[Case study] How a Full-Time Employee Made an Extra $40k on the Side
Are you concerned with your health?
With the rising trend in mobile applications, it’s only fitting to incorporate health and fitness apps into our daily routines. These apps not only to help us to reach our fitness goals, but they also help drive our motivation to stick with a routine that the platform ultimately holds us accountable to.
Going hand in hand with these workout apps, an influx of diet and meal planning apps have also recently increased by over 300%. This is exactly what Matthew, the seller of this Amazon FBA business had foreseen to be the future within this niche, and he was absolutely right.
Having owned and operated two other online businesses prior, Matthew was looking for something a bit more passive, which led him to researching the Amazon FBA business model. This is something a majority of our Portfolio Paul and Strategic Sally buyer personas (Take our buyer persona quiz here) are usually looking for when performing their due diligence on any business.
Matthew, who was working a full-time job at a brick and mortar business and raising a family, had little time to focus on other side projects. This was especially true for ones that required a large amount of sweat equity investment on his part.
The Amazon FBA model was very light in terms of time required to get the business off the ground, as a majority of work for this business model is front-loaded. From the seller’s standpoint this offered an opportunity for a relatively passive revenue stream, which was his goal from the start.
Being a strong advocate for eating healthy and maintaining a proactive fitness routine, Matthew realized this niche would be something he would enjoy, already having a passion for it.
Having built the business in January 2018, there was very little competition for this particular diet/meal plan during that time.
Not only did he build and grow this Amazon FBA business to generate $2,016 a month on average in net profits, but he did so from creating all of his own products. This not only offered an excellent profit margin of just over 30%, but it was also scalable if he or a new owner wanted to add more products down the road.
With 83% of the businesses on our marketplace sold at list price at the time of writing, which you can see on our scoreboard, it’s no wonder why we have become the go-to brokers for selling your Amazon FBA business.
Let’s dive in and see how the seller of this business, which was generating over $2K a month, was able to walk away with a payout of $41,130 after our commission was factored out.
Passive Income With Amazon FBA
What most online business professionals enjoy about the Amazon FBA model is how passive it can be with just a little effort during the beginning stages.
Whether your plan is to grow or maintain the current state of the business, Amazon FBA offers a tried and true platform with little learning curve necessary to take over the asset. This is something many buyers consider beneficial based on the simplicity in understanding the platform’s capabilities.
Most of the skills necessary to take over an FBA business stem from an understanding of general marketing, VA management, and the platform itself. A little PPC know-how is not required but does help.
At the start, Matthew had a few freelance VAs helping with small tasks such as performing product listing copy, professional photos for each new product added to the account, and monitoring PPC and analytics. This is very common with how front-loaded this business model typically is.
However, a majority of his time during the beginning stages was spent on product research.
As with most FBA accounts, the product itself is the business. Having a high quality product will set you apart from the competition and will create a barrier of entry from your competitors. Since the seller was already passionate about this particular diet plan, researching products based around this specific sub niche was something he was already doing for his own personal development.
What is also unique about what he has done with this brand is something most Amazon FBA businesses tend to neglect, which is building a website and offering CTAs to build an email list.
This is a very powerful tool when you consider the amount of traffic you miss out on from having a standalone Amazon storefront.
Not only did he build a website with plenty of free information on this particular diet plan, but a free meal planner for this diet was also given to those who subscribed.
Matthew had also created a secondary website included in the sale as a capture page with testimonials from those who have used his meal planner and gained value from its use.
He was able to direct over 18,000 social media followers to the primary domain site for free information or the secondary site for those who wanted a direct link to obtaining the meal planner. Having multiple sources for capturing customer contacts was a great means of retargeting this addressable audience with new products at a later date.
After the initial set up of everything mentioned above, Matthew no longer needed to spend much time on maintaining this business. After just one year, he was now only spending a few hours a week monitoring PPC, and adding new recipes to the site from a database he had already created.
Planning A Profitable Exit
Most first time buyers are often curious why someone with a generally passive income stream requiring minimal effort to maintain would want to sell this asset in the first place?
For Matthew, an opportunity had presented itself within the real estate market, and he wanted to use the capital from selling his business to pursue this opportunity further.
In order to get the most from his exit, he knew that having systems in place to make the business as passive as possible would only make this asset more desirable.
Building a social media following of over 18,000 with Facebook being the largest contributor, he directed traffic straight to the website where they could find free information on this specific diet plan or download the free meal planner.
