If you’re thinking about buying websites but you have no interest in managing the websites yourself, you’ll want to listen to this interview with the CEO and founder of Domain Magnate, Michael Bereslavsky.
What Michael’s company does is they help people get into website investing without having to learn how to build, buy or manage the websites themselves.
Today, Michael’s going to talk to us about how it all works, including the minimum investment you need to get started, what kind of returns you can expect from the first year, and much more.
Watch the interview or read the article below to learn how you can get into website investing without having to learn how to manage
Hear from Michael Bereslavsky why he chooses to invest in smaller content websites when creating passive income for his Private Equity firm…
Matt Raad: Hi, everyone. I’m Matt from eBusiness Institute, where we teach beginners how to buy and sell content websites.
If you’re looking for a way to make passive income online, then today’s interview will be perfect for you. I’m excited to have Michael Bereslavsky, the CEO and founder of Domain Magnate.
What’s exciting about Michael is that he buys and sells websites, but he does it through a fund. That means if you want to invest passively in websites, you can do so through him.
Michael will talk to us today about what he does at Domain Magnate. Also, if you are buying or building websites to sell, you can possibly do that through someone like Michael.
So, Michael, thanks so much for coming on board with us today.
Michael Bereslavsky: Hi Matt. Nice intro!
Matt: It’s great to have you chat with our readers. We’ve got a fantastic community of people here in Australia who are buying and building websites.
With the way the marketplace is going for building websites, you are one of the key people I wanted to talk to. One of the big changes in the market is funds like yours. These are little micro, private equity funds that can buy up websites and manage a portfolio of websites for people.
I’d love to cover that, but I also want to look at your background. I think your personal story will be very inspirational for our readers.
Michael Bereslavsky’s journey to buy and sell online businesses
Matt: Let’s jump into it. When did you start online?
Michael: Back in 2004, I was 19 and a student at the university in Israel. I didn’t know anything about buying or building websites at the time. But I had a plan. I was going to become a software engineer, and I was just looking to make some money online.
I was rejected by all the different companies that hired students at the time. I had about 20 interviews lined up as a second-year student, such as Intel, Microsoft, IBM, Apple, and other software companies we had in Israel back then. They all rejected me, and it turned out I was not very good at writing code, and that’s an essential part of being a software engineer.
So, I started looking at other options to make money. Somehow, I stumbled upon the idea of making money online. I spent all the money I had at the time (probably around a couple of thousand dollars) on different courses that promised to teach me how to make money online.
None of those worked, though. I had to learn the hard way by trying pretty much everything to figure out ways to make money.
About a year later, I started making my first money online. And then, a couple of years after that, I was making enough money that I considered changing my career path.
Matt: You did well.
Why Michael chooses content websites to make money online
Matt: In those days, when you first started online, what sort of websites were you building up or working on? Did you do e-commerce, or was it content sites?
Michael: It was all content affiliate sites, which were also monetized through Google AdSense.
Matt: Okay, that’s the same as us.
Michael: At the time, it was completely different. There was no competition, and Google and SEO were straightforward. All I had to do was build some websites, add some content, and cross-link between all my sites; that’s it. They would typically start getting quite a bit of traffic straight away. But obviously, it’s very different now.
How Michael Bereslavsky can access multi-million dollar website purchases…and how you can too…
Matt: Michael, you’re very well-known in our industry with Domain Magnate and what you do when it comes to buying and selling websites at a high level. You’re purchasing multimillion-dollar websites now. Over that journey, what was the next transition point for you?
You got to the point where you decided you’re making enough money and could quit your traditional career to do this full-time. But what led you to manage people’s money and help them buy websites?
Michael: Initially, I had to learn all the different skills around building sites, monetizing them, etc. The next step was to see how I could reinvest my money. So, I started buying sites and then focused on growing them.
At first, I bought tiny sites for just hundreds or thousands of dollars. As that evolved, I was buying bigger and bigger sites.
