TrollingMotors.net Auction Follow-Up

TrollingMotorD63aR03aP01ZLA 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% bribe/referral commission to get people to spread the word and structured the sale as a reverse auction.

It’s been a pretty exciting few weeks since the initial post, and I wanted to provide an update on the sale and how the process was received.

The Initial Reaction

One of my goals was to generate a lot of publicity around the sale (and for eCommerceFuel), and I’m not sure things could have gone much better in that regard.

Within a few hours of publishing the post, it hit the front page of HackerNews, a Reddit-style site in the tech community.  Traffic poured in, and at the peak there were more than 280 people reading the post at one time.  Within three days, about 20,000 people read the article online.

Apparently, the open-book nature of the sale plus the bribe was effective in spreading the word.  The article received more than 700 social shares, which undoubtedly helped drive traffic and attention.

 

Visitors

Shares

 

Reactions were overwhelmingly positive.  Most people really enjoyed seeing the inner workings of not only an eCommerce site, but also the sale process.  But there were a few less enthusiastic readers.

One business broker I spoke to seemed perplexed by my peculiar approach and was somewhat dismissive until I told him about the traffic and interest I was generating.  Another broker offered some well-reasoned insights on why he would have structured things differently.  I hope to be able to bring him on the podcast or blog in the future to discuss.

But by and large, I couldn’t have asked for a better kick off to the sales process.

The Bid

As I’ve mentioned, the sale was structured as a reverse auction (sometimes called a Dutch auction).  The price started high (at $185,000) and was slated to drop by $10,000 at scheduled intervals until someone submitted a bid.

I also offered potential buyers a detailed prospectus with more information about the company and the bidding process, which they could download after signing a non-disclosure agreement (NDA).  In the days after sale was announced, I had nearly 50 people submit NDAs requesting more information and a bid sheet.

While I felt I had priced the site on the upper end of fair-market value, I had no idea how long it would take to receive a bid.  I structured the sale as a reverse auction because I thought it would create a sense of urgency and potential loss among bidders. But making a purchase of this size isn’t a trivial matter.  Buyers still had to dive into the initial diligence information, think about the investment and get comfortable with the idea.

Although I thought the starting price was in the reasonable ballpark, I had also heard from people who didn’t think it was worth anywhere near the initial asking price.  I thought — and still think — that was fairly off-base, but it still made me unsure of what would happen.

I received the first bid four days after the auction was announced and two days before the price dropped by $10,000.  The bidder was someone from my email list (sorry commission hopefuls!) who had been following my work at eCommerceFuel.  He was looking to get into the eCommerce market, and although he didn’t have any industry experience, he had a solid background in business.  To top things off, he loved fishing.

Despite all the interest from potential buyers, no other bids came in at the $185,000 level by the deadline.

The Process

Shortly after the bid period ended, the bidder and I had signed a letter of intent to move forward with a sale.  A letter of intent (often referred to as an LOI) is a non-binding agreement that expresses the good-faith intention of both parties to close a deal.

Although the agreement isn’t binding, the bidder put down a $5,000 earnest money deposit into escrow.  It’s refundable if the transaction closes OR if the deal is called off due to misrepresentations I made about the company.  But if the bidder changes his mind, it’s non-refundable.

With the LOI signed, we’re now in the diligence period before closing.  The bidder is digging into the company’s sites and financials to ensure that everything I said was accurate and he’s not getting sold some fly-by-night scam.  In the interim, I’m working to get things cleaned up on our side so that we can easily hand off an independent and well-organized business to the buyer.

The final step to closing the transaction is to sign an asset purchase agreement.  This is the final, binding agreement that stipulates all the terms of the sale.  We’re hoping to sign this agreement, hand over the business and close the transaction shortly after the new year for tax and accounting purposes.

I’m not sure I could have asked for a better buyer in terms of reasonableness, business experience and generally being great to work with – our working experience so far has been outstanding.  Business sales are notorious for falling apart at the last minute, so I don’t want to get too excited, but I’m  optimistic we’ll be able to finalize everything and close the deal in 2014.

Assuming everything closes successfully, I’d love to bring you an interview or blog post with both myself and the buyer to talk about the transaction, the process and our different perspectives on the deal.  I think it would offer a unique view of the transaction from both parties’ perspective.

