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- Hardcover Book
- Michalowicz, Mike (Author)
- English (Publication Language)
Welcome everyone to the Firing the Man podcast on today’s episode we are joined by Jacob Erdei. Jacob has 20 plus years of experience being self employed in the early 2000s. After leaving a computer manufacturing company he went on to start his own in home computer repair business and has been forced to pivot several times. Currently his focus is on acquiring ecommerce businesses through vertical acquisition strategy can met Jacob in the rhodium mastermind and we have had the pleasure to share Jacobs vast experience with you today. Welcome to the show, Jacob.
Jacob Erdei 1:42
Hey, thank you. Great being here a fan of the show.
Thank you. So first things first, can you give the audience a snapshot of your background previous jobs and experiences? Oh, yeah,
Jacob Erdei 1:51
and I’ll kind of start but I’ll call my first real business. And so I just graduated from college and it was an associate’s degree in computer networking information technology. With that degree. I did nothing the first year. And so essentially, right after graduating, though, a roommate of mine, his parents owned janitorial business and kind of we were talking about businesses in general and starting something up together. And we ended up starting up the janitorial and maintenance company that also did construction cleanup in that company. It only lasted for about six months. But that was like my first real ein type company that started up and ended in flames in terms of Yeah, we had some sales numbers and weren’t necessarily bad there. But ultimately, it was very bad partnership. There are some drug use in there. And you know, other things that come about from that. That was my first experience having a real business and partnering with somebody and after that I was like I just swore off doing any business partnerships as a call, never do a business partnership again and ended up moving on I ended up getting a job leaving that company and I ended up getting a job at compact and compact as computer manufacturer then bought out by Hewlett Packard, hp and hp outsources all their all their manufacturing. So when I found out the HP bought Compaq, we had somebody coming in that day from Foxconn and Foxconn, at that time wasn’t really known. It’s one of the largest companies in the world at that time. Nobody really knew of them. And you know, it was clear that that’s who they’re going to be contracting to. So I kind of just knocked on the guy’s door said, Hey, I heard you’re hiring. He’s like, yes, we are. And I jumped ship right away from HP over over to Foxconn. And from there I ended up having moved out to Indiana for about a year and a half. I was a computer engineer over there did a bit of work for them. During that time my wife got accepted to veterinary school in Fort Collins, Colorado. So I ended up moving to Fort Collins, Colorado, got a job there only lasted maybe 30 or 45 days, I was a supervisor to a computer repair company. It’s a big, big electronic store chain that’s very popular in the US and but for me, it was the corporate life. And I dealt with a lot of that already with inner fighting in compaq and HP and people stealing each other’s work and trying to justify their job to stay employed. There’s just so much politics that go in into, you know, corporate America in general. And it just wasn’t for me, it was the only job I ever really walked out on but I just I ended up walking out. I was just like, you know, I’m just gonna start my own company. So I went home, I started my own company, BrainBox Computer Solutions, you know, got an ad in the Yellow Book, it was going to come out like three months later, and then my, my wife comes home and I tell my wife, like, Hey, I just started my own computer repair company. I quit my job. And you know, her response was, Well, can you get your job back? So it was like, Well, no, but that’s when we sat down. We talked about as long as I could pay the bills. I was good to go as long as I could pay and meet my commitments to help support a family were good. So you know, once I had that blessing, I was able to move forward and you know, whenever you start a company, I wouldn’t recommend just quitting a job and having no income and starting a company. Much prefer, like the chicken entrepreneurial approach where you keep your job, but then you start something on the side and let that income build up a far easier way of doing it. But I was kind of thrown in there. And so I ended up getting a job carpet cleaning, it was a contract job. So I go out and I’d carpet clean, and I carpet clean at home. And then you know, I’d go into the truck, I switch out from my scrubs, kind of like Superman, right, put on, you know, something semi nice, and then go do an in home computer repair job, then switch back into scrubs do carpet cleaning, I did that for close to a year. And roughly about that point, all in my computer repair business was slowly gaining more and more steam and all I really needed it was just 400 more dollars, just 400 more dollars. And I’d be able to quit carpet cleaning because carpet things a lot of hard work, it is a little pay hard work. And, you know, I just need 400 more dollars. And ultimately, that’s where I discovered digital marketing, affiliate marketing, I should say, of promoting other people’s products and services and