When it comes to investing in businesses, most people think of purchasing a bricks-and-mortar operation, or taking a punt on a startup with strong ambitions to grow.
There is, however, an expanding market for buying and selling established online businesses, with proven revenue through channels such as Amazon and without the burden of expensive overheads.
Coran Woodmass, Founder and managing partner of The FBA Broker, knows this market well, and after growing a number of these types of businesses himself, Coran is now carving out a niche as a broker who can help founders of online businesses achieve lucrative exits, or help those looking to invest find the right deal for them.
Coran told Bushy Martin on the Get Invested podcast that one way to maximise the chances of a successful acquisition is to find an online business that allows you to bring an unfair advantage to the table.
“You want to build an unfair advantage before you start looking at acquiring. If you do have an unfair advantage, it’s an absolute gold mine,” he said.
“It’ll take you time to find the right deals, but man, the returns on these can be amazing if you’re coming in with an unfair advantage. You can really do well.”
By unfair advantage, Coran means having something you can bring to the online business that will give it a boost in profits or help it nudge out competition. That could be a particular set of skills the business didn’t previously have access to, knowledge of new markets, or extra capital in order to invest or grow.
For people interesting in buying, Coran says it’s those with more capital to invest that do the best.
“If I was buying, I would really be looking at the $1 million plus range … the sell through rate is almost 40 per cent at the $1-5 million range, so for the most part they’re better businesses. Not always, but for the most part, they’ve actually got some momentum there.”
“And it depends what you’re coming in with … you really want access to more capital. I would look at this as a team exercise, not as something I would do on my own.”
Like many of the guests on Bushy’s Get Invested podcast, Coran’s path to business success was anything but conventional. Coran wasn’t good at school, and didn’t go to university, but describes himself as a born entrepreneur who got his start in sales.
“I think I was attracted to selling because I was looking up to people like Richard Branson and the likes and thinking, ‘I want to be rich, I want to have my own choices’, and I figured that if I could learn to sell, I wouldn’t have to constantly be working for someone else and taking orders, because that’s just not my personality.”
His first gig was drumming up sales for a friend’s window cleaning business. By the time he was 18, Coran was selling Foxtel door-to-door and made more money than he knew what to do with.
Coran then became interested in commercial real estate, and after asking to meet with a contact in the industry, was offered a job on the spot managing commercial space, which he did for about eight years.
At the same time Coran bought some vending machines that sold snacks, and when he sold one of his machines, the buyer asked if he could also purchase Coran’s vending machine website. It was his first insight into the possibility of building and selling online assets.
Coran began consulting in online marketing, and soon landed a marketing job with Flight Centre, despite have no formal qualifications. But the office job lifestyle didn’t suit Coran and his wife, they wanted to travel the world, so they quit their jobs and flew to Vietnam. Two weeks later Coran started researching how to build an online business.
“I thought ‘I’ve been looking at all these online businesses, why don’t I start investing? Seeing if I can buy something, build it, grow it and sell it?’ And that was my approach. So I ended up building a pretty sizeable portfolio of money making websites … I had about 25 or 30 of those, cranking out good cash. The eCommerce business that I’d started to build from scratch was also starting to make some money.”
When Coran started The FBA Broker in 2016 the average deal he worked on was US$350,000. Now, he was a minimum list price of US$1 million, and is starting to focus on the ‘middle market’ – online businesses with a list price of $5 million to $250 million. In addition to being more robust, middle market businesses also give Coran’s clients more access to finance.
“It’s because of their history, and what they’ve done and how big their business is,” he said. “So the capital markets see that as less risk, and they’ll put money in that all day long, and they don’t want much for it because they can invest wisely. And the higher you go in the sizes of capital deployment, the more capital there actually is. You hear the term, ‘rich get richer’, well, it’s actually true in the capital market too.”
Coran now wants to grow his team to significantly increase the number of transactions he can achieve each year.
“My goal is to actually be able to do deals without myself being involved, and that’s not because I don’t want to do deals,” he said. “It’s just I know, to expand, I’m going to need to do that. So this year we’ll do, let’s say, $20 million odd in transactions. Next year I want to do $100 million.”
Listen to the full interview here
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