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3 Steps To Avoid Failure When Buying an Online Business

Jaryd Krause is the Founder and CEO of Buying Online Businesses, a community where people learn how to buy and scale online businesses. As an online business mentor, Jaryd has gained knowledge, experience, and great success purchasing online companies and teaching people how they can do the same. He’s on a mission to help 1,000 people replace their current income, quit their jobs, and live a lifestyle they love. When he’s not working, Jaryd loves traveling the world and surfing.

Here’s a glimpse of what you’ll learn:

[03:37] Jaryd Krause talks about Buying Online Businesses and how it helps clients buy and scale
[08:28] The best marketplaces to buy an online business
[11:30] The considerations for buying a content site
[18:31] Jaryd discusses his company’s course and the value of investing in education before buying a business
[24:39] Jaryd’s advice about traffic, SEO, financials, and the buyer-seller relationship
[44:16] The biggest mistake people make when buying online businesses

In this episode…

Are you aspiring to buy or scale an online business to replace your income and live the lifestyle you’ve always desired?

Building a business from scratch is challenging, and you might end up losing all your savings. That’s why Jaryd Krause recommends buying an established business that has successfully passed the startup phase. According to Jaryd, who has thrived in this space for years, getting help when buying a business is critical to ensure your purchase is less stressful and more successful. With the knowledge and experience he has gained, Jaryd coaches people on making the right online business purchases.

In this episode of the Quiet Light Podcast, Joe Valley sits down with Jaryd Krause, Founder and CEO of Buying Online Businesses, to discuss how to avoid failure when buying online businesses. Jaryd talks about the leading marketplaces to buy an online business, considerations for purchasing a content site, the value of investing in education before buying a business, and top due diligence tips to foster a smooth purchase.

Resources mentioned in this episode:

Sponsor for this episode

This episode brought to you by Quiet Light, a brokerage firm that wants to help you successfully sell your online business.

There is no wrong reason for selling your business. However, there is a right time and a right way. The team of leading entrepreneurs at Quiet Light wants to help you discover the right time and strategy for selling your business. They provide trustworthy advice, effective strategies, and honest valuations. So, your Quiet Light advisors aren’t your everyday brokers — they’re your partner and friend through every phase of the exit planning process.

If you’re new to the prospect of buying and selling, Quiet Light is here to support you. Their plethora of top-notch resources will provide everything you need to know about when and how to buy or sell an online business. Quiet Light offers high-quality videos, articles, podcasts, and guides to help you make the best decision for your online business.

Not sure what your business is really worth? No worries. Quiet Light offers a free valuation and marketplace-ready assessment on its website. That’s right—this quick, easy, and free valuation has no strings attached. Knowing the true value of your business has never been easier!

What are you waiting for? Quiet Light offers the best experience, strategies, and advice to make your exit successful. To learn more, go to quietlight.com, email [email protected], or call 800.746.5034 today.

Episode Transcript

Intro 0:07

Hi, folks, it’s the Quiet Light Podcast where we share relentlessly honest insights, actionable tips, and entrepreneurial stories that will help founders identify and reach their goals.

Joe Valley 0:18

Hey folks, Joe Valley here, welcome back to another episode of the Quiet Light Podcast. This episode is with Jaryd Krause from buyingonlinebusinesses.com. I think this is such a critical topic, buying a business, how do you do it? What kind of preparation do you have to do? What do you look at? When making a decision? How do you be a great buyer so that you can bind the business over you know that Jackass with all cash that’s outbidding you, there’s so many things that go into it. And you would think that us at Quiet Light wouldn’t want to help you with this because we sell online businesses, we want you to buy these businesses and we want you to win, we want you to have success with it so that someday down the road, you’ll resell it and think of us and you’ll get a much higher value too. So this is with Jaryd, he’s done this for a long time. He is an expert in the space. I think getting help when buying a business is critical. Learn as much as he can use resources like buyingonlinebusinesses.com or the acquisition lab with Walker Deibel as you all know, from here at Quiet Light and his book Buy Then Build, use these resources to make sure that your purchase is less stressful and more successful, so that you can do it a second and a third and a fourth time, we go into a number of things that you’ve got to look at, that are really obvious to Jaryd and I but might not be so obvious to you. And then he talks about the tools and resources that they’re able to provide to help you with learning how to run the proper reports in Google Analytics and SEO and looking at financials and things of that nature. It’s just he and I chatting as it always is. But it’s incredibly helpful and useful. And it gives some real golden nuggets here. So if you’re buying an online business, take a listen. If you’re selling and you might buy one yourself someday, take a listen as well. It’s gonna be very helpful for you. Here we go. Jaryd, welcome to The Quiet Light Podcast. How are you, man?

Jaryd Krause 2:30

Joe, thanks so much for having me. I’m really good. How are you?

Joe Valley 2:33

I’m fantastic. As I said, it’s been a pretty easy day for Joe Valley. It’s been good. I said welcome to but I should say Welcome back. You’ve been on before with Mark. As I understand.

