EFP 85: Selling Our Six-Figure Outsourcing Company

We finally pulled the trigger and listed our outsourcing company for sale. It wasn’t an easy decision, but deciding to focus on Empire Flippers means we had to make some sacrifices.

The Details of Our Outsourcing Company We’re Selling

Today, Joe and I share some details on the outsourcing company that we’re selling and break down what potential buyers need to know. We also talk a bit about our new Partner Program where you can make money by referring customers to us.

If you enjoy this episode’s template then please let us know. We’re considering using it for future interviews with website sellers.

Check Out This Week’s Episode Here:

 Direct Download – Right Click, Save As

Topics Discussed This Week Include:

• Our Partner Program setup and the potential for our fans to make money helping us.
• The breakdown of the benefits of owning our outsourcing company.
• Brief history of our company and how we got into outsourcing.
• Details on our company’s revenue, expenses, net profit, etc.
• The opportunities the new buyer has for expanding our business.

Mentions:

• Our New Partner Program FAQ
• EFP 79: How to Prepare Your Site For Sale
• TMBA 227: The Rise of Productized Services
• The Public Sale of Our 6-Figure Outsourcing Company
• How to Steal Your Competitor’s Twitter Followers
• ToutApp

Quotables:

• “When you’re selling a site or business, you have to expose a lot of info during the due diligence phase.” -Joe – Tweet This!

Do you have any questions about our outsourcing company? Leave us a SpeakPipe message or comment below!

 

Speaker 3:                           Welcome to the Empire Flippers podcast. Are you sick and tired of gurus who have plenty of ideas but are short on substance? Worried that e-book you bought for $17.95 won’t bring you the personal and financial freedom you long for?

                                                Hey, you’re not alone. Join thousands of others in their pursuit of niche profits without the bullshit. Straight from your hosts, Justin and Joe from Empire Flippers.

Justin Cooke:                     Welcome to episode 85 of the Empire Flippers podcast. I’m your host, Justin Cooke, and I’m here with my business partner extraordinaire, Joe ‘Hot Money’ Magnotti. What’s going on, buddy?

Joe Magnotti:                    Just back for Puerto Galera. Boy, are my arms tired.

Justin Cooke:                     Yeah, man, you’ve got a little bit of a tan, you’re hanging on the beach.

                                                What’s up with the work, man? You back at it now? Back in the saddle?

Joe Magnotti:                    I’m back at it.

Justin Cooke:                     Cool, well while you were gone, I decided to sell our outsourcing company.

Joe Magnotti:                    I saw that.

Justin Cooke:                     Yeah, man, I figured, what the hell? Joe’s not around, I’m dumping this thing, man. We’re moving on.

Joe Magnotti:                    You should probably tell some people when you do that.

Justin Cooke:                     Yeah, should probably let someone know.

                                                We’re actually going to be getting into that today. We’re going to go through, kind of, the details of selling our 6-figure outsourcing company and, kind of, lay it out.

                                                It’s also, kind of, a plan that we want to do with some sellers that are coming along that want to sell their sites with us. The plan is to take sites, probably that are $20,000 or more and do a great walk-through with them and kind of explain to buyers the process and what the site looks like and a bit more about the business than you might get from just a regular listing.

Joe Magnotti:                    Yeah, we’d love to see how this model works with other sellers when we get into it.

Justin Cooke:                     So the other thing I rolled out was our partnership program, which basically is this. So anyone that has a blog, an e-mail list, that would like to make some extra cash and send them over to some of the products and services we offer, like keyword research, site set-up, content – you know, those types of things, or website sellers. They’re going to get a percentage of the sales that they send our way and the partnership.

                                                For example, with website sellers we have a listing fee of $297 for the first time sellers of websites. They’re going to get 50% of that listing fee. So that’s pretty slick. The other ones are 10%, they’re a bit lower.

                                                So we’re actually, specifically, looking for website sellers.

Joe Magnotti:                    Cool, yeah. I’m very interested to see what this could bring along and see how it works out.

Justin Cooke:                     Yeah, I think we got 15 people signed up so far. There is an approval process so I want to make sure that they’ve got a legitimate site and it looks like they’re going to be doing not too spammy stuff.

                                                We might eventually roll this out for sending over website buyers. I’m a little hesitant to do that though because I don’t want people sending buyers that are ill-informed or badly informed. I just think that that could be problematic so we’ve avoided that for now.

                                                We may look at doing something in the future, I’m not really sure.

Joe Magnotti:                    Yeah, and the commissions would be a lot bigger on that so it’d have to be something that we definitely had on lockdown.

