment funds that are engaging in high frequency trading, offshore investments, and other places that don’t help Main St. business.

However, there are signs that business is starting to gain a little life. Take manufacturing, for instance. Textile manufacturing is starting to return to the U.S. but it is in the form of automated factories run by robots. To compete with goods produced by low-cost labor in lesser-developed countries, U.S. manufacturers have had to figure out inexpensive ways to produce goods. Robots are just one aspect of the “New Normal.”

If you have a business, one of the most important things you can do right now is to make sure your business model integrates with the “New Normal” …

This article might give you some ideas:

 

What Is Organizational Integration?

Organizational integration happens when a company’s internal and external factors successfully mesh. Every company, large or small, has certain internal characteristics such as management style, systems, organizational structure, strategy, staff and organizational culture. External characteristics include the company’s mission or business model, input and output, the economy, technology, political factors, social factors and stakeholders. Identifying the degree of organizational integration is a way of evaluating the company’s success and discovering ways to improve. (more)

Re-Creating the American Dream — Forget the Baloney!

I see signs in the market and the economy that are not good — my 20 years experience on Wall Street tells me so. And I see people all around me scratching away at part-time jobs at the local gas station/mini-mart/etc. I see people scheming to get into social service programs that will pay them something … anything. How many do you know who are living in rooms in their parents’ homes or someone’s garage – just to survive until they can get jobs? So many many people are suffering in this economy, waiting for things to get better as they always did in the past, and wondering why it isn’t happening now. If this isn’t you, then you know these people. Plenty of them.

So, I decided it was time for a little tough love. Time to tell it like it really is …

Today I got another emailed note and, frankly weak resume, from someone who had found me on the Internet. It said: “I have been following your career for several years. You are a most impressive woman and I would love to have the chance to work with you. In fact, I would even consider a starting salary of as low as $150,000 just to learn what you know and …”

Delete!

I’m getting tired of these experiences. The economy is stagnating at a low level of Main Street activity, storefronts are empty, people are living like refugees or sponging off Mom and Dad, and the guy who will stoop to working for $150,000 annual salary has probably been out of work for five years. I was at a popular startup networking event downtown a few weeks ago looking for sharp-thinking entrepreneurs that might be worthy of an introduction to my venture investors. After getting pod-people reactions from pod after pod, I hadn’t met even one likely candidate. The place was full of suavely scruffy job seekers, including one who was far too important to tell me what specialty of computer science he had studied. He grudgingly informed me that I wouldn’t understand.

Get real.

Perhaps you don’t know why your life is so miserable. You’re working at a low-pay job, or two, or three.

Perhaps you can’t even get a job as a barista.

Let me just tell you what real life is like. Not everyone gets to play on the team, and little trophies aren’t given out at the end of a losing season. Life is not graded on the basis of smiley faces and frownie faces, in fact, throughout most of your life the only way you will know if you are doing it right is when you can pay for your own lifestyle with the money you earned yourself – and even then, there are no guarantees. Life is not politically correct and you occasionally face disappointment.

You might never be anything more than you are now.

Even if you are employed, how comfortable are you that you won’t walk in one morning and find out it is your last day? How much money have you saved? How long have you been whittling away at your credit card limits?

The stock market has had a heck of a ride to the stratosphere, but the money that is in the stock market isn’t on Main St. helping the economy. Margin borrowing is at record highs. Read this: http://www.marketwatch.com/story/stock-caution-urged-as-margin-debt-levels-hit-new-highs-2014-03-09  That is a good indication that the hedge funds and proprietary traders are hard at work using Fed stimulus money, provided by banks. You see, a big commercial bank borrows cheap money at the Fed window and loans to its subsidiary, which happens to be a brokerage firm. The brokerage firm then lends the money to its margin investors – but that’s another discussion. The Fed recently demanded that banks not do that anymore, but …

Part of the rise in the stock market is due to corporations buying back their own stock, borrowing the money to do that from banks that are not making loans to small businesses.

When small businesses can’t borrow, they can’t hire and expand. When they can’t hire and expand, their employee-consumers don’t have money to spend and the recovery doesn’t happen. That’s what is happening now.

