EP53: David Fairley from Website Properties on Lessons Learned from 20 Years and Over $500M in Deals - Domain Magnate

EP53: David Fairley from Website Properties on Lessons Learned from 20 Years and Over $500M in Deals

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This week on the show, we have one of the first people in the online business brokerage space, David Fairley!

David is the Founder and President of Website Properties. David established Website Properties as the first online business brokerage, specializing in selling established and profitable internet-based businesses. From 2002 – present, he continues to enjoy and draws great satisfaction from bringing buyers and sellers together to complete a transaction that is a win, win for both parties.

With his industry knowledge, years of experience and successes, David Fairley is considered an expert in online business marketing, appraisal, and sales.

Learn more about Website Properties at websiteproperties.com

Connect with David on LinkedIn

To learn more about Domain Magnate and find additional resources to buy or sell an online business, visit https://domainmagnatecapital.com/

READ THE EPISODE;

Michael 0:00
Welcome to the domain magnate Show. This show is sponsored by the main magnate, macro private equity firm where we acquire and manage online businesses for investors and clients. Check out our offerings for our third fund and our current opportunities for goodbyes. And on today’s episode, we have David Fairley, the President and Founder of website properties, one of the oldest brokerages online. Hello, David, thanks for joining. So you run one of the oldest brokerages? How old? Is it when when did you start brokering online businesses

David 1:07
officially registered the company in 2001. So it’s been 20 years, I was online, as an internet entrepreneur, myself, got on around 9095 96 and ended up representing myself in the sale of my company at the time, which was hammocks calm, and had a pretty harsh lesson, not knowing what you know. So it kind of stimulated me into I ended up buying and selling and flipping a lot of websites for a year or so afterwards. But through that process kind of got more savvy to the process and had ended up just organically helping other friends and associates who were online and sort of formally formalized from there. And, and since that time, we’ve done somewhere over half a billion dollars in gross sales and for over 500 different deals. So it’s a it’s it’s pretty exciting and interesting space. It’s kept me engaged and fascinated for 20 years because it keeps on changing so quickly. So very impressive. So half a billion dollars in deals. Do you know how that compares with other brokerages? Like and also what what is the typical range kind of price range of deals that you make, you know, look at the industries industry are is interesting. There are certainly different business models that some brokerages have, they operate like franchises, so they get, you know, lots of different brokers and that they put into a into a funnel, my strategy has always been sort of to quality over quantity. So we work as a more of a boutique brokerage, and there’s six of us, we’re expanding, but we work as a team, I think that provides a higher level of excellence and customer service, we found and it’s just a strategy that I prefer, you know, it’s about working with people that are that we are aligned with and that we believe in and that, you know, because our business model is also one of

performance based so we don’t get paid unless the business sells we want to work with, you know, quality businesses and quality entrepreneurs. So that’s our approach. As far as other there’s certainly other companies have done. You know, there’s a couple and one company in particular, that’s, I think, achieved a billion dollars in sales. But they again, they’re more of the other format that I mentioned. And, you know, it’s really I think for a business owners, it’s about finding a brokerage and a broker that you can, you know, trust and believe in and that you you vibe with basically, that’s really important.

Michael 3:09
So, yeah, I definitely agree it’s important to work with someone that you actually like. And that’s that’s often what we see on the market as well, people come to specific broker that they have some relationship with, that they’ve already done a deal on, they enjoyed it, and then they keep going to them for all the other deals. And I imagine it’s probably similar with you, since you’ve been operating for 20 years, you probably have a lot of repeat customers and internal.

David 3:38
Yeah, absolutely. I mean, it this is a business of relationships, you know, and it’s once you it’s like when you if you’re a homeowner, and you find a contractor that works for you, it’s very stressful, a lot of money involved. And, you know, people get ripped off all the time by the trades are there, you know, because you don’t know what you know, and it’s yeah, it’s similar in our industry. So once you find someone you can trust that, you know, has your back and your best interests ahead of theirs. Of course, you’re going to you’re going to come back and work with them again, because you had a success the first time and then you’re also going to recommend that company. And so a lot of our business is based on referral business. It’s and that’s why, you know, that’s how you stay in business for 20 years. If we didn’t do a good job. We, you know, we wouldn’t be talking right now.

Michael 4:19
Yeah. And so what’s the average size of business that you broker?

