Blake Hutchison is the CEO at Flippa, the largest marketplace to buy and sell online businesses. He's seen more entrepreneurs exit than perhaps anyone else and specializes in growth marketing, marketplace dynamics and leadership....
Ronald P. Skelton - Host -
Reach me to sell me your business, connect for a JV or other business use LinkedIn:
Ronald Skelton: https://www.linkedin.com/in/ronskelton
Have suggestions, comments, or want to tell us about a business for sale
call our hotline and leave a message: 918-641-4150
Ronald Skelton 0:06
Hello and welcome to the how to exit podcast where we introduce you to a world of small to medium business acquisitions and mergers. We interview business owners, industry leaders, authors, mentors and other influencers with the sole intent to share with you what it looks like to buy or sell a business. Let's get rolling.
Hello, and welcome to the how to exit Podcast. Today I'm here with Blake Hutchison. Blake is the CEO of Flippa and the large which is the largest marketplace to buy and sell online businesses. Flippa empowers individuals and companies to take control take ownership and thrive in this new small business economy. Welcome Blake. And thank you for having, i's funny, I have a really good friend his last name is Hutchison.
Blake Hutchison 0:54
I wouldn't worry Ron, thank you so much for having me. Everyone gets my name wrong. Most people will put an "N" in the middle or even leave off the last couple of letters.
Ronald Skelton 0:54
I think that's what I think I throw an "N" in the middle of the month. I think I said Hutchinson.
Blake Hutchison 0:56
Yeah, that's right. It's very common.
Ronald Skelton 0:57
Yeah, that's okay. People call me skeleton all the time. And I just smile and nod. And like, you know, I haven't been that skinny in a long, long time. Thank you for being here. Everybody kind of probably knows who you are. If you're just CEO, Flippa. And, and all of us in the acquisition entrepreneurs space, we crawl through there on a regular basis. Let's just start with your kind of your origin story. How did you, you know, how did you go from a little boy in Australia? Of all places, which I think it's 10:30, 11 o'clock your time there?
Blake Hutchison 1:39
Yeah, that's right.
Ronald Skelton 1:39
How did you go from a little boy in Australia growing up there and, and moving around, they ended up on a mergers and acquisitions show?
Blake Hutchison 1:46
Yeah, that's, that's a super interesting question. I often ask myself that. How did I end up becoming the CEO of Flippa, but you know, ultimately, we all find mysterious ways to find our path, don't we to where we end up. And for me, it was very much just about exploring different business development or growth roles in different technology companies, to the extent that I found myself often working for founders and helping them out with growth. And so I did that across the US, across multiple businesses, startups and more established companies. I've done that in Australia with cloud accounting, software companies and online travel businesses. And you know how it happens, people start to sort of see you as a guy who can grow their business and flipper was just that. So it wasn't necessarily that I, I targeted m&a, or I targeted small business acquisitions or online business marketplaces. It was more that I was recognized as being someone who could could grow a business with a big vision. And, and as a result, found myself in the space. And I must say, it's interesting because I've always empathized with small business owners because I was one. I had my own online business. And ultimately, I wasn't successful in my endeavor. But I tried to sell that on Flippa. And so when I was tapped on the shoulder to have a look at the flipper marketplace, and to grow it into what it is today, I obviously knew what it was because I was a customer. And sometimes that counts for a lot.
Ronald Skelton 3:15
It's interesting how I got into this space, as I hired I was in the real estate space and doing real estate investment group. And I hired a performance coach and you know, after a few sessions, like men, usually really should be playing a bigger game, and I would close the house or five, you know, we would do a deal or something to close the house and the wire transfer would be nice for our little business, right? It'd be, I think the biggest one was like 40, something 1040 $4,000. And the back of my head, I still had that performance scope, but you shouldn't be playing a bigger game. And I used to before Flippa was around I used to flip websites I used to I was a domain or I had an you know, I didn't just say I had a big enough account at GoDaddy, I had a personal assistant that worked at GoDaddy for me, right? I can call him day or night, I had my own personal account count in there, I was, you know, stroking 30 or $40,000 worth of domain renewal checks a year to them. And, but I would buy websites, fix them up and sell them. And before Flippa came around, we used to use like warrior forums like these forums, chat chat online, you know, browser, race chat groups, or whatever, and we would post our stuff. And some kids got on there. And basically they falsified a couple of deals that I had bought. And it was just real. I realize it's just so easy to fake financials and that type of stuff that I stopped doing it went and did something else. And I see on here, you guys do a lot of work towards checking things and checking traffic and verifying that stuff. You took a lot of the risk out of that. Tell me a little bit about Flippa and you know, kind of the product evolution like I'm sure what you got on here or not. I mean, I even since I've started looking at it again, I just noticed stuff today. You got services in here? I never did. You did due diligence, legal and all that. So what is the kind of progression you guys went through?