Investing other people’s capital to buy passive websites online
Michael: Leading up to 2018, I had many people approaching me and asking if they could invest. Until then, I was just saying, “Well, thank you. I don’t have any options right now, but we’ll let you know.” But I never emailed or contacted them again because I forgot about it.
Then in 2018, I came across a few deals that were really good, but I just didn’t have enough capital to buy them at the time, so I lost them. It was very upsetting to have the perfect deal lined up, where you know right away how you’re going to grow and improve it. Then to lose that deal at the last moment just because you aren’t able to get enough capital.
From that moment, I thought, “Well, maybe it’s time to start using some investing capital.”
I didn’t know anything about it. So, the first thing I did was Google “how you raise capital, how you have some capital with some investors.” That wasn’t very helpful.
Then the next thing I did was ask different friends, and one of those friends was Joe Magnotti, the founder of Empire Flippers. He gave me some good advice, along with a few other people from the industry.
At first, it started with an investor interested in buying one website with us. He was pretty happy with what happened, so he brought in a few more investors. Those investors bought a few more sites, which evolved into our first fund. It all happened quite organically.
Why small 6-figure websites provide great opportunity for passive income investors
Michael: Later, we launched this buy-and-manage program where we started buying individual sites for investors. Over the past 3-4 years of working with investors, we’ve experimented with different approaches to determine what works better for us and what doesn’t.
“I’ve learned that it’s better to focus on buying sites in the range of mid-six to low-seven figures. That range has less competition and better opportunities.” – Michael Bereslavsky, Domain Magnate
Still, most individual buyers don’t have enough capital to get to that range, so they usually look for smaller sites. And most of the bigger investors, like public companies and large funds, usually go above that range. So they look for sites that are in mid-seven figures and so on. So that’s the opportunity.
We also found that it’s better to have a smaller portfolio. So now we mainly do group buys, where we raise funds and buy just one business (potentially two) per group entity. That makes it quick and straightforward to grow the business and sell it, with a minimum of regulatory requirements needed.
Matt: That’s awesome. You’ve found a niche spot in the current marketplace.
And just like you mentioned earlier, we also recently heard from the founder of Empire Flippers, Justin Cooke, at one of our bootcamps on buying and selling websites. He said that the sweet spot is $500,000 to $1.5 million because that’s where the big corporate buyers aren’t going at the moment. So, you’ve got a much better opportunity.
Unless people are doing what you are doing, not everyone’s got a million dollars cash lying around to go and buy a website. So any websites around that space are really your sweet spot. Isn’t it?
Why group buys with Domain Magnate are an opportunity for investors with limited capital
Matt: I think that’s something I want our readers to understand; if you don’t have a million dollars cash, this is where you fill the marketplace, Michael. You’re the man to speak to because you do these group buys.
You get people coming on and saying, “Well, I don’t have a million dollars, but I could put $100,000 in and pull our money together. You’re an experienced person in this space.”
The other big thing I noticed that Domain Magnate is known for is keeping things simple and quick. You can do deals quickly, build them up, and even look for quick exits with these websites, too, don’t you?
Michael: Absolutely, and we also try to do most of our deals privately to avoid the high brokerage fees these days. So that allows us to save 15% on buying and selling websites.
Try this underutilized strategy when purchasing websites
Matt: Your other specialty is doing private website deals now.
I’m guessing there’s a bit of history there. You and I are probably similar online because we started around the same time. We probably even bid against each other! I remember this was before Flippa; it was mainly SitePoint Forum that we used for buying websites.
As I jokingly said to you, we actually bought our first website on eBay. Would you believe it? I would never recommend that now. But back then, you couldn’t buy websites anywhere.
There’s another strategy that we use, which is an underutilized strategy for buying websites. We call this the private approach, which is the equivalent of doorknocking. We emailed every website in the niches we’re interested in and just saw if people wanted to sell.
