I just sold my first eCommerce business (FU money!)

[biophase]

So I wanted to wait a few days for it to settle in to make a post about it. This week I sold my ecommerce business that I started back in 2007. It's been 10 years running this business that I started from scratch. I still remember my goal of making one sale a day at $50 profit and being happy if I took home $18,000 a year.

Fast forward 10 years and 3 months later... and it's sold and mostly gone.

I sold it because I started another ecommerce business in 2015 that I am much more passionate about. And passion combined with experience can really blow up a business. It took my first business 10 years to go from 0 to a million dollars a year. It took my second business 2 years to get to a million dollars a year.

I began thinking about selling the business about 2 years ago. I think once the thought gets in your head, you know it's about time. I put the business on the market in March 2017 and went through 3 serious buyers before the 4th actually closed.

What am I going to do with the money?

It's funny because if this happened 5 years ago, I know the first thing I'd be doing is getting a Ferrari. But honestly, I have no idea what I'm going to do with it. I thought about buying another business to grow my second ecommerce business. Maybe I'll get some real estate. Bitcoin? Just kidding.

The odd thing about closing is that it the money hitting the bank account didn't even matter. I was more relieved that the business was sold and seeing the inventory leave my warehouse there was a sense of closure, but not fully because I still have to provide support for 6 months.

I am more excited that I get to spend 100% of my time on my second business because if I could get it from 0 to a mil in 2 years working on it 50% of the time, I can't wait to see where it could go with me working on it 100% of the time and with a huge cash infusion to expand!

 

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[JasonR]

I remember discussing selling your business a few years ago, and you were like why would I sell? Business is great.

I also remember first meeting you, and I thought this guy sells THESE *widgets* and does this well? Boy do I have a lot to learn.

I really think your passion for the new business is what pushed you over the edge.

Congrats man. The most inspirational thing I've learned from you is how to have a very long term outlook on business, money, investments, and life in general - which is something I personally struggle with.

Repped.

 

[MJ DeMarco]

Congrats man!

Now tell us all about it. How it works, lessons learned, etc. Everything please.

Are you talking about the sales process of selling a company? Biophase has over 5,000 posts and has been very helpful and forthcoming in general, so if you're looking for "lessons" in building a saleable business, he has more than provided.

 

[biophase]

Hope you don't mind I modified your thread title, seeing you don't have any immediate needs for the sale proceeds, you're in the realm of "FU" money.

But I do! I just ordered 3 Lambos!

 

[biophase]

Huge congrats @biophase

Once again you provide inspiration and information for all of us working towards what you have achieved. Well done!

Out of curiosity, if you feel comfortable, what is the rough industry average multiplier for an eCommerce business?

Thanks and congrats again

The multiplier is between 2-4x. If you are 100% Amazon the multiplier is lower. If you have website sales the number gets higher.

As your revenue goes up the multiplier also goes up.

 

[MJ DeMarco]

Out of curiosity, if you feel comfortable, what is the rough industry average multiplier for an eCommerce business?

Can't speak to what bio sold his company for, but in all my conversations with people it's still around 2-4. It hasn't changed much in years, although that number is dependent on your moat. Bigger moat, bigger multiple.

 

[biophase]

Would you mind expanding on the key differences between how you ran your first business versus your second business? What allowed you to scale the second one so much faster? Capital? Experience? More competitive niches? I feel there's a lot we can learn here.

Sure. My first business was started with $100. I didn't have any money to grow it fast. But I don't think that was the main reason. If I had to list the top reasons for rapid growth...

1) Amazon as a platform vs. my own websites - Amazon allowed me to grow very fast because the traffic was there. I just needed to provide my product onto its platform.

2) Social Media - My first business wasn't social media friendly, my second one was and gets many mentions and shares everyday

3) Experience - From my past years of experience, starting another Ecommerce company is very easy (in fact I just launched another one today, finished its website last night)

4) Money - I had enough money to buy as much inventory as I needed without ever thinking about budgets. I could also afford to run at low prices producing low margins and not care. Having alot of capital is not always a good thing as I had some losing products that I launched before vetting 100%.

5) Niche Size - My second niche is huge, in fact it's not even a niche, it's a category. My first store was in a small niche within a niche.

 

[MJ DeMarco]

Hope you don't mind I modified your thread title, seeing you don't have any immediate needs for the sale proceeds, you're in the realm of "FU" money.

