In this episode, we look at some of the pitfalls first time buyers fall into and how those newbie buyers can avoid them.

United States


00:00:00welcome the Empire podcast episode 174 you don't know what you don't know we don't want to question some new buyers wondering what they should look out for Joe and I want to take an episode to look at some of the pitfalls new buyers run into and lay out some of the pro tips to avoid them now this episode is definitely targeted to new buyers for some experience as well you'll find the show notes for this one Empire flippers. Com / pitfalls all right let's do this
00:00:28listening to entrepreneurial advice from guys with day jobs
00:00:32I want to hear about the real successes and failures that come with building an online Empire You Are Not Alone from San Diego to Tokyo for Nora's and investors are prioritizing wealth of personal freedom over the oppression of an office cubicle check out the Empire podcast and now your house Justin and Joe are each other's No Way Around It buying your first business can be both exciting and scary at the same time lots of questions from new buyers through the buying process of the business very often most people don't there's probably not a lot of people to painting your network to ask them about this kind of stuff early but they're definitely less of them ride most bars by the business once a year once every couple years once every 5 years so it's not a common practice for sure
00:01:32like that this would be a good, handbook for people to look at one of their new or whether they're just you coming back to the table and want to refresh themselves about what to think about when buying a business what are some of the signs that their new without saying at the garage coming out in telling you like what are some signs you've noticed the people that have read a book somewhere and you know maybe the guy was talking about buying a hundred million dollar business and their try to use those strategies here when buying a $20,000 website while some of the things might work I think you've got to make sure that your checklist is rational and you don't have a hundred things that need to be checked off checklist and you know they're like those little their first medications like hey can you get these answer for me please and we're like
00:02:32flexibility I mean you've got to see a balance here and do a little give-and-take especially if you find a seller and a business that's close to what you want people that draw a line in the sand too early and say it's either this or nothing I think that's a problem is that can make it very difficult for you to find a business to work with it might take a very long time I like you know act as if right but I think was awesome particular it's better to just say right this is my first time I haven't done this yet before I'm looking into it I want to get comfortable with it and our guys and they're not super pushy they're not going to try to put you in a deals or pull the wool over your eyes like they go okay great will let me step you through the process show you how it works and you know basically lay it out
00:03:32yeah I'm in most good Brokers are going to be that way especially if you say your new then they're not going to try to find you a business that's going to require all this time effort energy experience that's part of the problem so our marketing team in our sales team has been like hey Justin can you guys do something that can help out new buyer so this is the episode for them to mention that this isn't just a stand-alone like you're not going to get everything you need as a new buyer out of this episode it should give you some helpful tips and guidance but really if your brand new and you kind of want like more you want a little more meat on the bone I check out season 2 of the podcast web Equity show that we do at Ace Chapman and it is start to finish you know Season 2 Episode 1 all the way through the end it will guide you through step-by-step exactly what you need to know to buy none of my business I got the great resource and I'll link to that in the show nuts before we do that buddy let's pay the bills with are featured listing of the week what he got 44165
00:04:32this is an Amazon FBA business created back in April of 2015 in a sport snitch it has the Amazon Seller Central account has 6 products two of which have a design patent pending so that's pretty cool the brand is trademark and the business includes a website where the seller publishes content and has begin setting up a storefront so it has that ability doesn't require a whole bunch of work required from the new owner Roman looking at about 7 hours per week the net profit is just over $8,000 a month and we have it listed for $211,000 expect at a really big Christmas obviously so there's a run up there and I'll fall back down to normal levels after that I'm about to be expected I guess you to all and it expires like look I think your Amazon FBA in particular is going the way of brands of not having a brand that's memorable having repeat customers I think that
00:05:32where it's going and so this type of business would be a good fit for someone who wants to get ahead of that curve because it's not a meat you product it's not just you know anyone can Source it easily it like it has a brand and they've taken steps to protect it so that's what I thought was kind of interesting about this business
00:05:54this week
