Partnerships to Maximize Value of Web Properties and Flip (for % of Flip)

[Island]

Has anyone ever done partnerships for existing web properties to maximize its value and then flip for a share of the flip value.

I.e let's say a website is making 3k/month net and the main traffic source is SEO and it's monetized through affiliate marketing.

Then you have a paid traffic and monetization guy come in, work on paid traffic campaigns, creating services/offers, and just having a solid funnel set up. In exchange he asks for xx % of any profit above 3k/month.... as well as a share of flip value. And then let's say in 6-9 months the site's doing 20k/month net and both parties decide to flip for a nice payday. 1st guy is happy because otherwise the website would probably have been stuck in purgatory... while 2nd guy is happy because he makes a very good return.

(I could see this also appealing to people who have projects they don't have time for....)

Ideally I'd like to be the second guy.... I've seen how paid traffic can just be rocket fuel to a property/brand that's already doing well with organic. A friend I worked for, once we started running paid traffic to an already optimized funnel and brand his profits literally doubled in a matter of months (for a 6 fig/month business already).....

Btw, on the SEO front, there are people doing this. Matt Diggity from Leadspring is doing that. Wired Investors have been buying properties and greatly increasing their value. They have a good case study on Long Tail Pro and how they increased the value on that by 2x- http://wiredinvestors.com/2x-seven-figure-business-3-months-long-tail-pro-case-study-2/

At this point I already have a decent cashflow from client work... and this is one of the routes I see that would have a high return on my time....

The issues of course would be-

1) How would I be able to make sure I don't get screwed... (contract wise etc.)

2) How would I screen someone as a good partner to work with?

3) In the first place, how would I find someone to do this with.... (I'm thinking of building my own personal brand as a way to do that).

@eliquid do you have any thoughts on this?

 

[eliquid]

really odd you bring me into this, bc I was going to write a post about finding good and bad partners.

ill write up a bit below in a min

These are just my thoughts. Haters gonna hate, but I don't care. More than 1 way to skin a cat...

1. I don't like the whole, "you get X% over $3k" method.

Reasons:
Great, you got it running and got it to $3k a month in SEO. I value that.

However, if I come in and get it to $20k and increase the LTV/CVR with funnels and such, why should I only get XX% above $3k?

What happens in the first few months and your SEO revenue dips to just $500 after an animal update and now I have to work harder to bring in an extra $2500 to hit the bottom threshold of $3k just to even start getting a cut?

You gonna bring in someone to help you explode multiple times revenue past where you are now and greatly benefit the business, than make them a true 50% partner. Hell, make them a 75% partner.

I've done this in the past myself, it works out good for everyone on both sides.

People want to value execution over ideas so bad, but not compensate for it on the other side. You got your idea off the ground and running and got your idea to $3k a month SEO ( which isnt always stable, yours might be though for now ), but only want to give a % to execution when it comes in and 7x the revenue and overall value of something.

Even at 50% split, Id rather get 50% of $20k a month and take 50% of $200k of an exit, than own 80% of $3k a month and a site worth only $20k in an exit.

People want to cottle and love their ideas and think they should get lion share just bc they were first.
​

2. On screening partners, here are some tips:

• Make them a real partner, not someone that only gets ABC if XYZ. Otherwise you just really have a contractor and someone working with a contractor mindset at the end of the day. If you can't accept this, none of the follow advice will be helpful below.
  
  
• Purposely Skype, call, text, and/or email them on Friday night and on the weekend. Do they only get back to you on Monday morning or after 5 minutes? You want someone that cares and is on the ball as much as you are with your project. If they are not responsive, did they at least tell you something like, "Hey I wont be online this weekend bc I need to go to a funeral". The reason isn't important, the fact they let you know is.
  
  
• Stuff they are responsible for, does it always seem they "can't get it done" and have an excuse, or is stuff getting done? It's ok even if it's tiny small jobs. If it gets done, that's all that matters even if it's wrong in the end. It's also ok if its taking more time than planned bc nothing always goes right, but is it at least getting "done" and movement?
  
  
• Is the stuff they complete wrong all the time? Taking action is huge even if it ends up wrong. However, someone that is constantly getting it wrong all the time is a whole other story. Allow mistakes, but not the majority of the time. We all learn....but someone failing 80%+ of the time prob. shouldn't be a partner.
  
  
• Are they updating you on stuff without you asking? Like, are they finding errors and issues and letting you know about it before you even know or care to know? That shows they care in fixing things and they care in letting me know which helps both
  
  
• Give them small projects upfront to test the waters before you agree to set % so you can see how they handle things. Last thing you want is to give them 50% and then find out they do nothing or get it wrong all the time and reply late to you anytime you need them.
  
  
• Realize everyone is human. You might be single and be ok with being online for 20 hours a day and doing 17 different projects at once. Your partner might have a wife/kids/older parents that need help and also just a single focus thinker than cant sit more than 2 hours at a time. You can't compare your output to theirs though or else you will feel shorted all the time. Work on strengths and not comparing output. Just because you split up the company 50%, doesn't mean your workload will match. However, your investment mentally should match. Is your partner all in mentally?
  
  
• Are you both listening to each other? This is tough. I might think one way, my partner might another. Neither of us are actually wrong or right though. Can you compromise when you don't agree? Sometimes I really hated something that a partner wanted, but I let it go so I could see the end result. Sometimes I loved it, sometimes I still hated it. Next time though, I got something I really wanted that they might have hated or not liked as much. It evens out if it's a good partnership at some point.
  