getting paid to do that. And then AdSense and things like that it didn’t take too long, I bought a few courses, some are good, some are bad. But over the following six months, ultimately, like month six, I ended up earning $100. And then month seven, I earned 200 and month eight, you know, I earned 400. And I was able to fully quit the carpet cleaning gig. And slowly over the course of the next year or two, the digital marketing aspect of the business started earning more than my in home computer repair business, which was taking up full time work for me at that point, with my wife closer to graduating from college, I knew we’d be moving. And so I ended up selling off the in home computer repair business and just focusing full time on doing affiliate marketing. And there I built up over over several years, I built up a really really nice income and had had nice income coming in, I had a few different tech startups in between on that too, that I tried my hand at Overall, at the very peak I had close to like 3k. Net, that would have been the actual cash flow. Now keep in mind, most of the money that I made, I ended up putting back into the business, I did buy a number of content businesses as well, or content websites I should say. And then ultimately, one day I woke up and even though I had you know 100 different niches 150 different websites, you know, I woke up and Google said, Jacob, we hate you and we hate all your websites. And it over the course of about six months, I saw all my all my income, you know, from 30k. Net to about 2k. Net. And keep in mind I didn’t stack a lot of funds either I was putting most of it back into the business. I was living really, really frugal. And you know, that was that was a really hard lesson because I thought I was diversified. I thought No look, I mean all these different niches, I had these these websites and different hosts, I thought I was doing what was what Google wanted as well. That was the other real shock. And yeah, I was gaming the system a little bit like everybody does. There’s always gaming the system if you’re doing any kind of SEO but you know, ultimately the table’s turned and I learned that Oh, no, I really only had one customer. And that was Google. And when Google said, Jacob, we don’t like you anymore. My business was gone. And with that I kind of swore off doing just organic traffic. I said no, you have to be able to run paid traffic to the offers. That way, it won’t die on you. Right? If I can make money by running paid traffic to something and arbitrage that difference, then then it’s a business. And so I kept doing what I was doing there. Yeah, some content but focusing more on affiliate offers or running affiliate business. But over time, you know, I kind of quickly realized I say quickly those like a three or four year journey, and I had multiple different startups, again, that I tried, you know, some bigger swings for the fences, I kind of learned that everything I was doing, I was building on quicksand. And so no matter what you always get kicked off of affiliate offers, they always go down, you don’t control it, you don’t own the customer, you don’t own any of that. And so essentially what I was doing is I was building income, and it was good lifestyle. Don’t get me wrong, I you know, I had zero customers, I had zero issues really to deal with. And so that lifestyle aspect was nice, but there was nothing that I could sell at the end of the day. For me it was important. And this is roughly about, you know, four or five years ago, I realized after after another startup I had went under I kind of realized that no, I need to find something else. And ultimately, that’s when I turned to just focusing more on E commerce and starting ecommerce or purchasing ecommerce websites and to go down that path was kind of a big roundabout way to where I’m at now.
- Kane, Brendan (Author)
- English (Publication Language)
- 302 Pages - 03/09/2022 (Publication Date) - Independently published (Publisher)
Sure. So no thanks for you know, sharing all that. And you know, I think David and I always chat about all the times we have to make pivots and lessons learned and we learned I think the most in in our failures. And but if you’re never taken at bats, you’re never you’re never gonna have those lessons learned. So that’s awesome. Sounds like that. You know, you’ve had a wealth of experience with pivots and lessons learned. And so Jacob, I know that your Google Ads expert so I’d like to pivot into this a little bit specifically for E commerce. Can you speak to like what’s working regarding Google ads for E commerce and 2022?
Jacob Erdei 9:55
Yeah, and an app’s absolutely the biggest thing that’s working for most is going to be PLA ad so product label ads. So absolutely, especially on the E commerce end. And so that’s where a lot of my focus goes into is just ensuring that hey, you know, is my merchant feed? How do those products look? Are they presentable? Are they good? And then running PLA ads? Man, ultimately, the PLA is going to get you a lot cheaper CPC than let’s say in a keyword search ad is going to get you Okay? And what is a PLA ad? Yes, so the product label ads are going to be the product ads that you see. So if you were to type in, let’s say, you know, red violins or something like that, in Google, you’re going to see those six or several ads that are up on top all showing products. And those are going to be the PLA ads.
