Podcast: Play in new window | Download

Subscribe: Apple Podcasts | RSS

 

Welcome to the Investing for Beginners podcast episode 71. Today Dave is taking a break and I am taking over the reins. We have an interview for you today with somebody who has a really unique take on investing and it’s a cool little mix between investing and entrepreneurship.

We have Greg Elfrink from Empire Flippers and what his company does is provide an outlet and a unique investing possibility and approach where like I said it kind of mends these two ideas of investing and entrepreneurship. And it quite literally is something that wasn’t available before the internet.

This is something very new a new type of investment opportunity and for somebody who is particularly like me because I’m super passionate about entrepreneurship. I’m type A going to go out and spend way too many hours of my day kind of hustling and trying to make a secondary income and some of the who’s familiar with the online space is definitely this is a resource that you might be able to find useful for being creative and finding other investment opportunities.

Greg welcome to the show thanks for coming on and thanks for joining us and giving us a couple ideas today.

Greg: yeah thanks for having me Andrew I know this is probably going to be a bit different than your typical podcasts and like you said a relatively unique way of investing in creating a bigger thicker wealth machine for you in a kind of a different way not affected by the stock market and all that good stuff.

Andrew: so yeah so I actually remember hearing about you guys I’ve mentioned Pat Flynn’s podcast on our podcast before.

we’ve talked about passive income here and there so I heard about you guys on his podcast and I can’t remember if it was from him if it was for my guests but there’s something really cool you guys do and it’s essentially and you can correct me if I’m wrong or you’ll probably have a much more elegant way to put it than I do.

But buying websites online or basically as businesses and then either working in them or kind of letting them run on their own and then collecting the income. Essentially buying a small business but you’re buying these websites online.

Greg: yeah I mean that’s exactly it so what we do is we help people connect between the buyer and the seller and is it’s not always necessarily a website because it’s always a non-business but there’s a few business models on the internet that don’t really require a website which I know some weed sounds kind of weird.

But like businesses we call them Amazon FBA so that’s like fulfilled by Amazon so that’s like an e-commerce business that’s using Amazon’s platform. So they don’t necessarily have a website but we’ve sold a ton of those businesses over the over the last two three years and obviously a bunch of websites as well.

Andrew: okay yeah makes sense even that idea Amazon FBA is really new I don’t I don’t memory hearing about it like five years ago and then two or three years ago kind of everybody’s talking about it so that’s really good.

Greg: for sure one of the interesting things too like even the concept of buying and selling on like businesses like you mentioned at the top it’s a pretty new concept I mean making money online is not even really 20 years old yet.

There was some people doing it like in the 95 1995 and stuff but very few and far between and now we kind of reach this level where a lot of these businesses or are starting to mature as assets.

So there’s an it’s a very interesting time so the buy and sell space still pretty young comparatively even two making money online.

Andrew: all right so I know this might be unfair to you based on your experience or background with Empire flippers. How I guess how would you compare either the stock market or index funds to the idea of investing in a business do you see any obvious pros and cons when it comes to that and what would what would some of these were like personality be to kind of attract them towards wanting to buy essentially an online business?

Greg: yeah so the first part of that question I think they both have a really good place right as the time-tested wisdom is you diversify your portfolio so you have everything in stocks if one bad day in the stocks you can kind of get screwed depending on where you were what you’re holding and all that stuff.

Versus an online business it’s separate it’s a different kind of asset class is the easy way to think of it so you can diversify there I have your stocks your look your mutual index funds all that good stuff and also have a business.

One of the big advantages of buying an online business as an investment is usually they don’t take too long to run. Like a lot of these businesses once they’re built they’re kind of I don’t want to say set and forget it because that’s not totally a true picture either? But usually you can manage maintain a lot of these businesses 2 to 6 hours per week so they’re not like your traditional brick-and-mortar business where you have to clock in every day or they open it up all that kind of stuff so that’s a big advantage.

Another advantage that owning an online business or investing with one has versus say the stock market is that since you own the asset I you can change that asset doing a bunch of different things.

You’re through your own hard work you can proactively affect it which versus the stock market that’d be very difficult for you to do unless you had a lot of money which the majority of us are probably not going to have enough money to like affect the value of a stock by buying or selling it right. So that’s one of the things it’s pretty awesome.

