One of my 2018 goals is to develop another income stream. The motivation behind this goal is to enable income stream diversification and to better protect the family against external shocks (e.g. involuntary unemployment).
What have I done so far?
In Q1 this year, I signed up as a freelance management consultant on Upwork, which is a platform that connects freelancers with businesses that seek services. I have written quite extensively about my experience with them, which has been overwhelmingly positive.
- Upwork has low barriers of entry and thus the time-to-revenue is very quick. I landed my first client within 3 days and received my first payment within 10.
- As a result, competition on Upwork is fierce and it’s very much a buyer’s market. Even though I commanded a high hourly rate, it took me roughly 30 applications to land a successful project.
- Consequently, I was still stuck in the business of trading my time for money, which is a pattern I want to break.
For these reasons, I decided I needed to break out of the “time-for-money” model. I focused on e-commerce as a more appealing alternative because:
- It is scalable. Once a certain amount of effort and ingenuity has been poured into the business, it does not require me personally being constantly “on”. It breaks the “trading time for money” deficiency that’s associated with freelance consulting.
- It can be truly location and time-independent. Being a consultant definitely offered flexibility however one still had to show up at the right place (thankfully Skype most of the time) at the right time to deal with clients. A B2C/B2B e-commerce business has much less of that involved.
- I have prior experience: I work in a B2C e-commerce business and I have detailed working knowledge of how such businesses operate. As a result, I am familiar with much of the operational landscape.
So how did I find the business?
The easiest way would be to find a broker what matches sellers to buyers. I put it in that order because most of the time, they are paid by sellers and would act in sellers’ interest. The importance of this will become evident later on.
There are 2 mainstream internet business brokers out there:
Both have similar propositions where website sellers list their sites for a fee in and prospective buyers would find and engage in the transactional discussions with them. If the sale was successful then the broker site would take a success commission which is usually 10-15% if the sale price.
A huge number of site on sales are “template scams” where are the seller owns a domain, installs an e-commerce WordPress template and put a $500-1,000 price tag onto it. They can market them as “e-commerce ready” and “passive income opportunity” where in reality these sites have zero traffic and do not generate a dime. Plus you could get the whole template set up for less than $100. Steve from MyWifeQuitHerJob has written a useful article about the mechanism of these scams.
However, there is a significant number of genuine e-commerce sites for sale on both platforms. Their revenues ranged from less than $1,000 per year all the way up to several million.
I signed up for the email alert service on both sites, which sent me a weekly deal summary. After about five months, a site from Flippa caught my attention and I began investigating further.
What did I find?
It was a t-shirt print-on-demand (POD) business dedicated to producing British military-themed t-shirts. The business was set up in October 2016 and had generated $20,000+ revenue at 20% net profit margin at the time of sale (23 months).
The site was built and hosted on Shopify and the operation was super simple:
- Customer visits the site and places an order
- Shopify handles payment processing and passes the order info to the t-shirt manufacturer via an API link
- Manufacturer prints the t-shirt and dispatches to the customer and automatically invoices the business.
I liked the business because:
- It’s a niche and specialist market which doesn’t face much competition.
- It already generates a sustainable level of revenue and profit.
- It’s simple to understand and operate
- It can be hands-off and relatively passive.
What happened next?
I performed extensive due diligence (which I will write more about in the next post) on the business over the space of a week to examine the accuracy of the many claims made by the seller. Much to my surprise, every single one of these claims checked out!
So the ball ended up in my court: do I buy the business or not?
I weighed up the pros of the business against the cons, which ultimately came down to time commitment.
I already have a demanding day job managing operations of an e-commerce business. On top of that, I look after a sizeable portfolio of assets, write for WealthyBy40 and I’m publishing my first novel. Oh and there’s this tiny small thing (literally) on top of that called a child. Mrs WB40 had just given birth to WB40 Junior.
To say time is a scarce commodity in my life would be an understatement!
Looking intrinsically, I am a starter-finisher, which means if I were to embark on this business then I will do whatever it takes to make it a success. Coupled with my other commitments, it would simply mean cutting back on the precious zzz time, which simply wouldn’t be sustainable.
The importance of focus
Looking at all the previous endeavors which I had succeeded in, the single most important attribute to the success was my relentless focus. Once I had set my sight on the goal, I would exclude all distractions and simply pursue it until it was attained.
Focus is more vital than ever in today’s world where distraction has become the norm. I knew my current priorities very clearly:
- Look after the family
- Ace at work
- Publish my novel
- Continue develop WealthyBy40
Adding a 5th priority of managing and growing a fully-fledged e-commerce store would spread myself too thin, leaving me to become the master of none. Not a viable option.
It was an eye-opening experience to perform due diligence on the e-commerce business. If I had one thing less to do then I would have accepted te challenge without hesitation.
Yet often in life, the ability to say no to an enticing opportunity requires far more courage and self belief than to say yes. I believe this was one of those occasions.
Have you ever had the urge to buy an online business? Did you go through? Did you say no? I’d love to hear your story. Please comment away.