Justin Cooke:                     The next thing we want to talk about is, we have several meet-ups this week. So we’ve got some friends coming to town, we’ve got Dana and his girlfriend going to be here. We’ve got a few other people that are visiting and wanted to hang out with Justin and Joe, and some other people that are here.

                                                So, we’re really looking forward to that. I think we’re going to do some island hopping next week. So, that will be kind of fun. Take people around Davao, kind of show them a good time.

                                                I think 4 or 5 people are going to be here next week.

Joe Magnotti:                    Cool.

Justin Cooke:                     All right, buddy, enough about that. Let’s get into the heart of this week’s episode.

Speaker 3:                           This is the Empire Flippers Podcast.

Justin Cooke:                     So before we get started with this, I just want to, kind of, explain how this works. We’ve got a total of 9 sections or areas we’re basically going to walk through. And it covers things like niche selection, it covers a brief history of the company, a business snapshot today, the work required, the opportunities for growth. These types of things.

                                                And our thought is that it will help central buyers get much more information about the site or the business that they’re looking to purchase and really give them a more informed decision and choice when they’re looking through due diligence.

Joe Magnotti:                    Yeah, and I think it can definitely help potential sellers as well. Things they’re going to have to prepare and how they’re going to have to be able to speak about their company or site.

Justin Cooke:                     And I think that we may not make this a regular podcast episode, we may, depending on whether you guys dig this or not. It may just, kind of, be audio files attached to the listings. But do let us know what you think.

                                                We’re going to go ahead and guinea pig ourselves since we’ve got a business for sale. And we’ll kind of go through the process.

                                                So, the first one man, we’re going to call it the Seduction Round.

                                                We’ve got 60 seconds to basically explain the business to you in a nutshell, give you an idea on what we’re working with.

Joe Magnotti:                    Yeah, so the biggest thing that I would say, if someone was asking why should I buy your outsourcing company, would say ‘Hey, it’s a little more than $7000 in mostly passive income per month.

Justin Cooke:                     And that’s because we built systems and put people in place to basically run the company for us. Another thing I think is really valuable is that it’s an instant plug and play Philippines corporation. We’ve got trained staff, we’ve got an office facility, we’ve got room for growth. It’s only about half full, in terms of the office. And the corporation set up is huge. It takes months of bureaucracy to get business up and rolling here. So, that can be a bit of a pain.

Joe Magnotti:                    And hiring good staff is tough, too.

Justin Cooke:                     Yeah, it took us years to get the right staff in place and develop that staff to take over the business.

                                                The other thing we have is some long standing customers with a good history of payment. These are people where it’s a win-win relationship. They’re getting great value out of us, we’re getting great value out of them. And we’ve both been happy on both sides of the aisle.

Joe Magnotti:                    Yeah, they’re good guys to work with. I know all of them personally. I’ve met with them personally. I know that these are long standing customers.

Justin Cooke:                     The last point that we mentioned in Seduction Round will be the 4 month turnover. We’re definitely willing to give some time and, kind of, hand-holding and training with consulting to really make sure that the new owner of this business hits the ground running and can really move up for it.

                                                This is a baby of ours. This got it started for us, Joe, in terms of getting us out of the Philippines, getting us started with a Philippines corporation, running our business here.

Joe Magnotti:                    I think it’s important with any business this large to have some sort of transition period. If you’re a seller and you’re out there and you have any sort of business with a lot of moving parts, even if it’s mostly passive and taken care of because you have SOPs in place and employees, expect to have some sort of transition period where you train the new owner on how to use it.

Justin Cooke:                     I think that’s interesting, too. If you’re looking to build up a business to sell it, this is not the model to use, right? Because if you look at it, there’s more transition time, I’d say that, in general there’s just too many moving pieces to be a quick and easy sale.

                                                If I was building it over, to sell, I don’t think I would have went the way that we went. Because there’s a bit more work involved in the transfer process.

                                                So that’s it for the Seduction Round. Let’s get into the 2nd question, getting to 1st base. So you’re romancing, you’re getting into it, you want to get to 1st base.

                                                How did we get into niche selection, how did we get started, how did that all work out?

                                                Well, first thing is, we had an existing relationship with an on-the-ground virtual assistant in Davoe City, of all places.

Joe Magnotti:                    The story we love to tell is that we needed a VA, we interviewed VAs from around the world – China, Vietnam, Africa.

Justin Cooke:                     It was pre-4 hour work week.

