from Hacker News

The Open Book Sale of My $600K eCommerce Store, With Financials

by spiredigital on 11/14/13, 5:29 PM with 72 comments

• by spiredigital on 11/14/13, 5:36 PM

  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.

• by smoyer on 11/14/13, 5:59 PM

  According to "The Portable MBA", the selling price for a business like this should be about 2X gross profits, so we'd logically expect about four price cuts before someone bites (predicting a sale at $145k).

• by chstrcheeto4prz on 11/15/13, 5:01 AM

  The real value in this sale (which the author readily admits) is the organic traffic that he'll get from publicizing the sale. Pat Flynn did the same thing with http://www.smartpassiveincome.com/niche-site-update-new-cont.... The people reading about how to create niche sites are actually the ones bringing the most value to the author's niche site. It's a clever model for social seo.

• by mvkel on 11/14/13, 7:07 PM

  I agree with the other sentiments here on losing the reverse auction. There's no need for it; pick a number that's objectively fair and leave it at that.

  I'm trying to figure out what the incentive would be for anyone to buy this, let alone folks in HN-type circles.

  Yes, technically it's an ecommerce business, but with wages and salaries (outside of the general part-time site administrator) being non-existent, I don't see how it can stay afloat. You allocated a portion of the shared infrastructure expenses with the parent company; why is a portion of your salary not also included? Surely work goes into finding and brokering relationships with the motor manufacturers, selecting opportunities, setting the vision, etc.

  On paper, even if you allocated 100% of the profits to pay for a person's salary, it can barely sustain a single person. The only realistic outcome is for it to be added into the fold of an existing company that wants to get into the high-end trolling motor space as a break-even business unit. Potentially serving as a loss leader to sell other higher margin items.

  This reduces your prospective buyers down to about ten in the entire country.

  One thing I love in your data: tracking traffic -> revenue. Cool!

• by staunch on 11/14/13, 6:59 PM

  How is this more open than just about any auction on Flippa? Basic financials and traffic stats are the norm, not a special example of transparency.

• by dingdingdang on 11/14/13, 6:17 PM

  Thanks for the transparency, I'll wager that this sort of behavior will become much more naturalized in the business environment at large as pre-internet behavior gradually becomes replaced with post-internet sentiment - for now it certainly reflects very positively on you and your business.

• by grimtrigger on 11/14/13, 6:56 PM

  Hey, i highly suggest getting rid of the reverse auction.

  Imagine X is the highest value any bidder attaches to ownership of the site. Even if the price drops below X, the bidder has an incentive not to bid (since they can potentially wait and scoop it up at a discount). You're throwing out money.

• by kposehn on 11/14/13, 6:18 PM

  One very important note for anyone looking to purchase this site: a huge portion of his traffic - and revenue! - is from direct visits (no search).

  That is a fantastic asset to the site and makes it very sticky in the face of Google algorithm changes.

• by fatbat on 11/14/13, 8:54 PM

  Thank you for the awesome article and sharing the details! One random question from looking at the charts, how do insurance/product liability for drop shipping work? Are they generally not needed or covered by someone else?

• by ajiang on 11/14/13, 7:07 PM

  A few questions:

  * Why is Q4 Projected so low compared to Q1-3? * Why are Gross and SDE Margin % falling consistently from 2011-2013?

  I think one thing that pops out at me is that while most business get better margins as they scale, your margins are actually declining or stagnant, which seem to be driven by the decline in COGS.

• by OhHeyItsE on 11/14/13, 6:57 PM

  Great post and thanks for sharing.

  How did you get started in this? I mean - why trolling motors? And, how did you find drop-ship suppliers for such a seemingly expensive/low volume-product?

  Good luck!

• by seansoutpost on 11/14/13, 7:37 PM

  Will you take bitcoin for the purchase price?

• by tslathrow on 11/14/13, 6:31 PM

  Part of the reason this is not a good business is you can't amortize advertising. ie no SG&A leverage going forward. unlikely to see decreasing marginal cost

  why not post cash flow as well?

  you will also get your ass kicked for posting projected financials without a series 7 & 63

• by mrmagoo312 on 11/14/13, 7:55 PM

  I'm skeptical of OP, because I remember him on reddit saying he made over six figures on his drop-shipping sites... Unless he has other successful sites, he flat out lied about his successes, possibly to sell his ebook.

• by vpayette on 11/14/13, 8:32 PM

  Can you share the details of the site's tech stack?