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"Flipping" an ecommerce business

rwhyan

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I am not sure if this is the correct forum for this, so feel free to move, but I have an idea that I would like feedback on how to go about executing.

I had an idea for a product that would solve a need of mine (and many others, I presume, but have not validated that yet) and after doing some digging I discovered it already exists (not unexpected).

However, the business has been essentially dead for the past few years (no longer even selling the product). I researched the business more and attributed the failure to abysmal marketing (i.e. horrible website, poor social media presence, doesn't show up on Google for its noncompetitive keywords, etc.).

I believe the product provides value and that people are willing to pay for it (the few reviews of the product that I could find were all praising it). They did, after all, have some sales.

I was originally considering designing a similar product (their product is patented), getting it manufactured, and marketing it on my own. However, given I have zero experience in manufacturing or product design, I figured it may be more efficient with my time and money to use the already existing (but dead) business and simply "flip" it.

I am weighing these options and not sure which to choose which is why I'd like some input:
1. Start from scratch: work on designing, prototyping, manufacturing, and marketing the product myself.
2. Call up the business owner and inquire about his valuation of the company. I am mainly interested in their manufacturing set up/relations. Since the business has zero revenue, should I just purchase the patent rights and manufacturing relationship by acquiring the entire business?


Any thoughts on this are much appreciated.

Edit: I realized there's no downside to calling and asking about his valuation, so I am going to do that today. However, I guess my question was more: should I work with this already existing (but dead) business or just start from scratch on my own?
 

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I am not sure if this is the correct forum for this, so feel free to move, but I have an idea that I would like feedback on how to go about executing.

I had an idea for a product that would solve a need of mine (and many others, I presume, but have not validated that yet) and after doing some digging I discovered it already exists (not unexpected).

However, the business has been essentially dead for the past few years (no longer even selling the product). I researched the business more and attributed the failure to abysmal marketing (i.e. horrible website, poor social media presence, doesn't show up on Google for its noncompetitive keywords, etc.).

I believe the product provides value and that people are willing to pay for it (the few reviews of the product that I could find were all praising it). They did, after all, have some sales.

I was originally considering designing a similar product (their product is patented), getting it manufactured, and marketing it on my own. However, given I have zero experience in manufacturing or product design, I figured it may be more efficient with my time and money to use the already existing (but dead) business and simply "flip" it.

I am weighing these options and not sure which to choose which is why I'd like some input:
1. Start from scratch: work on designing, prototyping, manufacturing, and marketing the product myself.
2. Call up the business owner and inquire about his valuation of the company. I am mainly interested in their manufacturing set up/relations. Since the business has zero revenue, should I just purchase the patent rights and manufacturing relationship by acquiring the entire business?


Any thoughts on this are much appreciated.

Edit: I realized there's no downside to calling and asking about his valuation, so I am going to do that today. However, I guess my question was more: should I work with this already existing (but dead) business or just start from scratch on my own?
If you start from scratch wouldn't you run the risk of having to surrender all of your revenues to the patent holder?
 
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rwhyan

rwhyan

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If you start from scratch wouldn't you run the risk of having to surrender all of your revenues to the patent holder?
That is a good point. I examined the patent and while I am no expert with regard to patent infringement, I believe there are multiple ways to create the same results the product creates without infringing on the patent. It would definitely be a risk and I would need to talk to a professional, however.

After thinking about it more, I am going to try and purchase the entire business, but if they do not want to sell/the price cannot be negotiated low enough, I may have to put this idea on hold.
 
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rwhyan

rwhyan

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How much traffic is he generating? Does the website have authority? If it does I would buy it outright.
It has a domain authority of 26/100 according to Moz, ~140 linking domains, and ~4k inbound links.

The large number of linking domains and inbound links greatly surprised me, given that the site is fairly difficult to find and took me a bit of scrolling through Google. I would assume that 4k inbound links would have some effect on boosting the site's rankings, but it could also be that the content of the site is so poor (and poorly SEO optimized) that it does not even matter.

Combined with the fact that the business has been offline for 3-4 years now, it would make sense why it does not rank higher on Google (even though its keywords are pretty much all long tail keywords, since the product is quite unique/specific).

Since they do not even sell the product anymore, I would assume current traffic is low. Thank you for your input.

I would be interested in purchasing outright mainly for the manufacturing relationships and patent, however.
 

Sebastya

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It has a domain authority of 26/100 according to Moz, ~140 linking domains, and ~4k inbound links.

The large number of linking domains and inbound links greatly surprised me, given that the site is fairly difficult to find and took me a bit of scrolling through Google. I would assume that 4k inbound links would have some effect on boosting the site's rankings, but it could also be that the content of the site is so poor (and poorly SEO optimized) that it does not even matter.

Combined with the fact that the business has been offline for 3-4 years now, it would make sense why it does not rank higher on Google (even though its keywords are pretty much all long tail keywords, since the product is quite unique/specific).

Since they do not even sell the product anymore, I would assume current traffic is low. Thank you for your input.

I would be interested in purchasing outright mainly for the manufacturing relationships and patent, however.
140 linking domains is nothing to sneeze at - not sure how much he is asking for but it's definitely worth something.
 
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rwhyan

rwhyan

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140 linking domains is nothing to sneeze at - not sure how much he is asking for but it's definitely worth something.
Yes, 140 surprised me. Unfortunately, however, the domain is different from the product name by one letter. This makes it very confusing and ideally if acquired I would purchase a new domain (since the product name is trademarked), so that’d make this domain authority is not very valuable.
 

