Flippa Seller Showcase – RomperJack

Flippa Seller Showcase – RomperJack

This week, we spoke with Justin Clarke the founder of RomperJack. RomperJack sells romper suits for men and the business was established after Justin discovered an opportunity and niche market via a Kickstarter campaign. Since then, RomperJack has hustled and exceeded all expectations, with annual revenues of $594,000. Romerjack is currently for sale on Flippa

Check out the full video below.

Seller interview – Business selling cremation urns and jewellery

Seller interview – Business selling cremation urns and jewellery

Looking for an established business, in a booming industry with monthly profits of $38k? We recently sat down with the Asha Martin, the founder of an eCommerce and wholesale business sells cremation urns and jewellery worldwide. In its 12 years in operation, the business has continued to grow and evolve. Their pets category which includes urns, keepsake pendants and tags, is currently experiencing significant growth. 

Asha started a funeral products business and was inundated with requests for urns and cremation jewellery, seizing a gap in the market. What does it sell?

The business sells funeral accessories and memorial books, cremation urns and keepsake memorials. Their collection can be used for adults, pets and includes a selection of biodegradable urns for the environmentally conscious. 

Interview with seller Asha Martin 

What is your background and why did you start Life Cycle Urns?

At the age of 23, I started my first own small business as a furniture upholster. A year before selling the upholstery business I started the funeral products business. The business first opened as a retail online store. It grew steadily over the first few years and soon enough I added B2B wholesale sales. 

We kept getting requests for funeral urns and cremation jewellery. The funeral homes wanted better quality products at cheaper prices. There are only so many times you can hear the same request over and over again before I thought RIGHT, I’m going to find a way to make it for you!I set about designing a range of different funeral products which we continue to have made at our factories in India and China to this day

For many, this industry will be unfamiliar. Tell us a little about the industry and why people choose Life Cycle Urns?

We operate from a medium-sized warehouse with upstairs office. We hold bulk stock of over 130 different types of funeral urns for ashes and jewellery that has a hidden void for storing ash. Cremation jewellery is very popular, we sell thousands of pieces a year. 

Our company has grown and gained momentum over the years because of our constant focus on supplying high-quality products, great customer service and shipping out orders at lightning speed.

How does the business make or acquire the product?

Over the past 12 years, we have formed trusted relationships with our factories in India and China. Its first name basis stuff and that’s the way we like it. Having good communication with our factors is so important, otherwise, it would be very difficult to manage. We have independent QC on the ground in each country to check each other which means we get the high-quality finish we are after.

 Who are your paying customers?

We supply a range of different customers from the general public via our retail eCommerce store, funeral homes, pet crematoriums, cemeteries, crematoriums, jewellery stores, online stores. We are also about to start supplying a US wholesale funeral products distributor which is very exciting. The market in the US is ginormous compared the to Australia to the potential for things to explode over there is unreal.

How have you acquired customers to date? Where do they find you and why do they use the service?

Our main way of acquiring new customers has been a combination of direct mailing our catalogues, website SEO and trade shows.

What are the biggest challenges in this business? What would I want to know if I was starting this business from scratch?

The biggest challenge is keeping track of stock and manufacturing all of the different lines we carry and supply wholesale. Some weeks certain products just fly out the door like hot cakes and we can’t keep up.

What do you think you have done really well to date? What have customers been really happy with?

I am most proud of our range of exclusive designs. Seeing these items sell really well and having happy customers who buy them regularly really is a pleasure. Our customers have come to rely on us for being able to provide them with high-quality funeral products and the fact that we delivery so fast just makes the service so much better

 What is your best seller?

We have a number of best sellers. Our range of premium cremation jewellery and also our stainless steel cremation jewellery sells really well. Our pet crematoriums love these items and buy large amounts regularly from us. They are small and cheap to ship so I like it when the jewellery sales come rolling in.

Where do you distribute to?

We distribute Australia wide which is our core market. We also distribute to HK, NZ, USA, UK and Canada.

Why do I want to sell if you love it so much?

I’m a creative, this business is built now and is ticking along nicely. I need to build and create something new. If I’m not learning, I’m not living life to the fullest. This is a brilliant industry, the people are warm and easy to deal with. 

