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GOLD! From 0 To $240,000 Per Year PROFIT In 18 Months

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richardd

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When you say monthly revenue, are you talking gross revenue or profit? I think there's a disconnect here.
Of course on a SAS like this, the expenses are so low that both numbers are very close to each other.

But you had mentioned this for an ecommerce store in your previous post, "I don't like Empire Flippers because they focus mainly on ecommerce. And they typically do the 20x monthly revenue valuation. Not even profit based."

I have yet to see anything close to this in ecommerce.
In your quote I am referring to monthly revenue, not profit. Empire Flippers values businesses based on 20x (or more) monthly revenue. I don't focus on purchasing ecommerce businesses on Empire Flippers because of this since ROI will be too low. I also don't like ecommerce in general due to my personality and strengths and weaknesses.

I target SaaS/software businesses that have low overhead and high ROI (less than 20x monthly profits, NOT revenue).
 

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Bertram

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I can't promise you that you won't get laughed out of the insider forum. But I'll say that I won't be laughing. People around here generally are content with people who execute. And if you start a thread about putting your money where you mouth is, you will most likely not get ridiculed by the masses. On the contrary, there will be many that will show excitement for you. They will also give you good advice.

As for how much should you invest, I can't answer that for you. That is a personal question based on your personality, your level of risk aversion, and your current financial position. I will say this though, at the start 18 months ago, I decided to risk it all betting on myself. What's the worse that could happen? I could lose it all. But I came up with my search criteria to mitigate risk. All of my businesses have been running for years and profitably and with recurring revenue.

So, I asked myself, do I want to play it safe, and store $200,000 is low-yield investment instruments earning 2% or do I want to run a company that makes 50% or more a year? Of course the third option is a hybrid dedicating a percentage of your capital to business and the rest to savings. For me, I'm somewhat impatient, and I saw the light at the end of tunnel, exiting the slow lane. So, I decided to let it all ride. And I tell you, nothing motivates you more when you have very little savings. But I knew I'd rather have recurring income than money in my bank account. That's a no-brainer for me.

Ask yourself if you believe in yourself, and if you want to exit the slow lane. If you answer yes to both, then it's time to let it ride. If you're not quite sure of yourself, then start smaller. I honestly would stay away from businesses less than $10K. They are much riskier for multiple reasons. Typically these are startups that have limited history, or are failing businesses. Not all, but generally speaking.
Thanks. I'm always investing in myself, also never trouble myself over others' regard. But this is the first crack at picking up the assets of other persons' efforts and taking the shortcut, in effect. Since I'm just buying the assets the unknown risks are irrelevant.
You're very kind to provide this help.
If you've recently puchased flippa.com or FEI, hats off.
 

SamRussell

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F*ck man I hope i can get to your level. Im running my Landscaping business and expecting i can make enough so i can buy or start off an internet company. Every time i read MJ book or see a story like yours I feel like i’m wasting my time and should just go for something digital. This year was horrible for me. I had a fallout with my dad then he got a heart attack. I had to sell my truck to pay bills and im not stuck with 5k in debt. So I been doing Landscaping to get out of my rabbit hole. The business pays me enough to live but i want to do better. Im done with having to trade time for money. Im tired if competing with me too business. Im tired of always dealing with penny pincher customers. What are some are some tips in becoming an online entrepreneur? What are trades or skills I should focus on. Creating people value is obviously important but i want to do so with my brain not my hands. Please any information you can provide will be appreciated. I don’t want you to tell me the hows. Instead guide me to the right information and I will figure it out. Im not as tech savvy as I should be for my age but god damn i will learn !!
Have you seen @Johnny boy 's progress threads? You might get some ideas from there that you can take to your landscaping business
 
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richardd

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PROGRESS UPDATE: A couple of awesome things to report today. For my blog, we officially had our best advertisement-earnings month with 4 days to go! This month we should bring in about $4400. I'm really proud of this, since as a new owner, there are occasionally doubts that go through my mind. Doubts that I might not get these businesses to perform well. Except, all of them including the blog have just run almost flawlessly since I took them over. There surely has been some learning, but nothing overwhelming.

SECOND thing: I'm in the process of buying another business. It will be a quick sale, target within 7 days. The business is a web host. This totally is in line with my web site backup business. I will probably merge them together thus offering web site backup / hosting services. I'm really excited about acquiring 2000+ customers who are perfectly suited for our backup services.