Now, have you found any trends in terms of like either types of products or price points, or maybe sizes of products that tend to perform better with Google ads than than others,
Jacob Erdei 10:52
not necessarily there. But the more margin you have on the product that you’re promoting, the more you can take stabs at doing different things. And so a great example would be, you know, a recent website that we purchased waders.com. So think fishing waders, and hunting waders and stuff like that, there, we have really, really good margins on it. And it’s a higher price point. But I can also spend 3040 $50, to acquire a customer. Whereas another website that I have model cars.com. Great example. So that’s a website that we acquired here not too long ago. And on that one, the margins are horrendous, I can’t make it profitable, except for I found one little niche inside there that I’ve been able to make profitable and make some money on. But because there just isn’t a whole lot of profit margin, it’s really, really hard. So I can’t necessarily say that there’s a certain price point of prices that work better. But one thing for sure that I see a lot on Google is if it’s one of those products or services that people absolutely need, then they’re more likely to buy. So your conversion rate in general is tends to be a little bit higher. And so if you have a product or service that people pretty much have to buy for one reason or another, then your conversion rates in general are going to be better.
Okay, I’m looking forward to 2023 Are there any strategies that you think will kind of persist as the Google machine is tends to be ever changing?
Jacob Erdei 12:13
Yeah, it’s always evolving and new new ad things come up, you know, we had expanded ads take over from regular text ads, and then responsive ads, because expanded ads are now retired. And, and so you know, it’s always going to be an evolving ecosystem. But the one thing is, is clearer than that’s the, you know, Google’s always, always taking over is giving you less and less control. And they’re putting more and more control into their own hands. And so I think, you know, one of the things to really look at for when you’re running Google ads is not just Google ads, but ensuring that your entire funnel is functional. So you know, ensuring that okay, when somebody lands on your website, you’re there to capture their email, or that your product page, you know, so many ecommerce descriptions for products are really, really, you know, piss poor at the end of the day. In the end, you know, I’ll use the waiters.com example. Again, there. It’s a recent acquisition for us very, very recent, but on a lot of the waiters, they didn’t have sizing charts, like sizing charts, weren’t there people, you know, there’s already high return rate in their payroll field in general. But if you don’t have a sizing chart, like, you know, people are always going to buy the wrong size, and then you’re going to end up with all kinds of problems. So just ensuring that your funnel itself not just Google ads, but hey, does your landing page convert? Does it look good? Does answer the individuals questions? Are you capturing their email? Are you then remarketing to them, that’s very important, and then are you following up with emails, you know, abandoned cart emails and, and things like that. So ensuring that your full funnel is there is really important. And then Google as well, if you can niche down, let’s say you are running search ads, specifically, if you can niche down and ensure Okay, I’m going to set SCAG level ad groups, which is single keyword ad groups and in so ensuring that you’re going after in theming, and sending people not to your homepage, but to the search page on your site or the product page on your site that closest matches the keyword the search intent that people are doing. So sending people to the right destination. And then customizing those ads for those specific key words is going to help give you a higher click through rate, which is also going to give you a better quality score, which is going to help lower your CPC overall and you know, through kind of all that together, you’ll have a better chance of performing. The other thing is ensuring that you’re spending enough money over a long enough period of time. And so by that I mean hey, don’t just say okay, I’m gonna set my budget $200 a day for this campaign. And then three days later, you’re not making money and shutting it off in frustration. It’s like well, maybe start with $10 on that campaign, see what keywords are coming in, add in the negative keywords, refine it a little bit and over time, increase that daily budget and kind of keep those lower CPC These ad just kind of figure out, hey, what’s my row, as you know, return on adspend and kind of go from there. So it’s starting smaller, and then trying to scale out is an approach and getting very, very granular. Overall. That’s an approach. That’s that’s been very successful. For me
a couple follow up questions to pick up. One is you had mentioned earlier, like you were struggling with one of your portfolio companies to run profitable ads now. And you had mentioned having enough margin to run paid ads now, is it enough margin? Or is it pricing like so let’s say you’re selling, you know, a $10 product versus $100 product, and you have a 30% margin on each now, have you in your experience, like when you bought businesses and you’re looking for Do you have a criteria on price of the products in the catalog? Or is it just margin?
