Ep 273: $5M Per Year Business Acquisition For Only $1 with Marc Roca

In today’s BOB podcast, Jaryd has an extraordinary guest, Marc Roca, a powerhouse in the business acquisition sector. With over eight years of experience and a track record as an eight-figure seller, Marc has revolutionized the way we think about buying businesses.

Marc Roca is not just any entrepreneur; he is the founder of the third-ever Amazon Aggregator and has acquired an impressive portfolio of over 30 brands to date. In this episode, we explore Marc’s journey from his initial steps into the world of business acquisitions to becoming a leading figure in the industry.

They talked about when, why, and how Marc got started buying businesses? How did he buy 30 businesses over 6 years? How does he structure deals, how does he finance them, and what does he pay investors? What are the businesses he bought that failed and how does he have to shut them down—those that have done well? 

Marc also spills his top 3 lessons for any acquisition entrepreneur and his 25 year vision.

Jaryd and Marc share the wise words they’ve both learned along the way of acquiring businesses and being entrepreneurs. 

Don’t forget to subscribe to our podcast for more insights from industry leaders. If you enjoyed this episode, please leave a review and share it with fellow entrepreneurs. Your support helps us bring you more valuable content. Let’s dive in!

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Episode Highlights

06:10 Even the best entrepreneurs make mistakes and still learning

19:15 In buying businesses, you need to be a strategic acquirer

26:35 What are business lenders?

35:20 Never say “No” to a deal!

42:30 Knowing your risk tolerance is the key to business acquisition

52:00 When you see an opportunity, don’t miss it

Courses & Training

Courses & Training

Key Takeaways

Strong relationships with suppliers were crucial to lowering costs and improving profitability. Marc mentions that the market’s volatile nature means timing is critical for acquisitions and exits. Understanding and managing risk is vital, especially when banks are hesitant to lend.

Marc talked about his journey as an entrepreneur, focusing on key moments and strategies that led to his success. His interest in online businesses began with a trip to the Philippines, where he and his partner were inspired by a friend’s e-commerce venture. Roca stressed the importance of asking questions and learning from others in the industry. He shared lessons from his 30 acquisitions, including the need to understand the founder’s role, the advantage of partnering with owners who want to step back, and the importance of not overpaying for businesses to minimize risk. Roca also discussed the benefits of buying struggling businesses, using relationships with lenders, and learning from both successful and failed deals.

➥ Marc discussed his strategy for acquiring and turning around distressed businesses, particularly in e-commerce. He explained how sellers’ finance plays a crucial role, where lenders often end up controlling distressed businesses in lieu of unpaid loans. His approach involves negotiating lower acquisition costs and using consignment for inventory to minimize the initial capital outlay. He shared an example of acquiring a pajama brand for a significantly reduced price due to its distressed state, then using his team’s expertise to reduce costs and improve margins. Despite the initial challenges and capital constraints, Roca’s team managed to turn around the business by leveraging their sourcing capabilities and strategic financial planning.

About The Guest

Marc Roca is a 7 figure seller with 8+ years experience in acquiring businesses. He founded the third-ever Amazon Aggregator, and has acquired 30+ brands to date.

Connect with Marc Roca

Transcription:

Jaryd Krause:

Can you actually buy a multimillion-dollar business for just $1? Is that really possible?

Hi, I’m Jaryd Krause. I'm the host of the Buying Online Businesses Podcast. And today I'm speaking with Marc Roca, who is a seven-figure seller with eight years' experience in acquiring businesses. He founded the third-ever Amazon aggregator and has acquired over 30 brands to date.

Now, in this podcast episode, Marc and I talk about when he got started, why he got started, and how he started buying e-commerce businesses and brands for Amazon or the Amazon businesses.

We talk about the 30 businesses he's bought over those eight years. We talk about how he structures these deals. We talk about how he finances them. We talk about how he pays his investors in terms of family and friends who invest with him.

We talk about businesses that he's lost and failed at, the lessons he's learned, and how he's had to shut them down. We just talk about the businesses that have done okay and then some of the businesses that have done really well. We talk about his top three lessons for any acquisition entrepreneur.

And we also discuss his 25-year vision, one of which includes the business that he bought for $1, which is a $5 million revenue business with around $700K SDE, I think it was. And then we share some wise words we've both learned along the way of us both acquiring businesses and being entrepreneurs.

Now, there's so much value in this podcast episode. If you're looking to acquire a business, make sure you listen to this one. It's another level of how to acquire larger acquisitions with financing, deal structures, and how you can buy businesses for less money, and also if you've got a high-risk appetite.

Now, we do talk about buying businesses here, so make sure if you haven't already gotten my Due Diligence Framework, go away and get free. It's what I use, and all my clients use, to help buy businesses.

It makes it so much easier. It's made people millions of dollars and saved people millions of dollars, so you can get that at buyingonlinebusinesses.com/freeresources. Now let's dive in.

Do you have a website you might want to sell, either now or in the future? We have a hungry list of cashed up and trained up buyers that want to buy your content website.

If you have a site making over $300 per month and want to sell it, head to buyingonlinebusinesses.co/sellyourbusiness. Or email us at [email protected], because we will likely have a buyer. The details are in the description.

Marc, welcome to the podcast. Thanks for coming on.

Marc Roca:

Thank you. Thank you for inviting me. Early morning for us.

Jaryd Krause:

Yes, early morning. Well, mid-morning for me. Oh, actually, you're there at the same time. Philippine time, right?

Marc Roca:

Yeah, 10:00 AM. So you're in Perth?

Jaryd Krause:

No, no, I'm in Indonesia. I'm in Bali. It's the same time.

Marc Roca:

Yeah, same time.

Jaryd Krause:

I've been awake since 5:00 AM.

Marc Roca:

Yeah, me to, 6:00 AM.

Jaryd Krause:

I’ve got my early surfing. So when did you start buying businesses, and why did you start buying businesses?

Marc Roca:

So the story is that my business partner wanted to find a wife, so we went to the Philippines for the summer. We were poker players.

And one of the friends in Cebu started Amazon. He literally said over dinner, “Why don't you come to my house and look at Helium 10 and check the data, and then you'll see if you want to do e-commerce?”

