Gregory Elfrink - How To Buy and Sell Online Businesses

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What's up, everybody? You're listening to the Hustle and Flow Chart podcast with your boys, Mount Wolf and Joe Fear.

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Living online. Living in this podcast 24 7.

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You know what's really cool?

No. Yes.

Buying and selling businesses.

Well, we've done that.

We have done that.

And we're in the middle of acquiring, slash, purchasing more.

Yeah.

We're also selling equity in one of our existing businesses.

Mm.

So there's a lot of things. Interesting things. So why'd you bring that up?

I brought that up because today's guest comes from Empire flippers dot com. Yeah, he is the content manager.

He's a content badass over there. I'm gonna call him the content.

Okay. So he's the chief content badass over@empireflippers.com.

Greg, you're welcome. You could tell everybody there at the.

Company and basically what empireflippers.com is, he'll give a way better explanation than I will. But I'll give you a quick overview.

If you.

A marketplace where you can buy and sell your online businesses. Is it online only or is it any business?

It. It appears to be mainly online businesses.

Yeah.

Okay, so it's a marketplace to. To buy and sell online businesses. People sell businesses for as little as $10,000 all the way up into the millions of dollars on this marketplace. And what we wanted to talk to Greg about was if you're trying to buy a website that is going to be a passive income stream that you add into your business, what sort of things should you be looking for.

Factoring into purchasing it? And if you're trying to sell your online business, what sort of things should you be doing to set up for that sell? What are they going to look for? How are you going to value your company? What sort of things should be in place to get a higher valuation when you sell? And we just, like, really run the gamut of that conversation of buying and selling businesses.

Totally. And he has a. So Greg sees it all, and you Know, being the content guy, he's also producing a lot of content. So we actually link a ton of things in the show notes including this 80 page report. It's basically like the state of the union of digital assets and that's the big aha. I would say if you walk away with is just kind of reframe this idea of how you can have, you know, you have real estate and stuff, all these physical assets around you, but you can have digital assets. You probably heard Matt and I chat about it before and you can be very strategic and depending on the type of buyer you are or maybe seller if you're, if you're ready to sell something, these are all assets you can really make good returns on.

Yeah.

And doesn't mean it had to be you running the whole thing. It's kind of like think of it, in real estate you have operators that are, you know, operating it for. You could just be an owner if you want.

Yeah. I mean think about it like if you were to go buy a rental property and that just to make the numbers easy, if you were going to get a property and you're able to buy a house for $100,000 and you knew it was going to cash flow at $5,000 a month, meaning that you actually ROI on your investment within 20 months.

Right.

And then after that you still have the capital gains from the value of that home. You can then sort of recoup your entire capital, your pure profit on the monthly money you're making after 20 months plus you get capital gains when you sell it. You can do that with websites too. Same kind of concept. And those numbers I used are the examples. He gave a $5,000 per month business might run you about $100,000 to buy. Meaning that you're roiing after 20 months. Unless you sell it earlier then you can roi obviously a lot sooner for sure.

Now it's super cool. And just going over to empire flippers.com you can see the marketplace and, and just kind of some of the numbers and types of businesses out there to get a good idea. So for sure, maybe after listening go just peruse, peruse and of course like this one's going to be packed with notes as always. So we have those ready for you totally free if you hurry over there, scamper over if you will within a week or so to hustle and flowchart.com comp o m p and you can get these bad boys for free.

Yep. And once again we are sponsored today by ahrefs a h r e f s.com really, really awesome SEO tool. We actually use it ourself in our business. In fact, one of my favorite uses of it is it's got this feature in it. I think it's called competitor analysis. Is that what it's called?

You nailed it.

Competitor analysis. So what it is is you plug in your website and your biggest competitor's website and they're going to tell you. No, it's the content gap. That's what I'm thinking of.

There is competitive analysis too. Okay, go on. But I'll tell them what the competitor does.

All right.

The content gap, that's one of my favorite feature. You plug in here your website URL and you plug in your competitors URL and it will actually tell you all this stuff that your competitor is ranking for that you are not yet ranking for. And then you could sort of deep dive and find, oh, well, they're ranking for, you know, how to shave a cat and they're ranking with only 10 backlinks. Well, if I go and write an article about how to shave a cat and I get 20 backlinks, maybe I can top them. Right. So that's one of the ways that we use Ahrefs is we use that, that. I mean, it is a competitor analysis, but it's a content gap feature of Ahrefs is one of my favorite features. And right now ahrefs has a seven day, $7 trial.

Right.

Correcto. @ahrefs.com a h r e f s.com you can go to their YouTube channel. There's like a ton of blog and their blog, there's, there's a ton of SEO tutorials on how to basically just do exactly what you just said. Yeah. And that competitive analysis kind of technique, because you can, you can do all sorts of different things using their tools, but essentially you're figuring out how the hell are they getting traffic. Well, that will show you. So you can try that out as a seven day trial, like Matt said, for seven bucks.

So if you've got some competitors that are doing some good content and you want to knock them off and do better at that same content, that's your tool. That is a great tool and we use it ourselves and we love it and go grab it for seven days for seven bucks, you're gonna find it very, very worth it.

Ahrefs.com all right, let's go talk to Greg Alfrank. Hey, Gregory, welcome to the show.

Hey, thank you so much for having me.

Do you like to go by Greg or Gregory?

Either Is fine. Most people call me Greg. I have a weird habit though. Whenever I write my name, it's always Gregory.

I didn't know actually I had it on both ways. I'm like, I'm gonna go with the Gregory just to make sure. Well, dude, you are a trooper for one. Because it's what, 4:30 in the morning over there where you're at?

Yeah, it's 4:30am here in Kuala Lumpur, Malaysia. But as I was telling you guys a little bit before offline, I pretty used to it. I mainly live in Asia. I do the, you know, whole digital nomad thing. So weird hours kind of comes with the territory for sure.

Yeah. The life you're choosing. What's the, what's your favorite place so far that you visited in Asia?

It's definitely Saigon, Vietnam. I think Vietnam is an amazing place and Saigon is going through a pretty interesting time in its history where it's almost like a little Silicon Valley. And like I could see it becoming like in like 30 to 40 years, kind of like a new Singapore. So it's right in the mix of all that hustle and energy. I think it's a really cool city. Followed up by Bangkok, of course. Bangkok is a really awesome city too.

Yeah, I've never been to Asia, period. Anywhere in Asia you have to come visit me, man.

I know that.

Have you spotted opportunities like in places over there? Are there people that are doing. Because then we'll get into this, into the whole business model and all that. But is that part of what you're doing over there or is it just purely of pleasure and living somewhere new?

You know, it's interesting. So I've been with Empire Flippers for three years and they originally brought me out to Vietnam. So we have a policy. Whenever you get hired, you go to, you go wherever your direct report more or less is. And I report to the founder and he was living in Vietnam at the time. And so I moved from Alaska to there and I just absolutely fell in love with it. Now the cool thing about living in Southeast Asia is there are a ton of digital nomads, tons of online entrepreneurs doing the whole geo arbitrage thing. And so it's not uncommon to feel like I'm at a conference every weekend when I go out, like do have a few beers with some friends or talk about E commerce, email marketing, funnels, the whole nine yards.

No, it's funny because we live in San Diego and it kind of feels that way in San Diego a little bit.

But we bubble up in our own Little community out here. But yeah, whenever we want to explore, we just like, all right, venture to downtown or venture to all these other places around town.

Yeah, venture over to Asia, man. A lot of really cool people over here.

Definitely, definitely. So let's get into your story a little bit. How did you get involved with Empire Flippers? What were you doing before Empire Flippers? What's the sort of story arc and progression here?

