Michael Bereslavsky: Domain Magnate | The Authors Unite Show #974

All right, everyone, welcome back to another episode of the Authors Unite show. Today we got Michael Baraslovsky with us. So welcome to the show, man.

Hi, Tyler. Nice to be here.

Yes, grateful to have you on. Where are you based out of?

I'm currently in Chiang Mai, Thailand.

Gotcha. Okay. I want to hear about that then, but just before we get into that, tell us a little bit more about you and what you do.

So I buy and sell online businesses and I run several companies. The main one is called Domain Magnate. It's a micro private equity firm. We raise capital from investors and then We go and buy and grow different online businesses. So like content sites, SaaS businesses, e-commerce stores. I also run, I co-own an M&A advisory firm called Dealflow Brokerage where we help sellers exit their online businesses.

Okay, awesome, awesome. And how did you get into this?

Yeah, it's, you know, it's an interesting story, Tyler. I was just 19 or so, and I was 15, more than 15 years ago, I was kind of looking what to do, and I've heard that you can make money online. And back then, and we are talking about like 2004, 2005, like no one knew Google at the time, like no one knew that you could actually earn some money or do anything with that. And I just started researching and built some websites and learned about affiliate programs and how things work, how to get traffic, and gradually started making money with that. And as the business grew, I looked more into scaling and expanding, and the best opportunity on the market was that I could buy some existing websites and then continue growing them. And that's basically what we've been doing for the past 15-16 years. And recently we've also started working with investors so that we are able to grow much faster and buy more and bigger businesses.

Awesome. So what are like, when you're looking to buy a business, what are some of the top things that your team and you are looking for I guess, like, what qualifies a business in your mind to be bought or that would interest you in buying it?

So we buy based on a multiple of profits.

Okay.

And typically most businesses sell in that range, and we are talking about the range of under $1 million in value. So most businesses typically sell for a multiple of 2 to 3, sometimes more, of profit. So that means if a business is making $100,000 per year, you would typically expect to pay something like $300,000 for it. So it's a fairly straightforward process, that's in terms of financials. And then we also look to see that this is something that's a fit for our team, for our specific criteria. In terms of traffic sources, monetization, and other things.

Gotcha, okay. And back to Thailand, how did you end up in Thailand?

Yeah, I used to live in Israel and I traveled around a little bit, caught the digital nomad bug, and I went around Europe, Americas, and Asia, of course. And then I was thinking, where would I actually like to stay longer? And I just kept coming back to Thailand. So eventually I decided to settle here for a bit, and I've been here for a few years now.

Got it. What part of Thailand are you in?

Chiang Mai. So it's on the north.

On the north. Okay. How far? I'm trying to remember where one of my friends lives. It's this island. That doesn't help. I don't remember where she lives.

Yeah.

It starts with a K.

There is like Koh Samui, Koh Phangan. There's a few.

Yeah, yeah. It looks awesome. She says it's like one of the most peaceful islands and like apparently your money goes way further over there too. Have you experienced that?

Yeah, absolutely. Things are much cheaper and the islands are very beautiful. The locals are very friendly also.

Gotcha. Okay.

Very cool.

So I think what would be helpful for the listeners, like, Maybe, and I don't know how it works with some of the businesses you buy, like obviously you have some testimonials on here so some of them are public but I'm sure some of them are private. But can you walk us through some like stories of like how you guys either bought or sold, just some of like the more significant stories that could teach our listeners some lessons on how to buy and sell businesses?

