Ep 372: [Case Study] Red Vs Green Flags When Acquiring An Ecommerce Business with Jan

I would say just brace yourself for any type of updates, changes, or anything of that sort. Just be ready for it because it will happen. It is kind of crazy to think, okay, you have the set of previous owners doing this one certain thing for the business, and then you switch it over to a totally different person or team or whatever the case may be. You can't expect the same outcome. So be ready to deal with any type of change. And honestly, like everything is a learning opportunity.

Hey, I'm Jaryd Krause, host of the Buying Online Businesses podcast. And today we are speaking with Jan, who is a Buying Online Businesses graduate who has gone through the YouTube channel podcast, jumped in, done the course, and done a little bit of one-on-one coaching with me and bought a six-figure e-commerce brand in the health and beauty niche space.

And today we talk about her journey and how she decided to buy an online business, why she decided on a few different business models based on where the market is at, the one that she landed on, and why.

And then we talk about red flags and green flags and how some red flags can be green flags for people. And we talk about what she learned through her process, what advice she would give to somebody who's a first-time buyer, how many businesses she looked at when she was doing due diligence, how she negotiated inventory, and a whole lot of things that she'd learned through her process.

If you are a first-time acquirer and you're looking to buy a business, understanding and learning and listening to people's stories and learning from them is very, very inspiring to see that there are so many people out there buying great businesses and doing really well from it. So tune in and enjoy the podcast.

Jan, welcome to the podcast.

Yeah, thanks for having me. I've been a listener for a while, so it's kind of awesome just to finally.

It's so good. It's so inspiring to have you on to share the story of your acquisition. Since you mentioned it, when did you come across my pod or any of the content?

Yeah, I want to say early summer of last year, so 2025. I even forgot how I came across it, but finally found your stuff, I believe, through YouTube,e and got to really dig through quite a bit of your content.

Awesome. Yeah, that's cool. Most people listen to a Fairfew podcast or watch a Fairfew video. How much content do you think you consume before you decide, okay, I might be able to trust this Jarraguy?

I did think it first started with obviously the content, and then I did get a chance to take your course, and I found that to be super helpful,l so I think it was kind of like a path,th like a stair step for sure in terms of yeah, this guy definitely knows what he's talking about.

Yeah, so that's awesome. I guess, well, everybody knows they've seen the title. They know that I've done an introduction that you've acquired a business and you're a graduate, Bob graduate. Were you looking to buy an online business? How did you come across the thought, I want to buy an online business? And why did you want to buy an online business?

Yeah, so my world professionally revolves around everything online-based. I knew that I wanted to get into purchasing some sort of business. But to me, just like my travels, I love to be able to not just be physically in one location and rely on one specific area. I knew that it had to be within the online world.

The work I do professionally is in the digital realm as well. So I think that it was kind of a no-brainer for me compared to buying like a brick-and-mortar existing business, which I do love the whole concept of all of that. But again, you're kind of tied to some sort of physical location that I almost just wouldn't want to deal with.

A lot of people actually find me or find buying an online business as an alternative to buying a physical business because they want to be able to work for themselves. And then they realize, like, hang on, like so many online businesses here, I could do it at that location independence, right?

Which is a massive, massive freedom benefit now. And this is also another reason I should share, like why some multiples for some online businesses are more than, say,y just regular stores or regular brick and mortar businesses,s because you are paying, I guess, a little bit of luxury tax for a more freedom style business. When you say your job is in the digital realm, what's your work? Just so people can understand a little bit more about your background.

Yeah, so for the past like seven to eight years, I've been in the world of digital marketing, working with a handful of D to C brands. I think the big difference is the budgets in terms of the paid media and the marketing that I dealt with were definitely on the higher end of things.

But again, just knowing the concepts of different platforms and just how the overall D to C e-commerce world works from a digital marketing lens is just overall helpful. So that's kind of the world that I come from.

Yeah, definitely a huge benefit to you acquiring an Econ brand, you know, coming from that world. So what businesses did you look at? Did you look at other business models, or did you just think artists want to go with Econ because I know that world?

