An ever increasing number of traditional businesses are looking to grow and diversify by adding an online component to their business model. Just like in offline business, buying an online business that is already established and generating leads is way more profitable than starting a new one from scratch. Joining Domenic Rinaldi on this episode, online business mentor, coach and investor, Jaryd Krause shares how offline businesses can increase their lead generation and revenue just by buying an online business and integrating it to their business model. He also talks about the five fundamental things that you need to be looking at in online due diligence. Having learned how to do this through the school of hard knocks, Jaryd helps other people achieve the same level of success he had through his coaching programs and his own platform, Buying Online Businesses.

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Jaryd Krause: Online-Offline Business Synergy

Are you interested in reading about new ways to grow your business? If so, you’re going to love this episode. My guest, Jaryd Krause specializes in helping people buy online businesses. He successfully acquired and grown several of his own online businesses and he’s seeing an uptick in traditional businesses looking to grow and diversify by adding an online business component. He’s so passionate about this and he now dedicates his time to helping other people buy online businesses. He’s a guru and a hell of a nice guy. What you’ll learn is that there are many opportunities to plug in online business into your traditional business with a path to immediate revenues and profits. Read and think about how this strategy can help you accelerate your growth.

Before we get into the episode, if you want to avoid common deal pitfalls, the risk of losing substantial dollars, you need to know how ready you are for a transaction. I believe that proper preparation is critical to your deal success so I have decided to open up enrollment in my coaching group for applicants or interested in improving their knowledge and skills on how to buy or sell a business. I’m limiting enrollment so contact us as soon as possible if you’re interested. You can do that by sending an email to [email protected] and mentioned that you’re interested in our coaching. Being prepared is critical to ensuring that you maximize returns and minimize risks. Thank you for being here and hope you enjoy this episode.

Hey Jaryd, welcome to the show.

Domenic, thanks for having me. I’m excited for this one.

You had me on your show and I’m excited to have you here because we do the same thing but you do it with online businesses and I do it with offline businesses. It was fun chatting with you about the parallels of what we do it. You could start with, how did you get into online businesses? Share with M&A Unplugged Community a little bit about your journey.

It was a bit of a struggle. I used to be a plumber. I went through the schooling system and realized how cool them. I got dumb, not smart enough to get a desk job. I went through and thought, “What’s the highest paid job in the trade?” so I went and became a plumber and didn’t like it. I worked my way up through the ranks and became a supervisor, but I hated doing that type of work. I found myself getting heavily into drinking, partying, and black numbing out on the weekends. I found myself saving money and running off overseas. From doing so, I did that on many trips where I would go away for months.

One of my trips, I was living in Egypt and I thought, “I don’t want to go back to this lifestyle. I need to do something online.” I typed into Google how to travel the world and make money online. What popped up was of all these crazy things. People would travel blogging and different things. Travel blogging became a standout. I started travel blogging. I thought I’ll put my hand up. I’ll go 100% into this. I did that for quite a long time. I did that for two years. It didn’t make much money. I thought I’d start my own website business and it didn’t make much money either. I didn’t know much about digital marketing at that time.

I came back with my tail between my legs to work in Australia and realize that after I came across this quote or it might’ve been a stat that 90% of all startups fail. If 90% fail, why don’t I go and buy one that’s past that 90% failure rate? That’s where I turned to online. I know a little bit about websites. I typed into Google again how to buy websites and then came up a bunch of stuff. I slowly started to teach myself. Nobody was out there doing what I do now guiding, teaching, and helping people buy sites through due diligence and stuff like that. That’s how I got into it.

MAU 69 | Buying Online Businesses

Buying Online Businesses: It costs a lot less to buy a business instead of building one from the ground up, and you still have the same learning curve and the same failure rate.

 

You don’t look old enough that you would have traveled the world and gone away for six months, come back, and gone away. I can’t imagine you did that many times.

Thanks, I appreciate it. I did travel for a long time. I’ve been to every continent except Antarctica. I spent a lot of time overseas and spent a lot of money, but it was worth it. It was the worldly experience that you gain from doing that. It humbles you. You become grateful for everything that you have around you, especially when you go to these developing countries.

Thankfully, you got all that stuff in before the world got a little bit crazy. It’s a little bit harder to do that these days.

It’s hard now or impossible actually.

I’m going to fast forward so you got to the point where you have this successful business called Buying Online Businesses where you’re helping people buy online businesses but you didn’t develop that by going to Google and reading up. You learned it from the school of hard knocks and you bought a few of your own.