Seller interview – Romperjack

Seller interview – Romperjack

They followed a Kickstarter campaign and beat the competition at their own game.

Every now and then we come across something truly unique. It’s the uniqueness that captures the hearts and wallets of consumers making what was a clever idea into something highly successful. Below we interview Justin the founder of Romperjack which was founded in 2017 and since then has experienced incredible growth. They’ve tapped into a fashion niche and from their strong beginnings as a men’s only fashion line they’ve successfully expanded their footprint. 

The business sells romper suits and was established after seeing a Kickstarter campaign. They hustled and have exceeded all expectations, with annual revenues of $594,000.  

Interview with the Founder

You’ve built an impressive eCommerce business. How did it all start?

We came across a campaign trying to raise money to launch male rompers.  The Kickstarter campaign had a goal to raise $10,000 in 30 days. They surpassed this goal instantly and were able to raise $350,000 in just 3 days.  We instantly realized this was going to be very successful. So, we quickly went to work to launch our own brand with an aim of beating them to market. Romperjack was born. 

Your business is built on creative genius and quality manufacturing. Tell us about how it all comes together?

The creativity of our brand really comes from our customers.  Every style we design and decide to launch is voted on by our customers.  It’s the perfect product-market fit for us! We have found some really great manufacturers overseas that are extremely patient with our focus on quality.  They always go above and beyond for us and make everything just right before going to full production with new styles. 

The audience response is something most companies would dream of. Why do they engage / what is your ‘secret sauce’?

Our audience really engages well (with Romperjack) because the products we design and sell are something they have never seen before.  80% of our buyers are LGBTQ and they are the kindest and most supportive audience. We really care about our followers and we always make sure to share quality content and respond to all of their comments.

A company like this is reliant on a team of fantastic marketers, designers etc. How is the team structured?

Actually, this company only has 2 people that actually do the marketing and designing.  We found a way to make marketing and designing simple and make it run like an efficient well-oiled machine.  A lot of the time, designs are sent to us from our customers or influencers and we kind of just roll with them. It makes it super easy for us.

You are moving on to a new passion project. Why are you leaving such a great business and what are the opportunities for accelerated growth?

Yes,  we are moving on and we are sad to let our baby go, but we have a brand new exciting company that needs a little jumpstart.  We started a company called Whiz Tutor. Whiz Tutor is a mobile app and web app that allows students and parents to book on demand local in-person tutors anywhere, anytime. We need funds to boost this company and to take it to the next step.

The good news for the new owner is that Romperjack has so much potential and there are so many ways you can take this company to the next level.  First, is to offer our products to customers in other countries like Brazil. We have more Brazilians visiting our website than anyone else. Second, Romperjack has had offers to go into retail stores but we didn’t have the money readily available to get a large enough inventory order at the time. Third, is to market our products to other interested markets, we have really only focused on the LGBTQ market to date.

It would seem you are dependent on social media to advertise. What kind of risk is there in such a dependency?

Actually,  social only makes up 45% of our sales.  We have a lot of organic and direct customers.  Meaning they search for the rompers or jumpsuits on google and we pop up.  Not only do we show up on PAGE 1 of Google, we show up on PAGE 1 SPOT #2. Which many companies never make it to this level, Romperjack has amazing SEO power.

What does the competitive arena look like? Who do you worry about at night?

We really only have one 2 competitors: one is RompHim “they are the original company that launched on Kickstarter”  and the second is Zesties. Zesties is a bargain low-quality brand that is sold on Amazon.

Romperjack is focused on selling premium rompers and jumpsuits that are actually stylish.  If you actually look at these companies style you wouldn’t even catch yourself dead in one. So many of our customers have said they returned their Romphim and bought a Romperjack instead. Plus, competition is good!! It keeps us striving to do better and to continue to give our customers an amazing product. 

A smart businessman once told me “if you don’t have competition you are either a complete idiot and no one will ever buy what you are selling or you are a complete genius!”