Joe Magnotti:                    Yes. South America. These are people that put their stuff on Craigslist and we just interviewed them and said ‘Can you do some posting for us?’

Justin Cooke:                     We had someone that was working out really well. We had an existing relationship. And then, eventually, we had an employer that was looking to reduce cost and they wanted to expand their team, right? They were growing pretty significantly. They were looking to reduce the cost of production.

Joe Magnotti:                    Yeah, so we pinged our girl back in Davoe City and said ‘Hey, can we go ahead and expand you as [inaudible 00:07:13]

                                                And so that was perfect setup for us.

Justin Cooke:                     So then you and I, we end up pitching our bosses, the CEO, CFO, on this journey, basically. We had nice PowerPoint presentation, we went through the whole looking at cost-reduction, scaling, scalability, staffing – and they loved it. They were totally down with it. We ended up quitting our jobs, we set up the corporation, and then started our Philippines outsourcing company. Started working with them directly.

                                                So it wasn’t really that we selected the niche necessarily. We saw value in it when we were working with a virtual assistant. But I think it’s more of a case of us scratching our own itch. We were with a company, or business, that had a need, definitely in terms of scaling and growing. And the opportunity presented itself.

                                                I think we were open to it because you and I were entrepreneurial even before that, right?

                                                And so when we saw that opportunity, we jumped on it where other people might not have.

Joe Magnotti:                    And this was what, 2008? The end of 2008. So this is really pre the proliferation of oDAS or Elance. Those sites might have been around but they were definitely not very popular or easy to use.

Justin Cooke:                     There were outsourcing companies at that time, and I remember we looked at some of those as competition. Because we wanted to give a fair approach to our CEO and CFO and say ‘Look, here are your other alternatives. Here’s their pricing, here’s where they’re coming from’ and clearly we just made that – we were the clearest choice for them to go with, without a question.

                                                All right man, so that’s the 2nd question.

                                                Let’s get a 3rd question in a little bit.

                                                So you’re going from the first date to the second date, into a relationship. Let’s talk a little about the history of the company after getting our start, how we got from there to here.

Joe Magnotti:                    One of the first things we did, when I got here full time in 2009, was we looked for other companies that would be a good fit for our services.

                                                That was so important to us to expand, to have a diversified revenue base and really make sure that we had other pieces of income, pieces of the pie coming in.

Justin Cooke:                     And we also wanted to expand to fill our clients needs, right?

Joe Magnotti:                    Yeah, so.

Justin Cooke:                     They had additional needs, they had additional scaling opportunities for us. And we wanted to make sure we had the right staff in place to do that. When it comes to looking for other opportunities, and I think this is something we’ll counsel the new buyer on, one of our problems – one of the mistakes we made – was that we went too broad.

                                                So we took the approach of ‘We’re going to be everything to everyone’ and that was a bad strategy for a bunch of reasons. There was no specialization. It’s really hard to stand out as an outsourcing company amongst huge players, thousands and tens of thousands of people that they have. It’s really hard to stand out when you’re competing with them. It’s much easier to niche down and compete in a specific vertical or a specific niche and be the best at that.

                                                And we’ll get into that a bit when we talk about opportunities.

                                                One of the things we did do is that we targeted our focus, we niched down a bit. We dropped any voice based campaigns – it was something we had worked on in the past. We were taking some of those on and it just wasn’t a good fit for our organization.

                                                And we started looking for, and only taking, deals that we knew were win-win. There was a clear value proposition that we offered to them, and it made sense for us.

Joe Magnotti:                    I’m so glad we dropped the voice campaigns. And I’m telling you, the new owner is going to be so glad about that, too. Because, unless you’re a telemarketing guy or a real big huge customer service guy, voice campaigns – they’re a bitch to run.

                                                They just are.

                                                And other type services – back office type services, or technical type services – are much easier.

Justin Cooke:                     The other thing we did, and we realized this was important, is to build good relationships with your long term clients. And I think one of the ways we were able to do that was by cutting down on all the clients we were taking on at first. We would take someone on for a month and we’d put all this work up front, front loading this work for clients that weren’t a good fit.

                                                It led to the point where we could be neglecting the good client. So the ones that were a good fit, a much more long term fit, we’re neglecting them trying to work with all these ones that just wouldn’t work. It wasn’t great for us.

Joe Magnotti:                    I think the day that we started doing that, it felt risky at first, but man, was the pressure off. Because you got these people that said yes, but you knew they were only going to stick around for 2 or 3 months at most. And you didn’t want to put a lot of time, effort, and energy into that.