Jacob Erdei 15:45
No, it’s not necessarily all just margin, but it’s more margin than price. And a really good example of it is like as an affiliate, I used to push a lot of automotive paint. And there as an affiliate, in general, I’m used to like 10% Commission’s 5% Commission’s, you know, like really low margins. And so getting that stuff profitable can be really, really hard. But if you’re honing in, and there’s a lot of buyer intent, and you’re gonna have a higher conversion rate on it, you just you don’t necessarily know. And so a great example would be one of the companies that we own is Quilt Company, we sell a lot of quilt patterns, we’re one of the largest quilt pattern companies around are getting there. Anyways, we got a few competitors, we got a knockoff steel, but you know, they’re the average quilt pattern is gonna send any sell for anywhere from you know, 10 to $12. But we make some good money, we make some good money, because we have a lot of repeat customers, because we have that full funnel in place. So we can pay a little bit more to acquire a customer. And then even there, because we have good margins on the product. And people don’t just buy one quilt pattern, they might buy three or four. And you know, our average order value, for instance, on Google ads is right around $26. And so with that we have enough margins for our campaigns to reach, you know, a 567 row as their which is return on adspend, which clearly makes us money. And so that’s a low, low cost dollar item. And you know, I’ll spend all day long on that. Yeah, you
- Audible Audiobook
- Alex Hormozi (Author) - Alexander Hormozi (Narrator)
- English (Publication Language)
kind of highlighted that how that full funnel makes an impact on on everything. Whether your you know, your post purchase, follow up your upselling at checkout, all of those other things combined with it. So make sense. Next question I’ve got is I know you’re, you know, deep into Google ads have been for a long time. Do you guys test any other ad platforms like Instagram, Tik Tok, Facebook, Pinterest? And if you do, do you guys see any gyms out there? Are they just all noise?
Jacob Erdei 17:39
Well, no, I every business is going to be different. And you know, one thing I learned from pushing so many different affiliate offers was you just don’t know what’s going to work until you try it to kind of test throughout and you know, whatever you get good signs of life on focus a little bit more on that and keep building it up Pinterest for instance, it’s it’s taken a while. But for Pinterest for the quilting company that’s working really well. For us. Now. We put some effort in on the organic ends, we have the organic sales going. But we also have a paid sales going to on the paid ads, which if you use the Pinterest attribution model inside Pinterest itself, it’s pure crap. It’s 100%. Baloney. The row as you They say you’re getting is false. It’s not true. It’s based upon people seeing your ad never clicking or interacting with it. And I know that because we have, you know, we use Google Analytics. And we have UTM codes. And so we can actually see, hey, what’s working, what isn’t working, they’re on Pinterest. But yeah, for Pinterest, we have that working on a quilting site. Same with Facebook, Facebook, the the demographic is really, really good. It fits in well, with with that niche. And it does really, really well. And for other businesses, it can work it but oftentimes people give up way too early, they spend way too much on the front end, and just don’t give it enough time. I’d rather say hey, you know what, start at $10 Start at $5. Start smaller, keep testing different campaigns, keep testing different audiences. Also feed Facebook, you know, do some light campaigns and people who are already like it. And then similar to audiences, to your existing customers and your existing customers. Let you know feed Facebook, that data of the people that who are already visiting your website and who like your ads. And then Facebook will will kind of learn Hey, this is who you know, interacts with these ads. And then over time, you’ll probably discover an audience or two, that works well. And it just it just takes time very, very similar to what I said with model cars where we don’t have a huge margins to work with. But still on Google ads, we have some winning campaigns there. They’re never going to scale all that big at this point in time. But, you know, through testing, we’re able to find some some gems and you know, I can’t speak to Tik Tok at all just because I don’t understand Tik Tok. I try the app a few times it’s on my phone now I just it just not me, but I’m sure there’s I know there’s people out there crushing it, like, you just got tests, you don’t know what’s going to work until till you test.
