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RMRB 19 - Growing a Passive Business

RMRB 19: Growing a Passive Business

JakeDavis November 14, 2018

 

Jake spoke with Maurice about his ecommerce business. He created it in February 2017 and in only a year and a half, he’s managed to grow his business to be making over $30k/month in net profit! With almost 300K Facebook followers, an email list of over 300K that hasn’t yet been monetized, VAs in place, this business requires low work hours from him. 

Find more businesses like this one on our marketplace: http://bit.ly/2Pvcv9l

Check Out This Week’s Episode:

 


Submit Your Business For Sale


 

Speaker 1:           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 combed through the P&L. 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 to level up your knowledge, whether you’re looking to buy a business or looking for inspiration to take your current business to the next level.

                                Hey, listeners, welcome back to the Real Money Real Business Podcast. This week, I’m going to be speaking with Maurice about his E-commerce business in the beauty-and-cosmetics niche, and the crazy thing about this business is that, in only a year and a half, 18 months, he has grown the business to be making over $30,000 every single month in net profit.

                                Maurice, thank you for coming on here today. How are you doing?

Maurice:              I’m great. Yeah, I’m glad to be on this interview.

Speaker 1:           Maurice, can you tell us a little bit about your background in building and running online businesses?

Maurice:              Yeah. Sure. I actually have a background in working from multinationals, so I spent about seven years in the strategy and consulting, and I was very much into digitalization. I did digital banking of the future. I did digital insurance of the future, and there was a lot of stories going around digitalization, and so, after work, I would just go online and just check out what’s going on and what’s trending, and I saw that, in terms of E-commerce and in terms of mobile purchases not only in banking, but in retail as well, these kind of interactions with customers have started to increase significantly, and I was wondering to myself after work if I would be able to put in some time to look at my own E-commerce business, so I started with my first account, which was a really, really small account, which was selling travel accessories because, myself and my colleagues, we fly around really, really often.

                                That didn’t really take off, and it’s because it felt incredibly niched, but, after that, I decided to go into something where I felt like the purchase behaviors were very, very aligned and very frequent, and it was in a niche that was too small. It was something broad, and so I looked into beauty and cosmetics. What started off as a very, very slow burn suddenly ramped up quickly as I started to look at trends in the market and just follow and ride through these kinds of trends, so, yeah, that’s a bit of a backstory of how I started this business.

Speaker 1:           Then, looking at this, when you decided to start this business, why did you settle upon your own E-commerce store using Shopify rather than sell on some platform like, say, Amazon?

Maurice:              Yeah. I was looking at Amazon as well, but I felt like Amazon was pretty much a price war and, for myself and with my background in strategy and marketing, I felt like I had a real case that I wanted to try to make it work whereby we wouldn’t be just challenging on margins all the way, but, in this company, we command a bit of a premium as compared to our competitors, and certainly, as compared to Amazon, we are priced significantly more. Okay, not significantly more, but we do command a premium as compared to the price wars in Amazon.

Speaker 1:           Is the business seasonal at all?

Maurice:              From my experience, it’s Q4 that performs the best. In terms of seasonality, I feel like there’s a case for Q1 and Q4 doing better, but because our customers are generally female and they have shorter buying cycles, so that isn’t very much of a problem.

Speaker 1:           Then when you look back over the last year, you see a very dramatic spike for the business in April of this year. Correct?

Maurice:              Yeah.

Speaker 1:           If it’s not seasonal, the April spike wasn’t due to the product selling better in the springtime, what brought upon that significant spike?

Maurice:              Yeah. Okay, so, because in the very beginning when we started looking at trends, this was something that we were ahead of the trend, so, instead of being fast followers, this was something that I felt this product was ahead of its time and, when we launched it, we set off so everything caught fire. It did really, really well, and with a lot of assistance from Facebook that drives our traffic, having that really, really viral product really launched our company into the scene.

Speaker 1:           How do you feel that a new owner or you if you were to keep the business could replicate that April month, because you made $140,000 in profit in April alone? How can we do that again?

