Entrepreneurs Guide for Purchasing a Profitable Online Business

Getting his start in e-commerce proved to be a series of false starts for today’s guest, Jaryd Krause.  While he knew that getting away from a career in plumbing and having the opportunity to travel the world was the ultimate goal, it took him some time to figure out how to get there.

After several failed attempts, Jaryd realized he was not approaching his e-commerce career the right way and still had a lot to learn. Armed with the realization that what they say about ninety percent of all startups failing is true, he figured out that he needed to go in and buy an established business that had successfully passed the startup phase. He started to buy businesses and be so successful at it that people began asking him for advice on doing the same. Nowadays, Jaryd is running his businesses and coaching people on how to buy websites and earn passive income while following their dreams.

Episode Highlights:

• How Jaryd got his start and some of his past failures in e-commerce.
• Where and how he found the first business that he bought.
• The advantage of looking for listings with professionals brokers.
• Some mistakes Jaryd has seen with buyers he’s advised.
• How he guides buyers to align the business they are looking to buy with their personality and past experience.
• How Jaryd teaches his clientele to become attractive buyers.
• Advice he would give to someone who is coming into the e-commerce realm for the first time.
• Trends in e-commerce and where Jaryd sees the opportunity for growth.
• One last tip Jaryd would give to someone just starting out in e-commerce

Transcription:

Joe: Hey Mark one of the things we need to do is to plug the movie intro. Folks if you know that what that movie was shoot us a note and we will give you an audio mention. Chris our content director is big on that. It’s awesome and no cheating though. We’ve had a few folks that admitted that they looked it up on Google. Don’t do that just send us a note by listening.

Mark: Yeah, I think both folks have actually guessed right.

Joe: Yes.

Mark: I’m looking at you, Mike Nuñez.

Joe: Alright, listen. You had Jaryd Krause on the podcast talking about something that we talk about all the time but it’s good to hear it from someone else. We technically as Jason will always say our client is the seller. We have a contractual obligation to the seller. But as I always say to buyers look I can’t help my client unless I help you as well; the buyer, and constantly having conversations with buyers on the approach to buy a business. It’s great to hear from someone else. That’s what Steven does. You say he’s from Australia. You had a—not Steven; Jaryd, you had a conversation with him about this and his job. His process is actually teaching entrepreneurs or people that might be from the corporate world how to buy an online business is that right?

Mark: That’s right. So he does coaching in this and obviously, he has a lot of background experience in this as well. He started out buying smaller sites and kind of building up. And we just talked—had a conversation about his views on buying which is I think fascinating for us to do in our role because you and I have some pretty set ideas as to the best way to go about buying online businesses. We do this from the seat that we sit in which is working on behalf of sellers and representing them. But like you said we can’t do our job well unless buyers are also doing the job well and a good deal; a deal that’s good for a buyer is oftentimes a good deal that’s good for our client as well. Because if everybody wins, everybody’s happy afterwards, everybody’s making money; that’s the goal, right? So Jaryd and I talked a lot about some of the things he looks at. What does he look at and what does he coach when he’s teaching people how to make that first acquisition. So some of the things we talked about are like what are the struggles that people run into? How to get over this imposter syndrome that some buyers might feel when they’re coming into an acquisition like I’m really not the same class of this guy that built this business. And he gives some really nice practical tips on how to overcome some of those problems and address those head-on. So I want to get right into this episode here and just listen to what Jaryd has to say and this conversation. And just by the way a huge asterisk, here I apologize. My microphone wasn’t working properly on this. I thought I was recording through my regular podcast mic and was just going through my laptop mic so it’s going to be awful. But here’s the good news. I’m not really the person that you need to listen to. You need to listen to Jaryd. He’s got the good information in this episode.

Joe: Well, let’s get right to it then.

Mark: Alright, Jaryd thank you so much for joining me on the podcast. I don’t know if you’ve listened to many of our previous podcasts but we typically have our guests introduce themselves. I figured you know yourself quite better than I know you. So tell us a little bit about yourself.