Jaryd Krause 2:44

I have. I have ready to three years ago now. It was a while ago. So yeah, it’s good to be back and having a chat with you guys.

Joe Valley 2:51

Yeah, he’s definitely not as good of a host, as I am. Put it out there right now just state the facts.

Jaryd Krause 2:58

I love it, let’s just lay it down. Let’s get right into the podcast.

Joe Valley 3:05

As I said, prior to hit record, I said, I need to talk to Walker, because he’s got the acquisition lab and he’s helping buyers from his book Buy Then Build, learn how to buy online businesses, you’re doing it as well. And you’re doing it in a little bit of a different model. And you’ve been doing it for a long time to Buying Online Businesses. Why don’t you go ahead and tell the audience what it is that you do where in the world you are as well, because you don’t talk like I do. And what you do with the firm that you have?

Jaryd Krause 3:37

Yeah, so I’m in Australia, on the Gold Coast. And I got into this because I wanted to travel. So I do a bunch of traveling a lot of surfing around. And yeah, just love different cultures. What we do with the firm, is people typically come and they find us through our YouTube channel or our podcast and check out the content, and then they decide they want to buy an online business with our help. And we teach them we have a course within our membership. And they go through the membership and they learn how to buy a business based on the course. But they also get to ask us questions through the group through email. And we also teach them how to do due diligence. And they are allowed to submit their due diligence to us and we review them prior to them making an offer and point out risks and opportunities and stuff like that. And yeah, and then they go by business and sometimes people I do this with one on one clients. Sometimes I coach people that want a bit more hand-holding and help them grow the business as well.

Joe Valley 4:41

We talked about this in the pre-interview most of your clients are actually US-based clients is that right? Yeah, correct. In our most of the clients that you work with buying e-commerce, FBA content SaaS, you know agencies, what kind of businesses are they typically buying?

Jaryd Krause 4:58

Typically, most people are beginners, so they start off with a blog. So a content site.

Joe Valley 5:03

Oh, I keep seeing new listings coming up by Chris Guthrie, folks. Guthrie is what is it? It’s [email protected]. He’s like, he’s like the food blog King. Now he’s listing. So many of those. Personally, I’m just going on a tangent here. I love content sites, we call them blog, column content, whatever it might be, just because the margins are so strong. You’re doing 300,000 in revenue, and you’re doing $250,000 in profit versus 2 million in revenue for FBA business and maybe 200,000 in profit. It’s amazing, really.

Jaryd Krause 5:45

We really dig the content sites, because yes, the profit margin, but also for a beginner, typically, it’s quite daunting to get into an e-commerce business and go, I’ve got to manage all these different things logistics, marketing, be across, like understand digital marketing, and be able to get performance out of it. Or at least know how to hire somebody or work with somebody that’s not going to take advantage of you. We know how hard it is, in the digital marketing space to have somebody that’s good, reliable, and gets results that we can use the contractors.

Joe Valley 6:20

Do you help people like in this case, Buying Online Businesses is I mean, that’s your URL name. It’s awesome, by the way, and the.com not that dot guru or anything like that. It’s perfect. Going back to Guthrie, I saw this morning, he just launched a food blog listing where they’re doing something like $37,000 in profit, discretionary earnings, and it’s listed for like 110,000 or something like that. Do you help buyers with monetizing content sites and educate them on that? Or is it strictly how to buy them?

Jaryd Krause 6:58

No, it’s I have a course in the membership. We have a course Buying Online Businesses course and a growing online businesses course very basic. And the growing online businesses course we have an organic section, we have a paid marketing section, we have an email marketing section. So with content science, yes, I mean, I’ve helped people scale all different business models, membership, the e-comm, seven, eight figures and e-comm, and then also content sites. Now, it depends on what, the way I grow a business is not. Let’s learn a strategy from somewhere else and plug it into the business. I typically learn to listen to the business and I go from Inside Out growth was what I call that’s my philosophy, Inside Out growth, learn to listen to the business. It’s basically just doing the 80/20 the Pareto principle, leaning more into what’s working, doing less of what’s not working. Whilst sounds super simple. That’s not easy. Because a lot of people get distracted with shiny object syndrome. It’s like, oh, they these guys did this really good. We need to get this. We all do it. Yeah, we’re all human beings.

Joe Valley 8:08

Your audience. You know, they’re obviously trying to buy an online business. Where are they looking? Where are they finding them? Come on, it’s more than just Quiet Light we’re just one right. And we don’t have there’s a bunch. There’s a bunch. So I mean, name them.

Jaryd Krause 8:28

Yeah. So typically, Flipper, Motion Invest or a lot of content sites. Empire Flippers. International doesn’t really go down that route.

Joe Valley 8:39

Did you say motion invest? What was that second one?

Jaryd Krause 8:41

Motioninvest.com.