I think that if Liz and I were to run a fund, our sweet spot would be doing private deals. Is that a strategy you guys use today?
Michael: That’s certainly part of our strategy. We do send quite a bit of outreach emails. We’ve been experimenting with that quite a lot over the past few years to find out what works better.
As everyone knows, it’s tough to get a good response to these kinds of emails. So, it’s essential to optimize your templates as much as possible.
But I would say most of our best deals come from people contacting us. This is from people in the industry that I know privately or people who come to us and looking for a quick sale. They just fill out our application instead of going through the whole brokerage process.
Should you add special conditions when buying websites for profit?
Matt: Part of your role as CEO of Domain Magnate is to get out and do interviews like this. You never know who watches these interviews.
Even within our audience, I know for a fact there are people with websites that are exactly what you’re looking for; those mid-six figures to low seven-figure websites. I think that’s a nice, sweet spot, and you guys offer a great opportunity there.
I’m thinking of some specific students who own passive websites with low seven-figure valuations. If you had someone like that, do you keep them on as partial owners? Do you do deals with them where they can cash out for a certain amount, but they retain some equity in the website?
Michael: We’ve experimented with that before, but I found out that it just doesn’t seem to work well. That’s because most owners don’t remain interested if they only own 10, 20%. They are just no longer interested in working on the site, maintaining it, assisting, etc.
I’ve found that it’s better to have a structure in our agreements to provide some kind of earn out instead. There are some conditional payments such as 20% of the purchase price that is spread over maybe six months or 12 etc.
It’s conditioned upon the performance of the site. That way, the seller is more likely to assist us and give us some advice if needed. But they don’t need to go and do anything, and they usually don’t want to run the business.
Matt: So, you prefer just outright buy it and run it with your team.
How big does your team need to be when buying passive websites?
Matt: Do you have team on board that you’ve built up to run these sites?
Michael: We have a team of about ten people now and maybe another 10 or 20 freelancers. We’ve experimented with that quite a bit over the past few years, finding the perfect balance.
We’ve been working with agencies, outsourcing some things to freelancers, and building and growing our in-house talent.
Matt: So, you blend the two – owning a team plus outsourcing to agencies etc.
The Benefit of using Group Buys and Funds to diversify your website portfolio
Matt: That’s one of the beauties of the online business model compared to the bricks-and-mortar world, and it lets you scale. I know you said you’ve found you like to keep it focused. That’s an interesting comment too.
Over the years, Liz and I have found the same thing. We used to have this massive portfolio of websites, but it’s too much to manage. It all sounds great, but the reality is there’s a lot of headspace needed.
So, it’s interesting to hear where you’ve basically got a private equity fund; you’ve brought it down into a narrow portfolio. The Domain Magnate website says you’re up to fund number three. Is that right?
Michael: That’s right. I guess we could call it our third fund.
Just to be clear for your readers, our group buys technically cannot be called funds. That’s because we don’t satisfy the SEC requirements for being funds. We would have to do many regulatory things, which are very expensive and time-consuming.
We’ve done it once, and we’ve learned that doing these small group buys is much easier and better. This becomes more like a partnership rather than a fund in the legal sense. But it allows us to have much easier, faster management and operation.
How much should you invest when considering a Group Buy?
Matt: What would the typical investment be for someone like myself who wants to invest with you? What would be the minimum, and what would be a usual investment?
Michael: For the one we are doing now, the minimum investment is US$75,000, and the maximum is US$150,000.
We had a maximum because it’s a small project. There are usually around ten people or less, and we didn’t want any single person to own too much of it. In other words, it’s well distributed.
Matt: So, it’s literally like a syndicate. It’s a group buy.
Your model is a group buy, where you bring on ten website investors. Typically, you’ll have about $1 million of funds. Everyone pulls their money together, anywhere from $75 to $150,000. And that’s why you’re saying you’ve got funds to go out there and buy a million-dollar website.