I would say investing online business gives you even more of that kind of control that even real estate does in certain cases. I will say that online business is more volatile then uh like a real estate investment so there’s that too which is always that risk and reward right the kind of like grow with each other.

Maybe that as far as the type of person that gets attracted to these business to the style is man has crossed the board people who maybe they built their own business and sold it and now they’re liquid so they come in and start buying that business.

People who may be similar to you or some of your audience made a lot of money in the stock market and now they’re looking to put that money elsewhere.

We see we call them institutional investors there’s people who own like family offices if you’re familiar with that where they are managing a trust or something like that they’ll come in and buy a few of our businesses because of the rate of return can be so impressively good and you can  control the asset.

So that it’s between diversifying and as far as who’s attracted to it it’s a bunch of small walks of life.

Andrew: expand on the right of return for a minute if you will do you guys have data on like average returns or the type of returns that buyers tend to get or are there may be expected kind of projections if there isn’t data are there like projections from the sellers on what kind of return rates our talk a little bit more about expected rates of return.

Greg: yeah so every business is going to be different and even if it’s like the say monetization strategy with the same traffic but a different niche the rate of return can be drastically different based off that alone because there’s so many variables at play.

But a good example of it would be like let’s take a small amount of investment money around $40,000 most active investors probably have around that kind of money to play around and you invest that into the stock market like say mutual funds or whatever over I think it’s like what over a 10-year period 7% or something like that.

With real estate much probably less so on your cash on cash return like a $40,000 is basically like a down payment on a house that might give you or at least where I’m from in Alaska will give you like a cash flow 200 bucks a month. Versus that same $40,000 into online into an online business say like Amazon affiliate site for instance that has traffic coming from Google that’s pretty set and forget.

Where you’re spending maybe an hour every other week on it that can make you between 1,500 to 2,000 dollars of monthly cash flow. If you analyze I’ve everything stays the same no Google update no and  changed Amazon’s affiliate program that $2,000 will pay for itself in what like 20 months and then it’s all in that profit after that. So the cash when cash can be pretty aggressive in that light.

Andrew: so you mentioned some of the cons right obviously well I guess I’m not really sure are there minimums too or what’s the general kind of starting point for these businesses what kind of investments needed to buy one of them.

Greg: yeah so they range all over the place so you can buy them for as little as $1,000 you can buy them as much as a 10 million dollar deal like.

For us specifically for Empire Flippers I think the late the lowers we can go is about right around $12,000 so that would be like Amazon affiliate or Adsense site probably making around five hundred to a thousand dollars a month or so.

But we go as large as like we just recently sold a four million dollar ecommerce deal right. So if the range is really all over the place so if you’re just if you’re just starting out maybe you don’t have like a big amount of capital I would I would actually recommend for you not to buy a business right away.

But instead like play around like get a domain yourself body get it all set up on hosting and get familiarized with WordPress because a lot of these sites use WordPress it’s very straightforward to let it intimidate you there’s a thousand videos on YouTube you can watch.

And just play around a little bit with it you don’t you don’t necessarily have to build it out and make it profitable before you  buy and other business but it’s worth your time to at least get familiar with the toolset a little bit .

But when it comes to buying them you definitely buy on the cheap I would actually recommend to go above the ten thousand dollar range though because as you get higher in the price valuation of the business you’re buying. There’s less chances for someone to scam you to mess with the traffic or to mess with the revenue because it becomes harder to doctor that kind of stuff.

Andrew: is that a common theme where like in the lower I don’t know if you call like a tier or the lower price levels you tend to see that and then as you go up higher that kind of goes away?

Greg: yeah so for us we vet every business that comes onto the marketplace so we’re combing through the P&L’s we actually log into their analytics we log into their affiliate their affiliate dashboard if it is an affiliate site or their Amazon affiliates or so and so forth so we try to make sure everything is as legitimate as possible before we present it to our buyer.

We reject about two-thirds of our sites not because all of them are like nefarious and they’re trying to messed up miss someone usually there’s like some problem that they didn’t see so they have to go back and fix it before they sell it.

