How To Profit By Buying And Selling Online Businesses – An Interview With Jock Purtle

This Post: How To Profit By Buying And Selling Online Businesses – An Interview With Jock Purtle

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hey guys it’s my last four here and today I have the pleasure of being joined by a very special guest jock pedal thank you join me today jog how are you Goomer yourself I’m very well thank you now a quick introduction to my guest job turtle is the owner of digital exits calm this is an agency that specializes in helping individuals get the best deals when buying and or selling online businesses and today we’re going to be looking at how you can make money buying and selling online assets so can you tell us first of all how you got started in buying a setting on my businesses so I started buying sewing along businesses late two thousand nine I was doing web design SEO all that good stuff for local businesses and came across this thing called website flipping people were pushing products at the time which got my attention I then jumped in there’s a form called experienced people dot net jump in there people were talking about buying selling sort of educating myself and then for my first Adsense site for 10 grand and that was the start of my journey okay great so I want to kick off by talking about the buying side of the process can you maybe share with us what some of the key benefits are to buying an online business so in my opinion the main benefits of buying an online business is a time thing so essentially what you’re doing is you’re buying the time invested by the previous owner and you get that right away so you’ve got a business that’s already existing or established already making money already has customers and you can jump out of box really really quickly what also is benefit is that existing customer base I think it’s a lot easier to make small tweaks to something to get a massive exponential result than it is to get something that stationary and start trying to make tweaks so I like to use the metaphor it’s hard to steer a parked car yeah that makes a lot of sense I guess it’s a lot harder to cry momentum and get something off the ground compared to take us something that’s already up and running and optimizing it right yep like my skill set has always been buying and selling stuff I was a bit of a kid entrepreneur and cut my chops on buying and selling so I’ve always had that in my blood but even if I didn’t I still see the benefit of acquiring something this is buying something personally okay so how does an individual go about working out how much an online business is truly worth so the market accepts what’s called a multiple of earnings valuation method and what this means is you take the net profit of the business that’s the total profit or net earnings of the site made in the last 12 months and and they generally x number between one and three to get a value of the business so let’s say you would making a hundred thousand dollars net profit per year and someone offered a two times multiple therefore they thought the business was worth two hundred thousand dollars quite simple in that regards and thats a t’market accepts the valuation of the online business okay that’s interesting so were the types of businesses that you’re involved in can you maybe tell us what price ranges these businesses fall under generally start at the hundred thousand point we will sell the odd sight the like 50 grand 60 grand a kind of thing and then normally up to about 5 million dollars and then ending over 5 million will be a good candidate for a notice and acquisitions company okay great so what are the key areas to consider when looking to purchase and online business the key things that you’d want to look for our history you have a look at the background or the site how long it’s been around what’s happened to it in the past you look for growth yeah use the business growing is a declining and you’re going to make a judgment on your position on the business whether either of those two things are happening on the flip side you want to be looking at you know what it was its revenue sources how sustainable is that and you want to have a look at the traffic sources are and how sustainable bodies as well maybe also the business model and a market that would come into account as well but generally because it’s an asset and it’s an investment you gotta look at okay well if i put x amount of dollars down how quickly i’m going to get my money back and if i make some improvements can i make money back quicker okay so i’m quite new to this whole process i’m trying to get my head around in the terms of when you’re looking to buy a property is there a way that we negotiate the price when buying an online business definitely everything’s up for negotiation generally someone’s going to put their business up for sale at a higher price than what they expect to get same in the real estate market so let’s say someone put their business up south to turn a grand you might come in and offer 180 yeah okay so this is just something I was thinking or as well is if say somebody was looking to get into buying online businesses and they have previous skill sets like Laura expertise and maybe driving traffic or particular skill sets in copywriting listening do you think these are almost similar to like when you’re looking to buy a property and you’re thinking of fixing it up could you find these gems if you like in the market and look at a website where you can see so many opportunities to improve it and then maybe take that approach as well definitely that’s what I’ve been doing since 2009 so the main things I look for is can you improve the conversion rate of the site can you increase the prices and can you find better and more traffic sources so those are the main things that you look for when trying to acquire an online business and if you’re looking to make a quick flip that would be the plate that I would make ok so try and maybe look for something which is got a load of opportunities waiting to be exploited just find what the owner is not seeing their ticket yes ok that’s interesting can you maybe give us a little bit of a breakdown us to the process of actually going about acquiring the online business sure the first thing would be to educate yourself on the process or maybe even on what you want to look for come up with some type of buying criteria and that would be educate you so then you’d say you decide okay I’ve got X to spin let’s say you got two on a ground to spend so you’ve gone start looking or hunting for a business now you’d look through the website brokers listings and you look like the business for sale