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RMRB 3 - Making an Online Business Passive

RMRB 3: Making an Online Business Passive

JakeDavis September 5, 2018

We have another dropshipping business in the apparel & accessories niche. Cole has managed to grow the business to $8k/month in profit in two years by driving traffic from social media and an email list, as well as improving SEO to get organic traffic. While the email list could be utilized more, Cole has a VA in place to help make the business passive. 

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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 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 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, I’m excited for this one. We have a drop shipping business selling worldwide and it’s valued at a quarter million dollars. So very excited to speak with the seller today, the owner of the business, to figure out kind of what makes this business tick and how he grew a quarter of million dollar business.

                                Cole, thank you for taking the time to be on today. How are you doing?

Cole:                      Hi Jake. Doing well, thank you.

Jake:                      Yeah, it’s my pleasure. Thank you for taking the time to be on with me today. I’m looking forward to our chat.

                                Before we get to the questions that I have for you. I’m gonna go ahead and run through a quick summary of the business. Again, the business was built in October of 2016, has a monthly revenue of $42,916, expenses of $34,432, to make for a net profit of $8,484, which is generated on a 12 month average. Included in sale of this business or the domain, site content and files, email list and social media profiles, which include two Facebook pages and one Instagram page, profile, Instagram profile, not page.

                                Cole, can you tell us a little bit about your background in building and running online businesses?

Cole:                      Yeah, so this is actually my first online business. I was recently employed in a 9:00 to 5:00 office job. I live in a very expensive city, Toronto, Canada, where a lot of people are just kind of getting by and [inaudible 00:01:50] online business just as an additional source of income. Ended up spending, I think it was about five or six months sort of figuring things out with drop shipping. I had a friend that had some success that had sort of recommended it to me and had a few kind of semi winning products at the beginning, but it was not very profitable. The store started out as a general store and I was sort of testing our different niches and seeing what would be viable. I ended up settling on women’s accessories and actually a sort of specific sub niche within that niche.

                                I noticed that those types of products we’re selling quite well so I ended up rebranding the site completely around that niche. From that point on became profitable. And yeah, over the last year I’ve been adding more products within the niche, testing more products and I’ve had quite a bit of success.

Jake:                      And why are you selling the business today?

Cole:                      I’m selling the business because I have another project that I’m currently working on. It’s white label site that I’m going to be watching with a friend in the coming months in the beauty niche and it’s taking up quite a bit of time. Essentially I’ve been looking to get some capital that I can invest in that business and potentially other businesses as well.

Jake:                      When you started the business all the way back in October of 2016, so it’s been a year and a half now, was there anything that you would call a sort of bump in the road or was it pretty smooth sailing when growing the business?

Cole:                      Well, I was like, I’m like a lot of my peers that I was actually completely new to ecommerce. So the bumps in the road where mainly learning Facebook ads, learning how to improve average order value, learning the ins and outs essentially of ecommerce from scratch were probably the main challenges. Also finding a certain type of products that would work took some time. But yeah, it was sort of a trial and error process that eventually resulted in quite a bit of success.

Jake:                      When you look back at the numbers for the last year, you have to notice this gigantic spike back in November of last year. What happened?

Cole:                      Yeah, so in November was a pretty amazing month. Q4 a lot of people complain about increased prices on Facebook and whatnot, but I just ran a lot of promotions, Black Friday, Cyber Monday, started doing some marketing sort of around starting in November and leading up to Christmas that was really successful. I didn’t see this spike in prices that a lot of people were saying, and I suspect that has to do with just the success of the marketing campaigns that I was running. So I just pretty much scaled to the moon in November and December.

                                Beginning of Q1 things slowed down a little bit and then also with Chinese New Year in February, given that some of my products are dropped with, most of my products are drop shipped from China, with Chinese New Year shipping times can be a little bit problematic for drop shippers. So scaled back a little bit, but yeah, things are running smoothly and profitable. But definitely Q4 was just a massive quarter for me.