If you have even the slightest doubt about what I am saying, read this article: http://www.zerohedge.com/news/2014-03-10/20-mind-blowing-facts-us-retail-apocalypse

A large portion of the rise in real estate prices comes from offshore investors, hedge funds and wealthy individuals who are buying up blocks of REO and desperation sales, with money borrowed at the low rates created and maintained by the Federal Reserve. Few ordinary people can buy a home because they don’t have perfect credit scores, but the big boys can.

The Fed has done what it usually does to boost the economy into a robust recovery, but the money supply isn’t acting like it usually does. It isn’t making it to Main St. where it is needed because Main St. can’t borrow at the same low rates, or borrow at all, for that matter. That’s because small businesses and their owners don’t have the assets anymore to back up their borrowings. This means assets are accumulating in a place that doesn’t help the economy: the stock market, institutional and overseas investment. Whether you think this is brilliant or evil Capitalism, or due to the progressive or regressive American Way, or not — it is NOT sustainable. History teaches us that, and has so many times.

Please. I don’t care what your conspiracy theories are. Can’t you get it into your brain yet that it doesn’t matter? It really doesn’t matter who is conspiring with whom to do what to the American people. Economic recovery will fix the problem. But where is the economic recovery we were promised?

We are most truly in a mess and it isn’t getting better anytime soon. The only way out is if everyone decides it’s time to do something productive – anything productive. The recoveries always come from Main St. and, this time Main St. has to do all the heavy lifting.

The truth is that interest rates were so low at the time of the credit crisis of 2008, there was very little left for Ben Bernanke to work with in creating economic recovery.

What made it hard to get money to Main St. small business was the historically low interest rates that made it difficult for banks to make money. Yep. Banks have not had it easy, either. It costs a lot to run a modern bank these days and they just can’t afford the risk of lending to any but the most secure borrowers. Their cost of funds is low, but so is the interest earned on their reserves and the interest earned from their loans. That’s why they are charging fees for everything, which now makes up the majority of their revenues. You can hate banks, but you don’t want them to go out of business.  

Banks, and the big corporations for that matter, have gone to the Dark Side because the Dark Side has been made so attractive by our politicians, and whoever decided it was a good idea to make it easy for companies to move manufacturing offshore.

Back in the 1980s, it became clear that the US had priced itself out of world markets thanks to our high wages and high prices. Sending manufacturing offshore raised the wages of people in emerging economies, so we were creating more new consumers. Unfortunately, part of the bargain seems to be that US wages have been steadily declining.

Face it: We’re on our own.

Rules of the New Way Things Are:

You can’t afford a $750,000 house on a $60,000 salary.

Oh, I guess you supposedly learned that lesson a few years ago but do you realize it wasn’t the bank’s fault you lost that house? It was YOU who decided you can afford to pay a price that was way beyond your pay grade, and commit to all kinds of screwy loans that you didn’t understand just so you could bury yourself in debt. Yeah, yeah … I know you were taken advantage of. You thought you would be able to live in the house for a couple of years and then sell it for a cool million, buy a place in Costa Rica and walk the beach at sunset wearing Tommy Bahama clothes. You thought things would just keep going up, and you were wrong.

Nobody is going to bail you out.

If you can’t get a job, either make your own job or help someone else start a company.

What can you do that people will pay you to do? (I’d suggest not becoming a drug kingpin like on TV.)

There are people who have money to pay for things they want, so there is still opportunity. Your job is to figure out what they want, then figure out how you can sell it to them. And I’m not talking about what you can sell to Donald Trump that he doesn’t have already. I am talking about what products or services the ordinary people living near you need.

A friend of mine tried everything for years and just couldn’t get back in the ranks of the employed in anything having to do with his profession. So he started driving a cab. That was about two years ago. He now owns his own cab company and is making more money than he ever did. He went around to all the bars and restaurants in town and marketed his services, again and again. He picked up bar patrons and sold them on the idea of calling him to pick them up and take them home each time they went out. His customer service was perfect and he greeted all his customers with a smile. He worked hard but it paid off very well. It’s those little details like great customer service and a smile that can be the foundation of a very successful company, as it has so many times in the past.

You don’t need venture capital.

