The Open-Book Sale of My $600K Store (With Complete Financials)

OpenBookI’m selling one of my stores, TrollingMotors.net, and will be using a radically different approach.

Instead of keeping the details private, I’ll be sharing all the key data, including financials and traffic stats. And forget business brokers or Flippa; I’ll be selling the site exclusively via the blog.

Even the auction will be turned upside down. The price will start high – at $185,000 – and will drop every few days by $10,000 until someone buys it.

I’m also offering a 5% friendly bribe referral commission – possibly totaling more than $9,000 – to anyone who connects me to a buyer, even if it’s through a Tweet or Facebook share.

So definitely not your run-of-the-mill store sale.

I’m doing this for two reasons. First, I want to challenge the status quo notions regarding selling a store. Do you really need a third party involved, or is it possible to sell successfully on an independent platform? Second, I want to offer a look inside the process of selling an eCommerce store – the details of which are usually very hush hush.

I have no idea how this will pan out. It could be a huge flop or a massive success. Regardless, I’m excited to take the ride alongside you.

Store Overview

For those who aren’t familiar with it, TrollingMotors.net is a drop shipping eCommerce store I started three years ago. It specializes in (surprise!) trolling motors, which are electric fishing motors designed to provide more precise steering and navigation than large gas-powered motors.

Our customers are predominately male, aged 40 to 60, who love fishing and are looking for a quality trolling motor for their (often expensive) boat. While motors can be found for as little as $100, TrollingMotors.net  focuses primarily on high-end models ($700 to $2,000) targeted for customers with larger boats in the 12′ to 20′ range.

TMScreenshot

Financials

Let’s dive in to what everyone is most interested in: the financials. Listed below are the financials for TrollingMotors.net, both annually for the last four years and a quarterly breakdown of 2013:

Reading on Your Phone?  Having a hard time reading the charts? Here are the high points: 2013 revenues of $623,022. Gross profits of $72,784. Bottom-line profits of $65,042. Revenue growth of +50% in 2012 and 2013. Income growth of 40%+ in 2012 and 2013.

Four-Year-IS

 

2013-IS

Income Statement Footnotes

(1)(2)(3) TrollingMotors.net shared a lot of services with my other businesses, so these were expenses covered by the parent company. As such, I’ve listed estimated expenses for services like telephone, hosting and a help desk to replicate what those historical expenses would be.

(4) This is the cash back received from my credit card when paying for goods from suppliers, effectively reducing the cost of the products.

Thoughts on the Financials

As you can see, growth for TrollingMotors.net has been extremely healthy with revenue growing +50%  in the last two years and earnings growing 40% or more in each of the same periods. Most drop shipping businesses have smaller margins, and TrollingMotors.net is no exception: Its gross margins are around 12%. But with the significant revenue generated by the company, it will earn about $65,000 for 2013.

I invested a significant amount in SEO and web design the first year to get TrollingMotors.net off the ground, and total expenses for 2010 were nearly $25,000. But since then, operational expenses have been fairly low. As 100% of the products sold are drop shipped, there’s very little overhead to worry about.

The trolling motor niche is seasonal, with demand peaking in the spring and summer and dropping off in the fall and winter months.

New Supplier Discount

Recently one of our suppliers who didn’t realize we were selling approached us about a partnership that would offer better pricing. In October, we met with them in Vegas and secured a deal (transferable to the new buyer) that will lower our costs in 2014 by about $5,000. This one pricing change alone should add $5,000 directly to the bottom line for 2014, raising profits almost 8%.

Employee Wages/Automated Business

Currently, my operations manager, Pat, runs the day-to-day operations. He works part time and spends up to two hours per day running the operations of TrollingMotors.net. For more details on exactly what he does, please see the section on Operational Responsibilities farther down.

When calculating seller’s discretionary earnings (i.e., income) for small eCommerce businesses of this size, wages for one person (often the owner) are usually not deducted. Given that Pat and my combined operational workload for the business is less than 15 hours per week, I didn’t include any labor costs per this normal exclusion in calculating seller’s discretionary income.

However, I realize that most people (myself included if I were you!) would want to see the financials including payments to an employee. That’s why I’ve listed below how paying an employee would impact the bottom line. This is the anticipated cash flow assuming someone else was running the day-to-day operations of the business, effectively putting the operational aspects of the business on complete autopilot.

Salary-Estimate

Footnote:

(1) In sensitivity to Pat, I haven’t included his actual compensation numbers in this post. While these actual salary figures are available in the full due-diligence packet (see details below), the calculations assume a $50,000/year salaried employee working 2 hours per day (inclusive of tax costs to the employer).

 

Traffic and Conversion

Traffic has been consistent throughout 2013, apart from the few days where I accidentally disabled the the Google Analytics plug-in. Again, please note that the trolling motors niche is seasonal, with traffic peaking in the summer months and falling off in the fall and winter. Over the last year, the site has seen more than 185,000 total visits and nearly 140,000 unique visitors. The charts below represent data for the last year, from 11/1/12 to 10/31/2013.

 

Total-Traffic

Key-Stats

Top Organic Keywords

Top-Keywords

 

Traffic That Drives Revenue

Direct traffic (people typing TrollingMotors.net directly into the browser address bar) is the store’s leading source of business and generated 39.2% of the store’s revenue in the last year, totaling approximately $232,000 in sales.

Of this $232,000 in direct traffic sales, about half was made up from orders placed over the phone. The other half was revenue generated from people actively searching for the TrollingMotors.net brand online and ordering from our website.

Approximately 20% to 25% of TrollingMotors.net orders are placed over the phone.