Blake Hutchison 5:08
Part of the evolution is as a result of some of the things that you've just gone through, right? It's easy to, to fake things. And it's, it's an industry, which is so new to so many people that you've got to make sure that you build safety into your marketplace, first and foremost. And that's not that different to other marketplaces, right like Airbnb or an eBay or an Uber, where you're always striving to ensure that they're trusted, that their places have integrity, and that you can get business done with each other, or get a transaction done with each other in a safe and secure manner. And so, flip has worked really, really hard on that. And so there's a couple of things that that we do in the product, which which are really close to our heart, and critical. One relates to our human based verification team. So we've got a team of 12, who all they do all day every day is verify assets. So they look at revenue data, they look at operational data, they look at the history of the individual. They map that individual to other assets that they've historically owned, and make sure that it's all credible. And then we also have what we call our verification at the source product, which is nine different technology platforms, which are connected to flipper that you can connect to to expose your data. And that's been a great evolution of our platform over the last three years. And we're busily building the next suite of integrations to make that even easier. And of course, it helps both parties, right, because, you know, we're doing it for trust and integrity and helping buyers assess a deal. But it also helps with sellers, because most sellers have no idea how to sell a business. Most small business owners are busily running a business growing a business. And we've got to make their job really easy. So one of the benefits of connecting to something like a stripe, or Shopify or WooCommerce, or a Google Analytics is that, Flippa understands the metrics that matter in any given business model. And that's how we derive valuations and price guidance and things like that. So if we can make that available to you, it tends to be easier to list some of the other features and services you've alluded to them. So we now have a due diligence team, you can tap into that team anytime you want. It is a fee for service. So it's a team of accountants and analysts who are on hand, typically use for bigger deals typically use for 100k Plus deals all the way up to sort of $50 million deals, less common in in cheaper stuff. But it's there for people to use. We've also got legal, so we've got imbedded letters of intent, just making that that friction that is usually part of m&a and, and out of reach for so many people, we make it more palatable and easier to use.
Ronald Skelton 7:58
You know, it's interesting, the process, like I look at a lot of brick and mortar companies and their process, you have to train the user or the seller on the process, you know, and a lot of times you're talking to them, if they're not represented by a broker, you ask questions like, Well, do you want to sign an NDA? And they're like, Well, what, what is that you have to explain what it is. And once you explain what it is like, yeah, we probably ought to have one and then you send yours over. Right? I like that. A lot of that is just built in, like I was, I was just telling you before the show started, is I hadn't looked on the site in a while. And I had made an offer off of your site a while back as somebody who just beat me to it a day or two beforehand, that actually happened to be a business, I know where to stay. I searched one day on here for a real estate related business. And I kind of looked at it like I know that website, I know those people, so I want it. So I talked to her and somebody got it right before I did. But you know, I was looking at another listing on here, and I go to click on it. It's like, click here to do your NDA. And I was thinking no normally that, you know, in the process I normally go through, we've had a conversation, we've got the basics. I know I liked this guy he's easy to work with. He knows he likes me, then I say suggest, do you think we needed a non disclosure? Would that make you feel more comfortable? And they'll then after explaining what it is I sit in the mind over which is very generic, you know, it protects them protects me. And and we go forward. I see a lot of that process by having it online. It streamlines that right. I mean, it looks like you go there's even a whole section in our How to sell a business. So you guys have taken a lot of that process and integrated it into something that people can do a step by step.
Blake Hutchison 9:39
Yeah, that's right. And it's a really important piece because a lot of people don't necessarily know what a nondisclosure agreement is for what are you actually protecting right? So if you expose your financial data, that's not necessarily confidential information. It's that the financial data is inextricably connected to the business and the business name, then it's To become confidential, you want to just give small business owners choice. So at the moment, when you list on Flippa, you can choose to either sell yourself or list with a broker. So that's flexibility and choice, you can protect your listing by way of a nondisclosure agreement or not. And you can also choose for assets valued in excess of $250,000, a quarter of a million dollars, you can also choose to only talk with people who have got a verified funds balance, so will actually plug into their bank account using plaid and check that they have the capacity to pay. And so it's just about giving sellers choice around the protective measures that they think they want to take, it's not necessarily the right thing necessarily to do. But you want to give them the choice.
Ronald Skelton 10:46
So what's the largest deal that you know, has closed on Flippa?
Blake Hutchison 10:53
Up to about $40 million. Last month, it was $35 million app sale. So you know, certainly some bigger deals happen on Flippa. You know, biggest deal would be around $40 million, but most recent big deal was 35 million.
Ronald Skelton 11:09
So that's a pretty good range. So I see things on here. For just a, you know, a few 1000, maybe even less, I'm just scrolling through, but, uh, all the way up to you know, they're bigger deals now. Is that that just recently, like in the last couple years, you got some really big deals, or is that been peppered throughout the whole process?
Blake Hutchison 11:29
Yeah, I mean Flippa's always, I guess been recognized for smaller deals. But interestingly enough, there's always been bigger deals in there, it's just that you know, they've been fewer than there have smaller deals available. And that's just because remember, flippers, not a broker, we have over 35 3rd party brokers operating on our platform. But as a marketplace, we have the benefit of scale. And so we are price agnostic, you can sell for something, as you just said, couple of $1,000 all the way up to something a lot bigger 10s of millions of dollars. And we're able to do that with our platform. Whereas a broker couldn't necessarily do it not because they're not good at it. They're amazing at it. It's just that they don't have the luxury of technology behind them that enables that to happen. Certainly, more recently, we've seen lots of bigger deals, and I'm talking about far more deals in excess of a million dollars happening on our platform. Is that Flippa or is that the industry as a whole? It's hard to kind of say the reality is digital businesses today are more mature, aren't they? Right? The average age of an asset on Flippa now is four and a half years old. Whereas you know, Flippa started 13 years ago, we were way before our time. 13 years ago, when you're trying to sell a website, there's actually very few established websites globally. You know, there's clearly some unicorns and a few that came out of the.com, bust and boom, boom, and then bust. But most sites would be small words today, you know, a $10 million website, it's actually not not that hard to imagine.
Ronald Skelton 13:08
Yeah. We were we were picking up websites that kind of look like 80s websites and turn them into websites that look like 90s websites, right? Because that there, they didn't have all the stuff we have now.