                                                So, we just learned a lesson there. And that’s something that we can convey to the new owner very well, I think.

Justin Cooke:                     So the 4th section we’re going to go Full Monty on you. Basically, we’re going to drop trou, we’re going to pull back the kimono, we’re going to let you take a peek inside the business. We’re going to discuss things step-by-step.

                                                So the first thing to cover, I think, is revenue.

Joe Magnotti:                    I think we just back up a second here and realize that sellers, when you’re selling a site or business, you’re really going to have to expose a lot of information during the due diligence phase.

                                                So it’s important to have everything tracked and set up so you can get that done.

Justin Cooke:                     We actually have a podcast episode where we talk about some of the steps you can take as you’re heading into a sale, 6 months out, 3 months out. And we will link to that in the show notes on EmpireFlippers.com if you want to check it out.

                                                Anyway, for total revenue for 2012, we came out just over $250,000 in revenue. In 2013, just over $321,000 in revenue. We have an estimated growth of $356,000 in 2014. So that’s our revenue.

                                                For expenses we’re looking at $198,000 in 2012, $233,000 in 2013. $250,000 in 2014. So basically, that leaves us with seller discretionary earnings in 2012 – just over $52,000. Just over $88,000 in 2013. And just over $100,000 in 2014.

                                                But let’s talk a little bit, Joe, about the revenue and who that comes from.

Joe Magnotti:                    So over the course of 3 years, we basically only had 6 clients. And that may not sound like a lot, but for an outsourcing company, honestly, you don’t really need that many clients.

                                                What you need are good long-standing relationships from clients that are going to pay you a good deal of money over a fixed period of time.

                                                So that’s what we looked for and, right now, we have currently 3 clients, but those guys have been with us for multiple years.

                                                And it does look like they’re going to continue with us.

Justin Cooke:                     That is the plan.

                                                So, basically, in 2012 we came out with seller discretionary earnings at $52,000, $88,000 2013. Part of the expenses, and we should talk about the expenses. This also includes salary, this includes the office, this includes everything that we have, as well as our time. We’ve also accounted for the time that we spent on the business, maintaining that business while we’ve been building up the other side of the house over at Empire Flippers.

                                                So, let’s talk a little bit, Joe, about the office that we have.

                                                So we have an office location here in Davoe City in the Philippines. It seats about 20 people. We have 10 people in the office right now. The rest of the people work from home. There’s 22 total staff with our outsourcing company right now. And so the office is expandable. You could add up to 10 more agents to the office without too much in additional expenses.

Joe Magnotti:                    We should mention too that this is actually our second office. It’s in a central location in Davoe. So it’s pretty well, easily accessible for most staff members coming from either side of the city.

                                                Our first office was way south and we had a lot of people from the north side of the city complaining about getting down there.

                                                So this is pretty good. It’s in a newer building – we’re actually the first tenants of that office. And we use a custom set up that we came up with – with nice big cubicles so lots of space for your programmers or developers.

Justin Cooke:                     So breaking down the clients, some of the first clients first.

                                                Client number one brings in the majority of the revenue, also has lower margins than some of the other clients. But we have a total of 10 staff that are working with that client. We’ve got one manager running the shop. We’ve got 9 employees that work underneath that manager. And those are all in the office here in Davoe.

                                                Client number 2, we’ve got a total of 7 staff. We’ve got 6 employees and we’ve got 1 supervisor. The supervisor sends us weekly roll up reports and reports directly to us.

                                                I should mention that, with client 1, we don’t actually manage the staff. That’s handled by the client. We’re more of an administrative role. Whereas client number 2, we actually do manage the staff and they send us the weekly reports directly.

Joe Magnotti:                    Well, our manager manages the staff.

Justin Cooke:                     Yeah, but we’re responsible for the work that they’re doing whereas with client number 1, the manager on the US side is responsible for the work that they’re doing and responsible for working with [crosstalk 00:15:25]

Joe Magnotti:                    And with client number 1, the majority of the expenses are also with client number 1, along with the majority of the revenue. So it’s something that needs to be tracked and needs to be taken care of exactly.

                                                But our admin staff takes care of that.

Justin Cooke:                     And our 5th client, we have 3 staff total, we have 2 employees and 1 supervisor. They’re actually home-based agents and they work out of Cebu. Again, with them, we don’t have work oversight so we’re not actually managing that staff. They’re not sending us weekly roll-outs. They’re working directly with the client. We handle them in an administrative role.

                                                The other staff we have are 2 HR admin, and that’s something we’ve talked about. We’re willing to go either way on this.

