spiredigital

I've worked on my own remotely / out of an office environment for years, and definitely miss the banter and the camaraderie, but would never trade it back for the typical 9-to-5 I use to have.

I find it insanely easier to get things done when I'm in a closed, quiet room with no co-workers around to bother me. At the office, I'd often be bombarded by drop-ins, people chatting or other distractions. A focused 4 hour day working on my own is equivalent in productivity I've found to a full working around other people who aren't completely involved in their work.

Call me a robot, but I love to get my work done alone and then shift into social mode. I'm not good at doing both at once.

Very nice! Will this work with complex forms I already have built on my site, or do I need to create the form with special code/markup for it to work properly?

Cool listing, Dave. Shared it as I think it will be interesting to see how this pans out. Quick question: Do you guys have the processes for this store well documented? IE, written instructions for how to do all of the recurring tasks like route orders, issue refunds, answers to common questions, etc?

OP here. Happy to answer any questions on the process, the auction or the closing.

And thanks for submitting, akcreek!

Didn't use them right from the beginning, no. Have been using them to sync inventory for about 6 to 9 months now, and just recently started using them for order routing and sending out tracking numbers.

Original product data was gathered from the manufacturer, as well as independent research.

Unfortunately, the trailing six months isn't a meaningful figure given the annual seasonality of the niche. Value would be over stated in the spring (when profits are high) and under stated in the fall (when profits are low).

And while, theoretically, it could be possible to create a ton of fake transactions to boost the sale price, it'd sure be a heck of a lot of work for little payoff. You'd need legitimate transactions, otherwise you'd simply be returning the motors and reducing revenue.

I suppose I could start a trolling motor MLM and ruin all my personal relationships to boost my chances at a slightly higher sale price...

Appreciated, thank you. And congratulations with the success you've had pairing your web app and eCommerce - very original! Best of luck with it in the future.

Good question. It's really a personal decision based on risk. Technically, I think consumers can go after anyone in the supply chain so, even retailers or stores. So it's not a bad idea to have.

That being said, I'd say the majority of stores don't have it....

No worries! :-)

Absolutely. It's run on the Magento OpenSource shopping cart, and it's a LAMP environment.

Thanks! And, yes, will definitely be doing a follow-up post when everything is finished.

Sorry, "elicit". Thanks for the catch mvkel.

OP here! This is not the only drop shipping site I run, and I talk about the others on my blog. This specific site (TrollingMotors.net) doesn't make six figures annually - that's correct. But I do have stores that do (I mention my other stores on my blog). And, of course, the combined earnings are above the six-figure mark.

Also, I don't sell my eBook - I give it away for free. :-)

Starting with $0 would be difficult. I think having at least $1,000 or $2,000 would be helpful for web hosting, some basic design / logo work, and a small advertising budget.

I started with $1,500 (for my first site, not this one. This one I invested a LOT in early on - not all of it prudently!) so you don't need a ton to begin, especially if you're willing to invest a lot of sweat equity.

But you do need a little bit to fuel the fire.

Thanks! I picked the niche purely based on where I thought I could make money. When I started it, I had been running another drop shipping site for a few years already and wanted to try my hand in different market.

Finding drop shippers is actually a lot easier than you might think. You can't find them for every niche and market, but if you're willing to spend some time digging through Google you can usually find legitimate wholesale drop shippers without too much work. I did a video on it (see below) that might be helpful:

http://www.ecommercefuel.com/drop-shipping-wholesalers/

I will if you will offer me a 60 day options contract to sell bitcoins at a fixed price after close! Otherwise, the volatility cold double or half the purchase price. :-)

Good question! I was actually wondering about that when I was drawing up the financials. I don't honestly have a good answer for that.

Speculating here, but it could be minor changes in the manufacture pricing (they set minimum pricing levels). It could be slight differences in which supplier we use over time (given different costs at different warehouses). I'm really not sure. Sorry I don't have a better answer for you.

On point #1, you're right - not everyone will know about the auction right away. But I have been able to alert a large group of people early.

I have a good-sized email list, and they found out this morning. I structured the sale to (hopefully) get attention as well early on, and that has also seemed to work well. This was also the rationale behind the 5% referral bonus - to get people to spread the word. So there will be some buyers who, yes, won't see it until mid-way through. But there should be (hopefully) enough early on watching to get some serious buyers interested at the right time.