classified sites you look in forums you look privately those are probably the main places you start looking you find a business that you like you generally get some information about the business beforehand like what’s its revenue what’s its traffic how does it make money all of the above after you’ve done that you would make an offer so I want to buy this business for 150 grand you negotiate you’d come up with an offer price that was whatever you negotiated you then move into due diligence so the person would claim that it makes a hundred grand per year in gross revenue or gross profit and then you’d want to verify that so you look at things like merchant account bank statements all that kind of stuff and then once you’re happy with that you’d make a formal offer for the business that formal offer would then go into a contract for sale that would be signed you’d use escrow.com to transfer the funds and the assets and then you’ve got your business and the owner has their cash and that’s the deal done yeah it sounds like this quite a lot of steps involved in the process that’s where someone like yourself would come in to help out right definitely it’s use your accountant to do you tax and your lawyer to do your leg of work use a broker or an adviser to help you buy sell and online business definitely okay that makes sense now can I just clarify here because when we talk about online businesses are we mainly referring to just purely e-commerce type businesses where they do the majority of their transactions online or even websites which then lead somebody to an offline business so ecommerce store SAS businesses advertising based sites at businesses service-based businesses that have a virtual team membership or subscription sites so those are the business models of the cupboard so generally something that doesn’t have a physical location okay that makes sense so you mentioned quite a lot of different steps there earlier on in terms of the process now can you give us maybe a ballpark as to how long the process of buying this acid would take roughly how long is a bit of string okay it would depend on the size of the deal and the deal complexity so generally smaller D Lana Turner grand should take four to eight weeks anything half a million bucks might take two or three months anything sub for me and might take six months anything post five million might take more than six months that would be a rough god okay thanks to that quick now I want to also take a little look at the selling side of the process as well can you maybe tell the listeners about some of the benefits to the selling and online business so benefits for the seller you get a whole lot of cash at once there’s an opportunity cost of having a business so if you have a business and you’re devoting your time to that business then on the flip side you haven’t got time to devote to another business so there’s that opportunity cost knowing people sell when they’re yeah not so much had enough but ready for the next opportunity so that’s the main benefit okay that’s fine that makes sense so can you maybe tell us a little bit about one of the main areas then to think about when looking to actually sell your online business the main steps first of all we probably want to know what’s it worth yeah and generally you know that’s what you come to a broker to determine I’ve also published quite a few articles and guides on online business valuation once you figure out what it’s worth then if you’re using a broker the process is going to be this valuation is done you then accept the valuation if you’re happy to sell it for X price that they come up with you’d sign an agency agreement with that broker and they represent you exclusively you saw the business what then happens is they develop a prospectus really that’s a document that says what’s the business how does it make money how’s it work a bit of an overview of the business etc then the next step is that prospectus is finished and then the brokers go and sell your business to the database identifies few strategic acquisitions regarding someone that’s a good fit for the business yeah then those people that you’ve approached are then going to show some interest if they are interested I start asking some preliminary questions about the business those preliminary questions will be clarifications on some claims that you’ve made in the prospectus those kind of things if they’re then happy with the answers to that you probably have a few calls with the buyer before they make an offer they’ll make an offer for you then you’ll negotiate price etc then if you’re happy with the price then you go to a letter of intent and that says mr. buyer is going to buy your business for X he’s then allowed a certain period of time it’s usually 14 days to verify the proof and earnings of the business Healey then it gets 14 days to look at the bank statements and the merged accounts and the paypal account and the traffic stats and all of the above to make sure that everything’s shipshape and winds up after that process if he’s happy you make it final offer that final offer will then be put into a contract of sale that contact the seller signed by both parties once that’s signed the assets normally put into escrow generally we use escrow.com after escrow.com the seller transfers the assets to the buyer the buyer receives the assets and obviously transfers the money then once everyone’s happy they you get both so the buyers got the business and the seller has their cash and then the deals done ok so again it sounds like quite a lot of steps and quite a complex process if you’ve never done it before you probably want to try it out yourself probably look to seek out someone like yourself to assist in that process as well correct ok so can maybe we just quickly touch on some of the concerns as somebody who has an online business and they look into salad are there in common concerns that business owners might have maybe what will happen if part of the brand is associated to the other business owners personal name or something anything like that at any kind of common concerns that people tend to have the main concerns that they’ll have in the process is will they get a cash like if they’re self financing that kind of thing some owners get really attached to their business I want to know that the owner is also the new buyer is going to look after it for them but generally sellers are at the point where it’s like okay I’m ready to sew so they’re happy to get the deal done yeah that’s generally my summary of the process ok i want to quickly ask you as well about thinking about excess strategy it’ll say somebody is in the process of currently building up their a business