Really. We’re talking about starting small, and that’s where your creativity, shoe leather and consistent determination come in. It’s not easy, and you might need to drive a taxi for a while until you think of what to do. Your alternative is to continue doing what you are doing now, hoping to make it somehow until the economy recovers.

Tell me, do you think you can continue as you are for two more years? Three more years? By then, will anyone hire you? You don’t need big money to start a very small business. You also don’t need big money to grow that business until it can pay for its own expansion. You might need only little money or no money at all. What you do need is persistence. Fall down a thousand times, get up a thousand and one.

Get rid of your drug of choice: Ego.

In other words, get over yourself. Own your mistakes. Like I said, life doesn’t give out little trophies to the loosing team just to make everyone feel good. There is a massive change taking place in the Way of the World. It might help to do a little reading about the Great Depression to get some perspective on how close we really are. The spinmeisters are calling what we are now living through the … and get this … Great Recession. Heck, it’s comparable to the Great Depression the old folks tell us about. My father once told me that during the Depression, you lost everything. It was terrible, but when it was all over all you could think of was “Whew! I survived!”

It’s time for the people of this country to make their own recovery.

Nobody is going to do it for you. In fact, you might see some of the assistance you depend upon reduced or taken away, entirely. You might see stock market crashes and another dip down further in recession. You might see house prices go back to their lows, or lower. You might see even higher prices at the grocery store and even higher taxes on things you buy. Think like the guys in the reality survival shows. Work as a team with other people and find your way out of disaster together. It’s our only hope.

Keep in your mind the vision of thousands or millions of new little businesses, each doing what it does better than anyone else, faster, more responsively and with a smile. Get out there and show what America is made of, because corny as it might sound to you as you read these words, it is exactly what the fabled American Spirit is all about.

The Easiest Way to Go Into Successful Business – Buy A Web Property

gold bars

I am seeing the birth of an entire new industry … and an entire new investment vehicle.

Those of you who know me know that I know investment vehicles. (If you don’t know me, look at my G+ profile.)

Anyway, what would you say if I told you that I know of a solid stock that pays a 50% dividend? You would say I am either crazy or don’t know what I am talking about.

However, you can’t deny it would be a great investment if it existed.

Not so fast! Consider this …

If you buy an online store that does a reliable $15,000 a year in net income, it would require you to work a maximum of 2 hours a day, and it costs $30,000 to buy. And

  • it’s a good store that hasn’t done much SEO so there is opportunity to drive more traffic,
  • has a good size mailing list so you can promote specials,
  • happy returning customers and
  • hasn’t done any advertising and doesn’t sell ads on the site so it has undeveloped revenue sources …. well, that’s pretty much the same thing as a stock that pays a 50% dividend.

If you hired an SEO service, started an affiliate program, sold ad space and pushed it on Facebook, you would probably see an improvement in revenues and profits while spending very little money.

This is not an unusual opportunity.

And most websites sell with a small amount down and a buy-out from revenues over a certain number of years. 

That’s right.

There is a growing market in web properties and, while the market is still very young, great bargains can be had.

It won’t last forever.

Some sites are made to sell. There are lots of people out there who are creating game sites, driving traffic to them through SEO and social media at very little cost, and make fairly good money off selling ad space. Now, these aren’t much more than formula money makers but you might just be going to one of those sites to play Bejeweled for free amid ads that pay the site owner well. And the site might be for sale.

Lots of people find themselves in need of selling their websites. If you started a site that became popular, and you need money to buy a house or a car, or you have an idea for a different business or you are just sick and tired of your current blog or e-commerce site, you might just be interested in selling your site. It happens.

It happens all the time.

I can suggest a reputable place to start your self-education: Latona’s 

The reason I say “reputable” is you want to deal with people who are professional enough to turn away the websites that use Black Hat techniques to make it look like they have a lot of traffic, and I happen to know Latona’s does identify and refuse to broker those sites because Latona’s is a client of mine.  (Did you notice that was a disclaimer?)

There are some great opportunities to be found now  —  before investing in web properties is discovered by the masses.

And don’t kid yourself! There are a lot of savvy investors out there investing in multiple sites and hiring people to run them. They are making a lot of money doing this. In fact, there are private equity funds doing this right now.

I will continue to post about this subject because I believe the marketplace for websites will grow and prosper.