Jake:                      Do you predict that happening again this coming quarter four?

Cole:                      I do think so. Yeah. I actually think the site could surpass those numbers quite significantly. I’ve been running Facebook ads pretty much exclusively. I’ve done a little bit of Instagram shout outs. I tested Pinterest ads for I think $20. But the vast majority of my traffic has come through Facebook and some email marketing.

                                But I think a savvy marketer that has skills with different ad platforms, Google shopping, Google AdWords could really take this site to the next level. It’s done extremely well with one traffic source. So I do definitely believe that these numbers could be surpassed.

Jake:                      There’s also an email list, correct? And there’s about 10,000 subscribers?

Cole:                      Correct.

Jake:                      So first off, how did you go about growing that list?

Cole:                      Yeah, so I’ve used a couple of different apps, pop up apps. I was using really Welio for a little while. And I used Privy and also Buyers. So the 10,000 or so scribers are a mix of buyers and people that have visited the site, emails I’ve collected through, did pop ups and spin to win type offers. 

Jake:                      And do you use the list regularly for email marketing?

Cole:                      Yeah, email marketing was something that I neglected for quite a long time. I started sort of seriously, well I don’t even know I would say seriously in terms of comparison to the amount of time that some marketers allocate towards email marketing. I’ve done most of it myself, but I started more regularly sending out blasts in November. So coinciding with Black Friday, Cyber Monday. I had done some campaigns that started then and I really started to see some success and just unbelievable ROI. So I started to do them a little bit more often.

                                My email marketing knowledge is a little bit limited. So again, I think that it’s definitely an area in which if someone with some skills at segmentation and different types of offers could really take my list to the next level in terms of profitability.

Jake:                      Are there any other areas of marketing that you don’t feel like you’ve been hitting to the business’s full potential just due to lack of time or knowledge?

Cole:                      Yeah, definitely. I think the main thing is definitely traffic diversification. I’ve been wanting to get started with AdWords and Google shopping, but also native ads, Pinterest and there are so many SnapChat ads. There are so many different platforms out there now that I know are working extremely well for a lot of people and I just haven’t had time maintaining the site with also this new project and up until recently having a full time job, which I’m no longer there anymore.

                                But there’s definitely a lot that can be also in terms of someone has some development experience that’s also a website design experience. It’s not something that I have experience at all but my site converts really well. But there definitely is a lot that could be done specifically or particularly with in terms of traffic diversification.

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.

                                Do you feel like there are big opportunities in terms of like expansion? Are there other platforms you could be selling on that you’re not? Are there other products that you could include that you’re not?

Cole:                      Absolutely. The niche that I’m pretty much is terms of the types of [inaudible 00:09:19] limitation, but there are a ton of different types of products that you can use within this niche. And in terms of selling on other platforms, I have some ecommerce colleagues that are doing extremely well on Amazon. That definitely could be an option. Ebay as well. I’m selling specifically on a Shopify hosted site, so definitely other options out there.

Jake:                      What are you currently spending your time on when you are running the business?

Cole:                      So right now most of my time is launching and monitoring as well as importing new products, doing product descriptions. My assistants, my virtual assistant, is in charge of fulfilling orders and answering emails. However, she does have some experience with importing products and product research. So that was something that I was going to get her trained up on. I just haven’t had time, but that is something that the new owner definitely could work with her on.

Jake:                      And so you have the VA. Is the VA willing to continue working with the business when a new owner takes over?

Cole:                      Yes she is.

Jake:                      Do you feel like there are any big risks associated with this business that a potential buyer should be aware of?

Cole:                      In terms of risks? I think there’s the increase in the cost of Facebook advertising. Most marketers know that it has essentially doubled over, I’m not sure if it’s the last year or 16 months or so. But I think I’ve found a ways to deal with that and still remain profitable. I’ve been using a lot of bundles, as we have a bundle app on my site that works really, really well. So I try to focus on products that can be combined into bundles, so products that have different variants with different colors.And I’ll offer a sort of mid to low range to price. But if you have like 10% off if you order two, 20% off if you order three, et cetera, a lot of times customers will take that offer.