Joe Valley 8:43

Yeah, heard of it. Okay. It’s mostly content sites.

Jaryd Krause 8:45

Mostly content sites.

Joe Valley 8:47

Yeah. Cool. And we know Flipper. Yeah, the International is more SaaS related. Yeah.

Jaryd Krause 8:51

Yeah. Yeah. And that’s the bread and butter. That’s really, yeah, there’s people that pop up and come and go. But you guys have been around longest and been doing the most deals and transactions. And yeah, you got some of the right branding and stuff.

Joe Valley 9:06

Sure. We try to educate in the package itself.

Jaryd Krause 9:11

You guys have been running a podcast for a while now.

Joe Valley 9:15

Five years now. Yeah. I just looked at the first episode today, for some reason, it did the odor in reverse. And I think we had 41 downloads on that. And Chris Yates, from Central Intelligence was, that’s right. Yeah. And it was rhodium weekend that it aired as well. I made an announcement on the rhodium forum or something like that. And I got my hand slapped because you’re not supposed to promote anything. But Chris, it’s you on the podcast.

Jaryd Krause 9:47

Really, when you’re promoting his episode, right?

Joe Valley 9:50

Yeah. But I totally respect what he does or what he did, because Centurica has been sold to Nate Ginsberg, yes, maybe six months ago. maybe a year ago actually, I’m not sure

Jaryd Krause 10:02

Must be longer than six months. Yeah. A year

Joe Valley 10:04

Five because I know that there was a lot of business with aggregators prior to Nate buying it and then the aggregator implosion last year has affected the numbers a little bit.

Jaryd Krause 10:16

Yeah. When this something goes bananas like that, like the trend just go when something goes up super-fast. Like so many people are getting so much money’s getting poured into the aggregation FBA aggregation is only what goes up really fast. Typically, typically, not always. But that’s where I see things that Michael one I get worried that. But yeah, Chris, Chris is an amazing guy. I met Chris, in I think 2016 before I really started buyingonlinebusinesses.com. And I went on his podcast in 2016. So that’s at least, what, seven years ago?

Joe Valley 11:00

Yeah, it took you a while to count the years here. You sure you’re good at math? You sure you’re right. Chris is good guy. So in theory, if somebody is listening, and they want to buy a content site, let’s say we just named a bunch of places that they can look, what key things are they going to look for when buying a content site to determine whether, you know, it’s a good investment or that stuff?

Jaryd Krause 11:30

Great question. The first thing that I like to tell people to do, the philosophy that I share is, most people want to buy a business. So sometimes they sell themselves into a business. I teach people to do due diligence so much that they need to prove the business as a bad investment. And if they can’t, then they must buy it. And how we do that is we just look for risks. And the risks are traffic trends. So looking at Google Analytics, and looking at the traffic trends, is the traffic trending up down sideways? And most importantly, why is the traffic trending in a certain way? And also understanding the trend? For example, if the trend is like what we said with the FBA aggregation, if it’s very steep, incline, is that sustainable. Or if it’s very steep decline, how much work would need to be put in to reverse that trend. If it’s a less of a decline, it’s very small and over a longer period of time, then maybe it’s a lot easier to reverse that trend as well. And understanding if you can reverse that trend, or if you’ve had experience doing it in the past. So that’s just one thing, checking the traffic checking the traffic sources, single source dependency based on pages, if a site has, you know, a business where 30% of traffic is going to one page, and it’s ranked quite high, and then Google changes its algorithm and you lose that rankings. And you can lose a lot of traffic, which in turn a lot of revenue as well. So single source dependency on traffic, where’s the traffic coming from? Organic, social. Pinterest, you know, of last few years been pretty fickle. People had a 50% traffic coming from Pinterest, and Pinterest changing their algorithms more so than Google.

Joe Valley 13:14

How do you determine where the traffic is coming from all through Google Analytics? Yeah, yeah. Correct. And in your experience, most buyers, I’m sorry, most seller is going to allow view only access to Google Analytics. Perfectly fine to ask for it.

Jaryd Krause 13:28

Perfectly fine. It’s expected.

Joe Valley 13:30

I agree.

Jaryd Krause 13:33

I was like hiding something in the dark, what’s the point? Running relationship with somebody like that, and wanting to buy their business.

Joe Valley 13:40

One of the biggest flags and actually, Chris Yates and I talked about this a long time ago, when we talked about due diligence. The biggest red flag that I think people should look out for is when it’s being listed for sale or through a broker, or direct by the owner, and they refuse to give monthly views of traffic and financials. If it’s quarterly or annual, and they refuse to give you anything else, then just walk away because they’re definitely hiding something. Won’t you agree?

Jaryd Krause 14:06

Yeah, if they refuse to give you anything. Pull away.