Yeah, so it's interesting. So what I did before Empire Flippers was I was actually an oil filled roughneck in the Arctic Circle of Alaska. I'm from Alaska, born and raised, and I used to work on rigs, throw chemical sacks 18 hours a day. Always was fascinated about the online marketing industry and started a lot of different projects of my own. But when you're working 18 hours a day, it's kind of hard to get anything off the ground. But I did manage to get a freelance writing business going finally and that actually mutated into me building out my own affiliate sites which I was actually going to originally sell on Empire Flippers, but then they sent out an email saying, hey, we're looking for a content marketing pro. And I was like, I'm going to apply. They're never going to contact me. And sure enough, here I am now talking to you in KL as the director of marketing for the company.

Dude, wait, so how did you get into the content stuff? Being doing all the hard work you did in Alaska, how did that be a thing?

Yeah, it's interesting. It crosses over with another passion of mine. So I'm really passionate about fiction writing, literature, poetry, and I've always been fascinated with business because I view business as a kind of an art form in of itself. And so content marketing has always spoken to me as like a really cool way to market a company because it's not pushy, it's not salesy, it's just helpful. You know, people, whether they buy something from you or not, they feel like they got value for interacting with your, with your brand. And I think that's one of the most powerful things you can have. So that kind of brand loyalty even they're not necessarily customers just yet. Uh, if they know someone that is, they're gonna, you know, refer them over to you and refer to you to refer them to your content and all that good stuff.

Yeah, no, it's true. It's the heart of any good business really, is good content.

Yeah. I'm curious, what was the process like getting the, the role over at Empire Flippers when, when you, you know, when you had the opportunity arise and. And you, you sort of reached out and said, hey, I'm interested. Did he, you know, did he fly you over to where. Where did you say he was based out of? Saigon.

Yeah, he was in Saigon, Vietnam at the time. Our co founders are also digital nomads. They're all over the place.

So did you fly out to Saigon and actually interview with him and do that whole thing or was it kind of remote? They hired you and then you moved?

Yeah. So how it happened, I finished my 12 hour day and I was working in town at that time, and I went on my computer and did a Skype interview with them. And that first interview, it was tough. I was like, there is no, no way I'm getting this. And asked some really hard questions. And then sure enough, a week later, I get a second email from him saying like, ah, we would, you know, we want to interview you again. I'm like, oh, shit. Okay. And so I hop on and this time both founders are on and Justin, the cmo, he sends me his private Skype message. He's like, hey man, I really like you. Don't dunk this up. I'm like, oh, Jesus.

No pressure.

Yeah, yeah. So.

I finished that second interview and then I think it was like a week and a half later. I get this email that looks like one of those canned emails, like, oh, so sorry.

But at the end it was like, just kidding, you're chosen and we'll give.

You like a week.

Make a decision. So I told my boss in the oil field, this is right around 2016. So the crash in oil was just. We were in the midst of that, so my whole industry was panicking. And I told my boss about my job. He's like, oh, that, that's great. You've always loved marketing. You've always wanted to do this. So where are you moving to? And I told him Vietnam. He's like, are you sure this is a real thing, Greg?

What are you doing?

Yeah, he was a great boss.

That's cool, man.

I mean, that's.

Yeah. And you probably saw like, hey, you know, he has this opportunity to escape the, the hard work. And I mean, how old were you at the time when you left there?

Yeah, I was 27. I was. I'd been in the oil field for about 10 years off and on in Alaska. If you don't go to college, that' either military or the oil field. So never been good with disciplines.

There you go. That's cool, man.

Cool.

Well, let's talk about Empire Flippers real quick. Can you sort of give us the sort of quick elevator pitch of what Empire Flippers even is?

Yeah. So what we do, we're an Inc. 5000 company, hit it three, three years in a row now. I think we'll hit it again this year, you know, knock on wood. But what we do is we help people buy and sell profitable online businesses. So whether you are building out e commerce store, a content site, a software as a service, you want to make an exit, we can help you get the best possible exit for your business. Or if you're more of an investor, a buyer looking to invest into the digital asset space. We can also help you find a business that matches your criteria, even go as far as helping you create that criteria, which is something we do quite often. We sell businesses from anywhere from 20 grand all the way up to multimillion dollar deals. And over the last three years, we've become the largest curated marketplace in the world now for online businesses, which is pretty cool.

Gotcha. So it's like a marketplace where people could go and sort of see what's for sale and kind of browse through the businesses that are available.

Yeah, I often use the real estate comparison because a lot of what I do is similar to the real estate industry in some sense. Like you have your realtor that helps you find the house, buy the house, and you have something like Zillow.com, right, where you can shop different properties, same exact concept, only it's with profitable online businesses. We have a marketplace. You can browse, you can have different filters, and we have a team of business analysts that can help you find the one that, you know, matches what you're looking for and help you negotiate that deal.

Okay, so this is. Yeah, it's cool. I'm actually, I'm just kind of scrolling. I was curious about the marketplace. I'm like, ooh, I kind of want to see this. And I could see there's.

Are you ready to buy a business?

Yeah, I mean, we're always looking to buy and sell this.

There's always an opportunity.

No, no.

We are probably the market for your website, to be honest.

Oh yeah. It's dangerous to have you on the phone here or you have a call here.

My content marketing is about to woo you over.

Exactly. Man, you're good at what you do. But it's like, who, who is the best type of. Because you have both sides, obviously you have sellers and then you have buyers. So talking about, I guess the buyers, like who's your best buyers? Buyer of a property from on your.

Listings here by best buyer, meaning, I.

Guess I'm thinking of, you know, is it all typically like, is there financing involved for some of these deals? Are there things maybe.

Let's go there. What's some of the ways that people actually buy the businesses? What are some of the ways? Because you know, when you, when you say like, oh, there's some businesses available for, you know, multi millions, all the way down to, you know, 10, $20,000 available, you know, there's obviously people listening going, oh, a $2 million business, you've got to be pretty liquid to just write a check for that, right? So what are some of the ways that people buy businesses?

There you go.

So I guess I can divide that question into two basic answers. So if you're shopping the sub $200,000 range, typically it's almost always an all cash offer. If it's below $100,000, it's almost 100% all cash offer. I've seen deals that are right at the 100k mark be sold on our marketplace. After about an hour of being on the marketplace, which is crazy to me. It's still crazy to me, even though I've seen it now so often that people do that because, all right, man, you're pretty quick with your due diligence there.

But yeah, people have that kind of liquid in that price range. Now, as you get above that, it's still very close to all cash offers above 200k until you get to the 500k mark. After you get over $500,000, that's when a lot of deal structuring can come into place. Because what you guys just hinted at, financing is not a big thing in our industry. Like if you go to Wells Fargo or really any traditional bank and you say, hey, I want to get a business loan for this $800,000Amazon affiliate site about dog food, they're going to say, what are you talking about? Get out of my office. No way.

But what's funny is if you went to that same bank and you had a $10 million content site about dog food, you say, hey, I want a business loan for this $10 million media company. And they were like, oh, great. Same business model. The thing is, it's just not at scale enough for most of these financiers to actually take the risk on. So what ends up happening is a mixture of deal structuring where there's earnout, seller finance, often there's milestones tied to earn out. I actually have an entire blog post where I break down how deal structuring works. I think that is one of the most powerful tools for buyers. If you master the heart of the deal, if you will, then you're going to put yourself in a much better position. It's just similar in real estate where the common line is you make your money when you buy. A lot of that same truth applies to this space. And a lot of the more creative financing aspects of real estate. How you would raise money for that can also be used in the online business space. For example, we've seen people buy e commerce businesses using HELOCs, home equity lines of credit. Now I would never suggest you to do that unless you're in a healthy financial situation, obviously. But if that's the way you want to get the leverage, and that can be a powerful way as well. Some people raise money from multiple investors, like investing clubs, whether local or global. We have a lot of different funds that do it that way as well. Deal structuring is extremely powerful. But as I said earlier, if you're, you know, if your audience is more in the, you know, someone listening out there is like, oh, I have 50k to spend, definitely not 500k though, then I would suggest buying a 50k business for all cash. 50k. And the reason why I say that is if you tried to do deal structuring below that a hundred thousand dollar level, more than likely you're going to miss out on the deal. And it's better to pay, get that deal if it's a good one. You know, if you did your research and all that stuff that didn't lose it out to another buyer who was willing to pay all liquid because that seller always wants all liquid.