Very nice. Now let’s pivot a little bit into ecommerce. How has 2022 been for you in your portfolio companies? Has it been a good year bad year? What would you say that
Jacob Erdei 20:18
overall, I’d say it’s been a really, really good year. And so the quilting website, for instance, we’ve had that now for about 15 months, going on 15 months, and we were able to triple sales there largely throughout 2022. And so that’s been, you know, really, really good. That’s been a major focus of mine, I try to spend 80% of our time on what’s working best. And focusing on that, that one has definitely been more of a runaway success for us. But you know, the other sites I have, I have a fantasy theme home décor website. So think dragons, and fairies and mermaids, and you know, all that fun stuff, then that one, like Google Ads completely got gutted. In 2022, the CPCs doubled, the conversion rates went down, it just it just didn’t work, there’s a lot more competition that entered into the field. And in there, I haven’t haven’t had nearly the growth that I would have wanted. In fact, this holiday season, my sales are down like 30% in q4 currently on that, and, and so that’s that’s, you know, disheartening, but at the same time, not all my eggs are in one basket. And we did buy with Fairy Glen and the quilting business fairy Glen’s a fantasy themed home décor company with both those ones were bought with the SBA loans, or with the quilting, one, we put a lot more money down. So you put 50% down on that one. And there, we have a lot more margins, because our cash flow or our cash flows a lot better, because we have less debt. And so I’m able to take that capital, put it back into the quilting company to get that super hyper growth, where as with the other one with very Glenn, we leveraged that one to the max. So we put the 10% down, we extended the loan as far out as we could for inventory to get a capital operating expenses, and there, especially with interest rates going up, you know, there’s I’m able to service the debt on that company, but not much else. I’m not getting a paycheck this year, from a company or if I do, it’s gonna be really, really small, I’m still able to pay the debt just fine. But you know, it just speaks to hey, if you leverage, there’s a cost to that. And the cost ultimately, is growth, because if I had a lot more inventory on a very glad I’d be selling a lot more to, but we’re out already a lot of our top sellers, which is really, really sad, you know, late q4, this is where you make money.
So right now, on the quoting.com, you had mentioned that you tripled sales was that if you were to pick like three reasons for that happening, was it? Was it product launches? Was it refining the current catalog? What What would you say led to that?
Jacob Erdei 22:47
It’s not quilting.com? I’ll stress that I wish so so maybe in the future, if you’re out there, and you own that domain, you willing to sell it at a reasonable price, please hit me up. But no, there there are several things. And a lot of it is when we when we purchase a company, you know, one of the things we look for is where’s the win? What value will we bring to the table where we know we can grow this company, and it was already really good company, the woman who started it was a fantastic person who had 30 years of experience in the field quilt shops, and she set up a really, really good business. But ultimately, she was capped because she could only handle so much, she’d have some part time people coming in to help her out to ship items out. But she was running operations out of her home, she couldn’t keep the items in stock. So customer would order it, then she’d order it from the manufacturer or they’d ship it to her. And for us a lot of it was okay, well, let’s start holding more inventory, let’s build up the inventory. And that way, we can ship stuff out a lot faster. And you know, keep at least all the top sellers in stock. Then as we did that, let’s say she mailed out two times a week to her customer list. And it wasn’t religiously mailed out because she was like, no, if I’m too busy, then I want email. And it’s just like, wow. And so for us just you know, doing those two emails a week. And we do we do technically two emails. And then every other week, we throw another one in there, like new products, and then just ensuring that we’re pushing out a lot of new products, we’re always adding on more product to the website, because there’s a lot of new patterns that come out weekly. And so we continuously just keep adding more and more product onto the website. Whereas, you know, she didn’t religiously do that. But we do as part of our process. And then on the marketing end, there wasn’t any any big sophistication going on there. And I was able to look at the CPCs that other people were paying in that niche cost per click and determine that oh, we can do really well on the paid marketing end. And so we’ve been able to set up some very, very successful Google ad campaigns and Facebook campaigns and target those towards individuals and all that has been just slowly feeding into growing the business and then along with the repeat customer rate, just fantastic repeat customer rate. These are fantastic people who buy and there’s zero fraud. There’s zero fraud in that industry. So you can ship pretty much anywhere in the world, nobody’s trying to steal your quilt patterns for free. Which is, which is awesome.
- Hardcover Book
- Michalowicz, Mike (Author)
- English (Publication Language)
That’s, that’s kind of funny how you met how you highlighted there is zero fraud. And that comes from experience. I’m sure that every, you know, a lot of people listening to this podcast has probably experienced, you know, you know, competitor attacking them or you know, or whatever, who knows, but no, it sounds awesome. And just to reiterate the company that you’re primarily the last several years, your you’ve been focusing on acquisitions, correct?