Joe Valley 14:12

Yeah, they should have your best I mean, this is all about building rapport, but they should have your best interest in mind as well. Because you’re making an investment with your money, your family’s money, and it’s going to affect your livelihood and your family’s livelihood and stress levels in the house and everything. So, good people will share everything for you to make an educated decision. Let’s talk about Flippa for a sec, because, you talk about traffic trends. In a very young business, there’s going to be a very rapid trends going upwards, hopefully right. And Flippa has a bit of a stigma that these are young, not well-defined businesses that are not well aged and the younger it is the more risk there is And it’s all being sold direct, right? So you’re having to scrape for information from the seller. Is there an approach or a process that you help people with in terms of scraping Flippa for good listings, because I find it really hard to just go through the entire thing, and there’s so much there.

Jaryd Krause 15:18

You need to find a diamond in the rough and to do that are a needle in the haystack, they have started to get better. I think since Blake Hutchison became the CEO maybe about three years ago, they have done better than, you know what they were previously, they were like, really well, and I actually, in all my content on YouTube was like, do not use Flippa like, you can see how much media there is about flipper and people having been taken advantage of on YouTube and all these different places. But it’s also not just Flippa’s fault. It’s also the people that not taking responsibility to understand how to buy a business as well. So, with that said, I don’t have a process on teaching people to scrape football, typically, people will resort to Flippa, if they are struggling to find businesses from larger firms and brokers, because they just need to like fill in some time and make sure they feel like they’re doing some work at like, it’s rare that we will buy that many businesses off Flippa or our community, because it just takes so much time to find the right ones. And also the right ones do get snapped up really, really quickly as well. So

Joe Valley 16:37

Where are they buying them from? What’s the most frequent one, you’re seeing people buy them from Empire Flippers. I mean, they’re a little Empire Flippers get some smaller listings than we do ours are a little larger.

Jaryd Krause 16:49

Empire Flippa is definitely up there. Also, Motion Invest is definitely up there. Because a lot of people buying content sites or motioninvest.com. Sometimes investors club, they came out hot and heavy, when they sort of opened up and then they went, we didn’t see too many listings being bought by them. And then I do have more buyers looking at them these days, about basically in the last sort of year, really. But those are the main ones.

Joe Valley 17:23

I’m looking at Centurica as MarketWatch right now, for folks that have not gone there, go to Centurica.com. And go to the market watch tab. There’s a filter there, you can narrow down the type of listing in the niche that you want. And you can look at all of the brokers or exclude brokers as well. Funnily enough, I don’t see Motion Invest there in the list. I do see Investors Club Empire Flippers, us of course, and other sources as well. Yeah, I don’t see it, they’re never heard of it. So I’m gonna have to take a look. See what they’re all about.

Jaryd Krause 17:56

They do sell, the listings they sell are typically under the 250k range. They’re selling a lot smaller deals.

Joe Valley 18:04

Yeah, it’s 100% content sites that they’re selling. Yeah. 100% content sites. All right. So let’s say that I go to, I’m gonna say you URL on buyingonlinebusiness.com. How much time am I going to invest on my own in learning through your courses? Do you have a forum where we talk to people as well, because I’m looking for some specific? Yeah. Tell me about?

Jaryd Krause 18:31

Yeah. So it’s a great question. I actually don’t know how many hours are in the new version, I just updated the course in January of this year. 2023. So it’s a brand new spanking course. I don’t know how many hours they are, the lessons are far more condensed than they were. But there’s some pretty hefty lessons in there. So I don’t know the timeframe. People can if you were going to binge-watch it, which I don’t recommend. If you’re going to binge-watch it, you could probably watch it in a week, or depending on, timeframe is very hard, because sometimes people eight hours a day for a week. Is it that long? Yeah. No, it would be probably eight hours a day for maybe two and a half, three days.

Joe Valley 19:20

Okay. Yeah, a lot of information. Yeah, you can’t absorb all of that at once.

Jaryd Krause 19:25

It’s silly to because I think when we learn we need to stop process and digest and take notes at the same time. So yeah, after each lesson, sort of this actionable steps to go away and do and feel this out in the framework. I provide a framework for people to go through in how to do due diligence and then take it one step at a time? Yeah.

Joe Valley 19:47

I’m just gonna say this, you know, I don’t have people on to promote their products and services and things of this nature. But buyers, folks, if you’re listening, you’re out there and you Buying an online business, don’t do it on your own, we give you.

Jaryd Krause 20:03

Even if it’s not with me, even if it’s not with me or us, like just get some help somewhere.

Joe Valley 20:07

Yeah, it’s a funny thing, we are on the sell side, right. And you think that we don’t support the buyers, but we have to do everything we can to help the buyer make a good, educated, risk-averse decision to make an offer on the business and have a close. So if we’re not helping the buyers, we’re not helping our sellers. Generally speaking, the buyers are not represented, I think maybe I’ve had one buyer represented on a deal in what it’s like, I’m been doing this for a long time, 12 years now. So I think it’s really, really important for whatever the cost is, you’re investing in this course. But you’re going to spend 50 100 a million dollars on a business, it’s well, well worth it. Because you make that one mistake. Like for me, I bought a content site in oh, gosh, I’m gonna I know I’ve written about this, I’ve talked about it, it was just before the payment update, it was like March 21 of 2000. And I think that might have been 12, right. And I had like three great weeks. And then the Penguin update came in my six keywords that were on page one all fell to page 234. And I ended up losing like $280,000 over the course of the next 12 months. The problem with that is that when you go to your loved one and say, I know I learned a lot, I want to do it again, you’re gonna have a really hard time negotiating with them.