Who are they are trying to do that to people which sucks as far as the range where that usually happens it’s usually between like a valuation price of like $500 I’d say even upwards to $20,000. Especially if you’re buying it not from a broker if you’re like doing a private sell you have to be extra careful there.

and the reason why it’s so common in there is just because it’s very easy to fake it like  for especially at the thousand dollar level you can go get a few family members to go to your site click here affiliate link and buy like boom look I have revenue. So you got to be careful on those lower level purchases.

Andrew: so it’s funny we actually never really talked about affiliate marketing before on this and it’s a topic that really excites me so  you mentioned some of the additional risks are something like a Google update right where it kills your traffic.

Assume somebody like never heard of this like worth affiliate or this word Google update or algorithm or anything like that right. Can you give us like a 101 breakdown on that and then why like affiliate income can be so exciting so even if it’s an it’s a way that for somebody to make money even if they don’t have a product or service and so really it’s like a whole another business model that is not it’s a derivative of the standard I sell my stuff and then you buy it so can you touch on those for a little bit address like how the risks  how that how that relates like the risks that would be inherent and buying a business and then kind of why it’s exciting.

 

Greg: yeah so to explain a bit of the jargon I was using earlier so apologies I forget I’ve non-business podcast.

SEO search engine optimization and basically all that means is if you’re really good at SEO that means you can rank your website on the first page of Google for a keyword so a good example of this would just be like if you type in if you live in Chicago you’re looking for a plumber you type in Chicago plumber.

The first website that comes up that isn’t an ad they’re probably doing some kind of SEO they’re optimizing their site to get that free Google organic traffic to their website. There’s tons of different ways you can get traffic and traffic is just visitors to your website right.

But SEO is a very common one that we see and it’s very powerful because it tends to convert better than a lot of other traffic sources out there.

As far as your second question about the risk with the penalties aside so Google is always changing the way it does its algorithm so for instance earlier this month they rolled out a big update that affected a lot of people using SEO there’s a lot of fluctuation in the SERPs.

SERPs is a term for search engine ranking position but for so there’s a lot of like just fluctuations of where people with sites were appearing for certain  search queries and keywords things like that.

That’s one big risk and that’s something that’s out of our control similar to the stock market  none of us own Google at least I imagine no one listening to this don’t know Google. But yeah so that’s something to be careful of.

As far as affiliate marketing it is extremely exciting business model in fact it’s probably one of my favorite online business models to be honest so basically what it is is you can go oh using Amazon because everyone knows Amazon.

You can go to Amazon.com right now if you scroll down to the footer of that site there is a little box it used to I think it still says make money with us or something like that you click on it and you can sign up for free to their Amazon Associates Program which is their affiliate program.

Basically what that does you and they’ll give you a tracking link just a link you can paste onto your website for any product that Amazon sells. You can type in I don’t know dog brush and finding the dog brush that has the reviews that you think is best. you click on the button Amazon creates the affiliate link you take that link you put it onto your article reviewing dog brushes on your website you get that traffic coming in from google or wherever.

They click on that link and with the next 24 hours every affiliate program is a bit different about Amazon’s is 24 hours anything they buy on amazon you’ll get a commission for that. That’s called an Amazon calls it an advertising fee but  as a commission for us advertising fee for them because that’s how they advertise so all right they use all these affiliates.

A lot of business models will create these content sites are full reviews informational content selling things on Amazon if you’ve ever been to any site reading an article that’s reviewing a product especially if it’s like  best dog brush for hairy dogs or long-haired dogs article title is something like that.

That’s actually called a best article it’s very common in the affiliate marketing space you use those kind of articles because there’s a lot of fire intent in them so a lot of your listeners are like I click on articles like that all the time so you probably are familiar with at least thing without ever I mean owned that’s what it is but it is exciting because you don’t need to hold any product yourself.

You don’t need to do any customer service Amazon takes care of everything for you and if there is a complaint say the product is broken or it comes in like with a defect or whatever that’s not your problem because you’re the affiliate that’s the owner of the company whoever owns that dog brush company has to go fix that not you so that’s a really awesome thing with affiliate marketing you can really bootstrap it and you can start with like a newbie level income with affiliate and build yourself all the way up to multiple six figures.

