How To Buy and Sell Hundreds Of Digital Businesses With Michael Bereslavsky

Hey. Hey. Welcome back to the show. This is Brad Costanzo and I'm not sure if you were expecting somebody else, my name is in the title. But that being said, I want to welcome back all my long time subscribers. Thanks for tuning in to the show. One of the things that I like doing the most on this podcast is featuring people that I really want to learn more about, kind of the way they're doing some of the things they're doing in business. And one of my absolute favorite strategies is the acquisitions, mergers, acquisitions, deal making, leveraging what other people have built, maybe are no longer interested in and seeing if I can acquire all or part of the business and do better than maybe the previous seller did. And that's why I've had a lot of topic experts on this area on the podcast. I'll put links to some of the various other guests if you're interested in this topic like I am. And today I have brought another guest on the show who specializes in buying and selling established web based businesses. He's been doing this since 2004 and his name is Michael Bereslavski. He is the founder of domainmagnet.com and I'll have a link to this in the show notes. But if the name is a little bit misleading, they're not just purchasing domains. It is primarily like real established web based businesses. They're also a small private equity firm and most of the businesses that they buy are either in the content or SaaS Arena. Although we're going to talk about with Michael a little bit more about his acquisition criteria. And I kind of want to dive into kind of how he got started into this as well as what to look for in order to find a good deal, but also what to do once you purchase it. And you know, that's the other thing a lot of people don't think of. They think of like I'm going to go buy a, buy a site and then what? So there's a lot of things I want to know from our guest today. So I encourage you to stick around to the end. And without any further ado, welcome, welcome Michael, to Bacon Wrap Business.

Hi Brett, happy to be here.

Yeah. Now you are over in Thailand right now. So it's 6am where you're at. Just tell me you've had, hope you've had some nice Thai coffee and getting ready for today.

That's right. Yeah. I usually wake up early, so that's okay.

That's great. That's great. So tell me more about your story, how you got Started. I mean, it says here on your site that you've been buying and selling established businesses since 2004. Take me a little bit through your story of how this all started before we dive into some of the.

Real big strategies and things that are working here.

Yeah, so back in 2004, I was living in Israel, I was a student.

And I had about $1,000 to my name. And I thought I had my life figured out. I was going to graduate from, from the university, get a degree in computer science, go work for a big high tech company. But for some reason that didn't work out. It turns out I wasn't actually very good at programming. And that was a pretty important part to get a job at some high tech firms. And I couldn't get a job. So I started looking into some different opportunities of what I could do to make some extra money. And I figured being a poor student, if I could make like a hundred dollars per month, I'd feel so rich. So I started researching. And you know, back then, I don't know if you remember Brad, but no one had any online business. There was nothing about setting up an online business. In 2004, I asked a few friends, I asked my parents, and they all just said that this is ridiculous. You cannot make money online. It's just scam. And in fact, most of that was scam. So I spent my thousand dollars on buying some courses and different systems that promised to help you make money. And none of this worked. But eventually I kept pushing and I got to try some things. And I registered a few domains, I built a few websites, and I started learning some basic SEO. And back then SEO was very simple. You just get some content and build some links and that's it. You get traffic.

So I started working with some affiliate programs, I started working with adsense, and gradually I kind of figured things out and started making money. And as soon as I was making money, I asked myself, what's next? How do I move forward with my business? And an idea came. Why not go and buy some established businesses, some established websites? Because building a new website and getting some traffic, it takes time. And one of the first websites I bought was this website for $120 and it was.

About online gambling. It had this blackjack game and it was making a little bit of money. So I bought it, I improved it a little bit, added some extra content, added some more ads, and just forgot about it. It wasn't making much money. But then suddenly, a year later, I received an email from a big gambling Affiliate company and they wanted to buy the website and I ended up selling it for $2,500. So I thought to myself, $120 to $2,500, that's an amazing return. And that's kind of how the whole idea was born. So I got more into buying sites and I built a portfolio of websites and then started selling them as well. And we've expanded since then and now we kind of doing the same thing. We are just buying sites but bigger sites.

