Orchestrating Successful Business Sales: Insights and Strategies from Justin Cooke

Part of that outsourcing company was like, look, we'll do anything for everyone, right? If you want back office support, we'll do it. You want to call center, we'll try to set that up. You want us to do this or that just to make money and keep the business rolling. We'll do anything for everyone. And what we realized is if you're anything for everyone, you're not going to be terribly successful for anyone at all. Um, it's better to have a niche, right? Say I make blue suede shoes, right? You want red dress shoes. I don't do that. I do blue suede shoes. I make the best damn blue suede shoes. And if you're looking for that, I'm your guy. Otherwise go somewhere else. And once you do that and you pick your niche and you commit to it, you'll get everyone looking for blue suede shoes and everyone else you can send away. And I got to tell you as an entrepreneur, when they don't fit your niche, it's refreshing to tell them no. Welcome to super entrepreneurs podcast. Today we have with us Justin Cook. Justin is the co-founder and CMO of web street. The world's leading marketplace for buying and selling established and profitable online businesses with 245,000 users and 450 million plus worth of deals done. Love it. Welcome to our show, Justin. Hey man. Thanks for having me on. I appreciate it. It's my pleasure. Pretty amazing stats. When did you guys launch this? Yeah, I should talk about it. So there's kind of two companies that we have. One is the older established company called empire flippers. And I'm a partner in that company. And that's where we help people buy and sell online businesses. We've done more than $450 million with deals. We started that back in 2010. And then one of the things we realized as people started buying and selling these businesses, that there's a certain kind of person that can buy an online business, like you, for example, you've been around the internet a bit. You could probably buy an internet business and run it and be successful. But my aunt couldn't. Do you know what I mean? We're trying to figure out like, what do we do for these people that have in money that want to invest, but they don't have the skills to run an online business and that's how web street was formed. So web street is our kind of newer startup. That's only a couple of years old where we match experienced entrepreneurs that have built successful online businesses and match or pair them up with investors that are looking to get access to the space. Okay. So it's more dynamic how you put people together then. Yeah. So we, we originally, we had a marketplace at empire flippers for people buying and selling online businesses. So you go to empire flippers, you can look for businesses you want to purchase, or you can go there. If you want to sell your business and we can put you in front of an audience of people that want to buy. But what we realized, we want to create a separate company for people that just want to invest. Right. They don't have the skills. They don't want to buy a business. They don't know how to run a business, but they want to invest in someone that is successful at running online businesses. So that's what web street is. That's what web street is. Yeah. So it was basically born out of a need. We found an empire flippers. We said, look, why don't we match up the money, the investors with the people that are already having success at running and growing online businesses. And we can help those entrepreneurs scale and we can help these investors get a return on their investment. Listen, there might be an entrepreneur that's looking to increase their sources of income, but they don't want to add another business to manage. They could come to web street and you'll match them with the best opportunity out there where they can get a return on investment without having to do any work. That's exactly right. We have some entrepreneurs that are in the kind of SEO space. So they build affiliate type sites, right? Amazon affiliates, all the types of affiliate sites, but that's all they do. And they do it really well. But what they want to do is they want to get exposure to a different type of online asset. And they don't know how to build e-commerce businesses. So what they'll do is take some of their affiliate site building cash and invest that in e-commerce entrepreneurs that are buying e-commerce businesses. That way they get access to investable e-commerce businesses without having to learn how to grow them and run them and buy them themselves. So it's a way to diversify your online business away from the kind of core competency that you've built over the years. And what's the minimum investment someone can walk in with? Yeah, so it depends on the earlier rounds. We're now five rounds deep with web street. And on the earlier rounds, we could, we did a minimum of $10,000 investment. Right now, if you invest in all the deals, it's a $60,000 minimum. So that continues to go up and up depending on how further in the rounds we go. And ultimately this is for accredited investors. So you have to have a million dollars in assets or make 200,000 a year or more for the last two years in the U S yeah. And then, but we are, and we started it that way because we didn't want, I always say, I don't want Tammy's college fund in this, right? This is a risky investment, right? It's not, you're not investing in blue chip stocks here. So you could lose, you could not get the return we're projecting. You could lose some of your principal. So there are risks going on here. We started with accredited investors. Once we've proved the model, we have a number of years behind it. We can then lower it down, allow kind of everyone access to invest in the different options. How's it going so far? Yeah. So we are, as I said, five rounds deep. We're raising for the