David 4:24
I mean, it’s been interesting when I started out, like, you know, it was kind of the beginning of the internet, like, we weren’t doing any m&a activity. Wasn’t that sophisticated, but the deals at that time people it was early stages, there was fewer mature businesses, you know, you might get one or two that are three or four years old, but so the average you know, initially when we started out was probably, you know, closer to 250,000. Today, it’s hovering around a million dollars. The deals just keep getting bigger and more mature. There’s way more money coming into the market. Now. There’s, in a more larger awareness of the opposite tivities you know, in the smart money’s coming here because the returns are great. And the data is there to follow. So it’s keeps evolving. I mean, there’s you know, every year they say the internet’s growing revenue is 18%, or something like that year over year. So it’s, it’s affecting our industry as well. Like, we’ve got a company that right now that we’re working with, and getting ready to onboard, that’s a digital digital media company that represents some huge brands, and they’ve been around for 20 years. And like, we were just laughing, it’s like, you’re like a dinosaur. Like, that’s so unusual to find a company that that’s, that has been around that long and survived and still thriving. So yeah, I mean, these it’s an it’s an ever evolving landscape. And it’s, you know, people are getting getting up to scale and getting super profitable and seven, eight figures quicker than they’ve ever done. I mean, we’re finding businesses that are getting to, you know, to those levels within a year or two, it’s astonishing. So it’s a very exciting time to be involved and not to, it’s never really boring, because there’s so many unusual, niche businesses that we interact with. And it’s just, it’s quite fascinating to see what people focus on to earn and earn a living is great.

Michael 6:11
Yeah, absolutely. I also, as I look at a lot of deals, I always find things that are just fascinating. Like all these really random niches like I was looking at this business, currently, that’s about providing some some services for people that do recommend sneaker trading. I was like, what, apparently people buy and sell sneakers on eBay. And because it’s such a competitive interface, like special tools to to go and look for the sneakers to have like proxies, and all those different things. And as business isn’t enough money, like over $100,000 per year, it’s you know, such a such a narrow nation. Yeah, occasionally I just find businesses with I never thought that that could lead to business. So it’s really exciting.

David 7:00
Absolutely, yeah. It’s infinite. Honestly, it’s, and that’s, that’s the opportunity as well, I think people that are listening to this is that either, you know, either as an entrepreneur yourself, or someone that’s looking to invest in this, I mean, there’s just, there’s such a buffet of selection that you can get into, and there’s different business models, and there’s something for everyone. But, you know, we’ve all learned in the last year and a half with COVID, that, that working remotely as if you were an online entrepreneur, and you had that business, you’ve typically most people have thrived. And so but now a lot of people have sort of learned about that. And before some that and so it’s, you know, we’re seeing a, you know, a huge burgeoning interest online in the last, you know, last year and much more money and being invested as well, because brick and mortar was kind of scary and sketchy for a while. So

Michael 7:52
yeah, it’s pretty exciting. So what was the biggest deal that you’ve ever done that you’ve closed?

David 7:59
Well, you’re getting really personal here. I mean, the largest deal we’ve done is, is in the eight figures, I’m not going to get too specific, but it’s, you know, it’s, it’s under 50 million, our goal is to, of course, grow into a company that is doing deals, you know, in a mid eight and nine figures. You know, we have the capacity, we have the marketing expertise, and we have the buyers, quite frankly, it’s just like, really, there’s more demand right now than there is, you know, good supply, and a lot of cases and but the process is the same whether we’re selling 100,000, well, a $500,000 a $1 million business deal than it would be to sell a 50 million I mean, that the principles and the fundamentals are all the same. And the execution, the processes that we would entertain are the same. So to answer your question, I mean, we’re, we’re doing we’ve done, you know, multiple eight figure deals, and lower eight figures. We do you know, like I said, our averages moved up over the years from 250 to 500. Now, it’s, you know, it’s above, it’s in the seven figures, I don’t have the exact numbers, I wasn’t quite prepared for that kind of granular detail. But

Michael 9:06
yeah, I’m curious. Yeah, the numbers are fine. For approximate, I’m just curious to hear more about the differences between like an eight figure deal and maybe a high six figure deal. How different is it from from like, how long it takes so what what are all the extra things that need to be involved? Like, there’s probably more lawyers more more bureaucracy involved? Sure.