I went through and I bought my first business. I learned a bit and I was like, “This is making money.” I was excited. Months later, I bought another one. Over that year, I have spent buying my first two businesses. It might have been 14, 15 months. I started earning more money from my website and that was from my full-time gig as a supervisor for this plumbing firm. I bought another one. I quit my job after two. I went traveling for 1.5 years. Through Central and South America and then people still like, “How do you do this? You’re not working.” They find out and they’re like, “You need to teach me this stuff.” After that trip, I went fully into help mode, service mode, and teaching people the process that I learned myself.

What a great journey. You found something that you love and you’re helping tons of people. There are many parallels between offline and online. I constantly tell people, especially first time buyers who are coming to us that are grappling between starting a business and buying one. For the most part, unless they have a unique idea that they can get good funding for 9 times out of 10, it is always better off looking at buying an existing business. You walk into existing employees, clients, brands, all sorts of stuff that be might take you years to build if you can even build it. You might not get that far.

Isn’t it crazy? This is a sole pressing point for me because I went through that stage of like, “If you want to be an entrepreneur and you want to make a good amount of money and make a living on your own, start your own business.” Everybody is under this misconception that if you want to have your own business, you need to start it from the ground up. It needed to be self-made and all these things that I feel certainly put Millennials back even further than where they were at when I first started. Not just Millennials, but kids that are trying this and putting all their money, time, effort, and energy into it.

They come a way with their hands burnt and trauma on like, “I’m not going to go down this route again.” They can have that lost all as a business owner if they learned from somebody that say such as yourself that can buy a business that’s already established. We’ve got a mutual friend that introduced us. We had a good talk on my show about how much it costs to start a business versus buying one. It can end up costing more. That learning curve still got that failure rate.

There’s this fallacy that if you start a business, you can do it on a shoestring and you can incubate it for a while. Assuming it’s not a side hustle, you’re trying to start a business, you’re not bringing in any money so you’re having to pay yourself plus fund the business. I’m big on return on invested capital. That’s my ROI analysis. Every dollar you invest and comes out of your pocket, what kind of return did you get on that? When you’re starting a business, the returns are negative because you’re starting from scratch, whereas you take a pot of gold and you put it into buying an existing business that has cashflows, you can calculate a return. Even if you have to take on debt, you can still calculate a return.

If 90% of all startups fail, why not buy one that’s already past that 90% failure rate? Click To Tweet

You know what you’re getting into when you buy a business because you can see the prospect as you can see the business. In your case, you could even touch, feel it, walk through the shop, and franchise or whatever it is. You’re hemorrhaging money and you can’t calculate that. A lot of people are trying to pay themselves a wage. A big stat is that most people don’t pay themselves a wage. When their startup goes under, 90% of those people have done all this work, spent all this money, and they’ve never paid themself the whole time through it. They’ve taken income away from themselves twice in terms of putting it into a business and not paying themselves. I’ve done it and it’s not nice.

Jaryd, I would love to talk a little bit about online businesses and how it can enhance in offline business, given your experience. Most of the people reading the blog are in mainstream offline businesses but there’s a real opportunity to tap into what you’re doing to add in an online component to their businesses and scale their businesses dramatically.

People come to me and say, “Jaryd, I’ve got this existing business.” For example, one guy mentioned, “I’ve been in business for 25 years. We spend multimillion dollars on businesses in the construction and that industry in HVAC.” It can be anything from electrical or plumbing as well. They’ve got these businesses that they go away and purchase. They’re not the operators but they own these businesses. They’re like, “How do we grow these businesses?” A lot of people are turning to myself and the internet to go, “I can buy a lead generation website that can bring in business, merge these two businesses together, and bring in a bunch of new business to what we’ve already got.”

People are building these portfolios of online and offline. It’s a cool mixture because you can have multiple different lead generation websites or content websites that you may talk about. These different types of online business models can bring in traffic, leads, and a bit of money themselves but also pushing that towards those brick and mortar and offline businesses. It’s a cool combination in the sense that things can change online, algorithms, and things, and business models can change very quickly.

Things can change in the offline world and where we may not be getting many leads from our offline funnels or our offline streams of how we get people in. The online may pick it up such as COVID, where people like, “We don’t want to be letting people into our home to fix our air conditioning and that sort of stuff.” We can get quotes online, put a deposit down, and you get it cheaper when people do start to open up their doors. There are cool opportunities.