Details to follow with more of the financials, but the deal is for less than $20,000, and I get a pretty damn high ROI! Way more than my target 50%. And that's not even taking into account the cross selling with my backup business. I'm pumped!
 

pumpking

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We have one primary developer, and I have a couple secondary ones. I'm pretty involved in making architectural decisions with the primary guy. He's very good, so I ask him if he thinks one way is better than the other. ... We also discuss issues with the programs, to try to fix problems that have arisen. As for the dev team, they are all contractors used by the former owners, but I was free to continue using them, or not if that were my choice.
Hey @richardd, quick question for you on the above. I assume whichever SaaS I eventually acquire will also put me in connection with contractors for the software dev work, but if this were not the case, any suggestions on where I could look to find and hire good developers? I assume you are using folks from India (or similar) for price considerations? Further, how do you handle their contracts, do you hire them for specific features, or based on the time they spend working for you?

BTW congrats on your 5th business acquisition. :) Onwards and upwards!
 
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richardd

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Hey @richardd, quick question for you on the above. I assume whichever SaaS I eventually acquire will also put me in connection with contractors for the software dev work, but if this were not the case, any suggestions on where I could look to find and hire good developers? I assume you are using folks from India (or similar) for price considerations? Further, how do you handle their contracts, do you hire them for specific features, or based on the time they spend working for you?

BTW congrats on your 5th business acquisition. :) Onwards and upwards!
My backup plan is upwork.com for finding technical resources, but up till now, I haven't had to do that. Currently, I pay one US developer to maintain my accounting software products, and the rest of the team is based in the Philippines. I pay a flat weekly rate of $75 for each resource on average. They work whenever they want, as long as they get their work done.

Thanks! Pretty excited. Should be a fast transaction to close.
 

pumpking

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... the rest of the team is based in the Philippines. I pay a flat weekly rate of $75 for each resource on average. They work whenever they want, as long as they get their work done.
Wow, that's a fantastic rate. Just to clarify, for $75 you get roughly 40 hours of development work done?
 
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richardd

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Wow, that's a fantastic rate. Just to clarify, for $75 you get roughly 40 hours of development work done?
Ah, no. I wish. Let me clarify. For the offshore support, my contractors don't work 40 hours a week. My guess is maybe 10-15 hours a week. It's a flat weekly rate for them.

My one main developer for my accounting software products bills at $110 an hour. He's US based. For product maintenance, he usually charges 10 hours a month.
 

kelbs

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@richardd Love this thread! Thank you for the valuable info.

Earlier in this thread you called consulting "a necessary bridge between slowlane and fastlane". Is that simply because it allowed you to save enough cash to buy businesses? So in my own life, I could replace consulting with any opportunity that allowed me to save cash? For example, if I was able to get a slowlane job at 200k/yr while reducing my expenses? Or do you think the higher control over your time afforded by consulting is necessary to reach escape velocity?

I'd like to know more about the origins of your contracting. I'm a software engineer also, but my experience so far has been in C++ and DoD contracts. Not a great skillset for consulting in my opinion. Although I'm learning python/Django/web dev on my own time and can see myself consulting with those skills in the future (in addition to using those skills to build my own products/businesses). But how did you originally develop your skills to the point where you could do consulting? How did you move from a 9-5 to consulting and find your first clients? Etc..

Thanks!
 
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richardd

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@richardd Love this thread! Thank you for the valuable info.

Earlier in this thread you called consulting "a necessary bridge between slowlane and fastlane". Is that simply because it allowed you to save enough cash to buy businesses? So in my own life, I could replace consulting with any opportunity that allowed me to save cash? For example, if I was able to get a slowlane job at 200k/yr while reducing my expenses? Or do you think the higher control over your time afforded by consulting is necessary to reach escape velocity?

I'd like to know more about the origins of your contracting. I'm a software engineer also, but my experience so far has been in C++ and DoD contracts. Not a great skillset for consulting in my opinion. Although I'm learning python/Django/web dev on my own time and can see myself consulting with those skills in the future (in addition to using those skills to build my own products/businesses). But how did you originally develop your skills to the point where you could do consulting? How did you move from a 9-5 to consulting and find your first clients? Etc..

