Scared Money Don't Make Money

Ryuzaki

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I'm tossing this out there for food for thought for the random person that reads it at the right time in their life. I've been consuming massive amounts of "guru talk" lately and this popped out to me. It's not uncommon advice and really is common sense, but it's something many need to keep hearing, including myself.

"Scared Money Don't Make Money."

I'd venture to say that almost all of us are trying to create systems, outsource, and automate in a way that allows our businesses to earn money for us while we sleep. It's what Tim Ferris talked about in the 4 Hour Workweek (you know, the book everyone hates on in a way that shows they didn't even read it or understood the basic premise).

Cash Conservation
It seems like many of us, especially those who grew up in households that dealt with poverty or low income, or any behavior that led to an unpredictable amount of random expenses, hoarding, or whatever... we hit a lick and make a relatively decent chunk of cash and then we try to CONSERVE that cash. We're worried about the rainy day when our manic dad runs off and buys drugs and a new car again, which becomes fears of Google killing our sites or an IRS audit or whatever. Maybe we're so used to have been rationing our budgets growing up that we're having a hard time letting go of a death grip on whatever cash we have now.

And the problem with conserving cash is two fold:
  1. We now have to keep grinding in the trenches ourselves actively to get the next chunk of money.
  2. Replicating our first successes is harder because we aren't using money to grow in marketing or systems.
Nobody gets a hit every time they step up to the plate, which means we have to work harder and faster to replicate success, and then we hit the problem of only having 24 hours per day. All of this would be solved if we invested a portion of our money into growth (automation, outsourcing, marketing).

This is how you get stuck at the same level and become one of those people bitching about "luck" and how others got lucky and you're just as smart and good. Sure, but you didn't expand.

Let me preface this next part just to stop dummies that want to nitpick before they start: don't expand beyond your means, save an emergency fund, save for a mortgage, etc. Business loans are relevant here but I'm not getting into that. If you do, just think about the volatility of your industry (like SEO vs. Real Estate).

Cash Expansion
We hear this advice all the time, that cash should EXPAND. Kevin O'Leary talking about how each dollar is a soldier that is sent out on the battlefield and brings back at least one captive (another dollar). Grant Cardone is big on expanding with his own cash as leverage to get people's investment cash. They're absolutely right.

Here's a real world example from my life. I hit a great lick, Google rightfully destroyed it all. I then went into cash conservation mode. Here on BuSo I started up an authority site and hit the grind because I felt I didn't have much choice (which was dumb). Instead of investing what I had for a head start, I counted the months I could live off of what I had with no more income, and built up a site with my blood, sweat, and tears. It does fine, but how much time did I lose doing it all myself? Google is causing that site problems too. It would have been better to hit a "maximum revenue" sooner and moved on. Because once I have something else popping I can push a huge influx of content on that site and double or triple revenue easily. I can't do that by myself. I need writers.

Fast forward to the past two months and I've started two new case study projects. Both are starting on aged and juicy domains ($6k and $2k), both are getting an influx of content ($1.4k on one and $1k on the other, just for starters). On the previous site, by the time I hit the one year mark I got an "explosion" of traffic due to the year of writing and link building. This time around the links are already there, better than any I have on the previous site. This time around I'll hit the amount of content I wrote in the first year of the previous site... I'll hit that in probably 3 months all while having built a custom, secure, speed optimized theme.

Assuming I keep at that rate, by the time I hit the one year mark on this new project, I'll have 4x the amount of content in place with way better links for what may amount to a measly $5k total. Why the fuck did I not just do that on the first site? It was because I went into cash conservation mode instead of cash expansion mode.

Perfectionism
Conservation is the main enemy, and part of what lets us rationalize and justify that stupidity is being a perfectionist. Funnily enough, we'll never hit perfection, just our version of it. I guarantee you that the time you spend trying to tweak the CSS of a pre-built theme to your perfection, I can pump out an entire theme that shits on yours. I guarantee you that in the time I try to write the perfect base of 100 pieces of content that moves the people, you could pump that out 10 times over. Perfection is stupid when we could have paid each other to get it done better and most importantly, faster.

I think it was Gary Vaynerchuk or one of these guys recently I heard say in the background in the PIP screen I'm running all day... It was Gary that said something like "Why should I worry about doing it myself 100% perfect when I can have 20 guys all doing 70% of my 100%?" Gary said "I give my team full freedom to get the work done the way they think is right. What am I going to do, ride around on their head like a go-pro and micro manage them all day? That defeats the point."

