Follow along as I browse through some Flippa listings and point out some classic signs which may indicate what you’re considering investing in, is most likely an absolute scam.
Even with specific filters in place to weed out as many bad sites as possible, plenty still manage to fall through the cracks and make their way to the front of my eyes. So I thought I’d shine some light on what separates legit investments with rubbish.
These examples won’t be exactly the same across all websites, so it’s up to you to use your judgment and apply them appropriately. Some may seem common sense to you but to others, they aren’t, so I’ll be going through even the most basic of signs.
0:00 HOURS WORKS REQUIRED
I’ve seen that phrase word for word on many descriptions across Flippa. After the 5th or 6th time, it was clear – every seller offering a site for sale with the unconvincing salesman phrase was offering a moldy lemon.
Sorry to crush your dreams, but no site requires zero hours maintenance.
Sure, in the short term you could probably get away with leaving it on the backburner for a while, and some longer than others. But eventually, it will decline without your tender loving care.
Take note of the wording in the following examples – if you’re considering purchasing a site with the following based on their words – I’d consider again.
100% NO RISK
No investment is risk-free. Period. Rid yourself of the perception that such a thing exists and you’ll save yourself countless hours pondering over investing in potential scams.
Yes, even the great US government backed bonds aren’t risk-free. The risk may be unbelievably minimal and potentially even non-pertinent in certain situations, but it’s still there. Think about it, if WWIII were to start tomorrow (according to CCN that’s every three months), you think the government would immediately care about your $100,000 bond if they were under financial strain? Don’t get your hopes up.
A bit of an extreme example, but one needed to show you risk-free assets don’t exist, and anyone peddling them is trying to pull the clouds down from the sky and shove them in your face.
The only risk-free investment in existence is if you were able to invest in the fact that some people will always believe risk-free assets exists. I’d leverage myself 99,999 to 1 and be able to buy China with the winnings.
I even went back to the last listing above to highlight the “risk free opportunity” text, and this is what I was greeted with:
A well deserving suspended auction and banned seller. Quite fortunate it was shut down before the scam could go through for those who bid, if they were even real bids.
This is a given in all businesses. Put yourself in the seller’s shoes – if the site is making $3k/month, would you sell the whole site for a mere $10k? Why not wait 3 months then sell it?
The only reason a site could possibly sell for such a low multiple is for one of the following reasons:
- The sole supplier of the business just went out of business and the seller is looking to pass the buck before they get stuck with it
- Adsense or another monetization source has recently dropped the ban hammer on the site
- Changes in legislation will deem the site and its contents illegal in the near future
- The seller needs cash fast to pay off their drug debts to the local cartel
Personally, I almost alway look over sites with a BIN less than 5x the monthly revenue – the chances of it being a legitimate, sustainable business, is near nill.
You’ll have more luck seeing a Kangaroo dancing on stage at a comedy show in Detroit. Oh, wait. Let’s try that again. You’ll have more luck finding a President in 2017 using Twitter to spread vicious rumors about the former President. I’m not very good at this, am I?
You see any of the above, you keep that middle finger scrolling.
My despise for Paypal isn’t personal, just business. Under absolutely no circumstances, in any substantial transfer of online assets, should either party in the deal be in control of both the business/asset and the funds. So why the bloody hell would you do it with a website?
Escrow. Escrow. Escrow. If you’re not using a trusted broker, use a trusted Escrow service. Flippa has their own in-house, or you can opt to use Escrow.com. Whatever the case, make sure you choose one or the other.
If at any time, you come across a listing with PayPal as the only accepted method of payment, first confirm with the seller to see if they’ve accidentally made a terrible mistake, and if they haven’t – you know what to do. Walk away.
Thankfully, Paypal is becoming an option far fewer choose for virtual transactions – so much so, I was actually unable to find a listing solely accepting Paypal.
But if you do come across a listing which looks similar to the image below – run for the hills.
Again, a bit of common sense is required here. If you had a legit income earning asset for sale, would you seriously enter into a contract to sell to any bidder – no matter the price? I don’t think so. That’s why real estate auctions always have a reserve price – meaning bidding must exceed a pre-determined price by the seller or all bids are able to be rejected.
You should always look at no reserve auctions with a healthy skepticism. No person in their right mind would start a no reserve auction. There are no ifs, buts, or ‘ors’. If you own an income producing asset, you’re not willing to let it go for any price. Unless of course, you aren’t in your right mind.
Be confident the bidding will reach an acceptable level, but why bother taking the risk when you can ensure a price you’re happy with?
With all that said, though, if you read my analysis on Flippa’s most active auction at the time, you may have noticed the seller started it off with no reserve. How did it end? With a multiple of 70.
Maybe being a little bit crazy pays off sometimes. Keep in mind, I was able to confirm the legitimacy of the listing with just 2 minutes of due diligence. Again, this is the exception to the rule.
The majority of auctions starting with no reserve are not worth investing in.
These are just some of the classic scammy signs you can use to spot them as quickly as possible and spend more time conducting your due diligence on quality sites.
Don’t get me wrong, this is by no means an exhaustive list of scam signals, simply some of the few which are easiest to spot, and 98.6% of the time effective.