Thanks!
For me, consulting is the bridge because it allowed me to accumulate cash quickly. Your situation may vary. The point is that any way to increase your income can be the bridge. So, if you save $20,000, then you can target buying a business that returns $10,000+ yearly.

While keeping your day job, that extra income while reinvesting it in other businesses can allow you to achieve escape velocity.

For my situation, I'm probably more of an extreme case. There were two factors which motivated me to go full speed. 1) I've come to hate working for others and 2) my family and I plan on moving to Central America by the beginning of next year.

It is not necessary to work 100 hours a week for a year. You can do it at a more moderate pace. But I guess it comes down to personal preference, and how much you want the fast lane. I had enough. Even now I have to have talks with myself to keep me going. Consulting brings in a lot of money for me, and the faster I can build my company, the easier it will be for me in a shorter amount of time.

I've been consulting since I was about 23. So pretty much my whole adult life. Interestingly, I didn't study computers in college. I learned it afterwards. I'm pretty good at it. But I think my strengths are more architectural, like understanding computer systems vs. individual programs.

Anyway, we really are in a financial position that I no longer have to work for someone else. Maybe that's why it's getting harder for me to continue consulting. Because there is no dire need to do so. But I think that is another lesson with entrepreneurship. Things get hard, and self motivation is so key to keep moving forward.

EDIT: I forgot to answer your question about how I find those extra gigs. I mainly go to dice.com. I mentioned early in the thread that I do document management consulting. I'm highly specialized. So find work is easy. The more challenging part is finding remote work. But I'm able to periodically.
 

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ZeroTo100

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Yes, stay away from both of these two companies, they over inflate and should not be a first choice.
Not true.

Every deal on Empire Flippers is negotiable. The listings are quality listings so you might end up paying a little more for an opportunity BUT a big part of the heavy lifting has been done for you.

Remember this, a business is worth what someone is willing to pay for it.

Personally, I would stay away from Flippa but that’s just my opinion. The OP probably has a pretty good insight on separating the scammers from those who just want to sell and get out. I personally wouldn’t feel comfortable recommending Flippa unless your buying domains but again that’s just my opinion.

Congrats to the OP - definitely a great story!
 
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richardd

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Not true.

Every deal on Empire Flippers is negotiable. The listings are quality listings so you might end up paying a little more for an opportunity BUT a big part of the heavy lifting has been done for you.

Remember this, a business is worth what someone is willing to pay for it.

Personally, I would stay away from Flippa but that’s just my opinion. The OP probably has a pretty good insight on separating the scammers from those who just want to sell and get out. I personally wouldn’t feel comfortable recommending Flippa unless your buying domains but again that’s just my opinion.

Congrats to the OP - definitely a great story!
Flippa does have a lot of scammers. I root them out pretty easily now. I was thinking about starting a new thread on how to do so.

At a high level, my rules are non-negotiable with the seller:

1) use escrow... Never PayPal or wire transfer.
2) have due diligence with screen sharing
3) government issued ID cross verified

Then I do a lot of social proof analysis.

I've been scammed a few times over the years, although not recently. Actually being scammed in the past gave me a healthy understanding of how many of these scams work. That insight protects me moving forward. The businesses that I've acquired this past year have been legitimate since I've taken them over.
 

ZeroTo100

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Flippa does have a lot of scammers. I root them out pretty easily now. I was thinking about starting a new thread on how to do so.

At a high level, my rules are non-negotiable with the seller:

1) use escrow... Never PayPal or wire transfer.
2) have due diligence with screen sharing
3) government issued ID cross verified

Then I do a lot of social proof analysis.

I've been scammed a few times over the years, although not recently. Actually being scammed in the past gave me a healthy understanding of how many of these scams work. That insight protects me moving forward. The businesses that I've acquired this past year have been legitimate since I've taken them over.
Are there any sellers on flippa that you would recommend working with? Not that I use flippa but truthfully their auctions are fair game and it's more comforting for fastlane members to follow a user's listings knowing they've done business with a fastlane member and were satisified with their experience. Once the listings are sold, they go private anyway so users here wouldn't be able to see your purchase. If you feel i'm reaching, it's fine no worries - would have just gave them a follow on their account.
 