00:05:57are you were talking about avoiding first time buyer pitfalls move Got7 guideline 7 things to talk about with new buyers where to go through and we're going to give some kind of tips around them and then give you a pro tip what like the more experienced buyers would do in that situation so number one cheapest isn't always best and I think this is really important because you get some new tires for like look I want the lowest multiple I want to get the fattest discount I can get and you know the old saying if it deals too good to be true that definitely applies online businesses and you'll see a places where you can get a multiple like 7 times this month in that or even seem like three times more thing that I made a visit that low it's just not real I spoke to the guy on the phone the other day said the same things looking at somebody who is willing to sell 5 times Oakley net and he said yeah this is definitely too good to be true and he passed on it but then
00:06:57you say book unless the seller is willing to give me a 50% discount right off the bat I don't even want to speak to them so whichever your listings that you have available are able to get a 50% discount on my answer is none early on there is that the guy that liked didn't like are multiples that all your muscles are way too high bought elsewhere and is really low multiple and he like literally kind of gloated to me via email and then like within 6 months or something it was on the warrior for him it was on the warrior for him and he was like yeah that didn't work out too well I got burned while I was like well that's not at all surprising cuz it was just ridiculously low forget about the ones that are crazy little multiples right let's talk about you know what 20 * 22 * 24 * monthly net profit versus that 32 or 34 are you the new bar that sees that and
00:07:57tragus similar business you know some similar Nets that's ones for like 24 x I know it's 4:30 accident Aqua of course I'm going to buy that wants 24th we would spend like why would someone buy one for 30 but here's the thing the multiples are like an indication of risk right so the ones that have lower multiples generally or higher risk and there's a whole lot that goes into it and you normally pull that sour sauce. Out in due diligence computer or multiples and look at the site hasn't been around as long if a site is smaller foresight takes more work required that kind of thing then you're going to see Lori multiples and the reason why is because there is a risk related to that I need to figure out those things and we're going to walk through those numbers and show you why the computer that way you know if you're looking at smaller deals you really need to make sure they're worth your time so if you're looking at you have a deal that makes a 50 hundred bucks a month or $2,000 a month and
00:08:57what took you 20 hours to find that deal I'll take you 10 hours or so to get through it you got to put in a hundred hours over the next two months or so. Kind of like get it approved and you improve by 50% let's say is that really worth your time I was at the best use of your time maybe for your first one maybe if you're trying it out but I mean still you might find it's not working for $3 an hour you know like wow this is such a good deal so you know make sure that if you're doing a deal that it's going to be in and you're successful right then let's a best case scenario you know it needs to be delivering a reasonable r y or it's not worth it yeah I mean we'll talk about this later in terms of moving quickly but you have some guidelines of goal post for yourself in terms of our why but don't spend you know months and hours and hours and hours of searching negotiating that kind of stuff you're really find something that's reasonable that meets motive your predetermined values and go for that one
00:09:57literally talking about this what 15 minutes ago 20 minutes for a minute before you got on the show Joe and I were looking at some real estate Investments and we're deciding whether or not we can do this deal and we're still not 100% decided but one of the concerns is that he's like man we already spent 15 minutes talking about this how many hours are going to put in the back what they're going to do it and then finding the right deal on digging through you know all the comparables and oh my God I think of you a lot of work to it and is it really worth our time and it's an open question was just trying to figure that out I'll give you a pro tip on this first point cheapest is always best you're looking for Value that's really weird looking for not always the cheapest deal but when you buy you always want to buy deals where you have a competitive or Unique Edge that actually isn't baked into the multiple so the multiple is based on the risk and bitching about the wrong things but if you're particularly good at Facebook ads and the person running the business is not and you seen that that's not baked into the multiple for you honestly the Brokers we love to charge you more
00:10:57what is to you but we can't do that cuz we don't know so you have unique Advantage if you have particular skill sets that can grow and expand that business quickly well said and that's why I think making a list of your skill sets and your advantages beforehand is a good idea so that this way when you're looking at the marketplace like ours you can quickly check off which ones meet your criteria and which ones don't number to everything's negotiable right and Brokers and marketplaces and everything will do their best to put up a front and so you know this is the price this is what you get this when your pan right but that's absolutely not true everything is negotiable in this business so always ask for a deal right the worst cases they say no they're not to take it personally if it's a sound that might take it personally will help ease the blow that's our job so he'll make it work but you should always ask for a deal it's not going to hurt you I mean if you try and get paid like 20% or something it should be obvious know but I mean some kind of discount seems