I mean really does directly trans over to translate over to real estate, right? It's like somebody who's going to come by my house and they're like, hey, I'll give you, you know, a million dollars cash versus somebody coming to my house saying I'll pay a million dollars, but it's going to be an FHA loan. There's going to be some approval process. There's a 50, 50 chance they're going to approve my loan. And here's, here's 30 contingencies that I have on the house before the loan, the money gets released. Right? Which one are you going to pick? Right. So it's kind of the same thing where if you're going to buy a $500,000 business and somebody has cash in hand versus hey, I'll do an earn out, I'd Take the cash, right?

Right.

Yeah, for sure. We tell sellers all the time. Sometimes sellers, especially if it's their first time, which it often is, we tell them, you should really be flexible on that list price because there's two different ways you can go at it. Right. If you have a $800,000 business, yes, you can get that $800,000, but that doesn't mean you should deny the guy who's going to give you $700,000 upfront versus the guy who's going to give you $800,000 where he pays you like a dollar a month for the rest of your life, for the rest of.

Your life, and you'll never see it all.

That's an extreme example. But even at the idea of, you know, say it was that, yes, I'll give you that $800,000, but I'm going to do 450 upfront, and the rest over, say, 12, 14 months, I would still, depending on the situation. And the buyers, of course, probably take the, you know, the haircut on getting the more money up front because that money is more valuable upfront. So we always tell sellers to be flexible on those terms if possible. Sometimes, obviously they can't be, but, yeah, that makes sense.

And I'm thinking. So back to that whole buyers question. Do you see a lot of folks who are kind of just new to whatever industry they're buying that. That web asset for, or is there. I'm sure there's all sorts of different types, but I would assume some people are rolling them up into maybe a bigger play of something they already have going on. Or is it, you know, do you have a lot of folks that are just kind of like, this is a first business, they're testing out the waters or they see the opportunity and they know the levers to pull?

What kind of buyers are you seeing there?

Yeah. So you actually named two different types of our buyers. We have about six buyer Personas that we really cater our company for. And there is the ones that we call them newbie norms. They're just starting out in the online business world. Maybe they bought a course, they've done some stuff, but nothing significant. But they have some cash to invest, and they're the ones that we really hold their hands a lot of the times. They're the ones that were building out those criteria calls for. And we're making sure that they understand everything before they buy something. Because at the end of the day, while we have a fiduciary responsibility to the seller, that's how we get paid. We get paid a commission on the success fee. We want the buyer to win too.

Right.

We don't view it as a zero sum game. We want the buyer to win, seller win, and of course us to win from the transaction. So we spent a lot of time educating those people who were just coming into the marketplace. Now on the other side, we have multimillion dollar funds. For example, we had one fund that they just bought, I think around $6 million worth of businesses from us over the last four or five months. And those guys, what they do, their model is raising money and buying one kind of monetization. So for them is Amazon fba. That's the thing that they do. And then exactly, we roll it up into something bigger. They have economies of scale so they can order much more products from the factory, greatly reducing their actual cogs, cost of goods sold and increasing their profit margin, sometimes quite wildly because of that economies of scale. And we see that pretty much across most monetization. So if it's a fund, typically they'll be focusing on one monetization, not necessarily one niche. That's a different kind of buyer. Sometimes we get those, but those are more rare. Those are called Strategic Sally. In our buyer Persona, then they're looking more for, you know, a strategic acquisition that lifts all sales versus just dominating one kind of monetization with all their sops and systems and so forth. Okay, gotcha.

So what are the other types of Personas? I think you said you had six, and I think I heard three.

Yeah, yeah. So another one. It kind of has an evolutionary path. So Numinorm is like the guys just starting off right, and then we have the do it Yourself Dave. And usually that's like, still, yeah, these are all great names.

We have a whole infographic. You want to see them. We actually just created a buyer Persona quiz too, that people can fill out and see and play around with to see which kind of Persona they get. But yeah, the do it Yourself Dave guy, he's like a guy who knows a little bit more what's going on. And he wants to roll up his sleeves and really get into the heart of the business. So a Do it Yourself Dave guy might be like, hey, I want to buy that affiliate site that has a Google penalty, because I want to get in there and really mess around with it and fix that penalty. That's the thing that they're trying to do, and that's what excites them. And then there's the next evolution is typically after do it Yourself Dave has done this a few times. They will often become a flip of Fred, which is actually where we get half of our name from. So very similar to real estate. You buy a distressed property, maybe need some repairs, a fixer upper, and then you invest the money to fix that property and you flip the property for a much higher value than what you actually bought it for. We have people that will come in, buy sites from US or E commerce stores. They'll do a bunch of work over 6 to 10 months such as conversion rate optimization. They'll order a bunch of new content because there's an age domain so they can start ranking on Google much easier. Or they'll optimize the email list of different email funnels. And they often see some quite significant gains in profit. And while that's nice, they're getting that monthly net profit. Their real business model is at the end of that 8 to 12 months to come back to us and actually sell that business for a much higher price. Right. Because even if everything stays the same, if nothing changes in the business, they weren't able to make it go bigger, but still staying at the same price or the same net profit, then that business is probably going to sell for more just because it has a whole year of extra track record of profitability. Right. So some people, that's their entire business model with us. I've seen the same site sold on our marketplace about four times now, which is pretty awesome. Most of the time it's grown too. So it's kind of cool to see that.

Yeah, I think that's like a showing of total success of what you guys are doing and the type of people you're attracting to the marketplace place there too.

Yeah, it's amazing to watch. But the other two types are Portfolio Paul and Investor Ivan is what we call them. So they're pretty similar. Portfolio Paul is the guy that is typically he's running like five to 10 different entities, typically again in the same monetization. And it's all self funded, it's all his capital. So probably someone that was the other stages and they got some capital. It's not uncommon for us to see sellers actually become buyers after they sold a couple businesses from us. Because now they're the most liquid they've ever been. They can make some good deals and they know what they're doing. They can start leveling up by acquiring now. So that's a common transformation. And the final one, Investor Ivan's exactly what I was describing earlier with those funds, people who go around raising money, they Usually have a deal guy that sources the deals and negotiates and closes the deal. And then they'll have operations teams as well, so people raising money. Deal guy and then operations team.

Hmm, Got it. Yeah. This is, this is cool because it's, I mean, we have a variety of assets ourself under our business and then with some partners too. And it's, it is always amazing how many people are out there who are willing to partner up or, or maybe acquire your business or your asset. And it's, you know, maybe it's a broken site or one that you're just like, well, I don't know, I don't have, I don't like to do this or that. Like you said, Google penalty. There's always like someone out there that's interested. Oh yeah, that's really cool.

It's funny.

Absolutely.

Being the nerd that I am, I'm always like analyzing people's site. I know Joe does it too, because Joe will like, he'll look at a really big, well known site and he'll screenshot the fact that they don't have a Facebook Pixel and send it to me and be like, look at this idiot. Don't even have a Facebook Pixel.

Or I'll just call them out and I mean to help them. Of course, if I get on the phone, like, you might want to plumb, you know, fix your plumbing a little bit.

Yeah, yeah. Now I'm curious about, about valuations of companies. What are some of the biggest factors you see that play into the valuation of a company? You know, obviously revenue and recurring revenue and things like that. But I would imagine, you know, two identical companies that let's say are making, just for easy numbers, let's say a million dollars a year. Each one are both making a million dollars a year, but one of them, the owner is running it himself versus the other one has a team of people that the thing just kind of runs on autopilot for the owner. I would imagine that one's more valuable than the one where the owner is also the operator. I'm curious what sort of factors are at play with figuring out the valuation of a company.