That’s a great example because when you think about it, as a business owner, you have multiple opportunities to grow your business. The one that I hear most often is, “I’m going to go hire a salesperson.” That’s almost like a startup especially if you don’t have a Salesforce or sales manager that can train that person and manage them day-in and day-out and help them be successful. You’re hiring a salesperson, you’re relying on them to go out, and generate business, whereas, with the same amount of money, you could take and invest in buying an online business that is already generating leads. You made an investment in something that’s a known quantity versus already measured.

As you said before, it’s calculated and your ROI can be when you hire a salesperson. In my opinion, one of the hardest people to manage because a salesperson is great at what they do, but they can be emotional as well. It’s hard to manage a sales team which I’ve done myself. You don’t know how they’re going to perform when you could pay them $60,000 a year. You could buy a business for $60,000, you can calculate, and know specifically how much business that’s going to bring into your business, how much it’s going to grow your offline business, and then how much that online business is going to grow at the same time? It’s far more attractive than going away and hiring one salesperson. Instead of hiring a sales team of 3 or 4 people, you could buy for lead generation businesses or you could buy 1 to 2 that are bigger and more stable. They’re far more lucrative investments, easier to manage, and easier to run.

If I’m an offline owner and I haven’t done this before, what are some of the things I should be thinking about if I’m going to venture into looking at online businesses to plug into my offline business?

One cool thing that everybody should start to look at is to go to website brokers and see the businesses that are listed for sale. When you’re listing a property for sale, people will list a website or an online business for sale within these different website brokers. There’s a number of them and they’re popping up all over the shop. You can see with real estate, how much that business costs? What’s the asking price? What’s their average net profit per year? What are their average expenses per year? You can calculate how much they making. They’ll send you the prospectors, you can go through, start breaking it down, and doing due diligence on it if you’re going to go down that route. That’s a good place to start. If you’re planting the seeds to somebody through this episode and they want to put a little bit of water on it or to see how this is looking, they can go to different brokers. Type in what website brokers in Google, and there’s a list that you can go and look at.

That’s a great place to start and you can feel through it. It was the same thing happened in the offline world. There’s a bunch of websites you can go to and you can see what’s out there. At least gauge what you might be interested in. If you’re an offline owner and you have no experience in managing an online business, we’re leaving due diligence out of this for the moment, but I’m skipping forward and thinking, “I go out and I want to buy an online business, how am I going to manage it? I don’t have the skillset or the expertise internally.”

MAU 69 | Buying Online Businesses

Buying Online Businesses: Different types of online business models can bring in traffic and leads when merged into a brick and mortar business.

 

The cool thing about somebody already being a business owner is a good mindset. If they would be competent, they’ve got a good mindset and they’re got some good processes and systems down the path in knowing how to hire people and all that stuff, managing a team and whatnot. Not that they want to do that but they may want it to the start. There are two different options. You can buy a business and you can take it over, a lead generation business, a content website, or any of these online businesses that can push people to your core business, your platform business, or your lead business, whatever it is in your portfolio. You can hire a COO, a Chief Operations Officer and they can run the business for you.

You can have a meeting with them once a week, once a fortnight, whatever it is. They can tell you what they know, what they would do, and you can make those lead decisions. When you buy a business, you can buy a business you do with a bigger offline business as you can buy the team. The team comes with the business, you can step in, sit on the board, be a bit of an advisor, learn from them, and start to make some conscious decisions. You could also hire a CEO who has run multiple online businesses to sit on the board with you and help you make those conscious decisions depending on how big the business is. If you want to get your hands dirty, you want to start to learn how to buy multiple ones of these, and start to put CEO’s in each one of them then you can start to learn as you go through that process or you can learn as you purchased the business.

The second-order consequence of doing due diligence is that you look at many website businesses and you learn about the online space. Those little things that you learn, you put them in your memory bank, and they help you grow the business. You look at these different strategies that businesses are using to help them grow their business and that can be different types of digital marketing. It can be different types of content and all these different things that a lot of your audience may not know about now but you pick up on these things as you do due diligence. That’s cool. That’s going to help you even if you were to become an advisor to a CEO.

One of the challenges that I see in the offline space, Jaryd is, people don’t necessarily live and breathe Google algorithms. They don’t understand how the digital world works day-in and day-out. It’s a bit challenging for people to take that step and say, “I can easily fit an online business into my offline business.” In the back of their heads, they’re thinking, “I have no idea. If I buy a smaller one, how I would fit that technology into what we do.” We don’t have the people to manage it. You’d almost have to buy one that has a team with the knowledge, but if you didn’t, are there resources out there that you could hire on a part-time basis that could help you manage an online business?

