EFP 120: 5 Niche Business Ideas We’d Pay For Right Now
Coming up with a niche business idea from scratch can be difficult. What if we told you 5 products or services we’d pay for today if you had them ready?
Today, Joe and I will look into five ideas, dig into the details, look at the problems they solve, and give you an estimate on what they would be worth to us.
Check Out This Week’s Episode Here:
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Business Ideas Discussed This Week:
- Seller Interview Editing/Publishing
- Customer Service / Systems & Processes Expert
- SEO Sweeper
- High-Level Toucher / Referral Engine
- Travel Concierge
- 10 Business Ideas You Can Launch in 7 Days
- Featured Listing 40107 – Entertainment Site – $1.53K/mo. – $30,595.00
- Contactually CRM
- Going Against All Business Advice: When to Ignore ROI and Scalability
- NomadicNotes.com Work Cafe Shops
- EFP 119: Scoring Free Travel With Abroaders.com
- Website Valuation Tool
- Empire Flippers Twitter
- Leave an iTunes Review!
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“Business ideas on their own aren’t worth much by themselves, but VALIDATED business ideas may have more teeth.” – Justin – Tweet This!
Are there any products or services that you’d absolutely pay for if someone offered it? Let us know what it is in the comments and maybe we can help you find someone!
Speaker 1: Welcome to the Empire podcast episode 120. Coming up with a niche business idea from scratch can be difficult. What if instead we told you five products or services we paid for it today if you had them ready? That’s exactly what we’re going to cover today. We’re going to look at the idea, dig into the details, look at some of the problems they solve and give you an estimate on what it will be worked through us. You can find the show notes and all links disgusted this episode of empireflippers.com/five ideas. All right, let’s do this.
Speaker 2: Sick of listening to entrepreneurial advice from guys with day jobs? Wants to hear about the real successes and failures that come with building an online empire? You are not alone from San Diego to Tokyo, to New York, to Bangkok. Join thousands of entrepreneurs and investors who are prioritizing wealth and personal freedom over the oppression of an office cubicle. Check out the Empire podcast and now your house, Justin and Joe.
Justine: All right, Joe. So we all know that business ideas on their own aren’t worth all that much, but validated business ideas may have more teeth and that’s kind of what I’m going forward with this. There was a great blog post over on tropical MBA that talked about 10 businesses you can start in seven days. It was really inspired by Dan Norris and there were a bunch of kind of service based businesses that could be started that Dan Andrews thought might be valuable and I wanted to take a stab at it, I take a swing at it because I think there are some needs and problems that we have in our businesses that we be willing to pay for it.
Joe: Yeah, I made it through Daniel’s book on all that flying we were doing around. So I actually got a free copy of it at DCBKK. I’d love to do this kind of a podcast. I think it’s a very interesting topic.
Justine: I want to look at some of the problems that we have that we’d be willing to pay to solve. Right. And whenever you’re in business, there are certain things that pop up that are either just recurring and irritating or you just see gaps in the market. Look, I’m not fixing that. Like that’s not a business focus of mine, but I wish someone would do this because there’s definitely value there.
Joe: Yeah, and that’s not to say that it doesn’t have to be validated and it might not be a good business to be in, especially at the price points that we’re willing to pay. But it’s definitely something to get you started with.
Justine: That’s the funny thing. So I might take one of these and we’re like, “Yeah, I’d be willing to pay 300 a month for that.” And they’re like, “Nope, those guys are losers.” I’m going to charge 1000 bucks a month run. People will be happy to pay that. Don’t take this as gospel, take it with a grain of salt, but I hope it doesn’t inspire you to get started on your own business idea. Just a quick break to cover your featured listing of the week. Joe, what you got for us?
Joe: [inaudible 00:02:29] Listing 4107, it’s in the entertainment niche. It uses ClickBank and some affiliates as it’s monetization strategy. Specifically it’s about online singing lessons and it kind of tells you what the best online seeing lessons to use are. It makes about $1,800 a month net. I get about 8,500 page views in the last 30 days. It’s pretty well set. Good to go, doesn’t need anything but you know except the additional content once in a while. think it’s great site if you are interested in singing, if you’re interested in the arts and you want to get into an online game, this could be the kind of jumping off pad or starting a business.
Justine: I say that there is an ebook with the listing. Also though there is a PBM. The PBM is coming from links management.com so there’s a risk there. I guess the current seller hadn’t explored paid traffic. He thought of that as an opportunity. What’s interesting about this, I actually know someone or saw someone talking about a website for singing lessons and the dynamite circle, so probably something that we should reach out to and see if there’s any value here for him. I mean, it’s a headstart on a business he was looking to get, I didn’t getting into.
Joe: Yeah, definitely. And I think where the list price of just over $30,000 it’s not that expensive especially for a first time purchase, so it’s something that someone could get into and easily make their money back very quickly.
