Thinking of buying an ecommerce business. Any tips?

[unorthodox]

Sale price: $800k
Gross income: $1.4million
Cash flow: $270K
Established: 2003
Email list: 10K

Dropship, 150k+ products, all dropshipped. Built on Magento, uses Vendito. Utilizes Amazon, eBay, Sears, Houzz for additional sales.

Owner claims he only spends 40 hours a week managing business.

 

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[Vigilante]

Sale price: $800k
Gross income: $1.4million
Cash flow: $270K
Established: 2003
Email list: 10K

Dropship, 150k+ products, all dropshipped. Built on Magento, uses Vendito. Utilizes Amazon, eBay, Sears, Houzz for additional sales.

Owner claims he only spends 40 hours a week managing business.

What if the vendors change to sell direct or the platforms change to not allow 3p sellers?

 

[ZCP]

Can you get your money back ($800k / $270k) before you are cutout / shutdown / or end arounded (as @Vigilante)?
40 hrs per week means you are hiring 1 or 2 people or you are buying a job.

 

[LightHouse]

Dropship? 40 hours a week... Wtf.

I would caution Abby above you get, because there isn't near enough detail to help

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[AllenCrawley]

What does your own due diligence tell you?

If you don't what's involved to do proper due diligence then you shouldn't be considering buying an $800k business.

 

[GuestUserX09]

I would want to see income charts over at least the last 12 months.

I would ask the owner what a day in his life looks like. Or in other words, what he's doing exactly during those 40 hours.

Lastly in additional, I'd want to know all main sources of traffic and marketing efforts being used.

Drop shipping on 150k+ products?

 

[Vigilante]

I'd sell it to you, then start a new blind ownership Delaware corp and become your biggest competitor... since the company essentially owns nothing and has zero intellectual property.

 

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[unorthodox]

15% of traffic comes from Google Adwords
The remainder is generated by the accounts on other Shopping Engines.

Income statements go back 3 years, net profit has risen every year.

I attached the Income Statement

 

[ZCP]

Suggest pulling that or moving inside.

 

[GuestUser450]

I attached the Income Statement

Please remove or at the very least anonymize. I'd guess the seller doesn't want that shared publicly.

 

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[Y.B.]

Business is a bit overpriced. Hard to gauge without getting more info. the 20% profit margin is pretty good for a dropship business. How much of it is from the site vs. all the other channels.

 

[Y.B.]

Ironically enough I just found an amazing opportunity for an ecom site. It's really underpriced because of a few reasons so I'm trying to see if any of my friends with $ are looking to invest and run it together. There are some gems out there, but they are hard to find.

 

[GuestUser450]

I'd sell it to you, then start a new blind ownership Delaware corp and become your biggest competitor

So much said here, literally and between the lines. @unorthodox I recommended reading TMFL, specifically ch. 30-34 that cover CENTS, because these deals violate most commandments to some degree. No control, low barrier to entry, questionable need, steep time requirements; at 40 hrs/week, you're trading time for income = job = no scale, etc.

Getoffmylawn mini rant for the impressionable: there's no escaping the upfront work. Every time you outsource something instead of building in-house processes, you're giving away not just equity but leverage, value and competitive advantages. Say no to the middle man and DIY.

 

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[ZCP]

On the flip side, the infrastructure and customer list do have some value. Suggest going through and at least put together an offer for the company.

Since no one knows the full story of the deal but you, you may be able to pull some value / shortcuts / quick start together from this that the little bit of info you shared did not show.

Am finalizing a deal now where the owner is older, retiring, we met them personally, not worried about them competing....... if this is similar, you might find value....... did you have $800k or was the money coming from others?

 

[AllenCrawley]

On the flip side, the infrastructure and customer list do have some value. Suggest going through and at least put together an offer for the company.

Since no one knows the full story of the deal but you, you may be able to pull some value / shortcuts / quick start together from this that the little bit of info you shared did not show.