Michael: Exactly, and we also make sure that we put some of our own capital in it, and then we would go and buy either one or two businesses.
Matt: And how much of that is your own capital? Are you allowed to disclose that publicly, like typically just a rough amount?
Michael: For this particular project, we are putting in 5%.
Matt: You’re putting 5%, and then you run it.
Always do your Due Diligence before investing in a Group Buy
Matt: Do they get a quarterly or annual return if someone invests in that, or is it more on the exit? Is it like an angel investment, purely on the exit, or do they earn some money throughout it as well?
Michael: First, we make a point to be as transparent as possible. We send quarterly reports and payouts to investors. And we explain everything about the deals we are doing, i.e., the businesses we are buying, the strategy, how we grow it all etc.
Usually, we aim to reinvest as much as we can into growing these sites. So, we typically tell our investors, “Initially, you might expect lower returns from the first year or so. But then we usually resell the business after two years or three years.”
It’s not a very long-term endeavour. As soon as we resell, then we distribute all the profits. But throughout the investment, we distribute quarterly dividends in the scenario we haven’t reinvested everything and have some profits to share.
The top considerations Michael looks for when investing in content websites
Matt: What sort of sites are these businesses? Are these content sites, or do you also do e-commerce style sites?
Michael: It’s only content, and sometimes we buy SaaS businesses. We have quite distinct and specific criteria, and it consists of a few different parts.
The first part is the ethical and legal requirements. We only want to buy businesses that make the world better rather than anything problematic or controversial. So, we don’t purchase news websites or anything like that. We mostly have informational content and affiliate sites.
Also, we are looking for businesses with primarily SEO traffic in an industry where there is quite a bit of room for expansion. We are looking for very low SEO risks, so we don’t buy sites that do any kind of aggressive SEO link building and sites that are relatively new and high risk. We prefer solid, stable, longer-term projects, which we can then grow aggressively with more content and links.
Matt: Awesome. So, content sites would fit nicely into those criteria for you then.
Why private funds like Domain Magnate are looking to buy small established content websites
Matt: Here’s an interesting question for you, what are the smallest websites you would look at in terms of the purchase price?
Michael: For the group buys, we usually look at mid-six figures as the minimum, around $300,000 – $400,000.
But lately, we have also started looking at the option of buying really small websites. For example, about six months ago, we purchased a website for around $20,000 for our portfolio. We’ve managed to get the revenues up to about $2,500 per month, so we could probably sell it for $100,000 now.
I’ve found with these small sites that it’s an easier opportunity to grow it very quickly.
“With smaller websites, people are often not as experienced and not as aware of what you can do to monetize the site to grow it better.” – Michael Bereslavsky, Domain Magnate
But the challenge for these smaller sites is that you probably have quite high expenses if you have a team. So, it might not be as profitable unless it grows a lot.
Matt: So, for our beginners reading this interview with Michael, please take inspiration. You just read it here, he’s buying these smaller sites under $20,000 – $50,000. There is an awesome opportunity because most people selling smaller websites haven’t optimized them well.
Even someone like Michael, who runs a private equity fund in this, is still buying those little, tiny sites, just like we teach you because they’re a lot easier to fix up.
And you’ve just read that Michael bought a site for $20,000. Now he can sell that for $100,000. How long did that take you to get to that level? Was that a year or so?
Michael: It was about half a year, but it was mostly just some small monetization optimizations.
I found a lot of these websites were just using Google AdSense. The other networks can make a big difference. We’ve found that platforms like Thrive perform quite well. So, it’s not uncommon to have double or triple the revenue after you move to one of those premium networks.
The advantage of selling your website to Domain Magnate
Matt: We have a lot of people in our community who have websites in that $20,000 – $100,000 valuation range. Suppose any of them were looking at exiting before selling on a traditional platform like Flippa or Empire Flippers. Would it be worth someone like that speaking to you?