00:11:57it can be reasonable just so you're making our sales guys job hard asking for 10% off I mean these are things that you can and should ask for and sometimes there just to say no sometimes you asking might lose you that deal but we'll talk about why it's not an issue in a minute thing it gets the juices flowing because you might come up with a deal that you didn't think of in the beginning just by starting to set the measuring stick on that and so I would recommend about negotiating if you guys haven't seen it before it's gone never split the difference by Chris Voss pick it up it will give you a lot of great tips on asking for the correct price and getting some good tactics done in negotiation oh God I just talked to Ace about that was telling me about that book and how you were negotiating trying to help you don't have one of the guys come out and entering our guys and I got a little sticker shocked and I was like good luck negotiate
00:12:57that with the hostage negotiator that's not going to be fun they can you met your match with those guys perhaps it's not just about pricey too so we can negotiate you know the seller stock right and they just can't go down a bit more and you're like I'm not sure I want to pay that what else can you get aside from that dollar amount can you give value in other ways can you get along or not compete with that big you feel safer can you get the saw to commit to a bit of work they still want that price point but can they take it in 90 days can they take it as an earn-out are there other ways to get that deal done and get them the money but you know still get it was slightly better deal for yourself I love the subjective pieces that you can put into a deal and they're definitely on both side something that we use here in a bar flippers in order to make a buyer and seller come together we've done it before and we're really good at thinking outside the box to make sure that both sides can get what they want here's the pro tip on this one if
00:13:57you're able to argue your case to your broker right and you can get the broker on your side as a buyer like you make them see your point see that valuation actually make that case to the seller so if you can get them on your sick of them understand why you're making you know the offer that you're making doesn't take that to the seller and be supportive of your point so it only Brokers are looking to get deals done so if you make a case and you make it while you might actually suck the broker over to your side yeah I've had many fires do that to me before and you know it's something that comes with the King phone number 3 is thinking you have to do this deal right this deal on your plate is the one this is the perfect deal for you you just can't get away from it you know the truth is there plenty of opportunities I mean Joe we're probably going to do I'm a put my foot out here on this one board game 2018 we're going to run 250 deals on 40 million
00:14:57bars with the deals so you know this isn't only deal we're going to beat you know what the 20 a month that we're going to do 20 to 30 a month this year you can have plenty of opportunities to 50 but let's leave it for another podcast getting stuck on something we had a fire recently who is very stuck on a deal unfortunately he did miss out on it he had been looking for a while and when I talk to him about his criteria and we were able to open it up a little bit more he realize that you'll maybe this deal wasn't the only deal that could work for him there were other ones on our Marketplace that could work and you know we were able to work through that actually will have out of something that was better for him so it does work out if you can open your mind a little bit and don't get to Tunnel Vision on one deal I react to this and every purchase you make as a commitment Commitment if your money but also your time so it's worth taking your time on the front end to find the right one it's similar to the hiring like we do take art
00:15:57I'm when we're hiring someone because we want it to be the right choice bring the putting a lot of time effort energy into that person so we want to make sure that those efforts are well invested at the same thing when you're buying a business if you hold me and never reaching for a specific deal that can cause you to the number one pay more number to just get less value and number 3 Miss other opportunities that came and went why you were focused on that one deal you know it's really hard sometimes to put an exact value on that but a lot of times people spend so much time effort energy doing to diligence on one particular deal when you don't listen very important but at the end of day you know triple checking the numbers is not helping when you could have been looking at it at a different deal and kind of doing other due diligence steps there and try to consider reasons
00:16:57you shouldn't do the DL reason the deal isn't a good fit for you if you can't find one or two reasons why you shouldn't do the deal like to balance it out of the way it out then you're likely to stuck or to focus on this one day you should probably back off and think about a little more expand on that other thing you could do is compare two deals together and kind of do the Ben Franklin approach of pros and cons of both deals and that might help you make the decision a little bit better spreadsheets over due diligence that past performances not necessarily indicative of future results so you know looking at what it says on the path of trajectory is on it doesn't mean you just get to continue that line up and to the right right so you can manipulate a spreadsheet or make it say whatever you want and so we can look really good on paper but the fundamentals of the business that details the business might be a horrible fit for you