Would I Do It Again?

QuestionMark

It’s still a little early to declare the experiment a sure-fire success, but I’ve been thrilled with how things have turned out so far.

I can’t imagine getting the same level of exposure for the sale with a traditional business broker, not to mention the saved broker fees.  And the benefit to eCommerceFuel in terms of additional readers, links and exposure is easily in the thousands of dollars.  While it’s impossible to know for sure, I believe leveraging the eCommerceFuel brand and transparency helped me get a premium price for the company.

I do have one potential hesitation.  If I were to sell a business in the future that was significantly larger — say at the $500,000 price range or up — I’d consider this public approach more carefully.

At that price level, buyers would likely be established investors accustomed to a traditional sales approach and might be put off by the open, unorthodox nature of this process.  Additionally, there wouldn’t be as many buyers for a larger site, so running a reverse auction where the price dropped over time would be riskier.

But for this particular business, I couldn’t be happier with the approach and the outcome.

Follow-Up Post:  The deal closed, but not without a few bumps along the way.  You can read my follow-up post titled How I Nearly Botched My Business Sale here.

Questions?

Happy to answer any questions you may have about the sale or the process!  Just let me know in the comments below.

Photo by Oberazzi

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Comments

  1. Alex B. says:

    Congrats on the sale! Just curious, what made you want to sell off your store? Are you going to be launching another store? Is this a change in direction for your overall business portfolio?

    Congrats again, and I look forward to your reply!

    All the best,
    -Alex

    • Andrew says:

      Thanks Alex – appreciated!

      There were a number of reasons, all of which I covered in the original post in detail. But in short, I wanted to sell to:

      1) Focus more on my other businesses and other, larger opportunities
      2) Gain the person experience of selling a site (have never done it before!)
      3) Take some money off the table and….
      4) Produce some great content for eCommerceFuel and gain brand exposure for the blog.

      • Alex B. says:

        Thanks for the reply Andrew! My apologies, I missed out on the original post.

        Just curious, in looking forward, do you still see the value in creating a dropshipping business, reselling of products? Or are you looking to explore a different avenue in your business?

        Thanks again,
        -Alex

  2. Stefan says:

    Love the open sharing and that it worked out so well for you. Really happy you didn’t have to lower the price!

  3. Bruno says:

    First of all, congratulations for the nice approach and execution… I understand your fear of doing this kind of stuff on larger business but you have to keep in mind that the real amazing business are “unorthodox” as you said, so keep your believes and do change the world :) not the opposite …

    One thing didn´t get clear to me… when you closed the bids acceptance? and at this point how many bids did you received?

    Thanks a lot for the share, actually I´ve discovered ecommercefuel in that post too :)

    Best Regards

    • Andrew says:

      Hey Bruno! And well said on sticking with your values regardless. It just does get a little scarier (with more on the line) the bigger you go!

      When I closed the opening round of bids, there was just one bid that had been placed – that from the current buyer. While I had a lot of interest and people who had said they were considered a bid in the near future, the current buyer was the only one to come in at the opening level.

      Thanks for reading!

      • Bruno says:

        thanks for the fast reply and keep in your mind that you didn´t get here by following avarage standards :) looking forward for the podcast with the buyer… good luck to you both

  4. Derek says:

    Awesome to hear it Andrew. This has been a lot of fun to watch and I’m happy that it went so smoothly, certainly due in part to all the work you put in to prepare this sale.

    • Andrew says:

      Thanks Derek – appreciated! It’s been a ton of fun (and work) from my end, and glad it worked out well.

      Where are you these days? In Vietnam? Things going well?

      • Derek says:

        HCMC for the win. Things are going really well, hopefully I’ll be moving into a really nice apartment beginning of next year. How’s the weather in Montana treatin ya?

        • Andrew says:

          Nice man, hope you’re enjoying it!

          Weather in Montana is great now. Sunny and crisp winter temperatures. Two weeks ago, not so nice: -20 F. Ouch.

  5. Brad says:

    Just curious as to the tax/accounting benefits of not completing the sale until after year end?