                                                Number 1, we keep the admin HR staff and retain you as a client. Basically, you’ll be paying us a reasonable rate ensuring that you have a team on the ground, signing checks, dispute resolution. I think that would be really important if you are not planning to be in location. So keeping that staff working with you and for you, would be important.

Joe Magnotti:                    Yeah or if you don’t want to be involved in the day to day running of signing checks and making sure things are done. We can offload that and continue to do that as your vendor provider.

Justin Cooke:                     The second thing is that you can keep the admin or HR staff and we’d actually become your client. Again, we’ll pay you a reasonable rate. You get a new client in us and it keeps us from having to find or hire new HR admin staff. That’s really an important piece. And so, making sure that we keep that together in the short term will be important. Definitely through the turnover and even after.

Joe Magnotti:                    Yeah the HR admin staff people, those two gals, are great. They really work well as a team and I work with them on a regular basis. So the things that we do well there – payroll, the AR, the AP – all of that stuff can basically be handled by them with a little bit of supervision from the new owner, or myself if you do decide to outsource to us.

Justin Cooke:                     All right buddy, so let’s get into the 6th section. Let’s talk about keeping the flame alive. What is the work required, what are we doing on a day by day basis. And I just say, first off, I don’t do much of anything. I do very little work. Maybe a couple hours a month, maybe. I don’t do anything – this is really Joe’s area.

Joe Magnotti:                    Me, I do about 20-25 hours a month. And some weeks more than others depending on collecting from clients – that’s always a thing when you’re in the outsourcing game.

Justin Cooke:                     So let’s talk about the first thing. So what’s one of your responsibilities on a monthly basis?

Joe Magnotti:                    Well they call me Hot Money for a reason, right? Invoicing on a regular basis and making sure that your clients do pay is definitely going to be one of your main priorities as the new owner. That’s something that the staff helps with. I have a staff that puts together the invoices and sets them up for e-mail. But I re-check them and make sure that we are invoicing the right amount and that the right things are getting paid for.

Justin Cooke:                     The second thing you do is you pay the bills, basically. Make sure the bills are paid on time. You don’t actually go and pay the bills. Staff does that. But you make sure that ‘Oh, we haven’t paid this in a while, what happened? Oh that bill didn’t come in’ and that kind of thing.

Joe Magnotti:                    Yeah, following up on lost bills.

Justin Cooke:                     Isn’t that the weirdest thing? Some of these bills just don’t show up. They actually don’t come.

Joe Magnotti:                    It’s strange.

Justin Cooke:                     And then they show up a month later like ‘What’s going on? It’s time to pay”. I’m like, well why don’t you deliver my bill?

Joe Magnotti:                    Yeah, and then they say they’re going to shut you down. So you have to look at stuff like that. And if there is any outrages you should ask for a refunds or gettting discounts while comparing vendors. That kind of stuff is always a little bit important.

                                                Honestly, it’s probably a little bit of what I do. But making sure that I’m the one at the end of the day who signs the checks because this way I know how much we’re spending – is important.

Justin Cooke:                     And third thing you do is that you’re making sure that we’re properly staffed. So you work with the HR admin staff to make sure that the supervisors are filled, that when we lose agents or we need to hire more, that they are able to work under supervisors and do all that.

                                                Now they do all the interviewing, they work with the supervisors, they have standing operating procedures they use for hiring, but you are just keeping an eye on that, basically.

Joe Magnotti:                    Yeah, it’s important if client A is paying for 3 people and then one of the people says ‘I’m going to quit in 2 weeks’ – you better replace that person otherwise you’re not going to be able to charge client A for 3 people anymore.

                                                And then one of the other things that obviously is a big point is payroll. Now that also comes under expenses. But we have a payroll manager that does all the computation for payroll. But I do look it over. We pay twice a month on the 7th and the 22nd. I look over the payroll to make sure it’s accurate. If there’s anything that doesn’t jive I kind of question that and go over the payroll.

Justin Cooke:                     I get those e-mails, too. I rarely look at it.

                                                I look at them just out of curiosity every once in awhile. But yeah, I get the bi-monthly report.

Joe Magnotti:                    Yeah and I approve the payroll for distribution to each individual’s accounts. So when the new buyer bought our outsourcing company, obviously it would come with the local bank accounts, too, along with the local corporation. And we have that all set up electronically so that our people can be paid through a cash card distribution.

Justin Cooke:                     So basically, every week our contractor, our bookkeeper/accountant contractor will work with our admin staff and make sure payroll is done, send that off to you for final approval, you check it out, approve it, and then they actually go and send the payments themselves.