Jaryd Krause 21:43

I don’t know if there’s much negotiation really happening.

Joe Valley 21:46

It’s just a no, right? So I think investing in learning, reading Walker’s book, Buy Then Build, going into Buying Online Businesses and signing up for the course and learning everything you can. You’re going to hedge your bet and make a better investment, less stress, a better decision. And you’re not going to talk yourself into something. This was my problem, Jaryd, it’s like I needed to buy something, I’d sold my other business, and really started with Quiet Light yet. And I wanted something I kept pushing, and I pushed too hard. And I bought a business I shouldn’t have, because I just wanted to get it done. And I wasn’t smart enough to do all the research. I didn’t know about Centurica, I didn’t hire them. I just did this on my own. And if I’d hired Centurica at the time, and they ran the report, they probably would have pointed out the risk of the purchase, and I would have walked away. But that’s something you point out is how to do your due diligence and assess your own risk in buying a business, right?

Jaryd Krause 22:43

Yeah, we are the teacher man to fish method. So the reason I like to teach people to do the due diligence for themselves is because when you do due diligence, you’re not going to do it on one business and buy it typically, you can do it on multiple businesses and the education you get from looking at so many businesses can be better than like a college degree in business. And you also learn so much about how businesses work and don’t work and you look at growth patterns, and you see different growth strategies that you may not buy the business, but you can implement into the business you do buy, so the education is so damn valuable. But I have a lot of people that do go Jaryd, I’ve got a million dollars, can you go and buy me a business and just get the right one that you think will be good for me, that just is so scary, because then we could buy them a business. And it might not actually be right for them unless we do our due diligence on what they actually want and their skill sets and how many hours they want to work and all that sort of stuff. But still, you can get somebody a business a buyer and they have never owned an online business before. And it can fall apart because they’ve never own online business. So it sort of gives people a bit of a leg up learning to do it themselves. I am obviously biased to that process. There are people that just want to get your diligence done. But yeah, you’re right, we point out the risks. And we also talk about what you would need to do to either decrease or remove those risks. Because risks are opportunities as well. No doubt, no doubt, but some are worth taking. And some aren’t. So we sort of like highlight where your skill set is at. And whether you can take on that risk or not.

Joe Valley 24:28

Tell me about just two or three or four of the top due diligence things that you’re going to have people that go through your course look at and I know we already talked about trends, or maybe some other things besides trends.

Jaryd Krause 24:39

Yeah. So basically traffic SEO, digital marketing.

Joe Valley 24:48

Within the course. Yeah, so traffic, right? So they’re going to look at Google Analytics, are you teaching them how to use Google Analytics and what to look for and what reports to ask for? Yes.

Jaryd Krause 25:02

Yeah, we teach them what to click, what tabs to open? How to find traffic for the last 12 months the lifespan of the business? Where’s the traffic coming from in terms of country, demographics, if they’ve got that available on Google Analytics, we also teach them how to find the top pages, see what percentage of traffic is going to those bounce rates, time on page, all that sort of stuff or if you’ve got on Google Analytics for engagement rate and things like that. So traffic is one big component that we teach. Another big component that we teach is SEO, like due diligence on backlinks and stuff like that. What’s been done in terms of on-page SEO, off-page SEO.

Joe Valley 25:46

How do they do that? How do you do due diligence on SEO?

Jaryd Krause 25:49

So the biggest component is backlinks looking at the backlinks and seeing how valuable are the backlinks can be.

Joe Valley 25:56

How do you look at backlinks, how do you get a list of the backlinks?

Jaryd Krause 25:59

You go to Semrush? Good question. I love it, Semrush or Ahrefs. And you can click into the tabs, you can look at the backlink Explorer, and you can go away and look at all the backlinks that site has and that domain authority or DR if you’re using Ahrefs. And you can see how valuable those are you can look at the domain and the anchor text.

Joe Valley 26:25

In a course, are you teaching people about domain authority and that domain authority of 20 might be useless, whereas a bit more, something of 64 is incredible.

Jaryd Krause 26:35

Yes. All right. Yes. Is 20 Useless? No.

Joe Valley 26:41

That’s why you smile and laugh.

