Due Diligence 101 for Website Buyers: Tread Carefully With Trademark Domains

A while back there was an Internet Marketer who released a very popular ebook that extolled the virtues of building websites with product names in the domain. For example, if you were promoting the Amazon Kindle his whole deal was that you would register a domain with “Amazon Kindle” in it – say AmazonKindleToday.com. There were many people who jumped on this bandwagon but I never did because I could see legal troubles a mile away. I had never bought or  built a website with a product or company name in the domain and I never would – so I thought.

How I Got Screwed Buying a Website With a Trademark In The Domain

In November 2009 I found myself buying a website with a product name in the domain. I knew the risks going in and even though my gut was telling me to walk away, I couldn’t resist. The deal was just too tempting. This particular website was promoting a very popular fitness program and ranked very well in the search engines for the product’s name. It was also generating around $400 net profit every month in auto pilot. The icing on the cake was the seller was only asking $1,200 for it. Even though I had a feeling this website was trouble and I would likely get an email from a lawyer sooner or later, my thinking was I could milk it for a few months to recoup my investment and then everything after that would be pure profit. Surely I could get away with it for at least a few months, I convinced myself.

Wouldn’t you know it one week after I sent the seller the money I got a cease and desist from the company’s lawyer! I was lucky because the lawyer was actually a pretty nice guy. After I told him that I just purchased the website and stood to lose a lot of money, he was willing to let me keep the site up for a few weeks to recoup some of my losses. How nice of him, right? Actually, it was because it allowed me to get at least $400 back from my losses.

Within a month I went from buying what was going to be an auto pilot cash machine to having nothing and losing $800 after having to surrender it due to trademark laws. I won’t bore you with the details but suffice to say, laws are in place that make it very easy for a company to take a domain from you if you are using their trademark. Of course if you have money to burn and you’re stubborn, you could put up a legal battle but is any domain at this level worth the trouble -especially when there is almost an 100% chance you’ll lose it anyway?

You’re probably thinking the seller knew this website was a legal liability and was selling it for that very reason except you would be wrong. Before I agreed to buy the website I asked him if there were any legal issues I should be concerned about and he said no. I believed him because I had known the seller for a while through a private forum we were both active members in. But as Reagan always said, trust but verify, so I asked the lawyer if he or anyone else from his company had pursued this domain before. He said no. The company was just beginning their effort to pursue people using domains with their trademark in them. I was actually one of the first persons they had busted – lucky me:)

Lessons Learned: Due Diligence 101

1. Get Permission In Writing To Use A Trademark In Your Domain
It was an expensive lesson that could have – no, should have been avoided. I knew better and my gut instinct was right all along. If you are considering buying a website with a trademark in the domain do your due diligence. Contact the company who owns the trademark and get their permission in writing that you can use their trademark in your domain before you buy anything. Some companies are actually o.k. with it but 95% are not so don’t be surprised if you get the no-go.

2. Listen To Your Gut!
Another lesson learned is you should listen to your gut. Chances are if something doesn’t feel right, it probably isn’t. There are plenty of deals out there to be had. There’s no sense wasting your time, money, and effort if you don’t feel 100% confident in the website you are buying. As another Reagan once said, Just Say No!

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Buying Websites: How To Buy Low and Sell High

The most important aspect of buying websites for cheap and flipping them for a nice profit is building yourself a solid understanding of the business. If you don’t know anything about about website flipping then you should strongly consider investing in an ebook that explains the business in more detail. But the basics of flipping websites come down to these principles: knowing what websites to buy and where to buy them on the cheap, and then knowing how to sell them and where to sell them.

If you don’t master these principles then you’ll have a hard time buying and selling websites with success. Let’s take a look at each one…

Knowing What Websites To Buy

The professional flippers will tell you that the best way to break into this business is to take it slow. Don’t bite off more than you can chew! Set realistic goals and don’t invest a lot of money on websites when you first get started. For example, set a goal to make $100 profit per week. That may sound ridiculously low but it’s a small enough goal that most people should be able to meet. They key is to buy websites on the cheap that have potential, then adding value to them, and then selling them in the right marketplaces for a profit.

When you’re first getting started you should look to buy websites for less than $200. To find websites at this price that have profit flipping potential, you need to know what marketplaces to buy from and that’s covered in the next section. What you’ll be searching for on those marketplaces are “established websites” or “websites with revenue.” Try to avoid those websites for sale that are labeled as “turnkey websites.” These are basically website templates with pages of content that isn’t always the highest quality. By searching for established websites or websites with revenue (no matter how little), you’ll be getting a more valuable website that will be easier to flip for a profit.

Where To Buy Websites on the Cheap

Right now there are only a handful of marketplaces where you can sell and buy websites. There are really only four that are worth focusing on regardless of your experience. They are Flippa, Warriors Forum, DigitalPoint, and eBay. These are the most popular marketplaces right now but they are all very different.

This is the grand daddy of all marketplaces for selling and buying websites. This is likely the market you’ll do most of your website flipping as it has the most buyers and sellers of websites. There are hundreds of websites listed for sale everyday.

Warriors Forum
The Warriors Forum is the most popular forum dedicated to Internet Marketers. There are literally thousands of members and the forum is incredibly active. Every Internet Marketer should be a member of the Warriors Forum! Not to long ago they started a section within their forum where people can buy and sell websites. While it’s a very popular section of the forum, there are usually less than 12 websites for sale listed everyday. This is a great marketplace to buy established websites on the cheap. You don’t find too many expensive websites for sale there so keep that in mind when it’s time to sell;)

This is another popular forum dedicated to all types of professionals who work online. There are Internet Marketers, designers, developers, and writers who frequent this forum. The section of the forum dedicated to buying websites and selling them has been around for a long time and is probably the second most popular marketplace behind Flippa. Unfortunately for sellers, not too many high-valued, expensive sites are sold there. The good news is it can be a great place for a buyer to find some great deals. The forum is loaded with start up sites and cheap established websites.

This used to be a decent marketplace for flippers but not so much anymore. Instead, you’ll find hundreds of “useless” turnkey websites for sale. These sites are basically templates so there is very little value in them and require a lot of work and effort to get them to a point where you can sell them. There is the occasional gem for sale that you can buy cheap and fix up so it’s still worth checking on a regular basis.

Knowing How To Sell Websites

There are entire ebooks written on this one aspect of website flipping so I won’t go into great details here. You can read my sell websites article where I highlight some of the basics. In addition to the tips in that article, you’ll also want to keep your website’s overall presentation in mind. Your buyers will be looking at the layout, design, and content of the site first and foremost. A few simple tweaks and improvements to your website’s overall appearance can go a long way in maximizing your sales price and your profits!

Where To Sell Websites

The place you’ll be concentrating your sales efforts is Flippa. It is the largest, most popular, and most active marketplace today for website flippers. Aside from selling your websites privately, this will be the main place you’ll be selling as it will generate the most profits for you.

The Buy Low and Sell High Process In a Nutshell

The idea is you buy a cheap, established website from one of the four marketplaces listed. You’re looking to spend less than $200. You then add value to the website by improving the website’s presentation, increasing traffic or revenues (or creating revenues if it’s not already doing so), and a host of other possibilities that are beyond the scope of this article. Then when it’s time to sell you list it on Flippa for a profit.

Buying websites on the cheap is the easiest part of the process. It’s the adding value part that can be the most challenging. However, if you stick with it and get a system down pat, that can become easy too.

Do You Have Additional Tips For Buying Websites?
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