Ep 304: Knowing When To Exit Your Online Business & Acquire Another with David Schnider

What is it that the best business minds do to make the most amount of money? Hi, I'm Joe Krause. I'm the host of the Buying Online Businesses podcast and today I'm speaking with Liam Donnelly. He started his first online business 11 years ago.

Since then, he's had many failures, like competing toe-to-toe with Alex Huamozi coaching gyms from 2018 to 2020, but he also has a few successes. His go-to humble brag is that he achieved the four-minute mile of doing 100K in cash profit in a single day and his new company, Archway Media, is a social media content company, where Liam strongly believes that social media content marketing is more in demand as business owners realize that the modern day landscape of branding and building a business for client attraction has changed completely.

So he strongly believes that his company is one of the best in the world at business social media content and his own content and growth of Archway will be an ever evolving case study. So watch this space. Now, Liam and I got started working together actually back in 2017 and we've known each other since then. We've had multiple discussions. He is such a brilliant mind and he strategic thinking is definitely his genius zone. And he and I caught up, we caught up in Bali and he started a new business. I'm a part of the new business jumping in as a member.

And in this podcast episode, Liam and I just wanted to chat with him about business. Like I want to chat about the failures that he's made, the successes he's made, what he's learned, how his brain actually works, how he's built massive businesses, tens of millions of dollars worth of businesses, how he's failed in business and what mistakes he's learned.

We talk about a few key ingredients that make very, very profitable business models and why some businesses make so much money even though the founders aren't the smartest. We talk about acquiring those types of businesses and growing those types of businesses. We talk about masterminds, we talk about communities, we talk about growing ourselves as people and also how we can do that with our businesses with the least amount of stress possible.

Now, Liam is such a brilliant business mind. If you are wanting to scale your business and tap into the mind of brilliant business people listen to this podcast. You are not going to be disappointed. Enjoy.

Dave, hello. Welcome to the Buying Online Businesses podcast and thank you for your time.

Thanks for having me, Jaryd. Pleasure to be here.

Now, you've got a marketing agency and I want to get to the marketing agency later on in our discussion. most of the people listening are in acquisitions and buying and selling businesses and you've sold two businesses. Congratulations. What was the first business that you sold and why did you sell it?

First business I sold was Ninja Outreach. It is an influencer marketing software that still exists, but it has changed hands multiple times. So I don't know the owner. I have nothing to do with the business at this point. I sold it in like 2018 after bootstrapping it for around four years. It was a software product.

So the software as a service grew it to around 20 or so people bootstrapped it. It wasn't originally, I mean, I wasn't planning necessarily to sell it right then. Of course, in my mind, I was thinking one day I might kind of want to sell it. was really my first proper startup.

As we started to grow the business, I think I kind of realized a couple of, there was just a number of factors that pushed me towards this outcome. One of them is that I sort of realized why people sell like businesses and the software business is, and that's because a lot of the value is in the valuation, right? Like a lot of what.

My net worth was my, you know, everything was really tied to the business. wasn't like paying myself some killer salary. And it wasn't like I saw this version where I ever would be, or if I did, it would be quite a ways away. However, I did see that there was an opportunity to sell it and pocket a nice amount of money.

And so then it really came down to, okay, financially, maybe this makes sense, but does it make sense logically, emotionally, like all the other reasons that you have to think about when you want to sell a business.

And honestly, after around four plus or so years of bootstrapping it, first of I think it was just like a little burnt out. I had kind of like put a lot into the business, you know, worked a lot of hours as my baby. And I felt like I just didn't know if I had like another four years to give.

I was concerned about the future of the space for people that were working in 2018. GDPR was a big thing that kind of came out and us being this email marketing software, I had concerns about how we would ever kind of become compliant. And I wasn't sure whether or not that mattered. It wasn't clear that it did or didn't, but it was just kind of like this concern that maybe I should take my chips off the table.

And so it was eventually all of that kind of came together. And then someone had reached out to me like a private buyer and they'd reached out to me in June of, I don't know, maybe 2017.