Jaryd: Thanks so much for having me on. I really appreciate it. So with about myself I’m from the Gold Coast, Australia. I love surfing and that was my goal to start making money online so I could travel around the world and surf. I got started in this a few years ago now and I started buying one business and then I bought another one and another one. And the reason I came into this is because I tried to start my own websites Mark and I just sucked. And I failed a fair few times. And I started failing forward and came across that saying 90% of startups fail. Well, it’s actually the studies being done with that one. So I realized if 90% of startups fail why don’t I go and buy a website that’s past that 90% failure rate so I’m not just struggling and struggling and struggling. And I did that. I taught myself how to buy a website and then I got a little bit of help from different mentors along the way. And then I bought one and another one and it kept growing and eventually replaced my income to a point where people started asking me how to do it. And that’s where I am [inaudible 00:05:30.1] in that position of teaching people as well just basically from my learning.

Mark: So you said you tried starting some websites and they failed. Can you share any of those with us? Not to make you relive failures of the past but [inaudible 00:05:43.7] so you should know.

Jaryd: Yeah. Well, the hardest one was—so I was in Egypt and I realized I didn’t want to go back home broke to my job as a plumber. And I’m like I need to go here. So I thought what I really want to do is travel the world to make money online. So I typed into Google how to travel the world to make money online. I literally typed that in and what popped out was people travel blogging. And I just went yeah that’s me. I’m going to go away and start travel blogging. And I did that for I think bit a bit over two years and I made a little bit of money. But what I realized eventually was just the competition was so fierce. Everybody with an iPhone was my competition pretty much. And it was a good value because I learned a lot on how to grow websites and how to build websites and all that sort of stuff. And that was—they did flop though like I’m just spending so much time on it and it wasn’t really worth what I was getting back like at all. I was spending a lot of time on it. But that time grew into a lot of knowledge and then I thought alright I’m going to start; the second one was I’m going to start a drop shipping business. And I got home and I got my phone and I just spent a month calling people to become suppliers for this store. And it was called AusGlobetrotter—oh no it wasn’t called that, my blog was called AusGlobetrotter and my drop shipping store was Trotter Gear. And I just wanted to put up a whole bunch of travel products like backpacks and heaps of these different types of travel products. And I got a bunch of suppliers and I built this store and I started making a few sales but it took a fair bit of—

Mark: What year was this?

Jaryd: 2013. And I started making a few sales and I’m like alright cool now I need to double this down and I forgot how long it takes to really build a business and get traction. Especially if I was doing it for free and not using paid advertising. And eventually, I realized that I was just coming up against some pretty fierce competition. You know all these big guys that are selling hundreds of these a week and I’m selling like one every now and then. And it was pretty deflating where I just I bit the bullet and ran around I’m just going to have to turn everything off and start again. And that’s been two businesses that I started and I learned a lot. I didn’t make a lot.

Mark: You value was in the education of going through that. Drop shipping is something that is a tough category to compete in especially if you’re doing that around 2013. There’s too much and a lot of people are getting [inaudible 00:08:43.4] drop shipping. So how did you start to realize well why don’t I go ahead and buy businesses and websites that are already been established? When did you buy your first site?

Jaryd: So I bought my first one in 2014; at the end of 2014. And I was pretty hair locked; I rushed off into it and it was a good investment and I got all my return back and everything like that and it kept growing but I should have taken a bit more time and a bit more—build a better process on due diligence. So I don’t know if that’s the same for everybody when they’re buying their first website. But it was certainly the case for me. I didn’t really seek out coaches or help or mentors I was just running it on the fly and yeah early 2014 and that—but when I did buy it I realized like wow I’m earning so much more money from the share market when I was investing the share market. Any sort of investment I have ever made I was making more money and I realized that was the norm at that time with the returns or the multiples that were around just in that year.

Mark: So how did you start looking for your first business and how has that changed? I think one of the problems that buyers have today is deal flow, right? Every business I just put on the market that is worth looking at has literally dozens if not hundreds of people looking at it at the same time. Where did you find that first one and what are you doing these days to really secure good deal flow?