What sellers need to know about valuations

What sellers need to know about valuations

There is no shortage of motivated buyers on the lookout for great online businesses. While the stock market is highly volatile, there is increasing enthusiasm for investment or purchase of online businesses. So, the potential appetite for buying is enormous. However, by far the major brake on buyers committing to a final purchase decision is their uncertainty about pricing. There is little understanding of sound valuation principles and buyers are wary of what they see as pricing based on an arbitrary multiple of net profit. Not to put too fine a point on it, buyers believe that sellers generally over-value their businesses and they find it hard to define a reliable and objective valuation method. The outcome is that too often an enthusiastic and highly motivated buyer fails to follow through with a final purchase because of the understandable anxiety about paying more than the business is worth.

How to value an online business

Typically with an online business, there will be little or no inventory to value and only a very limited if any physical asset base. Accordingly, the business will generally be valued almost entirely on the projected profits, calculated on the basis of current and relatively recent past profits.

While there are various alternative techniques for valuing an online business, including the traffic valuation method for sites with high traffic as a business asset but with no or incomplete monetization, many of these methods are highly technical and yield disputable outcomes. They are often suitable only in highly specific situations, depending on a precise definition of the particular revenue model, current and projected OR you are the next Facebook which is highly unlikely.

For that reason, online businesses are almost always sold on a negotiated value based on an earnings multiple or a price to earnings ratio. While it is very common to define the ratio in terms of a multiple of average net monthly profit, it is simpler for most purposes to quote the ratio as a multiple of annual net profit. Using this basis, average asking price multiples have increased from 2.4 in 2010 to around 3.4 now (sourced from our good friends at Centurica), with final selling prices typically at around a 10% discount to the asking price. This suggests that generally speaking sellers who value their businesses realistically can expect to achieve a sale outcome within reasonable range of the asking price. But putting a realistic value on the business is complex and there is an understandable tendency of business owners to over-value their business.

The average net profit multiple varies markedly from one kind of online business to another and also depends greatly on the specific market niche. However, the absence of highly consistent profit ratios can cause buyers to be both surprised and sceptical about the valuation proposed by a vendor. On objective grounds SaaS and e-commerce businesses sell for a significantly higher profit multiple than content-based or media businesses, because of the higher reliability of recurring income in the former models and the generally much higher operational time demands in the latter cases.

As an example, a currently listed relatively small SaaS business (not on Flippa) with a claimed $55k net annual profit has an asking price of $250k, a hefty earnings multiple of 4.55. You would expect that ratio level to make any buyer hesitate. Let’s assume it doesn’t have rocket ship growth (doubtful because they are selling) a buyer simply will not pay that amount.

Vendors who are seeking to sell at an earnings multiple above the prevailing average need to factor in the understandable buyer nervousness and be sure that the audited income and expenses figures are going to stand up to serious interrogation. While there is never an absolutely guaranteed success in any investment decision very few buyers overall, and virtually none in the six and seven figure range, are interested in taking a wild gamble on getting value for money.

The valuation factors that buyers will weigh up

Because it goes without saying that buyers generally regard sellers’ asking prices as inflated, it’s important that the vendor has realistically priced the business having regard to all the considerations which the prospective buyer will be factoring in.

The income figures must be accurate and cover the duration of the business operation, including only those income streams which will fully transfer to the new owner with the sale. Gross and net income trends will be crucial to the buyer’s assessment. All expenses must be transparently declared in detail, including all payments made to service providers and suppliers of goods and expertise. It is vital to new owners that they will be able to maintain all of the necessary business operations within the same cost structure, or ideally achieve some savings where possible. Any outstanding expenses or other debts transferring with the business obviously must be declared.

Absolutely all operating expenses need to be disclosed, not disguised, by the seller and discoverable by the buyer. Often overlooked, the full value of any unpaid work which has been invested in the operation of the business will be accounted for in the buyer’s own valuation of the business. The predicted cost of the new owner’s time, and any specific technical expertise required, will significantly affect the buyer’s business valuation. It is absolutely essential to the prospective buyer to be able to rely on an honest declaration of the time and expertise required to manage the business, as the new owner will need to put a dollar value on this expense.

The prospective buyer will need to analyse all the financial indicator trends over the longest time frame for which the figures can be produced. Sources of customers and the cost of gaining them will be important factors for the buyer, as will the effects of any changes to attracting traffic such as Google algorithm changes or even penalties which may affect search traffic.