Revenue-by-Source

 

Brand Reputation

Over the last few years, we’ve managed to build up some brand reputation with TrollingMotors.net. As mentioned earlier, a significant portion of our revenue comes from people actively searching for us. If you look at a list of the top 10 organic keywords that drive traffic, you’ll find “TrollingMotors.net” is #4 on the list.

And this brand reputation is growing. Over the last year, branded searches for the name “TrollingMotors.net” are up about 25%.

Conversion Rates

Because TrollingMotors.net focuses on high-end trolling motors, many costing $1,000 or more, the conversion rate is on the low end for eCommerce stores. Over the last year, the average conversion rate was 0.46%, which increases slightly in the busy season and drops off in the fall and winter.

Revenues listed in the graph below won’t match up with official financials, as the data below are for the last 12 months (Nov 2012 to Oct 2013) and because of the inevitable discrepancies between analytics revenue reports and actual bank revenue reports.

Conversion-Rate

 

 Google’s Penguin Update

As I’ve publicly written about before, the site was impacted by Google’s Penguin update and lost a significant amount of its organic traffic from Google. This penalty was primarily due to over-optimized anchor text that had been built by a SEO firm hired to help market the company. This SEO firm was employed for six months in the second half of 2010. Since then, they have not done any work on the site.

After the penalty, we did a backlink audit and reached out to linking sites that had questionable, spammy or over-optimized text links pointing to us and asked to have them removed. We were successful in removing a number of these links. We also made a number of changes to the site itself, such as removing highly optimized site-wide footer links, to help address the penalty.

Since the penalty, we’ve worked to build new quality links and have completely redesigned our website (see the case study here) to offer the most relevant and useful information regarding trolling motors online. While this doesn’t directly address the issues that caused the Penguin penalty, it is very much in line with Google’s desire to rank quality, highly educational websites.

Traffic Since Penguin

When comparing the first full two months immediately proceeding the Penguin penalty (May and June 2012) with the same period in 2013, organic traffic from Google had increased by more than 95%, as you can see in the chart below:

 

Improvements Since Penguin

Increase-Notes

Current organic traffic from Google isn’t as high as it was pre-Penguin. But the efforts taken to address the root problems of Penguin have helped significantly. Traffic year-over-year is up significantly and, more importantly, organic traffic over the last year has been consistent, despite additional updates to the Penguin algorithm by Google.

Most importantly, Penguin hasn’t slowed earnings growth. Earnings are on track to grow more than 44% in 2013 from 2012 levels.

 

Operational Responsibilities – Two Hours Per Day

It takes approximately two hours a day to run TrollingMotors.net. Pat, my sales manager, handles all the operations for TrollingMotors.net and my other store, Right Channel Radios, working just four hours each day. And of that four-hour chunk of time, TrollingMotors.net operations take up about half of the workload.

But it sure would be easy to underestimate work times when selling a website, wouldn’t it? I mean, how GOOD does a two-hour work day sound when trying to sell a store? I’d certainly be suspicious of a seller’s (er, my!) motives and estimation abilities.

That’s why I put together some hard data on how much work is involved to run day-to-day operations so you can make the judgment call. The metrics below are averages for the last year, ending 10/31/2013:

Operational Averages

Telephones

The largest operational responsibility is talking with customers on the phones. In 2013, our phone lines were open only from 8:30 a.m. to 12:30 p.m. MST Monday through Friday, with callers being sent to voicemail outside of these times. The average call duration was slightly over 8 minutes and we get an average of about 4 calls and/or voicemails per day. Over the last 12 months, approximately 20% of our orders have been placed by phone.

Email Ticket Volume

Answering emails is the second most time-consuming responsibility, next to the phones. We have historically used Zendesk to manage our customer email interactions. On average, we get about 3 new email tickets per business day from customers. Some are replies to automated order follow-ups that can be solved in 30 seconds. Others are return requests or complaints about a damaged shipment. But overall, average email volumes are extremely manageable.

Automated Inventory Syncing & Routing

One of the biggest pains of drop shipping is keeping inventory in sync with multiple suppliers and not selling out-of-stock items. If this isn’t handled well, it can be a HUGE hassle of running a drop shipping store.

This isn’t something we’ve had to worry about with TrollingMotors.net. The business is connected to both of our suppliers via a live data feed (facilitated by eCommHub) so that inventory status for items matches our suppliers real-time availability. Our eCommHub integration also routes many orders to suppliers, collects tracking information from supplier websites and automatically sends notifications to customers when items ship.  These systems eliminate a great deal of manual work.

Other Responsibilities

Other operational responsibilities include:

  • Updating the website. The bulk of this usually occurs in fall and winter, when new motors are released and old ones are discontinued. One of the benefits of the trolling motors niche is that model turnover is fairly low. But there are usually a few dozen products that change and need to be updated each year.
  • Troubleshooting order routing and tracking numbers. While eCommHub automates routing orders and sending tracking numbers in most cases, there are some instances when this needs to be done manually.

Business Advantages

So why would TrollingMotors.net be a good purchase? There are a number of advantages to the business:

Strong Historical Growth: The business has experienced strong, consistent growth over the last three years, both in top-line revenue and operating income.

The Premium Site in the Space: TrollingMotors.net is, as we’re often told by our customers, the BEST resource available online for learning about trolling motors. The site boasts an impressive library of educational articles, informative category pages and the most detailed motor product pages anywhere online.

100% Drop Shipped & Location Independent: Everything sold on the site is drop shipped. Most of our products are carried by multiple suppliers, which adds a layer of redundancy and increased availability to our sourcing and limits the number of orders we can’t fill. Due to the drop shipping model, it’s possible to run the business from anywhere on the planet. You don’t have to worry about purchasing inventory, dealing with fulfillment or managing warehouse employees.