So one week later, I met with Joe Magnotti in Manila, and then he said, “Why don't you buy a business?” So the next day, I went and looked at something that was $65,000. It was a belt bag made in China. We closed the acquisition when I was at the Canton Fair.

So the next day, I went to see the supplier. This is my first time in China. And yeah, that worked out well. We just fixed some keywords, and we sold it for $125,000 a year later. It took some profits along the way.

Jaryd Krause:

Congrats. So you basically started every double that one in a year?

Marc Roca:

Yeah, we doubled that one. We were kind of lucky. I raised the price and then just did some PPC and got a lower cost of goods because I had a nice dinner and drinks with the supplier. That's one of the main things—just good relationships with suppliers.

And yeah, after that, we said, “Why don't we buy more?” And we had the idea to roll them up from the second seller. We bought a business doing around $10,000 SDE. We bought it for $240,000.

Jaryd Krause:

For how much? So a two-year multiple.

Marc Roca:

Yeah, two years ago, back in the day. That's 2018.

Jaryd Krause:

Oh, so you bought this in 2018, right? And just for people listening, you mentioned Joe Magnotti. He's the co-founder of Empire Flippers, for people who don't know. And I just interviewed Justin as well, who's the second co-founder.

Actually, we haven't really spoken about this much; in one early podcast of theirs many years ago, I applied for a job in 2016 to work with Empire Flippers, and I didn't get the job.

I think because I wasn't able to acquire businesses while still working for Empire Flippers. I said, “My intention is to do this. Is there any way we can do it?” And Justin and Joe were still like, "Damn, we should have hired you anyway.”

Marc Roca:

Well, it's a cycle, right? We had good times and bad times; now I'm focused on the bad times, which is good for me. I will get to that.

Jaryd Krause:

Oh, I agree. People freak out during hard times. And I think it's really the best because, while people are freaking out, you can get to work. And it's this massive opportunity where people are too scared to do anything. And that's what Warren Buffett says, right? Invest when there's blood in the streets.

And yeah, it's an interesting time right now, a time of recording as well, in terms of acquisitions. And I think it's personally a great time to be in this game.

Marc Roca:

Yeah, right now, it's about lowering your downside. And not many deals get done because there's a difference in what people perceive as risk. And we can talk about that.

After 30 acquisitions, I think we kind of understand the risk, and we still made some mistakes last year. There's another guy in Hong Kong buying businesses, Roman, and he also said he made a big mistake last year.

So even at our best, we're all making mistakes and learning, right? We're still pretty young. It's not an easy industry, but it has opportunities.

Jaryd Krause:

I mean, we're only humans, right? We're going to continue to make mistakes for the rest of our lives, as long as we're learning from them.

And it depends on what stage of the journey, what type of mistakes you can afford to make, I guess, and when you decide to start being less aggressive in your approach towards your investment strategy, depending on where you're at financially in your goals and lifestyle situation.

So in 2018, you've been doing a lot of business and you've made 30 acquisitions since then. The first two sound like they were content sites.

Marc Roca:

No, it was Amazon FBA.

Jaryd Krause:

Oh, Amazon FBA. Okay. All right. So you did start with e-comm. Okay. And so you bought that e-commerce business because one of your friends started at e-commerce business and because you understood it a little bit more?

Marc Roca:

Yeah. He had started it in 2016, and by 2018, he was already making $5 million in revenue in fitness and accessories. And he's a smart guy. I met him in 2011. We spent the summer in Cebu. Everyone was playing poker; now everyone is doing Amazon.

So if the smart people do something that you're not doing, just copy them. Some people just wanted cash flow to have a family; some people wanted a bigger business; and some people wanted a lifestyle. Some of them sell to the aggregators.

So after that, we got the idea from the second seller. He literally sat over drinks. He came to Manila; he was from New Zealand. And he said, “Why don't you guys buy some companies at 2X, 3X and then sell them to an old public company at 10X?”

That kickstarted the whole thing. And we met with the first employee of Thrasio, Stephanie, who is now the CEO. Well, we'll visit the CEO soon in Bangkok on Dynamite Circle, DCBKK. And they raised $7 million, and we just raised $2 million.

And yeah, well, we didn't know anything about M&A. We didn't know anything about that. We didn't know. It was me and my business partner, another poker player, trying to get good returns on our money and build a team. And we had never hired anyone.

And so, yeah, that evolved over a few years. And then eventually, I got bored with that, and then I went into contentment.

Jaryd Krause:

And then you went into content businesses, acquiring content businesses. And why did you shift from that to content?

Marc Roca:

So my whole idea, my thesis back in 2020, early 2020, was that PPC would get more expensive, and the margins would get squeezed because everyone was coming into it. So driving content into the Amazon listings is like buying some affiliate sites.

I also saw a case study on Empire Flippers. A guy was selling a whetstone, but he had first created an affiliate website for whetstone, and he was making $5,000 a month.

And then he launched a premium whetstone, which was $80, like a grinding whetstone for knives, a sharpening stone, let's call it. And he started making 50 grand a month in profit, so that was very appealing.

But my business partner just wanted us to focus on Amazon. And I said, “Okay, I want to do one business unit Amazon, one business unit content, and then you merge them together.” And almost everyone has tried to do this. Thrasio tried to do it.

Yeah, that was a disaster because we raised a little bit over a million, we deployed the capital, and then the biggest content update hit in December 2020, which was the one that, for the first time, Google said, “We don't like gateway websites.”

Jaryd Krause:

Gateway pages. Gateway pages, right?

Marc Roca:

Gateway pages, yeah. And yeah, we lost 70% of the revenue. And over two, three years, we've tried to recover it, but in the end, like this year, we decided to shut it down because this year has even been worse than the year 2020.

Jaryd Krause:

2024, it’s been very interesting. Well, the end of 2023. And then also, March 2024 is pretty interesting with Google. And they've changed a bunch of things and I've got a bunch of guests talking about that. And Google's just really struggling themselves. They kind of have to make some changes.

So that aside, I want to ask you what happened when you raised a million in capital and it didn't go so well with that deal. What happened with the partners? Do you have agreements put in place for capital deployment and then the return? And how does that work?