I decided a long time ago that my previous project would be my "precious baby" where I can pour out my need for perfection. I decided this ONLY so that I could treat my others more realistically. Funnily enough, my skills have grown so far now that my previous project doesn't reach my ideal of perfect any more. How stupid is all this perfectionist business? Very stupid.

Conclusion
I can't tell you the number of people I've seen in the past and present, and will in the future, get their first big win at their level and immediately blow the cash on something dumb (and losing it) instead of reinvesting to grow. I've been almost as dumb by conserving cash, but at least I could tap into it later when I woke up out of my stupor. I've seen this at small scales of $5,000 website sales and as high as seven figures. At least the seven figure bosses can screw up and still have plenty of cash to keep it moving. The less we earn, the less room we have for these mistakes.

I'm sure all of our dreams and goals are bigger than the cash flow we have now. The only way to get there is to expand, which means 2 steps forward and 1 step back, over and over and over through reinvestment.

Scared money don't make money!
 

jstover77

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I've been in some really shitty situations financially in my IM journey to keep afloat, but this is due to this exact philosophy. I never let my money sit idle (of course I've learned over the last 11 years to keep a reserve). I look at it this way...if I invest in 10 different businesses/websites, and one makes me a steady residual income for a long period of time, it was worth the other 9 failed investments.

Great stuff as always man!
 
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To continue the thought experiment: should you actually sell? I sold a website and product that I knew well and regret it. I could have built it much bigger and I understood everything about it.

I later wanted to get back into the game and purchased a website that was going to kick start things again, and I didn't understand it. Revenues dropped to about enough to cover the hosting and domain costs.

If you're thinking of selling, have a read of this book first: https://www.amazon.com/Before-Exit-Thought-Experiments-Entrepreneurs-ebook/dp/B07BN2KD1J
 

Ryuzaki

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To continue the thought experiment: should you actually sell? I sold a website and product that I knew well and regret it. I could have built it much bigger and I understood everything about it.
I'm going to read that book, thanks for the share. "Should you sell" fully depends on the risk involved in holding. In the digital domain, I'd call organic SEO traffic a huge risk. I wouldn't hold on to any website indefinitely that depends on a majority of it's traffic from Google. But you have to think about the multiples you can get on the sale, and can you manage the risk for at least that many months longer (and then sell!).

If you're paying for traffic, what's that economy looking like? How's the bidding pressure? Will more channels open up for easy pickings or is your ROI going to continue to decrease?

Also, what's your success rate like? Can you replicate a sale or two every 3 years, and have that become 5 sales? If so, these liquidation events will earn you nearly twice as much as holding because you can reinvest to scale while minimizing your risk of holding. You're getting future money to grow with today, and it's not a loan. It's yours with no interest.

Sure, let's say of 10 sales you make, 3 of them live on, and 7 tank. I'd rather have liquidated them all.

Of course I'm thinking mainly about websites, apps, and anything that relies on SERP rankings (Google, Apple App Store, Amazon).

But really, there's few businesses I wouldn't sell off at the right time. It's more important, in my mind, as a solopreneur, to get a huge nest egg and war chest secured early than gambling on having a ton of passive income.
 
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A great post, as always.

And it came just in the right time for me. The last couple of days I have been thinking about this a lot, because in the upcoming weeks I will be investing some money. Not a lot, but enough to make me go on a mental roller coaster.

On Monday it feels like the right thing to do, on Tuesday I want to puke when thinking about it, on Wednesday I am motivated to invest money and on Thursday I just want to save it for the future. Yes, no, yes, no, maybe, yes, no, yes.

Investing is the right thing to do. Intellectually I understand it, but emotions are irrational and can be deceiving and make you doubt. Stoicism is your friend. That's why I enjoy your posts so much, they come from a logic place.

The next time my emotions try to trick me into not being smart with my investments, then I will come back to this thread and re-read it.
 
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On Monday it feels like the right thing to do, on Tuesday I want to puke when thinking about it, on Wednesday I am motivated to invest money and on Thursday I just want to save it for the future. Yes, no, yes, no, maybe, yes, no, yes.
Motivation should definitely be a non-factor in this.

I think your problems come from not having a plan.

I'm in a similar position. I'm also about to start putting money into my website and need to come up with a number. My "marketing budget" of sorts.

Here's the angle that I'm approaching this from:

Emergency Fund

Having an emergency fund is important. But how much money do you really need to save for the future? Why that amount? Why not less, why not more? What is your future? 6 months, 12 months? 2 years? Finally - what's the plan B if everything goes to shit?