And they express interest in buying the business. I had kind of sort of like fuel of those emails a couple of times a year. And for the most part, it was sort of, Hey, like, thanks, but we're not really looking to sell. And I met with this guy and it was kind of the same response. Thanks, good to have you in my network.

We're not really looking to sell right now. We've got a bunch of plans. actually redoing the website and the UI UX. And it felt like we were just actually just about to invest in like a ton of like growth oriented campaigns. But. six months later, again, I started to kind of do the math and I realized I was going to be heading back to the States. I'd been traveling for a while.

I was going to get married. I wanted to buy a house and we had some customer support issues where there were like some, again, people pointing the finger at us over GDPR and things like that. And I was like, maybe I'm being a little too greedy here and perhaps I should sell. And so I reached back out to that person and we in within like two months it was done.

Congrats.

Yeah.

There's so right, like when, especially for startups, people that don't have a job, they're just fully going to the startup and they're not making much money at the start. And then also the money is tied up in the valuation of the business. There's definitely a wealth risk there in terms of like financial independence risk, because you really don't have that much financial independence because it's really tied to this one asset. So there's two strategies, right? One, sell it.

The other one that I like to do is take profits from the business. And there's, see so many business owners not take profits from their business to build other sort of assets or acquire other assets outside of it in case that primary business does something happens with it in the marketplace.

Like you said, who knows what was going to happen as AI and things changed and all that sort of stuff, right? Like it's, there's definitely those risks there. So smart thinking, congrats.

And it's one of those things that you don't know, sorry to interrupt. Obviously, like you can't be predictive. remember I had a friend or I have a friend, but we don't talk like super often. He's also an entrepreneur. He had a software product and he was thinking of selling his business around the same time. And then he didn't. And then maybe two years or so after selling ours, kind of the pandemic struck in his business really shot up a lot. And I remember having this conversation with him.

He was like, man, I'm really glad I didn't sell because online businesses are exploding now and we're kind of making more than ever before. But then I caught up with him lately and he was like, yeah, now things have like gone a lot back down and I kind of regret that I didn't sell when it was kind of at that peak. And so he kind of experienced both outcomes. He experienced an outcome where post the opportunity to sell things went a lot higher, but then they even went even any lowers. It's really hard to time these things.

And so at the end of the day, you of just have to go with your gut. That's like the positive and the negative of online businesses. Things can move so fast. Like you can get growth really, really fast, but you can also lose action quite fast as well. And I noticed that in my business in 2018, first year, well from 2017 and 2018, with the first year we did half a mil.

And then it would just like almost wiped out the whole business. When I lost my Facebook ad account and wasn't able to run ads. And I realized like, I like have no money. Like I've made a bit of money, but I was paying a lot in team and nothing to my name really. And realize I need to restructure this business and pull profits out of the business at the same time, unless I build it up, hold on for a couple of years and then sell it.

So definitely an important thing to understand as a business owner. I don't think many people as entrepreneurs, we get so focused on the business and so in the business that we forget about like what like what could happen to it and what happens if worst case scenario like it goes down.

So I'm glad that you explained that story with what happened with your friend. What did you learn from the, what did you learn from the sale in those two months? What did you learn from the sale that you sort of applied to your next exit for people looking to sell their business? think every sale is different. You know, I haven't been through like dozens of them.

And I think that, obviously it's quite unique. I would say one of my big takeaways is that like deciding to sell a business is something you should really be planning for for like six to 12 months for sure. least you know the decision to sell the business, although we had had this conversation in June, like it wasn't like I then spent like six months preparing to sell the business. It's like I had this conversation in June. Then I was kind of like, cool, nice to meet you, but we're going to keep doing our thing. And then all of sudden, like one day it was kind of like, I'm going to sell this business.

