I bought an online business, here's what I learned

So a few years ago, I spent a lot of money buying a broken, declining business on a website like this, and it went really well. I bought it, and I was making a lot of money, you know, three, four, $5,000 per month in profit, and it was growing month over month, and then catastrophe hit, and that went to zero. So I want to use that story to tell a bigger story about buying businesses online, what works, what doesn't, what to look for, and critically, what to avoid. So this is part story time, but really, this is a tutorial and a walkthrough of sorts. So if you are considering buying a business, or you haven't thought about it, but maybe you will after this video, then this will give you a kind of step-by-step look into, at least from my perspective, what has worked, what can work, what to avoid, again, and how to proceed just through this whole process. And I think there's two polar extremes when people think about buying a business from someone else, especially a purely digital business, and those extremes are, on one end, they're all scams, right, and people think of that like in the online course and the information kind of product space, where it's just, it's so synonymous with a scam that people just avoid the whole niche, and that, I think, doesn't do justice to all the people out there who run successful businesses online and who want to sell them, and that's for perfectly valid reasons. Maybe they want to retire, they want to get into another business, they don't have time to run it. Those are perfectly valid reasons to sell a business that is doing well, that may be growing or is just stagnated over time. But that doesn't mean that the opposite end of the spectrum is true, whereas everyone who's selling their online business is doing it for good reasons, isn't lying about it, and actually has something that is worth buying at the price that they're suggesting. Right, going back to that parallel of the information content space, there are a lot of people who are, in fact, scamming you on their course or who are just reselling someone else's at a 10 times markup. Those exist. And so, really, this whole game, especially just of acquisition, of M&A, especially when it comes to marketplaces where anyone can list, there's a lot of work to sort through those extremes and come to that middle ground, which is you have to do the work to find the businesses that are those gold mines, and critically, a constant welcome back to is they are gold mines for you. Maybe they're trash for everyone else, but for you, it's the perfect acquisition from an ROI perspective to make. And with that concept in mind, I wanna touch on the options out there or the landscape of where you can go to buy businesses online from other people. And this ranges from quote-unquote starter businesses, so just like website templates up to businesses that are making tens of millions of dollars per year. Now, before I do that, we're talking a lot about online businesses in this video. And in previous videos, you have probably heard me speak about the domain and website of your business as the digital home for your business. And first impressions do matter. And as far as domain extensions out there go, .com extensions are saturated and really hard to find, or good ones, at least. And that often forces people to change their business name or to go for a really long or strange domain name like this. Now, instead of that, .online is the world's second largest new domain name extension. And the word online is part of keywords searched over 500 million times every month. And that makes .online domains a perfect fit for all types of businesses. And .online is available for a limited time for just 99 cents for the first year. To get that, you can use code JOHNLAW, all caps, at get.online, or just visit that link in the description. So if you, say, acquire a business, whether failing or successful, and you want to give it a new digital home, then, again, make sure to consider .online to do that and claim that 99 cent for the first year offer. And that said, let's get into those criteria for the businesses that I was looking at. So in the online acquisition space, there is one big player out there. There are a few large ones, but the dominant one specifically for digital businesses is Flippa. To my knowledge, Flippa is the largest platform with the most buyers, the most sellers, and the most transaction volume. The problem with Flippa versus a few other platforms I'll speak to is that they do somewhat less vetting, so generally anyone can go and list. And they do have a lot of tools available to make sure that transactions are vetted and go through well. You just have to do a little bit more effort than you do on other platforms to do that vetting work yourself, right? To check the website traffic, to make sure they've, say, connected their Stripe account properly and their Analytics account, and to maybe do some research into the actual seller themselves. Whereas other platforms that are more white-glove, concierge-like, they may do a little bit of that work for you. But given that they have the most listings, they're the largest, there are a lot of great businesses for sale on this platform. And this is where the business that I bought in our little story time here was listed and where I ultimately bought it. And I wanna mention two other marketplaces in the landscape here. And the first of those is Empire Flippers. Like I said, Flippa is kind of on the lower end as far as the service there goes, unless you pay more typically, at least on the seller side and the listing side. Empire Flippers is a bit more professional as far as that goes. And they very thoroughly vet every single person that wants to list on their platform. They interview those people, they check out the business, they actually may meet with them in person or online. And then they reject most of the applications ultimately and only list a very curated kind of type and volume of businesses. But that means that typically those businesses are sold at a much higher multiple. So you may have to pay say, 40 times monthly earnings or 60, 80, whatever it is versus a little bit less on Flippa. And there was a lot of competition typically for those businesses, just because there are so many eyes and investors looking at the small amount of businesses that are listed with Empire Flippers. And then for number three, we are talking mostly in this video about digital