There certainly are. There are people that help you that are in my space. They don’t have the most capacity and this space is still growing but there are people that do help run businesses and manage businesses. I would say if you’re coming down this route seriously, you can reach out to me and ask. It’s going to be dependent on the business you end up buying because some of these people are specific in one type of business model as opposed to others and on multiple different operators, funds, and things that people may want to be a part of. Reach out to me, ask, and be more specific. I can help put those people in the right position for different operators or at least help them find somebody who may be right to that type of business. There are those options.

Hopefully, you’re going to get some calls.

I look forward to it.

Let me ask you from a diligence perspective. We’ll go back here a little bit. I skipped forward to how you integrate something, but let’s skip back to diligence. I had a little bit of a conversation about some of the differences between online and offline diligence. What should people be thinking about as it relates to diligence for online businesses?

If you want to buy an online business, all you need to do is find someone who’s already done that to give you the right strategy. Click To Tweet

There are some key areas and we’re going to touch on those because there’ll be the higher level things that you need to understand throughout those types of due diligence and then we will filter on through there in different things that you need to share. The first thing would be traffic like, how much traffic is coming to the website? You need to verify that. You need to see if the traffic is trending up, down, sideways, and why. The same with an offline business like, how many people are coming through the doors, and what’s that trend look like? Traffic is an important one and you also need to look at what’s the environmental changes to that traffic. That could be the Google algorithm changes. It could be Facebook algorithm changes or a number of things.

You need to be checking that stuff. You need to be looking at SEO which is Search Engine Optimization, that’s what it stands for those who don’t know. Within the search engine optimization check, you need to look at what links are coming in and out of the website. You need to be looking at the bounce rate of how many people are coming to your shop or coming to this site and then leaving straight away. Picture website paint is an SEO profile. You want to look at the SEO profile to see how healthy that is and you can relate that to other different sites. We won’t get too heavy into the technical stuff here. You need to be looking at marketing.

That’s a similar question you need to be asking like, what’s working with the marketing? What’s not working with marketing? Learn more about their marketing funnel, how that all their sales process, and how that’s working. That can be not marketing on Google Ads or Facebook Ads but also their email marketing and stuff like that. The last two are financials. It is similar to what you’re doing in the offline space. You want to be verifying those. Traditionally, when people started buying websites, website brokers and sellers would send or post screenshots of somebody’s books, send a profit and loss statement within an excel sheet. A lot of your guys reading this are savvy and know that that is not verification and any of this can be put into those.

Make sure you can get viewers access to their merchant account or either their business bank account and even their book books as well so look at that. The last one is competition. What’s the competition look like? Are they doing or are they not doing well? What can you learn from the competition into yourself as a new owner of this business? What would it take for you to out beat the competition if you could? How realistic is that? If it’s not, that’s okay. Are they big that they’re going to in turn, crush you over a certain period of time? If so, what would that time be? All these different things, you need to be learning throughout the competition that they’re the main ones. I’ll run through them again, traffic, SEO, marketing, financials, and then the competition. They’re the five main areas that you want to be looking through your diligence.

It’s very similar to offline. Traffic is measured differently so we would look at how many clients do you have? What’s the repeat? This is a different traffic measurement. There’s an example of online versus offline. When it comes to financials, we always want to verify tax returns when it gets to a certain stage because I’ve never seen anybody over-report their revenues and under-report their expenses when they submit their tax returns to the government. That’s usually our standard-bearer for checking financials as at least the first level and then you dig deeper from there. There are many benefits to having an online business, 24/7 access and global access. You’re now not worried about a trade area. Who knows where clients are going to come from? You might be able to deliver your services in a cheaper fashion or a way to bring your offline product online and deliver it at a lower cost.

The opportunity is absolutely endless. In the online space has changed a lot and rapidly. It’s cool because the opportunity is infinitely abundant. Those two words are the best way to describe it. As you said before, you can go global. You buy a lead generation website, traffic comes in, and you gather their data and their information for a problem they want to solve. That could be anything from electrical HVAC, emotional healing like psychology and it could be virtual, or offline. You can take those leads that come into your jurisdiction in your area, your country, or wherever your practicing in the offline business that you own.