Blake Hutchison 13:18
There's still some of those available. It's great when we see them come on Flippa, we love them, actually, because they are so they're so dated from a UI standpoint, but they're beautifully optimized from a revenue standpoint. They've learned how to optimize every every page view so so well over so long. And good buyers can can sniff those out. And they'll quickly optimize them a few few additional ads on any given page, a better design, better user experience, and away they go.
Ronald Skelton 13:46
I wouldn't even begin to know understand what's out there. Now I remember putting on cool little things like click path analysis and you know, different types of analytics. And now when I get into my Google Analytics, it just does a lot of the stuff that we had to put very specialized tools into the websites to make work it just does it. So yeah, it's changed a lot. Tell me a little bit,
Blake Hutchison 14:08
Businesses Ron, come on our platform. We had a business from Queens, New York, that was a shopfront selling arts and crafts 60 years ago. And back in the 90s, converted to sorry, in the early 2000s, moved to digital just with a brochure website. And then around 2010 became e commerce and actually stopped their brick and mortar family business out of Queens and moved to digital exclusively. And so it's quite incredible when you see those stories of you know, businesses that are generational.
Ronald Skelton 14:44
That's kind of in the realm I'd like to be and I think I'm looking for the brick and mortar that you turn into a software company that I can bring into that software Turk company spectrum and make enough of a software company that we use their multiples Right? So there's a If you take a brick and mortar company, and typically you can buy those at anywhere, depending on how well they're performing between 1x, which is really low to about three, three and a half X, their, their profits, right? And you take that online, make it a website, turn it into an e commerce Store, and it's not on, unheard of to get, you know, to three times that four times that 10 times that. I've seen some some stuff on some of these websites where they're like, I think they're insane, like they want most of yours are pretty reasonable. 2.5 2.9 I'm looking at the different multiples are asking for here's a five, two. But uh, I've seen some of these websites where they're asking for a 15 Multiple or something you're like, you know, Software as a Service is kind of like that. Now, the industry is going through a little bit of a shake up, have you seen or much of that? As far as like, you know, I there's a lot of stuff in the news in the last seven to 10 days. Thrawn, your tech taking a hit?
Blake Hutchison 15:58
Yeah, it's it? That's a great question. And I don't know the answer. I'm wondering it myself. And so, you know, there's a couple of things that could play out here, one buyers, small businesses a little bit different, right? You're not getting the heady multiples that a fast growth tech business gets because the scale opportunity isn't there. They typically don't have the track record of, you know, year on year on year, triple digit growth. So there's lots of different things about the DNA of small business, which is different to Public Market multiples, and even startup multiples. But regardless, I have one with a buyers kind of buyers tend to be more sophisticated than sellers. They've got a history of doing this. And I wonder whether they use the public markets news and knowledge as a means to compress valuations even of small businesses, whether it's warranted or not. Because they'll have the knowledge, whereas an online business owners selling their ecommerce businesses have been running, you know, hard for the last three to five years may not have that understanding of, of the public markets. I don't actually think the value of a small business changes through a recession. Frankly, I think that people will continue to read content, therefore blogs will still have relevance. And there will always be advertisers. While some may not be as cashed up, as they may have been historically, they'll be gets substituted with whoever's having a good time of it. And in any given recession, that tends to be someone who's, who comes from behind and starts to excel, while the those at the top start to compress a little bit. I just don't know, Ryan, I It's, it's, it's hard to know. And clearly, there's blood on the streets right now. The last 24 hours was was a really sad day. And there's no doubt more to come. But I just don't think small business tends to be resilient. And it tends to be immune from some of these things.
Ronald Skelton 18:12
You guys, Flippa might actually benefit in one way, if you look at what's going on a lot of times that what that scares the venture capitalists, so in the angel investors. They start looking for a little more secure places to put their money. And when they take it off the market, or they take it off the VC table or the angel investment table. The funding for some of these little startups dries up and they have a choice, either they come out of pocket start asking friends and family again, or they put it up for the market and sell it at what it's currently worth. So I think a lot of stuff will come on the market just because, you know, they're what they're trained to reach out to and get as a source of funds is going to dry up for a little while. And I'm not saying there's not more money out there. There's crazy money out there. I've just I to have small business owners change their conversation of not only who's or what they're asking for but who they're asking it from. Yeah. It's less likely have a path they'll take than it is like, oh, no, we are funding guys left we need to sell. So there. I wouldn't be surprised if there's not a lot of listings in that startup.
Blake Hutchison 19:19
So what a lot of companies do on flipper and I'm talking about the buyers right now, what a lot of companies do on flippers is their strategy is to grow in organically, right? So you pay Facebook, you pay Google, you run the SEO play, you hire salespeople, all these types of things are tactical, they're tough to get mass scale from and they're expensive, right? You can acquire you can acquire a small business on Flippa. And you can actually get inorganic growth. You know, you pay as you just said before, two and a half times maybe up to five times multiple, but you're acquiring customers who are engaged in the niche or the category that you are interested in, you're adding revenue to your bottom line, but you're also adding customer acquisition on a day zero, which is what most companies look to do on flipper, I imagine more companies will look to do that now that there's there's there's some pressure as to where that money can can land.
Ronald Skelton 20:21
So somebody asked me the other day, are you going to change strategies? Are the markets crashing? Like no, everything's we went on sale right now is when a great time for us to look around everything, you know, everything, things will pop up for sale, that wouldn't be for sale before. And the things that are already. If somebody's trying to retire, and they and they feel a little more pressure, I think more things will close during a down economy than during a steady or inclining economy. Just because the fear of uncertainty, right, the business owner sitting on this right now doesn't know what the economy's look like, it looks like it's getting worse. You know, they're thinking they want to close now before it gets much worse. To where everything's steady, ugly, and climbing up at the last second if they get that, you know, sellers remorse where they they don't want to, like sell at the last second because they don't know what they're going to do next, then if the economy is going great. And it's like you know what to sell more for? I'm going to do it one more year. I'll sell I'll it'll sell for more next year. So
Blake Hutchison 21:19
it's a good point. Here, we may see some supply come to the platform. It's always an interesting question. We get around, you know, do you have more buyers or sellers, and there are so many buyers, that is unbelievable. There's a lot of dry powder out there.
