At the Website Investor we do have a bias towards buying websites over building websites and in this blog, I will discuss why I think it is most often the best option.
The qualification to be able to buy is that you have capital
You have access to funds or savings that you are looking to invest in some way. If you do have access to buy, to funds that will help you to buy, then stick with it because there are some good reasons and situations when you would want to buy and not build. If you have no access to funds, then you can’t buy, and you’re stuck in the building route.
Once you have worked out your capital then you can invest in something that has some size and scale that allows you to leverage your time. Any investment that you make after you buy ends up resulting in bigger ROI than you would make when you build something from scratch.
Let me give you an example
Let’s say that you spend a day optimizing the pricing of a product that your new website is selling. That day that you invest in optimizing pricing when you already have a lot of customers, when you already have sales, is likely to result in a much bigger profit and gain than if you spent a day building something from scratch where you have no customers. The benefit exchange for the time spent when you start with something significant is greater than when you start from scratch.
A second reason to buy is when you want faster profits, right?
When you become the owner of a new website, if you have invested wisely, you will be having net income coming in from day one of ownership. You have the same net income that was coming in the day before you bought the site. Your road to profits and your road to value is a lot faster than if you start something from scratch; it may be months, years before you see any appreciable revenue when you’re starting from scratch.
So, a second reason to buy is it’s a lot faster. Third reason is it’s easier.
You may not have any interests at all in doing those technical tasks, design tasks, the product development tasks, whatever those tasks might be for starting an online business from scratch whereas when you buy a business a lot of those things are already done. Yeah you may need to tweak them, yes you may need to learn something about them, you may need to improve some things and what you buy might have significant flaws but its way ahead of starting from scratch where you have actually absolutely nothing and you’re having to do all of those things from the very get go.
So, it’s faster it’s a little easier and more efficient, you can focus your efforts and energies on the specific needs of the business rather than on all the needs of building it from scratch.
Buying involves less risk
Some people will disagree with me on this, but I feel like it’s less risky to buy than to build and here’s what I mean by that – when you buy a business:
- You’re buying something that’s already working,
- It already has a process,
- It has a product or service of some kind,
- It has traffic,
- It has revenue.
So, all the pieces are working to generate a profit otherwise you wouldn’t buy it, and that is what you’re buying – you’re buying that working model, that income stream, that comes from something that’s already working. When you buy a website, you’ve eliminated a lot of the risk because you already know it works.
When you start from scratch you don’t know for certain that you’ll ever make your first dollar of income. Chances are increased if you’re following the right system but still there’s a lot of risk inherent in starting something from scratch and we’re not just talking about online businesses, statistically that applies to brick and mortar businesses very much so.
There are of course, different kinds of risk.
When you’re buying a website, the risk based on your evaluation of the ‘property’ that you’re buying more than anything else. You mitigate risk based on how well you evaluate the prospects of that business and then how prepared you are to take over ownership and run the business.
When you buy, of course you’re risking some capital but here the risk is hinging on your evaluation of the business that you’re buying compared to when you build the risk is spread over more things – you need to get the right market and you need to build the right thing with the right process and you need to be committed enough to it.