Jaryd: Yeah. So I found out about this marketplace Flippa. I went on there and realized that was a lot of not so great listings and much like—and I’ve spoken to the CEO of Flippa a couple of months ago and they’re making some amazing changes; new CEO, it’s really coming around which is great. But then they just hadn’t had people that like though you were allowed to sign up anonymously and people were listing a lot of junky sites on there and it was—I felt it was a bit of the Wild Wild West. And I was just trying to find this diamond in the rough. And I looked for a long time. And that’s where I bought my first business. And where it’s changed now is I’m not so much on those marketplaces that are out now. It’s because you’ve got to sift through so many listings to find something that’s decent. And a lot of my clients they do that and they say I don’t really spend too much time on there. I say have a look every now and then but where we’re really finding them is the brokers like you guys where the listings; you guys have your brand name. You have a reputation. You don’t want to list something that’s a junky website or not so great. And that’s why you have your process before you list it for sale. You don’t want to sell something to somebody and it just goes down that go blow like that because people are going to complain and bad reviews; all that sort of stuff. And that’s why I like to look to the brokers like you guys because they’re more quality listings and there’s already been a slight bit of vetting done and it makes the process so much easier when you come to do your due diligence. You guys actually help us buyers get more information rather than us to have to rely on sellers as like yeah maybe I’ll sell my site here and I’ll see if I can get some interest and they’re just not like very prompt with their response should I say.

Mark: Sure. So are you still active in buying sites?

Jaryd: No. Personally I haven’t bought a site in a while. I’m really—I do look at a fair few sites though especially through my clients. I help vendors in due diligence processing and stuff like that. So it’s great to keep me in the game. If I wasn’t doing that I’d be actively just purchasing. But yeah, I learned stuff. It’s great too because I learned so much from that process too with my clients. How I can sort of take a backward step and not be fully in the game but I’m a bit out and just have a better—it’s a really good approach for both clients and myself. We’ve both gained so much from it.

Mark: Yeah. So now you’ve transitioned over into this [inaudible 00:12:58.8] because of just how you’re doing and all that so [inaudible 00:13:01.7] learn is that—I’d like to pick your brain a little bit on what you’re telling people in this coaching process and some of the problems that you’re seeing. So let’s start off with this, out of the coaching clients or the clients that you’re coaching, these are all people that are looking to buy websites and they’re going out there and looking to maybe build a portfolio of these sites and getting into the game. What are maybe some of the top mistakes that you see most commonly among people that are looking to buy?

Jaryd: Yeah. The most common one is where people just start seeing dollar signs. They start to see—and a lot of my clients haven’t really known that this industry even existed. And they start looking at sites much like a lot of people listening to this already know that your website is much like a property website where they can scroll through and look at listings. It’s the same when people find this out. I noticed when I first come to this like oh my god I can buy this business this much and the multiples this much and I just go and this is in my end and it’s only taking x amount of hours and they just go; they want to rush through it. And that’s probably the biggest mistake is they sell themselves into the business. And what I’ve noticed is that sometimes whether you like this guy or not—what Donald Trump says sometimes the best investments are the ones we never make. And I find—and this is what I tell my clients as well is that if you can’t sell yourself out of the business because the data shows it is so good. I feel that it’s an investment that you need to really pursue. But instead of trying to sell yourself into the business why don’t you try and sell yourself out of it and if you can’t then move forward with it. In saying that cover all your steps during due diligence. And that’s probably the biggest thing that I find when people come and want to buy a website. The second thing is a lot of people don’t know so much about SEO and traffic and websites; how they work and stuff like that. So I have a few—a process and a few lessons teaching people what it actually is first, how it is incorporated in websites, and what it means for a website, and how important it is to gain traffic and to build your business up. And then there are obviously different techniques of marketing. And I think whether it’s paid or SEO and a lot of SEO now is paid SEO. But that totally; they are two very important things. I would say a top thing as a third thing would be people being confident in speaking to the seller and knowing what questions to ask and knowing how to ask those questions in a way that it’s a conversation. I noticed when I first had my first conversation with the seller is I asked a question about SEO and then I started talking about the finances for 10 minutes and then I went back to SEO. And I could tell after I came back off that call and a few months later I could tell the seller was just like these guys need to be game and I made the call really clunky because I was asking questions haphazardly. So that’s a big thing is coaching people to have the confidence to speak to sellers because when they’re first doing it they’re like oh my god I’m speaking to like—I know that when I first did that I was like I’m speaking to a business juggernaut here that’s owned business. They’re a gun, I’m nobody. And just teaching people that like hey you’ve learned so much through this process of working for me, you actually know a lot more than you think you do. It’s just a state; the state of being really. So getting them to state and really understanding like you’ve got this and that’s a huge thing that we have to teach for sure.