Ronald Skelton 21:33
There is absolutely shows right now you have over 6000 listings, though. So all a bit, I probably need to crawl through here more often. I was just prepping for your show I was looking through here. I was telling you earlier. Like, wait a second, there's a podcast company on here that does podcast guests. They acquire guests for podcasts. But I wouldn't be there would be a good idea to monetize that. So I'm gonna reach out and talk to those guys. But if you think about it, you know, I have a production crew. And I have a crew that goes out and introduces me to people I want on the show. What if I hired a production company is already making revenue and IRS, you know, a guest getting service that's already got revenue. Now I've monetized that might people go work at those, you know, you know, with those teams and help train them to do it the way I want it done. And now I've got a revenue generating source that was you know, something I spent a lot of money to maintain. So you're out there. I bet you get a lot of entrepreneurs that way. I think people crawl through here. If you're an acquisition entrepreneur, you're not calling through Flippa. Like myself, probably mistaken, because there's a lot of stuff here that would bolt on. You know, on almost any industry. At 6000 listings, I'd be amazed if I didn't find something. I bet if I I've looked at a coffee roasters right now I bet if I search your website right now, for coffee, I bet I find blogs or something,
Blake Hutchison 22:54
Yeah you know what? So to I hope you do but coffee and food blogs. And related businesses go very quickly. And I think it's just because it's an evergreen niche, right? You know, coffee is never going anywhere. So you see, you see a good performing coffee blog. People snap them up quickly.
Ronald Skelton 23:16
There are 22 results. What am I, in the, with the keyword coffee. So there was there are things that look through through on here. So one of the things I always like to ask is, you know, there's a lot of things going on in every industry, what are the myths around buying or selling digital products, such as websites, blogs, and apps that, you know are out there if you just wish were gone?
Blake Hutchison 23:42
Yeah, I'm gonna guess the biggest myth is that it's passive. And you know, there's almost no endeavor in the world that's truly passive. And, and digital digital can come across to the layman has been more passive than it really is. So I would say that's a big, significant myth. And I encourage first timers who are listening to us today and saying, like, Gee, I've never heard flipper, but I'd better go there right now in place, buy something, you know, you want to take the time out to learn and spend time defining the business model that you think you're most interested in and good at. Because it isn't passive, you've actually got to put in the time and the labor to ensure that it runs just as well as it has historically. They call that period of time. So the sort of 120 days post acquisition they call stabilizing the patient. And so it's actually not passive at all. You've got to put the effort in to ensure that it continues to run the way it was. That'd be myth number one. I guess myth number, number two would be that you have to buy within your own geography because they're scams everywhere else. And it's just not the case. You know, check out the verified data sources on any given listing obviously conducted due diligence, use a third party due diligence service or use flippers due diligence, I don't really mind which one you use. But the reality is there are great digital assets from all over the world. And we see American customers of which, you know, it is our biggest customer base 50% of all flipper activity happens in the US. But savvy American buyers are buying inexpensive Southeast Asian assets, and inexpensive Latin American assets, and inexpensive Central Asian assets. So take a look at the rest of the world because there's a lot of great digital businesses that you can leverage from home, staying right, put where you are, while getting a good return from certainly myth number two. I'm not sure I can come up with a third.
Ronald Skelton 25:47
That's okay. The if you look at, you know, one of the things a lot of these acquisition entrepreneurs do is they take a company like a brick and mortar company, and you know, they take them online. And I would venture to say that it's, you know, a lot of the Guru's and a lot of guys teaching this, you know, the acquisition entrepreneur space, they refer to bolt on, I would say, It's almost easier to find a bolt on software company that had built a, a site and a product in your, in your space talking to the same customers, they have customers already and have them, you know, update it or make it work with what you've got going on, as opposed to just going out and hiring a production crew and doing it from scratch.
Blake Hutchison 26:36
Yeah, that's right. And I grew up with that, right. And the other thing, one of the things add to that as well as often you can actually optimize and get return quite quickly. Because Interestingly enough, the people who list their websites on flipper on average, they own four sites. So they're actually quite their knowledge and their their labor is distributed. So if you buy a website and put a bit of time and effort into it, you can actually get pretty quick returns because you spend the time and effort to make it right. So if you own a tattoo parlor, right? Don't ask me why I thought of that. So you want to you want a tattoo parlor, and there was an asset that was available on flipper and it was called tattooing 101. And it was all about how to tattoo and there was a bunch of different artworks and all those types of things, a whole heap of experts commenting on on that occupation, that vocation. And I know for a fact that that business was bought for five figures, and then sold for seven figures, two and a half years later. And so you can get serious returns, when you find something which has been around for a little bit as good or authority in the eyes of Google, put a bit of put a bit of effort into a redesign. And you'll, you know, you'll prove yourself as an acquisition entrepreneur.