Maurice:              Yeah, so I don’t have an easy answer to it, but I do have some very good guesses. In terms of continued success in this business, I feel like it hinges very much on being fast followers. I see this as an example to the fashion industry, for example, companies like H&M or Forever 21. It’s just right behind when the source of the fashion trends are coming up, so they are doing it really, really quickly and making sure that their business moves very quickly, and this is very much dependent on good relationships with suppliers, having that very strong network and then being able to source in a very short span of time what you’re looking for or being able to manufacture from scratch if it’s something that you want to start selling.

                                The slightly other answer how to replicate April’s success, I think, I would continue to follow trends, but at the same time I’ll keep an eye out on what I think on products or different ideas that would set the company apart from the rest of the pack, and a lot of innovation is required, a lot of thinking out of the box, and, yeah, with a team that’s set up to always be looking out for trends, I don’t think that you’d be very far away from that.

Speaker 1:           Why have you decided to sell the business today?

Maurice:              Yeah. A few months ago, based on the success of this company, I actually got into a network of other investors, and there is a person or a group of people who are looking into setting up a Bath & Body products kind of company, and they are willing to put a significant amount of money for me to look into their business and grow their business and, because of that, it’s something that I am looking into immediate effect, and, yeah, there are more details of this new company to follow.

Speaker 1:           Do you have anyone helping you run the business or are you doing all of the work?

Maurice:              I have a team of five people, and they work remotely in the Philippines, and they help me manage a lot of the processes especially revolving around dealing with the customer.

Speaker 1:           You have five employees, and they handle a lot of the tasks in terms of dealing with the customers and stuff, so what do you have to do as the seller? What are your roles?

Maurice:              Yeah. Okay, so my task is very much a reviewing kind of role whereby my employees are assigned several tasks. For example, in terms of responding to the customers, so there’s somebody who’s heading customer experience and looking at emails, looking at claims, looking at disputes, looking at people who are unhappy or happy, so they report back to me and, based on what this person reports back, I would make an assessment and just do any decision-making if required.

                                In terms of, for example, for them looking at products, so there’s a product team that’s scouring around the Web for various trends. They would be copying those links and pictures to me, and I’ll be looking at the videos. I’ll be looking at the different creatives and just reviewing, so it’s very much like a reviewing role where you tick the box or where you check and say no.

Speaker 1:           Then, if you had to quantify the number of hours that you spend, how many hours would you say is spent on the business on, say, a weekly basis?

Maurice:              Yeah. I would say, if everything goes well and there’s no escalation, I would say it takes about two hours a day, more or less. Yeah, sometimes more, sometimes less. In the event that there is an escalation, so it could even go up to like an extra two days to resolve for something that’s very, very serious.

Speaker 1:           Given your background in marketing like you were just speaking about earlier, where do your traffic come from?

Maurice:              Yeah, so the traffic comes from Facebook predominantly, and this is because Facebook has a wonderful invasive tool that gets into people’s news feeds, and what I like to encourage people who like to advertise on Facebook is to do something that’s as native as possible so that it appears to be either a friend’s post or a page that a typical user follows. I say this because, in general, nobody likes to click ads and people usually skip ads, but, on Facebook, there’s a good opportunity to capture the attention of potential viewers or purchasers. Facebook is a wonderful tool that allows us to become very targeted based on what people like, share, comment or click, and so, yeah, we use Facebook a lot. We really, really love it.

Speaker 1:           Do you feel like there are any opportunities to grow the marketing efforts beyond Facebook and social media? Do you do things with email marketing? Have you tried to get on other platforms? Where are the marketing opportunities?

Maurice:              Yeah. In terms of inbound marketing, the quick wins I feel in other social media platforms like Twitter, YouTube and Pinterest that we haven’t really explored because a lot of the results are coming from Facebook, so that’s the best use of our time for now, yeah, but, definitely, those platforms. I think a second thing would also be coming up with our own content, so write-ups on about what are our top 10 bestsellers, why they are our bestsellers. Keeping people always interacting with our stuff, for example, like a lot of written content on a blog, I think that would help tremendously.