Justine: All right, man. Let’s dig into the heart of this week’s episode.
Speaker 2: Now for the heart this week’s episode.
Justine: All right, Joe. Five niche business ideas we’d pay for right now. We’re going to go through each one of them. The first one we’re going to call video Vic, so this is a process that we do right now for some of our sellers and for some of our listings. We do seller interviews, we edit them down, we publish them, and basically we take an audio interview and put bumpers on it, create a slide show, and then publish that on YouTube. And eventually Vimeo at that type of thing.
Joe: Yeah, I think this is my favorite one of the five. I really think that this is something we could use and that a lot of people could use. Is that a kind of turning audio into a visual format in a nice polished way?
Justine: Yeah, that’s a problem with ours right now. I mean they’re okay and the wordings okay and it works, but it’s not the high quality presentation I’d like to be and I bet someone could do a better job probably for less cost. So I think there’s really opportunity there and I don’t think it’s just with us too and there are other people that are putting out plenty of audio content. I think if they were able to take this, make a process out of it, there’d be able to crush it.
Joe: I think absolutely you could reach out to everyone who had a podcast and ask them if they wanted to do something like this. And I’m sure they would able to take sections from their podcasts and ask for stuff like this.
Justine: The problem is sauce for us is that, there are many different skillsets that are required for this one project, right? So we record the audio and then we hand it off. No, we need someone that can edit the audio, right? That’s a particular skill set. Someone that can listen to it and kind of get the main points, draw the main points out. We need someone that’s design friendly or at least can put something that’s pretty good looking together in terms of slides and then you go ahead and get it published and put it out. The senior marketers, I designers, I mean there are, you don’t have to be perfect at it, but you have to have those different skill sets and it’s silly for us to have to hire a bunch of part time people or contractors to do it. Right now these things touch multiple people’s hands. I’d rather drop it with a one stop shop that can knock it out of the park for us.
Joe: I think that’s part of the problem of anyone setting up a business would be that they would either need to have those skill sets in or higher for that if they’re going to scale it up. So at first you would need to have the eye in order to do it yourself.
Justine: Everybody moment of truth, what we pay for it. I mean I put this in at $50 would be a hell yes [crosstalk 00:06:10]. It would be a hell yes. Be a no brainer. “Yes, I would do that. Absolutely. Sign me up.” $100 is maybe, probably … I think we’d probably do it for up to a $100 above that and I don’t know, we’d have to look at, I’d really want really high quality if it were more than that.
Joe: At $50 a pop, I would easily do for a month. No problem. And I would request that of you at, you had $100 I’d probably do only two a month. So, and then at more than that I’d probably really limit myself to only doing the high end listings or like you said, really one more value.
Justine: Our second guy wanted to talk about our profile be customer service Chris, this is one that you came up with Joe. Basically someone that can improve the customer experience overall and this would be someone that could step into our business and they could take, some of our software for example, Zen desk and look at our processes, our SOPs and find a better mouse trap, right? With what’s the current tools that we have available. And so this is someone that can look at our process from a 30,000 foot view and then come down to the ground level and make some adjustments based on improving the experience for customers.
Joe: Yeah, I see him using Zendesk as he in using slack, I see him knowing the integrations between two pieces of software, making sure that that seamless writing, different macros, writing different automations in Zendesk and helping us there and making sure that our SOPs are streamlined in terms of customer service. I think that this is something we would definitely pay good money for it.
Justine: This is hard though because, how well do they have to know our business? Could we really pay an outside consultant? I know you know you were both talking about bringing in someone new apprentice, probably in the Q1 of 2015 that can run our customer service team and do some compliance checks and this type of thing. So we’re looking at bringing someone in, but I think that the role or the service are be willing to pay for someone that can come in and really streamline that process and work with our new customer service manager to make sure things are working as well as they can. So this is not an employee position. It’d be more of a consulting or contractor position coming in and making sure we’re optimizing our process and our software,
Joe: But I think we willing to compensate them for that and they would be able to make a significant amount more.
Justine: Yeah. I don’t know the work required on this. I mean it seems, I guess it’s going to depend that we were just talking about this though, in terms of price, putting our money where our mouth is and we came up with $500 a month for let’s say three to six months as being a no brainer.
Joe: No brainer would pay that today.
Justine: We would be happy to do that up to a $1000 a month for three to six months as a probably. It’s a pricey, but to really get that down, that’d be worth the three to $6,000 over three to six months we pay.
Joe: Yeah. At that price point, I’m going to want to know that you have some success in your history doing this before.
Justine: All right. Someone that can come in and step in, blend software and process to optimize the customer experience. I think that’s a really interesting niche. The third problem we were looking to solve and I really liked this one, is we’re going to call the SEO sweeper. This is someone that has some SEO skills, some familiarity, and they go through our site and clean and optimize for SEO benefit. We’ve got hundreds of posts on empireflippers.com and honestly I threw up a lot of content without much thought to SEO benefits. I didn’t do a whole lot of internal link structuring. I just put the content out. Now that we have so much content, we’ve got some authority on our website and some of our internal pages. There could be a whole lot of like sculpting that could happen to drive more traffic to the right pages and we simply haven’t gone back and done that.