Defensible MAP Pricing: Most of the high-end motors we sell (which make up the majority of our revenue) have strict minimum advertised pricing (MAP) enforced by the manufacturer. This helps keep the market viable and prevents the profit-destroying price wars that are common in other niches.

Highly Automated & Minimal Workload: Much of the tedious work involved with running a drop shipping business (inventory syncing, sending out tracking notifications, etc.) is fully automated. The other daily tasks, including answering the phones and replying to customer emails, take just a few hours a day.

Busy Season Right Around the Corner: The trolling motor niche is very seasonal, with demand beginning to grow in January and spiking in the spring. Assuming the sale closes in mid-January as scheduled, the new owner will taking over as peak earning season begins to ramp up.

Includes Training & Documented Systems: Most of the recurring tasks in the business (such as placing orders, editing orders, issuing refunds and handling returns) are documented and systemized. This makes it MUCH easier for a new owner to get up to speed and to train staff members. Plus, the sales price includes a two-month personal training period for the new owner. Full details of this are outlined in the full sales prospectus (see below).

Bidding Process

The sale will take the form of a Dutch auction. The price will start at $185,000 and will decrease by $10,000 at scheduled intervals until someone places a bid. The first party to bid will win the auction.

The timeline for the auction and its subsequent price drops are as follows:

Bid-timeline

The Bid Multiple

Included in the chart above is a multiple of seller’s discretionary earnings (SDE) that each bid represents. Small eCommerce businesses like this usually sell for between 2.0x and 3.0x SDE, so I’d be very surprised if the price falls to the lower levels or even to the reserve price of $105,000.

But I started it at a reasonable open and an aggressively low reserve price to make this process exciting for everyone involved. It should be nerve racking interesting to see how the bidding process pans out!

While the bid amount will take a dollar form, it will actually be a bid on the multiple to be paid on final 2013 seller’s discretionary earnings and adjusted in early January 2014.  If earnings for the fourth quarter end up lower than anticipated, the final sales price will be adjusted downward appropriately. This can sound a bit confusing, but it’s discussed in detail in the full prospectus available below.

Getting the Full Prospectus & Making a Bid

Given that the auction has ended, the prospectus is no longer available.  For details on what happened, please see the follow-up article referenced at the end of this post.

Why I’m Selling

If you’re anything like me, you’ve had one question in your mind throughout this post.

“If this business is so great, why’s he selling it?”

I ALWAYS wonder this when I see a site for sale, especially if it makes claims about being fairly easy to run and operate. For a long time I figured someone would have to be crazy to sell a site for 2x or 3x earnings, which is effectively a 50% or 33% annual return on your investment assuming things continue to go well. I couldn’t comprehend the logic, and fellow finance friends of mine agreed.

But what I finally realized is that all sales aren’t purely financial. Here are my reasons for selling:

Larger Opportunities & Focus: TrollingMotors.net has been a great business and an incredible learning experience, but it isn’t necessarily the business I’d start, run and invest in today given my current opportunities, experience and resources. The niche drop shipping model has been an amazing way to learn eCommerce and has provided the lifestyle flexibility for some incredible adventures, but I’m ready to step into a business that holds the potential for larger growth.

In the coming years, I’d like to explore developing my own products and trying to create a widely known brand. These types of businesses take a bit longer to scale up (and require more capital), but ultimately have a the potential to become much larger and more profitable. I’d also like my team to have more time (even if just a few hours a day) to focus on some aspects of our other businesses we’ve been neglecting.

Personal Experience: I’ve never sold a company and I’d really like to – both for the learning experience and (perhaps pridefully) to say I’ve done it.

Taking Money Off the Table: I like the idea of pocketing some money now and reducing my risk across my business investments. This also gives me more capital for larger, hairier projects (see above).

Produces Great Blog Content: Having a transparent, public sale of the site on my blog will hopefully create some of the best content I’ve ever been able to produce and gain exposure for eCommerceFuel. I’m definitely factoring in the value of that buzz in the sale decision. :-)

Earn a 5% Referral Commission (up to $9,250)

I’m paying a 5% referral commission – which could be as high as $9,250 at the top price – for anyone who brings me a buyer for TrollingMotors.net. You could be eligible for the commission simply by tweeting or liking this page!

When I close a deal with the buyer, I’ll ask if there was a specific person or website that steered them toward the sale. And if they name you, I’ll cut you a check for 5% of the final purchase price as a commission – up to $9,250 and no less than $5,250 if sold at the reserve price.

There are a few caveats: The buyer can’t already be on my email list as of Nov. 13, 2013, and you’ll need to provide some record of proof that you promoted the site prior to my connecting with the buyer (a blog post, a dated share in your Twitter or Facebook stream, making the introduction directly, etc.). But assuming you were genuinely the person who connected us, I’ll be cutting you a nice fat check for very little work.

This is really just a friendly bribe to try to get maximum exposure for the sale of the site. When you’re not paying site auction fees or for a business broker, it allows you to get creative with how you market the business. What’s more valuable: paying 10% to a business broker or offering an internet-wide 5% bribe? It will be interesting to find out.

So how can you score the 5% commission?  You can:

  • Tweet this post by clicking here
  • Mention it on your blog
  • Share this case study to your email list
  • Like the post of Facebook or Google+ via the buttons below

Questions? I’m Happy to Answer Them!

I’d love to answer any questions you have about TrollingMotors.net and/or the sales process – just leave them in the comments below.

Thanks for reading and following the sales process! I have no idea what will happen, but I’m excited to find out with you.