Had a little audio problem there. Say again? But bigger sites. Audio stopped for a second. That's great. So let's talk about some of your acquisition criteria because I mean I'm, I hope I know there's some new people listening to the show who might be intimidated by buying websites as opposed to starting them from scratch because they think that you have to have a lot of money to do this. And sometimes it helps if you've got a stack of fund in order to buy these for cash. It's not always necessary. But I don't want to go too deep down the rabbit hole of why buy a business instead of building it? Because I've covered that a lot. But I really want to talk more about some of.

Your process from where you're sourcing deals to the criteria you're looking for, what makes a really good acquisition for your company and then also what you've set up, whether it's internal resources, external resources, in order to make sure that the site continues to do well or does a whole lot better. So let's start with the types of sites that you typically like to buy on your website. Website, it's like content and SaaS. Are those still, is that still accurate?

Yeah, that's right. So then it comes to figuring out what's a good deal. I think it's also very individual. So you have to see what are some things you are really good at. And we have a good team with SEO because we have some really great SEO experts in our company. We have good programmers, people that do content. And so we mainly look for websites where we can use those talents. Mostly we focus on sites with organic traffic and content based businesses. Sometimes we also have some software components or SaaS businesses attached to them.

Okay, so on the content sites and for anybody who doesn't really understand, yeah, these are sites, blogs in different markets, niches, verticals, et cetera. Where is it where they're primarily monetizing with like Google Ads or other ad based revenue as well as affiliate or is there something more specific you look for there?

Yeah. The monetization methods vary. I would say the main criteria is it has to be organic traffic, generally from Google or other such engines, and that the main driver of traffic is content.

They are mostly monetized through Frau Affiliate, different affiliate programs, some AdSense as well. There are some that sell some digital products as well. Okay.

Whenever you purchase a site like that.

Are you looking primarily for sites that you can all that you know, you can add a tremendous amount of value and that you know you. Or are you looking for sites that are doing everything really, really well and you just kind of want to buy it for your portfolio just so it continues to incrementally go up?

Yeah, so it's a bit of both.

Our strategy is mostly that we target people who want to sell quick. Now, as a business owner, if you have a blog, if you have a site that is quite valuable and making good revenue, and I'm talking about somewhere in the range of maybe from $50,000 to a million dollars in value and you want to go and sell it, it can be quite a process. So let's say you go to one of the brokers or you list it on the marketplace and typically this could take like half a year to sell. So many of these people, they just want to do a quick deal and many of them come to us and we can usually do those deals in just a few days or just a week or two. So we offer them a quick purchase opportunity and you would do a contract and we would do a transaction through escrow, which is the wire transfer. And we honestly pay a little bit below market value. So we try to get a slightly better deal because we offer that kind of comfort and convenience versus going to a broker and then listing and then talking to many different buyers. And we try to do it to do a very streamlined and quick process.

How often do you do all cash up front versus some form of creative financing where there's an owner carryback or.

Or borrowed money or any other thing besides just an all cash transaction?

Yeah, I'd say.

The structures tend to get more complicated the bigger you go. Most of our deals are still cash because that's sort of our main focus. We cater to people that just want to sell quick and they want cash. They don't want a complicated deal deal. But with bigger deals, we often do some have some extra component. I found the easiest way to do it is just having part of the value tied to some future results of the business.

Okay, can you explain that in a little bit more Detail.

So for example, let's say you are buying a business for $150,000 and we could make a deal to pay 100,000 upfront and then let's say half a year later, if the business meets certain performance criteria in terms of revenue or traffic.

The seller would be entitled to the extra 50,000. So it's a simplistic view.

How often do you add that in versus just here's a check up front.

I would say we try to edit almost every time.

Smart.

So we might end up doing it in like half the deals, one third of the deals. Because, you know, it kind of depends. If you do pay upfront, you would usually expect to get some kind of a discount because no one likes to have a condition payment that, you know, they have to wait half a year for. So it sort of depends on.

What kind of deal we can get.

Yeah, that makes sense.

What the seller prefers, right?

Do.

What, what typical. Like on some of these deals, I guess your average deal. What kind of multiple? Well, first of all, how are you valuing it? Are you valuing it based on the net income and if so, are you trying to stay.

Under or around a certain multiple of that?

