The following post is the story of how I built and sold one of my businesses. I hope that it is helpful to other entrepreneurs, and I will be happy to answer any questions you might have in the comments section below.
I created a side business with my friend Josh from UW Seattle business school in June of 2008. Josh was the president of the business club and we became friends while participating in an accounting case competition. After college, Josh and I were roommates for a few months.
Josh had a family friend who ran a manufacturing business in Nevada that sold automotive gauges that said he would drop ship for us. Our original agreement was that Josh would handle the business side of things and I would handle building the site and marketing. In reality, we both ended up sharing all of the work. We dubbed it digital-auto-gauges.com for SEO reasons (this was 2008, I would not recommend this now).
We both spent a lot of time in the first year getting the site up and running on OScommerce. It was the first ecommerce site I had built and it took me a ton of time. OScommerce at that time was very painful to deal with. We switched over to BigCommerce in 2010 to make our lives easier. BigCommerce is a pleasure to work with as a designer / developer / store owner.
Our only marketing methods were SEO and AdWords. We did not even do email marketing to our current customer base or social media. We shut down AdWords after the first year and generated all of our sales after that from SEO work on the site.
Josh was a great partner and put in a lot of hard work along with me to get the site up and running and to do the early marketing. Josh also was responsible for handling all of the orders and forwarding them to our manufacturer for shipping. I think the key to choosing a good partner in business is someone who you have a friendly relationship with who you have seen put in hard work into other areas in their life and who has always been honest with you.
About a year after starting Digital Auto Gauges, I left the SEO agency I worked at in Seattle to found my own SEO services company in Los Angeles, Coalition Technologies. Coalition is now my primary business and I have about 60 full time team members helping me.
In May of 2012, Josh had finished dental school and wanted to focus purely on starting his dental practice so he asked me to buy him out. We agreed to just give him the cash in the business, while I took the business itself. I paid Josh $4,397.10 for his half of the business.
In early 2015, I decided to sell Digital Auto Gauges. For the last several years I had done no work on it and just passed it off to various team members at Coalition to do the work.
I posted the site on Flippa.com. I think the key to making the sale was posting a ton of information on the business and starting out with a $0 price ($12k reserve though) to get as many bidders as possible. There were lots of low ballers early on, but eventually a couple of serious contenders emerged and started a bidding war. This drove the price higher than I think the business was worth and enabled me to get $16,100. I did have to pay a 10% fee to flippa – $1,600. My net proceeds were $14,500. I also had to pay very high taxes since I live in California.
The buyer owns an auto body shop, so this business is a much better fit for him than for myself. I called him several times through the bidding process and we had a good relationship throughout the transfer. I think talking to him on the phone helped the buyer to feel comfortable spending $16k online.
Website stats at the time of the sale:
- 2650 unique visitors per month
- $2500 revenue
- $1000 profit
I can’t find all of my old sales data, but here are a couple of years that I have numbers for:
- Revenue – $26,728
- Profit – roughly $12,000
- Conversion rate – 0.6%
- Revenue – $40,987
- Profit - $7,260
The profitability of the business increased because I decided to raise my prices dramatically. This led to less revenue, but higher total profits.
Key lessons I learned from this business:
- A good partner will make starting your business much easier and more fun… pick someone you get along with well, who is honest, and who you have seen put in hard work elsewhere.
- Many side businesses may not be very profitable directly, but you will learn lessons that will help you make more profit in other ways. For example, the lessons from this business helped me do much better work for my clients at Coalition.
- Be VERY careful when choosing the platform for your site. OSCommerce was a nightmare and took hundreds of hours of wasted effort… BigCommerce was enormously better when we switched.
- A business is not a one-time push, it is the cumulative result of hundreds of little projects and thousands of hours of effort.
- Most little projects you undertake will not do much to help your bottom line, but a few will make a very big difference. Unfortunately, I was not good at telling what would help the most ahead of time so I just had to do tons of work instead.
Some people have been asking me questions and I will try to answer any questions asked in the comments or via email. I am updating some questions I answered via email below:
How much work was going into the auto gauges biz to keep it running?
Not much, basically I just had an employee who forwarded order emails to the manufacturer for shipping and then had my accounting team handle taxes at the end of the year. But it still was an extra thing taking up space in my head, and I want to focus solely on Coalition.
Is there a reason you went with Flippa instead of another marketplace like EmpireFlippers?
Hmmm… I think I did some light research and it looked like Flippa had a bigger community? I don’t remember well though.
Why sell it now? Do you have plans for the cash proceeds?
I sold it to keep my focus on Coalition. I felt like DAG was a distraction. The cash proceeds went right back into my other business ventures