And first of all, like any normal buyer is probably going to ask for a lot of due diligence. There's a lot of things to kind of organize. You want to get all you kind of like ducks in a row, as they say. But even more importantly is what is the story that you have built like over the last six, six to 12 months, because you can get everything organized. It's obviously like a bit hectic if you're trying to do it last minute, but you can get it organized, but you can't change the numbers. Right. And so had we thought about.

Hey, we're going to be selling this business in six months. Maybe we would have cut out certain expenses. Maybe we wouldn't have tried certain growth campaigns. tried, maybe we wouldn't have hired this developer that we had just brought on maybe three months ago.

It's like something you really kind of want to be forward thinking about to basically create like the best version of your business. I'm sure you can maximize the valuation. Absolutely. Absolutely. Yeah. And so what was the second business that you sold and what was the intention of selling that one?

Is this a startup as well? Yeah, I would say it's a startup, although it was not on the same level of a Ninja Outreach. It was actually a product that I bought right before I sold Ninja Outreach, like almost coincidentally, I wasn't even thinking like, I'm going to sell Ninja Outreach. should buy something. It was kind of like, I think I want to buy something. And then like, just sold Ninja Outreach. So I guess I'll work on this. It was a churn reduction software called Less Churn.

And it was the first time I had really like bought a business, like bought a functioning product. And I was kind of thinking like, Hey, you know, software product, I've had some success in this area. kind of have learned some things over the years. Like, why don't I try to repeat what's going on here? But I really liked the space of term reduction. Cause I was like, Hey, this is just like a feel good space where it's not about sending thousands of emails to people that don't want them.

It's something where I felt like it was a little more future proof. was like, there's always a need for tools that can help businesses reduce churn. So, this has been kind of the thinking for a lot of stuff I've ever tried is sort of you do one business and then you think about.

What did you learn from that? What did you like about that? What did you not like about that? And then that has heavily influences what you end up doing next. And so I bought this product. It wasn't like super expensive. I was probably like 10 grand. I mean, I know that, you know, that's not necessarily like what I walk around with in my wallet every day, but it's not like in the realm of buying businesses, it's like not like obviously a lot of money.

Right.

And I then I started kind of investing in it and I brought in a developer and a marketer and stuff. It was kind of like, it was like a brand new team. And I was kind of like trying to do the whole Ninja Artists thing again. And we did like an AppSumo launch and stuff like that. But honestly, like I just, had a lot of trouble growing that. It was one of those weird, I guess, realizations that success is not guaranteed.

And even though you maybe have done well in one approach that it doesn't mean you can just kind of like flip the switch and like do it whenever you want without like going too many details, not to be like, not to hide them, but just because they're really not that interesting.

It was just like, was a product that people had to like integrate into their software. And there was just like a lot of resistance. People didn't really kind of want to like make time for this. And what I thought would be like a no brainer that everybody used Stripe and stuff like that. Like actually I found like so many different variations and stuff that it just, I felt like it was a lot of resistance.

I realized that I was screwed up just sort of like, if you need to that out, like I bought this business, I'd invested in it. was like clearly like not really going to go the way that I wanted it. And so I reached out to a couple other businesses that I thought maybe would have like a strategic interest in buying it. And so one of them was ProfitWell. ProfitWell was a company that did a lot in like term reduction and they had like SaaS analytics and I kind of went to Patrick, who was the CEO of Prophetwell and I was like, Hey, I've got this tool and I'm wondering if you would find any benefit in this whatsoever. And I know I'm sure behind the scenes, had some conversations, some of which might've involved like just like taking pity on me, but he basically gave me equity in Prophetwell in exchange for some of the business.

And then, know, it was like, okay, cool. Like this is honestly the best offer that I'm going to get. So I'll take this. And Prophetwell was clearly like going very well. And then years later, Prophetwell got acquired by which is like a larger payment processing company. And some of that equity basically was translated financially into money. And then now I have like some equity in paddle.

Cool. Congrats. Well, it's, I just want to, I just want to say like those questions that you asked yourself, great questions that everybody listening should be asking themselves after they've like bought a business and sold a business or started a business and sold a business is like, what did you like about the business? What did you know, like about the business? What would you do differently?