Yeah, the two main factors you touched on there is definitely net profit. That's a huge one. As your net profit goes up just by that alone, you're going to typically raise your multiples. We operate on a monthly multiple. It's common for people to call it ebitda, which is annual income. But we look at that on a monthly basis because it lets us be a little bit More grainier with online businesses. But yeah. So net profit is a big one. And then also the track record. So the time, how old is the site? The site is making a ton of money and is only three months old and you're trying to sell it for a million dollars, that's going to be extremely difficult to sell. It just hasn't weathered enough storm. So on the flip side though, if you have a million dollar business that's three years old and it's been relatively at a million dollar level for those last say two years, then you're like, okay, this has at least some kind of track record much longer than three months. You can price it on a 12 month window instead of a three month window, et cetera, et cetera. So if you.

Pricing windows is also important. So if you price something at a six month window, which we still do every now and then for a young site, that can significantly hurt your multiple versus say doing it at a 12 month multiple. Because investors and buyers like to see more than 12, more than 12 months typically. So they like to see year over year growth or is it year over year decline? They like to look at those numbers. So that's part of it. Now to answer your question earlier, if both businesses are exactly the same, but is the owner is operating it versus having systems, then the second one for sure is going to be worth more the one where he's not operating it. Because at the end of the day, investors, buyers, whether they're just starting out or whether they're extremely savvy in the they don't want to buy a job, they're looking to buy an income stream, right? Just like you know, you're looking to build a car, usually to commute to work, you're going to buy a car that lets you commute to work, right? Very, very, very similar concept. So they're looking for something that they can leverage and scale, not something that's going to give them a 40 hour work week. Now when they buy the business, they might for sure work that 40 hours a week on that business to level it up, to scale the systems, to grow it. But they certainly don't want to be working that to maintain the business. We always tell sellers the best thing you can do to make the business more attractive is to dip in a little bit into that net profit to make those systems. For example, we just had a E. Commerce guy, he came up to me, he's like, I don't understand why you guys wouldn't be interested in selling my business on your marketplace I dug in a little bit and I found out the reason why we weren't interested in, or at least not super interested is because he packs and ships all the products himself. So all the products come to his home and then he has to package it all and ship it out to the right person that just ordered that product. But it's such an easy fix to go to a fulfillment warehouse or 3PL, a kind of service that handles all that fulfillment for you. But the sellers are often afraid of making their net profit go down a little bit and thus their valuation might go down a little bit. But it's a fine balancing act between making it a profitable asset and a profitably attractive asset. Right. So those systems are extremely important.

So how so when it comes to like the type of revenue you obviously have, let's say like an E commerce business where a lot of it is probably like one off sales, they might buy the product once and then it's kind of that that transaction's over and you're off trying to find more customers. And then you have more recurring models where they're paying a monthly subscription fee or something like SaaS model or something. Does the type of revenue being one off versus recurring have a big impact on the valuation you get for the company as well?

Absolutely. Recurring is definitely going to get the best. But.

If your audience is out there looking to build a SaaS, while the SaaS business model is fantastic, I want to get crazy dreamy eye on it because there's a lot of problems that come with SaaS as well as you guys might know if you've been in the space. So I'd be careful with that. But yes, on everything else being equal, recurring revenue is definitely the way to go. E commerce though doesn't necessarily have to be one off purchases. There are people who do the landing page style E commerce. But most of the E commerce stores that we sell, they're more branded. They're trying to build communities, they have email lists, they have multiple different products. They're often doing a hybrid model as well where they might source a bit of their own products and then they also drop ship. So example I use all the time is a shopify store where they source their own coffee grinder. They have their own branded coffee grinder. When you go out to check out there's upsells or different coffee beans. Now they don't source those coffee beans, those are all drop ship. But they use those drop shipping as a way to increase their alv. And maybe they do get them on a Monthly subscription to those coffee beans. Like hey, wouldn't it be much more convenient? We just brought this to your house. Don't you have to go to the grocery store? So that's an example. One thing that's really exploded in the E commerce space is. What's the word? It's like.

Basically monthly product bags. Oh like dollar shape. Does it.

Yeah, yeah.

Like the box. What do they call it? Something box.

Monthly. Yeah.

I don't know.

The crate model. Subscription. Crate model.

I knew we'd get it. All three of us combined.

That's. Yeah, yeah. And like you said, yeah, you just see that so many places now online. And the strong brand I feel like is the key. It sounds like you mentioned brand and all that because yeah, if you're just drop shipping or an affiliate business, it seems like, well that's great but it can be replicated pretty fast. But with the strong brand, that's unique.

Yeah, I would say that's true. But you want to be careful there because for example, so let's say you're just an Amazon associate site, which is very much one of the most popular kinds of affiliate programs you can promote. There is a difference between a website. Go back to dogs. Say the website is best dog food 2019 versus Dog Hero or dogkitchen.com. the second one definitely has more brandable power. Those kind of sites can have a real brand even though the monetization might be affiliate or drop shipping and so forth, as long as you play it a little bit smarter. So if you're building out an affiliate site, I always tell people don't view it as a niche site or an authority site. While both of those terms are fine, like in their own right, I think they're, they're helpful. I always tell people to consider your site as a real media company, as a real media site and that will make you make a thousand different minute decisions. So ultimately make that business much more valuable. If you had a $10,000 per month dog food site through affiliate monetization, the one with the good brand is the one that's going to be sold. Because at a certain point as you get a above the six figure range, buyers aren't as interested like they are interested in the cash flow, but they're also interested in something that can scale. And if you have something like best dog2019.com, the Shelf Life of that's pretty short. Right. So they don't care how much money is making, they're not as interested in it. Yeah, sure.

Now a Minute ago you mentioned that somebody submitted their site to Empire Flippers and their site wasn't approved. So obviously there's sort of criteria to be listed on Empire Flippers. What sort of criteria do you guys look for to even allow a site to be listed?

Yeah, that's a great question. So one of the things that is very important to us is to make sure all the businesses are as quality and as legitimate as possible. That we can do. In fact, we have an entire vetting team just dedicated to this alone, making sure that everything is fine. There's no scams, there's no like something nefarious. And usually to be honest, it has nothing to do with seller trying to scam being nefarious. A lot of times is the solo e commerce entrepreneur who great at marketing, terrible at accounting and so we have to help him build his P and L and he sometimes realizes at the end we're like oh shit, I'm not making as much money as I thought I was. No fault of his own. But yeah. So the minimum requirements, if it's a content site so monetized through things like affiliate programs, adsense sites or display adsense in general, you only need to have a minimum threshold of 6 months of average net profit of 500 bucks. Now any other monetization you have to have a minimum of six month average profit of $1,000 per month. So the actual net profit minimum is quite low. But we're looking for other red flags as we're vetting the business. Is this a one product only business? For example, like is this one sku that that could be an issue. Not necessarily that we wouldn't accept that, but you're probably going to get a lower valuation. If it's one SKU or even if you have 20 SKUs and only one of them is the one making money, then that means you have 19 SKUs of debt inventory. Right. That's something to consider. If your site has been penalized multiple times, perhaps it's in the throes of a penalization right now. If you tried to do any kinds of weird redirects, we usually won't allow that. If you do any kind of like we actually check out the seller too. We like research into them, make sure they're a real person and we can't find that you're a real person, there's a good chance you're not going to get onto the marketplace. Because yeah, we want the highest quality sites and by having the highest quality businesses on our marketplace, that also lets us give the Best opportunities to our buyers, which is very important to us and also the best opportunity of the sellers, too. We don't waste anyone's time.

Well, yeah, and I assume, you know, you want to stay a trusted resource. If. If people see Empire Flippers as a trusted resource to buy and sell businesses and they have one deal that doesn't quite go as planned, you know, that's a reflection of the business buyer or seller, but also some people in their mind will see it as a reflection of your company. So.

