I often think about business models and run scenarios in my head about which are the best and worst types of businesses to run.
In the hundreds of hours I've spent thinking about this, I still haven't come up with a better business model than owning content sites.
While I think "passive income" is way more rare than most gurus make it out to be, owning content sites is about as close as you can get to passive income without having millions of dollars to invest in stocks or real estate funds.
No customers to deal with, you probably don't need employees, and you don't have to worry about shipping out products yourself.
You can put out some content and change up the website, then sit back for a few weeks and let the site do its thing.
But there are also big opportunities in this space. If you want, you can dig in and build a huge, scalable business. You can accomplish just about anything you want with content sites!
People always ask how big of a business could this be? Answer is it can be small, like a semi passive $20/month side hustle, all the way up to huge, multi-million dollar ventures that get acquired by private equity firms.
Or here is an example of right in the middle:
My favorite businesses will always be online ones like websites and newsletters. You can run them from anywhere, upfront costs can be low, they're infinitely scalable, and there are thousands of niches to build in.
This Week’s Nano Flip Opportunity
Check out this website for sale on Flippa. It's a content site in the graphics card niche that did about $600 in revenue last month with over 12,000 monthly pageviews. Let's dive in:
Right off the bat, I like the backlink profile I'm seeing in Ahrefs:
One downside of this website is its age. Newer sites are obviously less proven, so it's harder to know if the traffic is a fluke or if it's repeatable over the long-term. However, that backlink profile looks great for such a young site.
I'd say this is a healthy site that's growing pretty well.
It's also in a great niche. The microchip industry is growing and becoming more important to everyday life, from connected 'smart' devices to the growing ubiquity of phones and computers. While the site is currently positioned within a subset of the microchip industry, it will clearly benefit from these macro trends.
We've also seen chips in the news lately, with the Senate working on a $280 billion subsidy. Computer components is obviously a great area to be in.
One thing that's important to note is you should understand this space if you're going to run this website. It can be a complicated niche, so probably best for someone who already has an interest in this stuff. I would say that goes for most niches, but especially this one since it's so complicated.
It would also be important to stay up-to-date on new technology if you're running this site.
Let's analyze this website for a potential flip. As you probably know by now, there are tons of ops to buy and hold... BUT you can get some real gains by improving and flipping.
So before buying a site, ask yourself, "what can I do to increase the traffic or revenue?"
You know your own skills best, so you'll have to answer that question for yourself with each deal you analyze. I typically use a 12 month time horizon for analyzing a deal.
If I wanted to flip this website, here are the changes I'd implement:
- Add Ezoic display ads. This could add roughly $200/month in revenue or more
- Sell 2 sponsored posts per month @ $100 each
For this example, let's say that both of these changes can be implemented and realized in the first month.
In addition to those two changes, I'd of course keep producing content, building backlinks etc.
Since this site is growing so fast, I think the multiple on the sale will be high. The revenue listed on Flippa is $304/month, but that's the average over the last 12 months. The site has been in the $600 to $800 range over the last few months.
When a site is growing this quickly, it might be easier to value it based on a multiple of trailing 6 months revenue, as opposed to just 1 month like I often do.
Over the last 6 months, this site did $3,218 in revenue (an average of $536.33 per month).
If we use a 40x multiple on that average monthly revenue, we get a selling price of $21,453. That seems about right considering how the bidding has gone so far on Flippa.
Let's break down the math:
- Buy the site for $21,453
- Increase revenue from $536/mo to $936/mo with the changes outlined above
- Collect $11,232 in revenue during Year 1 of holding the website
- Website is now worth $37,440 after Year 1
So after 1 year, without assuming any increase in traffic, we can add about 75% in value to the asset, plus collect all that cash flow.
Let's say that we sell after 1 year. Our net return on the sale would be $15,987 (Sale - Initial Purchase), plus we collected $11,232 in cash flow throughout year 1.
That's a $27,219 return on our initial $21,453 purchase plus our time. That's a 127% return!
The $2 trillion opportunity hiding in plain sight
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We had Andrew Gazdecki, Founder and CEO of MicroAcquire, on the pod this week!
Andrew’s current venture, MicroAcquire, is the perfect place to discover your dream startup. It’s quickly becoming one of the top startup acquisition marketplaces in the world.
On this episode, we dive into everything, including:
- selling startups
- running 400-person organizations
- leaving a legacy
- and the age-old question…exactly how much is enough money to be happy?
While you're here I want to shout out my new favorite newsletter - Young Money, from Jack Raines
Young Money is The best finance blog you've never heard of. 10/10 stories, 5/10 art.
Read Young Money
Give it a read and I promise you won't regret it!
Thanks for reading! I'll hit your inbox next week with another breakdown of a website flip.
Thanks from the Nano Flips team
Check out 2 newsletters from my best friends you will love
Free Smoke - A Cannabis Business newsletter by Colin Landforce: https://freesmoke.xyz/
Product People - Learn the art of building CPG brands with Oren Schauble: https://go.orenjohn.com/cpg/
All investment strategies and investments involve risk of loss. Nothing contained in this newsletter should be construed as investment advice. Any reference to an investment's past or potential performance is not, and should not be construed as, a recommendation or as a guarantee of any specific outcome or profit.