Ronald Skelton 28:01
Sounds like a brilliant way to start too. A lot of these guys that I talked to, you know, it's interesting, they take a course or whatever. And when you sit down with them and figure out what they've done in the past, they've only ever had a job. And they're taking courses on how to buy companies with revenues of 1 million to 20 million, having never owned the responsibility of a p&l. And first thing I tell them is get your hands on something smaller for a little bit run it, you know, and there's there's mixed signals on that, you know, the guru has to say, no, no, no, the, you're by yourself another job. When you buy something small, you really want to buy something big enough to where you can pay and hire people to know all that stuff that you don't know. But there's something to be said about knowing enough to have your own BS meter, on maybe that's internal for me. I really, I study a lot of things occasionally, just so I know enough about it. To know what I want, like I'll study when I you know, in the real estate space, I probably knew more stuff about real estate law than my real estate attorney. Over the years I did it. I'm doing the same thing in acquisition and merger space. I studied that because I want to know, like, what clauses the stuff I want in in the contracts and what you know, what should and shouldn't be in there. So when I go to another state, and my my favorite attorney can't operate in that state, and you know, they produce, I heard an attorney to produce a document, I can read through it and go, Yeah, I think you're missing x, y, z. Why are we not doing that? And that same level of level of kind of a BS meter. I would say you need that in almost any business. And that's just my personal preference. But I think Flippa would be a great way to start. You can come in here and find a company that's doing six figures that has you know, I was glancing at one that says it's doing six figures with a 47% profit margin. So you're gonna make on that little one. If you get a hold of it, you're gonna need to run it and do some work on it. But you know, your day one, if you run it as well as they did, you're going to make $75,000 a year and on that asset, and then you can take a look at what it means to own a p&l, like a profit and loss responsibilities for a company.
Blake Hutchison 30:16
I think that's a super important statement. Right now, if if people want to go to my LinkedIn, I've posted a video of a gentleman and you only have to watch the first five seconds, he actually says he paid for business school. And he also paid for a small website on Flippa. And the learning he got from running that site, he believes was more effective and beneficial than his business skill. Now, no doubt his tuition fees were pretty steep too. So there's a lot to be said, for owning and operating, you'd learn so much so quickly. Not only do you to learn about digital, the digital economy and the business models that that are driving the world today, which is really important for everyone. But as you just said, your financial aptitude increases from day one, because you've got to understand your financials from day one, including a profit and loss statement.
Ronald Skelton 31:14
It's interesting, you just saved me a little bit of money. Had you been around the 15 years ago, before I moved here. I did that I went to business school. I thought I was the king of the world. I have a master's degree in marketing, right? I have this MBA in marketing, I thought, Well, I'm gonna create my own business, and I'm an entrepreneur. I know marketing. Now let's do this. So I liquidated my entire 401k and a bunch of other stuff dumped a lot of my own money, let's just say high six figures, not quite seven figures. And you know, a few 100 grand of other investors money and created an online dating service. And our lesson, the lesson I learned and this is back when plenty of a fish was lying about their subscriber base and a bunch of others were faking it until they make it I need my damn business honesty first.com, because we actually created a solution to the, what they call catfishing. Now, I used to call it the Mr. Potatohead problem. You like you'd see somebody online, you go meet with them, and like they kind of look like the person but somebody moves some stuff around. Right? We created a mechanism that was fairly sophisticated, but pretty much it was kind of the eBay, five star rating with some, you know, better algorithms to keep people honest in their profiles. Well, I learned some very valuable lessons. Number one, nobody wants to be honest, and a dating profile. Right? Number two, an MBA program teaches you absolutely nothing about Bootstrap marketing a company. Makes you great, if you have a $50 million budget and you work for Coca Cola, it makes you a great employee. Yeah, but to sit down and actually just take something from zero users and to grow it, scale it and turn it into a viable business. My MBA gave me nothing. So I ended up going out to mentors and hiring, you know, hiring people. And it took kind of a an eye opening event. Both my parents passed away within 18 months, so I took some time off from it. And as you take time away from things, things that people said to you along the way started studied in. I flew around pitching VCs and stuff this business. And nothing they said to me stuck in until after I shut it down. It's like, Hey, you really don't have a business here, you have a great product, you should go pitch match and stuff, which I did later. And you know, I won't say which one it wasn't match. But I pitched some of them my technology about keeping people honest and profiles. And they reopened my eyes like none of our users want to do that. Right. But
Blake Hutchison 33:36
Before, but it just didn't match the commercial commercial needs, right?
Ronald Skelton 33:40
I might have been able to get at least one of the six figures out of because we had some users people were starting to use it. And it just, it was just I needed funding to scale the way I was at a scale is to pick major metropolitan areas, focus my market on there grow a following and like Dallas. Now the thing about dating sites is it's a chicken and egg problem. Nobody wants to be the first lonely soul in a zip code in a dating in a dating site. And that's why I joke around and said flip and flip I'm sorry, plenty of fish, plenty of fish and a lot of those other guys kind of faded, faked it till they made it. A lot of their first initial profiles weren't real people. And it's been proven since then. So I honestly I there's a there's a there's a huge opportunity out there down there's there's one or two websites out there that to kind of do what you guys do, but you've dominated this 6000 active listings. It says here you've already closed or sold 265,000. You know, that's that's fairly impressive. I bet I bet if you look at the scale of things, you said, you've been around for more than 10 years. That's probably ramped up quite a bit because, you know, I'll be honest, I only remember hearing about flip of five or six years ago so you really started getting some traction. And more recently,
Blake Hutchison 35:00
So I mean, you know, the numbers are reasonably impressive in the sense that last, so quarter, quarter one, this calendar year, there was $213 million worth of assets added to our marketplace. And this quarter, we're on track for $300 million worth of assets added to the marketplace. And so we don't, you know, we, we can absolutely imagine a time where there's a billion dollars worth of assets being added every quarter. And, and accordingly, you know, that matches up with buyers, or buyers looking for wheat, we get buyers complaining, because they're like, We want more choice, we want more deals, we have people who are trying to buy every day, they've actually told us that they would pay us to keep lots of deals behind a walled garden. Right. And so we have built, we built a private marketplace. So there's a, there's about 50 deals behind the scenes at any given time. That are just, you know, as they come on board, they're typically really high value. And we farm them out to institutional buyers who have a history of purchasing on Flippa. And so yeah, it's, it's, it's a great market to be in small business owners deserve the time in the sun. And that's why we, we'd like to talk about ourselves in the context of, you know, we're building the investment bank for the 99% of the services that, that people who have been in traditional m&a have gotten access to. I'm talking about the big end of town. Those services haven't been available to small businesses. So that's what flipper is, that's what Flippa's building.