Jaryd Krause 26:43

Yeah, it depends. Because there’s so many, like some a lot of people would like to say, Jaryd, what? I want to buy a site, what DR, or what’s one factor? Like what DR. Should I be looking at for a site that I buy? But there’s not one piece of information that we need about the business to determine if it’s a good business or not? Also the same time is a DR 20 a bad DR? Maybe not? Because maybe that’s an opportunity. Right? Maybe they’ve got really, really good content, and it’s fresh content. And they haven’t built backlinks to that content that allow them to build authority and build up their domain rating. And that could be an opportunity missed or disguised people might see it as that all this content is amazing. It’s fresh, but it’s not getting any doesn’t have any backlinks and doesn’t really the site does is only a DR 20. If you understood that you could use that as an opportunity. Some people might think it’s a risk. Right. So yeah.

Joe Valley 27:47

Just crystal clarification for those listening. This is not just for content sites, if you’ve got an e-commerce business where you’re pumping out content, or the owner is which is really, really smart thing to do. Otherwise, you just paying for ads.

Jaryd Krause 28:02

It’s the best thing if you have an e-comm.

Joe Valley 28:04

Yeah, exactly. Exactly. Okay, so we’re gonna look at SEO, we’re gonna look at traffic trends. What else are we gonna look at?

Jaryd Krause 28:33

We’re gonna look at financials. Super important.

Joe Valley 28:35

So I just got an Excel spreadsheet, a bunch of receipts sent to me in the mail, what do I get? The audience knows the answer to this.

Jaryd Krause 28:23

Yeah, if you get an Excel spreadsheet, you can’t rely on the Excel spreadsheet. Anybody can put any odd facts and figures and numbers in that you need to cross-correlate that with what’s in, say, the merchant account or the ad revenue account, or the bank account, or you can get access to their I think you guys call it QuickBooks or their accounting software. You get viewers access to that.

Joe Valley 28:46

Do you recommend people get access to that before they go under letter of intent? Or after a letter of intent?

Jaryd Krause 28:54

Yes, so typically, they are not allowed to get that like, until a letter of intent has been signed to get like, usually. So not every broker has a process of a letter of intent. I think it’s really smart on the brokers front to have a letter of intent to ensure that they’re dealing with serious buyers and weed out the tire kickers.

Joe Valley 29:23

What the heck are they doing if they’re not having the buyer sign a letter of intent and then go through due diligence period? What are they doing? Straight to an APA?

Jaryd Krause 29:31

No. That’s really good.

Joe Valley 29:37

You don’t like to put anybody on the spot?

Jaryd Krause 29:40

No. But what some of these businesses do is like they will list a lot of data about the business. And typically, you can go away and find out a lot of information about the business without having to ask for access. That may and things you need to ask for access for is like Google Analytics and financials, really, you can find out a lot of the other data through tools online. And so that’s what most people will do.

Joe Valley 30:13

Now with Quiet Light, what we do in our packages, as you know, is that we have them run a profit loss statement from QuickBooks or Xero, and then export it to Excel. And then we import it into our own system. So they all look the same. That’s an Excel spreadsheet.

Jaryd Krause 30:32

It is. I’m talking like a Google sheet. So you put it into a Google Sheet.

Joe Valley 30:38

Yeah, it gets to export it to Excel, and we upload it to Drive and then convert it to a Google Sheet. The key difference here is that we didn’t put the numbers, and it’s been exported. Yeah, exactly. So what we’re talking about here is situations where somebody is running a business, and they don’t use QuickBooks or Xero. They don’t have a online bookkeeper, they’re doing it themselves. And they just enter revenue and expenses into a spreadsheet. And 9.9 times out of 10 it’s wrong. I read about it in the book where one of them was right on the money. And he was, you know, doing huge numbers part-time was incredible. But in most cases, it’s just not right, you’re not capturing all of the expenses. And therefore you’re seeing an increase inflation of net income or discretionary earnings. All right. So number you want to see a good, good, excellent, and then in our situation, just so buyers understand, we provide them in detail with a monthly view, going back to inception, if possible, if not, to when they started using QuickBooks zero, and you take that at face value, and then in due diligence, once you enter a letter of intent, you get access to third party financials, reports from bank statements from the merchant providers, to then verify it all. It’s got to be fully verifiable. Otherwise, if you can’t match up the numbers, then something’s really off. And you might want to trust the information and walk away.

Jaryd Krause 31:27

For e-commerce business, millions of dollars of e-commerce businesses like you, you want to get that looked at by an accountant as well. It’s, for somebody that isn’t in accounting, or doesn’t do accounting like myself, I’m like, that’s a lot of work.

Joe Valley 32:35

What about a due diligence for my rapid diligence? Or since shortcut? Would you consider them qualified to do the work?

Jaryd Krause 32:43

If they are using CPAs what you guys call CPAs in America to help with the financial part of the Jordan share, and if they’re in those CPAs, understand e-commerce businesses, they’re not just a CPA that is just a general practitioner, accountant, and they don’t really deal with much e-commerce businesses, then.