Am finalizing a deal now where the owner is older, retiring, we met them personally, not worried about them competing....... if this is similar, you might find value....... did you have $800k or was the money coming from others?

https://www.thefastlaneforum.com/co...th-0-down-whats-a-good-business-to-buy.68001/

 

[ZCP]

forgot about that one

[HASHTAG]#landfill[/HASHTAG]

 

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[hughjasle]

man - i need to change my game plan. If a $250k a year profit drop ship company can sell for $800k, might just have to build out a bunch of those to sell off... I'll take orders

but OP - non of us can do the due diligence, you might have something good. Doubtful, but who knows. I do know that with 800k and a year you can learn to build those companies left and right, or buy that guy's biz and pray that it lasts 5 years as is so you can pay if off and make your money back.

 

[Raoul Duke]

In all seriousness. I know someone who created a 4 point plan. That is what you are looking for, right? Exact steps.

Spoiler: Exact Steps

 

[biophase]

I'd sell my biz for $800k if I thought I could get that and I have better numbers. Are you really getting anything for that besides a domain with good traffic? You don't own any of the products or brands.

I do wonder about biz brokers selling dropship sites for a 3x multiple to seemingly inexperienced people. Is the attractiveness of this business the dropshipping? Because for example, with my business you'd get a non dropshipped ecommerce store, all brands and all import contacts, etc... But you would need a warehouse. IMO you would get a much better business to build upon. Posts like this make me wonder if I could be cashing out for seven figures.

 

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[snowbank]

Sale price: $800k
Cash flow: $270K
Owner claims he only spends 40 hours a week managing business.

Curious, why would you want to spend $800k to buy a job that it doesn't seem like you know about/love?

You're not actually buying a business in this scenario, since it needs YOU to make sure it makes money. Let's pretend you knew a good CEO who wanted to run it and paid the full time CEO $100k so you wouldn't have to do anything(made up scenario, it is not that simple)...

So, really you're paying $800k for a $170k business, which is a ridiculously overpriced, and as @Vigilante and @biophase pointed out, you have no moat you're just selling other people's stuff, so not only might you lose the income, you may lose massive asset value quickly, and have no way to protect it.

Likely scenario:

"Wow, this is a lot of work, and not only that work I don't even like. Let's sell. Oh shit, profits fell... well at least they only fell $50k I can take a $50k loss... wait what so the asset value is a lot lower... at least $150k lower!?... and i've got to pay a broker to unload this thing??!!... "

It's likely you'd be burning hundreds of thousands for a temporary job that you didn't even like.

If you wanna get into e-commerce probably a better bet to just read threads from guys like @biophase @Vigilante @AllenCrawley @Vick , etc... first. They might not even charge you $800k.

 

[hughjasle]

Posts like this make me wonder if I could be cashing out for seven figures

My thoughts as well. Would LOVE talking about this with anyone else interested. I'm in the same boat as biophase here. Importing all my own stuff under my own brands etc. So far I'm just cashing in on holding them, but if I can sell one that is doing the $250k yr profits for $800k (or 3x profits)... I'd unload a ton of them and just keep building out products. "one in the hand is worth two in the bush" type of thing...

 

[LightHouse]

My thoughts as well. Would LOVE talking about this with anyone else interested. I'm in the same boat as biophase here. Importing all my own stuff under my own brands etc. So far I'm just cashing in on holding them, but if I can sell one that is doing the $250k yr profits for $800k (or 3x profits)... I'd unload a ton of them and just keep building out products. "one in the hand is worth two in the bush" type of thing...

Websiteclosers.com
Empireflippers.com

If you are over 1M, or have distribution beyond online channels there are plenty of brokers you could use.

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[WebWizards]

Don't buy, make your own. Too risky imo

 

[hughjasle]

Empireflippers.com

Wow. Anyone have experience buying or selling on one of these sites??

One of the first ones listed is an ecom shop that sells via FB ads to their shopify store. They didn't say if it was dropshipped or their own brands that they had manufactured or not, (which is what I do).

This company went from $68 PROFIT in Nov. and built up to as high as $49k profit in March.

