Buying An Online Business From Empire Flippers (PART TWO - FINDING ONE AND NEGOTIATION)

It's been 12 months since I closed on my 2019 purchase from Empire Flippers. Here's the story of how I ended up with what I bought.

This is part TWO of this multi-part series about my 2019 Empire Flippers experience. When the other parts are available, I will come back and link them.

Part One: Backstory/WHY

Part Two: Negotiations and Closing

Part Three: Migrations Challenges

Part Four: Running the Business for 12 Months

Part Five: Takeaways/Hindsight is 20/20

Before I bought a package of websites through Empire Flippers, I couldn’t have called myself a “business owner.” 

I’d never owned a business.

I’ve worked my entire adult life, and for many of my childhood years. I’ve been to school (and then more school) and earned a lot of money that I was proud of earning. 

Though I’d been in charge of important projects, I’d never been the boss.

In fact, even though I own several websites, I struggle to call what I do an actual “business” or to think of myself as “the boss.”

I think many people come to the idea of purchasing a business through a broker like Empire Flippers without the experience of running their own business, or even having management responsibilities of a business owned by someone else. 

It is an amazing thing that someone without any experience could just buy an existing business and in just a few minutes, make that transformation.

Become a business owner.

Fulfill a lifetime dream set by many. 

But it is also dangerous.

When I made the decision in late spring of 2019 to see if I could buy an existing online business, I wouldn’t call myself naive or inexperienced. I had spent close to a year testing the waters of the online world, and had substantial experience working with businesses in the offline world.

But even with that knowledge, I think I still came to the process of finding a business like many people do at first.

I discovered what I believed was possible, through hearing about someone else’s experience. For me, it was YouTube. For others, it may have been through a blog, Facebook post/group, or other social media.  

Once I did some investigating, I realized that I had enough cash on hand (or could get at it easily enough) to do something similar to what I’d seen. 

I got excited, and let that emotion kick start the hunt for a business. 

But rather than looking for a specific kind of business (divided by strategy or monetization method) that I could skillfully run given my background, I went looking for one that fit my price range. 

Then, once I found one in my price range, I started to look at it to see if I could make it work for me. 

My impatience turned listings that were only so-so attractive given my knowledge into something much shinier. 

If you go to Empire Flippers, you will find businesses listed for sale in Dropshipping, Amazon FBA, SAAS, Affiliate, Ads, Subscription, and more.  

The listings are pretty much optimized for inexperienced buyers. Why else would they disclose how much time the seller works on it in a given week, and how much time the buyer would need to expect to commit?

The listings promise SOPs (Standard Operating Procedures), so theoretically anyone can step in and take over, regardless of their experience or skill level. Brokers will even handle the stress and cost of migration. 

At every step of the way, simplicity and ease are emphasized, to overcome buyers’ reluctance and objections. 

The job of the broker is to find a buyer and then close the deal. 

They are not there to save you from yourself. They are there to sell the businesses they have contracted to list. They are very friendly to the buyer, and do everything they can to be useful.

But, buyers need to remember that the broker does not represent them.

Period.

In many cases (I would like to believe most cases), a win-win occurs. Someone who wants to sell their business is able to sell it for a profit, and someone who wants to own a business but couldn’t otherwise afford to start an offline business can buy one at a price they can actually afford. 

But what if this places a technical business in the hands of someone who isn’t truly prepared to manage it?

Should someone who has never renewed a domain name, managed hosting, or written a blog post hand over thousands of dollars to purchase a business which requires them to know about all of those things?

I have to imagine that a portion of those types of deals result in the complete failure of the business, and a total loss of the digital property/asset someone originally poured blood, sweat, and tears into. 

As I reviewed the listings I found on Empire Flippers (and on other sites, such as Flippa, FE International, and others), I focused first on what I could afford.

I was looking for something under $50,000. 

Obviously, the higher the income per month, the better, so that I could hope to earn back my initial investment as quickly as possible. 

At the time I was looking to buy, the inventory available was one of the main reasons why I ended up making an offer on a package of sites monetized primarily with Google Adsense. 

I was totally open to Amazon FBA, due to all the content I had consumed in the previous six months and the false starts I’d had with Amazon Merch and with dropshipping/Shopify. I would have looked at a Kindle Direct Publishing business, or even a print-On-Demand business. 

But there wasn’t a lot in my price range at the time. 