Joe Magnotti:                    Yeah, every 2 weeks.

Justin Cooke:                     It’s funny I’m asking you these questions – is that how it works, man?

Joe Magnotti:                    Yeah, it is, it is. I guess, technically, it’s every 15 days because the payroll period is set up that way.

Justin Cooke:                     So the last thing you do is you contact customers to make sure that their needs are being fulfilled, they’re getting value, look for any upsell opportunities, look for another additional staff that they need or they require.

Joe Magnotti:                    In 2011, I visited our people in person. But that’s the only time that I visited them in person. Our largest customer comes to visit us every once in awhile. So that works out.

                                                Honestly, I probably don’t do as much of this as I should. The account management piece of definitely something that’s been neglected in the past. And potential opportunities there, when you’re contacting clients and asking them how happy they are with your services, the next question should be ‘How could we do more for you?’

Justin Cooke:                     All right, let’s get into the 6th section. We’re going to talk about taking it to the next level. We’re planning the wedding, we’re looking for a long-term commitment, we’re improving the relationship. If we were going to put a ring on that finger, what are the opportunities for growth in this business?

Joe Magnotti:                    The number one thing is going to be a sales and lead funnel to acquire new clients, along with a website, right? And you and I know how to do that fairly well now, I would think.

Justin Cooke:                     That’s one of the things – we’re going to get to that in a bit – but that’s one of the things we’re offering. Obviously the website and a lead funnel to squire new clients, in addition to a podcast we’re going to help set up.

                                                I think that’s important. The reason why – we should mention this too – is that we’re going to handover TRYBPO.com – that’s going to go to the buyer. We had a problem where it was penalized back in 2011, I think. The domain was penalized so it was problematic. I looked recently and I’m not sure that’s still the case so we might want to build out on the TRYBPO domain. Otherwise, we can do it on a separate domain for the buyer, if they want new branding or something like that.

                                                So that’s something we’re going to help with.

                                                The second point is they can expand relationships with the current clients. Although, you’ve kept in contact with them, you haven’t done the best job expanding that because you’ve been focused on driving and growing the other side of our business.

                                                So I think that’s one of the quicker wins – is to expand those relationships with the happy clients we have now.

                                                Third point is some multi-channel content marketing. This would be everywhere strategy – YouTube videos, podcasts, blog posts, guest posts – I really think that’s a long term content strategy that could absolutely crush it, building a Philippines outsourcing company. There’s very few people doing that. I know there’s a guy in Cebu doing it – but very few. No one in Davoe, I think.

Joe Magnotti:                    Yeah, becoming know as the expert of outsourcing in Davoe, Philippines, I think, would be really great.

Justin Cooke:                     Another thing we’ve had success with with Empire for business project type services, and I think the same thing would go for the outsourcing company. So for example, transcription services that you sell on a per piece basis, right? Or even set up recurring transactions for people that need transcriptions, I think, could be helpful. Podcast editing. These types of things that we never got into because we’re so focused on the other side of our business.

                                                But if we were building it out, these are the ways we would focus.

                                                We wouldn’t go with the Rent Bodies Model. I don’t think we’d do that because you can get better margins by creating project service. I’m going to link to an episode on the Tropical MBA about project services which you absolutely have a listen to. But that’s the approach we take, I think, looking for new clients.

Joe Magnotti:                    I think we have a ton of ideas there. One was the ZenDesk ticket idea. There was a bunch of things that could be productized and along with your content marketing, would deliver enough value that you should get a little bit of a trickle in the funnel.

Justin Cooke:                     I think those are a bit longer term. One of the ways, I think, you can get success is through paid social media advertising. We’re doing some of that now with remarketing. But when we link to the blog post regarding the selling of the outsourcing company, I link to a great Quick Sprout article and another article talking about how to quickly gain Twitter followers, and Facebook fans but just a little bit of a spend and by hacking your competition.

                                                I think that would be a great strategy. I would apply that for outsourcing company if we were to continue with it.

                                                The last thing, I think, that’s a great opportunity is that you get to work with us. When we need, I’d be happy to have someone else take the reins, run the business, and have someone that we can refer clients to them for. And send you business as you continue to grow.

                                                So working with you while you’re driving the outsourcing company sounds a lot better than us both having to take those offers on and then build up the company as well.

Joe Magnotti:                    Yeah, totally agree there. Absolutely wiling to do a lot of transition with the new buyer.

                                                And I think he could gain a lot of benefit from us on just both the marketing side and the operational stuff.