Yeah, so we actually, most of our deals are private but we actually have a few case studies on our website. Visitors, they can find them by going to our blog at domainmagnate.com/blog. Gotcha. And yeah, so the way we approach all our deals is by looking at 3 different parts, the numbers, the opportunities, and the risks. And typically it's a combination of those 3. So sometimes you get something that's a low price but very high risk. Sometimes something that's a high price, low risk, and then you have to figure out if there are some good opportunities for growth. It's usually a combination of those three. We've had some really interesting deals, of course. So like right now, for example, there are two businesses that we are buying. So one business is in educational niche. So it's a well-established business in the I can't really reveal a lot of details but I can just say that it's an educational niche and it's priced at around 3 years of profits. But it's, we love it that it's a very well-established business, more than 7 years of stable history and many opportunities to grow it and it just makes money. Like it receives traffic from organic rankings on Google. So people go to Google and search like if they want to prepare for different tests, they search something, query like that, then they are taken to the website and then the website is monetized with some affiliate links or else it also sells its own courses. So then people would go, they would buy a course and that's how the business makes money. It's a fairly straightforward way. In terms of stories, so we've had some, one of our initial Initial deals have generally been more interesting. Actually, my very first deal I think might be a bit more exciting for listeners to hear. Yeah. But it was one of the smaller ones. But it was a website I acquired for I think like $120. A very small website that did not have much revenue. It was a blackjack game. And it had this small unique blackjack game that I think, I'm not sure if it was unique or if the seller just took it from somewhere. But I think it's a nice website, it had some content so I just bought it for $120 and it made me, I don't know, like $20 per year, like very little.

Yeah.

But then eventually I think a couple of years later, I didn't do much with it. I had, I received an email from this company that was managing a large portfolio of gambling websites and they wanted to buy the site. Apparently they liked it. So I had no idea about selling a website before, so I didn't really know what it's worth. So I thought, well, let's see what they offer. And I said, and I replied with like, I wasn't really planning to sell it, but let me know what you can offer. And of course I was excited because maybe they'll give a good offer. And they offered $2,500.

Nice!

And I was kind of shocked, like I didn't think it's worth anything. So I sold it to them and that was the first time I realized that I made like 20 times more than what I paid for it. So I realized that there is probably some money to be made in it. Yeah. And then I bought some more websites like for a few hundred dollars, a few thousand dollars, and now we mostly buy sites in six figures from like $100,000 and up. And the principle is more or less the same. Just kind of try to buy, try to grow it, and then sell the result for more.

Got it. Okay. That is awesome, man. Now, yeah, and even, I mean, $20, $2,500, but it's cool, the multiple. And it's always cool to me how like you kind of fall into businesses, you know. So it's like, you didn't really, that first site, you didn't really see yourself, I don't think, doing this long term, but then you kind of fell into this one offer. And you were like, holy crap, $2,000 to $2,500. All right, let's see what's going on here. That's awesome.

Yeah. Yeah, there are some interesting opportunities along the way. So one of the sites I had was a site about drug rehab and like different drugs and how they affect people and things like that. It was just a content site. And it had different articles, was making a little bit of money from some ads. I think a few hundred, like a couple hundred dollars per month or so. And then at some point a company reached out who wanted to buy it that run many different drug rehabilitation centers. And for them it's a very different financial structure because they can get thousands of dollars per client. Well, for me the website was just monetized with ads, Google AdSense, so I would just make like 10 cents or 20 cents per click. So we were able to— then the website was worth much, much more money. So I was able to sell it for $20,000 at the time despite buying it for like $4,000. So many, many stories like that, hundreds of deals later now.

Yeah, I was just gonna ask that. So how many deals in total do you think? Not exact number, but just an estimate.

Yeah, it's hard to estimate also because there are some that were very small and some that included many different sites and domains. But since we've started counting more precisely in past years, we've been averaging about something like 15-20 deals per year. And now we are doing fewer deals and like focusing on bigger businesses. So it's probably going to go down to like 10-15 deals per year.

Got it. That makes sense. So I'm on your blog. Let's just, I want to go through like a couple of the examples, some of the on the top of your blog. So let's start with the how we turned $51K into $176K by reviewing coffee grinders. What's up with that?

Yes, we've recently published a few case studies. This is one of them.

Yeah.

It was a content site that we acquired, content affiliate site about coffee grinders. And we've added some more content, we've worked on SEO, added some backlinks and then sold it for more.

Okay, gotcha. So when you say you worked on some SEO and some backlinks, I know a lot of our listeners, well, pretty much anybody who has a business online would be interested in having it rank higher on Google. So what did that process look like? Obviously, I know SEO, it's not like just one click of a button, but how long did it take? What was the overall process you guys took to do that?

Yeah, so we have an operations team in the company. We have Currently 3 managers and several assistants. And so the way it's set up is the managers typically review it, plan the strategy, and then we would have the assistants helping with uploading the articles, getting the articles written, and all those kind of things, and also building backlinks. So the main structure of SEO is doing some on-page optimization and that could be a variety of things based on our analysis. And then also building some backlinks through some guest posts, outreach. So generally, yeah, currently SEO is not that, like it's difficult but it's not super complex I would say. In that sense.