Yeah, generally. So the market value for content sites is typically about two, two and a half years worth of revenue or profit. That sort of depends on, you know, like some sites they have, they require a lot of maintenance, require a lot of operations, so you can just value them based on revenue. But most sites, most content sites that don't need a lot of upkeep, they're usually valued based on just revenue.

Right.

And typically we pay somewhere in that range.

Like around, around the market price of.

Like, like around 30 months revenue. I would say like a little bit below 30 months revenue. Sure, that's kind of the average now.

Now that makes sense.

Are you finding most of your deals off market or listed with brokers or brokers sites?

Yeah, most of our deals are off market and we've been fortunate that we've developed that deal flow. So since we've been doing it for so long and we've been doing many, many deals, probably more than 300 deals by now. In the past 15 years we just had sellers come to us and sell a business and then once they have another business, they would come to us again before they go and explore other options. And we also had a lot of people just come through for word of mouth if they are looking a quick deal. So we are able to mostly just buy from that incoming deal flow.

So are there certain people who bring you more deals than others. I mean, you've been doing this for a little while, so you've got a reputation.

But.

But who are the biggest sources of referrals to you? Because I imagine that the average content site creator doesn't know who you are because most of them create these sites in order to just to, you know, it's a passion. They kind of want to create a little bit of income, but they're not out there with their ear to the ground knowing who's buying this. So what have you done to really develop.

That reputation? And who are some of the best sources of potential deals.

For you?

There is a large number of people that are just very good at building websites. And they build websites on different topics and different niches, and they are good at SEO and content. And then they usually want to sell those sites and cash out. So they typically want to be able to get a quick deal so they don't have to spend.

Months and months just kind of trying to figure out how to sell it and just go and sell it and then go and build another website. So this works well for most of them.

So that's some of them where they already know who you are. But those, I mean, but I mean, are you getting. Do you have certain types of people who end up sending you, like, a lot of referrals? I mean, are there certain. I'm not asking for a name, somebody, but are there like, types of people?

Yeah, like, it's. I'm thinking it's. It's kind of. There is by.

Age, by country, by everything. Like, we have people in India, but we've done deals. We have people in Vietnam, in US And Canada, like in Europe, everywhere.

Those are site sellers, right? Yeah, because I just curious, I don't know, like, do you have good referral sources? So not the seller, but like somebody who sent you? Like, hey, this person sent me 10, 20, 30 deals to analyze. Kind of a broker, but not really a broker. Like, not a broker, that that's their job. I'm just curious because I know you. This is one of the challenging things in this business is to get the word out that you are A, buying and that B, you've got a track record and there you're somebody to look for. So when somebody goes to sell their website, most of the time the first thing they think of is they go to Flippa or Empire Flippers and they. Or they go to a website broker. How do you get them?

Like if they haven't done a deal with you before, what have been some of the ways you've kind of gotten on these people's radar.

Absolutely. Well, the best way to get deal flow is really just by doing deals. Just by really being good at doing deals and being very professional. And that's actually our main source of marketing. So we do a deal with someone and they, they like how it went so they just tell their friends and you know, with things like selling your business, who would you usually go? Like would you go to someone who advertises on your Facebook wall or would you go with someone that your good friend recommended?

100%.

Yeah. Personal recommendations are usually just everything.

How often do you have. Go ahead.

Yeah, yeah. Your other question. We do have some people that refer us deals with and we actually started doing a bit of a referral program recently, a partnership program that we work with agencies that might potentially refer us deals for a commission. So this is just starting but we always try to focus more on direct deals with sellers.

Right. Do you have what about length of time in business? So if I started a content based site 12 months ago.

And you know got it going and I know all of this depends, there's sometimes like some very extreme situations like somebody started it six months or a year ago and had tremendous success. But do you have a specific criteria for how much time this business has been around in order to feel as though it's a safe investment for you?

It usually reflects in price if you've both sides from anywhere of just maybe like a couple months of steady revenue, up to 20 years of consistent age and returns. So we don't really discriminate on that, but it certainly reflected on revenue. So if you have a business that's been generating consistent profits for three, five, seven years, that's going to be a lot more valuable than something that's just half a year old.