The buyer will need to assess how competitive the niche is and whether there are barriers to the entry of competitors, which raise the business valuation, or the likelihood of increased competition in the absence of any significant barriers to entry, which will lower the valuation. It is crucial to the buyer to ensure that any licences required are fully transferable, or readily obtainable by the new owner, and that any branding, trademarks or other unique advantages will transfer with the sale.

The seller needs to appraise the business through a buyer’s eyes

The seller will be keenly aware of the time, energy, money and vision which has brought the business to its current status and positioned it for a successful sale. Naturally the vendor wants to achieve the highest possible price. However, seller over-valuation is the prospective buyer’s biggest turn-off. It really enables the sale process if the current owner evaluates the business using the same valuation indicators that the buyer will be applying.

It is worth mentioning that some buyers will apply a discounted cash flow (DCF) measure in their valuation. This is a somewhat less relevant consideration in an era of low inflation as at present, but put simply the principle is that a dollar of profit now is worth more than a dollar will be in the future, so a formula is applied to compensate by lowering the notional future profit value, given that the buyer will be paying in advance the equivalent of some years of projected net profit.

The bottom line for the buyer is that the online business acquisition must be fully transferable, it must be sustainable, it must have scalability, and above all it must be purchased at a reasonable earnings multiple. While it is still relatively unusual for an online business to be bought using funds from an institutional lending source, lenders may place a ceiling on the multiple, determined by the actual business model and specific market niche.

Overall, to achieve a reasonable pool of potential buyers interested in undertaking onerous due diligence and finally negotiating a fair sale price, sellers need to keep their initial asking price close to buyer expectations. Avoid ambit claims with the view that eventually you will negotiate down. The process of carefully considering a purchase is time-consuming for the prospective buyer. The factors outlined above will determine where the buyer expectation sits in terms of an earnings multiple. There are so many variations in play that the ratios will vary between around 2 and 4. There would have to be exceptional circumstances taking a selling price outside this already wide range.

Know exactly why you have decided on your own seller valuation, and understand what the buyer will be factoring in. Your initial asking price should not be more than 10% higher than you believe on reasonable grounds the buyer will consider fair after all due diligence and consideration of all the factors covered here.

It is very clear that a reasonable seller valuation is always the key to a successful sale.

 

Why seller financing makes sense

Why seller financing makes sense

Why Seller Financing might make sense for you when selling your business

Many buyers of businesses are looking to invest in businesses which they can afford to purchase outright, even if this involves short-term Earn-out agreements, which typically are not arranged primarily for finance shortfall reasons. (The many advantages of Earn-outs are covered in a recent Flippa Blog article). However many of those looking to build a portfolio of businesses or to acquire a seriously high-value business may need to source finance.

Traditional business loans from banks and other major lenders are difficult to obtain for business investment. Currently banks are highly risk-averse and even when lending for more conventional business purchases they will be restricting lending to home equity based loans. Amazingly, after all these years of online business progress, the major banks still tend to be out of their lending comfort zones in the business website world, not really understanding or being confident about the way it operates. One of their main reasons for securing the loan with home equity is that banks cannot secure the loan against the physical assets of an online business and they are reluctant to place a value on ‘goodwill’ or business profitability potential.

We’ll cover SBA loans in a future blog post where the situation is entirely different again.

Unsecured loans from small business loan specialists, including online lenders, are more readily available but generally come with unattractively high interest rates and often quite burdening fee structures. Private equity firms which finance online business acquisitions tend to be interested only at high-value levels, and with lots of strings attached including an intrusive degree of business control or oversight.

Why you should consider seller financing

Whether you are a buyer or a seller, give serious thought to the mutual benefits of vendor financing. As a seller, if you are definitely in need of the full purchase amount immediately then of course this arrangement is out of the question. However, you will greatly increase the pool of potential buyers and the purchase price achieved if you are able to offer vendor finance for an agreed proportion of the purchase price. Unlike an Earn-out agreement which is usually limited to a minor proportion of the cost of purchase, does not entail interest payments, and is generally paid out in full within an agreed number of months, seller finance funds a proportion of the purchase with a longer-term payout period and with interest charged on the remaining balance until final settlement.

To illustrate, the owner of the business (owned outright and with no existing mortgages or liens attaching to the business) agrees to a sale price of $100,000. The buyer who has only $40,000 available as deposit, after judiciously retaining sufficient funds for immediate operating expenses and contingencies, has been enticed to pay a premium price because of the availability of seller finance. A reasonable interest rate to be applied to the outstanding monthly balance is agreed and a repayment period of typically around 5 years is determined.