Joe: Yeah, this is my least favorite one though, I have to say, and that’s because I really don’t think it’s measurable. Like you’re insane. We can have someone come in and do all this stuff and then nothing could happen. He could say, I did my job and then we got no value out.
Justine: Oh yes, it’s measurable. We can measure and say they did a shit job. We didn’t get anything out of it. But I’m saying it is it clearly measurable, so we’ll know whether they did a good job or not. It’s just we don’t know what the return, there’s no guaranteed return, but that’s … Is there any there’s rarely guaranteed return?
Joe: Yeah, but the other services here, they pay, they do something, we get it and we know that that thing is done and how valuable that thing in.
Justine: What of customer service. Chris came in and screwed up our process made it worse.
Joe: Well then we fire.
Justine: [inaudible 00:10:43] I don’t know man. I think you’re out to lunch on this one. I love it. The reason being is that there’s just so much opportunity for us to rank a bit higher for some of the keywords. Like we’re on the bottom of page one. We’re on top of page two and we haven’t done anything intentionally to get those rankings like it would be really easy to make those small improvements. I think, the issue with this is that it’s really time consuming for you or I to go through and try to plan this out, map it out so that’s something we deal with.
This isn’t the work that we do, so for me, and you’d go in there and we know enough about SEO to where we could do it, but the job is pretty massive. Right? From our perspective for guys who don’t do this on a regular basis and this is one of those things that always gets put off when we know we should do it, we’re like, “Ah, let’s explore Facebook paid traffic instead of going back and cleaning up the content that we have.” This is actually one of the ones I was on the tropical MBA posts and I think there’s a ton of value to be had here.
Joe: No, I definitely agree that it’s a massive job and I don’t want to do it and I really don’t want an employee doing it. I want an expert, I want a some sort of specialist do it.
Justine: And someone who … Let’s say they came in and did it, a review overall of our SEO, they would see some quick wins I think. They would say, “oh my God, you guys aren’t even doing this. I can fix this, this and this.” In terms of value, money where our mouth is, I mean a hell yes to this would be two to $300 a month. That would be a yes, we would absolutely do that. Maybe it would be up to let’s say the $500 a month range and this isn’t a forever kind of thing where again, we’re looking at probably a three to six month process. So on the low end we’re probably looking at 800 bucks over three months all the way up to a maximum say $3,000 over six months. So that’s kind of where the value would be for this.
But I mean I think cause I think what would happen is they would 80 20 the approach and they would say, “oh my God, we got some quick wins here. Boom, boom, boom.” They do that. The first couple of months we’ve started to see the returns and then like the return on the work they would do would start to diminish because they’ve already kind of done the easy wins and now it’s just tweaking. Honestly, if this product came out of the service came out, I would imagine it would be kind of a three to six month process at a higher dollar amount and they’d be smart to put into drop it down I think to like a hundred dollars a month or $80 a month. Peace of mind fee and you can keep more out of us.
Joe: Yeah, absolutely because-
Justine: Under 100 bucks a month and we just pay for peace of mind. Just kind of do little tweaks here and there. We’ll be totally done.
Joe: Yeah. Because unlike video Vick who you pay what you get for at some level with the SEO sweeper, you don’t know if you’re getting that anymore, but if it’s such a low price point you don’t care because he did provide so much value before that you know at sometime in the future he might provide that.
Justine: Yeah and for the guys for the incident is where I worked out massively, I think we have a ton of opportunity there. We would have seen those gains and keeping you around for 80 or a hundred bucks a month would just be kind of a no brainer. Now I had to keep her around a 500 bucks a month where I know you did most of the work. That’s not so interesting. But the hundred dollar price point or whatever. Absolutely. The fourth one we’ve got is value Vincent. It’s a little bit different than the customer service. Chris cause not dealing so much with process and software. It’s more about a high level of touch and more care with our high value clients. So this is beyond the kite letter, like send them a postcard or sending them a handwritten letter. This is deep diving and like really providing a ton of value for your customers, your high value customers. These are customers are spending 40, 50, 8,000 $200,000 with you and it’s totally worth it to go above and beyond for them.
Joe: Yeah. This is the guy that’s going to deep dive on our customers, find out that he’s a jets fan and get an a Joe Nemeth ball signed and sent to him.
Justine: That’s right. This is the real goal of this position or this service would be to set up a referral or repeat business engine. Right. The goal would be to make fans raving lunatics about our brand. And it’s not just us. I can see definitely see other markets where this would be any industry where they’re spending thousands of dollars for products and services with them. 10,000, 15,000, $30,000 would be absolutely worthwhile.
