EFP 178: Why Would you Sell a Profitable Online Business?

Justin Cooke

November 22, 2018

“If those businesses are doing so well, why are they selling?”

This is one of the first questions new buyers to our marketplace have about the businesses for sale on our marketplace. There’s an insinuation that there MUST be something wrong with the businesses (or the sellers) if they’re being put up for sale.

It’s a fair question, but there’s a flaw in the assumption we wanted to explore in this episode.

We’ll cover some of the most common reasons our customers give for selling, but we’ll also dig behind those answers to look at some of the root causes and what that means for buyers.

Understanding a seller’s real motivation can provide opportunity and allow you to better leverage that information when it comes to negotiations.

We’ll also cover some of the ways you can better “peel back the onion” when talking to sellers and sussing out why they’re getting out of the business.

Check Out This Week’s Episode:

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Topics Discussed This Week:

  • Alternate Investment Opportunities
  • Businesses That Have “Peaked”
  • Life Events/Changes
  • Industry Limits/Changes
  • Burnout Or Lack Of Interest
  • Partner/Investor Issues
  • Fear of an Uncertain Future

Mentions:

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“The types of businesses they worried about someone selling are the types of businesses that don’t sell at all.” – Justin – Tweet This!

“If you’re looking for a win-win situation, knowing why the seller is looking to sell is important.” – Joe – Tweet This!


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What do you think about the reasons given? Agree? Disagree? Let us know in the comments!

 

Justin:                   Welcome to the Empire Flippers Podcast Episode 178. It’s not easy to build a successful, profitable online business, so why in the world would anybody want to sell one? In this episode, Joe and I pull back the curtain on some of the reasons sellers give for selling their businesses. Then we dig into the truth of those claims and share some of our experiences along the way. You’ll find the show notes for this one at empireflippers.com/reasonstosell.

                                All right, let’s do this.

Announcer:        Sick of listening to entrepreneurial advice from guys with day jobs? Want to hear about the real successes and failures that come with building an online empire? You are not alone. From San Diego to Tokyo, 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. Now, your hosts, Justin and Joe.

Justin:                   Okay, Joe, so this is a question we get pretty often from newbie buyers, even from potential sellers. Why in the world would someone be willing to sell their profitable online business?

Joe:                        Yeah, from the uninitiated, like you said, newbies, it’s the number one question by far, and something we really have to overcome as brokers with a marketplace to make sure that people understand there are legitimate reasons for sellers to sell.

Justin:                   And some illegitimate reasons, too, which we’re going to cover. I think there’s a misconception, though. The question kind of implies someone would only sell a crappy business. Right? Like only a business that wasn’t nearly as strong or wasn’t nearly as profitable or that was in serious trouble or decline, those are the only businesses people would want to sell. In fact, the funny part is, is that those business are typically, are often not sellable. The types of businesses they’re worried about someone wanting to sell are the types of businesses that don’t sell at all.

Joe:                        Right, and I think that a lot of things from, especially from people that are not familiar with the business and the industry, how it works, they don’t understand that access to capital and getting, sort of liquidating things, taking chips off the table, these kinds of reasons, give them a lot of ability to do things with that money.

Justin:                   One thing sellers often say is, they say they’re moving on to other projects, so they’re going to be working on other projects. That’s kind of a catch-all reason and we’ve kind of fallen in the trap, often, of just allowing that on the listing page, so you’ll probably see that pretty often, working on other projects. We’ll talk about kind of what that means and where that is and where that isn’t true and kind of dig behind it to get to the real meat of what they’re saying and what that often can be.

                                We also want to help buyers better understand what they should be looking out for and where they can find opportunity. Opportunity is leverage, opportunity negotiations, opportunity based on the actually reasons the sellers are selling.

Joe:                        Not because you want to take advantage of people, but because you want to know where they’re coming from and you want to be able to put yourself in their shoes, have a little empathy and be able to be successful together. If you’re looking for a win-win situation, knowing why the seller is looking to sell is important.