Yeah, that makes sense. Tell me about one of your. Tell me about a few of your favorite big wins of deals that you've done in the past.

Sure. So we sold one of our businesses last month. So this was, this was owned by our fund and we originally acquired it for $52,000. Was a content site.

You don't have to tell us which one. But like what was the market maybe.

Yeah, it was a content site in the kind of like in the food industry. And it was just an affiliate site monetized with Amazon affiliate. I was making some good revenue and we originally got a relatively good deal because this site had some previous band like.

Previous Google penalty and the penalty was later lifted. But what that Means is that, you know, then you look at the graph. Like the Google Analytics is like down and up and the revenue is down and up and most buyers would look at that and like, I don't want to touch that. But for us we can review things, we understand how it all works.

That's great.

So we managed to acquire a little bit cheaper because the seller had trouble finding other buyers. And we had our team work on the website and managed to grow it and increase revenue and traffic. And so we sold it for 142,000.

That's a good return.

Yeah. Like less than a year later.

That's a really good return. Yeah.

And the buyer was actually really impressed with how our team managed it. So he wanted to contract our, our SEO team to keep working on a website to keep promoting it. So we are now helping him grow the website further.

Okay, and then when you mentioned a lot of these sites, especially the content ones that are, that are monetized with affiliate revenue, how often is that predominantly Amazon affiliate revenue versus other affiliate networks? Is it, Is Amazon a big component in most of these?

Yeah, I'd say because Amazon is so big and they're quite easy to use, very convenient. Just a lot of the websites you see on the market in that price range of like 50,000 to a couple hundred thousand are often Amazon. When you go a little bit bigger, it would change a little bit. Different types of monetization or other affiliate programs. But yeah, we have quite a few Amazon affiliate sites.

So what makes a really good Amazon affiliate site? Like what makes it be.

You know, this gets down into not even the deal making side this is, you know, you've got a content site and you're monetizing a lot with Amazon. I mean, is it a lot of product reviews? It's like content with an individual product review, or is it oftentimes just general content? And then they also kind of mentioned an Amazon product in there versus a strict product review.

Most of these are typically focused on product reviews. So they are focused on a specific niche and you also have to pick a niche that works well for Amazon. And it's a mix of product reviews and some content. Because you can just have only product reviews.

Exactly, yeah.

And also there is quite a bit of SEO work because most of these are usually competitive. I would say nowadays pretty much every niche has some competition. So you have to be going and building links. You have to have really high quality content.

In order to get traffic and monetize. Well, yeah.

How long do you typically hold on to a company versus reselling it for a profit.

So it really varies. We try to resell faster because for our internal processes it helps to be able to buy business and draw a plan of like a year or half a year around that range. And then that's usually a period that's good enough for improving CRO, SEO and kind of anything else we can try to improve. And then we also have.

Yeah, and then we can resell it.

Michael, when you resell, are you. Now granted you don't really go to brokers that much, right, to get deals like Empire Flippers and Flippa and all these other sites. It sounds like you do more off market deals. When you sell a site, do you like to go to those auction sites because it drives the price up or do you have your own market of potential buyers? What has been some of the more effective ways for you to divest of and sell some of these holdings?

Yeah, we try to resell directly as well. So we have a list of buyers that we work with. And we also work with Flippa now. So we sometimes list our businesses for sale on Flippa.

And I would say mostly it's a combination of those two. We don't work with other brokers yet, but it's just because we've been able to accommodate through our own resources mainly.

Right. What is the hardest part of this business been for you and your team and the things you're learning? Because.

I haven't done nearly as many deals as yourself and I'm willing to bet a lot of my listeners haven't even done as many deals as I've done. But what has been one of the more frustrating, the harder, the more challenging parts about this entire business from your perspective?

That's a good question. I like it.

Because everything's not all glamorous and easy and fun, Right. If it was easy, everybody would do it.

So yeah, there are certainly been some failures. We've had deals where we lost money. I'd say it happens like 1 out of every 10 deals, maybe even 2 out of every 10 deals. We generally expect that they are going to either lose some money or just barely break even. I think that's normal in any kind of business. You have to have some failures.