Opportunity Cost & Inflation

What's your opportunity cost of not investing? How much money are you losing out on by choosing to keep the money in your bank account? Compound inflation is a thing, money is burning if you just let it sit.

The Alternatives Aren't All That Great
  • Savings Account: I considered putting my money to a 2.5% savings account, which is as risk-free as it gets. But after running the numbers in Excel, it's literally peanuts that I'd get from there. Not worth locking away most of my net worth in that thing.
  • Real Estate, REITs, Index Funds: Real estate gives around 6%, the same goes for index funds.
  • P2P Lending: P2P lending is too risky, especially considering we're near the end of a market cycle.

I mean - If I can't beat a 6% annual ROI with websites... I have no business being in the online marketing game in the first place.
 
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A question that I often consider when it comes to selling a site or "getting out" before the crash... Are you selling something because you feel it is going to crash and therefore passing on a bad deal to a buyer?

I can think of nothing worse than selling a site only for it to tank a few months after the buyer takes it over. Although nothing to do with me, surely there are moral and ethical questions to be answered on such practice.

So then if we all agree that we would not sell something we knew was going to hit the shitter pretty soon it follows that we would be selling a website that we believe has long term revenue in its future.

If this is true then why sell?

Just some thoughts.
 
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A question that I often consider when it comes to selling a site or "getting out" before the crash... Are you selling something because you feel it is going to crash and therefore passing on a bad deal to a buyer?

I can think of nothing worse than selling a site only for it to tank a few months after the buyer takes it over. Although nothing to do with me, surely there are moral and ethical questions to be answered on such practice.

So then if we all agree that we would not sell something we knew was going to hit the shitter pretty soon it follows that we would be selling a website that we believe has long term revenue in its future.

If this is true then why sell?

Just some thoughts.
I think there a quite a few reasons to sell a website which might continue to grow in the future, such as burnout, niche fatigue, etc. Why hold onto a website which you're going to neglect? Why not sell it before you put yourself in a hole and sabotage the website.

I have the same thought process as you, however, when it comes to selling a website which you know is going to decline in the near future. It's like when people sell a car when they know it will need new springs or brakes (which I've had happen to me) and don't tell the buyer or reduce the price.
 

Ryuzaki

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Are you selling something because you feel it is going to crash and therefore passing on a bad deal to a buyer?
Absolutely. I'm not into the dog-eat-dog world when things like win/win scenarios exist.

I'd never sell a project I thought was going to crash, because this implies forethought and malice and having performed bad business practices like scummy link-building you know can't last.

I knew a team of guys that would scam on Flippa back when mass spam worked. They had a handful of domains they spammed to kingdom come and would 301 them to a site. When it ranked and banked, they'd sell it for a large sum and then yank the 301's, pointing them to their next site. They scammed this way quite a bit, of course only after moving to South East Asia for protection and low expenses (forethought and malice, again).

Now, I'd sell a site all day long if the only risk was "maybe Google puts out a crazy update, maybe not" because both parties understand the risk involved and the buyer wants to gamble with it and you don't. There's nothing dishonest there. If the buyer weighs the risk and thinks it's worth the potential upside, then it's a win/win scenario. If they lose out later, they'll have recouped some money and you won't get the rest of your structured payout, meaning the revenue multiple on the sale has shrunk back down to the current reality to a more realistic number. You both still win, and they might recover the site in the next update. Maybe they don't. That's why it's called risk, you know. As long as everything is honest and everyone can hedge their bets a tiny bit with these stop losses or whatever, then all's fair.
 

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I'm trying to spend some money, but finding it difficult to do so.

More specifically, I'm trying to buy some competitor sites, but we're too far apart.

I wanted to buy a competitor that hadn't really updated his site since 2017. I offered 1 year of earnings plus a "potential" bonus, which he could set. We're apparantly so far from each other he didn't even want to make a counter offer, but instead has been updating his site. Told me, he might get back to me in spring, if he didn't find the time to update.

Then I tried to buy a strong EMD domain, but not with content, links or age. The owner was some small biz owner in construction. Wanted at least 3K, where I told him I'd give him 1K. I doubt he ever sells the domain name. Reminds me of this domain name I also tried to buy for 1K back in 2011. Still not active, still not sold.

Last I tried to buy a website that was custom coded tool similar to Uber Suggest (different niche). He was interested but told me he had spent 2.5K USD getting it developed and it had less than 1K earnings last year. Which makes me fairly sure he wants at least 4K.