  
• Learn to take criticism, even if it really hurts personally. People aren't out to hurt you on purpose, but they might accidentally. It's OK. However, if your partner is really in it, they value and care about the project as much as you and they are going to tell you things you would have been blinded to and just plain disagree with. You need to hear these things though and then think about what they said and why and really take it to heart. Sometimes you need to be told shit has to change to get back in the game at 100% personally. If your partner isn't saying no to you or telling you why your wrong, you might have the wrong person trying to help build your company.
  
  
• Things can be seasonal. Your business, your customers, even your partner. What works today at BETA might not be working once you are hitting 6 fig MRR. Give things time to iron out in the long run. I might freak out about something this 3 months, but then realize I was overthinking shit into my 6th month and how stupid was I. Other people go through this too which includes partners, customers, and even just ideas you have. You can't judge things based on today, this one metric, or even something you agreed on 13 months ago. Is your partner this flexible?

3. Im the worse person to ask about finding people like this or branding. I've had excellent partners that did circles around me while I was trying to keep up, and I've had partners ignore me and steal from me while taking about me behind my back.

It's kinda like anything else ( dating, successful business, etc ). You just gotta go out there and fail until you find the right things that work.

​

Another thing to think about too..

Do you feel your partner has your 6 ( your back )?

You won't know this until a few months in. But if something where to go down horribly for your partner, do you feel comfortable with having their back no matter the issue? ( up to a point of course, like say child molestation or something crazy ass )

This isn't a best friend/bro thing. You're running a business here....

However, there might be a time where your partner is going through a divorce or needs to take money out of the company for a loan to get them by for a few months because maybe w/e the issue. Would you have their back on this hard time and help them best you could? If not, you might need to rethink things.

Also, do you think your partner would do the same for you? If you think they wouldn't, maybe you need to rethink things.

I don't want to get this mixed up with being friends or making best buddies. But you are dealing with a person/human and shit is going to happen. What's going to happen if they get hit by a bus and can't work for 3-4 weeks or they go through a divorce and lose everything and they need a $10k loan ( if you had it in the business as liquid cash that wont hurt you ) to survive next month? Would you be able to do it?

 

[Thomas Smale]

The problem with paid traffic to scale up is that it's a specialist skill and most website buyers out there don't want to takeover a business where the person running paid traffic has now left.

Take a lot of these case studies with a pinch of salt... increasing revenue/net income for a few months would not double the value of a business especially as that level.

Instead of giving away profits/equity, assuming your business has some scale, I would suggest hiring people to do the work. This way you get all of the upside from their work and get to keep your equity (which is where the real value is). Let's say you have a business making $4k/mo now and assume it's worth $100k (to keep it simple). You have to give someone 20% to help your paid traffic campaigns. That doubles the value of the business to $200k. When it sells that costs you $40k. $40k goes a long way hiring people/freelancers/buying services instead...

 

[Island]

The problem with paid traffic to scale up is that it's a specialist skill and most website buyers out there don't want to takeover a business where the person running paid traffic has now left.

Take a lot of these case studies with a pinch of salt... increasing revenue/net income for a few months would not double the value of a business especially as that level.

Instead of giving away profits/equity, assuming your business has some scale, I would suggest hiring people to do the work. This way you get all of the upside from their work and get to keep your equity (which is where the real value is). Let's say you have a business making $4k/mo now and assume it's worth $100k (to keep it simple). You have to give someone 20% to help your paid traffic campaigns. That doubles the value of the business to $200k. When it sells that costs you $40k. $40k goes a long way hiring people/freelancers/buying services instead...

Hmm, I was thinking more of an operations partner.

When I say paid traffic I mean basically taking ownership and setting the direction of the property, in aspects such as monetization and offer creation, funnel creation, email marketing, CRO, etc....

(not to mention creating systems and hiring on people to take care of those pieces of the puzzle)

Essentially being a "partner" who takes on a ton of responsibility.

Basically all these important aspects that take massive work... and it's pretty hard to just outsource that kind of stuff completely without knowing how they work.

The problem with hiring freelancers, etc. is you have to manage them. For some people it's worth giving equity in their business to someone who's a long term partner who builds systems, hire employees and runs major aspects of the business.

A buddy of mine does this arrangement and he pretty makes 6 figures/month while working maybe 20-25 hours a week creating content. His whole operations side of the business is taken care of by a partner.... who has taken responsibility of setting up a decent sized team that works full time on his business.

 

[Ryuzaki]

@eliquid nails the details of how to choose a partner and not take it lightly.

The way I look at the rest of the discussion is that it's a luxury, but that's not quite the word I'm looking for.

My point is that the question between equity versus straight pay implies that you're going to be increasing your personal profit either way. That's awesome.

The answer should be determined by other opportunities. An equity trade will (SHOULD) mean that it's now hands-free and you can go on to ask this question on other sites. If you don't have other sites, it doesn't mean you should bog down in the outsourcing though. Your time is likely better spent getting a head start on the next project.

Outsourcing will require your involvement still to a larger degree than may be worth it at this point in the game. You may maximize profit but at the cost of your time. You're proving that you can build sites that can reach this point, so that's what you should be spending your time on.

Coming from the view point of being the person who's being brought on, go for equity.

 

[backwoods]

Take a lot of these case studies with a pinch of salt...

Indeed...

According to Spencer, Wired Investors did not 2x the income from Long Tail Pro (see his reply and comments about the sale in this post)

Spencer even called it "misleading" and Wired Investors were using it to lure in more investors for more deals. Even 1.5 yrs after the sale they haven't increased the revenue from when they acquired it from Spencer.

Looks like Wired Investors even removed their blog post.. pretty sketchy.