00:17:57you sound like a Charles Schwab commercial when you say it that way Justin but definitely I agree that you shouldn't get so caught up in the numbers that you missed the bigger picture of where the company is going with a company's head in one of the underlying fundamentals of how the business is doing you know if you're in an itch that's a fad and the numbers look great right now but it's pretty obvious that that's going away you know that might be something you need to seriously consider taking a step back a future performance on your spreadsheet isn't going to matter if there's something about the business that makes it a hard no for you that just makes it to where do you know you don't want to do that at work or you don't like the niche or you don't believe that then she's going to stick around very long it's faddish so you know there are problems that you can make your own paper business go away one of the pro tips for this would be to do a live walkthrough of the business with the seller and in that instance you actually you're seeing like a real life example of the numbers but also
00:18:57what they do in the business and what the business looks like rather than just you know looking at a spreadsheet be on there with you to make sure all your questions is an answer you as a first time buyer you don't maybe you don't know what to ask for we can make sure that set up beforehand but if you're comfortable with the seller walking through the business walking to the website walking through the number is showing you actually how he gets paid then that's going to make you feel more comfortable with the numbers that are on a spreadsheet in negotiations so new buyers will feel the need to win a negotiation they want to win on every single thing that they're arguing right and I think new virus would be better served by avoiding that Temptation they don't need to win on absolutely everything in fact like giving the seller when it lets them feel like they're walking with some benefit right you want them to feel like they got a good deal right and bite you
00:19:57being so hard on every single point in knowing the parts that are important to you or versus not important to you it allows you to give that when it lets a seller walk away Happy Boss's book here and say really listening to the seller and hearing what is important to them and be able to give that win especially if it doesn't matter it's going to be really important in negotiations with someone who I think it was the seller but they got a counteroffer they were always going to offer a counter offer they would never be the one accepting the DL right and so it just kept going and kept going you finally said luck you know he didn't tell the buyer look what the seller comes back with have your good with it just take it don't count her again because you're going to get stuck in it or not see those kind of other kinds of things and just let them have it they will keep going to the end of the Earth on this negotiation
00:20:56yeah counter-offer hell you know sometimes as the broker we have to play referee and we have to kind of explain the rules a little bit and say look this is where this guy is coming from this is sort of the mentality out there and that can help get it filled up on everything and then to Goshi ation giving up on a point that's less critical to you can make them feel like they got a win so you know a lot of times it's perception and if the seller field where they got to win even though in your mind they didn't hey that's a way that gets the deal done no one comes away from a negotiation happy and that's actually wrong you want both sides to come away from it ago she Asian happy that's ideal if both the buyer and the seller think they got a good deal that's what we want to do an end by giving up on a small point that might make him feel good about it I think there are zero some negotiations where it is like neither party should walk away completely sad
00:21:56fried with that and that makes sense but I don't think these are a zero-sum I mean you have a buyer may be taking the business, that's going to expand it that since you really well with that and so I was happy to exit we're both can actually be happy with the deal yeah so definitely there's def going to be different types of negotiations but in these types of negotiation business types to go see a shins you want the seller to walk away being happy or 6 don't sell us on future DLC now this is more about Empire flippers than dealing with an actual salary but you know we do hear this from new tires were they come in and they kind of puff up their chest and I say help me out with a small deal because behind me I've got 20 million dollars in a bind and I'm going to be buying you know that doesn't businesses of the next $12 and I just tiring may I see if we've never done business with you before we just don't even need to hear it I just was no reason to tell us it doesn't get you anything in fact it's just not helpful
00:22:56is a big pet peeve of yours and it's definitely a time-waster I understand where people are trying to come from when they do this they probably have the best of intentions but it's absolutely not useful tactic they learn but it just doesn't work in this scenario we hear it all the time right thing and it's not going to get you very far on the other hand if you've done a dealer to with us right now you want to have that conversation you know we're more than willing to kind of like dig into it and we done some business together we've already kind of test each other out we know how you work you know how we working kinda know how that was the deal is come back to us let us know you're planning to do we love to hear about it both your help and guide you want it the thing is when they come to us with these spreadsheets and this kind of like business plan and it's like literally the first call Weaver have with them and they want to discuss it for 3 hours and we just sign a nondisclosure before they can show it to us like luck