Update – Auction Ended:  Interested in hearing what happened with the sale?  You can read my post-auction update post here.

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Comments

  1. Susan says:

    So stoked for you, Andrew! Can’t wait to see how this turns out.

    • Andrew says:

      Thanks Susan! Should be an exciting ride regardless of what happens.

      And it’s been wonderful having you as a new member of the forum. You’ve been adding a TON of value! Thanks so much for joining us.

    • Anthony says:

      Hi Andrew,

      Thanks for your transparency!

      Can you advise on two things for me please:

      1. Why are the web domain and hosting fee’s so expensive? Can’t you get unlimited hosting deals these days with reputable providers?

      2. If you could do it all again, are you saying you’d skip out on spending the 10K for the SEO in the first year?

      Thanks in advanced.

      And PS. For all the people asking questions about things already addressed in the post. Read the whole thing before posting for goodness sake!

      • Andrew says:

        Good questions, Anthony. The web hosting fees are on the high side as the site runs on Magento, and I want to allocate plenty of money to pay for a high-quality performance web server that can run it. Magento doesn’t do well with budget hosting.

        And for point #2, yes – I’d definitely skip the SEO investment the first year, at least the way I did it. Ultimately, it ended up causing the Penguin issues and as expensive to try to undo.

  2. Susan says:

    Hey, thank YOU for having me! It’s all you guys who add the value, I just try and give back a l’il. ;)

  3. Mitesh says:

    Hey Andrew,

    As always love the transparency of your business but I’m curious as to why your selling off trolling motors. Have you actually got more ideas for a few start-up ventures in the next few months?

    Mitesh

    • Andrew says:

      Hey Mitesh! I talk about why I’m selling at length in the section titled “Why I’m Selling”. :-) It’s a long post, so it was probably easy to miss.

      But, in a nutshell, selling to focus on my other businesses in the short term and some larger projects in the medium to long term.

      • Mitesh says:

        Lol:) Yep easily missed, but looking forward to your next business venture and seeing what you do. By the way this a great idea.

  4. Elle says:

    I am forwarding your email to my husband. He has just left his high profile corporate company and now looking for a business opportunity. The thing is he is not tech savvy!

  5. Wow, really good looking post and business! The open process is going to be fascinating. I gotta say, if I was in the market right now, you’d be getting a bid from me – I think there are definitely some ways to bump the margin pretty quickly for the right owner…

    • Andrew says:

      Thanks, Bill! That means a lot coming from you. :-) Really interested to see how the open process / dutch auction works out as well. Should be exciting.

      Thanks again!

  6. William says:

    Hi Andrew,

    Thank you for sharing and being transparent with your business model and the reasoning behind selling it. I found some interesting gold nuggets from the post. Should make for a fascinating case study later.
    I wish you the best and look forward to seeing your next venture and hope you will maintain the same level of transparency. I think your blog is fascinating.

    Have a great day,
    William

    • Andrew says:

      Thanks William, appreciate the comment and really glad you enjoyed it. Will do my best to keep things transparent in the future as well.

      Thanks for reading!

  7. Mark Mathson says:

    I’m pumped for you! Great details in the post and financials, I will share with my network. The market looks promising as well into the future, so this would be a good opportunity for the right buyer.

    • Andrew says:

      Awesome, thanks Mark – appreciated! I’d love to cut you a check for that referral bonus. :-)

      Hope things with your business are going well!

  8. Kyle says:

    I’ll offer a $10,000 referral fee to anyone who knows a financier that will do a 90/10 loan on this buisness!

  9. Aron Kohn says:

    Hmm. this is so interesting i would like to see a live line chart of the analytic for this page.
    Otherwise i will have to wait anxiously for the detailed blog post after the sale :)

  10. Donnie Lawson says:

    This is really fascinating Andrew. I’ve poked around TrollingMotors.net before and wondered how much it was making. Now I know!

    I also can’t wait to see upcoming posts on your new ventures!

  11. Alex Smith says:

    Ever considered an earn out? Might work very well for this type of business…

    Alex

    • Andrew says:

      Hey Alex! I did consider it, yes – but I decided to do a straight 100% cash deal for the simplicity. I realize I’m probably leaving a little bit on the table in terms of price, but it was worth it to me for a cleaner transaction and the ability to focus 100% on other projects once the deal closes.

  12. jerry says:

    This IS my first time on This site..i got here through an email..well, i am pleased with what i read from This page. The Trollingmotor.net site looks great and IS worth bidding for..Goodluck.

  13. Ryan says:

    Good suff. Man, if only the margins were higher . . .

    • Andrew says:

      I know, right?!? Unfortunately, drop shipping margins are definitely on the low side. It’s great having little up-front risk and the ability to run it from anywhere. But you do give up some margin for those advantages…..

      • Ryan says:

        I see that you ran about 5k worth of PPC in 13. Were you able to be at all profitable, given the low margins?

        • Andrew says:

          I hired a consultant to run everything, and after paying his expenses it was pretty close to a break-even. It’s hard to say because he only had 2-3 months to get things setup and running before I decided to sell. Without his fee, the PPC was profitable.

          I think PPC could be a way to grow the business if the new owner was committed to doing it on their own, but with margins in the 12% range it is much more difficult. You have to be REALLY dialed in.

          We didn’t have a chance to test large banner style re-targeting ads, which I think may have done well.

          • Ryan says:

            I agree. I think retargeting could have been key.

            Anyway, appreciate the responses and congratulations!

            I’m a paid member of the forum now, but there is wayy too much amazing information on there. I find myself reading and NOT working. :)

            Been hugely inspired by you and your blog. I’m still a corporate drone and work from 10-7.

