07
So you want to do a leveraged buyout (LBO), but you dont have $1B in your pocket and your friendly banker won’t cough up the $10B? Well, we might just be able to help you to achieve your dream, albeit on a smaller scale but with the same sense of pride of ownership of property all of your own. We have done enough of these internet web deals that we feel comfortable giving guidance on how to do them from start to finish. This weeks strategy series is dedicated to the entrepeneurs, big thinkers, savvy traders and other constituents comprising our readership who we feel will get something out of this, perhaps a new hobby or even a new source of income to supplement their day job which exploits their knowledge of technology.
Define your Objectives. Before starting something like this, you need to ask why I am doing this? What is the point? Is this for entertainment? Do I have the technical know how to do this? Is this a serious money making enterprise to supplement my monthly income? As part of this soul searching it is necessary to assess how much you can afford to invest. Generally speaking you will buy a better business for a higher purchase price, but there are exceptions to this rule. You can buy a quality business for $1,000 or for $10,000. I think of a quality website the same way that I think of a stock with heavy dividends, except that with a web business you have full control of the business and the ability to increase your dividends as you improve the underlying business.
How to Identify: The locations with the most inventory of websites for sale are EBay.com, Digital Point Auctions and Sitepoint Auctions. There are other places on the web, but you really need a large marketplace with lots of properties in order to find an undervalued property with the potential for growth. Some of the types of situations that I find promising: 1) undermonetized property, e.g. a property with high traffic that is not monetized effectively, 2) scalable property, e.g. a real estate site with strong back end infrastructure that you can expand into new countries, 3) established property, a property that already has a online presence with an economic moat, e.g. the #2 forum site for a given niche with large membership and corporate sponsors.
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