Yeah, absolutely. And that's super important to us. And that's why, by the way, we don't do any of the, you know, the high pressure sales, high ticket sales kind of stuff. We believe very much in education, first model. And we'll tell people if a buyer comes to us, like, hey, I want to buy this $300,000 SAS business. Like, hey, great. What's your experience with code and running teams of developers? Like, nothing. I'm an accountant that does tax work or something. Well, this might not be the right fit for you. We'll try to steer him towards a business that does make sense for them. And, like, probably a smaller one. Like, look, you can always come back and buy a SaaS business, but you should probably first get your feet wet a little bit, you know, into understanding how all this online marketing stuff works. Maybe even hire a development team to help you with something small on a content site or something like that. Of course, if that person's dead set, like, no, I want that $300,000 SaaS business. Like, all right, well, we tried it. We tried to guide you, but we can't stop you from buying it.

Yeah, we always try to educate people to make sure they're making the right decisions. Not just from a financial standpoint, but also from a goal standpoint too. Right. Like that Guy buys that SaaS business and he's dreaming of being a coconut cowboy in Thailand or something like that, he might have a rude awakening when he realizes he's constantly on calls, on meetings, developing partnerships, collaborations, all that kind of stuff. So there's other stuff outside of just the financial incentive too, that we want to make sure the business matches for the buyer.

Yeah, no, we sort of have a philosophy in our business now. It didn't start like this, but we have a philosophy in our business of never starting anything from scratch. If we have an idea for a business, we're either gonna go and acquire it or partner or partner with somebody who's already started it. You know, we don't like starting businesses from scratch anymore because it's a pain in the butt.

It is. I agree.

I'm curious, what kinds of businesses have you seen that are sort of like the.

I'm trying to think of the best way to word this, but like a good business for somebody to get into that's going to create some fairly passive cash flow. You know, let's say somebody's working a day job, they want to get out of their day job and maybe their transition is they're going to take some of the money they've saved up, buy a business that kind of is sort of running itself. What kinds of businesses have worked for that, that kind of demographic?

Yeah, I think the perfect, the perfect one for something like that in that situation are content sites. And the reason a well branded content site, by the way, not the best dog food 2019 one like you want to buy a good branded one. And this is why I say that if you're just starting out, if you have some money to play with and you have some kind of online experience, like you're least familiar with WordPress and the concepts of SEO, it's very difficult or more difficult to mess up a content site than it's going to be to mess up e commerce site. There's just a lot less moving parts there. With a content site, your main two priorities is writing more content, which you can outsource very easily to quality writers, even expert writers within your niche nowadays, very easy to do, and getting quality backlinks. Those are the two main things. But if you don't do anything like say you buy a $100,000Amazon Associate site, it's making about four or five grand a month at profit. And you don't do anything because you're busy at work and handling your family and all that stuff. That business is still making money. You don't have to handle any customer service, you don't have to monitor any paid traffic because typically all the traffic comes through SEO or Pinterest organic. So you don't really have to worry too much about that versus if you bought an e commerce business. While the profit margins are much greater, often what you could potentially earn with E commerce store, you leave that store for a month, there's a good chance there's going to be problems that you need to solve during that month that might come up. The other reason why I suggest content sites is that if you're starting out.

It'S a great site or a great monetization when you're starting off, because it is so hands off. But as you develop more as a more powerful Internet marketer and you have more online business savvy, you can actually grow that into almost every monetization that we sell. So it's not uncommon for me to see sites that we're selling that are an Amazon Associate site and an Amazon FBA business. So what they do, they'll source their FBA product, put it up on Amazon and then they have this content site that's around that same niche and they review their own product with an affiliate link going to their product and so they double dip on both the affiliate commission and on the actual margin of the product. So that's one way you can evolve a content site into becoming an E commerce store. And I've seen that also where a content site evolves into becoming a software as a service or a productized service or lead gen or you know, all sorts of different kinds of models that you can go off from from a good quality branded content site. So that's almost always my go to if you, if your audience out there is looking at a content site, a really quick win. If you buy an Amazon associate site there's usually about 10% of those articles are commercial and like 80 to 90% of them are more informational how to pieces very few sellers monetize that information. So if you, if you buy that, buy that business you can usually just put on AdSense, Ad Thrive or Mediavine ads to display on there. And it's not uncommon to see a 5 to 10% increase in that profit just from that alone. And that's cool. Takes about a few hours to do so.

That's awesome. Yeah, it almost forces you to spot these gaps, you know, if you do intelligence and with the content forward because that's how like you said there's so many ways you can get traffic. So that's kind of already just cranking for you.

Yeah, for sure. What you just said, I always tell buyers don't look for the perfect business because is the business that has the flaws where all the opportunity lives for the most part.

Yeah. No, I'm curious. So the site that you mentioned like an Amazon affiliate, like a content site that's monetized mostly through like Amazon affiliate stuff, let's say is making. I think Your example was 3 to 5,000amonth. If something was around that range, what would that sell for?

Yeah. So a five like the average sales multiple for Amazon associate site is 27x of their net monthly profit. So like $100,000 website is going to get you between 3 and a half to 5 grand per month of net profit somewhere around there typically.

Gotcha.

Okay. Yeah, I mean, this definitely beats most rental properties.

No kidding.

You don't have to worry about roofs.

That's why I keep thinking about it, because this is. And this was the flip that we've had probably, I don't know, four years, five years ago. Matt and I is like, okay, yeah, we have these skills and a lot of people listening have similar Internet marketing skills. It's just how you apply them. And then you can gather assets online. Like you said, there's a lot, usually a lot less headaches and overhead than a house.

For sure.

Profitability should be a lot higher and easy to sell if you just want to get out of it too. There's a marketplace for all this. So it's this kind of reframing of what is an asset in your portfolio. You could just have a handful of these and that could be enough for you.

It really could. Of course, I always wanted to put the disclaimer that these assets are more volatile than say, your single family home. But I was talking to an investor and this is probably like, I don't know, maybe two years ago we were in Manila in the Philippines and hanging out, having a beer or whatnot. And he had bought several really small sites from us back when we were selling more like five $6,000 sites before we started getting the seven figure ranges. And I think he bought like about six of them. And he said, like, oh man, you know, like, I. 80% of them are down. Like, I'm down by 80% on the net profit. Like, oh man, you must be pissed. It's like, no, I'm loving it. Like, what?

Why?

Why are you loving it? He's like, this is outperforming every single stock purchase and real estate investment I had. Even though it's lost 80% of its net profit, it's still like leaps and bounds ahead. Like, oh, man, you know, that guy's not an Internet marketer because the Internet market is going to be pissed. But the average investor mindset is like, this is awesome.

Yeah, yeah, it's all relative, right?

Yeah, yeah. I always think that story's funny, but yeah, like, buy an Amazon associate site or really any online business, as long as you're for sure is making real net profit. You know, you don't need to play the 60 year game of compound interest to retire and live well. You can literally do that in a few years. I have many friends who have done it. Now, I'm not saying it's easy, it's hard. You have to learn a lot of skills, you have to be savvy, you have to be smart. But it's definitely a very real, tangible possibility.

Yeah. And just to just quickly put a cap on that is. A guy we've had on the show here and friend of ours, Roland Frazier, said the quickest way to build wealth, in his eyes, is to essentially acquire a company and then sell it in three to five years. And you do that a handful of times in your lifetime. And I forget the exact. Matthew said, but that's basically generational wealth. You just do it like five to seven times. And with the right kind of investments, you could do exactly what you're saying. You can live a good life.

Yeah, absolutely. I actually took Dave Ramsey's debt snowball and wrote a blog post about it. Applying debt snowball to acquiring online businesses. If you just bought one business a year, so you had 50k a year, that means you are like increasing. Back then, the multiples were a bit different, but you're increasing your annual income more or less by like 25 to $30,000. You don't need to do that that many years to make a huge impact in your lifestyle. Three years in, you're 75k up. And that's the typical metric number for happiness. It's harder to get happier if you make a ton of more money. Unless you're living in San Francisco.

That's the one exception.

Really.

Like Hong Kong, San Francisco, you're still like, unhappy.

You can live a pretty awesome life. Yeah.

