I almost considered editing my last post on Side Hustle Research because these thoughts came so quickly after I published. The Side Hustle Podcast led me to a very exciting topic that is bringing together a lot of goals and seemingly fitting a lot of pieces of this journey. I found the Empire Flippers Podcast, Her.ceo, and finally Web Equity Show which was the most exciting to me.
There are a group of entrepreneurs and investors who are looking at small online businesses as an asset class. The idea is that why start an FBA business (for example) from scratch when you can buy one that already has cash flows. Many start-ups fail, so buy one that didn’t. This also aligns with the article Debt is Coming by Alex Danco. When annual reoccurring revenue (ARR, the key measure for online businesses) is predictable, it becomes like an fixed income asset and is more amenable to traditional financing like debt. What we are talking about with this model is not just one web business, but many, making up a portfolio, delivering predictable monthly cash flows.
There are two additional aspects here that are exciting to me. First is that you can buy these businesses for relatively cheap and have full operational control over them. Second, they are currently selling at 2x multiples. This means potentially big returns on no growth, with direct control over making growth happen. These are generally businesses that sell products on amazon, or generate ad revenue through publishing content and range in size from profits of hundreds of dollars a month to hundreds of thousands of dollars a month.
I will be taking a course at school next term called Launch Your Startup and these are the concepts I will be bringing to that class. It could end up being a holding company or an accelerator or an escrow company for purchases, not sure yet. But this idea connects for me strongly with Entrepreneurship Through Acquisition / Search Fund and with my Ten Year Goal of making my friends rich. This idea will require investors small investors and the management and operation of small businesses. It is seeming like a very good fit.