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How to evaluate existing Internet business for purchase

MrMojoRisin

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Jul 21, 2019
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I'm a newbie here, pretty excited to stumble across this forum. I found it by searching through existing business for sale both physical and internet. I'll be diving more into the principles and picking up the books, etc.

My situation is I've worked a corporate job for 25 years, had a nice income, saved pretty well, invested in the stock markets which has helped to save most of my needed retirement. Now I'm about 10 years away from "retiring" from a corporate lifestyle, and roll into the next phase of income - owning my own business. I prefer Internet based companies if possible so I can work anytime / anywhere. Plus as I age I only need to be able to sit in front of a computer screen to make $$$. This has been a lifelong dream of mine to run my own business.

Which leads me to evaluating existing Internet business for sale. I've done a few searches on this forum for information but didn't find what I was looking for.

1. What are the best sites used to evaluate an Internet business. I've been looking at flippa for Internet, bizbuysell for brick mortar
2. Good books / resources / mentor tools to learn how to evaluate
3. Records: how to validate the actual income? Can I ask for a tax statement or is there a specific form?
4. Any good learning

Example: existing business on flippa selling xxx widgets (physical goods). Annual revenue stated $350k, expenses $260k, net profit $90k annual. For sale for $80k.

Why would somebody sell a business making $90k a year for $80k? I would imagine a multiplier of 2 or 3 x minimum for a profitable "turn key" business right? There are 2 years of statements (in xls) that support the PnL. What am I missing or is this typical? Obviously I need to put the time and effort into operating and marketing the site (no free lunch). However I'm happy to work a part time business to make $90k profit at this point from a computer screen.

I've worked in the tech Industry my entire life, so while I'm not a developer I do understand tech pretty well. I also pick up new concepts and business models too. I used the bogleheads philosophy on expenses and investing, which put me into a fortunate financial position today (as well as working my tail off :))

I'd like to start smaller to acquire a business (under 100k). Then learn before I go to take on anything bigger.

Thanks all for the info.
 

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Kevin88660

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I've Read UNSCRIPTED
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Example: existing business on flippa selling xxx widgets (physical goods). Annual revenue stated $350k, expenses $260k, net profit $90k annual. For sale for $80k.

Why would somebody sell a business making $90k a year for $80k? I would imagine a multiplier of 2 or 3 x minimum for a profitable "turn key" business right? There are 2 years of statements (in xls) that support the PnL. What am I missing or is this typical? Obviously I need to put the time and effort into operating and marketing the site (no free lunch). However I'm happy to work a part time business to make $90k profit at this point from a computer screen.

I've worked in the tech Industry my entire life, so while I'm not a developer I do understand tech pretty well. I also pick up new concepts and business models too. I used the bogleheads philosophy on expenses and investing, which put me into a fortunate financial position today (as well as working my tail off :))

I'd like to start smaller to acquire a business (under 100k). Then learn before I go to take on anything bigger.

Thanks all for the info.
Maybe there is a lot of sweat equity involved. The profit came about as a result of the owner not paying himself a salary.

If you have background in tech, and you have saved up good money, it seems to me that you are wasting your time with such small business and taking too little risk.

You could consider partnering up with someone with actual start-up experience, brainstorm for a good project (with some preliminary research), and cough up with 50k from each of you to run it. Pump the KPI numbers up and source more money from VC.

Since you are not going to change your life with a “internet flipping job” that pays you 90k a year, go for the 100 bagger or 200 bagger while you still have the energy to do so. That’s how I think about it.
 

NMdad

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Why would somebody sell a business making $90k a year for $80k? I would imagine a multiplier of 2 or 3 x minimum for a profitable "turn key" business right? There are 2 years of statements (in xls) that support the PnL.
Yeah, sounds like more due diligence is needed to verify income--Excel sheets are far from actual proof. I'd want to log in to their ecommerce account to see actual sales; then look at actual expenses, etc. to determine actual PnL numbers.

You'd probably be interested in reading @Greg R's thread: NOTABLE! - {Success Story} Feeling stuck? A six month case study of when I dropped everything to buy a business
 

CareCPA

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MrMojoRisin

MrMojoRisin

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Jul 21, 2019
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@Kevin: thanks for the reply. My initial thought is I don't have the time to do a start up with my busy day job + kids, travel etc. Plus putting $50k towards a start up has a very small chance for ROI.

However... it could be a long game - I don't need to make money from the start up for another 4 to 7 years, continue working, until that business matures into an income to pay my bills. Continue to save / invest in the meantime, where my retirement savings is done.
 
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MrMojoRisin

MrMojoRisin

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Jul 21, 2019
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@NMdad: yes, correct. I'd need to see some real proof of the business. Not just an .xls posted on the website. I'll have to dig into it further.

I'm using this particular site as an example model to what I would buy. I doubt I'll pull the trigger on this exact business. But think through this model of buying an Internet site with 2 to 3 years of consistent sales for $xxx that generates a return of $xxx that consumes xxx hours of my time per week.

If I can generate extra income from the site, it all goes into my savings. When my savings hits $xxx amount then my game is won. No more need to work a "day job". I can then shift my time into doing something I enjoy more but still generate income.
 

Kevin88660

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Feb 8, 2019
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@Kevin: thanks for the reply. My initial thought is I don't have the time to do a start up with my busy day job + kids, travel etc. Plus putting $50k towards a start up has a very small chance for ROI.

However... it could be a long game - I don't need to make money from the start up for another 4 to 7 years, continue working, until that business matures into an income to pay my bills. Continue to save / invest in the meantime, where my retirement savings is done.
Seems like you have a busy schedule and the side hustle should take minimum time.

Have you thought of doing investment instead of taking over a business?
 
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MrMojoRisin

MrMojoRisin

PARKED
Jul 21, 2019
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@Kevin: yes, that would be ideal. While seeking out an investment sounds great, I have not had much luck finding anything. If you have tips to help, I'm sure open to it.

My intent of buying / managing an Internet site (or 2) is that it can be done from anywhere anytime with flex hours. Where a B&M requires onsite presence. While I am busy with my "day life", I have a flex schedule during biz hours and nights / weekends to manage an Internet site.
 

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