Joe Valley 33:03

My CPA is great, but she wouldn’t be the right person for this, especially this time of year, right? We’re recording this on March 8th, it’s tax season, she’s not going to take be able to find the time to do this work for somebody in the next 30 days. So, we recommend Centurica and Rapid Diligence. The only problem I find when somebody hires their own CPA is A they don’t have the experience, they’re looking at things backwards. And they often think that because they’re a CPA, they can give a valuation opinion. Dead wrong, flat out. They don’t understand the online business world and sellers discretionary earnings, they have a different valuation model that they learned in school, went through some sort, of course, and it’s just not what we do. So, yeah, be careful about those experts. All right, so we’re looking at traffic, we’re looking at SEO, we’re looking at financials. What about the likability of the seller? Do you want to jump on a phone call or a zoom call with the seller do you recommend that?

Jaryd Krause 34:09

Highly recommend it, I highly recommend it. If you’re spending over 100 to 200k on a business, you’d be silly not to build a relationship with the seller. In fact, I often tell people, this is the most important part of the deal. And I actually teach people how to become attractive buyers. So they know how to be a likable buyer because I’m thinking of selling so

Joe Valley 34:37

It’s not as simple as that. There’s more to it.

Jaryd Krause 34:40

There’s things that you can do to build rapport. Like you can read a book called How To Win Friends and Influence People by Dale Carnegie and stuff like that. I’ve learned a lot about communication, a lot about speaking a lot about relationship building because I think it’s super important in business. And some of the things I just like to land and share with our audience and also through the course. Because I believe you should become an attractive buyer. And to become an attractive buyer. First you need to do the groundwork of understanding businesses and do due diligence. So that’s a big component of becoming an attractive buyer, just knowing your stuff. But also, yeah, being a good human being. And I reason I reckon this is important is because I believe a seller should choose the best person that they should partner with, to sell their business. Because it’s everybody needs to win, everybody needs to be happy. And the better you can make that relationship, the better it is, for both the seller and the buyer, there’s so many wins to have outside of just the transaction of the sale.

Joe Valley 35:49

This is why you’re on the podcast. I couldn’t agree more. And I just interviewed Mike Nunez, Mike has bought 10 businesses from Quiet Light sold a few of them as well. So he’s kind of a private aggregator. He’s bought more than that altogether. And more often than not, Mike is in a situation where there’s multiple offers, and his is not the highest, but he wins. Why? Because he’s a good human. One of the key questions he asks is, if you’re the seller, Jaryd, I’d say, tell me about what’s important to you in this process. And oftentimes people will say, Well, I really care about my staff, I want to make sure they’re taken care of and not laid off and fired or, you know, treated poorly. There’s so many things that are important to the seller that you wouldn’t think of as a buyer. It’s not just about the money. It’s so much more. I had a situation where I had a business, it was $2.3 million. It’s a sizable listing, and I had an all cash buyer that made a full-price offer 2.3 million, and he had the cash. And then I had another buyer that made a full-price offer 2.3 million, but needed the seller to hold a 10% seller note because it was an SBA loan. And that’s what I had to do at the time. And my seller didn’t trust the cash buyer, because the cash buyer wasn’t nice. He wasn’t kind and couldn’t communicate with him well, on these buyer-seller calls that we insist happen before letter of intense offers are made. And my seller chose this other guy, Nathan, and was willing to take 230,000 less in cash because the buyer cared about the things that the seller cared about. The buyer said, what’s important to you what’s important to your team? And check all of those boxes that I’m sure you talk about in your course. And he got the deal. So you don’t have to be the richest person making offers the one willing to make the highest offer in order to win the deal. Do you find that to be the case, often or not?

Jaryd Krause 38:02

Yeah, 100% This is the reason that we teach people to can’t become attractive buyers, because it saves them so much money. Often the times, we will see that the seller or whoever selling the business might be like, look, we’ve got some higher offers and stuff like this. And if they’re attracted by knows the business and they’re confident and they’re confident in the seller, choosing the right person, like confidence, people are just too attracted to confidence, right? And so if the sellers like, look, this guy offered less and knows the business asked way better questions about the business, better questions about me, we connected on an emotional level, in a good sense. And I really liked this person, somebody I could work with, and I would probably enjoy the time in training and working with through the sale of the business with that person, but they offered less. And they will go for that. And we often as buyers will sit back and be like, all right, cool. Sometimes the seller or whoever’s on the business might want to like, try and get a bit more for the business. And that’s great. Cool. And there might be ways that that can be done. And we’ll just be like, yeah, like if you get a better offer, sell it to that person if it’s right for you to sell it to that person. And that really shows the seller like okay, well this guy knows what the business is worth, I talk about buying respect. And how you can buy respect is through being a confident buyer, which is being an attractive buyer. And you can buy respect of the seller and how you buy that respect as you’re doing the work you doing the work on yourself and in the space and so…

Joe Valley 39:52

It’s closing too because as a buyer, you’re going to need that seller after closing first you got to work with them.