Rather than wait for more listings to make it to the marketplace, I instead started to seriously consider the inventory that was available. 

With Empire Flippers, you have to put down a deposit in order to get the details of a listing. In 2019, well before the scourge of the pandemic hit us, many sites were sold for asking or even over asking the same day they were listed. Some people kept large deposits on hand with Empire Flippers so that they could close a deal quickly without having to lose out because money was in transit via wire transfer.

I will stop right now and say that overall, my experience with Empire Flippers was a positive one. I would buy a business from them again in the future, and if I was ever in a position to sell one, I would be happy to have them help me sell it. While my experience wasn’t perfect (and I don’t think I’ve ever said that it was), I feel that the company has its heart in the right place, and is working very hard to do the best possible job it can.

With that being said, on with the story.

I did not feel comfortable enough with my risk tolerance to make an offer on a site without doing any due diligence, so I was left with the packages under $50,000 that did not sell right away. 

At this point, I was well aware that there were reasons why these listings did not move quickly, and I could not expect to find the perfect package. Any listing that had been on the market for a while was likely to either be overpriced, or have some warts that turned other buyers off. 

I rather liked the idea of checking into listings that had been on the market for a while. I thought that maybe a seller who had not received many offers would be open to negotiating a lower multiple, or even be desperate to close a deal just to get the cash for their own personal needs. 

I put down a deposit with my credit card to get access to a listing that I was interested in at Empire Flippers, but before I could complete my due diligence, the listing was sold out from under me. 

I tried again, for a listing that was a package of sites. I’ll ruin the big reveal at the end and disclose that this is the listing I ended up purchasing. But it didn’t happen right away. 

The sites were listed at a 27x multiple. In 2019, this wasn’t terribly overpriced, and even maybe under the going rate for a Google Adsense property. 

In doing due diligence, it was easy to see why a lot of people weren’t interested in the listing and for the listed multiple:

• It was for a handful of sites (not one), which also came with a few project sites that weren’t monetized. This seemed to me to be a strategy to support a potentially over-inflated multiple.

• The sites were all niched-down pretty far in the tech space. It would be hard for someone to take over these sites without any knowledge of these topic areas. Even keyword research to outsource writers would be hard, and would require a lot of learning.

• The content in the posts was just not that great. The original creator of the sites had obviously worked very hard to build up the business portfolio into what it was (more than 1,000 posts across the sites in total). In places, it looked over-optimized for SEO, and English was not the first language of the main writer. I worried that the sites were ripe for Google update troubles. 

• The sites were getting tons of traffic, but only from organic Google search. A pretty major vulnerability.

I think where a lot of people saw red lights, I saw green (at the right price). I think that is part of my personality, if we are going to look at what about me contributed to moving forward with this maybe dubious deal. 

If you are an experienced content publisher, you may already be seeing all the red flags that other buyers saw.

And that’s not to say that I didn’t see them.

I did.

But where people see reasons to say “no” and to move on, I see opportunities.

I’ve always been that way. 

Where people saw risk with this listing, I think I saw that the sites were performing remarkably well as bad as things were. And just think what could be done if the content was done well!

I could learn enough to create content for this site. This is what I thought to myself. 

Here are the reasons why I liked this package:

• There were tons of low competition keywords I could shoot for

• The CPC for the keywords was reasonably high

• The sites were all 2-3 years old or even older

• The traffic on all the sites was stable, without bouncing down or up significantly and had been so for the past two year, and consistently growing steadily

• Earnings were also growing steadily, consistent with traffic

And not only that, I was brimming with excitement, I was ready to jump in with both feet, and I had the cash on hand. 

I looked at the sale price, and knew that I had enough cash to make an offer on the sites outright.

But rather than accept the multiple as established, I did some math and determined what I was willing to risk and lose 100%.

I knew that this deal, if it went forward at any price, would be risking my entire investment.

After all, all of us who depend 100% upon organic Google search traffic know that we could lose our entire livelihoods in the matter of a minute.

I wasn’t prepared to risk my small nest egg of available cash on something I already knew to be risky just as a business model, aside from the warts I had already identified as potential problems. 

I wasn’t prepared to put my lifestyle (staying at home with my baby) on the line. 

So I made an offer on the site, for 50% of asking.

Some people might be reading this and think, what a jerk move that was.