The interest rate can be fixed, or floating and indexed to the official rate. In reasonable fairness to both parties, because the loan remains essentially unsecured the rate is initially set commensurately higher than major bank lending rates for business loans. In the simple illustration above, given the current interest rates and the buyer paying the seller a monthly instalment of $1000 plus the applicable monthly interest, the vendor would receive an income stream averaging around $15,000 annually for the five years. The bottom line for a seller who is in a position to defer full settlement is effectively a significantly higher final sale price, while the buyer is able to afford an acquisition which otherwise would have been out of reach.

It goes without saying that a legally binding contract is necessary for this kind of vendor financing arrangement, whereas Earn-out agreements typically rely on a less formal memorandum unless they are particularly complex or involve six or seven figure sums.

The mutual advantages of seller finance

While for the buyer the obvious advantage as already stated is the capacity to access an business business purchase which could not be afforded if the entire amount was required up-front, there is an additional benefit in the continued interest of the seller in the success of the business. Further, the willingness to provide vendor finance confirms the seller’s confidence in the business model and its ongoing viability and profitability.

For the seller, provided access to 100% of the funds from the sale is not required immediately for other purposes, then the regular income stream with an interest rate which is fair and reasonable but actually quite favourable to the seller is a great advantage and effectively raises the actual sale price achieved. Because the pool of prospective buyers has been increased by the availability of vendor financing, the agreed purchase price is more likely to be at a premium level also. Additionally in some circumstances, there may also be taxation advantages in the delayed payment of the full sale proceeds; this is a complex matter and as a seller you will need professional tax advice on this aspect, but it’s something further to consider.

A win-win solution to a business purchase arrangement

While this will not suit all sellers or buyers, seller finance is certainly an option which should be considered. In fact, it’s such a mutually beneficial situation that a rapidly increasing proportion of online business acquisitions are now financed on this way. For most vendors, offering seller finance is a sure-fire way to seal a deal.

Overall 2019 is emerging as a highly promising year for business investment, and we can expect to see exponential growth in seller financing arrangements.

There’s no such thing as money for nothing – but this one comes close!

There’s no such thing as money for nothing – but this one comes close!

If like me you’re interested in creating a rewarding website-based business, then this particular pathway can generate a lucrative income for relatively little investment of money or time, with the potential for eventual sale at a substantial profit.

Why this opportunity is so different

In a traditional commission arrangement, you sell something which isn’t yours and receive a commission from the owner of the goods or service. We all understand that. It goes without saying that you are actually working at some kind of job which provides the platform for this incentive-based remuneration.

But imagine if you had a set-up which produced automated online referrals to a seller, who then paid you a commission on anything that was sold as a result of your referral. You have no real costs entailed. You don’t own the inventory or pay the cost of the storage and delivery systems and you don’t have any accounting to manage. You just get paid for doing almost nothing.

The basic requirement is that you need to set up, or buy, an effectively functioning website that draws regular traffic. Once that’s been achieved, you’re well on your way to owning a potentially highly profitable ‘Affiliate Business’.

What is an Affiliate Business?

So what is an Affiliate (Advertising/Marketing) Business and how does it work? Well, Amazon Affiliate is only one of the many enterprises now operating in this space, but as it was one of the first and remains the largest let’s look at Amazon primarily.

Becoming an Amazon Affiliate business is as simple as registering with Amazon at no cost and then you begin promoting literally any of the products Amazon handles and you get paid a commission on all sales which emanate from your promotion.

How does it work?

The infrastructure for this is amazingly simple. You have a website which features products relevant to your audience. When a website visitor clicks on a product profile, created by Amazon with no work involved for you, this creates a 24-hour duration cookie. Now here’s the exciting part. You get a commission on anything at all that the visitor buys from Amazon in the next 24 hours, not only the items you were actually featuring.

Simply to illustrate, let’s say you have created or acquired a website that features boating and fishing tips, news and stories. On a current post, you have an engaging and informative article on how to choose the best fishing reel, having regard to the fact that these vary in price from around $40 to well over $1000.