Well, working at Empire Flippers, are you. Are you able to buy and buy any or flip any businesses yourself?

So we have a policy in the company, more or less, no online side projects. And the reason why we do that is to try to be as transparent, like as transparent as possible with our buyers and sellers. Right. We don't want them to think that we're doing these backroom deals where, you know, we're stealing the best stuff, only showing them the, like, the overpriced stuff. Like, we don't even send out businesses for sale to a private list, like in order for the. Like, once the business is for sale, everyone on the marketplace sees it. We don't. We don't do any kind of backroom deals at all. And our employees don't do any side projects. So that way our buyers and sellers have more faith in our process with what we're saying. There's no ulterior motive to what we're doing.

Yeah, no. That makes total Sense. Now, I'm curious. On the seller side, I imagine you probably have people that make a business model out of creating little online assets, ramping them up to a sellable number and then selling them and repeating the process.

Is that, is that like one of the types of sellers? I imagine, yeah.

So I actually call those the factory mindset sellers. I've given a few presentations at a few SEO conferences about this because SEO lends itself really well to a factory mindset. So basically you have all your SOPs, your systems laid out, and you're just building these sites. And we actually had a seller did a great job with it. So over the last, when I came on board, about, I guess a year and a half worth, you sold $700,000 worth of Amazon affiliate sites with us. Same exact process. You would launch, Once a quarter, 20 sites very cheaply, had everything systemized and optimized, all that good stuff. And at the end of the year, you would sell a batch of those sites. Out of the 20, maybe 10 of them started making money. And out of that 10, maybe five of them were pretty significant. And one might be really significant. And he would sell a handful of those every time. And what he ended up doing, he used that $700,000 they earned over that year and a half to acquire a SaaS business to start his own productized service. And now he's buying up hosting companies, you know, like. So that's the way he snowballed his way into being able to leverage the power of acquisition by initially selling. And he did it with that factory mindset.

Yeah, no, that's really interesting. In fact, when Joe and I first started, this is probably going all the way back to 0708, something like that, we actually started. One of our online business side hustles was actually creating and flipping websites. But I mean, not the types of numbers you're talking about. I mean, we would invest like $50 into the thing and then sell the whole thing for $500. And then we would do like two of those a week. You know, just kind of like real quick churn and burn kind of.

It's almost like a way to just test a lot of the stuff that we were learning in Internet marketing and applying it here and yeah, putting it on the market to sell. And it worked out. Yeah, we did that probably a good 10, 15 times or so.

That was our. That was our emergency strategy, like, oh, we need some cash flow. What can we do? Boom, let's crank out a site real quick. And we sold it on a Competitor's website, which I won't name, but I'm sure you're familiar with the name that.

Must not be named.

Yeah, I'm sure you're familiar with the website, but yeah, we used to do that and it was great, but, you know, it wasn't super scalable for us.

Right. Yeah.

And also, who knows if any of the sites that we ever sold are still making money. So there's sort of a, you know, an ethical thing that we didn't really want to keep doing that sort of thing knowing, like, okay, we churned out this site really, really quick. But I, you know, I imagine there's people out there that will go and they'll, they'll invest, you know, six months into making something really great and then flip it and then do that again.

What.

With that in mind, what kinds of sites have you seen work well for, like the people that sort of build and sell sites?

Yeah, first of all, Empire Flippers, by the way, just a quick aside. We actually started off the same way. We were originally an outsourcing company and lost our main client back in like 2010 or something like that. And so we were building out little ads and sites, also selling on the competitor that shall not be named. But that's how we blogged about it, and that's how we built up our audience and eventually turned into our own marketplace because we realize, oh man, our audience makes way better businesses than we do.

Well, you have a much higher, higher quality products listed as well.

But. Yeah. So back to your question. So you're. Could you rephrase the question a little bit?

Yeah. So if I, let's say I want to get in the business of creating something that people want and selling it on Empire Flippers, what type of site should I be focused on creating?

Yeah, so a lot of different variables there. It also depends on the monetization, obviously. But the main tenants is one, is this a good brand? And one way you can look at that is like, does this have room to grow? Is this something that people are returning to? Or are they just hitting it and then never coming back? A lot of people make a crazy amount of money sending paid traffic to a landing page and selling one product. And that person who buys that product never comes back to buy from that marketer again because it's a churn and burn model. He's not building anything real. So you want to build out that brand. You can still have landing pages. Of course I recommend them, they're very effective. But that doesn't mean you have to sacrifice on building a good brand. The other thing to think about too is, is this something that is plug and play? I have a few friends that are insanely good with paid traffic and just Internet marketing in general. They know everything to the, you know, the down to the minute. They're doing day parting advertising, all sorts of crazy powerful marketing strategies. And while that's really good, if you're going to sell that business to an investor or to a savvy buyer who is very intelligent themselves, that's just not as attractive to them as something that is more simply laid out. So is your business brandable? Is it scalable and does it have a good, good clear system of how it works or does it rely on tricks and single landing pages? If it's the latter, that's going to be a much tougher sale. Yeah.

Now if a company, let's say a website is very reliant on something like Facebook ads, but the company outsourced the advertising to an ad agency is, you know, is that something that is something somebody would want or would they prefer to see it like mostly organic traffic driving sales?

Yeah, we sell sites all the time that are predominantly Facebook ads. It's something you see very commonly in the e commerce space. Right. My earlier example was like what my friends who are really good at it were doing is so insanely complicated that it scares away the buyer. Right, Gotcha. Yeah. You have an e commerce store and you have a Facebook ad agency that's running 100% of your ads. Like I consider that smart. Like you are leveraging a specialized resource that like you, as long as you know enough that you could delegate properly that when they give you the reports, you know what they're talking about, you don't necessarily need to know the platform. Right. And that's, that's the real power of being the entrepreneur. It's just like I think Henry Ford said it and like I have a button that I can use on my desk to figure out anything I need to know in the world. Because that button just Paul's like experts. Right. So hiring Facebook ad agency I think is pretty smart. In fact. Funds people are raising capital, what they'll tend to do and even the portfolio Paul kind of guys, what they'll tend to do is they'll build out a core team that is working throughout all like throughout a bunch of different of their brands. That's almost like an internal marketing agency. Right. So they built out all their processes as internal marketing agency. And when they go to sell the sell one of their Brand properties. What they'll do is they'll hire replacements for the team that's working on that brand and get them up to speed and then those replacements will go off with the, with the new buyer.

Gotcha. Yeah, and that's. We've chatted with multiple kind of more portfolio Paul type people who, who are owner operators, you know, where their job essentially turns into exactly what you said, looking at the metrics, making informed decisions and then delegating to their team. You know, other people who are really good at whatever needs to get done. And, and yeah, if, if you have that portfolio investor. Oh, actually those are two different people. But portfolio mindset.

Similar.

Yeah, yeah, yeah, similar folks. That's a way to structure it and we have some good episodes on this podcast about that too.

Yeah. So yeah, I think delegation is probably one of the most powerful, you know, wealth generating skills. It's, it's a tough one to master. Sure. It's such a soft skill, you know, but it's extremely powerful if you do master it.

Yeah.

Now earlier I think you mentioned this before we hit record, but you mentioned something about your state of the industry report and sort of what industries and types of businesses are working real well. Can you kind of give us the rundown of what that is and how people can go get it?

