In my last post, I touched upon independent income streams as a good way to achieve financial freedom as seen by Robert Kiyosaki. While Mr. Kiyosaki emphasizes real estate, the same can hold true for “web properties” or websites. There are thousands of undervalued websites across the internet. These range from small forums on niche topics to sites generating $100K+ in yearly revenue.

In many cases the person or persons who created the site don’t have the skill set to grow it further. Usually a right mix of development skills, design/UI skills, marketing, and biz dev are required for success. On several occasions, I have seen beautifully developed websites that lack the proper marketing to create sustaining revenue. The same holds true for lack of planning and poor business development. In all cases, the idea was solid, but it was rough around the edges.

How does once get started? Well, it basically boils down to a six-step process:

1. Identify a Site
2. Conduct Due Diligence
3. Complete the Purchase
4. Add Value
5. Increase revenue
6. Sell

Identify a Site
The first step in purchasing anything is to find out what you really want. There are hundreds of type of sites ranging from dating websites to service oriented websites. I recommend you find an area that you have either considerable knowledge in or are passionate about. The key here is to understand your content and the type of users you will have. Of course you will need to find something in your price range. Below are some places to start scouring for potential purchase targets:

SitePoint Marketplace
Digital Point Forums
NamePros
DNForum
BizMP
eBay

Conduct Due Diligence
Upon identifying a web property to purchase, it is critical that you don’t just take the buyer’s word when comes to the value of the site. You must take it on yourself to conduct due diligence and make sure everything is as it appears. Most importantly, find the “hidden value”. Be able to answer the question of why this is under valued. This is the most critical of the six steps.

Just the basics will require you to look at search engine rankings, Alexa rankings, key word traffic, visitor browsing patterns, existing revenue streams, and net profit. Some of this will require the owner sending you screen shots of Google Analytics or Adsense. I would even go so far as to ask the owner to let me peak under the hood and see how the code is written. I would not want to purchase a site that requires an immediate rewrite. Make sure the owner is the legitimate holder of all domain names. Be aware of any liabilities the site may have as well long term contracts and partnerships.

Again, all of this will not only help you understand what you are really buying, but help you see where the site is under valued. For example, a site can have lots of visitors, but lacks proper advertising and affiliate programs to monetize the traffic. Another example can be a poor layout that does not maximize ad space. Some of these site analysis tools may help in the process:

Alexa
comScore
Compete

Complete the Purchase
When you’ve identified what you want, contact the owners immediately. There is a good chance your offer will not be the only one. I always recommend contacting the owner directly even though their site may be listed on a directory or auction. In the event you are in direct negotiations with the owner, I suggest you play your cards well, act professionally, and do your best to make both sides happy.

Add Value
Now that you own the site, every potential improvement you identified from the second step will need to be made. I recommend a very structured strategy where you can make enhancements, measure the result, and see a small bump in traffic. Even minor updates such as changing the title of articles or page headers can dramatically increase people coming to your site. Don’t leave any rock unturned and stick to your plan.
If you don’t have the skill set to do everything don’t hesitate to outsource once in a while. Just keep it within budget. Below are some great places to get ideas and see what others are doing:

Web Ladder
SitePoint Forums
ClickZ

Increase Revenue
The end result of the previous step should be additional value to your web property via increased traffic, additional content, new features, etc. Now you will have to capitalize on this. As traffic grows, so does the opportunity to monetize. Experiment with various revenue models. Don’t just rely on advertising revenue. Partnerships, sponsored content, and affiliate programs should also contribute to your bottom line.

Sell
Here is a very big judgment call. When to sell? Lots of factors such as personal preference, growth, and market timing will affect when you sell. I’ll leave the when and how much to you. Just don’t sell yourself short and unload your web property because of some early challenges. It can take months to see the growth you are looking for. But when you are ready, I would recommend first looking for an individual buyer before you list your site on auctions or directories. You can approach your sponsors, affiliates, or business partners. The odds of negotiating a more lucrative buyout rests with the people close to you and those who have long term familiarity with your web property.

Good Luck!