Using an extremely simple process you embed Amazon’s own seller descriptions for some of these items, enabling your visitors to click through the links. That’s all there is to it. Tracked by the 24-hour cookie if they then buy anything at all on Amazon over the next 24 hours, including download services, you get the commission. This includes expensive high-end items totally unrelated to the direct content of your website.

Think of it as being paid by a business for your online version of a ‘word of mouth’ recommendation. The actual commission structure is quite complex and strongly rewards higher volume sales, with a peak commission of 8.5%. But even a single sale will earn you 4%.

Is Amazon Affiliate the only option?

No, not at all. There are numerous providers of Affiliate Marketing programs. It’s important to do the research and decide which will work best for you and your website niche. Whether you decide to hook up as an Amazon Affiliate or commit yourself to an alternative targeted ads partner like Google’s AdSense, it is obviously important to understand the commission structures and to do the due diligence so you don’t get caught not understanding the Terms of Service (ToS) arrangements.

For a beginner in this space, Amazon is a very safe place to start because it has massive inventory in virtually every market niche and has a very high level of customer trust when it comes to making an online purchase. You can always migrate to an alternative program later.

Some things to consider

Always carefully check and observe the Terms of Service provisions. While Amazon, for example, makes the setting up of the Affiliate Business arrangement pretty simple, they don’t hesitate to embargo you if you breach a condition, such as making sure to never state a product price or specification within your own website content. And once embargoed, it is close to impossible to be reinstated!

Setting up the relationship and commission payment arrangements is fairly straightforward, but because of stringent identity checking requirements, it takes a bit of effort – more than setting up an Airbnb host account, for example.

The real challenge is to have a website which will attract traffic of the right kind and in sufficient volumes. Amazon will require the details of your website/s as part of the initial registration, but there is no stringent website quality checking on their part. At the end of the day if your website doesn’t attract sufficient traffic to re-direct to Amazon products or services in any great numbers, then all that means for them is that they won’t be paying out much commission.

Naturally, you want your website to be of the highest possible quality anyway and to feature regular posts of interest to engage your target audience. The more clearly you can define this niche and then concentrate on developing quality content for that audience, the better.

Personally, I like this Affiliate Business model because it genuinely rewards the creation of high-quality websites, including blog/vlog sites, and provides monetisation rewarding the level of audience traction gained. All of this at no additional cost to you and with the potential for very substantial commission payments.

Initially, you may be covering only your website hosting costs, but once you create and sustain good quality content with precisely targeted affiliate ‘advertising’ you may be earning enough to pay freelance writers for a great range of engaging content. Eventually, there’s a real potential to earn more than a good salary and start paying off the mortgage at a stellar rate!

Producing high traffic to make your affiliate advertising take off

It’s essential to have a website in an area of genuine interest for you. Authenticity of interest will enable you to work effectively with commitment and enthusiasm and will provide sustainable motivation for the long-term, or until you sell your website at a good profit!

High traffic can be produced if your website is in an area of interest to a large number of people, for example, a site on pet welfare and nutrition. Think of the enormous range of relevant products you could be ‘advertising’ in this context. While more narrow interest areas may produce lower traffic, there may still be a very high level of potential buyer interest in higher-cost products that you have sourced and can promote.

If you have your website up and running already, then linking it in as an Affiliate Business with Amazon or another partner is a prospect really worth considering. Alternatively, you can plan and create a website in an area of authentic interest for you but intended from the outset to be pitched as an Affiliate Business.

Would I consider buying an existing website and turning it into an Affiliate Business?

Yes, this is an intriguing and genuinely exciting opportunity which I’m currently exploring for myself right now. It’s also worth considering the acquisition of an already existing Affiliate Business which is up for sale, if it’s currently operating profitably or better still if you can see it’s got high potential yet to be realised.

It’s true, there’s never money to be made without any effort at all. The trickiest part of the Affiliate Business model is choosing a website niche that genuinely suits your interests and developing it as an affiliate advertising platform. Generating high-quality content and managing your SEO is the key to high visitor traffic and conversion to the click-based commission revenue. Ultimately the yield will make the website profitable and self-sufficient enough to support paid content writing. That will free you up to start your next website in a different niche, working towards your ultimate goal of building an Affiliate Businesses portfolio.