David 9:29
You know, the bigger the deal I mean, when you start getting into, you know, eight figures or even seven figures, I mean, it’s not like it’s a lot of it is is private equity, you know, or you know, these aggregators, some of them public companies, and, you know, family money, but it’s gonna, you’re gonna be dealing with a more sophisticated buyer, but the again, I mean, it’s yes, you’re gonna have contracts, you’re gonna have terms, but it’s really just the availability of capital. I mean, you know, we obviously we have A lot of people that are investing it, you know, under 100,000, there’s people that want to don’t want to invest above 10,000 or 100. I mean, when I started out, I was buying and selling deals under, you know, you know, between under 10 grand for the most part that I moved the 25. And so you have to evolve that, but when you have, there’s so much cheap money sloshing around with people that get their hands on it right now that they’re getting at zero to 2%. And they’re, you know, they’re trying to find a place for because cash, you know, there we’ve got inflation, we’ve got, you know, the government printing tons of money. So, it really, we’re debasing our currency, so people are trying to find places to put their money in, and they’re getting it cheap. And so there, you know, this has become an asset class that I think that is bringing in more, you know, more and more sophisticated buyers, smart money, and huge money. So they, they have learned to lawyers and their CPAs. But, you know, the deals that we’ve closed with, with private equity and public companies and corporations or whatever, high net worth individuals, there’s not much difference between them. You know, the companies, they’re going to be very diligent doing, they’re going through due diligence, I mean, they’re going to go through with a fine tooth comb, they often have teams, so anyone that’s preparing to sell something at that level is typically going to be, you know, very well organized and meticulous bookkeeping. And so again, if both parties are usually a good match, ultimately, you’re not going to find someone that’s building an eight figure business that’s disorganized, and chaotic, and, you know, doesn’t have a team in place and systems and operations and scalability of aspects. So, yeah, pretty

Michael 11:37
good. Yeah, that’s similar to our experience, deal flow brokerage, we’ve closed quite a few seven figure deals. I think we haven’t had any eight figure deals yet, although they did have some listings. And we were devising some eight figure deals, but haven’t closed ourselves yet. And what I’ve seen is that, in bigger deals, like seven figures up, people are usually more sophisticated, but it’s still generally, like individual buyers, or individual buyers would represent maybe some group of investors. But it wouldn’t be. So there’s not a lot more complexity on the side of the buyers, like there is like you’re not dealing with a bunch of people together. It’s usually most at one.

David 12:19
I mean, it depends on the organization that’s buying it. I mean, there’s usually just one or two decision makers, and that’s who you’re dealing with. But it’s mostly just making sure that your whoever you’re dealing with has, you know, is has is has the capital available, obviously, before you entered into that, and so yeah, definitely, you know, the bigger deals are more sophisticated sellers, and the buyers are more sophisticated. So it’s, it really isn’t, you know, it’s actually easier. It’s easier to work with companies that have their you know, where you just ask, and they like, hit a button and everything’s presented to you. So, you know, that’s, that’s an advantage as well. So and But getting back to your, you know, what you guys have achieved like it, it’s, it’s, you know, those deals come I mean, we there’s some, like the thing that I find, you know, kind of humorous is that sometimes brokers we try, and we do work with a lot of other brokerages and CO broker and an offer that and want to collaborate. But we found, we found the past that no one really wanted to co broker because they were, you know, because they wanted to take the Commission’s for themselves, it was easy to sell. And so we’ve, you know, we’ve worked out something that’s less doesn’t take away that incentive. But by and large, there’s just really so much, there’s so many people out there that really need our help, and need guidance. And, you know, there’s just there’s pies forever, there’s enough pie for everyone. And so I think, you know, it’s a small industry, but there’s, you know, there’s there’s definitely, I’m finding, especially this last year and a half a lot more collaboration. And I think that’s good for the you know, for clients, because they have, the whole point is to sell. Yeah, absolutely. Like, we work with whoever is open to working with them, it doesn’t really need to be a competition, everyone’s looking for deals, everybody’s you know, approaching similar marketplaces, it’s just about, you know, skill sets and nuances and abilities to sell a vision of a business. Now, that’s where that’s where the nuance in the skill set of a broker is going to come through.

Michael 14:18
Partly I agree, and many, many people in the industry, many companies treat it as a competitive space. But I agree that it’s best to just collaborate. And that’s also why we do this podcast. That’s why we do some masterminds and other things to try to bring people together to work together. I think there is always like a lot more money to be made if you work together rather than compete against each other.