            I get up at 5am every day to work on my store. Hoping to have traction in 12 months.

            Thanks again!

            Ryan

  14. Len says:

    The link “Fellow Finance Friends” under “Why I’m Selling” is broken. Can you post that for me? Thanks for the great article.

  15. Shabbir says:

    Hey Andrew,

    Hats off for such a bold move, man. Good luck with the auction. I hope you get the price you are looking for, and I’m pretty excited to see what your next idea is.

  16. Erik says:

    Hi Andrew. Very interesting move (again). Congrats. I have been a fan of your eCommerceFuel for some time now. Keep up the good work and good luck.

    Erik

  17. EJ says:

    Wow!oI only inspire to be like that, I’m looking forward to how it ends up

  18. Andrew Jiang says:

    Interesting business. Why is Q4 so low compared to Q1-3?

    • Andrew says:

      Hey Andrew! It’s due to the seasonality of the business. October and November are just slow months for trolling motors. People aren’t out fishing as much, and revenues are down. Things pick up in December for gifts a bit, but it’s still usually the slowest quarter.

  19. This was really interesting. I was especially happy to see that you had big start up costs your first year as I’ve been concerned about spending more than I am making. Seeing your subsequent numbers made me breathe a sigh of relief. My products are also fairly expensive, so good to see your conversion rate as well. Looking forward to following the progress. And I signed up for Ezra’s conference with you in Orlando in December and am psyched to meet the guy who gave me the tools to start up Rustic Artistry.

    • Andrew says:

      Hey Carole! Good to hear from you! :-)

      Yeah, the first year was definitely expensive. But if I had to do it over again, I’d skip out on the outsourced SEO and start with a more basic design. I think I overspent, but it’s a good lesson learned.

      Great that you’re coming in December, and looking forward to meeting you!

  20. James says:

    This is an awesome way to sell a high ticket item!

    I have been thinking about starting a drop ship business, and I’m curious if you would consider owner financing the sale?

    • Andrew says:

      Thanks James! Unfortunately, I won’t be considering owner financing. One of the reasons I’m selling is to take money off the table, and financing the deal still gives me exposure. So it will need to be a full cash deal.

      Thanks for reading!

  21. Josh Dance says:

    I have always wondered why someone would sell an easy profitable side business. Makes sense. Good luck and this is exciting to see!

  22. AJay Hubbard says:

    That’s awesome! I’d drop the money in a second if I had it :)

  23. Erik Rohman says:

    Wow nice Andrew! People think I am a bit nuts starting 3 businesses all at the same time and ask me how I am juggling all of this through the holiday season. When in doubt I can always look to you and say I have it easy. You rock and I can’t wait to see how this turns out!

    • Andrew says:

      Ha, thanks Erik! Juggling three businesses is really hard – actually it’s one of the reasons I’m selling, so I can focus more.

      Appreciate your support, and I’m looking forward to the outcome too. :-) Good luck this holiday season!

  24. Dan Gaspar says:

    This is great Andrew. Thanks so much for posting this openly. I learn so much from this site it keeps me motivated on my own store. I hope someone takes you up on your offer soon.

  25. Leighton says:

    Hey Andrew,

    Wow, I’m really excited for you and can’t wait to follow this process. I learned a lot just from reading this post–it’s inspiring me to consider buying a business at some point. The Dutch auction idea is really interesting. Thanks for sharing all of this, and good luck!

    Leighton

  26. Joe says:

    Hey,
    I’ve always been curious about drop shipping. How exactly did you decide that this was the product and market for you?

    I’ve found it quite difficult to find decent suppliers so never really ventured into it. After calculating costs I realised to be competitive I wouldn’t be able to earn more than 5% GM so thought it was just a DOA idea.

    • Andrew says:

      Hey Joe! I picked the market purely based on research and thinking I could make money in it – hadn’t done much with trolling motors before this. :-) The eBook here on the site outlines a lot of the criteria I look for in a business – both ones that have worked out well, and ones I wished I had known starting out.

  27. Ben Drew says:

    Best of luck, Andrew! Hope it sells high and thanks for letting us observe the entire process!

  28. Andy says:

    What platform is your site currently running on?

  29. Hope you sell soon. Can’t wait to see the new case study on building your own brand. I’m getting really convinced that is where the real money is!

    • Andrew says:

      Thanks Quinton! Yeah, I think building a brand offers a better long-term ROI. It’s riskier and requires more capital, but I think the long-term benefits are worth the upfront investment.

  30. Michael Garber says:

    Hey, you really should take down your auction. I think I might be able to get your penalty removed. Get back to me if you want some more information. I think you can restore your rankings and revenue. You would be taking a loss by going through with this auction.

  31. Chad Norris says:

    Andrew,

    Very cool idea selling your site this way. I have been interested in ecommerce for quite some time and finally started my own site this year. I found this blog post from someone sharing it on Facebook, which converted me to a subscriber to your email list, so your marketing strategies are working like a charm. Can’t wait to see how this turns out, I wish I had the capital to make the purchase myself.

    Regards,

    Chad

  32. Todd B says:

    Hi Andrew! Love the idea and interested in the business. Your ebook was actually what helped me start EZDogFences.com and it is now ramping up. Looking forward to getting the prospectus.
    Todd

    • Andrew says:

      Thanks Todd! And glad I was able to help! Inbox just exploded this morning with this post, but I’ll get getting those prospectuses out shortly. :-)

      Andrew

  33. Dimitrios says:

    Hi Andrew

    What a fascinating way to sell a business! Love your approach and can’t wait to see what happens.