From there, he created a 7-day follow up automated email campaign after traffic had opted in. This offered another marketing option for potential investors and a great opportunity for growth, as no other email offers were being sent after this initial outreach.
On the website, various products were sold based on this specific diet, and at the time of his exit he had 9 SKUs related to this sub niche of health and fitness.
Matthew has also taken the time to build a database of recipes that were used to add content to the site on a regular basis with little effort. Any new products for this business were optimized by a series of VAs that were only needed for the initial product launch throughout the life of his involvement with this business.
Put into simple terms: the business was quite passive at this point.
He knew that having products that were current with this diet’s trends was important to maintaining the year-over-year growth his business was experiencing.
In February, the business experienced a dip in revenue due to repackaging one of the main SKUs. In order to prepare for a new product launch in April, he decided to give away the old products for next to nothing in order to make room for the new inventory.
The new launch was a great success, and with a pending trademark in the pipeline, Matthew knew that now was as good of a time as ever to list the business for sale.
Buyers Are Hungry For This Business
After growing this asset for over a year, he listed it for sale on our marketplace at a 29x multiple and just over $70K listing price.
Now, this may not seem like much, but when you consider the fact he had only spent a year growing this now generally passive income stream, that is quite a nice payout when you consider the sweat equity invested overall.
This multiple may seem low when compared to content and affiliate monetization sites on our marketplace, however this is still slightly above the average listing multiple of true FBA businesses which demand an average of 22x according to our latest trend report.
Within the 139 days this business was live on our marketplace, 106 deposits were made from potential buyers which shows just how sought after a well-constructed FBA model is to online investors.
Thanks to the effort Matthew put into this business, he received an above average amount of deposits for this asset ultimately creating a bidding war for the business at this point.
During this time however, there were a few setbacks that came into play.
The Offer On The Table
After being listed on our marketplace for five months, some routine concerns had risen from potential buyers about the business.
Issues such as the business offering a low barrier for entry from competition was something that stood out the most to potential buyers when conducting their due diligence. At the time of listing, competition for this sub niche was low, however the diet itself was starting to gain traction.
At this point still having limited time to focus on growing the business more than he already had, Matthew made the decision to accept a lower multiple and listing price in favor of a faster acquisition.
This doesn’t happen often on our marketplace, but it does happen.
The option to list at a higher multiple is something we extend to every business that we list with a strong caveat that the seller is well aware by doing so will most likely result in a longer listing period.
On the other hand, if you choose to take a lower multiple and sales price in hopes of a faster acquisition; that option is available as was the case for this business.
You can see this represented in our valuation tool by the term “Absolute Valuation Range.”
Keeping the primary focus on selling the business as quick as possible, Matthew decided on a 24x, which is 2x more than the average FBA business sold on our marketplace. With a listing price just over $48K and a now approved trademark for his brand, this would get the ball rolling with legitimate offers to seal the deal.
He couldn’t have been more right.
With this new multiple and list price, over 55 new deposits were submitted before closing the offer.
He had almost one new deposit every day before selling at the new list price!
At the 7 month mark, Matthew was offered the new full list price and walked away with over $40,000 when you factor out our commission.
Not a bad take-away when you consider he had only owned the business for less than two years at this point in time.
Not only did his business sell in a timely fashion with this new list price, but the buyer had also been given a huge advantage obtaining a fairly passive FBA business at a below average multiple as a result. Something we can help you do as well when you schedule a call with us.
So What’s on the Plate for the Buyer?
With plenty of low hanging fruit awaiting the proper attention to grow the business, the buyer was more than satisfied with the acquisition of this asset.
He gained a quality trademarked brand that people use and trust and was able to grow the business with minimal effort outside of the database of content already included from Matthew’s efforts.
The migration period we offer to protect both the buyer and seller went smooth, as we’re the only broker that handles migrating an asset over from a seller to a buyer. It is important to note that if a migration does not go well, then all the work both the buyer and seller have put in will have been for nothing. Migrations is a key part of the sales process, which is why we have a team devoted to just that task alone.
Overall, this is important with the Amazon FBA business model, as the process requires approval of transferring the account to the new owner if needed, and changing links within the platform and sometimes the website itself.
Just curious how much your business is worth? Fill out our valuation tool and see what your business is worth on the largest curated marketplace today.
Or maybe you want to invest into a hands-off, profit producing machine just like the one Mathew built? If that’s the case, register for our marketplace or schedule a criteria call with our team to help you find the perfect business.