David 14:42
Yeah, well, I mean, I found this last year and that’s where my focus has been. I mean, that’s made all the difference. I’ve just, you know, I think there’s, it’s, it’s whether there’s a willingness to collaborate. It’s a point I mean, I found people that are approaching me that were sincere and want to work and one or are bringing value to To me, and I can bring value to them. And so if it’s synergistic, it’s you know, I think that there’s when when, when I, again, my company’s philosophy is to focus on serving the client, and, and making sure that the buyer is respected, and there’s no, you know, malfeasance and so, you know, that’s the outcome that I want. And so how I get there isn’t going to be about my selfish need to get an extra Five Percenter. Like, that’s not how that’s not my personal philosophy. And that’s not my company’s philosophy, and I, and so we are open to collaborating and that, and that ultimately does make you more money. And that’s my experience as well. So I’m glad to hear that you guys are

Michael 15:34
most typical commission structure,

David 15:38
we work on a tiered commission structure. I mean, I know like there’s companies out there that I mean, it depends on who you talk to, but it can be I’ve heard 15, to 20%, all the way down to people trying to get deals for 2% our scale, we have a very simple scale, it’s basically 10% up into two and a half million from two and a half million to five, it’s eight, from five to 10, at six, and then over, over 10, it’s 5% right now. So it’s scaled, I mean, we want to work with bigger deals, we don’t need, you know, we’re happy with, you know, the, the pound of flesh that we get, we think it’s fair for our efforts, but, you know, that’s it’s based on the, you know, the value to us, and to, you know, the ability to also to sell it. So we have some incentives there, we also have a minimum, so it’s, you know, 10%, or 15,000. So, you know, if you’re, if you’re below 150, you’re paying, you know, premium, but we’re really, you know, again, we’re all sell if someone comes to me, and I like them, and they got a business that’s 100,000, I’m gonna, you know, and I’m going to help them I mean, I’m not going to turn away, we treat everybody, you know, the same, if they’re, if we take them on, it’s because they have a good business solid, and someone that’s going to buy it at that price range. And we and we have to, you know, make sure that we, you know, they have they’re, they they’re, they’re clear, and they’re and they’re they are, you know, they have some synergy with our firm as well. So, you know, that’s, that’s kind of our model. But again, we’re primarily focused on, you know, our, our marketplace, our buyers are looking, you know, we have hundreds and hundreds of buyers that submit their terms, and then you know, a lot of them are like, you know, minimum a million dollars EBITA, one to 2 million. I mean, there’s so many companies out there that are sitting in war chest, you know, family money and funds and whatnot. But, you know, we find our sweet spot is half a million to you know, not right now. There’s lots of buyers and the bigger buyers that are that aggregators and the consolidators there who are buying, you know, dozens of these things up every month, or, you know, every few months, they’re looking for that. So they’re looking for that, you know, those higher six figure and seven figure deals, and more in the seven figure if they can get them. So that’s obviously what we’re hoping for. But we, you know, again, the business was, if the business is good, and it had solid fundamentals, you know, we know we can sell it, then we’ll take it on. I mean, that just scares buyers, in every level, as you know, I mean, not everyone’s, not everyone’s coming in with a, you know, a million large and going, like, I want a business, I mean, it’s not, you know, the average individual isn’t, is isn’t gonna, you know, have a little bit be a little bit more risk averse, unless they’re, you know, really, really experienced and have a load of cash on them. So.

Michael 18:22
Okay, very good. Yeah, I like the approach of really focusing on serving the customer and providing better service. That’s, I think that’s really what the industry needs. And so how do you find the buyers? Do you? Do you have just a big list with the use of the you also find some strategic buyers? What’s your typical straw? Well, I’ll be honest,