Ronald Skelton 36:36
So do you guys see any I know, when eBay came around, and anytime you get a big marketplace, you almost get a made for following. Meaning that like when AdSense came out, there was a bunch of websites that were made for AdSense, they actually just created a website to try to monetize it with AdSense. There's a bunch of people who they absolutely, you know, eBay came around as a marketplace to sell your stuff. And then there are people out there that hunt down stuff and sell. I'm imagining now that on Flippa. And I bet if I dig here, I can pick some of them out that there's some websites out there that are what I would refer to as made for Flippa meetings, somebody went out there, they built a website, they got it up to maybe rent it for a year, got a couple 100, maybe a couple 1000 users on it, and they post it for sale because they love creating marketing, they love the creation process, and they create and sell. Do you have a lot of repeat sellers?
Blake Hutchison 37:27
Yes. So we do have a lot of repeat buyers and sellers. Admittedly, you know, the made for you space isn't that big. And the reason being is, you know acquisition entrepreneurship expects the reason people are in that space to begin with is because they get to acquire traction. They get to acquire something where the hard yards have been done. And there's an audience ready to be tapped. And so those people who are building things to be sold that are only six months old, or nine months old, they don't yet have the predictability of of a longer duration or a asset. And so occasionally, they're less demand than you would think. But there are some really really savvy operators who build really, really high quality AdSense sites. And they're there and they will state that they are repeat sellers on Flippa, they've got a history of doing it, that they're trusted, that they've got fantastic reviews, and that you can buy a site from them for five to $10,000. And you are well and truly on your way. And you get a lot of benefit from their expertise. So that happens. What is probably even more interesting than that is you get repeat sellers of quite high value assets. So they've actually built not necessarily for flipper, but over a period of time they've amassed a portfolio of sites. And so much like someone who has a good quality wine collection, they eventually go and consume that wine and get rid of it. And similarly, in this case, they've recognized that the this asset class, which we call digital real estate, valuations have crept up and the predictability and the quality of their asset over time is worth more and more. And so they start to sell those off. And they do that two, three and four times. And so I saw this guy in Toronto, he's an awesome operator. Over here, he was meant to be retiring came out of retirement people, nine sites, each sites only worth on average 15 to $20,000. He's maybe spent spent a quarter of a million dollars on the platform, but he's up to 100% on his investment dollar so you do a lot of repeat customers. This is a long way of saying they're not necessarily always just new customers made for Flippa customers.
Ronald Skelton 39:52
I think the cool thing that protects you on that one is your buyer base tends to be more sophisticated. If you look at like eBay and the other Mart gets phased you basically just have your average and I wouldn't say unsophisticated, but let's just be honest, the average humans unsophisticated. So you have your average guy that will buy anything roaming through here to where the people on here are looking for a producing business, they're looking for a business, not just a website. So I think there's, I think it'll stay self corrected, so long as it appeals to sophisticated buyers. And, you know, there are other template sites and other stuff people can go if they're just looking for a template or a shell. But I was just curious if you guys put protection mechanisms and everything just to keep the quality listings up higher. I noticed I can search for yours. That's one of the things I like I like well read companies so and some of your filters I can turn on, like I want so I'll show me everything I started off like, show me everything has been around for five years or more. And then then I'll when there's if there's not much, or there's not something of real great interest, all look, you know, other ones, but uh,
Blake Hutchison 40:59
Yeah. In short, we have a marketplace integrity team that is, you know, ferocious in their reviews of websites. And if somebody has one bad transaction record they've done. We have a no tolerance policy. And then, in addition to that, we have what we might call internally, spidey senses a Spider Man senses. And we've got a bunch of different technologies that all about protecting against, you know, fraud and or bad actors. So it tends to be that one flippers doing some hard yards. And then two as you said, you've got a pretty sophisticated buyer base. There's three types of buyer, you've got side hustlers, they're looking to supplement their income, they like you and I, and maybe we just want to do something on the side. You've got entrepreneurs, and they want to own and operate, and you've got company buyers. But interestingly, even when you go down to side hustlers, the average budget, so per deal budget of a side hustler is $17,000. So whilst that might sound inexpensive to some people, that's still a fairly sophisticated customer when they've got $17,000 in discretionary. Discretionary, available for Flippa. So it's a savvy buying base.
Ronald Skelton 42:20
I can see that. So what would be your top three tips were for buying a digital asset. If you were like, if you were to sit down one day and like okay, I'm going to look through something here. I'd love to own and run next, what would be the top three things that you focus in on?