fifth right now. If you look back at our first round, which is, it has the most data. It's a couple of years old. Now we've been delivering cash return of about 15% in 2022. For example, it's, we're looking at an estimate of somewhere between 20 and 24% all in return IRR. That one's going really well. We're at the same thing for round two. We're looking at about a 15% year cash return and estimating a 20 to 22% IRR on that investment as well. So how can a business be part of this? If someone has a scalable model and doing pretty good numbers, how could be part of this? Yeah. So Webstreet has two kinds of needs, right? On the one hand, we need investors. And so people are willing to obviously put money in and want to diversify in a non-correlated asset. And that's particularly interesting right now. But a non-correlated asset that they want to invest in, we need that side of the market. We also need experienced entrepreneurs. We need people that have been there and done it, that have run online businesses before, had success running those businesses, because we need them to pair with those investors. And so it's basically a double-sided marketplace matching investors and experienced entrepreneurs. Now, when people, we have a vetting process, when people apply as an entrepreneur, we want to look at their background, look at their track record. Had they built up multiple two or three or $400,000 businesses? How much success did they have? How much did those businesses earn? And can they verify it? Once they've done that, we can then add them to the program and make, allow them to raise money to potentially purchase assets. How has the vision of what you guys are doing evolved since you started? Is there any, anything that evolved into something else? Yeah, we started it. We didn't know how it was going to work, right? So at Webstreet, we went to the investors and we said, we want to do this thing. I know that a lot of you have expressed interest in investing and backing entrepreneurs that have experience. We want to let you do that, but we have no idea if it's going to work. So you want to trial this with us and see if you can make some money? It was really that, because we didn't know, right? We're like, we need to prove three things. We need to say, Hey, can we raise the money? Right. Can we raise enough money to help these operators buy online businesses and get enough money together to make it work? Number two, can we find the right operators? Can we get enough of them to where they're going to be successful, be able to make it work? And then number three, can we get a return for investors? Right. The first two we've proven we were able to do. We're able to get the operators, we're able to raise the money. And the third we're working on now. So can we, in the end, give them a return on their money that makes sense. And once we do that, I think it'll be much easier to raise the money. Right now we have, we have some like small family offices that are starting to get involved in putting their money in, but there's a lot of money waiting on the sidelines, looking for good opportunities, right? Like capital needs yield. There are, there's money out there waiting to see what the return is going to be longer term. And so once we can show that to them, we'll be able, I think we'll have the investment side taken care of. Then it's just about, can we supply the operators? And what were you in business before this lunch? Yeah. So I mentioned before empire flippers was the main business before and out of, yeah, that late. Yeah. So empire flippers, we started back in 2010. So that's my business partner, Joe and I got started with empire flippers. I know. And that became a marketplace for buying and selling online. That's where we cut our teeth in the space you're starting. Yeah. That's our main business. That's how we got started was we started helping broker the sale of versus five figure businesses and then six figure and then seven figure. Now it's somewhere between like mid five figures. So somewhere around 50, $60,000 website at a minimum up to 11, $12 million are the largest deals we've done so far. So typically in that range of the businesses, we're helping people buy and sell. That's cool. And it's still active. The other business. Yeah, that's still active. That's still the main business. We've got 60, I think 65 people in that company. Whereas like web street is more of the scrappy startup. That's the business we've built and broken off from empire flippers originally. So that's the one I think it's interesting because empire flippers is, is the bigger business, but I think web street has the bigger opportunity. And the reason is that empire flippers has the buyers and sellers, but it's a niche market. There's only so many people that can buy online businesses and run them that have the skillset that have the know-how to do that. And so in terms of investors looking for yield, that's a very large market. That's a much broader target market in terms of who we can get involved. So I think web street has the kind of greater appeal, but it's also the kind of scrappier startup, right? It's in the earlier stages of trying to get it up and running. So we've got the model, the basic model proven. We've proven that we can find the investors, we can get the operators and we've got early signs of returns, but we need to exit out of some of these earlier portfolios to show final returns for investors so that we can continue on and grow. Launching two businesses. Can you share something big that you faced as a challenge, either of the businesses and then how you overcame it, where it can help someone out there that is launching a business? Yeah, I could say earlier on in my career, when we were starting our business, it was a lot of mindset things. There was a time where we had a physical office, right? We had a physical office