David 18:42
I mean, after 20 years, we’ve really just accrued a really, you know, a very targeted subscription base of people that are it’s double double opt in, they want to receive the deals, and there’s very little attrition, because we don’t spam we only send out, you know, the only emails, we really send out our latest deals. And, of course, every time we list, we’re, you know, we we are very aggressive with our marketing for our clients. So we have somewhere around 12 or 13, different portals that we, we list all of our listings, and they’re in the paid spotlight listing. So there’s a sizable investment, but that exposure also in all these different places, is, you know, brings people you know, buyers see these things and they come in and they sign up and so it’s very organic, but it’s you know, it’s very targeted. I’m not i My list is around 30,000. It’s not 100,000. But ultimately, when we go to market where our deals are in front of hundreds and hundreds of 1000s of people through all our different portals and through our list, our list is extremely targeted. These are people that want our want to see our listings know what kind of listings we have, recognize and are familiar with our prospectuses and our detail. And so they trust our brand. They trust that we’re going to bring deals that make sense I mean, not like and you know, that’s not always the case. Sometimes we get deals that are in trusting, you know, for whatever reason, and they, you know, they don’t make sense other people or they fall apart when you have them. I mean, we don’t really control that. But, you know, by and large, we’re, you know, we’re, we’re picking deals and taking on deals that are, we know that our buyers and our subscribers and the markets looking for, you know, so we’re, you know, again, our goal is just is to optimize the exit of whoever we’re working with. And so, you know, if we can’t, if we don’t think we can do that we will, you know, we’re not going to take on the deal.

Michael 20:31
Okay, good. So 50,000 That’s very impressive list, of course, over 20 years. Was it just organic? Do people just sign up? Or have you done some things to to grow? No,

David 20:42
no, I don’t know, I don’t need to I mean, they just come in, you know, we are listed very high in the search engines, for, you know, doing a good, a lot of our keyword terms, people find it that way, when they’re searching. And again, it the biggest thing, the biggest spider is all our listings. I mean, if we have 25 listings at one time, or 20, I think we have around 25, you know, anywhere from 20 to 30, in a given period. And so those are in you know, think about it, they’re in 12, different, you know, they’re in 12 different portals. I mean, there’s hundreds of 1000s of people potentially looking at them. So every time someone inquires about a deal they come in, and then we get them into our funnel, and they, you know, we have we capture their email. And so it’s just, it’s built, again, with a very, very solid foundation. And that’s why there’s no attrition, really. I mean, it just keeps growing. Yeah, which is great. Our clients, I mean, we’re just, you know, that’s the goal is to get qualified, targeted customers for our clients. Absolutely.

Michael 21:38
And so what are some average multiples that you’re seeing nowadays? And do you focus on specific business types of day just sell everything like ecommerce have be content?

David 21:51
Yeah, I mean, we have a we have, you know, obviously ecommerce, Shopify, Amazon, Amazon, FBA, those are all very popular anything in E commerce that’s well branded right now. You know, it’s a target for these aggregators are just these companies are doing roll ups and trying to go public, and they have a lot of money behind them. So they’re looking, they are interested in, you know, Amazon, specifically for the role of Shopify too, though. And in general, any e commerce business? You know, there’s some people don’t like Amazon, because they don’t really own your customer there. So you know, Shopify is a preference, or someone that’s just got a standalone e commerce business that’s using social media for marketing purposes, or, you know, they’re driving, they collect all their customer information. So it just depends, but I would say for for, you know, product related deals, ecommerce deals that are, you know, hitting the mark, or that are trending well, that have strong fundamentals. You know, they’re, I mean, I see things listed for, you know, you can say, well, this is businesses, you know, going for 6x, you can list something for 6x. And it’ll never sell. I mean, there’s people that push, we push the envelope, too, but I mean, I, what’s closing, I mean, really, really solid trending businesses that are, you know, year over year growth and good brand and, and some IP, you know, even, you know, with recurring revenues and strong LTV for their customers, I mean, those can get, you know, up to five, you know, sometimes a little bit more, but I mean, that’s on the rare side that’s written for E commerce, but most really solid ones are, you know, they’re getting we’re getting offers around 4x, four and a half. You know, then you’ve got if you’ve got a, I mean, SAS products, SaaS software as a service type of deals that are enterprise level, they can go as high as, you know, seven, 9x. Not that we’ve had that, but I mean, it just depends on you know, it depends on the on the, on the industry on the business model. And on, you know, what kind of protective barriers are the fundamental, what’s

Michael 23:57
the average like that, that you’re saying?