Justin Cooke:                     We’ve said a lot of no-no-nos to people that were looking to outsource. Sometimes it’s because I want an agent and I want them half time, I want them 20 hours a week or something. That’s not doable.

                                                But we’ve said no to larger clients too because we just see more opportunity in the buyer and selling website space. And that’s really what we’re in.

                                                And so, there’s a limited amount of time that we can work and we’d rather focus on that side of the business.

                                                All right man, so let’s get into the nitty gritty. It’s not you, it’s me, right?

                                                Let’s talk about the reasons for the break up, why we’re selling, and what the reasons are for us moving on.

                                                First one, I think, we should mention that the work required and the time required right now is just maintenance, right? So if we were looking to really grow this business out, we’d have to spend quite a bit of time marketing and growing the business and acquiring new clients. That is time we don’t want to spend today on the outsourcing business. For us, we see a bigger opportunity and more growth on the buyer and selling website space with Empire Flippers.

                                                And that’s really where we want to hitch our wagon. And that’s also one of the reasons that we’re looking to sell. We believe pretty strongly that if you have an asset that you’re not growing, it’s time to sell.

                                                And we learned this with a very small company, TwitR – the Twitter background company we bought. We didn’t really do much with it. We did at first but then we kind of just let it sit there and rather than just let that asset sit and eventually decline, why didn’t we just sell it off for someone looking to grow it that could take it to the next level?

Joe Magnotti:                    Definitely would have been a good move for us.

Justin Cooke:                     I’m glad we learned that on a small business.

Joe Magnotti:                    Right, no, it was.

Justin Cooke:                     That was a cheap learning experience.

Joe Magnotti:                    I would say also, TwitR was bit of a distraction for us. Kind of like TRYBPO is right now. So, it’s definitely outside of our core business. And although it only takes 24 hours a month for me, it seems like my mind gets caught up more with it.

Justin Cooke:                     You’re not spending time on it but it’s there. It’s dividing your focus, I think.

                                                All right, buddy. So let’s get into section number 8. Let’s go ahead and dish on our ex. Let’s talk about the risk factors that are involved with buying our outsourcing company.

                                                First one, it’s a big one, I think, is that we’ve got revenue from a single client. It’s about 75% of revenue. It’s a major revenue source for the business and so that is a bit more risky.

                                                Now, it helps that that client is a big one. I mean, they’re a fortune 500 company and we’ve got a long standing relationship with them which is helpful. But it is risky. So, it’s better to have not all your eggs in one basket. But we couldn’t really say no to it either, right? It’s one of those, we’ll take it, it’s good.

Joe Magnotti:                    Yeah, this really makes this sale the most valuable piece is that one client. And unfortunately that comes with a risk. Now, I don’t think they’re going to up and leave anytime soon because they do have people on the ground here that they need in order for their operation to continue.

Justin Cooke:                     Plus we have a really close relationship with them and we’re fairly intertwined. There’d have to be some uncoiling to happen to make that happen.

Joe Magnotti:                    Yeah, it’s definitely not something that could happen quickly.

Justin Cooke:                     The other thing is that there isn’t a website or lead funnel. That’s because our TRYBPO.com was penalized in Google. So that website or lead funnel is not there today. But that is something that we’ll be adding and turning over to the buyer during the transition period, which we’re going to get into in a bit.

                                                Obviously, if you have a sales or lead funnel already, that would be helpful. But we’re going to help you create one if you don’t have one today.

Joe Magnotti:                    Yeah, actually, I think that this is the biggest downside to the company other than the large customer.

Justin Cooke:                     It’s something that we could have built up but then we’d have to take that much longer. Again, because we were talking about this before, right? We could build out the website, we could build out the sales funnel, and take the time to develop those relationships, add new clients.

                                                But how much time is that going to take away from what we want to be doing and what we’re trying to really push growth.

Joe Magnotti:                    Yeah and I think this risk could be mitigated by someone like, you said, just that has their own contacts in the industry or has a sales funnel right now. So it is possible to mitigate it pretty quickly.

Justin Cooke:                     The other thing is that it’s not fully location independent so you’re not working with people that are working from coffee shops or home all over the place.

                                                We have an actual physical location and office here in Davoe City, that kind of thing.

Joe Magnotti:                    I actually spend very little time in the office myself. But I definitely think that it’s something probably better done at least half time from Davoe.

Justin Cooke:                     I think one of the interesting things is that whoever buy it, they’re going to have to make some adjustments with the admin staff so that they can do some of the check signing, they can kind of take over some of the responsibilities that are a requirement for being on the ground.