On point #2 - you're absolutely correct. The 2 hours / day assumes just the day-to-day operations. There will be other things that need to be done (updating site, misc. work, etc). In the full post, I do disclose this and am not trying to say it's 2 hours a day only, for the entire year.

But generally, with small eCommmerce sites like this, there is an exception for a full-time owner salary when calculating the earnings, which is what the multiple is based on. Given the fact that the total hours per week are 20 inclusive of maintenance (if being liberal) - and a 40 hours owner's salary is usually excluded from calculating income - I feel it's fair.

And thanks for catching the typo! Would you mind letting me know which post it was in? Appreciated.

Thanks - appreciate that!

OP here. Thought a lot about the auction structure and decided the Dutch style (reverse) was the best given my goals.

I wanted to combine getting a good value with the ability to showcase the bid/price - and the process - publicly.

If I did a normal open auction, there is a chance everyone would wait until the last minute to bid. I'm managing bids manually, so it could get hectic. Plus, it wouldn't be as fun to watch for people reading.

Also, if there were NO bids early on it would really hurt the potential sales price with a lack of interest.

A full-on closed auction wouldn't be nearly as exciting for people to watch, and I wanted to generate buzz and interest, plus show the whole process.

With the reverse auction, the bid management is simplified - I only have to manage one winning bidder. It also allows the process to be showed publicly. Finally, it creates a sense of scarcity. If someone really wants it, they'll be more likely to bid early to prevent others from getting it.

So is it perfect? Definitely not! :-) Probably leaving some money on the table but I thought that this was the best structure to maximize value AND interest.

Great questions. Let me address them:

1) The rationale behind the reverse auction isn't 100% profit based. It's the best combination of being able to be transparent (for a good case study) combined with the ability to get a good value.

The reverse auction actually prevents people from waiting until the last minute because it creates scarcity. The moment someone places a bid, the store is off the market. So for people who really are interested, they only get one chance.

2) Small eCommerce business like this usually sell for 2-3x sellers discretionary earnings, which is a term for net income with a usual exclusion for one full-time salary. The fact that a full-time salary isn't included is part of the reason they sell for a smaller multiple.

From the original post:

Currently, my operations manager, Pat, runs the day-to-day operations. He works part time and spends up to two hours per day running the operations of TrollingMotors.net. For more details on exactly what he does, please see the section on Operational Responsibilities.

When calculating seller’s discretionary earnings (i.e., income) for small eCommerce businesses of this size, wages for one person (often the owner) are usually not deducted. Given that Pat and my combined operational workload for the business is less than 15 hours per week, I didn’t include any labor costs per this normal exclusion in calculating seller’s discretionary income.

However, I realize that most people (myself included if I were you!) would want to see the financials including payments to an employee. That’s why I’ve listed below how paying an employee would impact the bottom line. This is the anticipated cash flow assuming someone else was running the day-to-day operations of the business, effectively putting the operational aspects of the business on complete autopilot.

Cost for employee wages is $15,000 / year (assuming $50,000 full-time salary paid at two hours per day), reducing the net income to $50,000 from $65,000.

You mentioned it can barely sustain one person which, if this all they did all day, may be true (depending on where you live). But the operational time involved with running the business is 2 hours per day, which leaves a lot of time to do other things. Most of the existing work has been done (website development, supplier relationships, etc) and the product line doesn't change much so the website doesn't need to be updated frequently.

Two hours a day can seem really low, especially from the perspective of the seller as I obviously have a conflict of interest. That's why I added real data points to the workload required for operations. Over the last year, averages are:

- 3 email tickets per day - 4 phone calls per day - Average call time of 8 minutes)

...plus some work at the beginning of the year to retrofit the website for the 20 to 30 new models that come out.

If you tried to take out a $150,000 full-time salary for someone out of the business, it obviously wouldn't make sense. But for someone who wants to get into eCommerce with a minimal amount of day-to-day work and quickly get a lifestyle business into their life, it's a much better fit.

Hope this helps clear things up, and let me know if I can answer any follow up questions. And glad you liked the traffic -> revenue chart! I think it's much more useful than simply traffic stats alone. :-)

Thanks for the comments. I do have a financial background, and to my knowledge companies usually don't amortize advertising. Amortization and depreciation is something reserved for large assets that have a significant upfront cost and a very long lifespan - like a building.

The benefits from advertising are usually used immediately. Buy a super bowl commercial? The benefits are definitely used up within that year, if not that week.

