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Investing in Businesses
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solotak Offline
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Post: #1
Investing in Businesses
Anyone have experiences buying online businesses? Did you do this on your own or had someone to help you with due diligence? What mistakes did you make and learn to avoid for next time?
How did you find your deals?

I have trouble starting things from scratch and I'm leaning towards aquiring one to optimize and build business skills.
05-17-2018 05:40 AM
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Gray Beard Online
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Post: #2
RE: Investing in Businesses
I am interested in the same question. On another thread, I don't remember now exactly which, someone mentioned Empire Flippers. I looked them up and they have a blog about the subject. They distinguish six types of buyers starting with novices who know nothing yet--which describes me for instance. One problem with their blog, however, is that they may be biased and inclined to present the idea of buying such businesses in a very positive light: After all, they represent sellers and if you buy they make a very nice profit. So I can't fully trust their advice how a novice should approach this task.

Graybeards tend to think of themselves as wise and experienced, while younger people just consider them "old" [Urban Dictionary].
05-17-2018 06:07 AM
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Sooth Offline
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RE: Investing in Businesses
You better have your own successful online business before you think about buying an online business.

If an online business is real good generally the owner isn't selling it.
05-17-2018 06:49 AM
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PolymathGuru Offline
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Post: #4
RE: Investing in Businesses
http://businessbuyeradvantage.com/

There are a lot of questions you have to be able to ask when buying a business. This guy has a podcast and some e-books and a few courses(warning: Be ready to shell out some money).

The upside to buying a well established business is that they are less likely to fail. The downside is getting all the right information to figure out how much to price your purchase. You may have upcoming costs that no one spoke about in discussions and a business broker can help. You should do research on business brokers and how to ask them questions. Also, learning some elementary accounting is important.

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05-17-2018 06:56 AM
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Saweeep Offline
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Post: #5
RE: Investing in Businesses
(05-17-2018 06:49 AM)Sooth Wrote:  You better have your own successful online business before you think about buying an online business.

If an online business is real good generally the owner isn't selling it.

Couldn't agree more.

The only businesses I ever look at to buy are ones that require the same skill set, infrastructure or can potentially be integrated into my existing business.

Rarely do you see large corporates buying businesses willy nilly; they buy ones they can integrate and reduce costs on the whole, or that are complementary.

Most people try and sell businesses because they're failing. That is the truth without the fluff; leaving the country, change of life circumstances etc etc etc

"Waste no more time arguing about what a good man should be. Be one." - Marcus Aurelius
05-17-2018 06:58 AM
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Sooth Offline
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RE: Investing in Businesses
I went through a phase of thinking I was smarter than everyone and that I could just buy a business and then do better.

Yeah right.

You gotta know the market before you even think about business, and then if you're new you gotta know basic finance and law.

If you have capital it's easy. Most don't. So you have to be an expert in the field if you even have a chance.

If you're young dude get your ass on the grind stone and start at the bottom. The youtube motivational people forget to mention the grind they were on at the start.
05-17-2018 07:28 AM
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Saweeep Offline
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RE: Investing in Businesses
(05-17-2018 07:28 AM)Sooth Wrote:  The youtube motivational people forget to mention the grind they were on at the start.

And that they make money telling others "how to make money" on the whole.

Which is actually a good lesson in itself...often it is more profitable to be the trainer than the doer.

"Waste no more time arguing about what a good man should be. Be one." - Marcus Aurelius
05-17-2018 07:31 AM
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gework Offline
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RE: Investing in Businesses
I knew a guy who used to build up sites and then sell them on Flippa as his main source of revenue. This was about 10 years ago. I can pretty much guarantee you none of those sites exist now and most of the domains dropped. I sold one business on Flippa. It was butchered by someone who made $0 from it.

I knew another guy who built up a blog and was getting about 3,500 visits / day. He sold the site to a son of a wealthy guy who wanted to set his son up for about $70,000. It was going about half that in revenue per year. They had zero idea what they were doing. Straight away they re-built the site from scratch and deleted all the old content with zero knowledge of SEO. The site quickly tanked to about 100 visit / day. They plowed in what would be about $30,000 worth of work and left it. $100,000 down the hole. They were so clueless all they knew what to do was post article that virtually no one looked at in the hope it might come alive again.

If someone is selling an online business for 2X yearly revenue (often not far off profit), then they probably don't have much confidence in it. That site I mention had potential to grow a lot, but the guy who was running it didn't have the tools to grow it. He was retiring and wanted a nice get out fee. The people who bought it knew nothing of online or the niche and killed it.

I've seen the same with many offline business that are sold or sites that are taken over. The new boys come in and often butcher the company.

