Buy It, Don't Build It - A Guide For Buying Business (Part 1)

 

“The way to get filthy rich is by aggressively copying others and then adding your own twist." ― Nathan Latka, How to Be a Capitalist Without Any Capital: The Four Rules You Must Break To Get Rich

Shortly after moving form Southeast Missouri to Central Florida I met some really awesome gentlemen that turned me onto the world of buying business as a way to invest and build a portfolio. They told me to read Nathan Latka's book, "How to be a capitalist without any capital". Since I was already an investor for a few years and had built up a nice little chuck of capital I figured I might be able to read it and get something small out of it but I wasn't very optimistic but I needed a new book to read and had built up quite the stockpile of credits on my audible account so I figured why not, and downloaded it. After reading it for the first time my eyes were opened to a world of new possibilities, I immediately got to work on setting up my account on a few platforms to find businesses to buy and then started the book over so I could re-listen to it. There is a lot of gold in that book especially for beginners and while I may not agree with every opinion in there such as "Rich Dad Poor Dad" is no longer relevant, I do think its worth the read and want to talk about one thing I learned in particular and have been doing since I learned about it from both him and the guys I have met here in Central Florida.

The concept I want to share and discuss over the next few blog posts is about how to buy a business and the power that comes with it. I started this whole process about 4 weeks ago, at the time of writing this, and I have already purchased my first online business that should be mostly passive. (We closed on it about 4 days ago and I have a final meeting with the previous owner today to go through the entire business) More on that business in the next blog post. First I want to take you trough how I found the business and my journey up to that point first. 

The Platforms

First lets talk about the platforms that I have been on and used to find potential acquisitions. I have found quite a few platforms but I don't want to list all of them because the platforms themselves didn't meet my criteria for me to use them. Lets go through the criteria real fast. First i wanted to see verified reporting of both online traffic and engagements as well as verified reporting of income and profit. Second I wanted to see verifiable sites, not some weird Ponzi scheme or some craigslist ad from a guy telling me that if i give him $1000 he will make me a millionaire in a month. Next I wanted to find sites and software in my target investment budget, sub $50,000.00. And Lastly the buying and selling platform itself had to be trusted, if you don't know how to tell if a site should be trusted by you then I would recommend taking some time to learn that before buying an online business, online. 

Exchange Marketplace 

One of the first I found was a site called Exchange Marketplace. Created to allow Shopify and Woocommerce store owners to buy and sell their stores. The site is great if you are looking for a dropshipping or online retail store to own and operate. It met a lot of my requirements as it was built by the Shopify team and it had integrations that allowed each members listing to pull the reporting data straight from the store itself unaltered. This gave me a high level of confidence in any potential transaction both from the platform provider as well as the seller of the site or store. I could easily go and look at the actual site that was being sold as well as social media accounts to verify that the information was correct. They also had a wide range of listing prices anything from a couple thousand to millions of dollars was available on the platform. The only problem was its listing were limited to pretty much online retail stores which wasn't what I was after.

Empire Flippers

Empire Flippers was the next one I found. It met all of my criteria as it had a very difficult process of getting verified to actually see any of the listings. Combined with its podcast for almost every episode where the host of the show asks some very targeted and great questions about the site that is being sold, I felt very comfortable with doing a transaction through this site. They also had great verification process for the information that sellers provided about their listings. They had a wide range of sites and software to choose from but most of what I was finding was hundreds of thousand of dollars and up. I found about 6 listings that were in my budget and I wasn't in love with most. Not saying that they aren't worth it or that they are asking too much on that platform, just that the average site was much priced than what i was looking to buy. I will however continue to watch for new listings to see if anything good pops up.

Flippa

This is ultimately the platform I purchased the site I mentioned early on. Flippa had everything I wanted. Anything from Shopify stores, to amazon affiliate content sites, to Mobile apps and games to Saas products were listed for sell, you name it they had it. Things were listed from as little as $1 to millions. Some things were listed as an auction and some you could negotiate or buy out right. They also had the reporting data integrations from many different service providers such as google analytics, AdSense, QuickBooks, all sorts of stuff. The site was clean, easy to navigate and the support team was very responsive. The payment processing was handled through Escrow.com which was a site that i was familiar with and felt comfortable with handling my money.

So after about a week of researching the different platforms these are three that I choose to narrow in on and find my first acquisition through. From there I was looking for something that I could buy for under 24x monthly profit. I also wanted something that was going to be as close to hands off as I could possibly find but something that if I chose to work on, I could see some upside. I also wanted a business that had consistent month over month growth in revenue and in a niche that I knew or had an interest either professionally or personally. I chose a 24x profit per month multiple as the typical range is anywhere from 24-36x the monthly profit and with a target portfolio value of $50,000.00 I should in theory be able to make somewhere around $2000 a month in profit. This is also about 4x the normal monthly return that most Single Family Rentals, that i typically invest in ,would make in cash flow. 

This was my investment criteria and now all that was left to do was to find the investment.

This is part 1 of a 2 part blog, here is part two Buy It, Don't Build It - A Guide For Buying Businesses (Part2)

 As always I am not a financial advisor nothing I say is a recommendation. This is all simply entertainment and inspiration. Go forth and conquer, mighty hero.