Mark: I want to go back to your first point here, the first mistake that you put out there, and that’s the people that are seeing just the dollar signs, right? [inaudible 00:16:52.3] into the business and it’s just that I’ve definitely seen that. Personally, I’ve experienced that as well [inaudible 00:16:58.1] a couple of years ago where I talked about in that position that I made that was a mistake and I did just that. I sold myself into the business and I just flew completely past all the red flags and caution signs and everything else and I thought I can take care of this [inaudible 00:17:16.0] I know what I’m doing like I can somehow get around the work which you can’t. But I don’t want to talk about the extremes of that because you talked about being able to sell yourself out of this. So you sell yourself out of this, you [inaudible 00:17:29.8] it doesn’t make sense. In my experience, there are some personalities though out there that A. either will privately still look at the data in a way that they’re selling themselves into the business. So you look at the data and you rather excuse the stuff that doesn’t make sense or you rationalize ways that makes sense for you. Or you just hyper focus on the benefits. And I’ve seen the flipside as well. I’ve talked to buyers that have been looking for businesses now for three or four years and there’s always something wrong with what they’re looking at which I get. How do you coach your client to balance that out and to be able to really take that objective step back to say look this buyer I know that you’re risk-averse and buying any web-based business is risky. There’s going to be risks in there. Or on the flip side hey slow down pump the brakes a little bit we need to take an objective standpoint. Generally just how somebody can do get that on top of text maybe of what type of personality they are?

Jaryd: Yeah it is definitely other than just a personality thing I think that’s a huge point and probably is but it’s also where you are at in your journey and whether you’re just on a; at different times on my journey I’m being so gung ho and then a lot of times like just being very stand back-ish. As for tips on how to navigate that is I think people if they ask themselves like alright here’s if I just do a massive pros and cons list. And they go here’s what could happen that I don’t want to happen. And you know here’s the cons and here’s the pros and then not just have yourself look at it but have somebody outside of being invested in this vehicle of investment to look at it as well. And I think that’s very helpful and that works for most of my clients because I get to look at it because I’m not like invested. And I had a call with a kid yesterday and he was like yeah I want to go out and buy this business. I’m like do you think this is—and I didn’t say like don’t buy this business. I’m just asking questions in a way that helped him understand whether it was right for him or not because that’s when we get the most profound learning; it’s when we ask them questions and they come up and they ask these themselves rather than I just blurt the answers onto them. But I feel that that’s a really good technique of getting somebody else to outside of it have a look at the numbers and the pros and cons and then that person asking the person who is looking on the business like are you willing to weigh up these risks, are you willing to take on these risks with the possibility of achieving X result? And I’ve done that with my second business with my dad and my third business with my dad. And my dad I love him so much but with parents what I find is they just want to protect you. And they love you but they just want to protect you. And dad was like saying like no this is a terrible, terrible business. And a lot of the business was—the financials were like; because I was buying in Australian dollars; I wanted to buy in Australian dollars because I was buying it from an Aussie seller. But I converted to US dollars for where the platform they’re selling it on and then also from US dollars into a different currency that they were trading through. And it made the financials very, very messy. And my dad just like flat out refused. Do not buy this business. And I rushed off and I didn’t rush off; sorry it took me like—I went through and I thought about this and our process for over a month. And I asked myself am I willing to take this risk to possibly achieve X? And the answer was yes because I knew the risk. I was willing to take it to achieve that. And it worked out amazingly well for me. But I think that’s a great process that people can do.

Mark: Yeah. That’s good. I think a lot of this actually ties into my next question because you have said the third mistake that you see was that confidence speaking to a seller. Now when you were speaking to sellers you had a little bit about imposter syndrome. First of all wondering why am I even on the phone, and you’re kind of all over the place with that and giving the impression of not really being up for the game. I know we talked a lot to buyers and on this podcast, you talked a lot about making a good impression to a seller, right? Sellers in today’s market they have choices in who’s going to buy their business usually. And sometimes the best offer doesn’t win because of their buyer. So there might be another buyer who has a better offer and [inaudible 00:22:15.2] paper. But if a seller might know the buyer better then they’d go with them. So there a process that you really use to ask the right questions and stay on track in making sure that here’s the financial questions and now here’s your product sourcing questions or your content guidelines or whatever type of business. Do you teach a method for this for looking at approaches to buyer and seller conference calls?