    I’m new to ecommerce, trying to understand what makes some stores more successful than others. I’m not interested in running an online store myself but building a “B2B2C” startup and trying to understand how online retailers think and some of the challenges they face. I found your blog to be a great place to learn how successful online retailers think. Thanks for sharing all those valuable insights.

    Wishes for best of success with the company sale and your next thing.

    Dimitrios

    • Andrew says:

      Thanks Dimitrios – appreciate that! But I have to ask: what’s a B2B2C business?

      • Dimitrios says:

        There seem to be several definitions for B2B2C out there :-)

        Techopedia defines it as follows: “Business to Business to Consumer (B2B2C) is an emerging e-commerce model that combines Business to Business (B2B) and Business to Consumer (B2C) for a complete product or service transaction.”

        There is a good post on the topic at Skip Walter’s blog (title: “B2B2C”) and another nice post by Jessica Tayenjam (title: “Startup 101 warmup: the B2B2C model”). (Not sure if I could insert URLs in this comment box, hence the titles.)

        I used B2B2C as a term because we will be helping online retailers to source good third-party content for their products from social content-sharing platforms, as well as helping them to take the guesswork out of what content works best for their store’s audience. We’re kind of a mediator for better B2C.

        Our services create value for both the retail business and the consumer, and both of them interact with our services directly. Hope this makes sense!

  34. Nick says:

    All the best Andrew, this a very creative way of selling. Good luck and thanks for sharing all your knowledge.

  35. James says:

    Hi Andrew,

    I’d also like to say thank you for sharing this information. Your e-book and other information has helped me get started so I look forward to continuing to learn from you.

    Good luck with the sale!

  36. David says:

    Andrew,

    Good luck. I have referred you to 2 people I know who have boat / fishing related eCommerce stores. One makes fish radar arches and one sells pontoon boat accessories!

    Best,

    David

  37. Peter McArthur says:

    Hi Andrew,

    I love what you’re doing. Your open-book auction is an excellent strategy for maximising the sale price. But I think you can do better. The way you’ve structured the auction still leaves a great deal of value on the table.

    There’s an excellent, and very accessible “auction theory 101″ chapter in the book “The Undercover Economist” by Tim Harford. I strongly encourage you to read it. Given a reasonable field of serious bidders, you can easily boost the sale price by at least 10% (and that’s a super-conservative estimate).

    That was for free. Drop me a note, and I’ll tell you what else I can do for you. My commission is 5%.

    Best regards,

    Peter McArthur

  38. Great post……..I wish more sites were open with their financials and overall site plan when selling……thanks for sharing!

  39. Good luck, Andrew, and all the best to you in your new adventures!

  40. Thomas says:

    Hi Andrew,

    You will always be successful in whatever you do because you are always giving out more than what you receive.

  41. Patrick B. says:

    What are you going to do to celebrate when you sell your first business, Andrew?!

  42. Alex says:

    That’s a very detailed post with a lot of information, I hope you manage to sell this site for the price it deserves.

  43. Dan says:

    Hey Andrew,
    I have been a lurker for awhile and enjoy reading all your content! I first found you when you did that AMA on reddit a year or so ago…
    I am curious, I read the whole post i couldn’t tell for sure, did your business actually start in 2010, or is that just how far back you are going?
    Also, can you give an example of a few key words that your site will show up on the front page of google for? I have tried a few different things without a lot of luck, I am always curious how a business can do so well if it is not easily found, because I personally allmost never go past page one on google. Since I am not real familiar with trolling motors I am probably not using the key words that the average shopper with knowledge of the product would use, I am just curious.

    Thanks!
    Dan

    • maxime sincerny says:

      Depending on your geographical position, you might receive different results from someone who is in the same country/state of the website targeted audience. That might be why you are not finding results for this website. You probably didn’t notice higher, but he show his highest keyword. You also have to know that exact match keywords are most of the time only 20% of a website search trafic as 80% are “longtails” of those keywords and get a little bit random like people writting “trolling motors with blue lines in alaska” might only show once, but you can get hundreds of thousands of searches like that.

    • Andrew says:

      Hey Dan. Yes, the business started about 4 to 5 months into 2010. For keywords, try “saltwater trolling motors” (#5) and “trolling motor wiring” (#1). But I think a lot of our traffic comes from really long-tail keywords that aren’t nearly as common.

  44. Max says:

    Andrew,

    appreciate you doing this!

    Can you talk about the chargebacks that you’ve experienced (if any)?

    Also how do you recommend going about the accounting and keeping track of the finances of the business – is there a particular software you like for eCommerce businesses?

    • Andrew says:

      Hey Max! Don’t track chargebacks specifically, but they are very low – I would guess we’ve had just a couple this year if that. Order volumes are lower, so it’s much easier to spot when something is fishy with an order.

      Use to use Quickbooks for accounting, but not we use Xero and loving it.

  45. Vo says:

    Given all the info … I can offer 20K. I do not have more money than that. Owner financing?

  46. Jock says:

    Andrew,

    I disagree with you on your calculation of EBIDTA or what you call SDE.

    Your calculation of $65,042 of SDE, should include pat’s wage.

    The purpose of add-backs and add-ins is to calculate the true net profit of the business (including all expenses) that is what it would cost a new owner to run the business.

    In the expenses column in the P&L there should be an add-in called wages. This is the wage or cost for you to man the phone and address support in the business. ***This must be included in the financials.