I think figuring out your strategy is the main component. Like figuring out, narrowing down to what, what are you good at? What is that area where you can really bring advantages? Because what I've seen a lot of people do, and that's often not successful, is just going to the market before we know what they're doing. And just go and buy some businesses and try to manage them and expect that they'll figure it out later. But then they end up doing some, some average deals and then they end up figuring, realizing that they don't have the skills to management well and that it's a lot more complicated than they expected.

So I would, yeah, that happened to me. That happened to me with one of the sites. I bought, I bought it and then I was like, oh man, there's, there's actually a lot more little moving parts to this than I expected. Right. It's like, oh, wow, okay, slow down now. Buying it's.

And this is extremely common, I would say pretty much the vast majority of people that buy business, the first, second, maybe even third time.

They don't have a great strategy, they don't have a great team, they don't have a great idea of how to manage it. And they've seen people go buy a business for a substantial amount, like 30,000 and then just forget to renew the domain or forget to renew the hosting after a few months, like even very simple things like that or just don't update it. So I think figuring out the system, figuring out the strategy. So once we've figured out what other things would be a good at and what kind of businesses we have to buy in order to utilize those advantages and then building a team to improve those, like we have a team for deal flow, that manage deals, that review deals, that buy business. We have a team for managing businesses, we have a content team, a social media team. So I think just putting those strategies in place is the biggest component.

What are your strengths there? Like, what are some of those areas that, besides just saying doing this, but are there any parts of this digital marketing space that you're particularly good at and parts that you're particularly not good at?

Yeah, there are a lot of parts we are not particularly good at, but I'd say the two main things we are good at are SEO, content and deal making. And deal making is also a skill. Many people don't realize it, but the more deals you make, the more you learn. The first deal might be really difficult, but the second, third.

And further, you just learn a lot and you are able to apply that. One of the skills is kind of looking at a business and realizing what are some risks, what are some potential scenarios and just getting better at predicting the success of that business. And so that's a very valuable skill.

Yeah, perfect. So how you mentioned team and you know, building resources, etc. How big is your, like do you work with both employees and contractors as well for some of your stuff, or do you. You have just like a large set of employees who work directly for your company?

Yeah, it's a mix. So we have about 10 people now in the core team and we also work with some contractors, some agencies, and a large number of freelancers as well. Mainly we try to do the things that are really most important for our business in house. So things like reviewing deals, negotiating deals, like managing businesses and doing SEO. And we often subcontract a lot of other things that are kind of like less, less, less common for us. Like large scale web development or things like that.

And one off projects. Yeah, exactly. What.

How long does it take you to typically do due diligence on a site? I know the bigger and more complex the business is, the more it is like that. But like when you're. If you're looking at something you're kind of interested in, you know, I know there's two aspects. There's the initial filtering out. You're looking at something and I'm guessing you can probably look at something within an hour or less and know that, okay, I want to look into this more or now Pass. Right. Because you've been doing this so often. But once you take a look at something that you kind of like approximately, you know, if the seller is cooperating and getting you everything you need, how long does it typically take you to do due diligence on this?

So it's usually done in stages. At first we might just look at the data, look at some numbers and see that, okay, that seems reasonable. The seller expectations are realistic and the business fits our criteria. And then we would decide that they would move forward with the review. And then we might look more at the actual data, like look at trends, at screenshots, if it's a content site, at the backlink profile, the content quality, all kinds of things like that.

And then we would probably start negotiating or we would prepare an offer and submit an offer or start considering the prices that the seller proposed. So there are usually. So you mentioned two steps. I would say it's just a lot more steps and at every step there is more due diligence being done because you look at hundreds of deals. So they cannot go and do due diligence in depth for every single website.

Get to a deal of the more we. The deeper thing. Look into it.

Okay, great. And the.

I had another question on the tip of my tongue here. I'm trying to remember what it was. This has been great because as you can tell, I'm asking questions because I've got, like, authentic, you know, authentic curiosity here.

Do you also buy SAS sites or other types of sites that are not content? Or have you been sticking straight down the pipe with content?

Yeah, we try to change things up a little. I think it's really important in any business to do some testing. So we have a few SaaS businesses. We also bought some E commerce businesses and all kinds of things.