Jaryd: Yeah. And that’s definitely a good question. Like how do you become an attractive buyer? Because you’re so right; there’s people that know their business and there’s people that want to sell their business to somebody that can take it to the next level and not someone is going to just butcher it since they get it. And that’s hardly—I think that’s really important for everybody who’s a buyer looking to buy a business if you can understand that and really respect that business, not just go—I mean they come in and just be a Wild Wild West cowboy and do this sort of stuff. I think that’s a really good place to come from when you do go to jump on the phone is respect that that person has put a lot into that business. And if you come from a place of respect the rest will fall into place. But as in the techniques I feel on how to be attractive buyer is to ensure that you do as much research and you know as much as you can about online businesses. And you know the lingo. Like when people first thought they may not know what SEO is or SEM or CRO and all these different types of terms. If you can speak the language of the seller that’s going to definitely gain you some points I feel. And if you are respectful and you make sure the conversation flows quite well and you’re not too hard like you don’t make the interview or your sales questions too much like an interrogation; if you can have some enjoyment and make sure it’s a fun and safe conversation then I feel that you come across as a far attractive buyer. And there’s also so many other techniques that you can use through—what’s it called an NLP; neurolinguistic programming in matching the seller’s energy and how you contact and phrase your questions with a middle that sort of stuff. But if you could just forget about that and throw that out the window if you come from a place of respect and you really understand the business and not just the business but the industry as a whole then the buyer is going to see like okay well this person’s really done a lot of due diligence. They’re asking really good questions. And I can see that they care about this business not just in a financial way but that they could be investing in this business to ensure it grows. And I want to be careful with invested in the business with emotions because you do need to be attached to a certain point as well. I feel that I think they vary; all those things help quite largely into being an attractive buyer.

Mark: And a lot of that’s very, very good advice there. I want to talk about some of the suggestions you would give to somebody who is getting into this initially. You talked a lot about knowing the language and understanding some basic concepts is SEO and you teach some of these things as well. I know for myself with Quiet Light Brokerage we get people that are coming in from the offline world; brick and mortar world who are coming in first time and many of them will just say I want to buy an online business, others might say I want to buy an e-commerce business then I have a few ideas of what they want and don’t want. But a common question I get is do I need experience before buying an online business? So I’m going to throw that question at you. What do you think? Do you think somebody needs experience to buy an online business? And if so what type of experience?

Jaryd: Yeah. I wouldn’t say you need experience to buy one. But I would say you definitely need experience to grow one. And not just experience but education. Because everybody says like I should you have experience and you can’t just—I know this when I first started looking for jobs when I was younger I was like you just you can’t go away and get a job you got to have some sort of experience but you’ve got to start somewhere. And that somewhere is education. So if people do decide that like hey I’m going to go from brick and mortar to online businesses is like invest in your education in that. So then you can become more confident not just when you speak into the seller and become an attractive buyer but like hey I know what I’m going to do when I purchase this business. And I think it’s an unnerving thing for somebody to come to the online world and go I’m going to buy a business but not know what their plan of attack is or what their strategy is once they do end up owning that business. And if you have anybody that’s listening and has that feeling of like I don’t know what I’m going to do I would suggest that you go away and get a bit of education. And there are so many people out there that do teach people how to start online businesses and that could be a place who will teach me where to buy websites as well. But understand and get some education on how the online business realm actually works. And then you put yourself into a better position for sure.

Mark: Yeah, that was what I would say as well. I often recommend the people to just understand the language. You don’t have to be an SEO expert but understand the business and what people are talking about. But then understand what you are personally good at; maybe it’s negotiating contracts [inaudible 00:28:01.0] look for a business that you really could get that optimized in that area and accelerate that. What are some of the trends that you’re seeing recently? You’re looking at a lot of deal flow and working with a lot of buyers who are currently in the market. Are you seeing any trends emerge over the past 12 months and maybe even forward-looking as well, are there any trends that you see coming up here?