    Therefore, if you have calculated the EBIDTA with the correct add-ins they new multiples should look like this:

    Date Offer SDE Multiple
    Nov 14 $185,000 $50,042 3.7
    Nov-22 $175,000 $50,042 3.5
    Nov-26 $165,000 $50,042 3.3
    Dec-03 $155,000 $50,042 3.1
    Dec-06 $145,000 $50,042 2.9
    Dec-10 $135,000 $50,042 2.7
    Dec-13 $125,000 $50,042 2.5
    Dec-17 $115,000 $50,042 2.3
    Dec-20 $105,000 $50,042 2.1

    • Manny Shah says:

      Jock,

      I actually agree with Andrew’s calculation. Here is a key sentence “Given that Pat and my combined operational workload for the business is less than 15 hours per week, I didn’t include any labor costs per this normal exclusion in calculating seller’s discretionary income.”

      If Andrew wanted to do this full time, he didn’t have to hire an employee. And as long as total man hours spent are less than one FTE (Full time equivalent), it is OK to not include those labor expenses. A potential buyer can argue that they are in the same boat as Andrew’s and they will need to hire an employee as well. That is a valid argument but the value of the business for that individual will not be the same as what it would be for an owner operator. Value of the business ( as beauty ) is in the eyes of beholder.

      Best,
      Manny Shah

      • Jock says:

        If an owner operator purchases this business, then the above valuation method will work well for him.

        If a private equity, financial buyer or investor is to purchase the business they will want to know EBIDTA, that is why it should be included.

        I think you are cutting yourself short by presenting the data correctly for that other subset of buyers.

        • Jock says:

          correction: ***incorrectly

          • Andrew says:

            Jock – I don’t believe it’s incorrect, it’s just in one format (financials formatted for an owner / operator) instead of for a financial buyer. At sites this site, most purchasers are owners / operators, which is why using Seller’s Discretionary earnings is the most common method of computing income.

            While less common, I recognized investors (although not private equity firms – I think this is a bit small for their interest) would like to know what the business financials look like with salaries paid out. And that’s why I included the salary costs in the post.

            But the multiples I listed on SDE are correct because SDE excludes one full-time salary equivalent as Manny mentioned. The multiples you mentioned would be correct if you were looking at a multiple of net income (or EBITDA). But not on SDE.

      • Andrew says:

        Nicely put, Manny! Couldn’t have said it better myself.

  47. Fred says:

    Awesome experiment. Looking forward to reading more and hearing a detailed recap on the podcast.

  48. Lance Moore says:

    Hello
    I listen to you podcast all the time its great for helping me with our e-commerce business thanks for the great work
    it is good to see what other websites look like on the back end . Thanks you for your great work
    All the best
    Lance Moore
    Support Dude Team

  49. John says:

    Applaud you on your transparency, really huge respect and I look forward to seeing how it works out for you

  50. amehedi says:

    that’s a huge post. read all the way, awesome post for e-commerce. i hope it will help newbie like me.

  51. Jon Payne says:

    Funny, I just saw a listing on bizbuysell.com about a trolling motors site and thought t sounded pretty familiar. Is that your listing? If not, I suspect someone put it on there to find interested buyers and get that commission. Ah, capitalism! A yow good luck with the sale!

    • Andrew says:

      Just learned about that this morning, and asked the broker who listed it to take it down. Don’t mind brokers sharing this with their list, but posting it in a way that appears they’re the listing agent defeats much of what I wanted to accomplish with this little experiment.

      It’s gone now, and thanks for letting me know!

  52. Shane says:

    Hey Andrew – I have a question… how do you avoid the sales tax for sales in Montana? Do you pay it for your customer? Thanks

    • Andrew says:

      Currently, online stores only have to charge sales tax if they sell a good to a customer within their state – and that’s only if the state charges sales tax. Because Montana charges no sales tax, I’m exempt from charging it nationwide.

  53. Love seeing the transparency in these numbers, really hope it helps you find the right buyer :)

  54. Andrew, thanks for your insightful post. I’m really interested to see how your eCommerce business sale goes and I will be following your podcast and blog from now on. I’ve shared this with as many people as I could to see who might be interested in buying your business. Good luck.

  55. Mike D. says:

    Hey Andrew,

    I would love to see how many folks have requested a full prospectus for this. Seems to me that could be a potential motivating factor for an interested party to make a bid. Of course as I type that sentence I also see how it could work in reverse if the interested party sees very little engagement they might hold onto their bid a bit longer.

    Regardless, great post. Excited to watch the process.

    • Andrew says:

      Hey Mike! Will definitely be sharing these numbers once the deal closes, hopefully in January, and maybe even sooner.

  56. John says:

    Hey Andrew, what’s your email address? I just have a few questions.

  57. Andrew,

    about the new plans: are you going to give a sneak peek on your blog? :)
    On the sale: best of luck and success!

  58. Alasdair says:

    Baller!

  59. Justin Lloyd says:

    Just reading your blog post inspired me with my website and internet marketing endeavors. Would it be a good move to pay a professional Seo company to build my back links for my website?

  60. Karan says:

    Andrew,

    Please andrew, can you do more than just 1 podcast per week. Seriously, you need to create a site like mixergy.com where you do interviews just for ecommerce. I love hearing your insight and you sound like a very honest and transparent person. Please man, make more than 1 interview a week!

    • Andrew says:

      Appreciate the vote of confidence, Karan! Probably won’t be stepping up to more than 1 a week anytime soon, but will definitely keep the suggestion in mind.

      Thanks for listening!

  61. TC says:

    Multiple seems high at top price for low margin and net but I think its a very quality and well done presentation. This thread probably helps with Google’s Hummingbird as I understand that rewards “converstional”. The challenge for any organic ecommerce site is that Panda/Penguin is just the beginning of Google’s drive to push ecommerce sites to paid ads.

  62. Deric says:

    Hey Andrew,

    Congrats for your new venture!
    Thanks for sharing the super transparent detail of TrollingMotors. 10k upfront for a SEO work is pretty hefty price tag I must say! Do buzz me next time round, I will try to help you out on that.