And then still even sometimes when we acquire a business, you acquire something looking at like, yes, I'll be able to make this work in this certain way. And you reinvested into this 10 grand sort of startup, I guess, and sort of realized like, it's actually not going to go the way that I thought it was.

And I would chalk this, I would say that's a massive, like, I think it's very admirable that you realized I might not be able to make this go the way that I want to make it go or thought I did remove yourself from it faster than what some people might hang on to. What sort of psych helped you do that?

Yeah, I think it is like important to know when you need to pull the plug. There's a lot of I feel like dialogue out there around how difficult business is and you you grind it out and just grind till success never give up those types of things. I think you don't want to quit too early, right? Like, yes, it is hard. And yes, like there are times where things are difficult. But with Ninja outreach, even when times were tough, it always felt like there were some opportunities.

There was always some potential partnership that we were exploring. There was somebody who was interested in what we working on. People who had ideas. There was just like energy there and it felt like every month, whether or not we, you know, we grew substantially or not, it still just felt like there was more like road to travel. With last churn, I really was feeling like I was running into a lot of resistance and I felt that to push through it was just going to be a financial investment beyond what I was really willing to do with no guarantee that it would do anything other than dig me a deeper hole.

And so I think I kind of had to have this conversation with myself about like, Hey, I've always been a sort of a big of proponent of like, got to stay in the game, like entrepreneurship is not a hundred percent. It's not this guaranteed like weekly salary and you got to take some risks. You got to take some chances, but you also got to know when to not overcommit.

And perhaps that's like, held me back from like some unicorn or something, but I feel like it's kind of helped me stay in the game for 10 plus years. So that was kind of this realization where it was like, Hey, I bought this for 10 K. I spent another few 10 K. I really don't have much to show for it. And I don't have like a ton of learnings and stuff like that.

I need to kind of see what other options are on the table. Yeah. So what other options were on the table? Like how did shortlist come into this? So once I sold less churn, I wanted to get back into product again. again, it wasn't sort of like deterred from the experience. I decided to just like take a little bit of time and do like some marketing services, do a little bit of consulting and just kind of like level set myself, make a little bit of money and get out there, like make some connections and stuff because in my limited experience, like if you feel like antsy to like buy a business, you're probably going to make like the wrong choice.

Like this, from what I've seen out there, you can't just like force like a good opportunity. Like sometimes it just has to take time. You have to kind of be looking at the marketplaces over a period, maybe of months to get a gauge of like, this is something better than average. This is something like I haven't seen before. And so I didn't want to feel pressured to like, I just got to like get into like this new product and buy some shiny new object.

And so I kind of started doing some like marketing services and consulting and stuff. got hired by like a Swedish company called Albuquerque that does like, it's like a lead gen software. And I was kind of helping them build their inbound marketing team. And as I kind of started to work through the process of creating the services that they would need for growth as like a new-ish software startup and like drawing from the experiences of Ninja Outreach, I started to realize like you know, what would be cool is if I had my own marketing agency where I hired the people, vetted them, knew everything that there was to know about the services.

And I could basically access that talent pool like at cost. And then down the line, if I acquire more businesses, I'll always be able to be like, well, Shortlist is going to work on this. Like Shortlist is going to design the website. Shortlist is going to do the SEO work. Like I felt like that would be a good engine to basically have in this vision of like this larger portfolio.

And so I basically kind of spun Shortlist out kind of with a goal of just like breaking even. Honestly, I was like, if I can just get enough clients to like pay for this, so then I can use Shortlist myself and I'm basically breaking even, then I'm basically kind of getting marketing like for free and that's cool. But it started to get more traction. People liked, I think the positioning that we had established for the way we approach SEO and link building in the way that we had aspects of being an agency, but we have removed a lot of the things people don't like about agencies.

So for example, we're not really big into enforcing contracts. We don't really have like minimums. We don't necessarily always like bundle our, all our services. have pricing on the website. Like it's, kind of had positioned as like this, an agency sort of marketing services. So it kind of started to grow. We started to get some more traction. And then I realized, Hey, this is a business that doesn't have like the same resistance that less churn had.

