Warren Buffett, myself and many other very successful people are buying undervalued businesses every day. For someone who does not have a strong education in acquisitions or has stumbled into the industry it is very hard to figure where to start or where to find these businesses.
Many things could make a business undervalued, but as we are talking about websites and I will keep it in that realm. Most online websites are undervalued because they lack any traffic, ranking, or have really bad design. Another factor could be that the owner is too lazy to create anything of value on the domain and copies everything they use, which leads back to not having any traffic.
Trying to find these websites can sound very difficult to the beginner investor. For the first timers they like to run to Flippa or other marketplaces (See my last article on buying businesses based on evaluation).
After that they start hitting up new websites that have just launched, hoping to snap it up before it comes of value. Or they go after the top ranking websites in the search engines. While these methods may work, I don’t think you’re going to get as far as you could.
Some years ago it was all the rage with domainers to buy unregistered domains based off of search terms. Today these domains are worth somewhere around the four or low five figures whether they have been developed or not. This does not matter to us. What we are looking for is Internet real estate that is undervalued, or needing much love, with a high chance of returning our capital really fast.
How you find these websites is really simple. My first stop is always my favorite search engine and keyword tool. [As I am the past owner of a popular keyword research company that I founded, I will not be making recommendations on keyword tools. However I will be providing some examples with Ye-Old Google tool].
For this article my first stop is going to be the search term “Boots.” I picked it because it’s a buy product. You don’t lookup boots to talk to friends, research data, or do something sociable. It’s a money product!
Have you ever asked yourself who owns the domain boots.com, or maybe womensboots.com?
A quick visit to the boots.com tells me that they are probably going to want more than my the price on my sports car, so I just keep on moving. While looking at websites, if I learn from the Whois or the footer of the site that a large company owns it I would be willing to bet they are not interested in selling it.
Moving forward I checked on womensboots.com…
It’s a PageRank zero with an Alexa ranking over 2 million. The content is from Amazon, so you know the content is not unique.
Now this site is undervalued. With a little luck, you could get it from just a couple thousand to low 5 figures. If the owner wants more than that, talk them down or leave them to rot.
As any SEO pro knows: Google is going to rank you in the top results for just getting some quality links because they have to rank you for your domain name, which just so happens is also a search term. Because of this all you have to do is buy links or build them and you’re on your way.
We also know from well-respected drop-shipping articles that sites like this can pull as high as 30% net on sales, depending the market. Additionally as I own cowboy boots I know a good boot runs $300-$1,000, and people like myself will spend the money as we are looking for something unique.
Now you see where I am going. I found a business that has a high chance of returning my investment after I spend the time and capital having it remodeled and marketed. If I do it just right, I may be able to get it sold in the million-dollar range this time next year, but it’s going to take a lot of work.
If you are not finding your keywords in your favorite keyword tool I recommend hitting the search engine. Some webmasters have a working business making small change, but they are targeting the wrong keywords because they do not know how to do SEO.
Remember, undervalued is about finding an investment that is being sold for less than it could be or is worth. It does not mean buying broken websites that can not be saved.
If you are wondering if I have ever contacted the owner of womensboots.com, I did not. I have been to busy with my new venture ArticleMe which you should check out and blog about if you like this post.