00:23:55I'm at number 7 if you're sure move quickly analysis process is a real thing and so as a newbie by RNA you can look at just a ton of deals and you know you're unsure and I'm not sure which one it might be the right fit but when you find that deal you're going to need to go quickly this especially true with out some deals under 200,000 they very often get snatched up out from under someone's someone's looking at they really wanted it someone else sweeps and buys a deal before them and you know some people they say about your processing the fact the matter is if we have the deal up until it's purchase until we receive the wire it's available for purchase there ways around that we could do LOL I lock it up for 36 days but that's not a ninja server sellers so if we had to lock it up for 30 days all the momentum all the interest in that business goes away cuz no one's reviewing it and then put it back out to Market and try to rebuild that momentum it is not a good deal for a seller so as it is you
00:24:55when the wires received the deal is done so if you're too slow especially these like you don't under $200,000 Deals they can get snatched up this is probably the new buyers and the best tactic to usually uses a new buyer is to go you know set up a criteria beforehand try to match that criteria as close as you can then focus on one listing in one listing only drill down on that one and if that one is your one if that one is good enough don't get the fear of missing out don't get that worried that match your criteria beforehand that checked all your boxes go for that one but if it's a no then explain to your broker explain to us why it is and know what boxes we missed so that we can sharpen the criteria and work with you I'm going to one other listing for that it's when people start to look at too many listings
00:25:55but once they get very confused and white up not being able to move forward one or two that meet your specific criteria let's look at that and ignore the rest of marketplace let's just see if this is a deal first if not then we'll move on to another here's approach it for you if you doing this when you're sure move respond quickly a great way to do that is to consider keeping funds on file with us now you don't have to do this and it's normally not first time buyers that dude has his number to repeat buyers but they all do a deal with and why are extra money over and leave it there but you get if they want to follow up with another smaller $43,000 deal and then they can quickly move when they want to make a move our portfolio guys doing this and as you can experience I recommend looking into this by I sent him a call and talk to whoever sells cats
00:26:55awesome news and updates if we are close to our best month ever in January 2018 we're still waiting on the final numbers business recording but we were super close yeah I looked at it we're about $1,000 off looks like so we might be number 2 but it's close but it's really good month for January it's even better is considering we've got a bunch of new sales guys waiting in the wings are up-and-coming that haven't really got to speed yet so I think if they are able to going to help and get on board that's going to help us out a lot in his corner and definitely heading in the Q2 and Q3 SBA Loans for some of our seven-figure businesses for sale right now I think that'll be great for Austin 2018 I think we're going to get a few multimillion-dollar deals done via SBA we're currently working with a couple of buyers in a couple of sellers with their businesses on the SBA Loans if you're interested
00:27:55Lincoln the show notes for this episode you can set up a call and talk to one of our business advisors and they can kind of guide you through the process see if there's a fit for you other types of loans and financing available if you are interested in those big big deals but simply just don't have enough to get there let us know nothing about our new business analyst and our bedding specialist are coming up to speed nicely I'm out here with them in meta-gene Colombia they've been going the office almost every day also I'll have to let you know that the sales guys did leave early on Tuesday so I don't know what that was all about when they get out here to the Philippines and now we're trying to plan the plane trips now I'm sure I am the mythical CEO because they haven't seen you in person yet but yeah we'll try to work on that when they get here in April
00:28:55he was telling me that about me when they went to change Mike's they hadn't met me at all and they thought I guess that is previous company they had a fake marketing person and so I thought maybe I was just like a name like just a fake you know Avatar something for the marketing IS350 f team profile the people are team both you have the front end and the backend guys and gals I do like a full profile on the move them from the about us page will give you like more in-depth information about the people you're talking to the people are dealing with and maybe give you some insights on your broker on our team I love that teaching people that it's not to chill and Justin show anymore like you know open the kimono I mean part of the cold air is that it's not that Justin Jesso so we have more of our team highlighted because it makes her company more valuable so you know if you have in your working with employee