 

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[JAJT]

Great to hear!

You were one of the first posters on this forum that got me "hooked" to this place. The value, info and inspiration you've provided over the years is legendary.

So happy for you!

 

[G_Alexander]

Big congrats, Kenric. So awesome to hear this great news. Man time flies! It feels like just yesterday that I was spending time with @RealOG and you in Scottsdale and you had just got your Ferrari 360 back then (while running the business).

Your first venture into ecommerce in 2007, followed by your posts here (& on your blog), and your never-ending quest for continued improvement in your business have been such a ray of light to so many people. I can honestly say that had you not taken the leap back in 2007: that I very well may not have in 2014 either.

Great to hear you are now chasing your passion 100% of the time. I struggle with the same thing (splitting my time) between my ecommerce business and my brick & mortar. No intention to sell either yet... but we will see where the road leads.

All I know is, your desire to always improve means more good posts in the future to look forward to =). Here's to $10M+ in sales with your new business!

And who needs the Ferrari? You already had it

 

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[Greg R]

2-3X yearly profits or yearly revenues? Congrats @biophase! I actually came to the forum today as I needed to read something positive about someones business, so I put "success" in the search box and this post came up! Just what I needed to read lol. Congrats again!

Profit, always profit.

It wouldn't make any sense to put a multiplier on rev.

 

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[Vigilante]

Proud of you.

Happy for you.

Looking forward to watching many more mountains you scale.

 

[MJ DeMarco]

It wouldn't make any sense to put a multiplier on rev.

Revenue matters as it gets higher and higher (represents market share) but the most important metric will always be net income. Otherwise, the old "sell c-notes for fifty bucks" could come into play. "We did $10M last year!" (But you lost $20M!)

 

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[Almantas]

Congratulations on selling your business! I hear it again and again from folks who've built multiple multi-million businesses that building a first business is the hardest part, after that it's much easier. Your case study proves it again.

I hope you are 100% happy about the sale!

P.S. I am more than sure most people will click your post only to see how much you sold your business for - which is irrelevant as long as you provide the process of doing so.

Thanks for sharing!

 

[JM35]

So the multiplier goes up as your revenue increases but the multiplier is quoted on your profit - so for example 2 times profit? I guess I feel like a 2-4X profit multiplier is on the lower side as I could run the business for a few years and make that. Even the Dow is trading at a 27 times earnings multiple.

Yes - you are correct, it is a 2-4 times profit multiplier. The multiple goes up as the revenue increases because it represents more stability in the business I'd say. A $2M revenue online business likely has more "secret sauce" and a more established and scale-able business model than a $10K revenue online business. Non-internet-based business typically trade at higher multiples, depending on the industry they are in. 4x would be on the low side for a more traditional business, with multiples going up past 15x for higher growth companies in hot industries (such as biotech). I would say the hot-spot for most private business deals is the 6x-10x range; at least this is what I saw from my experience at a middle market private equity firm.

Internet business get lower multiples because of the inherent risk with the internet. Think back to Google Panda in 2011...thousands of sites with poor SEO profiles and scam-like linking techniques got completely wiped from the search rankings. Updates like that have a massive impact on online business and therefore make it more risky than a standard business model. The barriers to entry are also so much lower making competition inherently higher. It is a lot harder to replicate a manufacturing company's business model than it is an online dropshipping store. This is also why many of the successful people on here are very careful about what information they share on the web.

And comparing the Dow and public companies to online business is honestly pretty apples to oranges. I can go a further into detail as to why they trade at higher multiples than small and internet business do if you are curious, but there are numerous factors.

 

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[biophase]

WOW! Very inspiring. Congratulations.

I am curious, what does the process of putting a business on the market look like?

You basically just contact a business broker and tell them that you'd like to sell your business. It's just like selling a house, but with way more data gathering.

Then you get a bunch of interest and someone will write a letter of intent that basically says that the are willing to purchase your business at X price. They will begin due diligence during which you give them your financials and whatever information they ask for.

If they like what they see, they move into the phase of drawing up a purchase agreement contract where all the details are written out.

Then they pay you and it closes and you transfer to them everything agreed upon.

 

[biophase]

For the others', I remember reading @biophase say (and I'm paraphrasing from memory) he helps friends get started by telling them to just sell (I believe) any junk, because the process is more important than the thing. As they improve the process, they can find better stuff to sell. I interpret that as meaning start selling stuff, because that's the process to learn what to sell.