David 23:59
I think that we’re seeing, I mean, I would say what’s closing is between three and a half, four, you know, on average, we’re getting for clients in cash. So that’s the difference. I mean, you know, you can, cash is really de risking the whole deal. Like there’s advantages to having, you know, earnouts and seller notes and whatnot from a tax purpose, but you still, once you do that, you you do take on some, you know, some risks so, and even with the SBA, your, if someone wants to SBA, that’s great, but it can take 90 days to close, quickly, maybe 60 to 75 but then you’re usually up to take on you know, 10 or 20% seller notice subordinate to this VA so, I mean, we we really focus on getting our deals in front of as many buyers qualified buyers as possible and, and we get to pick and choose when the offers come in. And usually it’s a cat the last few years, last two years. It’s largely the cash buyers that are getting the deals, so the ones that have the war chests come in and they can cook they can, you don’t have to go to the financing. They close in three to four weeks, and it’s all cash And, you know, maybe there’s a three month hold back of 10%, just to make sure that the southern plays ball, you know, but that’s what we’re seeing anyway. I mean, I can’t speak for everyone else, that’s our focus. And I think it’s the, usually the best outcome and you try and get them as where you try and get your, your baseline that you would take anyway in cash. And then anything above that is gravy, if there’s an urn out, or if there’s a seller note with a balloon payment or something or whatever, then it’s not, you’ve eliminated that additional risk, but you then have sort of a longer term stream of income potential that is, you know, often nice. After you’ve sold the business, and you have no luck, we no longer have that stream of money coming in. It’s like, sometimes it freaks out people, right? Like, they just like all the tap turned off and going broke, even though they just got to happen.

Michael 25:48
So yeah, cash is still king. Yeah, I Yeah, yeah, we are seeing similar, similar ranges, I’d say three and a half Forex, for SAS businesses, sometimes a bit more. I know on Empire Flippers on list when for higher multiples, like maybe even close to five. And, and, yeah,

David 26:05
I mean, but that’s my point, like we, when we take when we take a client a bit to market, I mean, it also it’s kind of like looking at the numbers, if the guy’s got a $350,000 business, you know, or his EBIT is 350, let’s say, seller discretion, earnings, whatever you want to call it, 350. And we’d say, well, let’s look at that at for excellence 1.41, I’m gonna, I’m gonna go to 1.5 or one, you know, 1.55 like, you’re not, you always put a limit, you know, because you don’t know, you know, when there’s good businesses, people fight over it, and someone’s gonna come in, and they will pay that. And that’s where the market is. I mean, it’s not even if you buy a business at 5x, that’s cash flowing and has super strong fundamentals, that’s a 20% ROI, if it just stays the same. Like, if it does, if someone comes in and it’s continually growing, they’re probably going to get a 40 40% ROI, what were you getting that you only asked it, and you got a cash flowing business, that’s you can roll into other other assets. So it’s really, it’s kind of like, it’s an interesting thing, like 5x Seems like, Oh, it’s so high, but really, you know, when when you’re losing money, keeping it in the bank, you’re better off buying a business that’s thrown off, you know, that’s gonna earn you 20 to 25%, if it just stays in, and there’s no guarantee with the business, obviously, there’s risk, appetites and things like that. But ultimately, you know, the, overall, the average multiples has definitely gone up in the last year and a half, two years, it’s, it’s been climbing steadily, it used to be at three, you know, 2.753. And, you know, I would say, what we’re experiencing for our quality deals in those levels is probably, you know, four to four 4.25. And we were getting good with closed deals at 5x. But, you know, keep in mind, anyone that’s listening to this, it’s a buyer, whatever, everything’s a negotiation. But, you know, if you leave the door open in this market, you lose, if you really want some and you it’s just like the housing market, you got to grab it, you know. So that’s just, there’s that those are the dynamics that I’m observing. You know, that’s just my personal perspective, and my companies.

Michael 28:16
And what are you seeing in terms of multiples for different price ranges? And we are talking about commerce and sales? So are you seeing businesses with sell in, let’s say, lower seven figures sell for, like, lower multiples versus businesses that sell higher ranges? Or is it more or less similar?