Marc Roca:

Well, usually I am the biggest investor, right? And then we always try to raise money from people. This was maybe 1% or 2% of their maximum net worth, so it's high risk.

If someone invests $50,000, they're worth like $5 million to $10 million, right? You don't want to take your hard-earned savings into this online business because it's an alternative asset.

Half of the people got bought out, and then half of the people still believed that we could turn it around. The people that got bought out in the middle made some extra cash back than the people that believed in me.

But yeah, we take calculated risks and there are things that are out of our control. And the risk analysis is always kind of downplayed from the broker's perspective on the sellers.

Jaryd Krause:

Yes, it is. Definitely, isn't it?

Marc Roca:

Yeah, I mean, recently I heard from someone that had gotten more than a $1 million SBA loan on a content site last year, and now that's worth zero.

So, yeah, that's a big problem, right? Because the loan is personally guaranteed, and then the banks are involved. We'll get to that on the turnaround stuff, but the banks are not lending anymore, and if there's no lending, the multiples are low.

The banks are not there to lose money, right? So that means there's more risk. If no one lends to you, that means the risk must be very high.

Jaryd Krause:

Absolutely, absolutely. This is the whole reason that I have a job. We've got people selling businesses—online businesses—and brokers that are selling them like it’s an easy business to run and there's not much risk. It's huge potential and upside, whereas that's where people get caught out.

I've heard so many stories with people like, “Oh, damn, Jaryd, I bought a business and I found out about you and what you do after I bought this business.”

I even had one person come on the podcast who was brave enough to share their story of one of their experiences. It's easy to get fooled in this game if you don't have good people on your side to look at the deals.

So when you're doing due diligence, you've obviously got other people that look at the deals and overlook what you've done in DD?

Marc Roca:

We've done it internally and then I sent it to some friends. The deals we've done haven't been big enough to involve us—we understand the risk. Honestly, we see an opportunity to grow it.

For example, in 2019, 2020, with $2 million, we grew it up to almost $1.5 million in EBITDA. And I told my partner, “Let's just sell one of the brands to the aggregators for $4 million and get the money back to our families.”

Because, I mean, I got a loan from my family. You get $100K, and then you know it's working. You sell a house to buy more. And it didn't take too long. I told them, “Let's sell it in November 2020.” And by the time they listed it in April 2021, it wasn't the time anymore.

So I had been bought out by the first aggregator around, I think, July 1st, 2020. I wanted to be more aggressive, and my business partners just wanted to keep going.

And it declined. Everything declined. In 2023, I bought maybe 20% of my partner out, so five times less than they bought me out.

Yeah, in the Amazon aggregator, it's called Alpha Rock and now it's folded, right? We just sold some of the brands because no one was running the product, right?

E-commerce is all about products, new products, and new customer acquisition. And his strategy was to just “let's keep going like the same it's been.” And yeah, well, that didn't work out.

Jaryd Krause:

No, not at all. There's a season for everything in life and business. And if you can get in and get out at the right time, you look like a pro, but it's hard to get it right. It really is.

Marc Roca:

It's luck. There's a lot of luck involved.

Jaryd Krause:

There is. And I don't think many entrepreneurs talk about luck enough. Sometimes you just get a break. I had one client who bought a business in the chess space, and The Queen's Gambit came out on Netflix.

And after that, his income just went insane with his business because there was so much more organic traffic happening around chess because so many people got into chess because of The Queen's Gambit. How can you predict something like that? There's absolute luck in that success.

Also skill, buying a good business. If it hadn't happened that way, it still would have been a decent business, but there's definitely that component to it.

Marc Roca:

Yeah. For me, I think my lucky moment was when my business partner said, “Hey, I want to go to the Philippines again and find a wife.” And because I was just back in school. I didn't know what to do with my life, right?

You play poker. If you don't play, you don't earn. So with an online business, if you can hire even a simple business with one or two VAs, you get a lot of your time back. If you don't want more than $100,000 a month in salary, you can do $10,000, $15,000. Over a few years, that's not a bad goal.

And then, meeting a lot of people, getting lucky and just asking a lot of questions. I feel people don't ask enough questions. You can go on Twitter or X and message people, and they'll answer—people with $50 million businesses, $100 million businesses.

That's also one of my recommendations. Someone reached out. I sometimes post in a mastermind, and you have 15 people reaching out, and I just answer some questions. That's okay. We have time.

Jaryd Krause:

I love that recommendation—having a curious mind. I've always been told that I'm a curious person. It's really a beneficial thing to have if you're trying to grow in any area. Be curious about certain things.

So you said that one of the recommendations you have for people is to ask a lot of questions. Now, from the 30 acquisitions you've done, what are the top two to three things that you would share with people that are looking to build their business for the first time or acquire an online business for the first time?

Marc Roca:

First, whenever they say the founder is not working on the business, that's bullshit. In my opinion, to replace a founder, it costs $300,000 a year, $100,000, or something. I would say almost any business.

Okay. And I'll explain my theory. You can hire someone very smart for $100,000. But then you might have another $200,000 in headaches if this person quits, if he steals, or if you don't know how the business works.

And that's why private equity investors, or more sophisticated investors, only buy things with over $1 million in EBITDA because the business will be more stable.

So, really, when you're buying an online business, it has to be that you are the strategic acquirer because you have some kind of knowledge about that industry and about those products.

Or that the salary is just really disconnected from the business, and they really don't care anymore. And there's a lot of those, right? People are burned out after eight years.

And then the cost is not $300,000, right? Because then you can grow the company by 50% in the first year, and then you get more excited, right? And then it's easier to hire someone because it's growing. But just buying to hold, I think it's a mistake.

Jaryd Krause:

I agree. Buying to hold is a massive mistake unless you are buying something, say, over a mill, and you've got people in place that, instead of paying them just a wage, like you mentioned, have some stake or equity in the business as it grows. So there's some incentive there.

And I would say the incentive should increase as time goes on to make sure they're going to build the business as best as they can without you having to have too much time spent on it or worry or stress.

That's a really good one. What else have you got for us first-time buyers?

Marc Roca:

Well, I wouldn't buy. I would partner with someone who wants to sell but doesn't want to grow the business anymore and I'll give an example.