Jeff Noel

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Yes, 140 surprised me. Unfortunately, however, the domain is different from the product name by one letter. This makes it very confusing and ideally if acquired I would purchase a new domain (since the product name is trademarked), so that’d make this domain authority is not very valuable.
Could you not make the typo domain a permanent redirect (302) to the domain name with the right name ?

Edit: I'm new to DA and PA ratings... how can they be used to add to the asking price ?
 
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MHP368

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I am not sure if this is the correct forum for this, so feel free to move, but I have an idea that I would like feedback on how to go about executing.

I had an idea for a product that would solve a need of mine (and many others, I presume, but have not validated that yet) and after doing some digging I discovered it already exists (not unexpected).

However, the business has been essentially dead for the past few years (no longer even selling the product). I researched the business more and attributed the failure to abysmal marketing (i.e. horrible website, poor social media presence, doesn't show up on Google for its noncompetitive keywords, etc.).

I believe the product provides value and that people are willing to pay for it (the few reviews of the product that I could find were all praising it). They did, after all, have some sales.

I was originally considering designing a similar product (their product is patented), getting it manufactured, and marketing it on my own. However, given I have zero experience in manufacturing or product design, I figured it may be more efficient with my time and money to use the already existing (but dead) business and simply "flip" it.

I am weighing these options and not sure which to choose which is why I'd like some input:
1. Start from scratch: work on designing, prototyping, manufacturing, and marketing the product myself.
2. Call up the business owner and inquire about his valuation of the company. I am mainly interested in their manufacturing set up/relations. Since the business has zero revenue, should I just purchase the patent rights and manufacturing relationship by acquiring the entire business?


Any thoughts on this are much appreciated.

Edit: I realized there's no downside to calling and asking about his valuation, so I am going to do that today. However, I guess my question was more: should I work with this already existing (but dead) business or just start from scratch on my own?
"Built to sell" podcast episode 164 , they interview a guy and thats all he does. He finds distressed companies then buys them and turns them around.

It seems like all you really want is the IP though? , if its ecom and its a one man show just buy the rights to the product
 

FinTech

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"Built to sell" podcast episode 164 , they interview a guy and thats all he does. He finds distressed companies then buys them and turns them around.

It seems like all you really want is the IP though? , if its ecom and its a one man show just buy the rights to the product
Thanks for podcast episode. I'm going to check this out. This is what I'm planning on doing and have been mapping out everyone doing this currently. Buying businesses is probably looked down on in this forum since I'm not building something from scratch but I would eventually like to have a large portfolio of different online businesses. The multiples are fantastic 2-4x. Location independent and economies of scale. I think the trick is not buying the ones that are DOA and figuring out what your value-add is and keeping them alive.
 

Kid

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"Built to sell" podcast episode 164 , they interview a guy and thats all he does. He finds distressed companies then buys them and turns them around.
This. I heard of people doing it even with such business as poor performing bakery.

It seems like all you really want is the IP though? , if its ecom and its a one man show just buy the rights to the product
If he'll get the license for some time, promote it and prove it more valuable then it's now, the licensor will see it too and won't extend the license after expiry.
 

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rwhyan

rwhyan

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If he'll get the license for some time, promote it and prove it more valuable then it's now, the licensor will see it too and won't extend the license after expiry.
Buying exclusive patent license almost always includes paying royalties, right? I would prefer to purchase outright because the product is already a low ticket item.

If I get the patent rights (either through licensing or purchasing outright), does that make it easier to find a manufacturer because the product design is already complete and I just have to show them what I want manufactured?
 

MHP368

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Buying exclusive patent license almost always includes paying royalties, right? I would prefer to purchase outright because the product is already a low ticket item.

If I get the patent rights (either through licensing or purchasing outright), does that make it easier to find a manufacturer because the product design is already complete and I just have to show them what I want manufactured?
Make it contingent on the deal that the seller introduces you to and plugs you in with whoevers already making it.
 

Kid

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Buying exclusive patent license almost always includes paying royalties, right? I would prefer to purchase outright because the product is already a low ticket item.
I think yes. That's why i suggest that buying outright is better way.

If I get the patent rights (either through licensing or purchasing outright), does that make it easier to find a manufacturer because the product design is already complete and I just have to show them what I want manufactured?
I'm not sure if drawings and claims in the patent are enough (they are more then the drawings on a napkin, but still).

When purchasing their Intellectual Property you could ask for the CAD files of the product if they have any.

With CAD files you could go to any manufacturer besides the one that is already making the product (as @MHP368 suggested) .
 

JunkBoxJoey_JBJ

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"Built to sell" podcast episode 164 , they interview a guy and thats all he does. He finds distressed companies then buys them and turns them around.
Some highlights of this episode were:

This particular purchase involved a CNC/Machine shop
Due diligence (not your average purchase this time)

Business Brokers Network
  • He looks at businesses listed longer than 12months
  • Deals with more distressed opportunities
  • Networking
  • People who want to sell their business before it goes to a listing usually tell their CPA, lawyer, banker or financier first (i.e. he has made those contacts and built those relationships, so he can get leads from 3 countries!)
  • He is at the point now where he buys and sells about 1 business per quarter
  • Distressed Sellers - what he looks for is a business not in financial trouble with about one year worth of working capital on a balance sheet to go forward

The Cancer Corollary from MJ's book had a cross over, unfortunately it was one man's wife.
 

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