I’ve met people in the industry and obviously this is more of an exception than the rule but I’ve met people who make six figures a month with affiliate marketing now they’re really good at it yeah. You’d spend years learning that but that is a possibility with that with that business model.

And likewise we’ve sold a lot of those businesses I have a friend he over the last year and a half he’s sold so many Amazon affiliates with us I think it was about $700,000 worth and then he took that money and rolled it into a productized service he created and then used it also to start a SAS. Company which is a software as a service it was a way for him to level up into ever more competitive and more lucrative online business models.

Andrew: yeah I just love online in general I love the passive aspect of it I think it’s something regardless of kind of where you are in the business world I think this is something that’s changing the business world.

I feel like we’re in like the gold rush stages where there’s so much innovation and possibility and a lot of money’s being made and flowing through the internet. and  as soon as a company that’s based on just internet businesses and whether they own a bunch of websites or whether it is or as soon as  as soon as they go IPO or as soon as like Google or Facebook become like reasonable valuation you can bet they’ll be throw money in there.

Because that’s really is the future and so really cool really exciting or.

Greg: just I just wanted to touch on this point real quick we just said that’s actually starting to happen right now so we those institutional buyers I mentioned there’s investors right now they’re doing we said joke like the roadshow.

Where they they’re going around to different towns and cities and investor clubs and real estate investor clubs and they’re raising money because they know how to make the deal how to like negotiate on buying these online business where the deal structure is that a really good advantage for the buyer to make  mitigate risk and all that stuff.

So they’re going around raising this money and then they go and buy the business themselves but they’re not actually running the business so they have a team of operators that they’ve put in place as a track record with that specific kind of business and then they pay out those investors on dividends.

I think a good analogy would be like the RIETs like really real estate shares something along those lines I was about to say that yeah exact same thing.

Yeah so that concept is now starting to happen it’s still very early days in our industry but there’s several of them that I’ve bought millions of dollars from us to  grow that fund.

I think that’s a very interesting role especially for an investor out there listening to this who’s like I have all this money I want to invest in this. But I don’t necessarily want to run them so that is an option in of itself.

Andrew: that’s cool yeah I mean if people are ever walking around you’re looking like the merry are the Hilton or a lot of these big-name hotel chains sure enough they’re actually owned by these REITs and you can buy them in the stock market and I bought a read before and it’s no different than buying any other stock.

And so that’s cool to see that as the industry matures it seems like this is kind of going in the same direction as that so I love just observing that and seeing how things evolve.

You guys are obviously kind of at the forefront of it and kind of got in early and I think you guys are one of the most respected marketplaces for that. I can’t think off the top of my head of another website where you can go and buy and sell.

Greg: I’m glad to hear that market my market is working there you go.

Andrew: yeah so real quick before we sign off here talk a little bit about the platform like what do you expect like what are the details when people go on say they enjoy entrepreneurship right they want to take more activists approach what they’re investing they maybe have more capital than others and can afford to have this as an alternative asset in addition to their regular investments. Kind of walk us through like what do you see when you go on that website and I mean is it any similar to I’ll give you context.

If I want to buy a stock and it’s essentially part ownership of a business I can go online and I go to the SEC.gov the government filings and they tell me things like revenue profit cash and they break it down obviously very extensively but those are some of the major things I’m looking at.

And I’m going to compare it to what’s it priced at what’s the valuation what’s the multiple and then make an investment decision based off of that so is there any similarities to what Empire Flippers brings and what kind of things will somebody who’s interested kind of run across?

Greg: yeah so the great question so when you go to Empire Flippers and you click on our marketplace you’ll see a right now I think we have about 103 listings on their different businesses. And when you click into one of those listings that catches your interest what we give you is kind of similar to a prospectus.

So it’s very common for business brokers to give prospectus to their clients like we if they’re by a gas station or whatever and we do a similar thing with through that listing page.

We’ll give you a description of what the business is we don’t reveal the niche because we want to protect the seller and the buyer from potential copycats there’s a lot of people always looking for like  free things they can copy and try to mimic or whatever. So we want to prevent that so we don’t give away the actual URL or the niche and that listing.