    • Andrew says:

      Thanks Deric! Yeah, $10K is / was a lot to spend and I don’t think I’d do it again. The firm did do quite a bit of work, but ultimately the quality ended up biting me in the tailend. Next time, I think I’d invest most of that money into top-notch content producers for guest posting and content on my own site.

  63. David Corner says:

    Congrats Andrew on not only an original, new, and transparent sales, but receiving an offer already. Best of luck to both of you (seller and buyer).

    P.S. does the sale come with a free membership to ecommercefuel forums? -:)

    • Andrew says:

      Thanks David! Funny you mention the free membership as that’s what the buyer asked as well! And I think for the price, I can definitely include that with the package.

      Hope you’re well!

  64. Hey Andrew,

    Sorry if I missed this in the above comments, but any idea on when you’ll do an update of the progress of the deal?

  65. Kevin Sun says:

    Hey Andrew, I’m 17 so I wonder if there’s a possible way to have the customers put money into my DEBIT card. Thanks!

  66. Peter says:

    Loved your post Andrew! I’m starting an ecommerce store for the 1st time, no experiance at all. Reading this post alone gave me alot of knowledge & realised I had a lot to learn!

    By the way, what domain & hosting service providers do you use? I was thinking of signing up with a cheap hosting service with unlimited bandwidth. Is that a good idea, if in future my store will have massive traffic?

    Thanks

    • Peter says:

      Oh.. & 1 more thing. Some people mentioned to me it’s best to have more than 1 hosting service provider, in case 1 of them crashes so that my website doesn’t crash as a result either. Is that a recommendable advice for an eCommerce store?

  67. Josh Ludin says:

    Hey Andrew – great post and I am so glad you did this publicly. Your website is great and really helped me grow my new ecommerce store, http://www.blindsurprise.com. Thanks again!

  68. Cheri says:

    Great post! Who was doing your SEO? Did you do it yourself or hire someone? Thank you!

  69. Ivy says:

    Hi Andrew,

    I came across your blog through google while I was searching for small business owner forum, and I have been constantly impressed by many of your articles since then. For a newbie like me, your blog has been a great educational resourse (I found a niche and wanted to give it a try so I am currently building the website, still a lot to learn!). Especially this one, you shared the financial data of trollingmotors.net and I couldnt help wondering what kind of accounting tool kit you’d recommend for startup?-if you dont mind. Your input is much apprecaited!

  70. Raweewan says:

    You’re amazing! This is the great cast study that I ever read. I have plans to build more niche sites & sell it one day. Thanks for this case study.

  71. Darryl says:

    I would have loved to see the balance sheet of this company… is it posted somewhere?
    I know it is sold, still I would have liked to have seen the balance sheet.

    Thank you.

Trackbacks

  1. […] good read to learn more about ecommerce and dropshipping: The Open Book Sale of My $600K eCommerce Store (With Financials) Reply With […]

  2. […] Shared The Open Book Sale of My $600K eCommerce Store (With Financials). […]

  3. […] his profits, you name it…everything is completely out there in the open for everyone to see. Here’s a link to his post if you want to check it out. Anyways, it’s extremely rare to find an online store owner who is willing to share every […]

  4. […] his profits, you name it…everything is completely out there in the open for everyone to see. Here’s a link to his post if you want to check it out. Anyways, it’s extremely rare to find an online store owner who is willing to share every […]

  5. […] it seems!). For an example of how effective this can be, look at Andrew Youderian. Andrew is publicly selling his online store, TrollingMotors.net, and in the post announcing the sale, he has put up some interesting […]

  6. […] Read more on this: The Open Book Sale of My $600K eCommerce Store (With Financials) […]

  7. […] the time and the audience you are always going to get a higher offer selling yourself, just like Andrew Youderian did with his trolling motors store. Or Dan Taylor in selling his Saas app. A strategic exit is […]

  8. […] month ago I announced I was selling my eCommerce site, TrollingMotors.net.  In rather unorthodox form, I shared all of the financials, offered a 5% […]

  9. […] month ago I announced I was selling my eCommerce site, TrollingMotors.net.  In rather unorthodox form, I shared all of the financials, offered a 5% […]

  10. […] On the line: losing a month of progress with a qualified buyer, and all the momentum I’d built with my public auction process. […]

  11. […] a pen and paper and run the numbers as you read along right here. Heck, you even buy the site if you are so inclined. Just be sure to let him know I sent you. […]

  12. […] outsourcing company for sale in March and even published a podcast talking about it. Inspired by Andrew Youderian’s public sale of his business, we thought it would be interesting to do something similar here. If we’re going […]

  13. […] Andrew sold his Drop Shipping Site for $170K – he sold his eCommerce site through a Dutch auction with making him a lot of money. Spencer Haws also interviewed him in this podcast. […]

  14. […] On the line: losing a month of progress with a qualified buyer, and all the momentum I’d built with my public $185,000 auction process. […]

  15. How To Get More Followers On Instagram For Free

    The Open Book Sale of My $600K eCommerce Store (With Financials)

  16. […] was selling stuff similar to Andrew Youderian’s former site TrollingMotors.net – and as he mentioned in his post, his conversion rates weren’t too dapper either: 0.46% […]

  17. […] “I’m selling one of my stores, TrollingMotors.net, and will be using a radically different approach. Instead of keeping the details private, I’ll be sharing all the key data, including financials and traffic stats… Even the auction will be turned upside down. The price will start high – at $185,000 – and will drop every few days by $10,000 until someone buys it.” – eCommerceFuel.com […]

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