Alternative Investment Guide #2 - Ecommerce Businesses
Understanding the rise of ecommerce as an alternative asset class
Hey all, 👋🏼
A few years ago, I was responsible for running ecommerce for a major global media brand’s $25 million portfolio.
After getting inspired in my day job, I took the plunge and set up my own ecommerce business.
It was much harder than I had anticipated.
We built all of our products from scratch. And what’s worse - we chose a product that is notoriously difficult to ship internationally: perfumes.
Ultimately the business failed. And if I had my time again, I’d take the easy route.
What’s that? Buying someone else’s business.
In today’s asset guide, we’ll focus on ecommerce as an alternative asset opportunity to help you understand the opportunity and how to get started.
Topics covered:
A 1,670% return success story 🎉
The data - market, growth projections 📊
Step-by-step guide to buying an ecommerce business 🗒️
Why people sell a profitable ecommerce business? 🤔
Active vs passive consideration ⚖️
ecommerce sales listings - red flags to watch out for before investing 🚩
Shopping for an ecommerce biz 🛒
Resources and tools 🧰
A 1,670% return - an ecommerce investment success story 🎉
Let’s start on a high…
Curd-nerd.com is a niche site that was listed on Flippa back in 2017 and publishes content about home cheesemaking – a very niche topic, built by experts in the field and with passionate followers.
These types of sites can be great buying targets because they usually have solid history and high quality content.
This site also had good traffic – around 9,000 uniques per month, but it hadn’t had new content for years and the owner was ready to move on - I’ll run through some reasons why owners sell up later in this guide.
Nathan, an electrician with no prior online experience, decided he wanted to take advantage of the opportunity. And he bought the site for $950.
Two years later Nathan sold the business for US$16,900, which was around 80-81x multiple of the monthly income.
That’s a 1670% return on his initial investment.
Now you might ask, yes, but how much work did Nathan have to do on the site to get that kind of profit? 🤔
Surprisingly, very little, according to Nathan:
“At the start, we did some work on the website. We built a shop on there, we tweaked some things, and lengthened some articles. But I think for the whole time we owned it, we only published four articles. That was about it”
I realise I am highlighting a success story here, and for every success there’s the inevitable failure, but it does demonstrate the opportunities for savvy investors in the ecommerce environment.
What is ecommerce?
A quick definition:
ecommerce businesses refer to online shops, like an Amazon business, that sell items over the internet.
Selling online has fewer overheads than a traditional brick-and-mortar shop.
Over the last few years, e-commerce has grown over 50%, making it an extremely profitable business.