Yeah, I mean, I initially did look at different types. I didn't want to just kind of pigeonhole myself into one specific type. I just wanted I wanted to start like broadly speaking and make sure everything aligned versus just sticking to one specific business model. So I was very open in the very beginning.

Like one business I was playing around with was just like a blog SEO based business. But I mean, like with everything changing in the world of AI, which I am like fully in, I know that I mean, like the businesses that were for sale, there were like quite a few drops in traffic and a lot of like lower revenue and profit from maybe years ago.

So I knew that that probably isn't going to be the best bet nowadays, especially again, with all of the changes. So I did kind of start off with that because I know that you recommend it. That's just an easy way to dive in and learn everything.

But then I know that we, with everything changing, I kind of steered away from that. And then I started exploring other avenues, and other essentially just other business models in the online world.

Yeah, absolutely. That was a wild time. The 2023 updates, Google Help for content update, a lot of content sites and blogs got absolutely smashed. You're correct is I do recommend that content sites were the easiest to sort of get into. The easiest to run, slowest-moving pace ones compared to say e-commerce, SaaS, and membership businesses.

Obviously, the online business world and life have changed. Obviously not the easiest to get into now. And I mean, they're still the easiest to run, I would say for sure, because there's less moving parts and they can still run at a slower pace. So I guess it's easiest to run and manage. It's just that the landscape has changed in how those sites gain traffic. And I've spoken to a gentleman who has bought a bunch of these businesses and content sites that have done very, very poorly, and he's acquired them and just done so well.

He's amalgamated them and merged them into one hold co and got traffic from alternate sources and has done significantly well from it without even selling his own products, just, you know, from advertising and affiliate links, which is really, really cool to see.

And that story, if you haven't seen it, it's already on the pod coming up, but yeah, it's interesting because every business, every business is so different in what you would like to acquire based on risk and also manage, right? How did you feel about moving from blog to e-commerce?

You, were you more excited because you knew the space and you understood the marketing part, but maybe not so much the logistics and operational part? How do you feel moving into like e-comm from blogs?

I actually was pretty excited just because it's like a full product that can't really I mean like overall AI isn't gonna disrupt like a physical product it will disrupt a lot of the other elements associated but no I I thought it would just be like a fun fun business model to get into again a learning curve for sure with quite a bit of moving parts and elements especially the larger it gets, but no, I was pretty excited to be able to move and explore different types of e-comm businesses.

Yeah, cool. And how many businesses do you think you looked at?

Yeah, from, I would say from like a high level where I just kind of went through the numbers, not doing like a deep due diligence or a deep dive, I want to say about like anywhere from 100, 150. So I was commonly looking at the listing sites that had these businesses up, anything new that would come through that kind of fit my criteria.

I was definitely taking a look to understand what was out there. So quite a bit from a high level. Then I think after that, if I found anything interesting where it kind of met like some of the main areas, both in terms of, guess, just overall, like revenue management, growth potential, all of that.

If I saw some sign in that, then that's when I got to doing deep dive due diligence, which, for that, I would say I did it like 30 of them before actually finding something. 30 was kind of my sweet spot of really finally uncovering something that made a ton of sense.

Yeah, I typically say people need to do at least 20 to 40 DDs before they find something that is likely going to be an acquisition, because then you, it's really just from first looking at businesses and looking at listings and then doing a deeper dive DD, you're just training yourself to understand the market, right?

And you're training yourself to know what a good business looks like compared to all the ones that I've already looked at. So you're just banking up as much data as you possibly can to then determine, like, okay, I know the market. I know what a good business looks like. I know what a terrible business looks like.

And you become faster and faster at deciphering and pushing aside the ones that are no good and spending more time leaning into the better ones. And that's what I would encourage people to do is just look at as many businesses as you can and do due diligence on a big portion of businesses and do a proper deep dive into them. can't, this is the thing, people want to save time and not do a deep dive into DD, and no red flags straight away.

But red flags are opportunities in disguise as well, right? A red flag might be a massive green flag for somebody like yourself, Jan, that way you've got Ecom digital marketing experience and people like, okay, this is heavily reliant on Ecom, sorry, digital marketing ads, or they don't have any ads, like it might be a massive red flag for people, but it's a massive green flag for you.