Justin:                   All right, but enough about that. Let’s get into the featured listing of the week. What have you got for us?

Joe:                        This week we’re talking about Listing 45021. This is an Amazon FBA business with its own storefront in the sports niche. It’s making just over $86,000 net a month, so it is a very large business. We have it listed for just south of $3 million U.S. dollars. It uses a nice multiple of 34X. I think that’s very reasonable for a business of this age with this many SKU’s and really an established, large business in the FBA genre.

Justin:                   I think the fact that it comes with a team, this business also includes a project manager, a logistics person, an advertising manager, a data person, a designer and a product development person that have SOP’s in place. If you’re looking for like a fully run and team-based, SOP-based business, I think this a good one to look at.

Joe:                        There’s two other things that I really like about it. Number one is it’s multi-channel. About 40 percent of the revenue comes from the Shopify site, so it’s not just only Amazon FBA. That’s really key for a lot of people out there. The second thing I love is that it does have a great Instagram following and a Face Book following. It has a social media, a legitimate social media presence, not something that they’ve just bought a bunch of likes or something like that. I’m talking about 45,000 Instagram followers and 160,000 Face Book followers, so it has a strong social media presence.

Justin:                   We’ve seen a lot more multi-channel businesses, particularly as they get larger. It’s really interesting. I think it provides some level of stability for buyers and assurances that it’s going to stick around because it’s more diversified. I also think that for the smaller businesses that don’t have that, that’s a really good opportunity for buyers when they’re like, oh, they aren’t multi-channel. Let me see what I can do about this in terms of adding additional channels and bringing in more money.

Joe:                        Exactly.

Justin:                   All right, man, let’s dig into the heart of this week’s episode.

Announcer:        Now for the heart of this week’s episode.

Justin:                   All right, Joe, we’re talking why would you sell a profitable online business. We have seven different reasons we’re going to cover point by point. We’re going to point out kind of what they are, we’re going to give examples of each and then we’re going to talk about what buyers might need to look out for on each individual point.

                                Let’s get started with the first one. The first one, the most common answer is, there are better investment opportunities. You also see this as moving on to other projects. As we said, Joe, this is the most common answer given, but it’s not always the real reason behind the scenes.

Joe:                        Yeah, this is something that I encourage buyers, and our own vetting team, to really investigate when people answer with this sort of question. It’s not because they’re being false, it’s just really easy to say this. Well, I have a better investment opportunity. I’m moving on to another project and I need the money. If you just stop there and you don’t really know what they’re doing, it could crop up with problems later. For instance, if they’re looking to build the same business again, that’s obviously going to be some sort of conflict of interest. These sorts of answers go a long way in getting you into the mind of the seller a little bit, into why they would answer with something like better investment opportunities.

Justin:                   A lot of times, people have a harder outer shell and so you need to go past the first layer. We talk about this as peeling back the onion. The first answer might be, I’m moving on to other projects or I have better investment opportunities, but then you can start to dig. You can peel back the first layer and the second layer. A lot of times you’ll find some of these other reasons we’re going to talk about today crop up, and then you know the real reason or their reasoning for actually selling. That will help you as a buyer. It also helps us as brokers when we’re trying to negotiate the deal.

                                Let’s give some examples of this moving on to other projects, what this can mean. An example would be someone who has a couple of different businesses or a couple different affiliate sites, but they’ve got an FBA business that’s growing really quickly and really sucking up cash. They may be willing to sell off their $80,000 affiliate site business and really reinvest that in their FBA business which is growing leaps and bounds.

                                You may have someone who has an offline business that’s growing but really needs a capital investment and so they’re willing to sell their kind of smaller $150,000, $200,000 affiliate site or FBA business to really fund their offline business.

                                Then there are people who, they get to the point where this is kind of the last cap on their retirement strategy and they’re looking to sell the business. The idea is they want to invest and create that passive retirement money and call it a day.