David 28:35
No, I don’t see that. I mean, I think the reason why something doesn’t sell for, you know, longer or greater multiples, that either it’s, it’s too early, you know, it doesn’t have enough history, you know, they’re trying to sell it with a year or 12 months or 15 months. And so, there’s just, you know, that’s not going to get you 3x, I mean, or they’ve got declining cash flows. There’s, you know, they have a backstory, something happened, you know, so like, you know, those kind of things are like, okay, it’s still making money, but it’s trending down, or something happened, you know, some disruption happens. So, you’re gonna get a, you know, you’re not going to see those multiples. So, it’s really about the premise of the business, you know, the foundational elements. I mean, if a business is throwing off $50,000 in cash, I mean, it’s still worth $200,000 If it’s got solid, you know, underpinnings, right? I mean, smaller, it’s just an easier and a lower entry point for someone. And that’s often like, you know, some of the time when some when people come to me, and they’re like, look, I’ve got 200,000 I want to buy a million dollar business. I’m like, Why, like, why do you want to take all your money and then put that much like, have that much leverage? I mean, you’re gonna get wrecked. Why don’t you buy a business? Why don’t you take a business that you can buy for 150 and still at 50k and grow it, you know, buy it and build it to a million dollars. You know, like, like, don’t bite off more than you can chew. I mean, that’s something but it’s really good advice I give to anyone that especially if they’re new to the space, they might be a savvy business person, but you know it, there’s no, you can always buy a smaller business and grow it into a, you know, significant size business, if you’ve got, you know, basic business acumen, and because everything can be learned, you know, it’s not hard to figure out how to do you know, to market online, and there’s plenty of resources, you know, on YouTube and, and companies and people you can hire. So you can get get up to speed, if you’ve got a little bit of capital very quickly now. So I just think that, again, it’s all relative, the business is going to be based on it valued based on its own merits. And, you know, sometimes you can get deals that should be selling for 4x or 2x. Because, you know, quite frankly, there’s a lot of sellers out there that think they know better, and they, you know, they get skin, you know, yeah, works. Not say that’s for everyone, I mean, like you can I’m not taking away, there are people that are quite adept at doing their own thing, I just think that what we do as a service, you and I, in our industry, is provide leverage and exposure that none of these people will ever get. And if you do that, you’re going to ultimately get have a higher probability of exceeding for a significant amount of money more, I mean, some cases over the years, I don’t have specific examples, but Well, I have an expensive specific example of someone that I came across, I was just on eBay, one point, they were selling an ergonomic, you know, furniture business, and I, you know, it was just like, they were, they were gonna, they were trying to get like, it was small, it was like, $30,000. And I got some information. I was like, Look, I could have bought it from her and turned around. So but I said, Look, your business is, you know, from, from my viewpoint is worth at least $150,000. And so she went, she came in, and we, we took it to market, and she sold, you know, it was sold for under $50,000. You know, it’s that’s what she didn’t edit. So you have these, you know, we have these blind spots? We don’t We only know what we know. And I think that, you know, it does pay to, you know, to do some research and you know, people that are looking for an eventual exit strategy, which is, I think 100% people, typically unless they’re going to pass it on to their, their children or whatever, which is, yes, it’s not 100%. But, you know, by and large, most people are thinking about, well, what happens when I sell this? What’s my next step? And so I think, you know, we try to educate people as to how to prepare for that, whether it’s in three months or three years, you know, that’s, that’s something that, you know, is worthwhile investigating.

Michael 32:35
Yeah, there’s definitely, definitely value in in consulting with an expert and getting some getting some extra opinions to what your business is worth. And what do you see in terms of content sites, which is my personal favorite, what kind of multiple sites seeing now? And for content sites here for affiliate business with rises?

David 32:59
I’ve got, we’re just actually going to mark with a couple of these sites, and you know, these, it depends what you know, that one of these is a top 10. Clickbank site that were we just not the market. But, you know, it’s only it’s trending down, but it’s because the guy take took this program that is still going along very nicely. And, you know, he started focusing on crypto doing the same course. And then it just took off. But I mean, his business is probably, you know, listed at 3x. But if he had kept if the numbers I mean, that’s because he’d come down from 800,000 to 400,000. Just because he took his focus off and energy off, but the thing can be ramped up. So content sites. I mean, with affiliates, I’m sorry. I thought I turned the sound off. Part of me.

Michael 33:49
I mean, it’s a reminder.

David 33:51
No, no, these are I got it. How do I removed myself from this?

Michael 33:57
And I’m picking it up. Anyway. Yeah.

David 34:02
So what was I saying? Oh, yeah, sort of passive income sites. You know, just depends on again, like, if it’s all if it if it’s based on, you know, the organic traffic versus paid traffic versus

Michael 34:17
Yeah, like solid, like, traffic, solid history, affiliate revenue. Yeah.

