How to Flip Online Businesses
A short guide to flipping online businesses for an amazing ROI
Two things come to mind when I hear “flipping” — pancakes and real estate.
Flipping real estate consists of three steps: buying a property, fixing it up, and selling it for a profit. It’s an investment strategy that earns real estate investors five to six figures in profit from each flip.
Let me introduce you to a new asset class in the flipping arena that earns just as much as real estate: online businesses.
Similar to flipping properties, the same principle of buying, improving, and selling applies to online businesses. Flipping digital assets has a much lower barrier to entry than real estate since you don’t need as much capital to get started.
Keep in mind that flipping online businesses isn’t a get-rich-quick scheme. You’ll need a certain skill set and at least some industry-related expertise. Assuming you have some knowledge, we’ll explain how you can start flipping online businesses for a profit, starting with deciding on your strategy.
Set Your Strategy
Successful flips in our marketplace took 407 days on average from start to finish (buying, fixing, and selling), and generated a 24% average ROI from each sale.
Flipping online businesses is a long-term play. Like any smart investment strategy, you’ll need to plan far in advance to have the highest chance of success in getting a profit out of your hustle.
Before you start buying online businesses, you need to figure out a few things first.
First off, you need a road map of what kinds of changes are necessary for a business to increase in value. Could it be targeting competitive keywords that will generate more sales by creating new content? Maybe you have experience with CRO to increase the clickthrough rates of squeeze pages, or you might be a ninja with paid advertising.
Once you’ve identified what types of changes you know will increase an online business’s value, you’ll be in a better position to find an asset that generates consistent profits but could earn more through these changes.
Setting a strategy that can consistently improve certain types of online businesses helps you with the next step of your road map: figuring out how much capital you need to invest.
Figuring Out Your Budget
The short answer is there isn’t a “right” number. How many businesses and the size of the digital assets that you buy will depend on how much time you have to work on them as well as your capital means.
Depending on your improvement strategy, it might make sense for you to buy a larger online business if it has plenty of room for growth. On the other hand, sinking all of your capital into one business has a higher risk if your optimizations don’t improve the business as expected, if at all.
It might suit your flipping strategy to buy smaller businesses (e.g., below $100,000) that will benefit from your improvement strategy and can definitely flip for a profit.
The advantage of online businesses over real estate is that you wouldn’t be able to buy a house for under the $100,000 mark and sell it for the same profit since the time and capital needed to make it a more attractive property would far exceed the initial investment.
Keep in mind that investing in several smaller deals could be difficult if you can’t keep up with improving them all at once.
Consider buying businesses in niches that you have some interest in. You’ll likely be working on improving your new assets for 12 months, so you’ll be more motivated to stick with the plan. However, what’s most important is that you find a business that you know can be improved for a profit.
Setting a Deadline for Each Flip
Finally, you’ll need an endgame for each asset you buy. We recommend setting a deadline based on a revenue or time goal. For example, you’ll list a content site up for sale after 15 months or once monthly revenue increases consistently over a three-month period by 20%.
With a hard deadline in place, it gives you a solid timeframe to work within so you don’t stay too attached to the business and delay selling it for a profit.
You can use this free list to help you decide which online businesses to pursue.
This covers the basics of what your strategy looks like. Let’s explore where you find the right deal.
Finding a “Distressed” Business
With your flipping strategy in place, it’s time to find a great deal. You can find a deal through your private network or by using a broker.
With a private deal, it’s possible you could find a diamond in the rough where you can buy the business for much less than it’s worth and sell for a much higher profit down the line.
However, it can be tough to find these types of great deals if you’re new to flipping online businesses. Using a broker can be much easier to gain traction in the buying and selling process since the sheer volume of deals that a broker receives gives you a higher likelihood of finding the best deal to buy and flip.
A broker can also help you with a higher exit compared to a private deal, making sure you get the most out of your flip for that business. We’ll talk more about brokers later.
Fixing Your New Buy
After buying a business, optimize it by working on the areas of improvement you identified during your search and with your strategy.
Once you’ve made your changes, see if the business is gradually increasing in revenue and traffic. If these numbers aren’t growing as expected, keep experimenting or bring in experts to help you improve the site.
It may take time but you should sell only when you can surpass your original earnings and improve the site overall.
Make sure not to disturb the business’s core structure too much. Remember that you are making minor tweaks, not major changes, and a huge overhaul could cause revenue to drop.
The Final Step: Selling for a Profit
Once the business is where you want it, all that’s left is to sell it.
If you used a broker to buy the business, consider using the same broker to help you sell. The deal will be streamlined since you’ll be familiar with their processes, plus you’ll have access to a much larger buyer pool than if you sold privately.
If you receive potential offers, keep in mind that savvy buyers could win negotiations, and you could end up taking home less than what you were expecting. By waiting for the right buyer who’ll agree to your terms, a private sale could take much longer to close than if you went through a broker.
Real Return on Investment from Flipped Businesses
This is just a guideline on how flipping online businesses work.
As we mentioned at the start, the earning potential of flipping online businesses has an incredible ROI for an active investment.
You could make an average of 24% ROI in just over a year. To put that into context, an Amazon FBA business you bought for $500,000 could be sold for $620,000 or more after you’ve optimized it.
However, let’s not just talk about hypothetical situations. So you can see the earning potential, we wanted to share with you two real-life examples of flipped businesses on our marketplace.
The first flipped business was a content site that was monetized through affiliate links and advertising revenue in the health and fitness niche.
After 303 days of working on the business and listing it for sale, the seller made 1164% ROI (yes, you read that right!).
The flipper focused on optimizing pages and adding more quality content to generate more traffic.
The second example was another content site that was monetized through affiliate marketing in the food and beverage industry. After 410 days, the flipper received 429% ROI after the business’s sale.
In this case, the flipper overhauled the site’s backlink profile. They changed the link building focus from PBNs and paid advertising to entirely organic traffic.
To see more examples and read about these case studies in full, check out our data-driven study of flipped businesses here.
Spatulas at the Ready
Once you’ve got a system in place to generate your own deal flow to find great deals and a reliable channel to sell your assets, flipping will be as easy as flipping pancakes. Kick start your flipping journey by registering on a marketplace.
