Now you probably know and, this is The Website Investor, that I am a big fan of buying and not just building but there are situations where you might want to build instead of buy.
With great ROI comes financial risk
The very first one is simply this: You have no cash, right? You simply don’t have the funds. Websites have great ROI ‘return on investment’, but the immutable law is where there’s great ROI there’s also risk involved. So, if you have no money or you have very limited money, you don’t want to risk it, then build don’t buy.
Do you know what to expect?
My first successful website was a News website and when I bought it, I spent time learning the business model. I bought several News sites, but I ended up over the years building more News sites than I bought. Once you know the business model that’s a good reason to, in the future, build instead of buy.
In cases where you know the business model well, you know how to operate, you know what you can expect from the business in terms of financials and the effort required, that’s an excellent situation where you’re going to build and instead of buy or maybe you do some of both if you have the funds for investing.
Quick returns are worth the build
Another situation where you would want to build, potentially, is where the payback will be quick enough to give you a great ROI. Particularly these are business models where you have paid traffic or paid customer acquisition that can be ramped up very fast and don’t require like a waiting or maturation period.
One example for me was a traffic arbitrage website that was valued at several hundred thousand dollars. The potential investor came to me and said ‘Hey, help me evaluate this website,’ I looked at it and I told him, ‘Look this is a situation where it would probably be better to build it yourself and replicate the model than it is to spend $250,000 to buy into it.’ We agreed to work on it together and after about six weeks we had the site in place and in our first 30 days we netted about $10,000 in profit. After that, the business ramped up very quickly and we doubled that profit a few months later. In this situation, building was clearly the better model.
Are you the face of your brand?
Another situation is when you want to be the face of your brand, you want your name and your picture and yourself, your personality, to be the corner piece of the thing that you’re building. You may be selling services, or you may be giving advice, but you want to do it under your own name using your own personality then in that case you’re going to want to build. Now you might be able to augment that business by buying audiences or synergistic similar kinds of businesses that have email lists or a following but if you’re going to be the brand then you’re more likely going to build and not buy.
Building is a good learning tool
If you’re primarily interested in learning, if your end goal isn’t necessarily to build and grow a great big business or at least not the one that you’re starting with, then having the experience of the technical initial setup of the website and the tools and techniques that you need to attract your first visitors is a good thing for you to do.
Learning from buying is also very effective because when you buy there’s already a working model and you can focus your learning on the areas where that model needs to be improved, but certainly there’s tonnes that you learn in the process of building a business of any kind and particularly an online business that you might not learn another way other than doing it from scratch.
Build at your own pace
If you’re not in a hurry and you’re not worried about the cost of spending your time to build a website then building and doing it at your own pace, in your own way, is perfectly reasonable. You can learn a lot at a pleasurable pace and you don’t really need to fast track the process if you haven’t invested any capital.
Do your homework
And the final reason might be that you’re trying to do something unique. You have a product, a process, something in mind, that’s different than other things that are out there and so you want to build your website from scratch so that you can fully customise.
Be careful with that as it can be a trap. In most cases you’re not quite as unique as you think and there are other people who are similar enough or other businesses for sale that you could mould into that thing you’re trying to create. Don’t get me wrong, there may be legitimate cases where you’re doing something quite different and building from scratch is really the best and easiest way to make that happen but do your homework first, there’s no point reinventing the wheel.
So those are the few reasons why you would want to start from scratch and build rather than buy. Of course, I’ve got a lot of reasons to buy, a lot of situations that it would be better to buy than to build but we’ll cover that in next weeks blog.