There's someone who has a 15-year-old business that is an e-commerce enabler in China. They do more than $200 million in revenue, and he is making $5 million to $10 million in EBITDA a year to himself. He doesn't want to grow the business anymore. He doesn't even have sales staff.

So why don't you reach out to someone like that and then kind of white label what they're doing for your own business? Or join someone that has a $1 million, $2 million revenue business, and they really don't want to do it, and you say, “Okay, if I grow it with you, 50% of the growth is mine.” That's a way for first-time buyers to really lower the risk.

Hell, I have 20 brands and 10 of them are just not doing anything because we don't even have someone that wants to think about it, right? Because it's too small. It's just sitting there.

And then you get so much experience, right? Because you only get experience with this if you buy it. You're not buying it. You act like the new owner. So you need to be given free rein to do what you want to do.

And the old owner will tell you, “Oh, maybe this is good, maybe this is bad,” but that's the only experience. And then you go, and then you have some experience, and then you buy something for yourself.

Jaryd Krause:

So you're going to start with earn-in is what I would call it. Earn your way into a business and get the experience. Yeah, I like that idea. I think that it would be pretty tough to find a good match for me to have a business.

I'm not discrediting it at all because I think it's a really good way to go. But if I wanted to not have to run my business anymore, I'd need to find somebody that I really liked, and I could go back and earn their way into my business.

Marc Roca:

Yeah, it's not easy. I've known several people from Dynamite Circle who have done that, and then they ended up buying the business. Like Tommy Joiner, he ended up buying WordAgents, for example, after helping it grow.

Jaryd Krause:

I think they are also some of the best acquisitions when you've got a worker who's just working in the business and the business owner gets to a certain time in their life or cycle in their business, and they're like, “This isn't for me anymore.”

And they see the person who's performing best as an employee in one of the roles and say, “Hey, how would you like to take this over, earn your way in?” I've seen that on offline businesses a lot.

Marc Roca:

And I think the third one is, if you're buying something, just buy something. Don't pay 3X. Pay 1X, right? Because then, even if it goes belly up, you at least get half of your money back over the first year.

Jaryd Krause:

Reduce your risk. It’s really a good one. I like that.

Marc Roca:

That's what we've been doing now.

Jaryd Krause:

And you are buying e-commerce businesses now or content?

Marc Roca:

Yeah, e-comm.

Jaryd Krause:

Yeah. So there's one that you just mentioned before we hit the podcast. Tell us about that. I think you bought it for $1 and it was a $5 million EBITDA, is that right?

Marc Roca:

$5 million in revenue.

Jaryd Krause:

$5 million in revenue.

Marc Roca:

$700,000 SDE.

Jaryd Krause:

So $5 million in revenue per year, and you bought it for $1. Everybody's so curious.

Marc Roca:

Yeah. Well, let's get to the background. So someone told me in 2021, “Go on Twitter, just follow people,” and I did that.

And then I found out that there were these two guys, called Fan Bi and Methap, who were buying distressed businesses. So there's too much debt, and then the founders don't have incentives. And so I started studying those things.

I was lucky, also, my wife went to INSEAD MBA. So I went to France, and we went to Singapore, and then Wharton. So I got the MBA experience without having to go to class while still working on my business.

But I got to meet the people from private equity—the professor who turned around Dr. Martens in the 90s—in London. And I said, “Hey, this seems very interesting because it's very niche, right?” The riches are in the niches.

So I just created a company called Inversal that was all about buying businesses from the lenders, or you don't want to deal with it anymore, and you want to be out in a month, and then that's it, right?

You sold it to me. We will not pay you much, but you'll be out, right? And for a lot of e-commerce owners, after many years, it's not even about getting a payout; it's about having peace of mind, right?

So then I went out and started cold messaging lenders on LinkedIn. Back in the day, it was Clearco and some others. And one reached out and said, “Hey, we have this situation of this business in New York, doing $3 million, $4 million revenue. You want to buy it?" I said, "Yeah, okay, I looked into it.”

That was a disaster. So we lost all the money there. So that was the first deal. Yeah, we bought it, and then it was just a complicated business model I didn't think enough about. There was a key vendor; if you lose the vendor, you lose the business.

So that's kind of what happened. And also, we mismanaged it a little bit. Yeah, we overpaid for it. That was also a reason I decided to shut it down. Because even with a five-year forecast, we wouldn't see money, and there were other things. So that’s the background.

Jaryd Krause:

So when you say you're outreaching to all of these lenders, what sort of lenders are you talking about? People who are financing businesses?

Marc Roca:

Yeah, like seller's finance. So all those lenders sit on top of the equity. So you have equity, which is the shareholders, and then the lenders, right? And if the business goes belly up, the shareholders lose everything, and then you liquidate the business, and the lender gets paid.

So the lender owns the business in principle, even though to really own it, you need to go through a process. But usually there's an agreement, because any process costs at least half a million dollars in lawyers. So for most people, you just have a handshake deal and some documents.

And so, yeah, that's the background on how we got to this point. So that was October 2022, when we did the first deal. And through this, someone reached out. There's a group of CEOs in e-commerce. Someone else reached out and said they had this apparel brand, which is still not a good one, right?

Now we're getting the one where we lost a lot, the one that's doing well, and then we have the amazing, right? It's been a cycle of two years.

So they reached out. It was a business selling pajamas on Amazon with $9 million in revenue the previous year and $900,000 SDE, and we ended up paying half a million dollars for that one, and the seller gave us $1.4 million in inventory on consignment.

But we knew we'd lose some money on the inventory, right? So the real acquisition price, you can call it $750K—is still really good, right? It's less than 1x SDE and it's not too complicated to run. So for that one, we're still cleaning up 15 months later.

You buy something and just expect the first six months of nothing to happen because it takes time. It takes two quarters just to get buy-in if you hire new people or want to make a change. It's a product business, right? It takes time.

Jaryd Krause:

Yeah. When I think about this in terms of risk in each of the businesses, it sounds like these businesses that have reached out to you are kind of not fully distressed but have some level of distress. There's too much on their plate for them to want to deal with.