Blake Hutchison 42:38
Yes, the first one would be, you know, decide the business model that best suits suits your skill set. You know, if you've never even heard of what SEO if you don't know what SEO is, don't buy a content website. If you've never been on a direct to consumer business don't buy a direct to consumer ecommerce business. If you think SaaS is sexy, but you don't don't understand the metrics that matter. You've never heard of what you don't know how to calculate, churn. You don't know what lifetime value is, you don't know what MRR means. SaaS sounds sexy to everyone. And then they typically don't know how to run a SaaS business. So write down your skill set. What what is your what are your skills, what have you developed over a lifetime of effort, and then match those skills up to the business model that makes the most sense. Tip number two would be find something you're passionate about. Because as I said, it's it's unlikely to be passive. So you've you've spent and in some cases, you've spent five to company really want to ensure that the category or niche that you're operating in, is something about because it'll, it'll most likely be that you're going to run that business for at least two years post acquisition, in some cases, five to 10. So passion is a really important part. The third thing is never like gambling, never actually spend more than you have. You want to also reserve some funds for optimization and getting the most out of the opportunity. So if something's earning $5,000 a month, $60,000 a year, and you're gonna pay $120,000 for that, so you're paying a two times multiple. The great news is that the the economics on that should give you a 50% annualized return, but they'll only give you a 50% annualized return if you continue to invest in the content and continue to invest in understanding the longtail keyword set that you operate within or whatever it might be depending on the business model. So have some funds reserved to continue to invest in the asset that you've just acquired, would be tip number three.
Ronald Skelton 44:48
Got it. And then what about selling? If I, if I decide I want to sell one of my online assets and I am going to use Flippa what are the top three things I should know before I before I come visit your site?
Blake Hutchison 44:59
You optimize, optimize, optimize. So first and foremost, optimize revenue. So if you if you've got two ads per page right now, for a third on there, see what it does. And if it doesn't work clearly remove it because it's impacting the user experience. But if you've got two ads on a page, and you can add a third, and equal a little bit more out of every page view, that's going to do wonders for you when you're seeking out of sale. I said, optimize, optimize, optimize. So the second optimize would be the user experience itself. So if you've got a crappy design, optimize that, you know, go into Fiverr Pro, find a WordPress designer, find an ecommerce Template Designer and have them improve it. And you know, it's a bit like merchandising in a shop window, when you walk past Banana Republic, you know, they've chosen those clothes for a reason. So and the models that are wearing them. And so think about it from that context and and pay someone to optimize the look and feel because that will do wonders, when it's up for sale on a Flippa type platform. And then the third thing is get your financials in order. So first optimized was about making more revenue revenue. But regardless of that, the last optimize is about getting your financials in order. Do you know how much money you make per month? Is that easy to account for? Is it sitting in a profit and loss statement? Do you know what your OPEX looks like? Where are you spending money? We've met five and $10 million dollar business owners who literally have no idea.
Ronald Skelton 46:32
That's very common.
Blake Hutchison 46:34
Yeah, whether expenses are and so you've got to get that in order. Because the first thing that a buyer says, particularly for an asset, five $10 million worth, of which there are lots of buyers out there is they're going to say Can I please see minimum two years, sometimes three years where the financials. And if you don't have that, you've actually done yourself out of a good deal. So,
Ronald Skelton 46:54
We certainly started asking for discounts if you don't have it. Right? It's, you know, I used to be of the mindset. And, you know, when I first got mentored in this, and I've only been in this space for two and a half years now, when I first got into this space, or I say back into the space, when I first got back into the space, I was of the mindset, it's a numbers game, right? So I was talking to many, many business owners. And if you didn't have your financials in order, you're out if you didn't have, like, if there was just a checklist of stuff, I was looking for it if you didn't have it, you're out. And I noticed for a long time, like I wasn't getting conversations moving forward, because nobody had this. And then I brought a gentleman on the show one day, and he's like, Well, that's absolutely absurd. Why do you expect these people that have less than $5 million in revenue, that have stuff, they're accidental entrepreneurs is what he called them. And I was like, well, that's a great phrase accidental door. And I said, What, in your words, what did you mean? And he was like, well, they knew how to create a great widget, a friend asked him for one. So they sold it to him. And then somebody else had wanted one. And the next thing they knew they were making, you know, 10,000 of those widgets and selling a million dollars a year and they're tired of doing it, they want to sell it. And the only accounting they've ever had to do is whatever the IRS needed them to turn, you know, have done correctly to turn in stuff. So they've never seen a p&l, or they've never seen a ballot statement. They've never seen some of the stuff you're gonna ask for other than your tax returns and bank statements. And it clicked because he's right, you know, I'm turning away a lot of businesses that are diamonds in the rough, right. And there are companies I found one, I interviewed him recently here on the show that will take you know, bank statements and tax returns, and what's your call and books and put it together in a format that it shouldn't be in there for guys like me and other sophisticated buyers to look at and go okay, well, this isn't this is a pretty good ran business. I think it's 50-50 on that. I think if I went back to all those companies, I told no, because they didn't have good books. I think some of them would have been, I think some of them would have been would have been run better than they expected or they thought they were run. And many of them were probably run subpar to where they were telling me they were at, right. That's when somebody says that's the initial reaction you have if somebody doesn't have books is like, you're probably over exaggerating, you don't know. Right? So we assume it's an over exaggeration, not an under exaggeration. So
Blake Hutchison 49:18
Yeah, that's right. But the good news is today, there are lots of affordable bookkeepers who can get things in order for you pretty quickly. And sometimes what a buyer will do, and Flippa has a new really cool feature where you can invite a bookkeeper or an advisor or a partner of banker into the negotiation. So you're on the platform, you're talking about staff, they're starting to share some documentation. And you just click Invite user. And so what some buyers will do is they'll actually utilize their own bookkeeper or accountant and they'll say, look, give us everything well sorted out so that we can understand it right. Give us access to your hosting account so that we can download all the invoices give us x Just to Shopify, so that we can rationalize your revenue. And they'll actually end up doing the work for the seller. But that's a patient buyer, that's a that's a buyer who's really hungry for your asset, they can see something between the weeds that looks really good, and not put the effort into doing it. But yeah, I mean, if you know, for all those people listening out there, the good news is that, you know, the market for buyers is not drying up, regardless of what you might see on the streets. And in the public markets, the market for buyers in a private setting for small businesses, is likely to get hotter in my opinion, because I look for safer, safer environments, less speculative assets from which to, to put their money. So you've got time, go and find a bookkeeper or an accountant, get your stuff in order, and six months to 12 months from now you've done all the hard yards, and you're perfectly suited to sell.