So everybody's flags are different and to look at something generally and to just push it to the side is not very fair until you really know what you're looking for until you've looked at a lot of businesses and you have the experience of knowing what something good looks like versus what it not looks like something bad looks like and that can only be done by doing a lot of DD and actually doing those D. What would you say to that?

Yeah, no, I totally agree. And I do remember, like earlier on, things looked great. And then I would do DDs. And we would find a few red flags. And knowing that kind of helped me, like that kind of stuck to where when I started doing additional scans of new businesses that popped up, I'm like, wait, I remember that this is relying just on a single source, or this is just a single product.

And we've kind of already covered that it's better to diversify or whatever the lesson was. And then it helped me kind of skim through it a lot quicker to move on to the next thing.

But I did notice that, like when I got to the end, I was able to say yes or no, and then yes. And then that's when I was able to do a deep dive to uncover more about the business.

Yeah. And we did some one-to-one coaching as well. How did that speed up the process for you? What did that do for you? What? Yeah.

Yeah, I think it definitely helped speed things up and it helped solidify the decision making process as well too, just because I was going at it somewhat alone to where in my head, think x, y, looks good, but then being able to kind of talk to you about it where you're like, but maybe x is something that we're a bit hesitant on having like being able to verbally talk through it was extremely helpful.

At the end of the day, it helped build confidence, like going either forward with the acquisition or there was maybe one where we decided not to, but being able to work closely on that was definitely very helpful.

There are a couple of pretty close on, and typically it's like, is the typically what I do is for people listening as I share with you, this is good, but it's got these things that may be a bit of a risk, and it's okay having that as a risk if you want to take it on. But also, there's some key information that we don't know yet to fully understand how bad that risk could be or if it's going to play out.

So then I would send you off and be like, all right, get these key questions answered. Questions that people have no idea how to ask because they're very custom and very specific to the situation within that specific business. It's not something general that you can just get from my due diligence framework, right?

The framework works great, right? But like, it's like, you need to be able to independently think to be like, okay, how would this look like? And how do I better understand this as a risk and maybe turn it into an opportunity? What are your thoughts on that?

Absolutely agree because at the end of the day, there's no one single formula for everyone because everybody is so different. But yeah, I do agree with that approach.

And like for everybody listening and thinking about, like what sort of like, you obviously bought an e-commerce brand. We're not going to mention the domain and the name due to privacy reasons, and the same with finances, but we can share that you bought something in the low mid-ish six-figure range, right? Exactly. And you bought an e-commerce brand with inventory as well. What did you learn about acquiring a brand with inventory?

Yeah, I mean, I think one of the things that we did talk about was pretty much doing like a quick analysis on what the skews were that just weren't moving to where, like, at the end of the day, it doesn't make sense for me to purchase those skews. So I was able to lower the inventory price on what I ended up acquiring, just because I ended up kind of getting rid of the stuff that just wasn't moving, and that was very helpful.

The business that I do have is on the higher SKU count,t where there are different types of variety. So it was helpful to be able to kind of look at the data, which the previous owners were great and super helpful in terms of providing all of that. So just kind of taking a look at that and being able to like really negotiate some of that out of the full purchase price. I thought that was so helpful.

Again, something that I may not have thought through on my own, but knowing that that is a possibility was and is helpful. And then I think the other piece in terms of inventory, they already had a three PL set up.

So I found that to be super helpful, where I didn't have to do much in terms of any type of heavy lifting. It was more of a transition for me. And then it kind of sticks to my goal of finding something where I physically don't need to be involved. Everything really is online-based.

Absolutely. Would you be open to sharing an industry, like a very broad industry, so people can get a bit in the healthcare beauty industry?. It fits within that category.

Yeah, cool. It's like those products can go out of fashion pretty fast, or they can be just old products or expired. Did they end up sending you the inventory that you didn't want to acquire because they just had it, or?

Yeah, I think what ended up happening was, I believe we still kept some of it, some of the other stuff. I think they removed it from the 3PL, but at the end of the day, there was nothing that I was missing out on, essentially.

Yeah. It's funny that you could, you know, these are the liabilities that you can acquire with a business, that you can buy inventory that is not moving and it's being stored, and you're paying to have storage in a three PL that it's just going to stay there forever. And it's a little bit of liability that you just carry on with business. You don't know how to cut the fat, for lack of a better term, in the business.