Joe:                        I would add a couple more reasons there that we say are typical examples. One is the guy that this is part of his process. He legitimately builds businesses, sells them, takes the proceeds of that and builds the next one, and he tries to get bigger and bigger every time. That’s definitely a legitimate sort of moving on to other projects reason.

                                The other one is diversification of portfolio. If you have somebody who has six, seven online businesses, he’d rather put some money in the market or buy a piece of property, something like that, that’s definitely some of the reasons why he thinks he has a better investment opportunity as well.

Justin:                   Because this is kind of a catch-all, one of the things that buyers really need to look for is, is this the real reason? The best way to figure that out is just to ask them questions. Have them explain exactly what projects they’re moving on to, exactly what they’re looking to invest their money into. They might think it’s a little odd at first when you’re asking that, but once you get some direct and exact answers, you’ll understand, oh, okay, well I understand the other business they’re running now. It’s also a way for you to find out that it’s a non-competing business and it’s not a business that’s like they cause you problems in the future. If they’re vague around that or unsure and they don’t know, then it may be worth just asking additional follow-up questions to find, and I’m doing air quotes, but additional reasons for them wanting to sell.

Joe:                        This is a good point, Justin. I think a reason why, if a business passes your initial criteria, you should really look to get on the phone with the seller as quickly as possible. A lot of these things can be resolved in an initial conversation that takes about an hour, where you go through other questions and one of them being, why are you exiting this business?

Justin:                   The second reason someone would sell a profitable online business is the seller feels the business has peaked. What I mean by peaked is they’ve grown this business, let’s say from scratch, and they’ve done everything they can to get this business to the very tippy top of the earnings it’s going to make. It’s up to $5,000 a month and they’ve done everything they know how to do to get it there, and it has nowhere to go but down. It has reached the very top and they’re like, look, I might as well get out before it declines or before anything else happens to it because it has nowhere else to go.

                                This is a unique or interesting situation because, quite often, the seller believes that to be true, they believe it to be the case, but they may be wrong or they may have such a narrow view of it, they don’t see the bigger picture. This happens quite often, where the seller is like, look, they’re an SEO guy, for example, and they have gotten the business as maxed out on keywords and they’re ranking top three for some of their main keywords and a lot of their side keywords. They’re like, look, there’s nothing else I can do with this business with SEO. Five thousand dollars a month is max.

                                The buyer comes along and says, you know, look, it’s making $5,000 a month, it’s finally worth me even taking a look at. I see they’ve only done SEO, they haven’t done any paid FaceBook traffic, they haven’t done anything else, all these other channels and opportunities I see for it. Let me apply those and really take it to the next level.

                                On the one hand, you have a seller who’s going, ha-ha, I’m really taking this buyer to the cleaners, and you have a buyer going, wow, I can’t believe this seller is leaving all this money on the table. That’s really kind of why we’re able to exist. That’s kind of how we’re in business.

Joe:                        I think that example is a perfect one, the SEO guy who really doesn’t see another way to expand the business. We see that a lot. We see people coming in and converting these sites or integrating these sites with other businesses, and double, tripling the money just because they’re changing the monetization method and using all that Google traffic in another way to really expand. Just because you’re ranked number one for all your keywords doesn’t mean there’s not a way to go up and make more money even when you have an SEO site.

Justin:                   It’s not just SEO guys, either. It can be someone who is an expert at paid FaceBook traffic and they’ve completely maxed out their audiences, they’re pulling max juice out of their audiences and re-targeting, and so they don’t know the SEO route. It may be someone who is good with ecommerce and has kind of like maxed out all the products in their category, but they don’t see other channels outside of Amazon, the seller, they don’t know how to do that well.

Joe:                        Sometimes it’s soft skills. We had a buyer who bought an Amazon FBA business and all he did was call the supplier and ask for a discount. He wound up getting about a 30 percent discount and, obviously, that passed down right to the bottom line.

Justin:                   Yeah, that’s a really good example. What buyers should look out for with this business that’s peaked, they should really look at what the seller’s strengths and weaknesses are, what are they good at, what do they have experience at, what do they not have experience, and what might they be missing. They’ve built this business up a particular way. What are other ways this business or other channels that could be used to grow this business that they haven’t see? I think you should also worry about, what are you missing? Why do they think that this business is kind of at its top, why do they want out, why do they not see any more opportunity for growth? It’s something you need to be aware of as well, particularly if you don’t know the industry as well.,

                                Let’s talk about the third reason. The third reason would include life events and changes. This is not something the seller will often say, definitely not up front. Often these reasons are a little too personal for them to share publicly in a listing. They’ll probably discuss it over the phone in a buyer-seller call, but not publicly and as directly.

                                This reason is actually more common than I think most people think. Sellers are strategic and they are maxing their earnings and their revenue, and they are going to sell at the perfect time and they’re trying to really plan it out. The truth is, life just gets in the way sometimes.

Joe:                        People need money for different things, whether that’s adopting a baby, a divorce, death of a family member, birth of a baby, there are a lot of things that people need money for in life. Liquidating the business, especially if it’s a side business or if it’s just a part of their portfolio, is something that they will look to do in order to overcome that life event.

Justin:                   Even if they don’t mention it in the listing, they’ll generally, after a discussion, ask them a few questions, they’ll get into it. These are all things that we’ve dealt with on sales in our marketplace, adopting a baby, divorce, death of a family member, birth of a baby. These are all things that people really have to go through.

                                What should buyers look for in a situation like this? The question is, does urgency provide opportunity? If they have, let’s say for example, that they’re expecting a birth within 60 days. They may really need to get this sale done within 60 days. As a buyer, that’s opportunity because they’re really trying to get the deal done. You may be able to get it at a discount, that kind of thing.

Joe:                        At the same time, I’d be careful exploiting people’s personal situations for monetary gain. Obviously, that doesn’t usually lead to a win-win situation, but what it does tell you is that you’re going to need to move quickly as a buyer. That means if you have a personal due diligence process that takes two, three months in order to acquire a business and their baby is coming up before then, this is probably not the deal for you. You’re going to need to move a lot faster than that.

                                If you are the type of guy that takes a long time in negotiations, you should understand, he’s probably looking for a quicker sale and if he finds somebody else that he doesn’t have to bargain that much with, obviously he’s going to go with that guy even if it’s a worse deal for him, just because it was easier and quicker.

Justin:                   You also need to think about if they’re heading into the nitty gritty of their divorce, and this is obviously going to take a bunch of time for one of the parties, what kind of post-sale support can you expect? That’s also the case if they’re having a baby, they’re adopting a baby and part of the reason they’re selling this business is so they can focus all their time on their new baby. After the baby is born, after they have adopted the baby, how much time are they going to be able to give you in a post-sale support scenario? Trying to think about what kind of time you’re going to need from them after the deal is done is something you should consider if they’re selling because of a life event or a change.

Joe:                        Yeah, completely agree with this one. This is a great thing to ask about, especially on larger businesses where if you as the buyer don’t know a lot about running that business, and maybe there’s not a team included and you’re going to have to take on some of the responsibilities, tasks and roles, you need to really make sure that that seller is going to be around and not tied up in some sort of very busy life event.

Justin:                   We talked about life events and changes. Let’s talk about our fourth point, which is industry limits or changes. You’ll rarely hear sellers mention this one. This usually comes from some kind of insider industry information they have. Again, it may or may not be true.

                                Let me give you some examples of these industry limits or industry changes. It could be that that industry has some upcoming legislation that will decide kind of the fate of the industry, it could be that there are new taxes, new tariffs, new regulation that’s being applied to that industry. It could be that some interest in the niche is just waning, that it was faddish or at least the products and services that are in that particular industry are just not as interesting anymore.

Joe:                        This happens rarely, for sure, but it’s something you want to investigate and make sure you understand. If it turns out to be the real reason if he says he’s moving on to other projects but the seller then really admits that he doesn’t have a long-term faith in the business or long-term faith in the industry, it’s something you should ask why. Then you have to investigate that and make sure that that’s a risk that you’re willing to take as the buyer.

Justin:                   It could be that, as a buyer, and we’ll talk about what buyers should look for, but as a buyer, you may just want to bake that into your pricing. For example, years ago, if it was the marijuana industry in the U.S., it really could have gone either way. They could have made it more illegal and that would have really hurt you if you had a business in that space. It didn’t, it went the other way, so there’s a lot more opportunity. If you were buying a business when they were kind of up in the air, that could have been bad.

                                With hover boards, it’s the opposite. There are some questions as to whether that industry would continue. People buying businesses then, it may not have worked out so well for them because the industry has gone a bit darker.

                                Wat buyers should look for when industry limits or changes are the issues, they should look for Google trends. When you look at Google trends, you can get a sense of kind of like where the industry is going. Another thing to do is to ask industry insiders. If you’re not in the vaping industry, if you’re not in the whatever type of industry, you can look for forums or communities online, get involved in those forums or communities, get involved in some of the FaceBook groups, and start asking people what they see on the horizon. Most people are happy to talk about the industry in the areas they’re working.

                                Another thing you can do is you can, and this is generally for larger businesses that may have legal issues or legislative issues, is get a legal review done and pay a lawyer to review the business and the industry overall.

Joe:                        You mentioned the vaping industry, supplements and vaping, anything you really put in your body, obviously those are open to constant regulation and other types of lawsuits. I think having a legal review in larger businesses that sell things that you ingest is a good idea. If the laws are going to change or if they’re very open to litigation, being sued by users, that kind of thing, that’s the kind of stuff you want to know and be wary of. It doesn’t mean that you’re not planning to buy the business, it just means it’s a risk for you. It may be something that you have to bake into the price that you offer to the seller.

Justin:                   All right, Joe, the fifth reason sellers gave is a lack of interest or even burnout in the business or the industry. One of the interesting things about this is sellers might be less interested in stating this up front. Their worry is that by them explaining how burned out they are or how they’ve kind of lost or given up interest, they’re worried that they may scare away a buyer. I don’t think that’s true, but they’re at that point. When you’re feeling burned out or you’re just feeling like, oh my God, I don’t want to spend another minute on this business, you’re thinking someone else might feel that, they’re going to sense that from me and I need to hide it.

                                You can generally get to this just by asking them questions about it and them feeling more comfortable with you over the phone.

Joe:                        I think that this one is really the most common actual reason for people to sell. It’s certainly the most common reason in the two thirds of the business that we reject at Empire Flippers. A lot of these guys come to us, the business has significantly declined because of neglect, because they weren’t interested anymore, they were burned out on it, and now it no longer meets our minimum qualifications and we simply won’t list it.

                                Sellers out there, beware and don’t get yourself into this sort of category where you’re in burnout, you’ve neglected the business and now it’s not really worth anyone selling. From a buyer’s point of view, definitely you want to look at businesses that have this type of burnout going on. Are they declining, is that decline really due to the seller or is it due to other factors?

Justin:                   Some examples of this, it may just be a loss of interest in the niche, so the seller may just not be interested in whatever product or services or whatever that are being offered. It may be that they’re working too hard or they’re just spending too much of their time and effort and energy on the business or the industry. That may be to kind of their own incompetence, their own inability to hire people or put profits in place, or it may just be that they want to change of pace. They feel like they’ve kind of cracked that nut and they are just getting bored in the business and want to deal with something else.

                                One of the things buyers should look for, they should look for burnout that’s caused by something that they can fix. If a buyer can go in there and like, oh, I can put some SOP’s in place, this seller is kind of all over the place, all of this stuff is in their head, but with a bit of process, with a bit of hiring, I can really clean up those hours and make it to where it doesn’t burn me out, then there’s opportunity.

                                If they see it and the seller is all over the place and they’re like, oh my God, I’m going to be all over the place, I don’t see how to fix that, that might not be a good buy for them.

Joe:                        Exactly, and I think making sure that you understand that by talking to the seller in a very matter-of-fact manner will help a lot.

Justin:                   The sixth reason sellers give is when they have partner or investor issues. This is a tough one, Joe. This can get really ugly. You can find some real gems here and get some real value on the buy side, but it can also be just, you’re involving yourself in their drama.

                                One of the things you need to do with partner and investor issues, you need to find out early and up front exactly who the decision-makers are. That’s often not very clear. You think you’re dealing with one person and then the only reason you’re dealing with them is because them and their partner or their investors, they’re at each other’s necks. They’ve designated one to be the talker, but there’s other people behind the scenes making decisions.

Joe:                        Before we had a lot of experience in the industry, we definitely fell into this trap at Empire Flippers before we really started asking the question, are there any investors, are they willing to sell, are they willing to sign on the dotted line right now that they will sell at this price? Before we used to ask that, we got a couple of deals in where, come right to the finish line, and the other partner said no. It could be very frustrating if you don’t know who you’re dealing with. Its always important to ask that from a buying point of view.

Justin:                   This is taught in any kind of sales organization or sales environment, Joe. You and I learned this decades ago, if you remember. Make sure you have both decision-makers on the phone. If you don’t have both, get them on there. It’s worth it, rather than trying to do your whole sales pitch multiple times.

                                Some examples of what this partner, investor issue might look like, oftentimes you have a husband and wife team that are having issues. They’re having personal issues or at least business issues. You may have one or multiple founders that are buying some or all of their investors out. You may have partners that they’re buying one or more of the other partners out of the business due to some conflicts they’re having. It can be, obviously, very challenging issues because everyone is frustrated, there’s a lot of things going on there.

Joe:                        I think that there’s a lot of personal drama that you could dig into but, honestly, I would stay out of it. I would find out who the decision-makers are, have them on the phone and then evaluate for yourself how bad the relationship is. You’ll be able to tell that. For instance, if other decision-makers refuse to get on the phone, that’s a good sign that you’re in trouble in terms of maybe getting a deal done with this type of company. If they’re both on the phone and they can’t seem to agree about anything or one person is being cagey about what he does in the business, that’s another reason to walk away as well.

                                Again, if you get the partners on the phone and they’re fine with each other and everything seems good and they just simply want to sell the business and move on to bigger and better things, then that’s an indication that, going forward, you can trust the fact that dealing with one of the partners is probably not a big deal.

Justin:                   What I think buyers need to look out for is, they need to make sure they’re getting all decision-makers and they’re buying up front, just as long as they’re getting them on-point. Eventually, later on in the process, they want to make sure that they’re contractually obligating all decision-makers in writing rather than just having verbals, which can, obviously, later turn into fights between the partners or fights between the investors. Having them all sign off on it in writing gives you something that you can refer back to and kind of steadies out the process in what might be a tumultuous relationship.

                                Let’s talk about the seventh reason given. This is fear of an uncertain future. This is a situation where the seller is looking over the next year, two years, three years and they’re not exactly sure what’s coming down the pipe, but they put a lot of blood, sweat and tears into this business and they’re just like, look, that up-front cash is a lot more tempting than even more cash over a longer period of time.

Joe:                        I think that this is the kind of taking chips off the table type of scenario where sellers have built something that’s pretty big, it makes up a large part of their personal net worth, and they want to sell all or most of the business in order to diversify themselves. They’re concerned that, for whatever niche they’re in, may not be there. They’re concerned about their financial future, they’re concerned about their family. For legitimate reasons, they want to have that cash in the bank.

Justin:                   I’ve seen this particularly with fast-growing FBA businesses. These constantly require a reinvestment of cash. Any profits or any cash they’ve had in that business is just constantly shoveled back in the business as it has grown to a multi-million dollar business. They’ve never really taken any personal cash or personal wealth out of the business themselves, and they’re going, look, I have this multi-million dollar business that I haven’t made any money from. I better do something about that. They start to look to sell the business.

                                Another example would be any recent changes in the industry or niche that may not have affected them, or may have affected them, but is really kind of scaring them out of the niche or the industry. For example, again, the FBA niche, if you see some FBA counselor and he’s shut down, yours hasn’t been, you haven’t been warned, you don’t have any issues or whatever, but just the fact that it could be shut down, or just the fact that you’ve seen other people have some issues is enough for you to kind of rethink your strategy and say, look, I’m out of this business.

                                What these buyers need to look out for here is to make sure that it’s just fear of an uncertain future and not what we talked about earlier in point number four, the industry limits or changes. If there are industry limits that the business is coming up against or there are changes to the industry, you’re going to want to follow the same steps we mentioned before, which is look at Google trends, talk to industry insiders, get a legal review.

                                If it’s not that and if it is just kind of fear on their end, again, how can you leverage this fear in negotiations? Is there a way for you to either, if you buy into to it with them and you agree that there is some fear, then there may be some contention there about trying to put some into an earn-out. If you don’t think they’re right and you see that they’re just being fearful about it, giving them cash up front but getting the deal done at a discount might make sense.

Joe:                        I love the earn-out idea because if you can give them, and I’m going to use the dirty G-word here, but if you can give them some sort of guarantees about money over time, as the buyer, then they might feel more comfortable getting [irregular 00:28:06] payments from you than getting up and down payments from a business that they don’t necessarily believe in anymore. If you can use your expertise to consistently run the business, grow the business, then there might be great arbitrage for you there between you paying them in the earn-out and you earning on a business that’s growing.

Announcer:        You’ve been listening to the Empire Podcast. Now, some news and updates.

Justin:                   All right, Joe, we’ve got some news and updates. What’s going on in your world, man? I’m currently in Saigon, Vietnam, hanging out here. I’ll be here for, other than a quick trip to the Philippines for our team Christmas party, I’m going to be in Saigon until March, so I’m going to be hanging out here for a bit. You’re still in Manila, Philippines, your kind of home base. What’s going on over there?

Joe:                        Yeah, I’m in Manila. I’ll be in Bangkok for Philly World Asia in December but, other than that, I don’t have any other real travel plans outside of the Philippines until March, April area. I travel often within the Philippines. Obviously, I’ll be doing the Christmas party as well, but it’s so easy to travel here. I was just down south in the Batangas area checking out some of the resorts there, quite nice and self-contained, some things I didn’t even know existed, that’s in the countryside of Luzon.

Justin:                   All right, man, so let’s talk about some other news and updates in the business. We’ve decided to extend our hiring freeze. We have it through the new year. We talked to our management team and said, look, let’s continue this through April. We won’t be bringing any new people on until April. That would likely be at our Europe meet-up, so we’re not going to be hiring any new people in the near future, but if you’re interested in working with us, obviously, get on our list and we’ll send you some emails when we’re hiring.

                                We also had some bad news or a bad experience recently where we had to let a couple of people go. Obviously, that’s not a fun scenario for us, for our management team. We’re not just always hiring, it has to be the right fit, we have to build the right team. I like your analogy, Joe. We’re not a family, we’re a team. That definitely applies here.

Joe:                        I always say that and I think it’s very, very true. You’ve got to bat 200 and play shortstop in order to be on the team and make that Mendoza line. If you can’t do that, unfortunately we’re going to have to cut ties. That doesn’t mean that we don’t support and try to help our employees through difficult times through retraining and give them [00:30:28] opportunities, but at some point it is better for both sides to simply walk away.

Justin:                   On a happier note, buddy, it’s Thanksgiving, so we wanted to wish our American friends a happy Thanksgiving. I’ll be doing turkey day here in Vietnam. There’s a whole bunch of people here is Saigon that we’re going to be doing a Thanksgiving dinner, and happy Thanksgiving to all our listeners.

Joe:                        I miss a home-cooked turkey. Unfortunately, I won’t be able to do that this year, either. I’m going to the Shangri-la here, which is a couple of blocks from my house. They have a great Thanksgiving planned and I’ve got a couple of tables reserved with a lot of American friends. We’re going to do something special.

Justin:                   All right, buddy, let’s do our listener shout section, also known as the indulgent, ego-boosting, social proof segment. First up, we’ve got a new five-star iTunes review from our buddy Dustin Ellard, said, “I love the transparency, willingness to share and no-nonsense business advice and experience shared. Joe and Justin always give great insights in online businesses from the viewpoint of being able to look deep inside of online businesses from many different kinds of markets, monetization methods and different revenue levels. Great podcast to subscribe to if you’re in online business and want to keep a pulse on what they have seen that’s been working and what is currently working and what they feel the future looks like in the various online business models.” Thanks to us and appreciate it.

                                Also got a mention from Nathaniel on Twitter, said, “Most of what’s on at Empire Flippers right now is FBA and drop-shipping sites. I wonder if that means people aren’t selling their affiliate sites because they don’t want to get rid of them or if those two other business models are just popular right now.” Hashtag, drop-shipping, hashtag, AmazonFBA, hashtag, affiliate.

                                What do you think about that, Joe? I think he’s asking why there’s a lot of FBA and drop-shipping sites for sale, businesses for sale. Why are there more of those than affiliate sites? I’d say FBA and drop-shipping is popular right now, but I’d also say that it just seems like we’ve, over the last few months, had less affiliate sites available as well.

Joe:                        It’s tough for me to disagree with that sort of logic, but I’d also add into the mix that Google has made some significant updates in 2018 that have affected affiliate sites directly. Some affiliate offers have changed significantly and that has hurt some of the affiliate-based businesses. They’re just kind of in flux right now, and they don’t qualify for our minimum standards. If you used to be making $10,000 a month through your affiliate business and then your affiliate program changed and now you make $5,000 a month, you come to us, you want to sell and you’re like, hey, I used to make $10,000, I want to sell at the $10,000 mark.

                                We’re like, sorry, the program changed. Now instead of selling, you decide to take the business back and find another program that will get you closer to the $10,000 mark, but you’ve got to do that for a couple of months and prove to us that it’s for the long run. We’re seeing that with a lot of people. People have lost ranking, they have a way to increase ranking but they need time to get back up there and show consistency. I think that’s a major reason why we don’t have as many affiliate deals anymore.

Justin:                   Also, for the people creating affiliate site after affiliate site, it’s taking a lot longer to get them up, get them ranked and earning. Because of that delay, they may be a bunch of sites they have in a flux as they’re kind of in the hopper waiting for them to hit their rankings and to actually start earning money. Because it takes longer, there’s going to be a longer cycle from when they start it to when they’re actually able to sell. I bet some of our sellers, members of our selling audience are kind of in that boat right now.

                                We got a great mention over at the Tropical MBA. I was a guest on their podcast recently. We did a really fun kind of background interview with Dan on their podcast, where kind of like go into our history of meeting up and how we got started and our early-day struggles, some of the things that we were doing that was working, the things that we were doing that weren’t, just a really fun interview. I had a really good time with that.

Joe:                        Yeah, I listened to it, too. It was good and kind of funny, the times you’ve mentioned to me and gone through my backstory. It would have been interesting to have me there or have me call in and do some comments on some those stories. That would have been interesting. I know Dan thought about doing that, but maybe next time.

Justin:                   We got a five-star recommendation on Face Book from Kurt Storing, said, “I’ve sold multiple sites and businesses through EF. It’s always super easy and I’m always 100 percent comfortable with the vetting process they use for both my own sites and the people who end up buying them. My go-to marketplace for website transactions.” Kurt, just want to give you a shout. Thanks for that, man.

Joe:                        Yeah, thank you so much, Kurt.

Justin:                   That’s it for Episode 178 of the Empire Flippers Podcast. Thanks for sticking with us. We’ll be back soon with another show. You can find the show notes for this episode and more at empireflippers.com/reasonstosell. Make sure to follow us on Twitter at Empire Flippers. See you next time.

Joe:                        Bye-bye, everybody.

Announcer:        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.

 


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