In this episode of the Website Investing podcast, Richard speaks with Mushfiq Sarker from Inventige on his success brokering and flipping websites. Mushfiq was very active in the early days of the Flipping Websites facebook group as well as on the Just Start Reddit forum and now writes case studies on his Website Flipping publication.
This was a longer conversation (almost 2 hours), actionable from start to finish. In this part 1, free subscribers get the first 50 minutes of the conversation; paying subscribers also get part 2 in their RSS feed. As is typical, part 2 elicits more insights as we get deeper into the conversation.
Part 1 Show Notes
Beginnings and First Website Flip
Mushfiq started building a Voice Over Internet Protocol (VOIP) website on Blogspot in 2008 while in college. 2 years later, an Australian company offered to buy his website, making it his first flip.
He then decided to make a Flippa account to buy websites, which he would work on and sell. Currently, Mushfiq has over 100 transactions on Flippa, where he buys and sells websites himself or for others.
Losing his Flippa Account and Involvement in a Lawsuit
In 2015, Mushfiq bought a website and sold it on Flippa. Later on, the buyer was sued for using an image on the website without permission. This image was uploaded by the first owner of the website. The buyer then sued Mushfiq and reported him to Flippa, leading to Mushfiq Flippa account getting banned for a year. Eventually, a settlement was reached and Mushfiq got his account back, but he also lost his Super Seller status in the process.
He now makes sure that the photos on his websites aren’t copyrighted images, and even got liability insurance as a precaution.
Protecting Yourself Against Liabilities
The Flipping Industry
Finding Success on Flippa
All of Mushfiq’s successful sites have come from Flippa. Though he has bought websites on a website flipper Facebook group, these were mostly short-term flips. Flippa has numerous websites created by hobbyists who have put up a ton of content for years, and these are what Mushfiq tends to buy.
Multiples and Changes in the Industry
In the past, if Mushfiq would buy a simple domain, he would buy it in 10x or 15x multiples. However, in recent years, people have learned that the multiples are actually in the 25x to 35x range, so it’s become very difficult to purchase them at lower multiples. The general industry has become smarter, and people are now wary to sell lower.
As a result, being a broker isn’t as profitable as it was before, with direct deals and marketplaces becoming more common. Mushfiq states:
I don’t think there’s a future for a broker in this industry, I think Investors Club is doing the right thing, just being a connector, and that’s where I’m going to as well.
Right now, brokers profit off of high-end websites in the 7-figure range, and this will continue for the foreseeable future. However, anything lower than 7 figures could be under attack by new automated platforms which offer far lower fees.
Flip or Keep?
Mushfiq usually keeps websites for as long as he can, and would flip only if he needs the money or if he has grown the site to its peak.
Holding multiple websites at once requires time and effort to grow. Otherwise, if you let them sit for too long, they would dip. Mushfiq used to hold 18 websites, but recommends holding only 1 or 2 which you can focus on and have it grow to its peak. You then have the choice of either hiring people to grow it even further, or selling it.
New Google Core Updates
Getting More Harsh
Both of Mushfiq’s websites got hit by the updates, and his competitors have got it worse. He gave up on solely focusing on Google and instead tried to diversify. Currently, he uses paid campaigns to drive traffic, Pinterest, and any other means to drive traffic other than Google. Organic traffic is always going to be the most dominant traffic.
How Mushfiq Avoids Risk at The Outset
Mushfiq tends to buy sites that are undermonitized and underperforming, but have a lot of traffic. He would then be able to 10x the revenue within a month. So even if Google traffic goes down by 50%, he would still be able to make a significant ROI due to the usual traffic that the site has.
Migrating Newly Acquired Sites
Mushfiq usually migrates the website to his technical platform when he buys them. He also switches themes, cleans up, and adds new plugins, and also moves it to his private virtual server to increase page speed significantly. This helps increase traffic.
He doesn’t tend to change the specifics and navigation of the website for the first 2 months as he’s increasing the revenue of the site. After 1 or 2 months, he then does changes on-page to improve user experience. By doing these, he is able to increase traffic and revenue significantly.
But Why Still Hold On to Sites?
Mushfiq prefers not to sell his websites quickly because of two issues: the first is that most people want a 6-month average of earnings, and the second is that US tax rates are bad for doing short-term flips. The tax rate will drop from around 25% to 15% after 12 months, because they would be considered as assets and capital gains by then.
Episode 10 Part 2
In part 2 of this conversation we discuss:
How to optimize your website by increasing returns
Tax on profit vs capital gains & LLC vs. S Corps
Having a dedicated website manager
Selling a majority position in a website
Selling websites to private equity funds and pricing out buyers
Part 2 is for paying subscribers, you can access by hitting the button below.
Enjoyed this episode or have any questions? You can leave a comment at the bottom of the web version of this post.
Richard Patey (Host) & Avi Silverberg (Producer)