No, no, I understand. Um, and the, the other one I wanted to talk about was the, um, was the weed one. So how you generated $200K in 5 months by helping people grow weed at home. So tell us 2 things. One, how do you grow weed at home? And secondly, and secondly, um, a little bit more just about the case study and how you guys did that.

Yeah, about the "Feed at Home," actually I don't know. I haven't really read the articles on the site to be honest.

Okay.

But we do have the writers and editors who worked on that. And apparently it was good content because people liked it and bought the products, affiliate products. The site itself also was a content website with some articles which ranked for good keywords and people would come to the pages and buy the products from Amazon. Actually, turns out that all the things you need to grow weed at home you can buy on Amazon. So that's a good thing for our listeners who might be interested. That's good. Yeah.

That's awesome.

Yeah. And basically that's the same process. We've grown it a little bit and then they found a buyer and And sold it.

Gotcha. Okay. What are some of the things that people, like, maybe talk about some of, like, have you had some failures with it? Like, have you bought some sites and then they just didn't work out? Like they lost money?

Oh yeah, definitely that. Like from the way we look at it is from every 10 deals, like 1 or 2 might not go well. So like a couple years ago we bought a site for about $10,000 and we lost about $10,000 on that. So that happens too. So something that might be interesting to our listeners on that is we have our buying criteria. If they go to domainmagnate.com/criterium I think that's kind of a hidden page right now. I think it's not linked to anywhere from our side, but that's where we list our actual criteria for how we review acquisitions. So we have, of course, we look at legal and ethical requirements and those are pretty self-explanatory. But we also review the strategic criteria in terms of if it's a good fit for our portfolio, for our team. So now we mostly work with just organic traffic and content as a service businesses and niches that are long-term. And we also make sure that the price is within, more or less within the market range. And it also describes our process, how it works for people who want to sell a business to us. So that might be interesting.

Gotcha. Okay. Yeah, I actually, I found that it's under the sell acquisition criteria. Criteria.

Oh, that's right. Yeah. Yeah.

Um, so, gotcha. Now, that's actually still pretty good though. Uh, or actually, I think it's really good, right? So, for every 10, 1 or 2 get like, don't work out, but then there's 8 or 9 that do. So, that's still, you know, 80-90% win rate. So, I guess, Is there anything people should really like watch out for if they were to get, I mean, it seems like it's a great business model. So I guess what I'm looking for is like, is there any like big red flags that you've like learned from doing it for, I think you said 16 years?

Yeah. Yeah, that's a good question. The situation on the market right now is such that the market is just populated by low quality businesses for sale. So there is a lot of people who build sites in order to sell, so they optimize them in such a way that they would maximize the revenue just before selling. And then people buy and then the revenue just drops. And that's very common unfortunately. And there is a lot of buyers now who just don't really understand this, don't understand the risks. And I would say the biggest misconception with online businesses is people compare them to real estate. They think This is like real estate, you buy a site, you get some revenue ongoing and that's it. And then maybe you get a managing company to help if it's a little complicated. And the problem with that is that with real estate if you do a bad deal you might get lower return, right? But you are not likely to lose your money unless you just get completely scammed, right? I guess it's unless you are really unlucky and there is a big crash. But with online business it's not like that. If you do a bad deal you'll just lose most of your money right away because the site would just plummet and even a good SEO agency won't be able to help if you didn't do your due diligence. So it's very important to really understand what you're buying and make sure that you do quite a bit of due diligence. And that generally takes, really takes some time to learn the industry, to learn it enough to be able to do that. So my recommendation to people is to either start with buying a smaller website, like set a learning budget, let's say a few thousand dollars, and then just buy a smaller website so you can learn all the different tricks and techniques. And the thing is it's not a huge difference between this website for like $2,000 or the website for $200,000. Of course it's quite a big difference in financials, but in terms of risks, understanding structure of business, it's usually not a big difference. So if you can do the smaller one, then you'll be much better at learning how to manage a bigger one. That's one option. The other option is really go with a company or with an operator who knows what they're doing. Because there are so many different pitfalls to fall into if that's your first deal.