I see young people making pretty ridiculous low ball offers out there in the world all the time, probably the result of the teachings of someone on YouTube. I have definitely heard people complain about these types of offers.

In the Before Time (before I started my online journey), I participated in countless negotiations of simple and complex issues. I am a trained mediator as well.

My decision to make the offer I did was a calculated one, based upon my experience in negotiations, what I valued the property at, and what I was willing to pay.

Not because of something I saw on YouTube.

I was willing to pay more than 50%, of course. But that wasn’t going to be my first offer. I was actually willing to pay somewhere in the range of 60-75% of asking.  

But that wasn’t going to be where I started.

In almost every single negotiation I have ever entered into, the opening offer sets the stage for where the final price ends up (assuming that the opening offer isn’t for asking). 

If you want to end up paying $45,000 for a site, and they are asking $60,000, you would never call them up and offer $45,000, because they are going to counter for more. You’ll offer less than $45,000, with the goal of ending up at $45,000.

Of course, if you bid too low, you risk offending the seller, who then refuses to budge because of your insult to his property. Or just blows you off and doesn’t even engage with you.

What I didn’t expect though, was for the broker to laugh at me.

He was very polite about it, of course. But when I told him what I was willing to open negotiations with, he actually laughed, and told me that he wasn’t even going to take it to the seller.

I was surprised.

First, I was surprised that the broker wasn’t going to take the offer to his client, even a bad one? At the risk of offending him/her? As someone who had previously spent a lot of time in negotiations, I couldn’t even imagine hiding the fact that an offer had been made, even if it was a bad one.

What that told me, was that the rep had probably already filled the seller’s head with expectations, and was hoping against hope despite passing months that some buyer would come in soon with the promised price. Otherwise, the rep would look foolish encouraging the seller to accept a lower price after having told him that his property was definitely worth a certain amount.

Now, I have no idea if that is the truth. But as a participant, that is what I took away from the interaction.

In my offline negotiating experience, my clients were only as offended as I trained them to be about offers and counters. If I prepared them adequately, they understood that low ball offers to start are not insults. They are the beginnings of a dance. 

He told me to try again.

I declined to bid against myself. I explained to him in depth as to why I had made the offer that I had. I also made it clear to him that I had some room to move, but that I needed the seller to be prepared to move as well.

As we spoke, he listened carefully but did not have a lot to say about my concerns about the listing and why I did not want to offer full price. He did not question my methodology at all, or even attempt to argue any of my points and to why I wasn’t correct. 

What I took this to mean was that he probably didn’t have experience running the type of business he was trying to help sell. He didn’t understand why some of the issues were a big deal to me. He was almost entirely focused on the amount the site was then earning. 

For the most part, his response was, “Yeah, I understand you, but the site earns $_______ a month.”

Needless to say, things didn’t go very far. 

I honestly don’t know if the rep ever took the offer to the seller. But the listing had been on the market for months (rather than days or weeks) and perhaps I was starting to see why.

Regardless, that was the end of the negotiations. I let the offer I had made expire, and I moved on.

I bought a three-year old site over on Flippa that had about 200 posts of decent content, to experiment on. The seller couldn’t figure out how to get adsense approval, which I was able to do by deleting some of the complicated navigation plugins which made the site look extra cool and adding a privacy policy.

And I went back to working on the site I had started from scratch in April 2019.

About a month later, I was contacted by the rep from Empire Flippers. 

He wanted to know if I was still interested in the listing that I had been rejected on the month before.

I said that I might be, pending review of the due diligence to make sure nothing bad had happened in the intervening weeks. 

He asked if my previous offer was still on the table, and I told him that it was not. I wanted to know, before getting into negotiations again, if the seller was open to negotiations on the multiple. He indicated that the seller was ready to talk.

After that, it was mostly horse trading. I offered what I wanted, and I received counters as expected. We worked towards a middle ground until everyone was ready to just be done with it. In the end, we agreed that I would pay in the range of what I had been willing to pay previously, which was about 25-30% less than asking. 

And just like that, I had done it.

I had bought a “business.”

A move I would question in coming months.

This is part THREE of this multi-part series about my 2019 Empire Flippers experience. When the other parts are available, I will come back and link them.

Part One: Backstory/WHY

Part Two: Negotiations and Closing

Part Three: Migrations Challenges

Part Four: Running the Business for 12 Months

Part Five: Takeaways/Hindsight is 20/20