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richardd

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Are there any sellers on flippa that you would recommend working with? Not that I use flippa but truthfully their auctions are fair game and it's more comforting for fastlane members to follow a user's listings knowing they've done business with a fastlane member and were satisified with their experience. Once the listings are sold, they go private anyway so users here wouldn't be able to see your purchase. If you feel i'm reaching, it's fine no worries - would have just gave them a follow on their account.
Honestly, I haven't worked with sellers that sell multiple assets. There are seller profiles on there that show reviews of past transactions. This is somewhat useful, but I wouldn't use that for full trust.
 

kelbs

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For me, consulting is the bridge because it allowed me to accumulate cash quickly. Your situation may vary. The point is that any way to increase your income can be the bridge. So, if you save $20,000, then you can target buying a business that returns $10,000+ yearly.

While keeping your day job, that extra income while reinvesting it in other businesses can allow you to achieve escape velocity.

For my situation, I'm probably more of an extreme case. There were two factors which motivated me to go full speed. 1) I've come to hate working for others and 2) my family and I plan on moving to Central America by the beginning of next year.

It is not necessary to work 100 hours a week for a year. You can do it at a more moderate pace. But I guess it comes down to personal preference, and how much you want the fast lane. I had enough. Even now I have to have talks with myself to keep me going. Consulting brings in a lot of money for me, and the faster I can build my company, the easier it will be for me in a shorter amount of time.

I've been consulting since I was about 23. So pretty much my whole adult life. Interestingly, I didn't study computers in college. I learned it afterwards. I'm pretty good at it. But I think my strengths are more architectural, like understanding computer systems vs. individual programs.

Anyway, we really are in a financial position that I no longer have to work for someone else. Maybe that's why it's getting harder for me to continue consulting. Because there is no dire need to do so. But I think that is another lesson with entrepreneurship. Things get hard, and self motivation is so key to keep moving forward.

EDIT: I forgot to answer your question about how I find those extra gigs. I mainly go to dice.com. I mentioned early in the thread that I do document management consulting. I'm highly specialized. So find work is easy. The more challenging part is finding remote work. But I'm able to periodically.

Thank you for the detailed response! I appreciate it

I've never done consulting before. Even before reading this thread I was considering doing some consulting on the side (and maybe full time eventually) because like you, I don't like working for someone else. But it sounds like the most important thing in your particular fastlane strategy is just to stack cash any way you can.

We're spending 70k on a kitchen remodel at the moment. While the kitchen is very very old and definitely needs a face lift, I can now see how that money could have been spent more effectively on businesses. I'm not opposed to cashing out our equity in this house (very high cost of living area) and moving somewhere cheaper. Especially if I can find remote work / consulting work. But that may be a little farther down the road...
 

jimmeboy

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@richardd Amazing thread! I've just spent my Friday evening reading it from start to finish with a delicious take-out. Much better than a Friday night movie!! ;)

Quick question for you... Once you have identified a business that meets all of your 11 requirements, do you have a specific strategy for determining what you will offer and under what terms etc?

I assume most people would offer under the asking price, but how do you decide at what level to go in at, and/or what terms or creative structure (if any?) to use?
 
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John_Wick

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Flippa does have a lot of scammers. I root them out pretty easily now. I was thinking about starting a new thread on how to do so.

At a high level, my rules are non-negotiable with the seller:

1) use escrow... Never PayPal or wire transfer.
2) have due diligence with screen sharing
3) government issued ID cross verified

Then I do a lot of social proof analysis.

I've been scammed a few times over the years, although not recently. Actually being scammed in the past gave me a healthy understanding of how many of these scams work. That insight protects me moving forward. The businesses that I've acquired this past year have been legitimate since I've taken them over.
This is just awesome. I want to let you know there are people like me who deeply appreciate the experience you share but just haven't found the opportunity to thank you for it. Your experience, good and bad ones, like getting scammed, are both inspirational and informative.

There are so many posts that I want to just hit reply. But, I wanted to finish all the threads first. Now, I finally have! And made an index of topics, too, e.g., price target range to start with, investment criteria, DD checklist, red flags to watch out on Flippa, etc.