Jacob Erdei 25:32
Yeah, yeah. So starting about 444 plus years ago, is where I determined that that because I had a lot of success with that acquiring companies. When I was affiliate of acquiring some affiliate content websites, like the first website I ended up buying, it was for, I want to say, like a 16 month revenue. And that one, yeah, well, that’s what the way it was, you know, if you go back, you know, 1214 years, 15 years, you know, the multiples were a lot lower, you know, I did fantastic on a number of those. And so, so my thought was, well, let’s just buy an existing business, because startups are hard. They take a lot of work and a lot of effort and a lot of time. And if I can cut that in half, in just already buy something that’s operationally already working, then then utilize my skill sets. And my business partner, his name’s Tim, Pete, he’s my tech partner, I’ll never start another business without a tech partner. That’s, that’s a lesson I learned from a previous startup. And so I was like, I gotta have a tech partner. And so he was, you know, I networked with him. For over a year, he was a rhodium member. And he was in a mastermind of mine, I knew him for over a year before we ended up doing a business partnership together. And yeah, that’s worked out really, really well. It’s, it’s a good model, if you know what to look for
awesome. Looking into 2023 Your portfolio of companies, are there one or two things that you guys are looking to improve on or attack or opportunities? What what does the landscape look like for 23 for growth?
Jacob Erdei 26:55
Yeah, so we have the existing companies, we’re going to be able to throw more money at and slowly grow them. As far as the acquisition go, we’re not in an acquire or die mode anymore. So So we’ve reached enough capital and enough earnings where we don’t have to absolutely acquire something or die. And I say that because we started a three PL. So a third party logistics facility, we bought a warehouse, we store all of our own inventory, and we ship out for ourselves. And that operation was negative. You know, when I started that company, I started that one with an SBA loan, and I had enough cash in the company to run for 18 months, I had an 18 month run rate, we’re now like 20 months into it. And just like this, this last month, which was the 19th month, right, where we’re running out of cash was our first profitable month. And so now we’re, we’re large enough to be able to cover those costs, and hopefully we can going forward. And so we don’t have to acquire a die. One thing I am looking at on the asset purchase end is is to really take our time and find the right company, that’s a good fit for our wheelhouse. That might be you know, a company that’s already doing really good, or it might be more of a distressed assets. So waiters, for instance, was a little bit more of a distressed asset, and that we purchased all in cash, that was a little bit of a seller’s note, but it’s already almost paid off. You know, we’re I’m looking at potentially buying more distressed assets, because the more I’m seeing how a lot of these e commerce companies are ran, there’s, there’s a lot of opportunity, especially on ones that are failing, because we already have examples of companies that are successful in what we’re doing there. And a lot of those tactics can just be applied to the new ones. And it’s nothing revolutionary in any way whatsoever. You know, running a business is running a business, that’s just you know, ensuring you have sales and cash flow and, and manage manage your balance sheet appropriately.
Absolutely. So as we’ve gone through this conversation, it’s become abundantly clear that you’re an entrepreneur, and you have a lot of experiences within this space. And so I’m curious, what advice would you give to your younger self say, say Jacob at 21 Just just getting into things,
Jacob Erdei 29:02
the first thing I probably say is, hey, diversify out of organic traffic, because Because Google’s gonna kill you. But really, it’s it’s more about owning the customer, and then understanding the risks, you’re taking better. And so So, you know, I don’t feel I had a good grasp of the risks I was taking. And I fully didn’t understand like, oh, no, if I lose Google, I lose everything. That’s sadly a lesson that I’ve had to repeat multiple times, building another people sandboxes they change their API, and now your code is dead business’s non operational now and just you know, understanding that a lot better and in really focusing, like I said, on your own customer and building an asset, something that you can actually sell down the road, something that’s sellable, because then you’re actually building equity, and you’re actually building something of worth and so you’re putting all your time into something that you can then later sell down the road. And so that’s that’s where I would have told a young Jacob to focus more on
excellent. I like that a lot. Last question. I’ve got Here is more on the acquisition piece of it. So as you’re like looking, you had mentioned some of the assets that you’ve acquired were distressed, some of them were decent, you know, as you’re like, as you evaluate businesses to buy, what are some things that you’re looking at, in terms of like how you can add value, how you can grow them, this may be at a high level, not specifically for you, but maybe a list of, you know, three to five things that you’re that you’re looking forward to that you can add value.