Joe: Yeah, now I absolutely think that this is a great position to have a consultant position to have. I’m just not sure how to price it.
Justine: I’m not sure how to price dealer. And that’s the thing, we want to put our money where our mouth is talking about the value to us. I think it’s really depend on spend. Right? And so what we determined as a budget for customers or different levels. I think though a good idea for this product would be to make it a percentage of spend, maybe some kind of like base level fee to come in and kind of like sit with you and console with you and talk about your highest value customers, make sure that we’re targeting those high value customers, and then determine what to offer them. I would say maybe a consultation fee to start and then ultimately you’re charging a percentage of spin. So we set aside a budget of $2,000 a month or whatever we’re going to spend on this referral. A lead engine. That’s what it is. We’re basically investing in $2,000 a month on the referral lead engine and they get 20% of that or something.
Joe: I see. What you’re saying. So I was thinking of percentage of what those high value customers.
Justine: Oh No, no, no, no. I’m thinking, no, I’m thinking of they get a percentage of what we’re willing to spend on them.
Joe: Yeah, that’s interesting way to do it. I mean it’s similar to the ad words consultant, technicians, kind of people that did go out there and do this kind of thing. There’s a lot of other ways to do it, but that’s a great way to baseline.
Justine: And a lot of this can be automated, can be used like VAs right? So they’re using VA’s to find out what these people like to ship them. The items. I don’t particularly care how they get there. Right. That’s not, and I don’t even want this consultant or this service to be about that. They can have a VA do that. Someone on the side or even some of it can be automated. I’m fine with that. But what I want them doing is I want them setting up the referral engine or the repeat business engine that drives leads on the back end. I can see that lead engine being really valuable and something will be willing to pay for it for sure. And the fifth one, Joe, this is yours. We’re talking about travel, Tina. So the details on this, this would be, this girl would be our travel concierge basically.
What you were talking about this, before we got on the show, you know we say, “Hey, I want to go to Cambodia next week.” Right? A couple of us are going give us the Justin and Joe Specialty, the different requirements for hotel rooms and what our style is, what we want individually. So hook us up with the usual. And they start to learn your travel habits. Like I like an Ilc, maybe you like the window seat, you know the exit rows are best, these types of things.
Joe: Yeah, absolutely. And they know how to save you money based on your travel criteria. And they do this for your whole team, not just for you.
Justine: Yeah, it can be, you can have an individual package. You can have small entrepreneurial package, you can have a larger organization package.
Joe: And they even interact with Eric from broader, so they’ll use your points if you have to, but they’ll do all the booking.
Justine: I’ll give you the credit. [crosstalk 00:17:49] my credit card information just took me out.
Joe: This truly came to me as an idea from how much time and energy you spent on all the last bookings we did. I benefit from it greatly, but I think that time had better invested in our company than a new, trying to find the best travel hacks.
Justine: Yeah. So no, no. A broaders does the booking for some of it, but they’re limited and they’re not a full on travel concierge. They’re only an a words booking service. They’re not full on.
Joe: And then not do the hotel.
Justine: I don’t do the hotel. Interesting I don’t services for them. But yeah, they don’t do everything that we need there.
Joe: And they wouldn’t find you the tour of Machu Picchu or whatever you want.
Justine: There’s definitely solves a problem. I mean definitely took up quite a bit of my time and just hassle too. I know it’s actually kind of enjoy it. Even me who enjoys it, all the travel we’re doing and all the books I was doing for us and our team and everything. I was sick of it by the end and I enjoy it. Generally I like finding these deals and stuff and it even overloaded me. There’s definitely a big sum via, there are some hassles and you, for a guy like you, you hate this.
Joe: I hate it so badly. It’s just miserable. I don’t care how easy these streamlined websites try to make it. Every time for me it’s miserable, especially if you’re doing multiple hops or multiple stops like you really wanted to go from here to LA, spend three days in LA, then Vegas five days, then Baltimore for a few more days in New York, then back to Asia. I mean, if you’re doing a big road show like that, having a travel concierge is invaluable.
Justine: And I can see, you know, we’re talking about pricing for this cause this is going to be … it’s confusing because how many times they’re going to use it, where are they going to do? And I want you to think about this. So it’s the WP curve for travel concierge. I remember when Dan first talked about WP curve and he talked about what he was going to offer for, I think it started off like 40 or 50 bucks and I was think to myself, I think I have actually mentioned Dan, “You are insane. There’s no way you’re going to be able to service all those clients at 40 or 50 or 60 bucks. Absolutely no way you’re going to be able to do that.” I said, “Honestly, at 40 50 60 bucks a month, it is a no brainer.” It is a no for a customer’s perspective, just for peace of mind.
It’s totally worth signing up for that. And I’m looking back. A no brainer price point is probably a good thing for sales, right? So I can see this being a no brainer at under the hundred dollars a month price point. And in fact you and I were talking about this before the show for our kind of like small business entrepreneurial company, a $200 a month price point for us it would be a no brainer to have a travel concierge.