And you got to understand like where the tailwinds are and sort of kind of start to, double down on that. So I started to put like more time into it, building up the team. And nowadays we've been around, we've been around about six years or so it's around 20 or so people, the main companies in Macedonia, we do a number of services related to like SEO content marketing, website design and dev. Even though I never really planned on running a marketing agency, like in, in this capacity, like it's generally been pretty good.

Yeah, cool. congrats. What's like, give us an example of a client that you've worked with before that have done like your bread and butter sort of products and services. Like what is it? Who's a call? What was the client's business? We don't need to know exactly the name of the business. What was the niche and what was the business model? What was the work that you did and the results that you got through shortlist? Yeah. I mean, we have a number of like client case studies on the website.

I will say in many cases we don't reveal who the client is. I personally don't think of like the work that we do as like black hat or anything, but there is sometimes like acquiring backlinks, which some people have like concerns about. I personally like, I've literally not seen like a manual penalty from Google related backlinks in like half a decade. So I don't find it to be like particularly worrisome, but out of just kind of respect for just like make, you know, the client and keeping everything.

Copacetic, we will generally write something like, we worked with this training software or this e-commerce shop or something like that to give people an idea of the industry and the business model, but not necessarily the exact client. And I usually think with that information, it's kind of good enough for most people.

A very common service that we do is essentially a combination of keyword research and backlink building. The reason that I like this service is because it's very clear what the baseline is and what you're trying to achieve and how it's going. So for example, we will review a client's keywords. We will understand which ones, what we call low hanging fruit.

So these are ones that they may be already ranking in the top like 10 or 20 and they're good keywords. The keywords that have sufficient volume, they have business value. The difficulty maybe isn't super high.

And so often what the clients are missing is they just need more links from other sources for those keywords to kind of tell Google this should rank higher. If, you know, chances are you're either kind of familiar with what I'm talking about or not, but if you've kind of spent time in SEO, you would certainly know like what I'm talking about here. And I can say that it is still effective. Link building in general is like kind of expensive when it's just like broadly applied.

When you have like more of a surgical approach and you're kind of looking specifically at the keywords and things like that, and you're focusing on just a select few, you can be kind of more economical with it. It just makes sense. So, I mean, this one client, I think I mentioned was like a training software kind of came to us.

Things were going reasonably well. They had generated some traffic. I think, for example, in January of 2023, they had around 18,000 like organic visits, we worked with them to understand the keywords that we should be targeting to get them some healthy backlinks. And about a little over a year later, in about April of 2024, they had like double their traffic to around 36,000 a month, which is not one of those like, one week later, we just doubled it out of nothing. But it's sort of a realistic, like case study of, hey, putting together good marketing plans, sticking with it consistently.

Doubling traffic for a SaaS business in a year or a quarter is nice. Sorry, I couldn't quite hear you. You just started out about $18,000 a month and then you got them to what? Like $36,000.

$36,000 Cool. Yeah, congrats. That's awesome. When you started basically the agency, you started from consultancy and moved into like, it'd be cool to have an agency where we could acquire brands and just plug them into the agency. Have you started acquiring businesses yet? I did. Yeah, I bought two.

And both of them could just totally bombed. mean, again, it's like you wish that like the story was like different, but it wasn't the shortlist marketing or anything like that. It was just that they weren't good. There wasn't like a market need for what they were, which is why they were being, one of them was sold.

Sorry. One I bought one. started from scratch in both cases. I kind of fell into the trap of like, lack of a better word, I had like too much money to throw around. Things were going well at shortlist and I was like, I should just like buy some stuff.

And I kind of bought that shiny object without really kind of like determining, like doing the due diligence to make sure that like I had a vision for this product that was different from what was out in the market and things like that. I think that there is definitely a lot of opportunity with buying businesses and it was better than I do because you do it for a living, but you do have to kind of like ask yourself why a business is being sold in the first place.