Seems difficult to buy websites? A lot of dreamers with websites. Next year it will take off.

Definitely a learning curve here.
 
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I'm trying to spend some money, but finding it difficult to do so.

More specifically, I'm trying to buy some competitor sites, but we're too far apart.

I wanted to buy a competitor that hadn't really updated his site since 2017. I offered 1 year of earnings plus a "potential" bonus, which he could set. We're apparantly so far from each other he didn't even want to make a counter offer, but instead has been updating his site. Told me, he might get back to me in spring, if he didn't find the time to update.

Then I tried to buy a strong EMD domain, but not with content, links or age. The owner was some small biz owner in construction. Wanted at least 3K, where I told him I'd give him 1K. I doubt he ever sells the domain name. Reminds me of this domain name I also tried to buy for 1K back in 2011. Still not active, still not sold.

Last I tried to buy a website that was custom coded tool similar to Uber Suggest (different niche). He was interested but told me he had spent 2.5K USD getting it developed and it had less than 1K earnings last year. Which makes me fairly sure he wants at least 4K.

Seems difficult to buy websites? A lot of dreamers with websites. Next year it will take off.

Definitely a learning curve here.
It sounds like you're looking for steep discounts. If you're going to bargain hunt, you'll have to expect to wait longer to find a willing seller.

For the first website, the owner would be silly to sell for only a year earnings plus some unspecified bonus. It's very easy to sell a site for 2.5 yearly earnings. That'd be some haircut for them to take. If I had someone approaching me with the same deal, I would've also dismissed them.

For the second website, the owner probably has some emotional attachment to the name. If the guy is a halfway decent business owner, $1,000 isn't going to move the needle much for him. I probably wouldn't sell either.

For the third website, well, it's hard to say depending on what he actually wants, but 4x on a SAAS isn't unreasonable.

It's not difficult to buy websites if you make strong, reasonable offers.
 

bernard

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It sounds like you're looking for steep discounts. If you're going to bargain hunt, you'll have to expect to wait longer to find a willing seller.

For the first website, the owner would be silly to sell for only a year earnings plus some unspecified bonus. It's very easy to sell a site for 2.5 yearly earnings. That'd be some haircut for them to take. If I had someone approaching me with the same deal, I would've also dismissed them.

For the second website, the owner probably has some emotional attachment to the name. If the guy is a halfway decent business owner, $1,000 isn't going to move the needle much for him. I probably wouldn't sell either.

For the third website, well, it's hard to say depending on what he actually wants, but 4x on a SAAS isn't unreasonable.

It's not difficult to buy websites if you make strong, reasonable offers.
Good points, thanks.

I suppose I don't feel strongly enough that I can improve these sites enough to warrant a 2-3 yearly earning here.
 

Ryuzaki

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I've found that trying to buy a site from anyone not actively looking to sell it is nearly downright impossible. They have unrealistic ideas about the value of their hobby project, and they're also so emotionally attached that only an astronomical offer will wake them out of their stupor.
 

bernard

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I've found that trying to buy a site from anyone not actively looking to sell it is nearly downright impossible. They have unrealistic ideas about the value of their hobby project, and they're also so emotionally attached that only an astronomical offer will wake them out of their stupor.
It's just so rare that sites get put up for sale in my locale, but I've seen people put up ads to buy sites. Probably a better idea.
 

bernard

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Now I have my eyes on a site that is actually for sale.

An affiliate "webshop" that supposedly makes about 1200 USD / year and his listing price is about 2000 USD.

On the positive side is that there's lots and lots to improve, from design to SEO. When there's actual income and room for improvement, then I like it.

On the negative side, is that it's a Woocommerce affiliate webshop and I don't have any experience with this. I do not want to fundamentally change the site if its earning, but I would add some "best product" and similar. I fear dealing with Woocommerce is time consuming and difficult.

With that, I've asked for income for the last 3 months.

I plan on lowballing 6-8 months income.

We'll see.
 
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That seems like an awfully low multiple. Please be sure to do your due diligence on that. They would only sell for that price if they saw a negative trend within the industry / their site.
 

bernard

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That seems like an awfully low multiple. Please be sure to do your due diligence on that. They would only sell for that price if they saw a negative trend within the industry / their site.
It's not a good site, it doesn't rank, it makes less than 100 USD a month, despite having been online for 3 years. In addition, the owner writes he doesn't have the time for it. The design is bad and ugly.

But...

He responds wanting MORE than listed price, which is now 2.5x multiple. Says he has another offer, which is obviously BS.

Haha :smile: