RMRB 11: Running a Business Remotely
In this episode, Jake speaks with Lewis about his Amazon FBA business. With a business valued at $400k, Lewis is actually able to live anywhere in the world since his business is run online. He shares his story about why he chose the occasions and gifts niche, how he has grown to make $13k in profit every month, and how he does it from anywhere in the world.
Find more businesses like this one on our marketplace: http://bit.ly/2N6fQL2
Check Out This Week’s Episode:
Jake: What if you could cut through the noise in the online business world and learn from someone who has built a real business. We verified the numbers and comb through the PNL, this is not only a real business, but a real asset that people want to buy.
We’re going to pull the curtain back and give you the insights this entrepreneur has discovered that you can use the level of your knowledge, whether you’re looking to buy a business or looking for inspiration and take your current business to the next level. Hey, listeners, welcome back to the Real Money Real Business podcast.
Today we’re going to be looking at an Amazon FBA business valued at nearly $400,000 and the best part about this business is that it can be run from truly anywhere. I got the opportunity to sit down with Lewis, the owner of this business to figure out just kinda how he did that. Lewis, thank you for coming on here today. How are you doing?
Lewis: I’m good, thank you very much.
Jake: Awesome. Well, I’m really glad that we were able to connect today down in Australia where you are. I’m actually up in Vietnam, in Southeast Asia today. I live in the United States, but traveling around Asia right now it’s pretty cool to connect today.
Lewis: That’s the magic of this business model because I’m literally sitting in a car outside my daughter’s ballet school doing my work and I could be anywhere.
Jake: It’s truly amazing like you said, and we’re going to kind of dive into the travel or ability to travel and ability to be passive and a little bit.
Jake: But before we do get to questions that I have for you, I want to go ahead and run through a quick summary of the business. Again, the business was built in September of 2016 has a monthly revenue of $43,945 expenses of $31,227 to make for a net profit of $12,719 which is generated on a 12 month average.
Included in sale of this business of the seller central account, 81 skews, registered trademark and all related intellectual property. Please note the inventory isn’t normally included in the list price further details can be provided to active depositors. Lewis, can you give us a little bit-?
Lewis: You talking about my baby in such scientific words, yes carry on.
Jake: I know, it can definitely be weird and speaking of your baby, can you tell us a little bit about your background in building or running online businesses and what led you to build this business?
Lewis: I’m a chartered accountant CPA and I didn’t like being stuck in an office and looked proactively for business opportunities where I can be with my family and travel whatever. Amazon FBA came up on the radar as I’m sure it comes up on everyone else’s radar, the magic of Amazon FBA is all about your product selection.
The other magic of Amazon FBA is that when you find a product that works in a niche that works, you are allowed, you’re entitled, the only thing that will hold you back is your own capital to invest you can kind of just grow it and grow it and grow it.
And so this particular niche that we found, it started with one ASIN, and I think you said there are 81 but there are actually many more than that, we just haven’t pressed the fire button.
Because once you’ve got something that works, you can just keep rolling out variations horizontally, different colors, different sizes, or you can kind of go more vertical and going to different targets using the same foundation. And so we kind of grew this from one to 81 and the sky’s the limit really
Jake: With the sky as the limit for this business, that leads us to an interesting question and that is why would you sell the business?
Lewis: We’re not, when I say we, it’s me and my partner. We’re not giving this business the love that it needs because used like we’re sell on average $40,000 a month but that’s not how this works because this is a gift niche, and it has extreme peaks around the holiday seasons, which in a calendar order would be Valentine’s Day leading to Mother’s Day that we’ve just had Father’s Day.
Other kind of smaller holiday things, obviously birthdays all year around and then Q4 and in these peak times, if you have your ducks in a row, you will have enough inventory to meet this increased demand for that particular peak.
We just kind of found that we’ve got too many balls in the air, we’re juggling too many accounts and I feel that I’m missing an opportunity to really, really nail the value that this account offers.
When somebody goes in and investigates it a bit further, you’ll see that we suffer this issue of being stocked out of ASIN it really requires somebody that’s, I don’t want to say boring because I’m an accountant but somebody that’s willing to just breathe, take a bit of time and go, “Well, what essence sold for Mother’s Day last year? And then “How many did you sell?” And then “How many did you sell out?” And “when did you sell out?”
Using that sort of an idea, “Well, how many should you have ordered this year?” Bearing in mind that it takes x number of weeks for the factory to make it x number of weeks for it to arrive. It just requires somebody with a bit of kind of, I don’t want to say time because it doesn’t take a lot of time, I’m sure we’ll get there, but it’s more the head space.
So we as a kind of an upstart business, we don’t have this head space to make these decisions and so what ends up happening is we make rush decision and go, “Oh, come on factory please, oh we kind of a miss that, if Father’s Day coming up. Oh God, please, please, please hurry and give us.”
And then either we end up overpaying in shipping because we air freighting or we just don’t have enough inventory then we stock-out two weeks before and we kind of left money on the table.
Why are we selling it, I think that somebody’s either with a little bit more head space or somebody that’s got a team of employed people to kind of track inventory and place orders at the right time for the right ASIN would see much more value than what we’re seeing.
Jake: You mentioned that it’s a gift business and so when you take a look over the last year, obviously there’s going to be a spike around the holidays then with the net profit in December of 2017 being $87,000, which is obviously a lot but-
Lewis: It’s the net profit, you should see what the revenues were luck with luck, your peak day being, 10 or $15,000 in one day. And only 10 or 15,000 because we hadn’t have sold out of stuff already, it could have been higher because we had some great products that sold out very early.
Jake: There are obviously the holidays at Christmas time that is what is happening there in December. But there are holidays throughout the year and you and I were speaking a little before this and some of the products can cater toward other holidays. So what do you recommend a new owner do to kind of try to level out the seasonality of the business a little bit?
Lewis: Well, I think that this business would make a lot of money if somebody did the opposite of leveling it out and took on board the fact that this is a seasonal business, and you could make a gift for the Jewish holiday of Hanukkah and you cannot sell Hanukkah gifts all year round, you can’t.
But if you accept and acknowledge that this is going to be a seasonal business, and you start planning Hanukkah, which comes in December, you need to have the goods there by November, let’s get them there by October to be safe.
Which means the fact just to ship it by September, which means you need to place the order by August, which means you need to in your office plan around June, July that’s the head space that you need to be in and there are just always these kind of holidays to plug into.
There could be Saint Patrick’s day, there could be whatever if you want to make it all year round, you’re going to lose actually where the profit lies. The profit lies in making sure you’ve got enough inventory when this big peak hits, if you want to go all year round, the way to do that is with the birthday because birthdays come all your art and engagements, anniversaries and those are part of our niches.
But people are scared of seasonality, and I would urge a buyer not to be scared of the seasonality. It’s kind of almost embrace it because when you quoted we made on average 12,000 or we don’t make on average 12,000 we made 40,000 in December and we make kind of a smaller amount in January and if you could just plan for that you’ll do very well.
Jake: You see the big opportunities for the business being capitalizing on the holiday season rather than trying to level out the business?
Lewis: Correct. When you saying the holiday season you talking Q4? Or are there other holiday?
Jake: When I say that I mean Q4 but as you said, there are other holidays like Saint Patrick’s Day for example.
Lewis: Or Mother’s Day things like that and in a niche of Mother’s Day matters day, you could have new mothers, you could have people that are pregnant and it’s quite a big deal that it’s their very first mother’s Day, it could be their very first grandmother. In other words, the mother’s turned into a grandmother for the first time.
These are the kind of targeted niches that we hit and money is almost not an option if your neighbor is becoming a grandmother for the first time, it’s just a beautiful time and as long as you’ve got a product that plugs into that kind of emotion they’re buying it nicely.
It just requires a buyer who has got the clarity of mind to go, “Well, we’re having this interview now it’s the 23rd of May, let’s take a month to make a decision, that’s June. We should be placing an order with the factory in July and then the factory is going to have it ready in August and then it’s going to ship over September and it’s going to arrive into Amazon in October.”
You kind of have got this clarity of mind to make the sorts of decisions and if you’re sort of a business where everything happens by panic and reactively as opposed to productivity, then you can sometimes miss that. You’re like, “Oh, it’s mother’s Day next month. It’s too late.”
Jake: Those are some massive opportunities, and I want to touch on more opportunities in a little bit. But before we get to that, I think an important thing to discuss is how much time you’re currently putting into the business. Can you explain what you do on a weekly basis for running the business?
Lewis: The problem is, and the reason we selling it is that I don’t spend anytime. I have a virtual assistant, an accountant who lives in the Philippines and I’ve calculated based upon his time sheets that he’s spending about three hours a week on this account doing things like responding to customer queries.
Because we are very, very, very, very pro active to try and get positive reviews to try and avoid negative reviews. So we implore with big customers to speak to us and not Amazon and we do quite well with our reviews and then pulling what would be some sort of an inventory calculation.
That says this time last year we were selling so many, therefore I predict I’m going to sell so many in this kind of run up to this holiday period and place the order with the factory we’ve already got the factory relationship, that doesn’t take any time.
If you in a holding pattern, you’re not creating new ASIN you’re not doing new launches, then there is the only time necessary is the planning. The only time that’s going to take is you’re planning to place your order so many months in advance.
It’s not one of these businesses where you know you’re putting out fires or things like that. That’s if you’re holding this holding pattern. If you want to stick with the 81 ASINs as soon as you want to go into more and to grow it, then it will take more time.
For example, maybe you want to target a St Patrick’s Day niche then you’re going to need to get your designer who will give you the design that we used kind of give you a design for a St Patrick’s Day kind of design.
You would need to send it to the factory, you may or may not want the factory to give you a sample because we kind of trust the factory now we’ve been working for a few years, but they would include it into their next run, et cetera.
But if you’re not growing the ASINs from the owner’s point of view, I’d like to say that it’s next to no time and then from my administrator, it’s a couple of hours a week.
Jake: Just to clarify for anyone who’s unsure, the ASIN as I normally refer to them on these interviews as skews, the ASIN is the Amazon standard identification number. So we’re talking about the same thing, just occurred to me that you may not be aware of that.
Lewis: Correct I also, and if something was a large product for Mother’s Day and a small product for Mother’s Day, that would be two different ASINs, correct.
Jake: Yes, so-
Lewis: The other thing as far as opportunity goes is that we’re selling these products into the United States Amazon market, which with all due respect, I love the Americans. They love buying gifts, and some of our gifts could be considered quite cheesy, but they’re the ones that sell the best.
There is an opportunity of course to take this into other Amazon markets, the very easiest and next one would be Canada, just because it’s so close. Then you could take it into the United Kingdom. With the same ASIN or Amazon kind of identity you could then pull the reviews and so you don’t have to go through this very, very difficult process of building up reviews.
You’re able to use the existing products reviews and you would start straight away. That would take extra time, that would be the owner. The owner’s involvement would be required to set up a new country, you don’t go to a new country after lunch.
It’s not something you kind of wake up and go, “I’m going to go into Canada.” It’s something that would take about a time you need to plan it with your texts and the import authorities and things like that, but it would add to the revenue is not question.
Jake: Hey listeners, do you want to find a business that is just right for you? Head on over to empire flippers and have a look at our marketplace where you can see you real businesses making real money just like the one we’re looking at today.
In fact, don’t miss out head over now share your email address and we’ll send you hot, fresh new listings of successful businesses every week to your inbox. Now back to the interview.
That kind of brings me to my next point that’s asking, we’ve touched on some of the opportunities like you said, getting outside of just the United States market and focusing, doubling down on these holidays, but what are some of the other big opportunities that you see for the new owner?
Lewis: Yup. Well our product is, and we’ve got the trademark, and we’ve got Amazon brand registry, which is now a requirement to have USPTO trademark in order to get the brand registry at Amazon. A brand registry gives you a certain powers, it’s not the be all and end all of Amazon’s strength, but it does give you a certain powers, control over your own listings, things like that.
I will be very, very open and helpful to any buyer if they don’t have Amazon experience we’ll help them out. But if somebody understands Amazon, then you know that’s all good. When you’ve got a product that’s selling on Amazon, there’s always two ways of kind of growing this further.
The one is you want to exploit the fact that you’ve got keyword data. You know which keywords are working, you know what people are typing in and then buying your product. The one way of expanding is to go into the same marketplace, but with a slightly different keyword.
For example, if you were hitting new mothers for Mother’s Day, you could hit new fathers for father’s Day without too much difficulty the keywords would be they’re very, very similar, the timelines would be similar, you’d be tagging at the same kind of emotional heartstrings, and so going into the same US market, you could create a whole new product and put it onto the same marketplace using your existing data as a starting point. Step number one.
Step number two would be taking your same product, your Mother’s Day gift for new mothers and going to other marketplaces that also will be looking for mother’s Day gift for new mothers. I would, if it was me, I would target marketplaces that have got a similar cultural kind of value system towards America.
Which would be Canada and the United Kingdom and Australia is kind of growing that would be your immediate kind of growth path. Taking your existing ASINs, your existing products and taking them to new marketplace. Obviously you can go off Amazon onto Shopify or eBay or Jet, which we haven’t done that.
Jake: What do you currently do for the business in terms of marketing?
Lewis: Well, we’re not doing any off Amazon marketing. Amazon is very appreciative if you do off Amazon marketing and if you do kind of Google ad words or Facebook ads or something like that, and you bring data, you bring traffic, real traffic from outside of Amazon onto Amazon. Amazon is very rewarding of me and you kind of get to rank kind of quite a bit higher and all that.
But we haven’t, we haven’t done that. The only marketing we do is to have a highly optimized title, bullet points, keywords of our actual listing. And we continually update and improve it and I will help the guys with it.
The other thing that we do is, we do an ongoing highly optimized sponsored ad campaign. You’ve got to be careful because sponsored ads can suck budgets especially if you’re going to just go gung ho for a target like Mother’s Day gifts, if you’re going to try and target Mother’s day gifts without being a little bit more targeted, whatever, you’re going to blow your ad budget.
One of the things that you’re buying when you buy this business is our advertising campaigns that over time have been so targeted that we’re achieving a profitable ad spend in extremely competitive niches yet our ads spends is still profitable.
Jake: Would you commit to a non-compete?
Lewis: Yes, sure. Amazon is big enough there, there’s lots of other things to sell.
Jake: You told me this in private, and you’ve kind of mentioned this on this call already, but I just want to reiterate, how helpful do you want to be? How much support do you want to provide during the transition? So a new owner can feel good about getting started?
Lewis: We selling a baby, this is like literally it’s quite emotional. The last thing I want to do is make my baby a problem for someone else, the world is round and Karma is a bitch. If I sell something that’s going to be a problem it’s going to come back and bite me.
I will do, and I’ll be so bold as to say I’ll do whatever it takes to get this new owner on their feet. I’ll support them, I support them over the phone, I’ll support them by emails, I’ll support them by Skype, it’s not going to take very much.
If the owner wants a bit of help on Amazon because that’s kind of what they would need if they were experienced on Amazon they wouldn’t need not even one hour of training. But if they had no idea on Amazon then I guess I would do give them a bit of training in this particular area.
I would show them what we’ve done, I would show them how we’ve done things and if it happened, what I would probably do maybe is with my team because I’ve got virtual assistants administering the advertising, things like that. We would maybe record our screens and kind of creates a documentation flow that somebody could kind of pick up what we were doing.
Jake: Are you open to something like an earnout?
Lewis: Nothing in life is not negotiable except like my wife I guess. Everything is negotiable, but we’ve created this deal and this price and this model on such a way that it’s a pretty clean and simple buy out and that we’re going to kind of shake hands and move on. If somebody wants us to stay in, it’s not our starting point, it’s not what we’re looking for.
Because sometimes when you sell you could be like saying, “Well you know, really I just don’t want the headache of owning the business but I’d still love a salary.” Like, “It would be first prize for me to continue managing the account, just earn a bit of money to manage it and you kind of take all the profits.”
That’s not what we’re looking for, we are looking to exit and if somebody wanted us to stay in i.e for there to be an earnout, it would have to be reflected in a higher price or some other kind of financial reward.
Jake: That definitely makes sense and that’s fair. But it’s good to hear that like you said, everything is negotiable.
Jake: Lewis I know we’re pushing up against your time that you do have for this call, lets kind of wrap up here. I do have one question for you left before we get to that though, I want to go ahead and run through the quick summary of the business again.
The business was built in September of 2016 has a monthly revenue of $43,945 expenses of $31,227 to make for a net profit of $12,719 which is generated on a 12 month average. Included in sale of this business at the seller central account, 81 skews, registered trademark and all related intellectual property. Please note that inventory is not normally included in the list price, further details can be provided to active depositors.
Lewis, I know this is going to be a little difficult because as you mentioned at the start, it’s weird talking about your baby, your business like this in such simple terms, but now 30 seconds give me your best 30 second pitch on why this is a business worth buying?
Lewis: We’ve created a huge amount of value in the opportunity that we’ve got. It would be very surprising for somebody to buy this business and not increase the markets that this business operates in or the skews that this business sells.
I would not be buying this business to sit at 81 especially with the very valuable data that we’ve got from our sponsored ads and keyword research that we know what people are looking for. We just haven’t gotten around to giving them that option and you’re going to be buying it from nice people, so who else are you going to buy from?
Jake: Awesome. Lewis, thank you so much for taking the time today, I just love the passion that comes across when you talk about this business. Clearly, clearly there’s a lot of opportunities and even if you didn’t want to take advantage of those opportunities.
You could just come in and not put very much time in cost on the business. Take a look at this last December, this last holiday season, there was $87,000 in profit and I believe $212,000 in revenue and that’s only for one month.
Lewis: We could show you how many skews were out of stock. Those revenue figures were based upon the skews that were in stock, and you could put an academic value as to what it could have been if we had our ducks in a row but all good.
Jake: Lewis, thank you for the time today.
Lewis: Okay, thank you Jake.
Jake: You’ve just learned how this business works, and I want to give you the opportunity to learn more about what you can do to buy real online businesses just like this one. If you want to find out more about businesses making real money.
Head over to empireflippers.com and sign up for a mailing list, there is an entire world of people quietly investing their money in to online businesses and seeing great returns. Now we want to help you do the same thing.