Joe: No brainer, and you wouldn’t need to limit it because a lot of guys like us, we’d go two months not use it then one month usually pretty heavy than two month [crosstalk 00:20:36]
Justine: Just for the peace of mind I can get on the phone, I can quickly make some travel writers but have you hooked me up and get me back price was right. I think about this, what if you did have like a WP curve pricing for an individual at 70, 80 bucks a month and then we are kind of like a small enterprise and then you have like the big enterprise pricing? You said even up to possibly $500 a month for our situation, but you said that you might shut it off on months that we don’t need.
Joe: Well, I just look at the amount of time that you invest in it Justin and I know how much I value your time. I mean $500 a month to me in the months that you deep dive on that stuff. I think it’s totally worth it.
Justine: Yeah. But you would shut it off on the months you were not traveling.
Joe: Yeah, especially we went three or four months without traveling [crosstalk 00:21:17].
Justine: The WP curve of travel concierge I see as being a winner for sure. I people will sign up for that. I know we would sign up for at the $200 price point for a small enterprise. That’s a no brainer for us.
Joe: Really if you listen to this and you really want to please the Empire Flippers, Video Vick has the … It’s probably the easiest one to do and we will definitely sign up for it. But the travel team, no, we will absolutely love you for it.
Justine: SEO sweeper I do to value events and I keep putting off, I don’t know. I like it. We need to work that out a bit. There was a couple of questions by the way, I like to do it. Customer Service, Chris. Yes, but probably not until January or February. So you want to do any of these? You want to work with us? Do let me know. You know we have other entrepreneurial buddies that have some of these needs as well. So if you came to us said, look, here’s what I offer, here’s what I’m putting together. I’m sure we get them excited about checking it out and trying as well. So we’d love to hear from you if any of these five appeal and you want to get started on your new business. All right man, enough about that. Let’s do some news and updates.
Speaker 2: You’ve been listening to the empire podcast now some news and updates,
Justine: Right. So first off, Joe, let’s talk a little bit about your coffee and steak dinner meetups. How’s that gone?
Joe: Well, coffee and steak, you’re really going from the 299 to the 199 kind of category. They’re no, I’m doing some lunch meetups. I’m doing some dinner, meet up. I am doing some coffee breaks once in a while. I mean that’s the great thing about being here in Saigon is the communities right here. People are very accessible.
Justine: What’s the goal? Is it a thing like they have to be wanting to sell with us or is it more of like I just want to talk to him and see where we can help each other?
Joe: No, I’m trying to do the Jordan harbinger approach of, how can I help you and what do you do so I can connect you to other people.
Joe: And I think it’s a really good idea and I think if I track it appropriately and I use something like Contactually to add them to my database and follow up with them again at a later time that eventually we’ll come back meet. It won’t always come back to me, but some of them will.
Justine: Absolutely. I was with you until you second tax Lee. Cause then it sounds creepy there. I do not have you. It’s almost like I have my database of dates lined up.
Joe: Well I mean it’s the only way you can do it. I met with … I think over the last 10 days, I met with 10 different people for private lunches or dinners.
Justine: And that’s in addition to everyone that you normally meet up with.
Joe: Yes. That’s in addition to meeting up with random people at coffee shops or the brunch that we went to on Sunday. So yeah, you do, you need something to track it all and Contactually is the best tool I thought for that.
Justine: Along the same lines show. So I’ve been working on this and thinking about this a bit is how can I be better at connecting other entrepreneurs, right? How can I figure out more about what they need and kind of what they’re providing and keep that in mind and make sure that I’m connecting people. So really one of the best ways to do this, and this is silly and simple, but it’s just to listen more, right? To listen more about what they’re doing, what they’re working on and store that in the back of my mind. I’ve been doing really well with that. Like I talked to someone new and they’re like, “Hey, I’m thinking about getting into this space.” And I’m like, “Oh, there’s a really good opportunity.” We were talking about the singing site that we have. I’m going to reach out to that kind of DC and say, “Hey, there’s this, maybe there’s a possibility for connection.
Anyone who ends up buying it, I’m going to make sure that I connect them with him so that they have some opportunities there.” And that seems to be really valuable to people. And it’s something I love when they do it for us, but if I can do it for other entrepreneurs, that puts us in a great position in a great light. And like you said, I think it does come back to you.
Joe: I think a little trick that I found for this at least is that when you start off the conversation, have them go first, have them talk about their business and their needs, their failures, and their successes first so that you listen more intently rather than talking about yourself. And then you realize you took up a whole hour talking about yourself.