                                So that has really helped offset sort of the increase in price of Facebook ads, which I have noticed. I think that’s probably the main risk I would say. And I think that could also be dealt with by diversifying traffic sources as well. Yeah, that’s probably the main risk I would …

Jake:                      So I think when you look at a business like this, it’s an excellent niche. As you said, it’s a very popular niche. It’s going to keep growing. There’s plenty of opportunity there. The business is succeeding with the Facebook marketing. You have the other sources of traffic ready for you. Like if you were to utilize the email list, if you were to improve SEO and run Google ads and all this stuff, it’s just really going to take the right person coming in with the knowledge in all of these different areas to be able to come in and grow the traffic to make the business even larger than it was in quarter four of last year, which is totally doable for this. Do you feel that it is?

Cole:                      Absolutely. Yeah. And I think it is, on top of that, adding more people to the team. So I’ve been doing this actually with myself and one assistant. So I think if someone really wanted to take this business to the next level, maybe outsourcing some the traffic generation to an expert in Google or an expert in Tableau or whatever, really could free up a lot of time and allow the potential buyer to focus on which ad platform he or she is quite knowledgeable in and perhaps outsource some of the other grunt work I think could be huge for growth as well.

Jake:                      Absolutely. I mean if someone were to buy this business and they look at a list of 10,000 emails, which is a very large list, but they don’t feel like they have a ton of knowledge and email marketing themselves, they could absolutely outsource the email marketing and to free up the time for them to focus on things that they are knowledgeable in. Like for instance, they could be really good at social media marketing or something like that.

Cole:                      Absolutely.

Jake:                      Would you commit to a noncompete?

Cole:                      I would, yes.

Jake:                      And how much support are you willing to offer a buyer during the transition period?

Cole:                      I think a month of email support and I would be fine with between two to four Skype sessions for an hour. That would be fine.

Jake:                      Are you open to something like an earn out?

Cole:                      Yeah, I would be flexible for something like that.

Jake:                      Awesome. Cole, thank you so much for the time. I do have one more question for you. Before we get to that, I want to go ahead and run through the quick summary of the business again. The business was built in October of 2016, has a monthly revenue of $42,916, expenses of $34,432, to make for a net profit of $8,484, which is generated on a 12 month average. Included in sale of this business are the domain, site content and files, email lists, and social media profiles.

                                Cole, can you just kind of recap and in your own words, give me your best 30 second pitch on why someone should purchase this business?

Cole:                      Yeah. I think it’s a business with a lot of potential because the success that it has had thus far has been under the guidance of a relatively new marketer. I think that just goes to show the success of a niche converts really well. The success that it’s had thus far has been just with one traffic source, well main traffic source, so there’s a lot of room for expansion there. It’s sort of a hands off business without having to worry about inventory, which is great. Can be managed from really anywhere in the world. Yeah, it’s a great business and it’s got a lot of room for growth, so that’s essentially why it’s a great option.

Jake:                      I mean, I think that’s just it. There’s a lot of opportunity for growth and there’s opportunity to outsource a lot of the menial tasks to make this as passive of a business as you want it to be.

Cole:                      Absolutely.

Jake:                      But on the flip side, if you’re looking for a business that you can put your heart and soul and time into, I mean this could be that business as well.

Cole:                      Oh yeah, for sure. I think that some people are more interested and even looking more on the branding side and importing products in bulk to the US or wherever, which is also a definitely an option. But the way in which the site is operating right now is sort of a more remote, sort of hands off and not having to worry about inventory type of business, which I think is appealing to a lot of people.

Jake:                      Cole, thank you so much for the time today.

Cole:                      Absolutely. Thanks a lot, 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 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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