So in other words, they built this company up from nothing for the purpose of selling it off. And at the asking price of $850k I'm thinking there is no freaking way it's worth that at all.

Do businesses like this really sell for these outrageous prices??

I think I"m gonna have to take a serious look at this as I'm thinking the same as Biophase here.

Posts like this make me wonder if I could be cashing out for seven figures.

I'm gonna call them and see if I can get more legit info on what businesses really sell etc. I will be seeing them in person in a month as well.

 

[Ecom man]

Sale price: $800k
Gross income: $1.4million
Cash flow: $270K
Established: 2003
Email list: 10K

Dropship, 150k+ products, all dropshipped. Built on Magento, uses Vendito. Utilizes Amazon, eBay, Sears, Houzz for additional sales.

Owner claims he only spends 40 hours a week managing business.

I wouldn't ever purchase a business like this. The chance of them just turning around and becoming your competitor are just too great. Even if they sign a do not compete they could still just help a friend, loved one, etc. become your competitor.

Another downside is that you don't know the business. If you build a business from scratch you learn a lot of "little" things that make a huge difference on the business and the bottom line. If you don't know how to build the business how will you keep it running/growing in the future?

 

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[Insaint]

Do businesses like this really sell for these outrageous prices??

I think I"m gonna have to take a serious look at this as I'm thinking the same as Biophase here.

Yes they do. A lot of money is coming into the e-commerce/SAAS/whathaveyou market because people are chasing yield. A lot of those people are very uneducated on the subject. If you have your own products with strong margins/sales and you're looking to sell the business you should definitely look into it. People would be better off buying your business instead of some random dropshipping site that purely relies on Facebook ads.

Feinternational.com or Flippa Deal Flow are two more places you could look.

 

[theag]

Yes they do. A lot of money is coming into the e-commerce/SAAS/whathaveyou market because people are chasing yield. A lot of those people are very uneducated on the subject. If you have your own products with strong margins/sales and you're looking to sell the business you should definitely look into it. People would be better off buying your business instead of some random dropshipping site that purely relies on Facebook ads.

Feinternational.com or Flippa Deal Flow are two more places you could look.

Do you know how they handle non-English businesses? Checking out listings from those brokers, they usually seem to be English-speaking and based in the US/UK, which makes sense because this allows for the buyer pool to be the biggest. I guess the pool of possibly interested buyers that these brokers deal with goes down rapidly for a non-English business?

 

[GuestUser450]

Feinternational.com or Flippa Deal Flow are two more places you could look.

I can vouch for FEI, good folks, above board and thorough. Flippa on the other hand...DF markup seems ridiculous for those properties, but apparently there's dumb money a market for them.

All things being equal right now, SaaS are selling at 3X SDCF and 2X for nonsubscription, nonrecurring revenue businesses.

 

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[Insaint]

Do you know how they handle non-English businesses? Checking out listings from those brokers, they usually seem to be English-speaking and based in the US/UK, which makes sense because this allows for the buyer pool to be the biggest. I guess the pool of possibly interested buyers that these brokers deal with goes down rapidly for a non-English business?

Most of the larger brokers don't want to touch non-English sites, probably because the pool of buyers goes down rapidly yeah. The only exception I know of is Flippa Deal Flow because I've seen the odd German site pop up there. Their minimum selling price seems to be ~$100k. So if your site is worth less than that, your best bet is to find a local business acquisition portal or list on regular Flippa (just be ready for a lot of tire-kickers).

 

[theag]

Most of the larger brokers don't want to touch non-English sites, probably because the pool of buyers goes down rapidly yeah. The only exception I know of is Flippa Deal Flow because I've seen the odd German site pop up there. Their minimum selling price seems to be ~$100k. So if your site is worth less than that, your best bet is to find a local business acquisition portal or list on regular Flippa (just be ready for a lot of tire-kickers).

Thanks. Yea thats what I figured. Guess I'll go with a German business broker and maybe give Flippa Deal Flow a shot if they don't require an exclusive contract. I think a local broker will achieve a better outcome though.