    In my “non tax-professional” mind it seems it would be nicer to report the transaction before year end, and start with a clean slate for the new year?

    • Andrew says:

      There are two reasons.

      1) The bid made was actually a bid made on the earnings for 2013. So once the earnings are finalized, the multiple bid will be applied to that earnings level to come up with the final transaction price.

      2) Tax reasons for the buyer. If we close the deal in late December, the new buyer would need to file a tax return and pay incorporation fees for just a few months of operation. We’ve decided to push that back to early January to avoid the hassle.

  6. EJ says:

    Thats Awesome! Little hard work and belief, anyone can do the same thing. Thanks for sharing

  7. Brandon Eley says:

    Congrats on the sale! When I heard of your idea of a reverse auction I really didn’t think it would encourage early bidding, but boy was I wrong! Seems that it all went exactly the way you wanted. I really enjoyed reading about the business and sale process, so thanks for posting!

    • Andrew says:

      Thanks Brandon! Yeah, it was a bit of a gamble but talking to at least a few people I think it create some sense of scarcity for the site – so glad it worked out.

      Been wonderful having you in the forums recently, and hope Christmas sales are strong!

  8. This entire process has been really interesting to follow. My question (and you knew I’d have one!) is if that initial bid hadn’t panned out, or doesn’t end up closing, what would the next step be? Would you reopen the bidding process at $175,000?

    • Andrew says:

      Hey Carole! Good question. If this bid fell through, I’d re-open the bidding at $175,000 and email the 50 or so interested parties that signed the NDA and received the prospectus. Then, I’d create a new auction schedule and go from there.

  9. Marie says:

    Congratulations Andrew! You’re a very astute business man. I am sure things will turn out great for you. I have a question. After launching your trolling website, how long did it take before you began landing sales? I recently launched my own online store (home decor products), and would like to find more ways to get the word out about the site. Currently I’m utilizing social media but I know if I want to make money I will need substantial traffic to the site. I’m knowledgeable about several marketing strategies but wonder if you have any tips or advice on generating heavy traffic or any other info that may be of value in the early stages of trying to get the word out and gain sales. Thank you for your input and wishing you a happy & prosperous 2014!

  10. Hey Andrew,
    We met at the Digital Retailer’s Association conference in Orlando. You talked about this eCommerce sale however I was already a follower of your work and Blog. You mentioned in the conference that you’ll be focusing more on Private Labeling. Are you planning on developing a training on this? How does this effect your Drop Ship eCommerce business model? In other words, are you going to completely step away from this model?

    Looking forward to hearing from you.
    Regards,
    Jaime

    • Andrew says:

      Hi Jaime!

      For my next business, I’ll definitely be focusing on either stocking / manufacturing my own products given the better margins. It involves a bit more risk and capital, but offers a better long-term ROI. If I ever did white labeling, I might do a training course on it but that’s a ways out. I’d need to do it, understand and succeeded at it before putting out a training on it. :-)

      I’ll definitely continue to operate my other drop shipping business going forward, and will be focusing on it more in 2014 as well. It’s a great business and won’t be scrapping it just because it’s drop shipped.

      Hope this helps!

  11. Matthew Harrington says:

    I was seriously considering putting a bid in myself, but stopped when you said someone already did. I did not realize I still had an opportunity to still put in a bid. Congrats on your success! I hope to bootstrap my own business in the future.

    • Andrew says:

      Hey Matthew! Don’t worry – by the time I announced there was a bid, the time to have placed one had passed. The only way I would have considered multiple bids would have been if one had come in before the deadline for the opening price had closed. So by the time I announced the bid, that period had already ended.

  12. Gretchen says:

    Nice work, Andrew, and congratulations! What a great conclusion to 2013 and an auspicious start to 2014 for you.

  13. Patrick Brennan says:

    Andrew -

    Really excited about this, and I think it’s fantastic that you’ve created a marketing vehicle like eCommerceFuel that allows you to do these things.

    I’ve never been fond of business brokers, so way to go! I would be curious to learn what the one that gave you his perspective had to say, and I look forward to the coming podcast.

  14. Rishabh says:

    I love your posts and specially your podcasts. I have recently started listening to them while i travel to and fro work.