For a business like this, cash flow is essentially what you see on the income statement. No huge account payables (pay bills with a CC) and no non-cash expenses (like depreciation. Again, I'n not depreciating my advertising.)

Also, I do happen to have a Series 7 and 66 - but as I left the financial industry a while ago they aren't current. I could be wrong, but I don't think there's any rule that prohibits me from 1) selling my own business and 2) disclosing the financials without a license. Might be different if I was selling YOUR business for you.

If you have a financial background and/or sources for your points above, I'm very open to being corrected. Just let me know.

Thanks! I have a hunch that this way of selling might get more traction in the future as well. When you're selling a business, usually the more attention and publicity you get the more buyers (and higher price) you're likely to have.

There are a few things I'm not sharing (like the top selling products, for example), but for the most part, I think the advantages from being transparent far outweigh the risks.

Thanks kposehn! But that is a little deceiving. Direct traffic makes up about 40% of the revenue. But about 1/2 of that is phone traffic that we get because we take phone orders via our site, which appears as direct.

So 20% is true direct traffic. But that other 20% of the total probably is originally sourced from other places (referral, search engines, etc) but they just close the deal over the phone with us.

Shopify and I collaborated to put out a drop shipping specific book which really gets into the nuts and bolts of drop shipping vs. general eCommerce. It's free, and you can read it via the link below. The eBook on my site discusses drop shipping as well, but not in as much granular detail:

http://ecommerce.shopify.com/guides/dropshipping

I'd also recommend DrewSanocki.com for some solid eCommerce / drop shipping material. (Disclose: He's become a friend of mine). He started a drop shipping business in the early 2000s and grew it to mid to high 7 figures before selling. Writes a lot of great stuff about eCommerce in general:

http://www.drewsanocki.com

For solid eCommerce, would also recommend Andy Dunn's Medium blog / writings. Great insights into eCommerce that I've really enjoyed recently:

https://medium.com/@dunn

Hope this helps!

Hey all - OP here. I know drop shipping sites tend to illicit some curiosity (as well as a lot of skepticism) online, so I'm happy to answer any questions as honestly as I can here in the comments.

Drop shipping eCommerces sites. I've been doing this for 5+ years full-time. Starting out - like anything - you need to do a lot of the legwork yourself but now I only spend a few hours a week managing my team and it provides a healthy full time income. And with drop shipping, all the fulfillment, purchasing and warehousing is handled by someone else.

I know drop shipping can get a bad reputation, but when done correctly it can be an effective way to create a passive income streams. If you can program well, I'm not sure if I'd recommend it over a SAAS based approach. You'll likely be able to make more money with SAAS as you're creating your own products vs. selling an existing one. But the long-term upkeep is generally less for eCommerce vs. SAAS (guessing here, as I've never run a SAAS business).

Margins are a bit lower with DS, so it does take a while to build some organic traffic and marketing buzz. But once that starts to gain some traction, it's not too much work to get a team in place and automate things. And if you're willing to put in the time to make a high-quality site that addresses customer questions and buying hesitations up-front before the sale, it's even easier to automate on the back end for support.

But you do have to be careful about niche selection. Because drop shipping markets are fairly competitive (low barriers to entry), you have to be really selective about what nniches you get into. Specifically, I like to see really confusing niches where I can add lots of informational value, plus lots of accessories I can sell to increase overall margins). For anyone who is interested, I wrote a blog post on the three crucial things I look for when picking a niche for eCommerce and drop shipping:

http://www.ecommercefuel.com/anatomy-of-profitable-niche/

Didn't know too much about Marissa before reading this piece, but it's an amazingly well done investigate story on her childhood, days at Google and how she eventually rose to run Yahoo! Impressive reporting by Business Insider.

I'd say I was much less productive. Usually when we were pushing 80 hours weeks, we were getting ready for a big conference that our bank put on - and cranking out loads of monotonous pitch books that didn't require too much mental energy. At least, not too much if you'd done similar ones 100 times before!

If I had had to create a financial model from scratch - or put together something really complex at hour 80 - that would have been a MUCH harder task.

I made good money for my region, but it wasn't extrodinary given the hours I worked. By the end of the my two years I had enough to live (without any income) for at least 2 years as a single guy - so a good little nut. :-)

But I really didn't need that much to start my business - time to work was what was most important. I started my business (drop shipping eCommerce) with $1,500 and did sweat equity for the rest. I wanted to save that money to live on so I had maximum time to invest in bootstrapping.