and we're running our business out of that, that physical office. And then our business was struggling early days and we weren't sure if we're going to be able to keep the office open. And ultimately we ended up having to close it and we have desks and chairs and all these things that we're going to have to close this office. And so for me, I just felt like having a real physical office means your business is real. And if you go virtual, what kind of company are you? If you have a virtual company, it seems maybe it's fake or it's not like it just didn't feel like a real thing or we're losing a real thing. And so for me, that was my problem was like, oh my God, like we're not even a real company anymore. What that turned into was us becoming a fully virtual company, which we remain today and really opened up our lifestyles, right? So we have employees living all around, employees in the Philippines. We have American employees living in Vietnam, in Columbia and UK and Prague. We have employees all around the world. As long as they have an internet connection and can do their work remotely, we don't care where they live. And so it really, it was a scary thing that became quite the blessing in the long run. Yeah. Virtual business model is extremely scalable and you can really grow something that is virtual compared to a building. Yeah. The good thing is you can hire talent from anywhere, anywhere in the world. Yeah. If I'm in, if I'm in Toledo and no offense against Toledo, but if I'm in Toledo, I can only hire people in Toledo. And so either I have to hire a local talent or I have to recruit outside talent to come to Toledo. And both of those have costs, right? If I'm only recruiting locally, I'm stuck with the talent that's there and the talent that's currently available. If I'm bringing people in, I may have to pay them a lot for relocation expenses, or maybe they don't want to live in Toledo. Maybe they like living in Manhattan or something. And so the expenses go up significantly. So being able to hire anyone from anywhere really opens up the talent pool. I'd also say because we've often done our training remotely as well. So we'll, if we hire, we try to hire in batches, we'll hire two or three people at once and we bring them to wherever their supervisor or manager is. So if they happen to be in California and their supervisor managers in Houston, we'll fly them there and have them do training for a couple of months. We've done it in Bali. We've done it in Phuket, Thailand. It really attracts people that are interested in a bit of adventure that are willing to go out of their comfort zone and try something new. And that's been really, really effective for us. Wonderful. Virtual is great on that side of getting the talent, but also if your offer is also virtual, you get more clients as well when you're dealing with a global market compared to just one city. Yeah. That's one of the things too, is that with both Empire Flippers and Webstreet, they're all online businesses. So none of the businesses sold have a local component. So none of the businesses sold at Empire Flippers require you to be anywhere or require you to be around the warehouse or anything. And similarly for Webstreet, all of the businesses are run virtually and online. And so any of the deals you're investing in there are going to be online businesses. Yeah. And COVID was a big wake up call for this, right? For a lot of entrepreneurs. And for myself, we were very much a brick and mortar. We need to be online. It has to be online. That's the pivot. The show is a pivot of that whole situation with COVID. Yeah. And I believe a lot of people went through that pivot because we have the technology to support it. Why wouldn't we be doing it this way? Smart on you to grab a mic and just start doing it, right? So like, it's pretty smart. A lot of people were able to kind of build their voice through COVID, which is great. It's weird to say, but like our business has done so much better. COVID was a boon for buying and selling online businesses. Uh, so that was helpful for us. COVID obviously was devastating in lots of other ways. Yeah. Um, but for employees, I think it was a wake up call too, right? Because if you're working at this company and now you're like, okay, you're working at home, you're like, okay, now you're gonna allow me to work at home or remotely. I like this. Like, why didn't you let me do this before? And then trying to get them to come back to a crappy office. They're like, you're not interested. No, I want my espresso at home. I want my PJs. A lot of people were saying, you know, before I requested to stay at home because of this reason and you never approved it, you had the ability. You said you couldn't do it. Now you can do it. So it was a sensitive situation for employers as well. Yeah. Changed the game for sure. Yeah. What are your strategies? How are you growing Webstreet? I guess one strategy is going on podcast here, spreading your message. Awareness, but what other strategies are you using to amplify your growth? Yeah. Podcasts help a lot. I really think there's a, a change in media, right? So some of the traditional channels aren't necessarily the best channels to take anymore. I think what's helpful and you split like chat GPT and all the like amazing amounts of content you can just spin up now or produce, I think having a real voice is super helpful. So things like AI content are going to be able to spin up articles like you wouldn't believe. So in terms of like just writing, you're kind of like standard informative content that's over. Right. So if you're going to be writing content, you have to have a voice. And so one of the reasons I think podcasts are helpful, one of the reasons I think writing very unique pieces that take a beat are helpful is because chat GPT typically isn't going to do that or they're not going to do it