Jaryd: I think hugely obviously Amazon, right? They’re making some massive changes. We’re seeing a lot of Amazon associate and Amazon FBA up until now. It’s been big. Like a lot of Amazon FBA businesses are popping up and they had started quite a few years ago. But it can take time for it to snowball and traction on the shore. And Amazon FBA is a great way to go about it. People I think before these even existed didn’t realize that there was like things like Zappos and different companies and different ways you could do order fulfillment for instead of having to do just drop shipping you could buy bulk from wherever you want in the world and send it to an auto fulfillment agency. But the way Amazon does it is they make things so much easier for you and feasible for everybody. So that’s something that I feel is definitely been trending or whether it’s had its trend or not, I’m not so sure. You can always speculate but you can’t always be certain. And I feel now that with a lot of changes that have been happening with Facebook advertising and different types of advertising where it’s getting more expensive and I’ve talked to a lot of people especially a boss over the world in Australia that they’ve been having troubles with getting results in marketing on that platform. I feel hugely that SEO and great content is going to come back into being a massive way to grow your business; the ones that you do buy. And I feel that’s definitely going to start trending a lot more. That’s what I feel and that’s what I see.

Mark: That’s fascinating. I want to pick your brain a little bit on that. Why do you see that coming back and then how do you counter that people that are saying voice aided search; Google Now and obviously Amazon website and Siri are pulling away from SEO? Where are you seeing the growth there, and what leads you to believe that that’s going to be a good opportunity in the future?

Jaryd: Sorry, what are you saying they’re pulling away from SEO?

Mark: Voice aided search as opposed to just type initiated search where you get results. You know you ask Google for when [inaudible 00:30:38.5] form and you’re going to get an answer right away as opposed to coming to process with content sites. Where do you see the opportunity in SEO? I guess that would be the main question.

Jaryd: Yeah. Where I see the opportunity in that is in particular search as opposed to just where people hey Siri or hey whatever it is and give me an answer is that those deeper questions where you can get a profound value not just like a quick little win like you know what’s the temperature today or whatever it is but for like something that’s more in-depth like hey Siri how do I scale my business by using a specific type of conversion rate optimize—sorry my Siri just went off then.

Mark:  [inaudible 00:31:20.0].

Jaryd: Did you hear that?

Mark: Just a little bit. Yes, that was pretty funny.

Jaryd: Sorry guys. And so I feel that if you want to go like hey I want to learn how to do this type of conversion rate optimization on my business on my website. I feel that if you got really good content behind that as—I’m not so sure if that’s a blog post but it could be podcasting or definitely some sort of way people can consume content in audio or video. I feel that that’s going to come up the top a lot more. That’s a way people are consuming it a lot easier I feel these days. And I feel that that’s going to win in content in audio and visual.

Mark: Yeah. I think watching how content has evolved in the past 20 years is fascinating.

Jaryd: Yeah.

Mark: But [inaudible 00:32:13.0] not as much content as we can and it’s really matured to the point where if you’re not offering clubby content you’re just not going to compete at all.

Jaryd: Yeah, that’s right.

Mark: Yeah. It’s gotten way more difficult. Alright we’re pretty much at the end of our allotted time but I do want to ask you what sort of; just as you were [inaudible 00:32:32.7] somebody for. You know a 30-second ride up and down and they said oh man that’s really cool. What would you want to tell me to get me started in this route? What would you give somebody that’s just starting out?

Jaryd: Yeah, I would say hey go to website brokers such as you guys and see what is available out there and start learning about the different types of business models. And you can see how much the businesses cost, what their expenses are, what their income is, and then also what the multiple would be. And you can see the sort of returns; start running the figures, running the math. And then dig deeper into those business. And when you start getting prospectuses on different business models then you start to get a bit of an education based on different types of online businesses and then grow from there. And then once you start doing that and you get more experience in looking at that. And it takes time to do so then you can decide if this is a route for you or not.

Mark:  [inaudible 00:33:28.2] that’s fantastic advice. Where can people learn more about you or reach out to you?

Jaryd: Yeah. So www.BuyingOnlineBusinesses.com; businesses plural. And then you can search that in Google or any search engine or go to my Facebook or social handles which is just Jaryd Krause. So Jaryd Krause.

Mark: Awesome we’ll link to those in the show notes. Jaryd thank you so much for coming on.

Jaryd: Thank you so much for having me. I really appreciate it.

Links and Resources:

Jaryd’s Website

Jaryd’s Podcast

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