I have some questions that I'm not sure about:

Q1. Foreign ownership restrictions
a) Are you aware of any restriction for overseas buyers? (this is more of my own homework; apologize if this sounds lazy...) I'm living in Hong Kong (not a US citizen yet) but would want to learn the ropes by doing. Eventually, the vision is to enable a source of income that's not bounded to a location, like in your case.

Q2. Purchase Agreement / Asset Transfer Agreement
In terms of purchasing, does Flippa offer a standard purchase agreement or should I create my own? How did you arrive at the one you are using now? How does the seller's asset become my company's asset? By signing an asset transfer agreement? What are the things I should keep an eye on?

Q3. Online Asset Checklist
Do you have a checklist of the things a buyer should be getting? Think mostly it's a result of negotiations and the rule of thumb is anything you need to make the asset operation. But, is there anything that I should look out for (especially the ones that will come back and bite down the road from your experience...)?

Thanks!
 

John_Wick

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Hi Richardd, again thanks for sharing this. Thank you for providing this as an example. It's such a good way to test whether I can see what you see in this business.

I'm quite surprised that people actually pay for this. I remember all one has to do is to go into the cPanel on a hosting platform and do the email forwarding, right? But, sometimes there is weird stuff happening in the backend and emails don't get forwarded and customers who email get rebound notification / error message. This can be painful to fix, hence the need I guess.

(Not really a developer. But, I have created a handful of simple websites for clients and my wife, using drag-and-drop and have some hands-on web development experience. Don't really know coding)

My question is... for assets like this, what do you see in it?
#1. You could have offered $31.2 for a ROI of 50% technically, right?
The price is about $26k, monthly profit is $1.3k (*12 = 15.6k annual profit). The ROI here is 60%. If we use the annual net profit as the base for a 50% ROI, then you could have offered $31.2k. Just want to check my math and see if that aligned with how you would think.

#2. How would you evaluate a business' value and entry of competition?
- on value to customer: seems the target audience will be customers who buy a website or have it built for them and got disconnect with the tech guy who maintained things like this (i can't even imagine the cases where complex data are stored in the data base or php stuff involved). So, I would think the most important value is in the access to customer
- on competition: as you said it yourself, if you have time, you could have developed it yourself (although my biggest concerns is in reaching the customers, I was surprised a basic cPanel function can be spin off like this). So looks like this kind of business doesn't really have a strong defensibility?
- on value to owner: the best thing about this business is probably the LTC, its stickiness should be very high like signing up to a hosting platform? But, then the revenue should look very constant and the drop in profit should be a result of some one-off cost?
 

TimC

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Richard ,
I can’t thank you enough for writing this , I just joined this forum and your post has inspired me in ways I never dreamed of .
I work on a offshore oil rig one month at work and one month at home where I have a lot of Free time . I would like to get out of this job as it’s half my life away from my kids and family .

Unfortunately I’ve been guided into the slow lane trap of investing my money into funds . I currently have over 20k in a RESP fund in Canada which is being set aside for my kids schooling if they decide to or not . But the interest rate on this is nothing to talk about . And it’s not even a tax deductible fund , i am definitely going to look for online businesses that I can purchase instead of throwing my money into this fund as I believe I can put this money to work better than it is doing right now .
Time to do some homework and take action .. thank you !
 

PupRich

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:moneybag: :moneybag: :moneybag: :moneybag: :moneybag:
 

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Mckenzie

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Flippa does have a lot of scammers. I root them out pretty easily now. I was thinking about starting a new thread on how to do so.
Please do start a new thread about this. Thanks so much in advance Richard.
 

John_Wick

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Quick progress report:

I like the fact that this (buying online business to build cashflow) is actually simple but not easy. The obstacle is there to block off people don't really want it.

Anyways, I tried Flippa, FE International, BizBuySell, and Empire Flipper
- Flippa - easiest to navigate but assets below or at $20k is quite hard to find (many are affiliate or BS in disguise)
- FE International - very hard to navigate (no filters at all, you basically have to scroll down and read the whole thing). Most seem legit business but bigger ticket items
- BizBuySell - the way I do it is to check out the "Search for Established Businesses for Sale", then choose the "online & tech" and deselect the "phone and PC repair". Then set the min. price range to $20k (well you will probably see a fire sale for $6k that looks pretty interesting. The website name sounds legit too - unsoldprospect.com. But there so many conflicting claims by the seller that smells fishy)
- EmpireFlipper - best navigation experience and highly relevant categories all related to online business models, e.g., subs, info product, service. Pretty damn expensive. That's all. (e.g., only 2 results on info product - one is $11,000k and the other $837k)

Not as easy as I thought - I didn't even get through the screening process in this journey... Probably a good idea to find some target just for the sake of practicing DD and sales inquiry with the owner though...