Justine: Yeah, that’s right. I’ve noticed people that are really good at this are really good listeners. And so I’ve been working at being better about that. You know, I’m a talker so, but I’ve noticed too, when I talked to those guys that are really good at this, I do find myself, I talked a lot about myself and my business and I’m like, “Wow, that was really unfair.” And so I think, going the other way, 20, 30% about, you know, me and us and what we’re doing and more listening to what they’re doing I think has been really, really interesting and valuable. And it’s something I’m really working on. I’m finding that this is a skill you can improve adding value, turning out work or something that you can work on and improve. So it’ll be interesting to see how that goes for both of us over the next couple of months.
You know, we had an interesting conversation at some clubs. What was a crabby Sunday night or something. So we went to John Meyer’s house and had a bunch of crabs and prawn and it got to network about 20, 25 other people at his house. And there’s a really interesting conversation the John brought up is like, and uh, Mike, Right? What responsibility do we have as entrepreneurs toward our local community? What can we do for them here locally in Saigon? Like what can we do for them? And devout Philippines. I think it was a really interesting question, right? I mean, yes, we’re, our businesses are online, but can we help some of the other up and coming entrepreneurs, can we put something on, can we raise awareness and raise value locally with the work that we’re doing?
Joe: I don’t know. I have to leave that in your court because I’m definitely not the kind of charity type person.
Justine: No, I’m not taking charity and not talking to handouts and dinner, what I’m talking about, how can we put on start up weekend type events, how can we help the entrepreneurial and that’s not charity. How can we have a convention in Holcim men that or raises the stakes for the city that gives the city more recognition as a potential startup hub.
Joe: I think better would be to support local businesses. But I see where you’re going-
Justine: Local businesses like the steel shop or the scooter rental place?
Joe: Well I wasn’t thinking that local you go a little bit bigger than that. But having things at the Hilton doesn’t really help Saigon in my opinion. But having things at a smaller hotel, a smaller mom and pop hotel would-
Justine: [crosstalk 00:27:18] shit venues that’s bring everyone out of here for around the world as just dig in a shit hole. I don’t really raise the local flavor. I don’t know.
Joe: Well this is why I left it in your court. Okay.
Justine: It’s interesting. I think that there is value there. You got to wonder though, you and I had been talking about this in 2015 our goal being, does this support our marketplace, does it support the investor program? And so I think we’re going to have some tough choices over the next 12, 18 and 24 months in determining is this in scope or outside of scope? I think we’re …. For our own sanity and for our own business, we’re probably going to have to stay focused on that. But you know, if I can squeak, I have free time. I have Justin time but falling to go off and do some stuff with Justin time. I think you know for fun. I think that would be cool. Our Buddy, let’s get into listener shouts or the indulgent ego boosting social proof segment.
First up on Twitter. Marcus Harper over at store coached our comp set. Another great reason the guys at Empire Flippers, this is about our latest ROI posts that went out earlier this week. We got Chris Mitchell said, “Keen to try your valuation tool, but what happens to data entered? Is it confidential?” We’ve had this question from other people. What’s going on with the data man who you saw on this tool is Google will get my stuff. Okay, so let’s be very clear. This data goes to us and US only, we’re not sharing it, we’re not selling it. And we use that as determination to help us qualify or business in terms of, if we’re going to help you sell it and where it’s going,
Joe: It goes to a private database that only we have access to. It doesn’t even go in a Google spreadsheet or anything like that. So nobody else has access to that.
Justine: So just us and then we can use that information to help you win if it’s time for you to list your business. And ultimately the evaluation tool is a lead generator for us. Not everyone who uses the virus until it’s going to sell their site and going to expect them to. And we do hope that as you know, some percentage of people that use that will ultimately are looking to sell their site and it’s something we can help them out with. We are a little bit of love from our buddy James over at nomadic notes. He gave us a shout for an interview with firstname.lastname@example.org
Joe: James, you’re next on the list for lunch so hit me up man. I’m buying.
Justine: I love James Man. He has the best coffee shop blog posts around me. If you’re in Chiang Mai, if you’re in Saigon and you’re looking for a nice coffee shop to hang on. He’s got these beautiful images on the site. Really good posts. I’ll make sure we link that up in the show notes cause I’m loving is coffee is coffee spot blog posts
Joe: You’re picking, I’m buying.
Justine: We had a question from our buddy David, he and Burger. I asked us a three part question. I’m going to cover these. These answers would be a bit larger cause I think they are going to take a bit of time to kind of explain. The first question is in general smaller companies typically trade for between three to five x normal Ebidta. I’d love to hear you talk about why many online businesses including the ones who sell, they sell for 20 to 24 acts of monthly profits. I realize this valuation makes sense for certain business models that are more risky. I he adsense or affiliate sites and businesses that rely on traditionally unstable channels like SEO, but doesn’t it using a 20 X as a rule of thumb, Lee, Dominique businesses being undervalued. They should. The question, David, first off, we’d somewhat agree with you. So if we’re only volume went at 20 x we’ve done up to this point, I think that some businesses are going to be over via some really undervalued, not every single business is always 20 X.