Ronald Skelton 50:52
Awesome. Well, we are at the top of the hour here. I mean, we're getting really close to the end here. One of the, like, I feel like we covered a lot of stuff. But is there anything I missed? If you stepped in my shoes and thought man, he should have asked me this. What's What's something I we should have talked about that we that I might have missed here.
Blake Hutchison 51:10
People always ask me what I would buy if I actually, you know, too busy building and running Flippa and working with our great team to do great stuff. But often people asked me what I would buy, they think that that that lends some insight. Look, I don't think you can go wrong with a good quality AdSense business, we spoke about how established that business model is. And I think for those people starting out, if you do understand what good quality content looks like, if you know how to read SEMrush and assess Google Analytics, then look for small blogs that use AdSense that have positive cash, they give you a positive cash flow opportunity. And you know, that's that's a that's the safest possible asset I can think of buying I wouldn't say it's passive because I said that there's no such thing as passive was the safest possible as to Buy and buy something in your passion. You'll end up waking up tomorrow morning, we're more inspired about your work than you've ever been, you'll go to the buy of a barbecue on Saturday and Sunday on your site. I just bought a cooking website. You know, I love cooking. And now I've got this website. It's all about cooking. And I've got people submitting recipes from all over the world. People get inspired by that stuff. So yeah, that's what I would do if I was if I was buying something.
Ronald Skelton 52:27
It's interesting is I know a guy who actually had a food blog, and I like how do you monetize it? He says the restaurants pay me to go there and review their their food. I was like, you're serious. Like, he goes to restaurants he gets to eat for free, which he's a foodie. He loves eating. And they pay him to do the review. You know, and he's, you know, he's like, the hard part is I have to be honest with him. So there are people who have paid me for reviews, like, I don't think you want me to post this. Right?
Blake Hutchison 52:55
That's a great point. And the other thing people forget about is, remember what Google is doing with AdSense is they're optimizing for big advertisers to place advertising dollars with them that go on the right websites, and FMCG fast moving consumer goods, they are the big advertisers. And so if you've got a recipe blog, or you've got a blog, where you review, you know, food at a restaurant, you'll get, you'll get FMCG companies advertising and Google will place them on your website using their AdSense pixel. So it's a good, good category to be in.
Ronald Skelton 53:29
Yeah. Well, I want to thank you for being here. We let's make sure everyone knows how to get a hold of you. So let's do a shout out Joey, you said that flip is great, great resource he loves Flippa, thank you, Joey. And then Tony says positive cash flow SME digital assets the last asset class apart from commodities that isn't losing. So thank you for being out there submitting your comments. If you guys want to reach out if you're listening to the show, you can go straight to flippa.com You know, and fill out a comment thing one of his team members probably will reach out to you and help you out in that way. Or if you want if you have something want to reach out I'm gonna post up his LinkedIn, Blake's LinkedIn. A thing that for you guys listening on the podcast, it's linkedin.com/in/blake B la Ke, Hutchinson, Hu, t c h i s o n and it's just a standard linkedin.com/n/his name and you can reach out to them they're famous last question. What can myself or my audience do for you like man, what can we do to to make you to help you out or to help flip out? What was there anything we can do for you guys?
Blake Hutchison 54:43
Listen to more podcasts like yours. I reckon, Ron, that would be a good tip for your audience. I would have thought so you know, shameless plug. We've got a podcast called the exit. And it talks to people who have successfully bought and sold businesses of high value and you can learn a lot from their stories. So, go and check out the excerpt on wherever you get your good podcasts, Spotify or iTunes. And I think you'll learn a lot from resources like that. So go and do that.
Ronald Skelton 55:12
I just I seen that I've watched a couple of them over the last few days, I like it. And I actually set my production crew. I said, Hey, see these guys out here. This did exes reach out to him. I want to interview some people that have sold the business. So I'm sure we'll talk about flip on those shows, too. So I do appreciate your time hanging out for a few minutes after the show. And just for a couple of seconds. And we'll be we'll be good to go.
Blake Hutchison 55:33
Thank you, Ron.
Ronald Skelton 55:35
All right. That's the show guys. Have a great day. Hey, it's your host, Ronald Skelton. I want to thank you personally for watching the show today and invite you to call our new hotline 918-641-4150 That's 918-641-4150 Call us and tell us about our show, ask questions, suggested guests or even tell me about a business you have for sale and we'll reach back out to you again that number is 918-641-4150 call our hotline leave us some information. Thank you, the investors and entrepreneurs professional mastermind. The investors and entrepreneurs professional mastermind combines that additional peer to peer mastermind introduced first in Napoleon Hill's famous book Thinking Grow Rich, with accountability partnering, where your peers help you ensure that you set goals take actions and get results. If you want to scale both hash roadblocks and achieve success faster than you might think is possible. I suggest you take a visit over to tiepm.com That's T i e. P m.com. And check out the investors and entrepreneurs professional mastermind