  15. Tony says:

    Hi Andrew,
    Well done. Could you tell me where did you go to do the reverse auction? Is there any specific website?
    Thanks

  16. Joe Magnotti says:

    Andrew, glad to see the sale is moving forward! Having sold a large drop ship site as well, I understand the hesitancy to call it a success before everything is complete. Stick with the transparency though — it’s not only an interesting read, but sets you up for success with future transactions, large and small.

    • Andrew says:

      Thanks Joe! Yep, I hear you! While very hopeful won’t be celebrating until everything closes. Saw enough deals fall apart at the 11th hour in finance days to start popping the champagne quite yet.

      Hope things are well at EmpireFlippers.com!

  17. Spencer says:

    Congrats on the sale Andrew! I hope it closes and all goes well! Your strategy of selling at least got me to your blog…I’m almost embarrassed to say that I hadn’t heard of your awesome blog here before this week. I have a tendency to stay in my own corner of the web and not “get out” much. But someone recently turned me onto your blog, and love what I see so far!

    Thanks for the openness about the ecommerce business, the few posts I’ve read already have really answered a ton of questions for me. Thanks!

    • Andrew says:

      Thanks Spencer – really appreciated!

      Have really enjoyed the work I’ve read of yours over at Niche Pursuits, and I know you take an open and transparent approach as well. And congratulations on bringing on your first full-time employee – exciting times! Having someone stateside you can really delegate to is wonderful.

  18. Stefan says:

    Awesome work Andrew, I hope you’ll earn the money you deserve :)

  19. Ric says:

    Congratulations Andrew, so when can we expect to see EcommercefuelBay.com :-)

  20. Cristina Ansbjerg says:

    Congrats Andrew! I love the clear way you explain everything on the blog but especially I’ve enjoyed a lot the two posts about the sale.

  21. Solid!
    I love the creativity in this Brother, and as known backlink junkie, I’m geeking out on the longterm SEO benefits :)

    I just sold one large site, and have the sale of another larger one pending for another few days. I used a broker for them, and I’m quite happy with how it went.

    I believe that the benefits of a broker are simplified into:
    1. Knowing how to get the biz in front of buyers (a list)
    2. Knowing the technicalities of the sale

    For those who can think outside the box like yourself, and those who know the sale process, I can definitely see there not being much need for a broker. Personally putting a high dollar value on my time, I will continue to use brokers as thinking about the amount of time it would take to handle this myself gives me goose bumps. But, if someone is selling their sole business then this method of generating the traffic themselves is kind of sexy. Low downside, high upside.

    Cheers

    • Andrew says:

      Thanks Travis! Yeah, it’s been great for backlinks – that was definitely one of the benefits I thought about when considering this option.

      And great point on the time opportunity cost – that’s a real cost. Given my background and goals for the sale / process, the time cost was worth it, but wouldn’t be the case in a lot of circumstances.

      And congratulations on the sale of your site! Hope you got top-dollar for it. :-)

  22. susan wowe says:

    Hi Andrew, I really enjoyed reading this post and interested in learning more about ecommerce from your blog. Wish you have a final successful sale of you site, and by then I will be back to read more of related interviews and posts.

  23. Godwin Martins says:

    Hi Andrew,

    I have been trying to figure out different way to start my own busines but it seems very difficult. But since I found your site ”ecommercefuel.com” few day ago my life and thinking change. I want you to know that I have been having sleepless night since I saw your precious site as I can’t stop reading, May God bless you and empower you to do more.

    Regards.

    Godwin.

  24. Jock says:

    Congrats on the sale mate. Very creative on the selling process.

  25. Sean Owens says:

    I have used your open offer financial data for setting client expectations when we are building ecommerce sites. The data contained in this is excellent as it puts substance to the business fugures.

    Delighted that you managed to sell this business, wishing the new owner all the best.

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Trackbacks

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

  2. […] of paying the initially agreed upon 2.84x multiple on 2013 earnings, he countered with a 2.69x multiple.  His rationale was that he was still […]

  3. […] of paying the initially agreed upon 2.84x multiple on 2013 earnings, he countered with a 2.69x multiple.  His rationale was that he was still […]

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