Gotcha, that makes sense. And What's like the quickest deal that you've ever, like, they've come in and you passed, like it went through the criteria and you bought it? And then what's the longest it's taken you to like gather all the data and then make a decision?

That's interesting. I would say the quickest was probably, yeah, we had some deals that took a day or less than a day. That's where just like discuss things, look at it, message, okay, it's a deal. I'm going to send you money through PayPal or through something quick like that and through wire transfer and that's it.

Yeah.

I had a few, generally the smaller ones, not the big deals.

For sure.

The longest, actually I had a few deals that took like 2 years from the initial contact and then the seller just wasn't ready to sell so then we followed up a little bit and then at some point they were ready to sell and we could negotiate and do the deal. So there is—

I bet that— I feel like that would happen a decent amount where like the founder, because it's like appealing to sell, but when it's like your baby, like when it's like your business that you've been building for like 5, 10 years or whatever it is, then when it comes down to the wire and you're like just about to sell, I feel like emotions start to come and you're like, oh shit, I don't know if I'm going to do this.

Yeah, absolutely. But also people often have unrealistic expectations. Like people want to get $1 million for a business that doesn't make that much revenue. And often we would say, hey, this is what similar businesses sold for on the market, so this is what we can offer. And they say, no, no, I want 10 times more. And then maybe, you know, sometime later they do actually want to sell and then they start checking things by themselves and they realize that this is reasonable and then they come back.

Mm-hmm. So really, last question, just because I'm curious about Thailand a little bit more. What's your like daily life like look like there? Like, is it similar to the States? Is it very different? Like, how would you kind of describe your routine there?

Well, do you get a Thai massage a few times a week in the US?

No.

So it's probably a little bit different. Okay, things are, things are a lot cheaper, I would say, uh, probably 5-10 times cheaper. Most, most stuff, things are much easier. People are very nice. Uh, this one time recently I was at, um, I was with, at a Grab taxi, and, um, after I, after I exited the taxi and, and went to my appointment 10 minutes later I see the driver coming by with a 1,000 baht note in his hand. I mean, I don't speak Thai, so I didn't quite understand what he was saying, but I thought this is strange because I know I paid him through the app. And turns out I dropped a 1,000 baht note, like it just fell out of my pocket, and he actually just came in order to return it to me. And I was so shocked, I thought that's so nice. I didn't even know I dropped it. I would have never even, you know, considered that or thought about it. And he just returned, like he realized it later, and then he turned around and returned just to return. That's so nice. That's pretty common.

That's freaking awesome. And then when you say easier, what do you mean easier?

I mean, like, easier to get things done in terms of You don't have as much regulations or problems or restrictions. So you, yeah, as long the visas could be a little bit complicated, but once you get the visa, you just, it's easier to find an apartment. You just, there is a lot of different places. You just come in and say, I want an apartment, and they say, okay, we have this, this, and this, and you just stay there immediately, or you You just pay and you get it. You go to a restaurant, the restaurants all have pictures. You just point like, this is what I want. Like, things are kind of simple. Yeah. You want to rent a motorbike, you know, a scooter, even if you've never ridden a scooter before, you just like come pay and you figure it out and you ride it. That's it. No problem. So it's kind of simple.

All right.

Yeah.

See, I live in Miami and I love it here, but I am like, slowly being convinced from my friend, from you, and some other people that are in Thailand. And I'm like, I love Miami, but Thailand, there's something— it seems like it's awesome there. So, um, and yeah, a few massages a week, I mean, I could, I could, uh, I could handle that.

I think the language is the tough part, but other than that, it's pretty good.

Gotcha. Well, listen, man, um, thanks for coming on the show. If there's anything else you want to share, please do. And then, um, lastly, like, tell people where they can find you on social. I'll follow you on Instagram so we can stay connected and anything else you'd like to share.

Yeah, thanks. It's a pleasure to chat with you, Tyler. For your listeners, they can find us on domainmagnet.com or look up Domain Magnet on social media. If they are looking for, if you are looking to sell your business, feel free to come to us and get an offer if it meets our criteria right away. And also we are currently launching our third fund, which is open to all accredited investors. So you're welcome to inquire to learn more about it.

Awesome. Okay, perfect, man. Thank you again for coming on the show.

Thank you. Have a good day.