That being said, I do think that the odds are like a bit against you, right? Like unless you really feel that you have some like skill set or network or something that the other guy didn't have or the other lady, whoever it may be, then for you to kind of just assume that like you got it like figured out like you're going to make this happen is can be like a bit of hubris.

And so this was a case where I felt like I'll come in, I'll clean up the UI UX and I'll do these different things. But realistically, like the dude who owned it was a smart dude as well. And he wasn't able to do it. And like neither was I. So I'm currently on startup number three and we'll see how it goes. Yeah. Congrats. Yeah. I mean, you're spot on. it's with why is somebody selling a business? You definitely need to ask those questions and also take what they say at the start with a grain of salt because you don't trust them, right? Which is why we need to look at the data first.

Sometimes people will sell a business cause it's failing, of course, but like you did with your first business, you sold it not because it was failing because you were burnt out and you got to a point you just like frustrated with like, and I get it because I've been here. I've sold a business for the exact same reason is that dealing with customer service sounds like I don't want to be dealing with customer service. I don't want to have a business that has customer service. Some people do it really well. I did not. I didn't know how to emotionally regulate myself that well at that point in my life.

And so sometimes there are businesses that are selling because they're just duds and but that's why we need to look at the D D and the data more so than just what the seller is telling us. And I also think a lot of people start to buy businesses and this is innate because when we invest, we're looking for opportunities typically, typically, and I think that's just the, that's not the right approach. I think the first best, my personal opinion is the best way to invest is to buy something that has the absolute minimal risk because everything has infinite opportunity anyway. Right.

And then when we can plug into our own skills, if we have them, if not plug into the network or find the skills that we have, then we can eventually get there with the growth. But it's not as pressing if the business is not that risky and it's going to be able to be easily maintained, right? So where to from here, Dave, you looking at acquiring more as you move forwards? If so, where did you buy this, this other one that you bought? Is it a little small one you bought? Like, was it a blog? What sort of business model was it? So the one that I had bought, and this was a couple years ago already, it was called Focus.

And I bought that off of MicroAcquire, which I think is now rebranded to like acquire or something. it's quite a relatively well known marketplace that think made a big splash because it was very kind of like self-service, but it didn't feel like Flippa. It felt like legit. But anyway, I am working on a new startup. Now, in addition to obviously kind of maintaining and working on a shortlist, I do have a startup. met an individual in Philadelphia who's a developer and we kind of connected and hit it off over a concept of optimizing networking events, in-person networking events and things like that.

We're kind of like in that couple months sort of journey and sort building out the product and kind of getting beta testers and things like that. So like anything, I have no idea where it's going to go. My record has kind of been about 50, 50 or so, but I like this one. like, it's the first time I've ever worked with anybody locally, like I'm happy to partner with all my business partners were in Europe and stuff.

And I feel like I'm getting like good vibes from the people that we talk to in our target market. Like I said, it just reminds me of something that I need to reference something I mentioned earlier with like Ninja RH where it just feels like there's kind of energy and interest there and it doesn't feel like I'm trying to like pull this boulder up a hill and try to like force it in everybody's face.

That's what I always felt with the like focus and this other one I had started in Spadar. It just kind of felt like I was just trying to kind of push it out to the market and the market was like, thanks, but no thanks. On this one, I get this feeling where like everyone actually is trying to pull it in different directions and we have to kind of decide a bit about like which one we choose. So anyway, TBD.

Cool, congrats. Well, I hope it goes well. Thank you so much for coming on and sharing your experience with exiting and acquisitions. Where's the best place to send people to check out more about what you're up to? Is it Shortlist.io?

Definitely. Shortlist.io is our website, our company website. I'm Dave at Shortlist.io. I'm always happy to receive emails, chit chat about marketing and growth and stuff like that. Hit me up.

Awesome. Thanks so much for coming on, Dave. Really appreciate your time and everybody that's listening, thank you for listening.

Thanks, Jaryd.