                                                The fourth point, I think we should mention as far as our risk or issue, that’s not 100% passive. As you mentioned, [inaudible 00:29:30] you need to keep your eye on the checkbook. But more than that, I think you can just maintain it if you want, but I think the real value here is going to be growing it. And that is going to take some of your time. So it’s not going to be a passive investment. It’s going to require an active investment.

                                                I don’t think this is a portfolio purchase. This is going to be someone who wants to get their hands dirty and has ideas for an expansion. We’ll have 30-40% growth a year.

Joe Magnotti:                    But the good thing is, right, that it does come with the infrastructure to get that set up. So if you’re a sales hustler, you’re able to get on the phone, you have some contacts, and you sell a 3-5-10 person deal, the infrastructure is there already to get that kind of thing done quickly.

Justin Cooke:                     All right man, so let’s move into the 9th and final section – the actual break up phase. We’re going to be talking about the turnover process, the post-sale process, and exactly what we’re offering to get the keys to the castle handed over, so to speak.

                                                The first thing we should mention is that we’re offering up to a 4 month transition. I think that will make the smoothest transition to the new buyer and allow us to, kind of, very gently hand the business over and make sure they’re hitting the ground running.

                                                We’re going to offer a bunch of phone calls. We’re going to offer a month of consulting plus some billable hours from you and I.

                                                So there are things that need to be done on the ground, running around, doing things to kind of get people up to speed, or the buyer up to speed. We’re willing to do that up to 40 hours total over that 4 months.

Joe Magnotti:                    Yeah and I think we’re willing to be very flexible with this because this is kind of our baby, so we do want it to go to a good home. And the last thing I want to see is someone frustrated because some administration task couldn’t be done.

Justin Cooke:                     And depending on the sales strategy, we’re also willing to offer website set up, which would basically be a lead funnel and include a podcast on outsourcing, living in the Philippines, really targeting your target market. Obviously, if you don’t need that for your sales funnel or your lead funnel then that wouldn’t be included. But the plan is to help get that set up for them during the transition and that would be obviously included in the contract.

                                                All right, so that’s it. That’s basically all the information about our outsourcing company, where we’re coming from, an exact snapshot of the business, revenue, expenses, profit, how we would build it out, the risks associated.

                                                I’m really interested to hear from you, as a listener, whether you thought this episode was value from your perspective or if it sounded more like a sales pitch. Or, kind of just for people that are looking to buy the site.

                                                So do let us know in the comments, I’d love to hear from you.

Joe Magnotti:                    Yeah, it would be good to hear if you guys see this for future large sites or businesses that we sell. I’d be very interested to hear what you guys thought about that.

Justin Cooke:                     All right, enough about that man, let’s get into our tips, tricks, and plans for the future.

Speaker 3:                           You’re listening to the Empire Flippers podcast with Justin and Joe.

Justin Cooke:                     All right, so our tip for you this week is actually Tout App over at ToutApp.com. Basically what this does is allows you to track whether your e-mail was viewed or opened, whether your links were clicked, and you can also remind yourself to follow up with people. It’s fantastic. It’s pretty sneaky but when you’re sending e-mails out, especially for prospects, or you’re looking for prospecting, this is a great tool to use.

                                                The buyer of our outsourcing company, if they want to follow up on prospects, I think this is a great tool to use. But if you’re in the service business, if you’re actually dealing with customers or anything, I think it’s a great way to approach it. Because you can kind of see who’s engaging with you or not, without them knowing even.

Joe Magnotti:                    Yeah, I’ve used number of these tools on an ongoing basis. I have to check this one out – I haven’t done it myself. But I’m very interested to see what it’s like.

Justin Cooke:                     It’s sneaky, man. So you know if I e-mail you and you didn’t open, or you did open but didn’t respond – I know about it, man. I know about it. I’m going to bust you.

                                                Anyway, it’s cool that you can use it. Vincent’s been using it quite a bit and he’s been playing around with it and it’s been pretty helpful.

                                                That’s it for episode 85 of the Empire Flippers podcast. Thanks for hanging with us. Make sure to check us out next week and you can check us out on Twitter @EmpireFlippers.

Joe Magnotti:                    Bye bye, everybody.

Speaker 3:                           You’ve been listening to the Empire Flippers podcast with Justin and Joe. Be sure to hit up EmpireFlippers.com for more. That’s EmpireFlippers.com.

                                                Thanks for listening.

                                                Yeah.

 

Photo Credit: Hugh Lunnon – Flickr