Those other ones that you get from around the world and start to grow, you can sell those leads off so that can be a good income earner for the business as well which is cool. You’re selling products in your physical store, you may start to put those products on Amazon or start to sell them online, that online business might override, become more valuable, and do more business online than it does offline. You open up your whole market. Not because I’m huge about value, serving, and those who add the most value in business have the most valuable life I believe or good life. It’s quite equal. When you do that, it’s not you’re serving one area, you’re serving the whole world possibly and you get to help more people with your business.

It goes far beyond a fixed location and you add an online business, you think about distribution businesses and manufacturing businesses who traditionally have thought I have this group of clients that I service, you could start servicing accounts all over the world potentially or at least in a broader geographic area by going online. A website oftentimes is not enough, you need another component to that. Jaryd, in our coaching platform with K2 Adviser, we help people understand how to buy a business. Everything from sourcing to evaluating, diligence, all the steps that get people to the closing table. I know you run your own platform. Do you take it from a lifecycle approach or you help people understand how to source right through how to close a transaction?

Yes, all the way through. A lot of people that come to me are traditionally started teaching people who were in the trenches as a plumber or a sparky and started teaching people that were tradies. I wanted to help people get out of that lifestyle because that’s quite toxic especially not just for the body but the environment and the mindset of some people on the job site. I don’t think it’s healthy and I wanted to remove people away. I wanted to help them get out of that. A lot of people traditionally started coming to me with zero experience.

MAU 69 | Buying Online Businesses

Buying Online Businesses: Traffic, SEO, marketing, environmental changes, financials and competition. These are the five areas that you need to look into throughout your diligence.

 

Even now, people will listen to my podcasts and be like, “I know nothing about this.” They’ll consume every single episode of my podcast. I go like, “I want to start this. They’ve learned a little bit and they come in with almost no tech skills all the way to them owning their first website business, running it, scaling it, and growing it.” I stopped one-on-one coaching for a number of years and opened up my mastermind to people who have bought businesses and take them to the next level with the businesses that I have bought as well. It’s a fun experience.

To be clear, you run a membership site to help people to learn how to buy. Now, you’re doing a separate mastermind once people have bought to help them to scale the business to the next level.

When you join the membership, it’s self-paced. You can learn as you go, break down all the lessons, learn everything. They’ll get a little bit of help from me, guidance, and support. They ask questions in the community and everybody helps one another. We do some virtual events and stuff like that. In the community, I still have lessons on how to grow your business. They don’t need to work with me one-on-one and join the mastermind. They can still grow their business by being a part of the community still.

If they want a strategy and take it to the next level, that’s where they start to work with me. I offered this because I was getting great results for clients years ago. We’ve already started getting great results now but it comes to a certain point that you don’t need any more data, information and watch any more videos. You need somebody that’s been there, done that, can look at your specific business, and give you the right strategy tailored to where thereat. That’s a whole other step.

I have the same thing in our coaching where we’ll help people at the early stages. If you want to scale, you can’t get it all online. Sometimes, you need somebody to put their eyes on it, talk to you, and hear about what you’re trying to do. Sometimes you have to put it in a context that understands where are you trying to get to so we can help you move the needle.

I also heard in different places, you pay for the information, not the information that you don’t know but the strategies and information you should not use or go down because when you’re online, there’s information overload and there’s gazillion. I could say the opportunities are infinitely abundant, as I mentioned before in why should you can grow your business. That can send you any old way and take you completely off track. I find that happens a lot with business owners when they get to a certain point. It is valuable as to the book, Essentialism by Greg McKeown. It’s knowing what to say no to and knowing what to focus on is key.

Jaryd, it’s been such a pleasure to have you here. I appreciate all the information. If people in the M&A Unplugged Community wanted to reach out and get in touch with you, how could they best reach you?

Go to my website, BuyingOnlineBusinesses.com. There’s a contact page there. If people want to go through all my free resources and podcasts or whatever, they can check that out there. Thanks for having me. It has been a blast. I love talking about business.

It’s been great getting to know you, share, and compare stories offline to online. All the best. Thanks for being here.

Thank you, Domenic. I appreciate it.

I hope you enjoyed this episode. If you enjoy our content, please remember to subscribe and review our show. I look forward to seeing you again on the next episode. Until then, please remember that scaling, acquiring, or selling a business takes time, preparation, and proper knowledge.

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About Jaryd Krause

Jaryd Krause is the Founder of Buying Online Businesses and an online business mentor. Throughout his years, Jaryd has gained knowledge, experiences and great success through purchasing online businesses and teaching people how they can do the same. His mission is to teach 1,000 people how to replace their current income, quit their job and live a lifestyle they absolutely love. To show people an alternate lifestyle is more than possible.

 

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