Also, what are the advantages of someone selling a website for $50,000 coming to you rather than going to a website broker? Here is an opportunity to sell yourself to us!
Michael: Since we’ve done hundreds of deals over the past 17 years, we try to make it as easy as possible for sellers. People can go to domainmagnate.com/sell, and just fill out a quick form. We only ask for the minimum amount of data we need: the URL, the revenues, and the expected price range.
Then if it’s something that fits our criteria, we would let them know right away, give them an offer, and ask for a few more details. If it doesn’t fit our criteria, we just tell them right away.
If we decide to buy a website, we can do the deals very quickly in a few days. That saves the seller a lot of time and effort. The prices we pay are pretty much the same as what they would get from listing with a broker and waiting for a few months and then selling and paying the commissions etc. So, it just simplifies the process a lot.
Matt: So, it’s a simple, quick way to sell your website.
I would add in there, too; with our background in mergers and acquisitions of bricks-and-mortar businesses, I’ve also noticed that a lot of people just want to sell their online businesses quietly and quickly.
It also means they don’t have to open up their website to the whole world like when they stick them on a traditional website broker’s site. I would imagine that would be an excellent advantage for some people.
Michael: We’ve found that many sellers prefer to sell to us even if they have a higher offer from someone else. They know that we will honour it, make the process easy, and understand what we are doing.
Unfortunately, there are also quite a few buyers in the space who are not as experienced. Sometimes you would have buyers who make offers and then don’t follow up, or they don’t have the capital or drag the process out etc. So, the sellers appreciate having a solid process.
Domain Magnate’s Buy and Manage Service – Another alternative to investing into Passive websites
Matt: One of the other interesting services you offer is for people who’ve got excess cash to invest in websites, but they want to do it passively.
They already have the option to invest via one of your fund/group buying opportunities. But I noticed that you also offer a service that you call the “Buy and Manage Service”.
Do you want to talk to us about that because that might suit people as an alternative to investing passively in websites?
Michael: The group buys are a more diversified investment option where you invest along with other people into a website. You own a smaller chunk of the bigger business. But for “Buy and Manage, people can own the website directly.
These typically come with certain criteria. Perhaps they want a website within a specific niche, specific industry, or specific price range, etc. So, we will go out and find them a business that fits. We share all our due diligence data, and then they can review and pick a business that they want to purchase. We then buy, manage, and grow the website for them.
The fees are slightly higher than if you invest in a group buy. And the minimum is a little bit higher too. But the upside is that people get to own the business directly, and they get to learn more to see how it works.
They also have an opportunity to say what happens to the site. We usually don’t ask investors to vote or suggest what we should do through our group buys. But with the individual purchases, it’s up to the investor how they want their business to be managed.
Matt: You mentioned there that it’s a little bit of higher investment. Typically, what sort of money would you need to invest into the buy and manage service?
Michael: It usually starts around $200,000.
Matt: Okay. Then it’ll be more worthwhile for everyone involved because you’ve got to put a team onto it and grow it.
Michael: We always try to sell directly to save on commissions, but sometimes we might not be able to do that. So, then we might use a broker.
We also found that sometimes we can sell sites directly from one of our investors to another. So that makes it very convenient for everyone.
Matt: That’s a great option.
Don’t make these 2 mistakes when building your online website business
Matt: Michael, we have a lot of readers in our community who are just starting. They’re learning to build and buy content sites.
Looking back over your own journey, what would be your advice for them? Do you have any key tips that you could give to beginners starting out earning money from online businesses?
Michael: There are two big mistakes I often see people make when buying and selling websites.
The first mistake is that they go and buy a big business before they’re ready. They just start looking at all the marketplaces and talking to brokers, etc., and then they find something they like and buy it. But they don’t yet have the experience or expertise needed to manage and operate a business. So it often doesn’t go well.
The other mistake is they just take too much time looking at deals, reviewing and planning. I’ve seen quite a few people who just spent years and years researching deals and looking and never really buying anything.