Jacob Erdei 30:25
Yeah, for, in general, some of the some of the criteria and of course, everything’s going to change depending upon the price in which the site is selling for. So you know, we there’s, we got that at a fantastic price model cars, that again, we got a really good price, and that one, our clear win for that was the SEO was messed up. So they transfer the site from another site to Shopify, they didn’t do like 301 redirects properly, they didn’t do a lot of like, really easy stuff, you know, most people on in the content or ecommerce world would know, like, Oh, that’s a big no, no. And so, you know, we just saw where we could add in our value. But ideally, you know, for if I was looking at a company today to purchase, you know, I’d want them to be, you know, 10 years old, you know, that way, they have an established customer list, you know, continual growth, so year over year growth, you know, might be affected there by COVID, a little bit, you know, operationally it has to be a good fit for us. So it has to be within our wheelhouse, you know, a product or service that we’re comfortable promoting. And just, you know, clearly identifying what when do we add to this? Where’s the meat on the bone? You know, understanding that, Hey, is it a diversified sales channel? So if somebody’s like, I will avoid with the plague FBA only businesses, I won’t touch an FBA business. The reasoning there is because well, FBA is only Amazon if Amazon cuts you off your debt. And so it comes back to that, you know, understanding your risks. If Amazon says, Jacob, we heard Google hates you, well, guess what, we hate you now too, then then you’re done. And there’s nothing you can do. And Amazon’s a big company, and they won’t bat an eye, you hear a lot of this horror stories. So ensuring that’s a diversified sales channels. Is it? Is it a website? Do they have a customer list that you can email? Does an email list actually, do they purchase? You know, hey, what’s organic profile look like? Things along those lines? And then within that you can take a look at okay, well, they only send out an email once a month, you know, is this something where no people would appreciate getting emailed every week? Like right there, you could do a lot better in sales? Or, you know, hey, do they not have shopping cart abandonment emails going out? Or are their product listings? Very, very vague, and they’re not answering basic customer questions coming back to like waiters website where they don’t even have a sizing chart? Pretty obvious things that you can do you know, if you can find that meat on the bone, or where you can add value? Amazingly enough, a lot of companies don’t even answer the phone, you know, some of those can have a drastic increase in sales if you just answer the phone, because a lot of those people just want to make sure you’re legit, or they want to place an order over the phone model cars. Great example of that. We did several 1000 in sales this last year, just by answering the phones big deal. Okay.
- Hardcover Book
- Clear, James (Author)
- English (Publication Language)
Yeah, no, excellent. David, any follow up
one more follow up on the acquisition model. So I know I’ve got him that get the email from the brokers that has a company it’ll give some details, maybe some revenue numbers, which is kind of like their teaser, right? So I’m assuming that you received those. And I would assume that there’s probably if you see something that piques your interest, there’s probably a follow on request, I want to look under the hood, learn more about this company. So when you are looking under the hood, pre acquisition, what steps are you taking? What types of information are you asking for,
Jacob Erdei 33:21
you’ll get the prospectus. The prospectus is going to tell you, you know, a number of things like how many suppliers do they have? So if it’s just one supplier? Well, that that’s kind of a red flag? Because what if that supplier cuts you off? Do you do you have access to another supplier? Where is it that I could save money or ad money? You know, in my case, I have my own three PL now. So if they’re paying, you know, $5,000 a month and warehouse costs, it’s like touching, like, that’s five grand that could be going to my three PL company, you know, just looking over predominantly, yes, the prospectus, which is gonna give you information on how the company has ran the products that they sell, but also understanding the p&l, the balance sheet and the cash flow statement with those three things, you’ll be able to reengineer that true seller discretionary earnings. For instance, if it’s a husband and wife that are running the company, and they have no employees, they might claim Oh, we have 200,000 sold discretionary earnings, okay, you got to replace two employees, like that’s not that much money that they’re actually doing. So I’m going to remove you know, maybe 90,000 off that and recalculate but what my my offer would be in you know, the the unfortunate thing is, is the unfortunate now is you know, multiples are starting to come down again, interest rates are up, multiples are coming down, you know, it’s just ensuring you don’t overpay you make your money when you buy so it’s just like in real estate don’t overpay you know, that’s that’s the bigger one and making sure it’s within your wheelhouse and that you can add value on to the business. Yeah, of course, there’s a lot more you can go into like there’s there’s a whole whole in depth. My due diligence document is I think 40 pages long so it’s a 40 page Word document. So there’s a lot of stuff that I check off and I look at to get that I built that a lot off of if anybody’s not subscribed to quite like brokerage emails, they they do the best Intake Forms period. So just request one more company sign up to the list request one and you can see like their prospectus that they give out, which is really, really in depth. And that’ll get you a lot of understanding of okay, these are really good questions that are asked, and it gives you a lot of insight into into the businesses.