Yeah, for sure. So this was a labor of love. It's 80 pages long, you know, so a lot of effort went into it. Basically what we did is we looked at all of our sales data over the last two years and analyzed about pretty close to 500 businesses that we sold between 2017 and 2018. And we created why it's called the state of the industry. It's the state of the buying and selling industry as a whole. And you get to see different kinds of businesses, how many we sold, the average sales multiple, average days on market, and the things that make this very unique. So in our industry in the brokering space, there's a few other reports out there that people create and there's a few one man brokers, they try to pull some data and talk about analyze or whatever. But the problem is when they do that, it's one, usually not their data, so they don't own it. And two, because they don't own the data, they have to scrape all these other broker websites. So really their reports are based off of just listing price and listing prices can vary tremendously. Like after being in this industry for three years, I know a lot of brokers that will try to do like we don't do this because we think, we think it's a waste of time personally. But a lot of brokers, what they'll do is they'll entice a seller in by promising them this huge multiple. Like, oh, you're going to have this crazy list price. Come with me, sign this exclusivity degree, exclusivity agreement and then they're in. And you know, four months in, no one's buying the business because it's way overpriced. They're like, well, you got to be realistic, you got to sell for much less. But those other industry reports that are scraping those listing prices, they never get that story because they only can see list price because they don't own the whole data. So we were able to do something that other brokers can't because we sell the most businesses out of anyone now. We actually won the International Business Brokerage association award for it for top global producer and top deal maker. Which that was a funny story actually because all most of these brokers are offline brick and mortar business owners. When they, when we had to submit how many businesses we sold for the year, like, yeah, yeah, we sold 400 businesses. Like, are you joking? What are you talking about?

For business Vietnam, you know, Malaysia or.

Whatever, they did have a bulk form to upload all the business businesses. We had to like fill out each form individually. So me and my buddy in the marketing team, like, God damn it. But yeah, we ended up winning like four of their awards for it. So we actually have enough data to do something like this, which is cool. It puts us in an interesting position. So yeah, if your audience would love to check it out, you can just go to empireflippers.com industry report. You can download it from there. But yeah, we do a pretty in depth analysis. We also debunk a lot of common myths and talk about the future where we see the industry going.

Cool. I might have it open right now and I'm looking at it and this.

Thing is like a bible of marketing automation.

Dude, this is no joke. This is very in depth and we.

Will link it up in the show notes too just to make it easy to find.

So definitely. Everybody go grab that.

So this is sort of a two part, very, very loaded question.

Oh, I can't wait.

Yeah, double loaded question, double barrel. So what would your best advice be for somebody trying to buy a business? And what would your best advice be for somebody trying to sell a business? Like if somebody just came to you, let's say you're at your barber or Something, getting a haircut and. And he was just to say, oh, I've been thinking about buying a business. What piece of advice would you give me, you know, both on the buying and selling end.

So I will start with the selling end. If I was a seller looking to sell a business and I was say 12 months out, I think that's a reasonable time to start making serious changes to a business.

So I would start looking at what are my expenses, what am I spending stupid money on. Usually if you go through your actual P and L, like with an accountant over QuickBooks, you're going to find a bunch of stupid things that you don't even use, like a recurring software that you like, this is a good idea. Then you never had time to actually use the software like your business, you know, so stuff like that, you know, clean up those expenses and look to automate as much as possible, systemize as much as possible. Really look at what you are doing. What is your daily activity to maintain the business, not to grow the business. There's a difference, right? You're just looking at what is, what do you have to do to maintain the business as is right now? Because that's what you want to sell to the buyer down the road. If you can maintain an E commerce business doing 15k net profit per month at 10, 12 hours a week, then that's a pretty good sell. That's a good thing. But you're probably not working 10 to 12 hours per week right now. You're probably working 40 to 80 hours a week, maybe even super stressed out because there's tariffs coming down the line or some other scaremongering kind of stuff. So you really take a hard, honest look at what you are actually doing. And when you distill that down to a few items, a few activities, ask yourself, how can I either hire this out or how can I source it out? And yes, you're going to take a hit on the net profit, which will affect your multiple a little bit or your ultimate valuation a little bit. But you will make the business much more attractive. It probably is not going to affect your multiple enough to even matter, but adding that layer of attractiveness will make buyers much more interested in buying from you. If you can make as plug and play as possible, that's the best.

I want to add another question before you flip to the other question. So with that, let's say I submitted like a profit and loss to you guys. Are you gonna. Let's say there's things on there like our cell phone bill and Our hosting and you know, things that they're probably already incurring in their own business. Would those be factored in or would that be. Would they look at that as a cost that they're also incurring?

It would destroy the business completely. Having your cell phone. Just kidding. So what we would do there, I mean that's pretty common, right? Like us business owners, like we put our car underneath our business license or our business income expenses, we go on vacation to Disney World. And that's a business expense somehow, right? Yeah. So like those are pretty obvious obviously what we call add backs. And it's exactly what it sounds like. We, we look at that expense like, okay, this is obviously not needed to maintain the business as is. It was just an expense he put on his business card. It's an ad back. So that doesn't affect your actual expense in any way. Now if you're going to an industry conference that's like extremely like the business is reliant that you're, that you go there, obviously that is much more of a gray area. That's probably not an add back. But if you're going to just a business conference, educate yourself more like say SEO conference, the business doesn't really require you to do that to maintain it as is. So it shouldn't be counted as an expense.

Gotcha. Yeah, that was kind of more. My question was, should I be removing that stuff in advance of trying to sell it or is the buyer and you guys as the brokerage.

Are you.

Going to realize that that stuff isn't going to be a factor for them, you know?

Yeah, it's not a factor for us. And honestly, if you're looking to sell, like I wouldn't be too concerned about removing that from your piano. Because what we do, even if you have a very clean piano, we rebuild the P and L because it's easier for us to see mistakes in by rebuilding it than it is to see Europe just, you know, looking pretty and everything. So we rerun the numbers as well on our side with our vetting team. And that's a big reason why we help so many E commerce entrepreneurs, especially because they're the ones who tend to have more issues with P&LS. It's more complicated to build those P&LS to help them out. But yeah, we see stuff like that all the time. It's not a big deal. Every savvy buyer, even relatively new buyers that know our process understand like that's not part of the expenses of the business.

Gotcha. Gotcha. And then. So what would your advice be for somebody trying to buy a website?

Yeah, so if I was looking, if I was giving advice to someone to buy a business, I would do a few things first. So I would create what I call a criteria. And we help people do this all the time. So we ask them, what are you looking for? Most people are like, oh, I want to make a million bucks. Like, great, so does everyone. But what are you really looking for? What would make your life better? Like maybe 5k, 10k per month. Okay. We narrowed it down to more reasonable number. And then we asked them, like, why do you want to do that? Like, you know what, what's your goal? Because it has to be more than just the incentive. And like I said earlier, it might be you want to go live on the beach somewhere and not really do much. Like, you want to work that more like the four hour work, work life, you know, four hour work week. Or you might be the kind of person like, no, I want to, I want something to really sink my teeth in. I'm willing to put in like 50 hours a week to grow this thing into a crazy, into a crazy business. Those two buyers, they have two very different criteria. Even though both of them might start at the 5 to 10k per month range. That's the first thing. Understand what your goals actually are. Both the cash flow you want and why you want that cash flow. What are you going to do with that cash flow? How does it improve your actual life? That's the first thing. Then the second thing is to create what I call a due diligence framework, which is pretty much the evolution of your criteria. So a due diligence framework is where you basically have a simple checklist that allows you to disqualify businesses as quickly as you possibly can. Because there's always going to be another opportunity. And you don't want to waste time looking at opportunity that's going to waste your time because it doesn't meet something that's very important to you. So what you do is you put the most important thing at the top. That's the easiest to check. So for example, someone that absolutely does not want a Google penalty that would be on their due diligence framework. And every time they see that in the analytics when they're doing due diligence, takes them about five minutes to spot that, like, nope, move on to the next one. So you want to create that due diligence framework, which is different for everyone because again, it's based off what they want and their Skill sets. Right. Once you have that framework, you're able to start going through and looking at different perspectives and businesses like on our marketplace, much, much more quicker and much savvier. And that way you're only spending time, like a lot of time investment on the businesses that really come close to matching your due diligence.

Yeah. The third thing I would say is, which is almost counterintuitive with what I just said, but don't be too strict on what you want. So we get people sometimes who are like, oh, I want an e commerce store that only sells horseshoes that have cloverleaf designs off of them. Like, all right, I know a site.

No, I'm just kidding.