I think that’s a really good starting point, but it’s not always the same. So if I have a business that’s been around for online for eight years, has got year over year growth and it’s got owner absentee business and it’s just this beautiful, beautiful specimen of a business that’s me a little bit different than adsense insight with the same earnings. It’s been around for a year and a half and it’s on the same. So I’m with you on this and that’s one of the reasons that we’re working on the valuation tool. I think that’s going to give us the flexibility to go up and down based on those valuations and based on some objective metrics that I think are important to a website or business sale.
Joe: Great question David, along with the next two from you. But I’d also say that the online market is very immature. It’s very new. As this market matures there’s probably going to be more trust in the online business in general. So we would expect valuations to get closer to offline and how many years is that going to take? I have no idea yet.
Justine: We’re seeing that actually happened now. So we’re seeing some offline businesses drop just a bit and we’re seeing the online evaluation started to creep up. It just, it’s such a new, an emergency in an industry that the trust isn’t quite there yet with online businesses as opposed to the brick and mortars. So I think over time that gap is going to continue to narrow. It’s not quite there yet. And we’re working on tools that we think will improve our ability to scale as the times change and as the market matures. Your second question. I’d love to hear, talk about what you can do other than systems or SOPs increase the valuation of the business. This is something we talk about at some length in our workshops and when we’re going around, to [inaudible 00:32:10] and Vegas and Chiang Mai. These are some of the things that we actually cover.
Just to give you a couple of quick tidbits or bites, some of the things you can do to improve your valuation on. You know, first thing would be cut exploratory marketing leading up to a sale. There’s regular in business where you have your fingers in a couple of different pies and you’re testing out different marketing channels. Some are working, some art. You’re going to want to cut out the ones that aren’t working so that you can improve your margins and improve your profit, which ultimately isn’t. It give you more valuation. You can also, and this is Joe’s point, is you can really clean up your accounting and bookkeeping makes sure that that’s ready to go. A lot of times we found there are websites that have additional earnings that the seller wasn’t even accounting for. And so, having all that clean and ready to go, we’ll obviously clearly improve your evaluation, but it’s also you’re going to attract more potential buyers and have a better chance of selling the site and selling at quickly.
Third, they want to cover is a diversification of traffic sources. Now you know, for smaller websites that’s not always possible. It takes time to really kind of build out this diversified traffic strategy, but definitely for a larger business if we’re talking a hundred thousand plus, making sure that your traffic sources of diversified know beneficial, some paid, some social, some referral, some organic, I think is a nice mix and so buyers are willing to pay more for that and they’re looking for these stable businesses, especially when you get above six figures. Your third question, I’m wondering if you have an experience or thoughts on finding strategic buyers since that should result in you getting a higher multiple? It definitely can. That’s one of these we talk about. We’ve mentioned a blog post. I’m actually going to link to this in the show notes as well. We talk about it, some of our emails that go out for buyers and for sellers, but yeah, finding a strategic can definitely improve the value.
Joe: Yeah, and I really think my big tip here is that you as the seller are probably better at approaching strategic buyers, especially in like the sub $5 million businesses. Over that year you probably going to get some investment banker involved or something like that, but in smaller online properties, you’re probably better because buyers are going to be turned off when being approached by a broker. Whereas they’re more likely to be accepting or open to being approached by a competitor, someone that’s looking to sell.
Justine: [inaudible 00:34:23] you say that Joe, they might be more interested in talking to the competitor. I don’t know, I think maybe there’s, it’s good to bring a third party in a broker, maybe not at the sub 100,000 range or talking cost small ball there. But yeah, I mean, uh, you know, 2 million north second, because here’s the thing, right? If you’re going to be selling your business, you have to release some financial information, you have to give up some information that will potentially better your competitors position. So I think having a third party broker and they’re kind of separating the wheat from the chaff does kind of make sense. I disagree a little bit whether you should have a broker involved with the strategic buyer.
Joe: Right. But I think that as the seller, you’re going to know who your competitors that are slightly better, slightly worse than you, and those are going to be the best strategic buyers for you. If we’re talking about a content site then we’re talking about ranking, you know, who are the guys that outrank you a little bit and you know are underneath you a little bit. If you rank number seven or eight, who the guys at ranked number six or five and who were the guys that ranked number nine and 10. If you just look at those guys in terms of content sites, it would be interesting to approach and to say, “Look, I’m the owner of this. I’m looking to sell. Are you interested?” Just from that kind of perspective, I think we’d give you a lot more validity than a broker trying to approach them.
From a perspective of a company that is not so dependent on ranking necessarily, you’re going to know your competitors a lot better than some broker is. The first thing that broker’s going to say is, “Well, who are your major competitors?” And then they’re just going to go out and contact them. Why not skip that and save yourself some money and try that in the first go round right away. As long as you’re evaluating your company at a reasonable price, I know what the real valuation of your company is. I think that this is a fair play.
