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

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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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cottonbuds

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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.
Thank you for the detailed explanation. I appreciate it!
 

Eskil

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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 :)
 

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It's so stimulating reading this story. Last time i think like a fastlane was as a child and then someone gift me the slowlaner's dream...Now I'm more confident that I can succed! I really like this forum and stories like these are like petrol for my engine! My Italian engine XD
 

Patrickg

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Congrats Biophase! It's awesome to see a liquidation event after a long process. Especially when the person has been so helpful to people in the forum and shared so much.
 

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Smile on my face!

Congratulations man. Can’t thank you enough for all the awesome content you’ve blessed us with, seeing it all come together for you makes it that much more real. All the best on business number 2!
 

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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.
 
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MJ DeMarco

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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!)
 

Eskil

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MJ DeMarco" data-source="post: 669997" class="bbCodeBlock bbCodeBlock--expandable bbCodeBlock--quote js-expandWatch">
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.
 
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TreyAllDay

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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!

WOW! Very inspiring. Congratulations.

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

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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!
Excuse my ignorance but how does one put a business up for sale? I know MJ mentioned that buyers came looking for him, but nothing is mentioned if you want to check out. Especially if everyone is going in one direction, MJ says go the other way and if it means cashing out, how do you do that?

Thank you for your time.
 

randomnumber314

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It's exciting that you can focus on the business that already draws your attention away.

For those focusing on the numbers, worry about that when people are looking to buy your business.

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.
 

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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.
 

biophase

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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

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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.
 

biophase

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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.
 
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Paul Thomas

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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!
 

Paul Thomas

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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.

If your own website sales are mainly paid traffic (and not organic) - does it still raise the number as the buyers consider it another proven channel?
 

MJ DeMarco

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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.
 

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CONGRATS @biophase I've learnt so much from your other posts, thanks for the inspiration on your mega sale! Can't wait to hear about how you explode your 2nd business from here.
 

biophase

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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.
 

biophase

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If your own website sales are mainly paid traffic (and not organic) - does it still raise the number as the buyers consider it another proven channel?

The paid traffic would be included in the advertising expenses so the traffic does count. But the paid traffic would have to be profitable or it would detract from the business value. I'm not sure if many buyers would even look that deep into it though.
 

TreyAllDay

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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.

Very interesting! I'm a bit embarrassed I did not even know business brokerages were a thing.
 

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MJ DeMarco" data-source="post: 670174" class="bbCodeBlock bbCodeBlock--expandable bbCodeBlock--quote js-expandWatch">
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.
Okay so if you want to cash out there are resources you can use to find potential buyers, very cool.

Thank you for your time.
 

Paul Thomas

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The paid traffic would be included in the advertising expenses so the traffic does count. But the paid traffic would have to be profitable or it would detract from the business value. I'm not sure if many buyers would even look that deep into it though.
I gotcha, I was saying more along the lines of its not "passive" like organic traffic so might take away from the value. But this makes sense, thank you!
 

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