Please correct me if I'm wrong bio. Hopefully I can meet you at the next summit we both attend.

Maybe not selling junk, but taking action with something that isn't 100% perfect. It's better to try and fail, than to not doing anything because you can't find the perfect product.

 

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[Midas]

Congrats @biophase. Well deserved, thank you for everything you do to help us scrubs.

I just started my e-commerce journey in a niche that I'm extremely passionate about. Nervously, ordered my first shipment this morning. Wish me luck!

 

[RogueInnovation]

So I wanted to wait a few days for it to settle in to make a post about it. This week I sold my ecommerce business that I started back in 2007. It's been 10 years running this business that I started from scratch. I still remember my goal of making one sale a day at $50 profit and being happy if I took home $18,000 a year.

Fast forward 10 years and 3 months later... and it's sold and mostly gone.

I sold it because I started another ecommerce business in 2015 that I am much more passionate about. And passion combined with experience can really blow up a business. It took my first business 10 years to go from 0 to a million dollars a year. It took my second business 2 years to get to a million dollars a year.

I began thinking about selling the business about 2 years ago. I think once the thought gets in your head, you know it's about time. I put the business on the market in March 2017 and went through 3 serious buyers before the 4th actually closed.

What am I going to do with the money?

It's funny because if this happened 5 years ago, I know the first thing I'd be doing is getting a Ferrari. But honestly, I have no idea what I'm going to do with it. I thought about buying another business to grow my second ecommerce business. Maybe I'll get some real estate. Bitcoin? Just kidding.

The odd thing about closing is that it the money hitting the bank account didn't even matter. I was more relieved that the business was sold and seeing the inventory leave my warehouse there was a sense of closure, but not fully because I still have to provide support for 6 months.

I am more excited that I get to spend 100% of my time on my second business because if I could get it from 0 to a mil in 2 years working on it 50% of the time, I can't wait to see where it could go with me working on it 100% of the time and with a huge cash infusion to expand!

YEAH MAN!!!
I know exactly how you feel.

For me, I took a while to think about what to do with my FU money, and I think if you take a while figuring out the best use and are really diligent about it, you will come up with a great idea that has you feeling set up for life and truly content as you pursue this new business of yours.

I'd say it is time for champagne!
And going out to dinner with friends to celebrate and mark the occassion!
Because you just did what most people find impossible to do in an entire lifetime!
That is no small feat

So go take some time to think, and feel out your next moves
Real estate is good, but be sure it is something you can sell, or rent out easily cuz of its location etc. I don't think you need to spend all that money on it of course, there are investments you can make, but you want to be as careful with the money as you were making it. So EXPECT A LOT for your money's worth, don't let anything or anyone persuade you cheaply.

If you play your cards right, you can feel 100% at peace as you go on to make your next business even more successful, and that is a hopeful thought.

Good luck and congratulations
Go celebrate

 

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[IGP]

Congrats man! Selling your first business is always a rush!

After you poured years into something, the culmination of so many different emotions is an amazing feeling. I can remember feeling joy, a touch of sadness and more than anything a sense of freedom once that wire finally hit my account.

The next one is easier too!

 

[Andy Black]

So I wanted to wait a few days for it to settle in to make a post about it. This week I sold my ecommerce business that I started back in 2007. It's been 10 years running this business that I started from scratch. I still remember my goal of making one sale a day at $50 profit and being happy if I took home $18,000 a year.

Fast forward 10 years and 3 months later... and it's sold and mostly gone.

I sold it because I started another ecommerce business in 2015 that I am much more passionate about. And passion combined with experience can really blow up a business. It took my first business 10 years to go from 0 to a million dollars a year. It took my second business 2 years to get to a million dollars a year.

I began thinking about selling the business about 2 years ago. I think once the thought gets in your head, you know it's about time. I put the business on the market in March 2017 and went through 3 serious buyers before the 4th actually closed.

What am I going to do with the money?

It's funny because if this happened 5 years ago, I know the first thing I'd be doing is getting a Ferrari. But honestly, I have no idea what I'm going to do with it. I thought about buying another business to grow my second ecommerce business. Maybe I'll get some real estate. Bitcoin? Just kidding.