I run a site. I would only begin considering to sell it for 5X revenue. With it's growth it wouldn't make sense to loose the daily profit stream + the ability to sell it for even more in the future. On the other hand if the industry and site was going down hill, I might be prepared to bail on it for 2X.

You also say you have trouble starting things from scratch. Everyone I know who has set up a successful business has an obsessive personality - that is they have the mental drive to pick a direction and not deviate for years, decades, a lifetime. If you have trouble starting things from scratch I doubt you have the stick to put in the regular 60-100 hour weeks that successful business owners do before graduating to investment tier.
(This post was last modified: 05-17-2018 08:57 AM by gework.)
05-17-2018 08:53 AM
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Saweeep Offline
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RE: Investing in Businesses
I agree with most of what you said gework, except for the part about wanting/needing to dedicate years or decades to one project.

Lots of entrepreneurs (not businessmen) get bored very quickly and like to do new things regularly.

There is nothing wrong with that approach...as long as you actually have the tools to do it successfully.

"Waste no more time arguing about what a good man should be. Be one." - Marcus Aurelius
05-17-2018 09:13 AM
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bgbusiness Away
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Post: #10
RE: Investing in Businesses
1. Make sure it's legit and you are not buying a piece of shit business. I have seen many people buy businesses, go into a deal, or pay people, but the seller runs away immediately after receiving the money.
2. I recommend if you don't have a high interest in the particular business, you shouldn't touch it.
Ex. If you are into real estate, buy businesses at least related to real estate, don't just buy a restaurant that you have zero idea how to run.
You should be somewhat passionate about it.

"Chase a check, never chase a bitch."
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"Don't let yourself get attached to anything you are not willing to walk out on in 30 seconds flat if you feel the heat around the corner."
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05-17-2018 11:42 AM
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456 Offline
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RE: Investing in Businesses
I recommended this elsewhere, and it applies to online businesses even if the examples don't -- similar principles, especially re: negotiating and the SEARCH process:

Quote:Harvard Business Review Guide To Buying A Small Business

Entrepreneurship through acquisition of small, enduringly profitable businesses with slow growth of repeat customers. From motivated sellers.

Fascinating insights — google and buy.

(Too lazy to link on mobile - let’s leave it as an exercise for the motivated reader!)

Quote:To your fear, it is true that selling a profitable biz is a worse deal than hiring a manager and becoming a passive owner. So a buyer should be wary of a young(ish) owner prepared to walk away — what does he know that we don’t?

Retiring owners can be a great source: they are motivated to sell for reasons that likely are not shady.

Read it or grab the .pdf version -- you will not regret it. Even those who aren't anywhere near purchasing a business, do read it!
05-17-2018 11:59 AM
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qwertyuiop Offline
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Post: #12
RE: Investing in Businesses
I run a semi-successful online biz and know others who are more successful.

If you do want to buy one pay someone who is successful (like a M&A advisory firmesque relationship) to vet it for you and make sure its a legit business if you don't know what is going on.

A lot of websites look like complete shit yet make $$$. A lot look really good and get 0 traffic.

There are ways to hide traffic and such and like above poster said you can accidentally delete all the SEO and totally fuck up the biz overnight.
(This post was last modified: 05-17-2018 01:10 PM by qwertyuiop.)
05-17-2018 01:10 PM
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Easy_C Online
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Post: #13
RE: Investing in Businesses
PM me and we can have a longer conversation. I've got a bit of experience doing acquisition valuation and advisory. Always happy to introduce you to a few frameworks you can use to judge opportunities.


Also be prepared to detach emotion from this. I'm in a career situation where I could use additional portfolio items so I'm willing to do some actual work on this (think valuation analysis) for free.
(This post was last modified: 05-17-2018 01:57 PM by Easy_C.)
05-17-2018 01:54 PM
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Gray Beard Online
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Post: #14
RE: Investing in Businesses
I assume if the business relies on a successful blog or some other collection of articles to generate readers and thus also generate income, then it is practically a sure bet to fail. That is, keeping it attractive to readers by paying for new content--an idea I picked up from the EmpireFlippers blog (if memory serves)--is going to be super-risky: hired authors guided by somebody who knows nothing about the blog's subject are not likely to be able to maintain the quality that a committed and enthusiastic original owner created. If I understand correctly, destroying the SEO of a business falls into that category. But what are the main risks in online shops, be it dropship, Shopify or Amazon? Just to clarify, I do not mean to imply there are no risks: My mom did not raise stupid kids. I am asking for experience-based wisdom that I simply don't have. Among other worries, I wonder how much work such shops really require even when sellers promise that they are virtually sources of passive income.

Graybeards tend to think of themselves as wise and experienced, while younger people just consider them "old" [Urban Dictionary].
(This post was last modified: 05-17-2018 08:04 PM by Gray Beard.)
05-17-2018 07:53 PM
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