And that could equal more risk as an acquirer, which is why you are buying it for a lesser multiple than, say, 2 to 3. Are you finding that's the case compared to some businesses that are listed on marketplaces and with brokers, having a little bit more risk in those?

Marc Roca:

Yeah, I mean, if it's growing, 2X to 3X is good, right? But if it's not growing, you cannot pay more than 1.5X. And if it's declining, I think 1X is a good price.

Because you're still buying their assets, right? If they have heavy assets on inventory, that's still money that, in this case, he's selling in the business for half a million. But if he shuts it down, what's he going to do with $1.4 million worth of pajamas and socks?

So in this case, he's getting about $2 million out, even if it takes him two years. And after we close, like he said, “Hey, can you send 22 trucks from Chicago to your warehouse because I'm defaulting on my rental, so they're going to shut down and keep all the stock inside in 30 days?”

So that's part of the fun, right? That's what we didn't know, right? So that's why you also don't pay so much.

Jaryd Krause:

Are you preferring to purchase these assets with a little bit more risk or a little bit more work to sort of turn them around for a lesser price than buy something that's a higher multiple and less risk? Is that sort of your acquisition profile at the moment?

Marc Roca:

Yeah, that's my acquisition profile. I feel there is less risk for me because we have a team in China. We have a team in Shenzhen. So in this acquisition, I knew we could lower the cost of goods.

And the guy was from Chicago, very successful. Over time, he sold over $50 million in revenue. He's been in e-commerce for many years, and then he sold the other business to an aggregator. He had two or three businesses.

So in this case, we knew he was buying from a sourcing agent in Hong Kong and paying 14% more of the cost of goods. What we didn't know is that the sourcing agent was buying from another sourcing agent in Ningbo, which was paying another 15%.

So we were able to lower the cost of goods by 40% on the next reorder. And our sourcing team in China has 10 years of experience in clothing and apparel, so they know what they're doing, right?

So, to me, there's a lot less risk. And we're limited by capital, right? We never raise money. It's all family-funded, reinvesting. And when people have raised this extra money and they have this growth forecast for their own business to raise another round, it's done.

They waste money. The money is growing from the trees. You know what grandmas would say, “The money doesn't grow on trees.” I said, “Well, if you raise easy money, that was your tree.”

Jaryd Krause:

Yeah. So how did you get to this $5 million revenue business for a $1 acquisition?

Marc Roca:

Yeah. So this was a deal that we didn't want to make. I was actually forbidden by my parents and my wife to buy anything else, because we were already in October, right? We had invested $1 million in pajamas for this brand. It's mostly winter.

There were several teams. I've finally been able to merge everything into just one company, and we just did it in March. That's why I got some of my time back. We're still integrating this quarter.

So I just said that I was doing this turnaround, and then the CEO, the founder, reached out and he said, “Hey, we're looking to sell.” And I was like, “Okay.” This is the start of November 2023.

And he says, “Well, we need to sell before Christmas.” And I'm like, “Okay, that's quite tight, right? It's only 30 days. How much do you want to sell for?”

And he came back with a $1.5 million valuation. He said, “Well, we bought all these for $3 million, so around $1 million in inventory and $2 million for the business.”

It's two Shopify brands, mainly. And this is a complicated deal because two of the brands are German, and one Amazon brand is in Germany.

And then there was a bonus brand that we didn't get told about until we closed. I was like, “Whatever, just take this brand.” And I'll get to that one because we're selling that brand. Now we're going to list Empire Flippers.

So that's November 14, and I didn't want to do this deal. I'm forbidden to do the deal. So it was pajamas. So I looked into it, right?

Oh, we're selling pajamas. Oh, this is like a pajama brand for older ladies, right? And that was the demographic. I told my team, “Hey, whoever buys anything else, it has to be an older demographic: Gen X, Boomers, and Millennials.” In 10 years, it will be us, right? We'll be old.

So I go back, and I tell them, “Look, we don't have money. This is November. You say you have a $1 million offer for February. Just sell it to them.” And then he's like, “Oh, but we really want to close before the end of the year for our investors.” They had raised $18 million, half debt, half equity.

Jaryd Krause:

The business itself?

Marc Roca:

Yeah, they were VC-backed then, and they were trying to do e-commerce and SaaS. They were one of the last to raise money before there was no more money. So they have been running this for almost two years now and burning through the money.

So my father-in-law always says, “Never say no to a deal.” That's, I think, one of the key takeaways from people in this podcast: Never say no to a deal. Never say no to a proposal. Just give what will make you very happy and then the reason why.

So I told him, “Look, I can only pay $1 for this, and I'll buy the inventory.” There was $700,000 in inventory. And my reason is that you have three Shopify businesses and $700,000 SDE.

And to run every Shopify business is $200,000 in salary, right? The agency. And they were using an agency paying $25K a month and another agency paying $10K a month. So I make no money from this unless I really cut everything.

We're going to make no money and you need to close in 30 days. And if we close, there's no more Christmas for my executive team because my staff has Christmas. We cannot tell staff, “No Christmas.” We need to transition everything in one week, right? End of the year.

So they go back to their board, and they accept. And I'm like, “Shit. Well, now we need to do it.” And we didn't have the money for the inventory. So I pushed the payment of the inventory to January and February.

But then there was another complication, which was a lender that was owed $1.5 million. So the lender was able to take the inventory and sell it or take the cash that they still had in their mother company, which was a few hundred thousand and kind of made them whole.

So I meet with the lender; there's a $3 billion fund in Israel, and the first thing they say is, “Who are you? We only work with VC-backed companies.” I'm like, “Well, I'm the guy buying the VC-backed companies.” It took them two weeks of due diligence to accept.

And the first idea was that they transferred the loan to us, part of it was like $1 million or something, right? So we have it as an answer, right? We sell inventory; we pay for it.

Jaryd Krause:

So you would buy inventory for the business first, sell it, and then pay off the loan.

Marc Roca:

Yes, exactly. Exactly.

Jaryd Krause:

Just repeat that a little bit so people listening can follow.

Marc Roca:

Yeah. So we have $700,000 in inventory.

Jaryd Krause:

And how much were you purchasing the inventory at each stage? So you pushed that back until January or February.

Marc Roca:

$300,000 in January, $400,000 in February. So there wasn't much time.

Jaryd Krause:

Yeah, right. Got you.

Marc Roca:

But in the end, well, we negotiated that if we do it like this and send them $300,000 in January and $400,000 in February, they'll take 50% off the loan. So now there's no loan.

So we paid $1 for the goodwill or for the business. And then we bought $700,000 of inventory, which we just took another loan for, right? So we took a loan of $700,000 to pay a $1.5 million loan.

Jaryd Krause:

Yeah. So you just made $700, 000.

Marc Roca:

So the typical person leverages one asset to pay the other. They're happy.

Jaryd Krause:

Where do you get the financing for the inventory?

Marc Roca:

So it was a blend of some family money, some friends’ money, and some money from the pajamas we sold in December, right? Maybe $300,000. We had almost $2 million in inventory in that business, and now, in that business, we only have $700,000. So it's really seasonal, right?

So we just needed to float this for 45 days. Pray that Amazon doesn't come up with “your bank account is invalid” or something. And we wired the last money on February 26th.

But there was risk because the deal was that we wired $300,000, and if we don't wire the other $400,000, they keep the $300,000. So nothing is free, right?

Jaryd Krause:

And so with this financing from friends and family, what sort of rate of return do you give them?

Marc Roca:

2% a month.

Jaryd Krause:

2% a month. Okay. So you want to clear that as fast as possible by selling as many pajamas as possible at as short as possible times.

Marc Roca:

Because there's risk, right? No one's lending at less than 18%. And this was a two-month loan, literally asking for the money the first week of January when people are still groggy from the vacation and saying, “Hey, can you send us $100K?”

And they're like, “Well, when am I going to get it back?” “Well, hopefully you get it back in April.” Beggars cannot be choosers, right? But we were buying $2 million worth of goodwill for $1. So it's worth it.

Jaryd Krause:

Yeah. And so where are you guys at now with this business?

Marc Roca:

So one of the brands is just breaking even. The other brand is making a few thousand a month. And then the other brand, the supplier, takes 120 days to produce the goods. So I really increased the price and reduced the ad spend. We had a 53% net margin last month.

Jaryd Krause:

You're talking about the same business that you purchased for $1.

Marc Roca:

So it was four businesses, right?

Jaryd Krause:

Okay. It was four different businesses.

Marc Roca:

So one pajama brand, one bedding brand—both of them generate $1.5 million in revenue each. Some bottles for the SodaStream and then the dog poop bug brand are the ones we're selling, which was like a gift. I'll get to that.

But the bedding one and the bottle one neutralize each other, right? This one loses a few thousand; this one makes a few thousand. We're just lowering the inventory because there was a lot. There were 400,000 bedding supplies.

For the pajama brand, we had a 53% net margin last month. So about $45,000 SDE, and that was a combination of lowering the ad spend, spending some money on SEO, and just having more clear messaging on the website.

That's the brand that we're most excited about. I believe we can take it to $10 million. That's why I pushed so hard. The pajama brand, I think, has $1.52 million in revenue; we can take it to $10 million in revenue next year once we fix the inventory issues.

Because the whole demographic is any woman 50+ in the US, she can buy it. So even if the other two brands burn to zero, this brand is already worth at least a million dollars, right?

So, yeah, it was hard. There were a lot of people to convince, especially knowing that the first acquisition was going to shut down. You're asking for money from the same people.

I mean, I personally guaranteed the loans on the first acquisition. So now I have some loans for the people who lost money in that one—a few hundred thousand.

Hopefully, when we sell this one, I’ll pay them, right? I take a lot of risks, but I'm blessed. My wife has a good job, and she allows me to take the risk.

Jaryd Krause:

Yeah, it sounds like you love it as well. Because there might be people sitting, listening to this and whatnot, and being like, “Okay, that's cool, it can be done, but the risk tolerance...” Your risk profile is higher than maybe what their appetite might be.

But the cool thing about it is that somebody is listening, and if they're going through that thought process, they may go, “Well, it's possible to do these sorts of deals,” but maybe not at the amount of risk that you might be taking on, maybe with a little bit less.

And maybe paying a little bit more upfront. Maybe if you paid a couple of $100K versus $1, you could have the risk decrease a little bit.

Marc Roca:

Yeah, definitely. There's a deal for all sizes. And I'll get to the dog poop brand story, if you want, which we didn't even pay any attention to.

So after we close or during closing, because it takes two months to close, right? It's like, “Oh, we have this brand. We'll give it to you for free as a sweetener of the deal.” Because of course we're still negotiating with everyone at the end of December, right? Like, “Ah, do we really do it?”

Jaryd Krause:

So you only thought there were three brands in this?

Marc Roca:

Initially, yes. And then they added a free brand. It’s a bonus dog poop brand.

Because of what they really wanted, their profile is a consulting P. I think the incentive for them after raising the VC money was to have a clean exit for their CV and say, “We tried this for two years; it failed, but we solved it without having to go through bankruptcy.”

The keyword was always a certainty to close, right? If you can give certainty to a seller that no matter what you find, you will close, you will not back up.

Because that's a big problem, right? People go through things like this crazy DD and then they find some, sorry to say, bullshit expense that the seller was not aware of, right? Because not everyone is very sophisticated and then like, “No, now half price,” right? That’s bullshit.

I understand because they're professional managers, but if you say you're going to buy it and it's something that's 5% of the revenue, you buy it, right? You don't ask for half off.

So his most important thing is, “We'll sell it to you for cheap, but you promise us that you will close, right? And we will do it. We'll believe in you. I mean, you have some references, not too many, but you will close no matter what you find.”

And we found some inventory loss here and some inventory loss there, and we closed. It's our problem now.

Jaryd Krause:

Okay. So that's your philosophy. If you say you're going to buy it for a certain price, you buy it for that price before DD.

Marc Roca:

Well, unless it's a very big problem, right? You do some seller finance. But in this case, we're paying $1. So whatever happens, even if we lose another $200,000 on some things we find, it is still worth it. But then when you're paying 3X or 3.5X and you find something bad, then there's no room.

Jaryd Krause:

You’ll decrease your offer. Yeah, definitely.

Marc Roca:

Yeah. There's really no room. So we are always close. If we say we close, we will close.

So, yeah, anyway, it's a business that was launched in 2020. Basically, it's like an organic poop box—not organic. What would you call it? Degradable, made with corn, sustainable poop box. Very simple business doing around right now, $15,000 a month revenue, maybe $8,000 SDE.

We turn off the ads in November. It's just 1,600 subscriptions. We'll lose $20, $30 a month. This was sold through Empire Flippers. I was listing it yesterday. And my CEO said, “Hey, I found an Empire Flippers email in the email.” And we found out it got sold for $370,000.

Jaryd Krause:

When? To the people that you bought it off.

Marc Roca:

Yeah, in February 2022.

Jaryd Krause:

Oh, wow. Okay.

Marc Roca:

So this is a bonus from the $1. But now we have a business generating $100,000 a year in profit. I mean, we don't have time to manage it. It's too small, right?

I don't think we can grow it to $1 million revenue. So for us, we will sell this business for maybe $200,000 or something and use the money for more pajamas, right?

Jaryd Krause:

Yeah, just buy more stock. Yeah. Sell off some parts of the asset of that fund there, and then just add in.

And this is a really good thing for people to understand that when I hear you say that is looking at assessing your opportunity cost of what assets that you have, I do this in real estate and business as well, where I'm like, “Okay, which asset is performing really well? And is it better to go all in?”

Depending on what your risk profile is as well,. Do you want diversification, or do you just want aggressive growth? And you know you're going to get it from this certain avenue, that one pajama brand. Why not? Why not take some funds and sell off things?

And also, what you're doing there is having more focus and more team attention on that one asset. And intention and focus, like you said, are the most important things. And you could whittle your way down to just that one pajama brand over time.

And when you've got all your focus on that, when it comes time to make an exit, you can focus on an exit for six to eight months, and then you're going to make a grand exit, and then you can go again.

Marc Roca:

Yeah. I don't operate anymore, right? I removed myself from the operations. I'm doing the CFO role, CMO here, product, when I want, and we just make a plan. It's not too ambitious. We have a 25-year vision now. Everything is for sale, but we don't want to sell, right?

So we finally achieved some kind of stability. I think after this year, we'll have a much stronger balance sheet if we don't buy anything else, which I hope I don't.

Jaryd Krause:

Is that your goal? As a CFO, just like, “Let's just get stable and then build a product.”

Marc Roca:

Yeah, I mean, I'm doing the CEO role, right? There are two CEOs reporting to me and then the marketing reports to me. I'm training one of the CEOs to take over marketing, but he came from another background, and he's only been in commerce for four months now.

So we're just trying to be stable and then sell assets. It's not the right time to sell, but I just had this focus, right?

There's a guy that had an aggregator and then he sold everything and just decided to focus on the pet brand, right? So now that he wakes up in the morning, it's all about the pets and the metrics of the pet brand. How are we doing on this?

I'm managing 20 brands, so I know what happens in all the brands. I got reports from all the brands. But right now, if I were to say, of my operational time, 70% is the pajama brand for older ladies because I'm running the Facebook ads and then I have a spreadsheet that I update every day.

So I know exactly how much profit we made the day before. And I'm aware of when the samples get here, choosing the models. And I don't have to do it, but I'm learning, right? You're always learning. Fashion seems very interesting to me.

Never go into fashion, though. If you're a first-time buyer, no apparel, no supplements, no beauty. Because you really need a lot of money for those.

Jaryd Krause:

Yeah, for the margins. The way I think about it in terms of focus and intention on one asset—to explain it easily to people or for them to understand—is that, say, you're playing sports and you've got all of these passions, and you love them all and you're playing all of these sports.

And you want to get good at all of them, and you say you're playing five sports in your life, you're not going to get the best there is in one of those or all of those unless you decide to cut back on a few and work your way down till you get to one. And then you could likely become a professional in that department.

And it's the same with business, and it's the same with life, where if you have a lot of things going on in your life—a lot of drama, a lot of things—you just don't have the capacity to think clearly.

When we're under pressure and stress, sometimes people, like me, have a really good survival instinct. I can get sh*t done.

But I'm far better and far more efficient at making good and accurate decisions that help me grow in my life when I have so much space and time. So why not treat our portfolios like that?

Marc Roca:

There are very few people who can have several businesses. Maybe we have mental issues. I don't know.

Jaryd Krause:

We've all got some mental issues. Each one of us has our own mental issues, though, don't we?

Marc Roca:

We just see opportunity and then we don't want to miss it. I've been seeing that a lot the last year. And unless it's really good, we don't do it. So don't push it.

And then you have the other people that have been looking to buy their own business for three years, right? And why don't you just buy something that's $50,000? And just do it.

I've been doing this for eight years and I still believe like I'm a newbie, and I'm lucky because I have a 25-year vision and I'll be only 60 in 25 years, but I've been doing it for eight years and I've seen a lot and I still believe I don't know anything. I'm learning so much.

Jaryd Krause:

I love that attitude. Just knowing that you're going to be a student and knowing you're only getting started. And when you say that somebody might be looking for a couple of years or even a year to buy something, know that the first one you buy is going to be mostly a great lesson.

Yeah, it might be your home run, but typically the first one you buy is going to be the best lesson to set you up for future acquisitions and to build a portfolio that you actually want.

Just like when I bought my first property, I knew it wasn't going to be the one that was going to set me free completely. It's just a stepping stone and I think that's a really good attitude to have, Marc.

So, well, I'd love for you to share—if you're open to—your 25-year vision.

Marc Roca:

Yeah. Basically, I want businesses to leave my kids. Because I became a father a year ago, my wife's pregnant again. Thanks. Before that, I wanted to do more turnarounds in the US, like real business. To me, this is a stepping stone to private equity.

But now, I'm localized in Asia. So I'm looking at businesses here in the Philippines and e-commerce in the Philippines. I just want to buy good businesses and then not sell them, right? And I think e-commerce and eventually other businesses.

But yeah, it's all focused on the Philippines growing because the Philippines are exporters’ people. So it's going to be more related to that than e-commerce. And then bring foreign brands to Asia. That's also an interesting part.

