Welcome to Diaz Acquisitions. I will be updating my journey on this blog. Come back and get an update on my journey to grow Diaz Acquisitions into a dynamic diversified portfolio of digital assets.
This past week I’ve been reviewing two websites for sale. The first one is a Shopify dropshipping business for sale in the soccer niche that was on the Shopify Exchange. This is a platform that sells established Shopify sites. I love this site for several reasons. The first one is that it is in a niche that I am absolutely in love with, of course, soccer or Football as it is known around the world. The site is currently making over $68,000.00 in a year. The second thing I love about it is that it is for sale at only $50,000.00. This brings up a few red flags. Why would anyone want to sell an asset that is making $68K/year for only $50K? Especially when the seller says he only spends about 8-10 hours a week…..
I reached out to the seller and finally heard back from him about 6 days later by email. I asked the seller to jump on a call to discuss the business. He explained that his English was not very good and that he would rather discuss it on Skype since he can write better than he speaks. This was another red flag, but I proceeded with caution. We sent some skype invites and that same day we were on skype chatting. He lives in Eastern Europe.
I asked him to tell me about the business and he explained that he and his girlfriend run the business. He runs the site, while she helps with facebook ads. She has a background in design. They have a nice email list of 3,000 but not very responsive. He said he loves soccer as well and we discussed a little European Soccer. He said that he picked the niche, but they had other plans to build another site and needed the money. He feels that anyone can run this business as long as they can learn facebook ads, which he was willing to teach.
After a few days of discussions I asked him if he would be willing to take an earnout and he said there was no way, that he would need the $50K at closing. I had some concerns regarding the Facebook ads. He had also mentioned that he made Video Ads on facebook since they worked so well. His girlfriend the graphic designer helped him. I knew I did not have immediate access to a graphic designer and this may be a problem for my company to duplicate. The entire time I was think about my mentor who has encouraged me to look at this as an opportunity to LEARN.
My other concern was the training I would receive from the seller. If he doesn’t speak good English and doesn’t have written procedures, would I lose something in translation?
The other major concern was the fact that the website only received traffic through facebook ads. I wanted the traffic to be a little more diversified, so I decided to walk away from this business.
Other concerns were that there were no social media channels established. There was really no brand established. At the end of the day it just wasn’t a great deal, so I thanked the owner and wished them luck.
The second website that I was looking at buying was a much lower priced Amazon FBA website. The FBA Business was in the Home and Garden niche. They sold one premium bedding product. The business was for sale on a 24X multiple, which was intriguing. I loved their website. It was very clean and the photos were great. The site did seem a little empty, but a few bells and whistles could be added to improve it. It was clear that the owners were attempting to make this brand very clean.
This FBA business was listed on a broker site. I reached out to the broker and discussed the business. I signed over the NDA and I received the business stats and PNL. A week later we set up a seller phone call. The phone call was great. The owner gave me a good background on the business. They have a few FBA brands established and according to him, were neglecting this one. They wanted to hand it off to someone else that could take it and do something with it.
The problems I saw with this Amazon FBA business was that the profit margin was very low, at only 11%!!! That is pretty low for a product based business. I usually look for businesses that are earning at least a 25% margin on profit. I would rather have something over 30%, but 25% is doable.
The second issue was the fact that it was super cash intensive!!! Most FBA businesses will be cash intensive, which means that you must have a lot of cash ready to buy product and have it shipped from the supplier, but since this was a premium product, it was very expensive. The owner explained that he usually purchased between $15,000.00 – $30,000.00 of product from the supplier. So if I added this business to the portfolio, I would need an additional $15-30K ready to purchase products, while only getting an 11% return………
I couldn’t see how I could grow this business without adding a ton of capital to it, and even then it was a flip of the coin. I loved everything else about the business except for the cash strapped issue and the 11% margins. I liked the seller, platform, and brand, just not the current business. I decided to walk away from this one as well.
We did find that the website may be a good strategic acquisition for another partner and we decided to share the deal with him to see if it would be beneficial to his current brand.
I have two other websites i’ve already identified to review. Make sure you come back and see what we are up to!