David 34:23
And whether are they selling their own digital products? I mean, that’s a whole other ball, if they have their own digital proprietary, you know, content that they’re selling. That’s a whole other matter for me. But I think affiliate passive income, like AdSense, stuff like that. I mean, those are they’re not, they’re not getting the same multiples as a physical product, like unless they’ve got some, you know, wacky Wild Growth. And, you know, I mean, digital, when I say digital offering, like, you know, that’s something it’s a digital download product, but they’re not the affiliate. So I mean, getting back to content sites where you’re putting your, you know, rolling out a Clickbank product product or you’re using it that sensor some other advertising mechanism. I mean, again, I mean, I don’t see any reason why those shouldn’t sell for, you know, a similar multiple if they’re performing well. You know, again, if they’re well aged, if they have good solid channel of, you know, traffic, diversified traffic and unique content and valuable content that is, you know, it’s not just search engine fodder, then, you know, the business, the business can sell for, you know, 4x or higher. I mean, I don’t see any, I don’t differentiate that with the buyers, because buyers make their own determination, right? I mean, someone that sees a business that’s throwing off $100,000 passively, that they don’t, they can buy and get that return, you know, 25, it’s a paid 400,000. For they’re gonna get a 25% return, and they can still keep their job, right. So that’s going to be more valuable to that person than someone that’s looking to run a company that wants to buy, you know, a brand and then scale, right, that’s a whole that’s a different buyer.

Michael 36:05
Yeah, that’s similar to what we are seeing, I’d say, because we, for the main magnate, we buy quite a few content businesses, we often buy like one one deal per month. Yeah, in six figures. And the multiples we are seeing mostly vary quite a bit. So the newer sites with less than a year old, they can be sold for quite cheap, often 2x, or even less, because there is so much. So the risk is can be really high, right. And it can be really dangerous. Like if they’re using some some tricky SEO, that’s more like short term, and very few people would want to buy that. And then we have the far more established sites, like one of the sites we acquired this year is actually 20 years old. About 20 years from like, I think from like 2001 2003. And and that’s, that’s great history doesn’t mean that the site is much more stable than the side that’s five years old. But it gives you more confidence when you see that history. And that’s still usually sells for like free acts more or less, maybe a bit less a bit more. Now, I would say there is we’re not seeing that many content deals with sell higher than, let’s say three and a half or so. There are quite a few that are listed higher. And yes, sometimes we’re like Forex prices. But that’s just for deals with are really amazing that there is very solid organic traffic, no shady links, like very good quality content, maybe some products. I am. I’m interesting. Yeah, it’s interesting that you mentioned digital products, we are don’t actually seeing higher value from digital products, we are seeing higher value from just higher high quality of content and links, I guess digital products do provide extra value. For sure, though, the thing is, a

David 37:57
lot of these digital products that we’re referring to are like they’re, they’re in the learning space, they’re teaching courses. And so they’re, and that’s been huge. I mean, there’s just there’s been a massive in that, again, since COVID. So it’s, again, it’s it may be the niche, but I think that it, you know, digital product versus a physical product, and is very attracted to a lot of people. And especially if it’s if it’s got, you know, copy written trademark material that is very, very good. And so and it’s good if it’s, if you if the numbers back it up. So again, I would say I take things on a case by case basis, I mean, I don’t sit there and go, Oh, this lead gen site or this affiliate content site, or this social media site, you know, because it’s that in that lane that it’s you know, 2x 3x 4x I mean, it’s really coming down to fundamentals in the end, right, and you have to sell it, I mean, we’re salesmen in the end, if I’m, if I’m going to represent, I have to sell the business and I have to, you know, I have to highlight the, the values and, and the fundamentals that justify the asking price. And if I can’t do that, then I’m going to get beaten down. And they’re going to be, you know, destroyed in any negotiation. So it takes preparation and knowing what you’re, you know, you have to be able to defend your multiple but not, you know, people it doesn’t some people, some buyers will just like I’m not paying more than 2x Like, I’m not going to do that, well, that’s fine, but you’re not going to get that you’re going to be dealing with you know, the stuff on, you know, on these auction sites and where, you know, you don’t know what you’re getting, like they’re not quite as easily vetted. And so I think that there’s you know, there’s more risk for you if you go out if the further you go out and thinking you know, Oh, this one’s you know, 1x or one out like you know, you got a you get what you pay for often, you know, you gotta be careful. It’s not to say there aren’t great deals out there. I mean, I listen, I’ve been I’ve been a shark in my past and that spot itself, I mean, it’s all in the eye of the beholder, right but from our standpoint, if the numbers The financials are solid and the fundamentals are there, the boxes are checked, and that heads gonna, that’s what’s gonna drive the multiple.

Transcribed by https://otter.ai

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