businesses and synergies and acquisitions. But buy-biz-sell is a great alternative for more physical businesses. So they have things like, if the family down the street is selling their laundromat that they run, or the pizza guy is selling his shop, or the vending machine network, the plumber network or business, right? Any physical business like that, you'll see a lot of those listed on buy-biz-sell. And a lot of the same criteria that I'm gonna mention in just a second do apply to physical businesses and buy-outs as well as digital. And so as it relates to the acquisition that I made, I was looking on all these platforms and I looked at them for a long time, and ultimately I found one on Flippa. This was after a year plus of looking and I knew kind of the domain in which I wanted to buy the business. And I wanna mention for a few minutes the reason why I bought the business that I did and specifically the criteria that I think are valuable and in my experience and other people's as well who have done similar things, what makes an acquisition successful generally or not go so well. Now the first concept as far as criteria goes is that of synergies. And this is, I think, if out of any point in this video, kind of the core one that I wanna get across. And what that is is the idea that there is not a goldmine buy-out to make where you're gonna stumble across it and make a boatload of money. There's not one that exists for everyone like that. Rather, there could be that goldmine for you specifically. And we can think of this more as there is a perfect buyer for a great seller as opposed to everyone is a perfect buyer just by function of capital for a given seller. For example, if you run a network of yoga studios and you own, let's say, 100 yoga studios and you find a business that is being sold online where the sellers are looking to retire, where they make this kind of athleisure, like this yoga clothing, and they have a dedicated fan base, they have a lot of people that love the clothing and it's really high-quality clothing, but they're struggling to just grow their footprint and get into stores and sell it. For a lot of people, that would be a really horrible acquisition to make because you don't have the connections to get the clothings in stores, you don't know how you're gonna grow it. But if you, as the owner of this chain of yoga studios, go and buy this business, you can suddenly distribute that clothing into your 100 stores, you can pull the customers into your studios. There's a lot of what the business world calls synergies there in that acquisition. And same thing, if you are a writer and you love to write and there's a blog that's being sold where they make a short story a week, maybe you would do that for fun. And this is just a way to pre-buy a customer base who's gonna read your work. And this is what I mean when I say there could be a perfect buy for you specifically or for your business. And that's what I was looking for. I started out in self-publishing, writing my own books, hiring other writers to write books, and ultimately span self-publishing as well as traditional publishing. And so that's what I was good at, that's what I knew how to do well. And so I was looking to buy another self-published book portfolio and then merge that with mine. And that right there has a lot of synergies. Since it's the same business and I have a lot of experience in that business. I can add those books into my portfolio, I can cross-sell the different customer bases and email lists. I have more to offer publishers internationally that I sell book rights to. There's more lead hooks. I can pay ad people to do and cover much more books in terms of the ads they create. There's a lot of synergies there. And so inherently by buying the business, by buying a self-published portfolio, I'm gonna be able to do a lot more with that than if I bought, even if it was a better financial deal, say some SaaS company. And so that was criteria number one. Now criteria number two, and this touches on what I spoke to earlier, is just legitimacy. You have to make sure the business you're buying is real and that you can trust the honesty of the person you're speaking to and what they say about the business. There's a lot you can do there, actually. And I think you should look into the sellers of the business as well as the business itself. And there's a lot here that you can hear from other people, but as far as just investigating a business goes, you want to look at the website traffic. You want to speak to past customers if possible. Anything that's public about the business you want to look at. Or if it's people, you want to speak to them, people who've interacted with the business, whether workers, customers, former owners, et cetera. And then there is what's called the due diligence period in every acquisition where you can investigate the business. And you need to be as thorough as possible here, right? They're going to, and they legally have to, let you see everything about the business. And so you want to take that time to make sure you ask all the hard questions if there are any and really see everything. And that is the prereq. If you can't trust the person that is selling you the business, if they have a shady history, if they can't find documents that they should be able to find for you, if they lied about any metrics of any sort, then that's just a no-go. It's really just not worth it to put capital at risk and to put yourself at risk because now you own this legal entity by buying something from someone where you can't trust them. Criteria number three is just don't buy it purely because it's cheap. Again, you want to get a better deal versus the worst deal, obviously, if you can. But really, again, it comes down to synergies. And the pure ROI isn't just going to be the amount of money that it's making now versus the sale price. It's going to be you and how much you can grow the business and what you can add to that revenue. And so a very high-synergy buyout is going to have a much better ROI even if the multiple you're paying on the sale price versus the monthly revenue or profit is gonna be higher versus one in which it's a better deal in terms of those numbers. But when it comes to you actually being able to grow it, there's gonna be much less money to make there. And criteria number four is stability. And generally, in the online acquisition M&A space, you see this inverse correlation between price and the duration for which the business