But right now, I would say to just go slow and go safe. And then if we take risks, it's mostly by partnering with someone who doesn't want to live with their business anymore, where at least our risk is also opportunity time right and the headspace of the team, my headspace.

And it will come once we have a bit more traction. We’re making $15 million in revenue. If we get to a $25 pajama background and grow from $2 million to $10 million, then I have a case study for other brands, right?

And yeah, I think at the start of 2019, when we raised some money, I mean, I have never seen so much money. The maximum amount of savings I ever had was $20,000, right? My family is just middle class. My mom's a teacher, and my dad's just a normal employee.

I was driving the company forward on blind conviction, and everything was unknown. So I didn't even know the risks.

Now, it was more fun that way, because everything is new and exciting and now we know that we bought it this year with no growth until next year, right? You put the people in place; you give them six months. So it's more structured now. The management meetings.

As a first time buyer, I think most people have never delegated a task in their lives. It's going to take you a year or two just to give a task to someone and then manage them, right?

And as you come from corporate and things like that, like VP level, I would say the vision is not selling, getting good opportunities and having fun. And there is no set amount to retire, either. If it grows, it grows. Some years will be better, and some years will be worse, right?

Jaryd Krause:

Oh, that's life. That's life and business. It sounds like you are working your way towards less risky acquisitions and just buying great brands that are going to stand the test of time and handing them over to your children.

Yeah. Personally, I like that approach. I like to grow, and I feel like I've taken the riskiest risks I've ever taken in my life, and I've already taken them. And now, as I start to get a bit older, and that's as personal as it gets, I don't feel like I need to go crazy aggressive.

Then you've got some other people. I've got some clients that are just on a different level, play a different game, and want to play a different way. They're different players and all the power belongs to them. And all power to you too, Marc. I really appreciate you coming on.

I want to ask one last question before you go. Out of all the entrepreneurs that you know, who do you look up to the most and why? An entrepreneur that you know.

Marc Roca:

I think Roman is the guy from Peak 21. He really has a vision of D2C commerce for the next 21 years.

Methap from Carta Ventures also. He's really focused. And every time I try to get money from him to invest in my business, he's like, “No, this is not good enough.” Yeah, mostly in the e-commerce space.

Jaryd Krause:

So you said Roman?

Marc Roca:

Roman, yeah, from Peak 21. I'll message you, though.

Jaryd Krause:

Yeah. And I'm wondering why, though. The important part of the question is Why do you look up to them? So why do you mostly look up to Roman?

Marc Roca:

He would strap it to his wife. That's already an achievement. I tried to work with my wife, but that didn't work out. And then he's been very clear on what he wants from his life and just keeps doing it. And there's no bullshit, right?

He's genuine and he also has a long-term vision. I feel once you become a father, something changes in your long-term vision and you're not chasing quick wins.

Because it's not going to solve anything, right? Okay, you make a few hundred thousand, now what? A kid is like a lot of money, and just college will be what? A lot more money. And so it has to be built for stable growth.

Jaryd Krause:

Yeah, I like that. The way I think about quick wins is like sugar hits. I’m hugely into my health.

But when you have sugar, you get a quick win and burst of energy, but it's not long lasting. Versus just stripping it all back and setting yourself up with the best energy in the business, working on the best things and doing it the right way.

Marc Roca:

Yeah. And I was chasing those for the first five years, right?

Jaryd Krause:

Most people do, though, right? Because that's the stage that we go through. I think I want to get out of the survival phase of “I need to do these things for work, and I need to make an income.”

And I totally get it. I'm not saying it's justified. I did it, but we’re just so hungry for money, wins and growth. And then we realized that sometimes those paths that we went down weren't sustainable, I guess.

Marc Roca:

Yeah. There's a quote from last year. My wife just said, “If you fail to plan, you plan to fail,” right? And I wasn't planning as much. I was doing these stretches visionary. I'm a visionary. I am not an integrator.

And now they are more conservative in that sense. And no, the vision is still very big, but the plan to get there is more conservative.

When we first modeled, we modeled that it would be IPOing by 2023 with $100 million in revenue and 20% net margins, right? And now the margins, you're lucky if you hit an 8% net margin. So now I model a 6% net margin.

Jaryd Krause:

Yeah, conservative.

Marc Roca:

And we're happy with that. It still works.

Jaryd Krause:

And it still works. You can still get there, and you need to do less crazy stuff to do so.

Marc Roca:

And we now underpromise and overdeliver, where at the start, because you don’t know better, you really overpromise, right? Sales, investment, and what you believe.

I think my partner also said another one, “People overestimate what they can do in a year, but they underestimate what they can do in 10 years.”

Jaryd Krause:

Yeah, I've heard that one. And you can put an X on that as well, and a lot of people don't think that way. You can put a zero in front of both of those numbers. People often overestimate what they can achieve in 10 years and grossly underestimate what they can achieve in 30 years.

When we first started, I wasn't thinking in 10, 30-year blocks, right? We are not taught to, because we're in a hustle, hustle, hustle. And it's a very different mindset when you start to progress from that.

And that's what I want for people that are listening to this podcast—it's what's so good to get you on, Marc—to see what you've achieved and how you've gone aggressive and started to slow down as you realize it's going to be beneficial for you and your family.

So, Marc, it's been a pleasure to chat. Thank you so much for coming.

Marc Roca:

Yeah, thanks for the invite. Bye-bye.

Jaryd Krause:

Bye. Hey, YouTube watchers, if you thought that video was good, you should check out this video here on the 2 Best Types of Websites Beginners Should Buy. Or check out my playlist on How I Made My First $100k Buying Websites and how to do due diligence. Check it out. It's an awesome playlist. You'll enjoy it.

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We help people buy established profit generating online businesses so the can replace their income and spend more time doing what they love with the people they love.

Host:

Jaryd Krause is a serial entrepreneur who helps people buy online businesses so they can spend more time doing what they love with who they love. He’s helped people buy and scale sites all the way up to 8 figures – from eCommerce to content websites. He spends his time surfing and traveling, and his biggest goals are around making a real tangible impact on people’s lives. 

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