I would also look into other sources / sites for sourcing assets (maybe a direct inquiry?)
 

John_Wick

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Hi guys, came across this post while doing my research. Think it's quite useful as a guide to buying online business. It offers some good perspective, like the 6 criteria for selecting asset targets. I also found the stuff on checking the SEO quite useful.

It also helped answer the question I asked Richardd before this post about what I should be getting from a purchase of online assets. So in case my link to that post here violates MJ's rules, I'm relaying some content here:

An online business might be well-placed in the search engines right now, but what happens in two months when you realize that the business has been using black hat techniques and everything disappears?

Other items to research before you move forward buying an online business for sale include:

  • Pending legal actions
  • Complaints against the company
  • Brand image issues
  • Full financials
  • Outstanding liabilities
  • Who actually owns the website (use Whois for this)
  • Information about the current owner (and the founders, if different)
  • Why the owner is selling the business right now
 
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richardd

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UPDATE: I successfully took over another business. I completed the purchase and hand over of a web hosting business. It adds $2000 a month profit to my bottom line. I've been handling all the tickets this last week or two successfully. I wanted to get a feel of the work load as well as learn the infrastructure. We will be getting a lot of web development projects soon as well. So I'm in the process of having my current off shore team take on these tickets for me. I also have a developer lined up to take on the web design projects.

I'm also in negotiations to purchase another business in the education niche. If that moves forward, I'll expand that out globally since it is focused locally. More details on that later, but I'm really excited about the scaling capabilities of it. And I wanted to implement that business for a while since it will work very well with one of my other businesses.
 
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richardd

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Well done! Where did you find it?
I stumbled upon it here:


And actually it wasn't listed for sale. The previous owner solicited me because he saw I posted on that forum saying I was interested in buying some web host.

I bought it for $16,500. And it makes about $24,000 a year in profit. We have about 2000 customers, and growing. I haven't even started marketing to them with our web site back services, nor web development services. It's somewhat of a cash cow for me now.

I definitely can off load all the day to day operations to off shore. I'm loving building that team to handle much of my IT work across all my business lines. I just can dabble in the stuff that interests me.
 

1milclub

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...

The main challenges to my path have been finding the right opportunities (see my list of 11 criteria), vetting the seller with due diligence while detecting scam artists ...
I haven't used it, but this is might be helpful: Our Due Diligence Reports | Centurica

As for the Capital, SBA loans from Byline bank seems to be very generous. They finance almost 90% to acquire service businesses (other banks may lend less as the software won't have real estate as collateral) , for 10 yr. at primt+2.75% or something close. Considering your criteria, the DSCR (Debt Service Coverage Ratio) will work out well and banks will be all over to loan you money. Remember, they are in the business to lend money :)
 
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pumpking

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Congrats @richardd, really fun to watch you work. You'll soon need to update the subject of this thread to $264,000 in 19 months. :)
 
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richardd

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I haven't used it, but this is might be helpful: Our Due Diligence Reports | Centurica

As for the Capital, SBA loans from Byline bank seems to be very generous. They finance almost 90% to acquire service businesses (other banks may lend less as the software won't have real estate as collateral) , for 10 yr. at primt+2.75% or something close. Considering your criteria, the DSCR (Debt Service Coverage Ratio) will work out well and banks will be all over to loan you money. Remember, they are in the business to lend money :)
I honestly don't consider financing from banks. I do consider owner financing. The reason for this is simple. Adding a third party to a deal can jeopardize the deal. I'm sure one can imagine how much stress a person may experience when the bank or lender says that they're missing a form, or some regulatory requirement is not up to date, blah blah.

When you deal with just the seller, you have a ton of leverage, especially if you deal in cash. But it works well too to secure owner financing. This can be an advantage because then the seller will remain engaged as you run the business, especially early after the transition. And on occasion I need an answer from the former owner.
 

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