Anything else we want to cover before we head into the fire round?
Jacob Erdei 35:23
No, I’m good. Let’s go.
What is your favorite book,
Jacob Erdei 35:26
my favorite book because I do a bit of fiction reading. And I so I’m not even gonna give you a business book. It’s it’s Kingkiller Chronicles and that’s Patrick reliford think I’ve seen that name wrong. And so even if you don’t like fantasy, like kings and magic and stuff like that, read it anyways, get the audiobook, the audiobook is fantastic. Kingkiller Chronicles, Book One, Book Two, book three will be out someday. I don’t know when but you know, it’s my favorite book. Otherwise, if you’re interested in actual acquisitions through buying a business through acquisition, the Harvard Business Review, the Harvard Business Review, buying a small business is a really good read that has a lot of stuff in there. As far as doing due diligence and other stuff. That’s the book I’d recommend, even if you’re going to buy something small. It’s a really good book to go through.
Jacob Erdei 36:12
But what are your hobbies? So I like you know, hiking, I do walks, I have a daughter, I like spending time with her overall, then I really like investing in general. So I read a lot about investments and you know, different companies and different ways of making money. And overall, it’s kind of kind of what I focus on big currently into the junior mining space. It’s a It’s not an area of investing, I would recommend anybody ever go into again, it’s understanding your risks and your risk tolerance level. And you have to have a really, really good risk tolerance level to be able to do that. Did you say crypto mining or junior junior mining? Gold mines and gold mines and resource sector? So companies that are on like the Canadian TSX exchange? So so no crypto mining? Yeah, yeah, crypto mining and crypto in general. I, again, I was very, very early in that field. I am the worst crypto investor in the world. When I say I have a lot of failures. It’s beyond belief. Like, like my experiences in the crypto world. It’s just just Yeah, so I’ve weighed like, like the plague. I’m a perma bear. It’s not to say don’t own anything. It’s not to say don’t buy here and there. But I’m, I’m a perma bear. In general, it’s it’s largely a solution in search of a problem. All right.
Next question. What is the one thing that you do not miss about working for the man? Oh,
Jacob Erdei 37:29
a lot. You know, the politicking? That probably be the biggest thing that really turned me off are the politicking. And then you know, when you’re your own boss, and you’re actually making a little bit of money, you can outsource the things you hate. And so if you don’t want to do it, you don’t have to do it, you find somebody else to do it for you.
Absolutely. Last one. What do you think sets apart successful ecommerce entrepreneurs from those who give up fail or never get started,
Jacob Erdei 37:53
there’s a lot there, I’ll come back to some of that risk tolerance of understanding risk tolerance, not necessarily putting your eggs in all basket, not necessarily going all in, I really, really liked the chicken entrepreneur approach. You know, don’t quit your day job, start something off to the side. And then persistence, knowing that you’re going to fail, and you’re going to have to pivot that’s just the way it is. But you’re gaining experience along the way. And as you gain more and more experience, you gain more and more confidence. As you gain more and more confidence, your experience level is going to meet opportunity. And at some point in time, those two will will meet and you’ll have the right experience level with the right opportunity. And you’ll be able to take advantage of that whereas other people won’t be able
to excellent answers over to David Yeah, to close out the show. If anyone’s interested in getting in touch with you be the best way.
Jacob Erdei 38:37
I think I’m gonna have my LinkedIn profile in the show notes, hopefully. And so really, that’s it feel free and, and reach out to me there. Say hi. So that’s probably the best way to get a hold of me.
All right. Sounds great. Well, Jacob, thank you so much for being a guest on the Firing the Man podcast and looking forward to staying in touch.
Jacob Erdei 38:52
Yeah, absolutely. It’s a pleasure being on Thank you.
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