So, using our search features, you’ve found a listing that grabs your attention. Now what?
Don’t place a bid right away! Instead, contact the seller.
You have to picture Flippa as a real world marketplace. Imagine yourself walking through a gallery that is filled with an incredibly diverse portfolio of artwork, each completely unique. Standing directly behind every painting and every sculpture is the artist who created the work. Would you walk up to the artwork, take a few looks at the colors and shapes, note the asking price, and walk up to the clerk to pay for the artwork without ever speaking to the artist who was standing right there? If you love the artwork so much, wouldn’t you want to pay the artist a compliment? Ask them what inspired the painting? Get some insight into how they learned to make something so ornate and exquisite? This is exactly how you should approach the Flippa Marketplace.
Purchasing a digital asset is a big decision. Even if the listing that you’re evaluating is being sold for a relatively low dollar figure, you’re making a choice to purchase something that you plan on spending your time and energy on growing and improving. It’s important to get to know a bit more about the business that you’re considering owning for yourself so that you can make a well thought out decision whether it is right for you. This is why the “contact the seller” button is so prominently placed on the listing page. It’s as if the artist is standing right behind the artwork, patiently waiting to interact with potential buyers. There is nothing binding about contacting the seller, it simply puts you in an environment where you can ask questions. But what to ask?!
Well, to begin, we always recommend putting yourself in the seller’s shoes. They are dealing with tens if not hundreds of buyers on the cusp of making a purchase and they are under no contract to accept your offer no matter what financial value you might bring to the table. So, be professional, be polite, and tell them a bit about your own story. Just as if it was an artist standing beside their artwork, approach them with a sense of etiquette.
It’s always great to show a bit of passion for their project and let them know what particularly interests you about what they have built. Start things off on a positive note by sending them a compliment or congratulating them on their success. From here, you can dive into your due diligence.
“Congrats on the quick success of your store! Could you shed a bit of insight as to how you grew your sales so fast? Is this replicable as the site continues to grow?”
“Wow, truly incredible how you were able to diversify into 3 different revenue streams! Do you think this is something that I would be able to maintain? Does it take any hard skill that I’d need to learn?”
“I’ve always loved the topic that your content focusses, on. I’d love to hear how you got into it and where you think the opportunities are to expand.”
Ten Questions You Should Ask The Seller:
Now that the ice has been broken, here are our suggestions for ten questions that you should be asking the seller.
1. Can you give read only access to Google Analytics?
Yes! Sellers have the capability of giving read only access to their Google Analytics page. This allows you to get into the real nitty gritty of what’s happening with traffic on their website. You can take a look at historical trends and get a verified look at what’s going on in the backend.
2. Can you provide proof for each revenue source?
This is critical. While Flippa does verify certain revenue streams, and we plan to implement more in the future, it’s crucial to know what the revenue looks like in the asset that you’re looking to acquire. Again, like with Google Analytics you can ask for read only access if the site is built on a platform that allows for this such as Amazon Seller Central or Shopify. But if nothing else, you can ask for a file download, a video, or screenshots of them sifting through the revenue pages themselves. We also recommend asking for revenue information for previous periods that aren’t listed on Flippa. It’s great to see if business has grown, declined, or remained neutral over the years.
3. Can you provide a breakdown of all of your costs?
You want to be sure you understand what they are spending money on. Revenue only tells one half of the story. What you want to understand is profit, so you need to know what the built in costs have been to run the company. Are they paying content writers? Are there web designers on retainer? Developers who are creating updates to a SaaS platform? Virtual assistants managing inventory, returns, or customer support? What do wholesale prices look like for a company that holds inventory and what are the shipping rates and storage rates?
As many sellers own a full portfolio of assets, be sure you get the costs directly associated with the asset at hand as certain expenditures might be spread out across their multiple businesses.
4. How do you acquire customers? What marketing initiatives have you used?
It’s great to understand how customers have been coming to this website or started using this service. Are they getting organic traffic through SEO? Are they paying for influencers or PR? Are they finding business using targeted ads on Facebook or Google?
Not only do you want to know what they have been using to find customers, but you should feel comfortable asking them what they have tried that hasn’t worked well. Does instagram move the needle? Does adsense provide a great return on investment? Try to get an understanding of where the opportunities might lie for future marketing efforts. This can often be a space for opportunity if you happen to be highly knowledgeable in a certain marketing stream that hasn’t yet been optimized or even attempted by the seller.
5. What tasks are required of the owner? How much time are you spending on this project each week?
This is a two part question.
1) What would you say is the minimum amount of time needed to just keep things moving along as is and
2) How much time would need to be put in to grow the business?
One mistake we often see from first time buyers is overconfidence in their own skills. It’s extremely important to understand that when you’re requiring an asset that’s been around for several years, the current owner is likely an expert at every process involved. If they claim to spend 10 hours each week to run the day to day elements of the business, you should assume that it will take you 20 hours, at least for the first few months as you ramp up your understanding of the business. There is always going to be a learning curve and you are going to need to spend time optimizing and running.
6. What level of technical knowledge is needed to run this business?
Luckily, it has become very easy to manage so many of the large, cloud based platforms such as Shopify or WordPress these days, but there can still be a number of technical skills needed to run a digital business. You obviously want to be sure that you can handle as much as possible yourself as paying a developer is going to be very expensive.
7. Operationally, what is working well? What needs improvement?
As with marketing, it’s key to understand what on the operational side is running efficiently and what could use some help. While sellers won’t often post the weaknesses of their business directly in their listing, they are often willing to share their shortcomings in personal discussion. Quite often you’ll find that sellers will be brutally honest in explaining a piece of the business that grew beyond their skillset. It’s extremely common for an entrepreneur to be selling their business because it has grown too large for them to run effectively. These knowledge gaps can be your opportunity to invest and grow.
8. What are the stability / legal risks?
Sellers can sometimes touch on the risks in the notes, but not to the point that you really want to know. Are there legal or stability risks? Is Google making an algorithm change that will mess with your SEO? Are they highly dependent on a specific supplier who they have no control over? Would a change in shipping costs or Instagram functionality instantly change the way that they need to run their business?
9. Why are you selling?
You’d be surprised how often the answer to this question falls into one of two categories. It’s nearly always either a function of time or a need to raise capital quickly.
Many sellers are running multiple projects at once, have a full time job, or have had a personal life change like having children, which has cost them the time, even if minimal, to devote to this particular business.
The other most common response is that they are looking to invest in something bigger and they need an influx of capital to use as an investment. This can either be an investment towards another digital asset or perhaps they are pulling money together to put a down payment on a home or to help a family member in need. Whatever the case, while it can sometimes seem odd to give up on monthly revenue, it’s quite common for a person to require a larger sum of money all up front.
As mentioned earlier, this is also a good moment to understand if the current owner has hit a wall when it comes to a certain aspect of their own knowledge base or skill set that you can capitalize upon be it marketing know-how or supply chain management.
10. What are the best growth opportunities?
You aren’t paying for opportunity, but you do want to know what opportunity is there.
Here’s a great way to ask this question if you want to be a bit more creative: “If you were me, and let’s assume you knew everything about every bit of technology and business, what would you do tomorrow to get this project moving forward?”
While you may be excited to get busy owning your future, we can’t stress enough the importance of having a conversation with the seller and doing your due diligence. Not only can you learn about the value of the business, but you can learn some tips on what you might want to do once you acquire it.