For years I’ve been focused exclusively buying domains and following the standard investor model of reselling at a profit, typically looking for an ROI of 10x or higher. I missed the boat on parking so the idea of buying a domain name to generate passive income hasn’t been a thing for me for some time. When I first started in the domain name world I was building out some names but once I started my own company, all free time pretty much evaporated, and with it my domain monetization projects.
Still, I’ve always liked the idea monetization but I just don’t have the time to build an online business on any of my domains, it’s too darn time consuming. In 2020 as the world has changed it’s no secret that eCommerce businesses have benefitted and consumers around the world move from shopping in-person to shopping online faster than ever before. This has made me think more and more about buying an existing online business that’s already generating passive income and doesn’t require me to be tactically involved.
In most cases I think you can divide these opportunities into two camps:
- Online businesses that don’t require anyone to do anything – these are truly passive income streams, all the work has been done and they just generate income
- Online businesses that require regular tactical work – I think most “passive income” businesses actually fall into this camp. While it doesn’t require eight hour a day, five days a week, it does still require someone to do something to keep the money flowing in
My assumption is that in reality, online businesses that fall into category #1 generate less revenue overall. Sure, you can tout that you’ve built a “passive income machine!” but I think to really generate meaningful revenue you probably need someone to be putting in some elbow grease. I might be wrong but that’s how I see the world today.
That being said, you don’t need to hire a full time employee or micromanage someone. I do think for a lot of eCommerce businesses, especially those that have been built and scaled by someone who has done it before, the tasks for someone to do are pretty easy to teach and repeatable without a ton of intervention outside of paying them for their time.
So then the formula becomes – how much revenue does the business generate, and how much do you need to pay someone to keep it going and hopefully continue to grow revenue? A good example of a business that recently caught my eye on Flippa is this one:
Here’s a few things I like about this kind of business:
- 93% of the traffic is organic – this is a great baseline to start with. While it will likely take someone keeping up with SEO to stay that way, the fact that the vast majority of the traffic is coming organically and not through paid ads de-risks things a lot IMO
- It’s educational content – licensing software would be complex, what do you do if it breaks? What if there’s a bug? Too many complexities. Educational content is pretty simple and has a lot less pitfalls.
- 5,000 email subscribers – this might surprise you but I’m not very connected in the tattoo space! Okay, you’re probably not surprised, and yes – it would take a long time to plug-into a new space and build up a list, the fact that there’s already one here is a nice bonus.
These are the kinds of businesses I have my eye on now. I’m not pulling the trigger on anything yet but I am casually looking and seeing what’s out there. I’m also getting advice from people I know who have bought existing online businesses to learn from them, like anything in life, if you’re not an expert, ask one!
I’ll keep you in the loop as I continue to investigate. If any of my readers have experience here feel free to share in the comment section below!