There is an opportunity as well is that you can get that for free. And when you acquire the business is do a mass sale for like the lowest possible price you can to just get it out of the warehouse and get a little bit more money into the business. It can end up being a bit like that's a red flag, right? Is inventory that's not moving that is going to be a liability stuck in a warehouse paying fees for?

So that's a red flag. You can turn it into a green flag with a low-hanging fruit as well by just getting rid of it for a massive sale price and not actually paying for that inventory. Obviously, there are contingencies on this depending on, like what the product is, how much it is going to cost to remove that from the warehouse if you don't sell it, all these sorts of things need to work out before you acquire the business.

But it can be some low-hanging fruit that I wanted to share with everybody, using a 3PL very, very attractive for an e-commerce brand and not having to have a warehouse. Pros and cons to both, but what sales distribution channels are you selling your products through? Are you selling on Amazon? What about eBay, Shopify, or your own? Yeah, where about?

It's all primarily through Shopify. So, through Meta, Instagram, Facebook ads, and directly onto the site. So that was one area of opportunity that we ended up discovering was that they had a really strong organic presence, which I'm always a big fan of because it's essentially kind of like free traffic, other than creating organic content and everything.

And where are you running ads,s else involved in that, and then layering in paid media, which they haven't done before. So I've been able to pretty much launch that and have that running in the background. So that was one of the areas of opportunity. Again, it wouldn't be for everyone, especially if somebody didn't have like a media background, but because I did, it definitely did make sense for me to know that I could take advantage of that opportunity. The other piece that was underutilized as well was email marketing.

They had a pretty large list when I acquired it. I was actually kind of amazed at how large it was. The only times that they ever sent out emails were during moments of launch or sales, which was like about once a month at the most. So with that size of an email, there's always an opportunity to be able to send something out on a weekly basis, especially with your top customers that engage quite a bit. So I found that to be like another area that they definitely didn't tap into, where I was able to really take advantage of that.

I love that. It's definitely, it's a bit of a risk starting a traffic acquisition channel and starting a marketing channel with Facebook ads, where you need to put not just time into it, but money into it. But once you've done it, as you've done, you do it for work. So it's obvious, you know what to do and how to do it in the fastest possible way, shortest, easiest possible way with the minimal ad spend, right?

What email marketing is, one, it's hard to stuff up there, right? You've got an engaged list,t and it's just a, E like a much easier one to run with because you've got free marketing.

Yeah, the ROI on that is like, that's why I'm such a big fan of email. Sounds like I mean, from what I've heard of your stuff, you are as well. No email, the ROI on that is pretty amazing. Whether they ever purchase from you or not such a great way to warm up the audience and help with just overall revenue numbers.

Yeah, absolutely. So how's the business going?

It's good. There are still a few areas of opportunity that I want to really like, like make sure I have everything in place. One thing that I like about the US tariffs and duties is that it's one area that we've been like essentially having issues with. But the nice thing is, since the majority of the base is based out of Europe, that diversity has really helped us to where we didn't take that big of a hit compared to if we were just, if a majority of the customers were US-based, but the 3PL was located somewhere else.

So I think all of that has been like a plus because regardless of whether I have the business or if the previous owners still have the business, this issue would still be present in terms of shipping out inventory to the US, like to US customers.

So yeah, regardless, it's like one of those things that you can't really fully avoid. Like the breakdown in terms of customers by country, that diversity was super helpful, where it wasn't as big of a hit as if we were 50%, maybe Europe, and then the other 50 % US.

Yeah, absolutely. Who knows where this has been going on for a while, this tariff thing. It's not just like a couple of months. And I'm sure it will be a continuing thing from here on in for business. And I'm looking at businesses every single day.

We're analyzing so many businesses, and a lot of them have to understand the tariff issues. If we're looking at these e-commerce deals and then understanding what the risks are and working out,t like, how do we minimize our risk whilst still acquiring an asset that provides us with a great return on our money. It's one thing to just sit on your hands because of tariffs and AI and the way the world is changing and not acquire a business and just be in the same position in two to five years because you didn't get in the market versus buying something that has a couple of things that may be challenging but you can work out of all where you can still get an ROI on your money and you get in the market and learn so much more and can keep moving forwards, right? All in all, how do you feel about your experience buying an online business?