Speaker 1:           Hey, listeners, do you want to the business that is just right for you? Head on over to Empire Flippers and have a look at our marketplace where you can see 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.

                                What are the other opportunities for growth that you see a new owner being able to take advantage of?

Maurice:              I suspect that it would be important for a new owner to get very close to the customer, and I’ll give an example. About 90% of our customers reside in either the US Canada, or the UK, whereas I’m residing here in Singapore, which is pretty far away from Asia to the west. There is a lot of advantage, for example, incorporating the company in the US, manufacturing in the US or Europe and sending it out to customers from there, and you can be touch with influencers within the country. You would be able to be spotting the trends much quicker than us from out here in Asia, so I feel like, if you want a really, really solid customer base and if you are from any one of those countries that I mentioned, I think there’s a lot of opportunity for growth.

Speaker 1:           Do you feel like there are any potential risks associated with this business that you want a potential buyer to be aware of?

Maurice:              Yeah. Like most businesses, I think it’s very reliant on ebbs and flows, and I say this because in … when you get a good trend, you perform extraordinarily well and, if you do it fast, you execute quickly, you perform well. The risks are associated with in the event that, whatever you do and whatever you try, it doesn’t work, then you got to [right 00:13:44] out the bad seasons, yeah, but, thankfully, this hasn’t been very often because of the niche that we are in.

Speaker 1:           If you were to expand beyond the E-commerce store, would you focus on Amazon? I know you said that you didn’t want to do Amazon at the start of this just due to, in your mind, it being a price war, but now that you have an established brand and established product, is that something you would focus on?

Maurice:              Establishing on Amazon?

Speaker 1:           Yeah.

Maurice:              Yeah, I think in the event that it’s an additional distribution channel, doesn’t cannibalize our current margins, yeah. Yeah, and that’s definitely something that can be considered.

Speaker 1:           Would you commit to a noncompete?

Maurice:              Yes, I will.

Speaker 1:           How much support are you willing to offer a new owner during the transition period?

Maurice:              Yeah. I think, in terms of support, I’m actually willing to offer support for even up to three months because this is something that I think needs time in terms of handover, in terms of migration, in terms of whatever, best practices. Yeah, I’d love to share all these things with a potential buyer.

Speaker 1:           Are you willing to negotiate on something like an earn-out?

Maurice:              My short answer is yes, and I would like to include that I’m open to keeping a minority stake. I say this because I still very much believe that this business will continue to be successful. The only thing is I’m unable to commit time, so what I can do is consultative role. Yeah, I’m comfortable doing that, so, for maybe like two days a months out of 22 days a month, I’m happy to sit down and provide any consultation or if there’s any key decisions that need to be made, yeah, but, other than that, yeah, I don’t think I’ll be able to commit more time on top of those two days.

Speaker 1:           Maurice, thank you so much. I do have another question for you, but, before we get to that, I want to go ahead and run through the quick summary of the business again.

Maurice:              Yeah.

Speaker 1:           The business was built in February of 2017, has a monthly revenue of $112,465, expenses of $82,336 to make a profit of $30,128 which is generated on a 12-month average. Included in the sale of this business are the primary domain and all site content and files, Shopify account, Facebook Ads Manager, contact dedicated English-speaking vendor and SOPs.

                                Maurice, if you could place yourself in the shoes of an objective potential buyer, why do you feel like this is a business worth buying?

Maurice:              In terms of the business’ ability to consistently drive results, I feel like this is something to consider. I feel like cash flow has never been a problem. I think, in terms of the processes that have been set out, they are very robust. There’s minimal action needed and, yeah, I think that it will continue to perform for the next few years with someone who has a steady hand and, yeah, just making good decisions with their business.

Speaker 1:           Maurice, thank you so much for taking the time. It’s really fascinating to me how you built this business up on your E-commerce platform, and there are plenty of opportunities to expand, and I just really appreciate your taking the time to sit down with me.

Maurice:              You’re welcome. Yeah. I enjoyed talking to you, and, yeah, I’m happy to share more about my business in the future.

Speaker 1:           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 into online businesses and seeing great returns. Now, we want to help you do the same thing.

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