But you can see the revenue the net profit you can see how many page views if it’s a website how many page views it’s getting we that we pull from there Google Analytics or Clicky which is another analytic software that tracks how many visitors you’re getting.

We also talked about the opportunities and risks that we see associated with the business and one thing we do for any business is over forty five thousand dollars is that we set up what we call a seller interview so I have a guy on my team Jake you’ll go and set up these interviews or he’ll talk to that entrepreneur it’s kind of like a pop well actually it is a podcast now we’re launching it next week it’s called Real Money Real Business.

But before we launch that what we’ve done in the past is we upload it to our YouTube channel and then we embed it on that listing. So people were interested in that business can watch that and if they want further information what we do is we sorry drop my mic there what we do is we asked for a 5% refundable deposit.

And so that but basically what that deposit does is it just gets rid of tire kickers make sure you’re actually like a serious buyer that’s actually interested in this versus someone that’s just trying to get a free URL. But we do refund that deposit even if you end up buying the business we still refund the deposit so we require you to send in a bank wire to in order to purchase the business.

But once you do that deposit we send you a folder a Google folder that has all the other more intimate details of the business and that’s when you get to start interacting with the actual seller with one of our business analysts. And our business analyst will usually be the guy that talks to you first and will try to feel you out make sure that this is the correct decision for you.

Because at the end of the day we want not just sort of the seller to win with a good deal but we want the buyer to also win because we have a lot of a lot of buyers that come back to us over and over again and we have a lot of sellers that eventually become buyers.

so we definitely want to keep it kind of a win-win-win situation right so yeah our business analyst will make sure your criteria is all good that  you are looking at a business that he’s confident you can run. And you’ll tell you the risk all that stuff and you’ll actually help you negotiate on that deal as well so that’s kind of how our process works in a nutshell.

Andrew: that’s really cool where can people go if they’re interested and want to find out more?

Greg: yeah you can just check out our website at Empireflippers.com our marketplace is right there in the header of the site. if anyone wants to reach out to me in particular my email is [email protected].

I’m the director of marketing for the company so I love to connect with anyone in your audience – Andrew usually pretty open. They can also find me on Facebook which is my URL is a facebook.com/gregorythewriter. Its writer because I write fiction and poetry for fun I’d add that banded URL for like 10 years now. So you can have your Facebook beware about it I write a written fantasy and horror but like kind of like really cerebral stuff I’m into like old Greek tragedies. I’m a pretty light-hearted guy but I love the dark stuff.

Andrew: I love beautiful tragedies.

Greg: oh they’re the best man.

Andrew: cool and you guys have a podcast as well?

Greg: right we do so we have the Empire Flippers podcast which right now is semi on a hiatus. That’s Justin and Joe are our two founders they run that.

We are launching a new podcast which is one I mentioned earlier Real Money Real Business and that’s going to be right now once per week. But eventually I wanted to get it up to a daily podcast and those are going to be all the cellular interviews. so you’ll get to hear kind of inspiring stories of people who have built their businesses from scratch and really bootstrapped it now they got this  six figures seven-figure valuation and how that whole story unraveled which will be I think a pretty fun one for the audience.

Andrew: yeah cool really great stuff thanks for presenting this to us and kind of showing us another alternative investment opportunity and ideas and kind of maybe we might have just opened the path for somebody who’s really a hard worker and likes to hustle and maybe this kind of changes the rest of their life so to say.

So thanks for coming on Greg anything I can do feel free to reach out I enjoyed this episode.

Greg: yeah thank you Andrew I really appreciate it and yeah hopefully we open up some new concepts very audience to consider I think it’s a really cool investment strategy even if you don’t use a broker. You do private cells like I just think it’s just such a cool strategy so definitely look into it you guys enjoyed it out there.

Andrew: all right cool well thank you very much that’s going to wrap us up for today remember to invest with a margin of safety emphasis on the safety and we will talk to you next week

We hope you enjoyed this content Seven Steps to Understanding the Stock Market shows you precisely how to break down the numbers in an engaging and readable way with real-life examples.

Get access today at stockmarketpdf.com until next time have a prosperous day the information contained is for general information and educational purposes only it is not intended for a substitute for legal commercial and/or financial advice from a licensed professional review our full disclaimer at einvestingforbeginners.com.