online or just looking to maybe even start they haven’t even d act or not and purchase domain name or anything you think that’s a good time to really think about excess strategy before you actually start building it or do you think it’s something that can easily be sorted out once you’re actually up and running in your few years into trading so i just actually wrote an article about this quite recently i think that your number one goal as a business owner is to acquire customers and to require them as fast as as profitably as you can but i think that an exit strategy can come later you can decide to sell and then get someone to help you prepare your business so yeah as you probably know there’s a lot of different marketers online who are setting up businesses or websites in their own personal name say my website is more masterful calm and then say for example I spend years building traffic to this website building at my list and so on and then one day I decide I want to move on to something totally different how could i go about then selling that business if it’s in my personal name and one of the concerns i would have had would have been well even if i did manage to get a buyer what if they then went out and did something that could upset a bunch of people for example and then my name would be tarnished so is there like a worker and to get around that you’d start with not using a name in theory but if you did start with your name type of things yes it’s possible so there are companies that are no for example there’s a company in Australia called dick Smith’s and that’s an electronics business and he started with his own brand and own name but what would need to happen is you would need to no longer be doing the work so you can sell your name with the brand but you need to not be doing the work that’s as simple as that sure she don’t have good systems in place and as much automation as possible as well you’d want to have a staff member that became oh yeah and that staff member would need to be on some type of contract that would make them stay around after the business for sold ok again I know we spoke about the shoulder but how do we know how much online business is worth from our perspective of where the ones selling it you’d have to talk to someone who does valuations all the time because it’s a different case to case things for example your business’s value because it’s your brand is a helluva lot lower than for example some SAS software called tiddlywinks calm that sells X Y Z to X Y Zed customers because that’s a business where yours is more of a personal brand so the valuation is going to be different for every business are there certain things that we should be looking especially if you’re looking to get out of the business and sell it on key areas we want to focus on to maximize the value of the asset before selling it I would look at making sure that you’re growing I would look at and making sure that you’re profitable and you have staff members in place that are managing the business that’s going to give you a higher multiple I’ll make sure you as the owner extracted from the business so what I’m actually have systems and processes in place that are running the business those are probably the main things that you’d want to look at to get a higher valuation ok thanks for that now I only take the strategies you’d suggest that when we’re looking to negotiate the cell of the asset itself how we can go about maximizing the profits I would increase your prices I would work on conversion rates I would do simple marketing like send out an email to your old customers and asked them to resubscribe like basically try and push sales so that he’s selling with growth see someone can see that you’re probably going to make future profit out of the business rather than see something that’s in decline pretty much okay so i know we quickly touched on this earlier in terms of the buying process but in their selling process i’m taking it it’s going to be about the same amount of time regardless if you to buy of the Salazar right yes it’s more determined to on what the asset ease that you’re acquiring or business you’re crying rather than whether you’re a buyer or sell sure okay in terms of the individuals who are looking to buy and sell these businesses maybe there’s a preconception in people’s minds is you have to be a big corporate executive or something but is it a case of it’s more or less open to anyone who’s got the funds really pretty much generally the buyers of smaller businesses or corporate guys don’t want to buy a business generally the next level up in terms of your internet entrepreneur is will also buy their smaller businesses then guys with more cash move up the value chain and buy those five hundred to two million sites and then you’d normally get institutional buyers that are going to start purchasing those larger businesses so we’re talking like two to 10 million in price okay is there anything else that we should be thinking about as well in terms of either on the buying side or the Salik side at this point when you knew and you’re just looking to get started I would add make sure you do research make sure your clued up on the process make sure you pay people for advice cause one small bit of advice can make such a massive difference in the deal I was reading a book yesterday and they’re talking about ray Crocs negotiations for acquiring McDonald’s and he paid an adviser to do some deal structuring and that advisor came up with the model of ray when you’re selling your franchises you should be flying the land underneath and leasing that back to the franchise that’s where you’re going to make your money and it was the guy that he paid that came up with that idea and if he didn’t get get that deal sure ID Donald’s wouldn’t be what it is today so that’s my advice do research do your homework and then get someone that professional and an expert to help you awesome okay well thank you very much Chuck again for your time today and obviously for instance amazing insights now there’s a lot to this process and we’ve just literally skimmed the surface by the sounds of things so if any of the listeners on this call interested in looking to either buy or sell an online business we would you think the best place for me to send them to get in touch for you send them to digital exits calm they can subscribe to our database if they’re looking to buy or they can get a free appraisal they’re looking to so awesome okay great stuff well there’s going to be links below this interview two jocks resources so thank you again for your time today jock and thank you to the audience and will speak to you soon cheers mo heard a bar okay take