Jaryd Krause 40:01

Correct. This is where the compounding comes from, you can save money on the listing on the purchase. But also by being somebody that the seller is happy to get on the phone with and enjoys talking to them. You may speak for an extra 15 minutes and that seller may share one critical thing that they’ve shared in the last 15 minutes of the call that about the business that they might have done or would be a good strategy or something to think about. And it could make the business infinite more money in the future just by sharing that one extra thing because they felt like they needed to and they had a good relationship with the buyer. So my buyers typically the relationships they have with the sellers are so good, they overextend their time and training. They overextend themselves through communication, and they go above and beyond. Because they just work together. And they love each other. In the sense.

Joe Valley 40:54

Mike Nunez was talking about one of the recent businesses he bought. He ended up being such an attractive buyer, such a likable buyer, that the seller was going on a vacation with his family rafting down the Colorado River and invited Mike and his family. And so they spent 11 days without mobile phones, rafting down the Colorado River after closing, it was just I mean, it’s invaluable. You get so much information sitting around the campfire talking about life, but also, this in the business, I could do this. And it’s so important.

Jaryd Krause 41:31

Yeah. And that’s just in the 11 days, like together, like there’s so much value in that. And they’re not going there, I’m sure that both of them are not going there with the intention to just talk about business, they’re going with their families, yeah. But also that relationship basically sets the foundation of how that relationship is going to grow from there. And the opportunities that happen outside of that one transaction in 5 10 20 30 years in the future, together with these two smart people in business that like each other. That’s where the real value is, isn’t that relationship.

Joe Valley 42:09

100%. Now, we don’t allow offers to be made on businesses without having a buyer-seller conference call. How do you feel about that?

Jaryd Krause 42:20

It’s smart, it’s smart. You guys are selling listings, you know, above the 200k range? I would say it’s, it’s necessary as well.

Joe Valley 42:30

Well, you know, 50k is a lot for a lot of people. If I’m buying a business for 50k, I kind of want to be on the phone, preferably a zoom call, so I can see the whites of their eyes with somebody that I’m talking to, and I’m about to send them $50,000.

Jaryd Krause 42:43

Yeah, I agree. $50,000 is a lot to a lot of people. And a lot of sales these days go without, like on these, we might say lower-end listings, but they’re not lower-end. For a lot of people, that sub 100k, a lot of deals are just being sold like this without seller calls, and I do insist my buyers to have a call with the seller. But sometimes they’re not open to it. And the reason being is, the reason is the market. And this is what frustrates me is when you have uneducated buyers, just buying deals because they think it’s good, then the sellers at that price range will go well I could just sell it to this person without having to have a phone call to 10 people. And without having to give too much information. And I’ll just sell it. The markets sets the pace, unfortunately, and which is why it’s upsetting and frustrating at times for us, where we educate people to try and make the market better, in a sense for every person. And yeah, people will sell deals for 100k without speaking to them. And that’s where the markets are right?

Joe Valley 43:59

Quit. Don’t do it folks. Don’t buy those, I wouldn’t, I would. Alright. What’s the absolute biggest mistake? Let’s wrap it up with this. I’m gonna put you on the spot the absolute biggest mistake somebody makes when buying an online business or that you’ve seen somebody make?

Jaryd Krause 44:16

I think you mentioned it earlier. The biggest mistake is not getting help.

Joe Valley 44:22

Simple enough, get help people get help. I tell you what, I’m considered an expert in this space. I’ve written a book. I’ve been at this for over a decade. Quiet Light’s got an incredible brand and reputation. If I were to buy an online business, I would absolutely get help. No question about it. I would probably ask Amanda to help me with the SEO stuff because she knows Ahrefs like nobody I’ve ever known. And I would hire a firm like Rapid Diligence or Due Diligence to help me just verify absolutely everything. And then what they do in that process. Like you said earlier, Jaryd is they point out the weaknesses in the business which turn into growth opportunities. I would absolutely do it. So I’d highly encourage everyone, go to buyingonlinebusinesses.com Check it out. It’s got to be the best investment you’re gonna make. If you’re looking to buy an online business. I’ll throw it out there buy Walker’s book as well Buy Then Build, you got it, you got to get it all your information from all different sources, and learn as much as you can so that when you make the leap into entrepreneurship, it’s a permanent leap and a successful leap. And it’s a fruitful leap financially. So Jaryd, appreciate your time. Thank you for coming on. Again. Keep doing what you’re doing. You’re helping a lot of people appreciate it.

Jaryd Krause 45:46

Thanks so much, Joe. Appreciate it.

Outro 45:50

Today’s podcast was produced by Rise25 and the Quiet Light content team. If you have a suggestion for a future podcast, subject or guest, email us at [email protected]. Be sure to follow us on YouTube, Facebook, LinkedIn, Twitter and Instagram, and subscribe to the show wherever you get your podcasts. Thanks for listening. We’ll see you next week.