Michael’s top advice for newcomers buying and building content sites
Michael: My advice to both is to start small, learn the basics you need, and then go and buy a small site for under $100,000.
It’s actually not a big difference between a $100,000 website and a website that you can buy for a million dollars. It’s not a massive difference in what you need to know to operate it. If you can manage a small website successfully, you’ll be much better at operating a bigger one.
So, my biggest advice is to go and buy a smaller business and operate it. Once you feel comfortable, you can buy a bigger one. That’s also the best way to learn because you learn by doing it.
Matt: I want to thank you, Michael, for sharing that tip because that’s our number one golden rule that we teach at the eBusiness Institute. We frequently say to people exactly what you just said:
“What you do on a $100,000 site to fix it up is virtually the same on a million-dollar site. It’s just there are more zeros involved.”
Matt: I know that it is so cool to say, but you’re hearing it from Michael. This guy’s an expert and does this at the multimillion-dollar level. Please, listen to Michael. Even if you don’t want to listen to Matt, listen to Michael. He knows what he’s talking about.
Michael: Absolutely. One small correction, though, is that once you go above a million dollars (more or less), that changes the landscape a bit because you are dealing with bigger businesses with more things involved and employees, etc.
Matt: Yes, so start small, guys.
Why Content Websites are ideal for beginners
Matt: What’s your preference for a beginner to start on? What sort of sites?
Michael: I would say it depends on the types of skills and expertise they have.
The default choice would be a content website. But we’ve found that many people have a lot of skills and logistics from their careers. In that case, it makes sense to go and buy a dropshipping business or an e-commerce business.
Or we’ve found that some people are good at coding and programming. They work in tech. So maybe they should go and buy a SaaS business or a software-related business.
Matt: For the whole, we found that content sites are just so simple, and they’re low risk compared to e-commerce.
If someone’s a beginner and they want to get into an e-commerce site, there are a lot more moving parts there. I guess drop shippings are nice in-between as well. Obviously, I’m biased because we used to buy and sell manufacturing businesses, and I don’t like businesses that involve physical inventory. I just love content sites.
Remember to always do your own Website Purchase Due Diligence
Matt: One of the other things that I should mention that you do, and I’m presuming you’re going to be a legend at doing this too, is you do specialized website due diligence services, don’t you? I saw that on your website there.
Michael: We offer that as a site service to all existing clients, but we don’t do that very often. We also offer a concierge buying service for our bigger clients looking for deals generally around a million dollars and up, and then we go find them some great deals in the private markets.
Matt: Awesome, so people can come to you for that.
How to contact Michael Bereslavsky to sell your website
Matt: Wow, Michael, that is just unreal. I’m so glad you came on today. It’s good to hear about what you guys do. I think you’ve got an awesome business there, helping people buy passive websites. I’d love to have you back later with an update but thank you so much for coming along today.
If you like this video, make sure you drop some comments below. And, if anyone wants to contact the team at Domain Magnate about any deals or invest passively in websites, what’s the best way to reach you, Michael?
Michael: You’re welcome to email me directly at [email protected], or contact me through facebook.com/domainmagnate.
You can also listen to our podcast with Domain Magnate Show on YouTube or Apple.
Matt: Awesome.
Michael: Thanks, Matt. Great chat.
Matt: Thank you so much, Michael. We’ll speak to you next time.
DISCLAIMER
This article should not form the basis of an investment decision. This is not a recommendation or endorsement to invest in Domain Magnate nor is it financial advice. This is merely an educational style interview with the founder of Domain Magnate so they can explain what they do and how they operate. Assume we have not done due diligence on Domain Magnate nor have we independently verified any statements made in the course of this interview. You must do your own due diligence and seek independent financial advice before acting on anything mentioned in this interview.
We receive no affiliate commissions or incentives from Domain Magnate. Links in this article are not affiliate links.