has been around and making money. So even if you've made a lot of money really quickly, you're not gonna be able to sell your business versus for a lot versus a company which has made less money but they've been doing it every year for 15 years. And stability is really important for me when I'm looking at something to buy because ultimately, the fact that some product or some business has stood the test of time, it's survived in the marketplace, that is the best indicator of the viability of the product and the idea or the service versus something that's made a lot of money but only for a very short amount of time. So you may see great deals, like let's say three times monthly revenue or profit on a business that just came into existence. And just because it's cheap, if it's not stable, that to me is just a red flag. And so I suggest you avoid any kind of businesses of that sort. And I remember during COVID, this was four or five years ago at this point, there was a business on Empire Flippers that I saw that was a toilet paper business. And they made $200,000, $300,000 in profits that month and for two or three months running. And they were trying to sell for just half a million dollars. And if you just look at the numbers there, you're gonna make your money back in two, three months. That's great, right? But why are they selling for that little? Well, it's COVID in two, three months, there won't be a toilet paper shortage and that business goes to zero, right? That to me is the kind of crux of the example there of stability versus price. So going back to the acquisition, I made the business that I found ultimately checked all of the boxes for me. It was stable, it was legitimate. I had a lot of Zoom sessions with the guy who was selling the business to understand why he was selling everything I needed to know about the business and so on. And I bought it, the transaction went smoothly. I did it through escrow.com on Flippa. And then that transitions into the next phase, which is how do you operate and grow the acquisition that you make? And that transitions into the next phase, which is how do you grow and operate the business that you just bought? And this ties into synergies again in using what you are already good at or what your team is. So when I had bought this portfolio, I did two things immediately. The first of them was I updated all the copy and improved it. And by that, I mean the titles of books, the descriptions, the subtitles, and the ad text, right? That is something that I knew I was good at, that my whole team and people I'd hired were good at. And when I looked at the business and all the books I was buying, I knew a lot of them weren't very good. The descriptions, subtitles, et cetera, didn't have keywords, they were badly formatted, there were errors here and there, even if the books were good. And so on day one, a really weak one, what we did is we went in and just updated that for all the books. And that immediately caused this big bump in sales. And that's what I mean when I speak to the synergies of if you are really, really good at copy, maybe you wanna just buy out a business that has really bad copy. If you're amazing at ads, go buy a business that can't grow because their ads aren't doing well. These are simplified examples, but the concept really does hold an actuality of merging you and what you're really good at, your competitive advantage with a model, with a business that would benefit from your competitive advantage. And second thing there was ads as well. And I touched on this earlier, but basically we have all these new products, we have a bunch of people and publishers overseas we can sell into. And so we started advertising these books first to our connections and to people we knew internationally. And then second, just through digital ads, Google ads, Facebook ads, Instagram, et cetera. But then the plot thickens, like I said. And by this point, a few months after the acquisition, it was doing really well. It was closing in on four or five grand in profit per month. So not amazing numbers, but growing fast and consistently and really just producing a great return on the money that was spent on it, right? A return that would vastly outpace the market. And then what happened is Amazon is kind of a monopoly in the self-publishing space. And so one day I woke up like four months later and this was unrelated to the acquisition and they shut that account down. The reason they shut it down, likely, I'm not a hundred percent sure on this, is because I was a minor. But however, it took them four years to find out that I was a minor and that they should shut those accounts down. Now I learned a lot from that because I should have run it through an LLC. I should have done a lot of things differently. But ultimately they shut that account down, which had all the books that were in the acquisition. And yes, they were also listed on other distributors and I still had the deals with overseas publishers. But net, that was a really, really big hit for the business. That was 70 to 80, if not upward of 90 over time because of the hit to search rankings, percent of revenue that just disappeared overnight. And that takes that four or five grand plus and growing per month and crashes that to nearly zero. I won't touch on this too much because I've gone over it in other videos, but the core two lessons for me there were about single points of failure and platform reliance, or really the ideas that you need to be really, really careful what you're reliant upon as a business. And especially if that set of things or thing is a single point of failure, right? If one partner, one customer, one piece of code, one person goes down, does a large part of the business just evaporate overnight? If that's the case, then that might be a point of risk that you want to look to disseminate over time. And that will do you well, whether you're looking to just grow your current business or you're looking to buy someone else's business out. So that's the story and the little process there of buying a business and acquiring one online. And again, if you do need that digital home for your business, or you want to update the business maybe that you buy, then make sure to use that code johnlaw at get.online to pay just 99 cents for the first year for your .online domain. That said, we are closing in on 1 million subscribers this year, hopefully. So make sure to subscribe to help make that happen. And I'll see you in the next one. Cheers.