This is gonna be, you're never gonna find it. Like maybe Google to page 10. You know, you might find something there but you're never gonna find it on our marketplace. It's just too specific. So that's why a lot of investors by the way are very niche agnostic. They, they don't necessarily care as much about the niche as long as it's a good brand with good potential to grow. The niche is often a secondary concern a lot of the time. Now if they're a strategic buyer, obviously that's different. But for most of them niches, they're more niche agnostic. So that's what I would do. And the last tip I would give for buyers is to really understand how deal structuring works, how earnouts work. Especially if you're looking to play in the $500,000 and up range. You should really read into that more how that works because that is one of your best tools. I always tell buyers, sellers hate this, ask them for an earn out because most of the time the seller's going to give it to you and almost 100% of the time they're not going to charge you interest. So that's basically a 0% interest free loan. So why wouldn't you ask that?

We actually have buyers that do just that. They have plenty of liquid to buy the business outright, but they get that 0% interest loan and now they have all this working capital because they didn't end up spending all their money to grow the business. Right. And yeah, no interest. By the way, on the flip side, if you're the seller, I always tell you should charge interest because why wouldn't you? Like you're taking a risk. Right? Yeah.

I mean that's the importance of all this stuff is that it's, you got to know, know what you're doing and deal structure is huge and all these other things.

So just to wrap it up here really quick because you mentioned a lot of blog posts. Can you maybe, maybe you could send those to us? Because I've been kind of perusing the website as we've been talking. I'm like, oh my God, you guys have so much good content that's relevant.

Thank you. We're actually redesigning the blog so it should make it easier to find a lot of our different content. Yeah, I'm excited about that. It's been a long, long time coming. But yeah, happy to send you anything.

That'd be great, man. Yeah, because I know the quiz was a big one we mentioned as well. The Persona quiz, the buyer Persona quiz. That'd be cool. Yeah, I think due diligence, deal structure, I mean just anything. It would be great resources. And of course the 80 page report will link up as well. Man.

Yeah, I'll send over a blog series I wrote too. It's also an ebook now as well. You can actually get it on Amazon but you have to pay for it if you go to Amazon. So just go to our blog because Amazon won't let me make it for free. Any of your listeners that are brand new, I imagine not many of you, the listeners are brand new to a lot of the online business models. But if you want just like a quick and dirty overview of how each of them work and what buyers and sellers should consider for each different business model. I actually wrote a 13 part blog series all about that. So it's very much newbie friendly. It's very high level kind of stuff.

Okay. Yeah. Do you have a link for that now or you could just send it to us later and we can link it.

Yeah, yeah. If you also type in popular online business models on Google, I rank on the first page for it.

The power of content.

Power content, man.

Thank you. Yeah. Now we'll link all that stuff up. I think all this stuff is just knowledge that you can have as a listener, you know, and buyer of a business seller, business, just business owner. This stuff doesn't change. Yes, valuations might change in specific businesses, but knowing deal structure, what to look for, what kind of buyer are you? You know, like these things you can carry over everywhere.

Absolutely.

That's awesome.

Great.

We always ask at the end too is, you know, and if you have one. Awesome. Maybe, maybe if there's a company one as well. But like a great book that you just find yourself or maybe the folks in your company recommending something that just like turned on the light bulb, you're just like, you got to read this thing.

Yeah. Well, we are writing a book as part of my content marketing distribution play. Right. Of course. There's a book involved.

A book that really affected me. And you know, if I read this a few years ago back when I was much more like affiliate marketer, build out my own content site kind of mindset, probably wouldn't have impacted me as much. But now that I manage a team and I oversee a fairly large marketing budget and operation, you know, I have to think very strategically, not just about, like, you know, the metrics, but also about my people resource and. Oh yeah, people becomes more. Sorry, my mic just fell there. Perfect timing. But people become much more of an important resource and how you handle them and motivate them becomes extremely important. So I read this book. I forget who it's by, but the book is called Drive and it's all about how people find happiness and work, more or less. And there's a lot of counterintuitive stuff in there. For example, you would think incentivizing an employee with more money would make them a better worker when a lot of times it has the reverse reaction on it. And funny enough, I can see that a little bit in our Filipino team at times because if we paid them an extra amount of money, typically that extra money goes to just like their family fund. So they never get to like their extended family. If you're familiar with the Philippines, their extended family is like 150 people. It's a crazy amount. So they don't get to see anything extra. So while we pay our staff very well, there. Well, something we also do, we send them on retreats once a month where they hang out with each other, go snorkeling around the islands, or do something fun like bowling. And it costs us very little, but it creates amazing amount of culture. And we do something similar like that with our western staff as well. So I think that book is really powerful if you're trying to level up your business and really understand what motivates a great work and what inspires them to do their best kind of work. Work.

That's awesome, man. Yeah. And the author on that one, I looked it up, is Daniel H. Pink.

P I E. Yeah.

Yeah.

Really good writer too. They have some pretty funny examples in the book.

That's cool. I mean, it sounds like it's experiences win out. And I mean, isn't that life at the end of the day too? It's like going to make more money, but it's like there's A you cover the foundation. It's like, then you just want to live. Live a great, fun life.

Yeah. That is another thing I tell investors and really everyone. Everyone in our space, in the Internet marketing world, because we have so much opportunity to do so many cool things and so much potential to make a crazy amount of money. I think it's a real dangerous game where if you don't sometimes get off the treadmill, you've done so much, and maybe go do some more stuff elsewhere. Because I've seen investors who bet every last coin, even though they don't need to anymore, and then they lose it. Like, what the hell did I just do? I have a. I have a friend, my dad's friend, actually. When bitcoin was skyrocketing.

He never paid more than $2 for a bitcoin. And he pulled my dad or this guy asked my dad, like, for some financial advice. My dad said, you should pull out, like, half of that. So he listened to my dad, pulled out 20 million and lost the other 20 million. But he. But he had gained over 19.9 million because he never spent more than $2, right? He was mining this. I've never bought a bitcoin himself. He'd been mining it for years. But what he told my dad, like, a year later, like, man, I should have cashed out. What are you talking about? You did cash out. The loss of the $20 million was more painful to him than the gain of the $20 million, even though he had spent probably less than $10,000 all in, like, mining those bitcoins. Right? And that's the crazy mindset that hits us sometimes. So sometimes it's good. And this is another reason to have really good criteria, what you want to accomplish in your life, because it's got to be bigger than money. Otherwise you're going to be like, that guy just made $20 million and he's sad about it somehow.

It's all a mindset thing, man. And definitely, obviously, we're not in his shoes, so who knows what was going on? But still. Yeah. You're like, wow, how?

How. That's amazing.

Cool story, man. Thanks for sharing.

Yeah, yeah, no problem. I wish I had a cool bitcoin story. I only have a, like, a 50 gain on my little USB.

Mine got stolen by Russian hackers. So, you know, actually I have no.

Idea where it is, so. It's part of the lost crypto coins of the world.

There's a lot of that out there. Much more than 20 million, I bet.

Yeah.

All right, buddy. Well, this has been amazing and thank you for your time and anywhere else I know we mentioned a ton of links. Empireflippers.com is definitely the main site. Anywhere else that they should go? Check you out personally.

Yeah, you can always add me on LinkedIn. Gregory Elfrink. Pretty easy to find. You can also add me on Facebook, but I get a lot of Facebook requests now, so if your audience wants to add me There, it's Gregory JamesElfrank or facebook.com gregorythere if you add me, just shoot me a message that you heard me on this podcast and apologies in advance. I write a lot of bad poetry. Like I said, I'm a big literary nerd, so I write poetry on my Facebook all the time. Awesome. Sorry about that.

That's good. Don't apologize. It's your art.

Cool. Gray.

Well, thank you very much again and we'll definitely be chatting soon. Hopefully invest in some cash with you guys, too.

Oh, I can't wait.

It'll happen.

Trust it. Thank you so much for having me.

Bye.

All right.

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