The Dubious Value of Starting a NEW Business …

Image

In the last couple of weeks I have had a re-birth of sorts. I have seen the new vision of entrepreneurship in another phase of the Internet industry that is just starting and promises to be the source of the next tide of wealth.

For the last 20 years I have been working in what had been an emerging industry — the Internet. It all started out with a lot of money and activity aimed at creating the future but, as with most new industries, the creation of the technology that would power the future was extremely expensive. Also, many of the startups of the dot-com era were just too far ahead of the technology, so they failed and the technology they spent million$ on was sold off for thousand$ and built the next generation of startups. This is how new industries get started. I wrote an article that went viral at the time: Bonfire of the eVanities.

Well, the Internet industry has emerged and is now mainstream.

For years, my thinking centered around starting something entirely NEW. You know, identify the pain and find a way to solve the pain. A whole decade of entrepreneurs have been searching for pain and ignoring the value that sits staring them in the face! Would-be Internet billionaires pitch ideas for products and services to serve niches that are only half-way interesting. I have to admit that I rarely hear a totally new and exciting business idea anymore. 

Perhaps this is why there isn’t a feeding frenzy on the part of venture investors anymore. They’re tired of backing good but not revolutionary ideas. They want to see at least 3 years of revenues before they’ll invest because they know from past experience that the totally new idea that will revolutionize the Internet is normally a chimera. 

I totally understand why people spend long dark nights of the soul devising startup ideas.

From where most people sit these days, the prospect of getting a great job is … well … daunting at best. You get out of school with a load of debt and the only jobs available seem low-paying and low-opportunity. Or you have been laid off from a great job and have no prospects of being re-hired by anyone at that same level. Or you took early retirement and need to work to supplement your income. Under these circumstances, putting together a startup can seem like the answer to all your problems.

The real truth, though, is that for most people a startup venture is just the beginning of their problems. 

A startup is pure risk. I don’t care how great the idea or how thorough the planning, it is still pure risk. That is why it is so difficult to get financial backing from anyone but Mom and Dad and your best friends.

One of my specialties has always been showing my clients how to bootstrap their startups to avoid becoming the victims of vulture capitalists. I believe in building a revenue base and using that revenue to power innovation. A flow of reliable revenue attracts even the most skeptical investors.

Do you think the cloud is where you want to create your innovative idea? Why not start with this already-established provider.

Have an idea for an eco-friendly product line or an entrance into cultivation of organic foods or medical marijuana? Your base of operations might be well served by an already-established enterprise.

There are three forces at work that you should know about:

The Builders and Sellers – There are tech-savvy people who build web properties, set up all the sophisticated SEO and advertising income, and then sell the turn-key operations. Similar to franchises where you buy a turn-key operation, these situations are better because they already have customers and revenues.

The I Want to Do Something Else Sellers – There are a lot of people who started web enterprises years ago and have built them up to be successful operations, but want to move on to something else. These web properties produce valuable consistent revenue and can be built on using your own ingenuity.

The Scammers – Yes, there are people who build a website and populate viewership using techniques that produce worthless traffic. That is why you should be careful to use a web property broker that does research into the validity of the seller’s claims. Not all do this.

The point I am trying to make is that it isn’t necessary to come up with a great new idea to get started in a business of your own. It is possible to buy an existing revenue-producing web property, get financing for the purchase, and use it to build out your most innovative ideas.

There is also another trend you should know about:

The Web Property Investment Funds – Many revenue-producing web properties require just a few hours a day to update the content,  SEO and advertising. There are investors who hire tech-savvy people to do this, and maintain a fund of income-producing web properties. This is a new space for the private capital crowd and it is going to grow.

I really encourage you to look into this emerging industry. As always, I am available if you have questions vduff @ abusinessplan.com

The Advantages of Buying a Company

The Advantages of Buying a Company

Enthusiasm and optimism are qualities most entrepreneurs share. This drives us to think we have to re-invent the wheel each and every time. Actually, finding an old wheel and just fixing it costs much less in outright costs and potential mistakes, and it frees your time and effort for the task of driving that wheel to new and exciting experiences.

Rather than try to start a business from scratch, look around to see if there is a business for sale that you can develop into a real winner!