We have one SaaS business, actually, that we are planning to sell soon.

So what we've learned is if SaaS businesses, there is just always way, way more things that you have to do that you expect.

Yeah, I agree. Yeah, content is a lot. Yeah, content is a lot more like just do, you know, it's wash, repeat, just wash, rinse, repeat. Just keep on doing it over and over. And it's a lot more predictable than software. Plus, with software, you don't know if somebody else is right around the corner about to just create something that makes your product, you know, you know?

Yeah, competition.

Yeah, yeah, exactly.

So what, you know, obviously one of the things you're trying to do is look for good. Look for good sites to buy. And maybe one of my listeners is like, man, I've got a site. Maybe I'd be willing to sell it. But are there any nuts you're trying to crack right now? And by that I just mean maybe there are stubborn challenges that you're trying to figure out or people you're trying to meet or hire or something you're trying to personally learn or just kind of figure out how to get from A to B. And it's been a little bit of a stubborn challenge. This is where myself and any of my listeners, you can jog our minds about how we might be able to support you.

Yeah. Thank you. So right now, the biggest challenge is people. Like, the bigger the business grows, the more I realize that it's just really all about people. It doesn't matter what you do.

The business is in general, people and systems. And once we have most of the systems in place, it's just about finding the very best people. And right now I was actually hiring some marketing people, and we haven't done that much marketing until recently, but now we kind of realize we have to start doing more. And it's really difficult to find very good marketing people, you know, at affordable salaries.

Yeah, I imagine. And are these marketing people to help you get more of the word out about Domain Magnet and what you guys are doing, or is this marketing for some other Aspect.

Yeah, it's both for our own brand and also for our portfolio businesses because occasionally they need some marketing strategy or improving different marketing channels.

So we have a job listing right now and I can send you a link so if your listeners are interested. And the other thing is of course buying more businesses as we are expanding. And we. So we have one fund. Excuse me, we have one fund and we are planning to set up a second fund next year. And we have quite a few investors that constantly coming to us asking, hey, can you buy a website for us? So we are always looking for more deals. So message to your listeners is if you have a business that you are considering to sell and it's anywhere between maybe as little as like doing as little as like $1,000 per month and up to basically, well, nothing is too big, but probably up to like $30,000 per month in monthly revenue and of course profitable. And you want to sell it for a quick deal. You don't want to deal with this whole process. So come to us, go to domainmagnate.com sell and you can just submit it and we'll usually respond within a day. It only takes a minute to submit some quick details, some quick numbers, and within a few days you would usually get an offer. Or if it doesn't fit our criteria, we just tell you, I'm sorry, you know, it doesn't fit our criteria. And we often try to help people so we can also give them some advice of how they can sell it for more if they don't buy it.

Fantastic. So that's Domain Magnet. M A G N A T E dot com. Obviously you can go to the website there, you can click on the show link, but it's also domainmagnet.com sell. Is that what you said?

That. That's right. Cool.

And that's if people want to find out a little bit more about that. Well, man, this has been great. I love talking to people like yourself who are out there doing these deals and making things happen and big, big fan of what you've been able to do. Maybe, maybe, you know, you and I can do a deal here someday.

Yeah, for sure.

That'd be a blast. Well, Michael, I appreciate you being on the show. That brings us to the end for everybody else. Thanks for subscribing. And if you haven't subscribed, go ahead and smash that little subscribe button. Whether you're listening on Apple or Android or even on the web, you can subscribe to the newsletter as well. As well as if you have any questions, you can always shoot me an email to ask. Bradakenwrappedbusiness.com Tell me about any, you know, feedback you've got or any guests you'd like to see or topics you'd like to have covered on the on the show. So once more, Michael, thanks a lot for being a guest and being so open and transparent about how you do and what you do.

Thanks, Brad. Pleasure to talk to you. And if your listeners are looking to learn more, they are welcome to also check out our podcast. It's called the Domain Magnate show, and we interview different industry leaders and we talk about buying and managing businesses.

Fantastic. Yeah, thanks for reminding me of that. I had that in my show notes, but I totally glanced over that. So I know I'm a subscriber, so I think everybody else should be as well. Thanks again. And I will see everybody else on the next episizzle.