I can remember that when I first made the decision to start investing and buying websites to earn passive income online that I had a whole lot to learn. Little did I know that every time I would look at another website to buy I would come across some type of coded acronym that is the lingo of buying websites.
The more you start to discover website businesses and dissect prospectuses, the more you are going to come across some different jargon being the lingo of buying websites. In saying that a lot of the short acronyms are not simply made up by the website buying community or industry should I say. Though majority of them are borrowed from website business terms and offline business terms that have been brought together to better describe websites that are up for sale.
Through this glossary on the lingo of buying websites I want you to be able to add these words to your vocabulary tool belt. That way you won’t need to go backwards and forwards to Google Search just to understand what each of these terms mean.
Having the knowledge and understanding the lingo of buying websites is too going to put you in an advantage point in many ways. From reading prospectuses, breaking down how online businesses work, talking to people in the industry from brokers, to seller and mentors about the subject of buying online businesses..
So lets take a look some lingo of buying websites;
Due Diligence
When you are studying something that you want to pursue, say for example a website you may wish to buy. The act of researching into an investment like this further is called performing your ‘due diligence’. This is in my opinion THE MOST important step of buying websites, so you completely understand everything about the business in order to be comfortable enough to put your money down to purchase it.
NDA
Stands for Non Disclosure Agreement, which are quite common when looking at buying any business meaning it’s not only lingo of buying websites. What and NDA is, is an agreement between you and the party providing the information (usually about the website for sale) where you will not disclose this information you receive to anyone (or according to the agreement). Most NDA’s are similar though some can differ so I suggest reading each one before signing it, just like you would do with everything you sign.
Prospectus
When you are looking at websites from brokers they will only give a brief outline of what the business is about and what it does. Once you start to show interest in the websites for sale and sign an NDA (see you already know this one!). The broker will provide you with a prospectus which covers exactly what the business does, how much it earns, generally a questionnaire from the seller and much more information needed to start performing more due diligence into the websites.
Listing
Probably the easiest lingo for buying websites you will learn is listing. Which is referred to as the business or websites ‘listed’ for sale. A lot of brokers will for example say “this listing is a good business with much potential…” or something like that.
Listing Price / Asking Price
Another quite obvious one is ‘listing price’ or ‘asking price’ which is the price website brokers and sellers have listed the business for sale. Please note that this does not necessarily mean you need to buy the business at this price, please remember this as it is very important to do your due diligence before you can decide on what you actually believe the business is worth.
Sale Price
This is the price in which you are going to buy or did buy the business at. Remember, it does not always have to be the same as the listing or asking price.
Multiples
When brokers and sellers talk about multiples, this is a way in which they use to describe how much the listing price or the sale price of the business is. The multiple refers to the multiplication of the businesses net profit that equals the listing price/sale price. For example, if a website business earns $1,000 per month and the website is listed for sale at $30,000, the multiple would be 30. Meaning the asking price for the business is 30 times the average monthly net income.
Gross Revenue
All businesses use this term which is not just apart of the lingo of buying websites, however it is one in which you need to know quite well to understand the performance of the business. Gross revenue is basically the amount in which the business earns in revenue (before any costs are taken out).
Net Income
This is my favorite and the figure I look at first. Which is the amount of money the business has made after all of the expenses have deducted. This amount can be shown as a monthly average or what the business has earned during the whole year.
P&L (Profit & Loss)
Brokers, buyers and sellers like to use the acronym P&L which is simply the profit and loss statements each business will have. Statements that you want to get a hold of if you are going to start performing due diligence on a website business you may wish to buy.
Monetization
Quite simply put, monetization is the act of making money from the website business. For example, a monetization strategy is an approach you could use or implement to make more money from the business.
Traffic & Proof Of Traffic
When you are looking at buying a website, the way you make money is from the amount of traffic (people visiting) coming to the website. This means you want to get some type of proof (usually through access to the sellers Google Analytics account) to see the facts and figures for how many people or visitors are coming the the website.
Proof Of Financials
This is what you would require from the seller or broker to see the proof of income and expenses that are going into and out of the business. To get this proof it can be done by doing a screen share with the seller of the businesses bank account and merchant accounts (like Stripe, Paypal and ect.).
B2B
B2B stands for business to business. A website business that uses the B2B method is a business that simply sells to other businesses directly and not to the customer.
B2C
The opposite of B2B is B2C which as you may of guess already is a business that sells directly to the customer or client. Sometimes a B2C business will sell to other business just as a B2B may also sell to a customer, however it is normally quite rare.
SEO
Standing for Search Engine Optimzation, SEO is something that all website investors should know how it works. SEO is the term used to describe how well ranked the website business is on the search engines. Performing SEO means doing things to the website that can help it to gain a better rank in the search engines. Because the higher your rank on the search engines, the more traffic and the more traffic the more money the business can make.
Marketing
In simplest terms, marketing means advertising. Which can be either free methods of advertising or paid methods, depending on what the business has or has not been using.
Seller Call
Getting on a seller call is talking to the seller of the website business to discuss further questions you may have about the business and to really understand it better before you decide to make the purchase and invest in that business.
Migration
Once you have made the required payments to purchase the business the migration phase will start which is moving all the assets you have purchased as apart of the website business into your name and taking over the accounts of the business to start operating it yourself.
As you continue learning about and investing in website you will be always picking up new terms and the lingo of buying websites as you go. Whilst I would love to list every single little acronym and lingo of buying websites in this post, I find that once you know these basics you have a good enough understanding to move forward and learn the vast majority of other parts of the lingo that may appear from time to time.
If you have any lingo of buying websites you use or think is important for people to know, please be sure to comment it in the comment box below and share your knowledge with this community.