Justine: Here’s another point that I’m not sure I agree with. I want to ask you a little bit more about, so you’re saying that, so I have a $400,000 business. Let’s say it’s making about 15 $20,000 a month in net profit. You’re saying I should go target someone’s slightly ahead or behind me. So some more of the $600,000 business, someone with a $200,000 business, how are they going to … I understand that they would be interested in acquiring me and obviously they could double up more than double up by picking up my customer base or anything, but how those are guys that have the cash to purchase me and they’re at my level?
Joe: Yeah, but you think that that’s maybe only the only property that they own or that’s all the investment that’s been instituted in that company. You don’t know that that company could be backed up by a lot of [inaudible 00:36:54].
Justine: Or they could raise money or they could work out financing. That’s a good point, Joe.
Joe: You don’t know what the scene is behind the scenes, but approaching them is going to be a lot easier than trying to approach number one. But the example I gave to you when we were talking before the show was if you’re making baseball bats and you ranked number eight for baseball bats approaching the number one guy, Louisville slugger, that’s going to be tough. It, they’re a big company. There’s a lot-
Justine: [crosstalk 00:37:19] from the door.
Joe: Yeah, you can’t get your foot in the door. But approaching the number eight guy, I don’t even know who the number eight guy is, it’s going to be a lot easier, but it’s probably going to be some smaller shop that you’re going to be able to get to talk to the CEO and the vice president of something fairly quickly and say, “Hey, I’m looking to sell, let’s talk numbers.”
Justine: On the other hand, if you’re number two and right behind the slugger, they may be interested in buying you or they may talk to you, I may be just buying you up because they can then start squashing the competition.
Joe: Absolutely [crosstalk 00:37:46]. And they would pay a premium for that above and beyond what you’re just, the numbers are.
Justine: Yeah. So, aside from just competitors where there is some risk and you know, sharing some of your sensitive information in terms of customers and higher acquiring customers and you know, costs of putting on a customer, that type of thing. You go look for parallel businesses that share your customer base. So what else are your customers buying that you may be, I look at partners, right? Someone that you’re partnered with or you share customers, whether you send them customers because they’re not directly competing with you and those guys, if they’re slightly larger than you, they may have the cache of Baiada may be extremely valuable to them because they may have always wanted to get in your space and kind of like stayed out of it because they didn’t want to break into it and you’re offering them away in.
Joe: I love this idea, especially I think as your, your first chance to go and go out there and make a sale without a broker, it doesn’t hurt. This way you have an idea of what your business is worth and who’s in Shit. You could always turn to a broker after that if you fail, and come to us and an audience member or someone else we have in the Rolodex could go ahead and buy that. But if you don’t try it, first of all, never know.
Justine: We’ve talked about this, like doing it on your own, uh, for Gordon, your broker. I still agree with that. I definitely agree with that, under 100,000. When you get … I don’t, I guess the gray areas a hundred to 500,000 and you get over that, I think there is value in going to a broker because they can guide you on what you should, shouldn’t share when you have to share the information with the competition, when you don’t, and kind of like guide you on doing that. They may not be the best. Even still, I mean I’d be the best people to be reaching out to your competition, although they may be because they can mediate, but they can at least guide you on like not putting your business at risk and reaching out to them. I don’t know. It’s an interesting point.
Joe: Yeah. But if you have a $500,000 company, you probably have the money to hire a lawyer to get you an LOI. So in an NDA, right, you could probably get it.
Justine: Yeah, NDA. What’s a contract work [crosstalk 00:39:39]
Joe: What’s the broker going to do for you anyway? He’s just going to get an NDA.
Justine: Oh leverage man. Leverage. So like put you in a position where you know you don’t retain the leverage. That’s my point.
Justine: But not allow you to … Cause this is all new to you. You don’t go through the buying and selling of our business very often. And so the broker does it says, “Hey, do I have to give them this?” You’re like the Burger was a no, that’s not typical. You don’t have to share this until we get through, you know, in the closing.
Joe: I like that point. But I still think that if the company is not on the open market for sale, then what sort of leverage do you have anyway? So if you’re going to go to a broker and you’re going to put it on the open market, then you already have leveraged yes, but if you’re going to do a strategic sale, I think that it’s something you’re going to probably do privately anyway cause they may want to keep the sale private as well.
Justine: Got you buddy. Interesting points.
Speaker 1: That’s it for episode 120 of the Empire podcast. Thanks for sticking with us. We’ll be back next week with another show. You can find the show notes for this episode of email@example.com/5ideas. That’s the number five and then ideas. Make sure to follow us on Twitter @Empire flippers and we’ll see you next week. Bye Bye everybody.
Speaker 2: Hope you enjoyed this episode of the Empire podcast with Justin and Joe. Hit Up empireflippers.com for more. That’s empireflippers.com. Thanks for listening.