I honestly have learned so much through the whole process, and I've been just having it now. I'm running it, I feel pretty confident with it, and there definitely still is an area of growth and opportunity that I for sure will be taking advantage of this upcoming year. I also…

I think the other fun thing about all of this is that my day-to-day with other work that I do gets a little boring. But for this, I also have like some sort of like, like I have a creative outlet to be able to like create things in terms of ads and other like visuals and help design things. So I actually really enjoy that part.

And then the community that the previous owner already built, it's so awesome to be able to interact with the customers online and really like take what they built and kind of add my own spin to it, but still nurture that community. So I think those areas I probably previously never really got to do much of, but now that I'm in it, I'm having like a really great time with it all.

I love that. And where to from here with either your online business or, like, would you do more acquisitions? Would you build it up and sell it in the future? What's your thought process moving forward with online business?

I think for the rest of the year, I'm just kind of continuing with the momentum of everTheng. Thenn, I mean, there are definitely a few different routes that I'll be able to go down, whether I want to sell it in the future or acquire something else, definitely open-minded, like I can't see myself being stagnant.

Yeah, a lot of different possibilities, which is great, but I definitely will spend the year just continuing with what I have and continuing to build the momentum. Then, eventually, I definitely want to explore other pathways and channels.

I love that. And what sort of advice would you give to somebody who has thought, all right, I'm going to buy an online business now,w and I think it's going to be something that can help me get a bit of extra income or eventually replace my income completely. What advice would you give to a first time looking to a client?

Yeah, I mean, I thought I did a really great job with like the due diligence, but things did pop up even after the acquisition. So I would say just brace yourself for any type of updates, changes, or anything of that sort. Just be ready for it because it will happen. It is kind of crazy to think, okay, you have this set of previous owners doing this one certain thing for the business, and then you switch it over to like a totally different person or team or whatever the case may be.

Like you can't expect the same outcome. So be ready to deal with any type of change. And honestly, like everything is like a learning opportunity, even if you know that industry well or you know that business model well, there are still so many things that I've even learned that I didn't know previously. So just being very open-minded. And then one thing that I would do differently if I were to start over or if I were to buy another business is I would actually love to keep the owners on for a bit longer.

The previous owners did like an amazing job with training me on everything, and they really took the time to like show me the ins and outs. So I completely appreciated it,t and we still have like a really great relationship.

We're still in touch. I think I would love to have them just kind of continue, maybe for a few more months, being like within the business, versus just like the training aspects. I definitely would do that for any future business that I'm working with, for sure, super helpful.

You're right, like, life has these, and business, as a business owner, isn't like a walk in the park. If you own a business, you're responsible for providing a product and a service. And yes, it provides you with the revenue and the freedom and the lifestyle, but you still just can't expect that for nothing. And as the economy and the world change, there are going to be changes that need to be made within your business to suit and to adjust to where people are at. It's just life, right?

So acquiring a business is not for somebody who just wants to buy and set and forget. And I think that's where you're coming from with the owners, Jan is like, it's so helpful to have them stay within the business as long as possible without costing you too much money in return as well, and all those, but there's definitely a way to work it out to keep them involved a lot longer. And I think a lot of people underestimate how valuable the owner is, not just the asset, right?

Nah, absolutely. And I actually didn't. Like, I now know, but previously I never actually really, like, thought through those things. But yeah, completely agree with.

Well, congrats, Jan. It's awesome. It's awesome to see you go away, acquire a great asset, and use the skills that you have before buying it. And I'm looking forward to seeing where you go in the next few years with it. Yeah, thank you so much. And I definitely recommend that if anybody's in the position of being able to purchase something, obviously, there's a lot of homework, but it's such a rewarding feeling once you acquire and get things moving. It's awesome because you're the owner of that. So good luck with anybody else out there.

Awesome. Thank you so much for your time. Thank you so much for sharing, and congrats on what you've done. I'll speak to you soon. Thanks, everybody. Speak to you in the next one.