quite as strongly or with the knowledge. Yeah. Not with the knowledge and the kind of experience that you have, and they're not going to have these types of human conversations that we're able to have now. So I think that's really helpful. I think really importantly, getting our message out there about the kind of the investment opportunity right now is like, I'm an investor. I'm looking for deals and I have deals come across all day, but many of them are like five-year holds, seven-year holds, 10-year holds on my money. Right. With a, it's an equity play for potentially long-term value. I'm like, I want cashflow right now. Give me something that makes money, spit out some cash today. And so I think getting the message out there for web street that we have there, you can invest in assets that are currently cashflow profitable is super interesting and the fact that these are not directly correlated to market returns is particularly interesting as well. So I think getting the message out there will help really getting the message out there to find more operators that have had some success that have a track record that we can verify, keeps that door open too. Can you share your number one lesson as an entrepreneur, as an investor, you're in growth mode, obviously. Is there something that you could share with the audience that you learn in your journey, that if you had to do it again, you would do something different? Something I learned, right? Do something different. I think, I think if you're going to sell your business, don't go half ass at it. Right? So it can be a grueling and taxing process. So you're going to go through, they're going to look under the hood. They're going to kick the tires. They're going to do more than that, depending on how large your business is. And so it's, it can be a very, very intense process. So if you go into a kind of half heartedly, it's not going to be terribly not going to be successful. You have to go in with a plan to do it. And as soon as you have an idea that you do want to sell your business, that's the time to sell. If you wait too long, you can see declines in your business. You can miss the boat because maybe you just lost heart with it. Or you have other focuses. A lot of entrepreneurs are doing three, four, five things at once. And if you let that business kind of decline or wither on the vine, you now have a declining asset. That's a harder sale. So when you've made up your mind, go in for it and then go more heartedly, because that's going to give you the best value in the sale. Great advice. Thank you so much for that, Justin. Can you share what you feel your innermost superpower is that got you to this point in your life? Innermost superpower? Well, I'd say a lot of failures and, but like learning from those failures. Years ago, my current business partner and I, Joe and I, we had a mortgage business and we thought that long story short, we brought on all these sales people and our thought was like, look, if we give them the best commissions, we don't have to give them infrastructure or anything, we can just give them the best commissions and they're going to work with us and be happy. And we realized that building a team with infrastructure and support and paying them less is actually what they want, even though they say they want more commissions, ultimately it's going to be a stronger company by paying them less money, paying smaller commissions, but giving them leads, giving them a team, giving them comradery, giving them structure. Yeah. So like things, there's lots of learnings I've had like that, where you go into something and think this is the best way to do it and it's not. Another one would be when Joe and I had an outsourcing company and part of that outsourcing company was like, look, we'll do anything for everyone, right? If you want back office support, we'll do it. You want to call center, we'll try to set that up. You want us to do this or that. We just, just to make money and keep the business rolling. We'll do anything for everyone. And what we realized is if you're anything for everyone, you're not going to be terribly successful for anyone at all. Um, it's better to have a niche, right? Say, look, I make blue suede shoes, right? You want red dress shoes. I don't do that. I do blue suede shoes. I make the best damn blue suede shoes you'll ever see. And if you're looking for that, I'm your guy. Otherwise go somewhere else. And once you do that and you pick your niche and you commit to it, you'll get everyone looking for blue suede shoes and everyone else you can send away. And I got to tell you as an entrepreneur, when they don't fit your niche, when they don't fit, like what you provide, it's refreshing to tell them, no, it's look, you know, I'm not, not the fit for you. There are some other guys over here that do whatever black tennis shoes. They're fantastic. Here's three different options, but to all your friends, blue suede shoes are me. Sorry. I'm taking that analogy really far, but you're right. I don't know. It's good. It's awesome. Thank you so much, Justin. Justin, I appreciate your time. I appreciate what you shared. I know you help people out there with the message and seeing the success you're at is definitely really needed. Like you said, there's money out there and they just need to find a place to park it in a good place that brings the returns they're looking for. I appreciate your time today to come on our show. Thank you. Awesome. Thanks for having me on. I appreciate it. My pleasure. And audience, thanks again for joining us and listening to Justin here's information will be in the show notes. If you're looking to diversify, you're looking to add more cash flow or opportunities, definitely get in touch with them and like always appreciate you guys helping us grow. Thank you so much. And thank you, Justin. Thanks man. I appreciate it.