00:29:55you have a team you know I think it's helpful for culture rides also to show like everyone in the company so they can get like you know some of the benefits of being out there and it's also helpful to the company overall to not just be you last appointment beefing up our Instagram the Empire flippers Instagram which it's a marketing thing that I don't know I'm okay with it I guess I'm just on Instagram guy so you know if your listen to this and you dig Instagram or going to have a lot of photos coming your way on Instagram Pages already happened on a link to the show notes but we're going to we're beefing it up we've got a marketing plan all set up RR Martin guys are fired up about it and I don't know I don't know but I'm just too old for today I just took a picture before this for the podcast by headset microphone so maybe that'll go up on Instagram I don't know but yeah I agree kind of a weird thing to be out there and use but the heck were doing it take some amazing photos
00:30:55just down in Patagonia like the southernmost part of South America I think some like Glacier shots and do some really cool photos and John to on the market so he's got some real photography chop so some good photos up there so he stopped school I'm answered the listener shout section also known as the Indulgence ego-boosting the social proof segment-first that we got Ryan who said hey what side project can I do to bring results I'm ready to rock so happy you're off during a growth opportunity for someone please let me know if there's any way to measure up thanks for asking about the positions we have available and how to apply for them right now we have a Content marketing specialist position so if you're at all interested if you're right or you can you write copy or do you know you're a marketer and you think you like to apply to work at Aunt Barbara's and Joint in Boracay Philippines in April in general for people that we hire at Empire flippers I'd say first off
00:31:55it's very clear and terms like what you need to do to apply for the position did you follow directions as number 1 second for this position of particular can you write coherently he says doesn't make sense do we like what you had to say was an understanding those things were looking for initially to get the first interview the first interview is in a really about like you know did you follow directions do we like weird to say about the position and kind of what you want to do in terms of marketing for Empire flippers do you understand our kind of vibe if that works you'll get on to the second interview which is more about like cultural fit are you good for your company we see ourselves working with you Dan day out can we see you both being able to learn and come up with your own ideas those are kind of the things were looking to suss out in an interview date there's going to be some cultural fit there but the attention to detail and the following directions especially initially is critical Steve another question for us to topic I'd love to you
00:32:55Empire for response on if and how net neutrality would affect websites and web site investments in returns how would net neutrality affect the buying selling websites industry overall actually relate see what the f word say about it Stephen Joe and I were talking about this right before the show I want to just kind of like I thought so I just don't see a ton of changes for industry overall I mean I guess I see that like you obviously the larger companies if they're getting preferential treatment they can kind of like suppress the smaller companies but in those teachers were talking about 50 billion dollar company suppressing a 500 million dollar company it's like kind of beyond the pale and scope here in the category so if you happen to be with the hosting company who didn't play ball with the underlying internet provider in order to get fast traffic for all of their websites then you might have to check
00:33:55you're hosting provider at your hosting fees by Co-op but I don't think it's going to go out 10 and then you might double and most small sites you don't have very limited hosting costs anyways so you're not talking about a huge impact on our industry to be fair though Steve I don't know that we know all that well I don't hear your thoughts on it I'd love to hear our listeners thoughts on like how this affect I know there's some people that are very you know you're worried about what's coming up I'd love to hear what they have they think it'll affect our industry I think they could price Harrison Michigan sites we definitely need to have neutrality and I think any of the rehearsals that have been done by the US government are a bad bad bad effect our industry exactly over at intuitive leadership master.com I'll put a link to that in the show
00:34:55how to talk about how we use business intuition and making decisions and Empire flippers and other things in our business also did an interview over at the entrepreneur house podcast is really interesting company where they basically set up like an entrepreneur house bring people out for a month and they got to work together play together it's like this kind of communist living working on for the real deal it's crazy episode 174 the Empire podcast thanks for sticking with us will be back soon with another show you can find the show notes for this episode of more Empire flippers. Com pitfalls make sure to follow us on Twitter at Empire flippers and our new Instagram account next time bye bye everybody episode of the empire
00:35:38will Justin and Joe it up Empire flippers. Com for more that's Empire flippers. Com thanks for listening

Transcribed by algorithms. Report Errata
Disclaimer: The podcast and artwork embedded on this page are from Justin Cooke and Joe Magnotti, which is the property of its owner and not affiliated with or endorsed by Listen Notes, Inc.


Thank you for helping to keep the podcast database up to date.