The odd thing about closing is that it the money hitting the bank account didn't even matter. I was more relieved that the business was sold and seeing the inventory leave my warehouse there was a sense of closure, but not fully because I still have to provide support for 6 months.

I am more excited that I get to spend 100% of my time on my second business because if I could get it from 0 to a mil in 2 years working on it 50% of the time, I can't wait to see where it could go with me working on it 100% of the time and with a huge cash infusion to expand!

Well done @biophase, and thanks for all the breadcrumbs.

 

[fvcorp]

Thank you so much for sharing, @biophase! This is fantastic news! We're all very lucky to have you here, sharing your knowledge with us.

I sold it because I started another ecommerce business in 2015 that I am much more passionate about. And passion combined with experience can really blow up a business. It took my first business 10 years to go from 0 to a million dollars a year. It took my second business 2 years to get to a million dollars a year.

I've read though hundreds of your past posts. This statement is scary. It means you're getting EVEN BETTER at building and enjoying the process! The passion helps I bet!

It's funny because if this happened 5 years ago, I know the first thing I'd be doing is getting a Ferrari. But honestly, I have no idea what I'm going to do with it. I thought about buying another business to grow my second ecommerce business. Maybe I'll get some real estate. Bitcoin? Just kidding.

This is a great feeling! One of the best moments in my life was when I first had multiple streams of income. Both large enough to pay the bills on their own. One account would stay the same and the other just kept on going up and I never had to touch it. The feeling of security and comfort is indescribable. Well...you know the feeling! Enjoy it!

 

[amp0193]

Congrats on the sale @biophase!

I wouldn't be where I am without your threads.

Your success has helped create success for others.

Thanks for everything you've done / are doing.


And I couldn't agree more about passion + experience being a winning combination.

 

[inputchip]

Congrats @biophase, that's a huge accomplishment.

Would you mind expanding on the key differences between how you ran your first business versus your second business? What allowed you to scale the second one so much faster? Capital? Experience? More competitive niches? I feel there's a lot we can learn here.

I sold it because I started another ecommerce business in 2015 that I am much more passionate about. And passion combined with experience can really blow up a business. It took my first business 10 years to go from 0 to a million dollars a year. It took my second business 2 years to get to a million dollars a year.

 

[Envision]

Congrats Bio!

And thank you for all the information and help you've put out there along the way it's helped me alot and im sure many others.

 

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[Eskil]

Revenue matters as it gets higher and higher (represents market share) but the most important metric will always be net income. Otherwise, the old "sell c-notes for fifty bucks" could come into play. "We did $10M last year!" (But you lost $20M!)

Add to this that the amount of data you are sitting on can also affect valuation and your multiplier. Data as in, email lists, size of your FB pixel list, subscribers, etc.

 

[MidwestLandlord]

Congrats!

These are my favorite kinds of threads for sure.

Thanks for everything you've done and shared here at the forum, seriously.

 

[Eskil]

Man, I'm away from the forum for a couple of days and missed this. HUGE congratulations my friend!! Good for you

I'm really excited too to see how far you can take the current business. I remember you showing us your early product samples at poker night. Congrats on that rapid growth as well

 

[MJ DeMarco]

Excuse my ignorance but how does one put a business up for sale? I know MJ mentioned that buyers came looking for him

True, but I was still represented.

Ultimately the "how" depends on the size of the sale. Mine was large enough that an investment banker rep'd the sale. Smaller sales can go by way of business broker. Even smaller sales, by way of Flippa or Empire or BizBuySell.

 

[biophase]

This is awesome I remember reading all your posts when I first joined here years ago.

One question I'd have is - > are there any key factors that you believe made this business sellable and things that if done the wrong way would have made it "unsellable"?

The reason I ask because in today's ecom world a lot of products are very very very similar if not identical, with different brands, marketing, etc - so just looking to understand key points to focus on in an effort to build something sellable.

Thanks and Congratulations!

Yes, I think that I was in a niche that wasn't competitive and the buyer liked my product selection. The fact that it was branded was also a strong selling point.

I think that any business is sellable. Someone is willing to buy it, but you have to produce a clean running business with no excuses to ask top dollar.

For example, I wasn't asking for more than it was worth due to potential, or the fact that I never emailed my list, or really fine tuned adwords. There was never any talk of future growth added into the valuation. I just showed a consistently growing business and priced it at last year's earnings.