Acquisitions Anonymous - #1 for business buying, selling and operating - High End Marketplace with $23m in EBITDA- luxury or illegal? - Acquisitions Anonymous 291

Episode Date: April 23, 2024

In this episode of Acquisitions Anonymous, Michael, Bill, Heather, and Mills review a fascinating deal shared by one of our listeners, Michael Weinstein. This potentially dubious business deal involves a technology platform for selling luxury items. As we analyze the details, including impressive sales figures and margins, questions arise about the legitimacy of the transactions and the business's association with website closers. The discussion navigates through various topics, from the intricacies of luxury marketplaces to money laundering risks. Check out the listing here: https://www.websiteclosers.com/businesses/technology-platform-to-expedite-the-sale-of-luxury-items-projected-30-yoy-sales-growth-28-margins-3-billion-in-items-launched-so-far/109876Thanks to this week's sponsor:CloudBookkeeping offers adaptable solutions to businesses that want to focus on growth with a “client service first” approach. They offer a full suite of accounting services, including sophisticated reporting, QuickBooks software solutions, and full-service payroll options.Learn how to buy a business.If you are interested in buying a business but unsure how to start, you should check Michael's Buy a Business Course:You will learn:• Build a thesis for the type of business that's right for you‍• Learn how to stand out in a sea of buyers• Create a working, scalable Deal Engine getting you leads• Maximize your chances of finding great dealsShow notes:00:00 Intro02:40 Reviewing the deal07:35 Figuring out the business12:06 Did we find the seller?13:35 The elephant in the room: is this legit?16:10 Is this best way to sell luxury items? 19:25 Doing due diligence 21:06 Similar businesses review 20:08 Final Thoughts Subscribe to weekly our Newsletter and get curated deals in your inboxAdvertise with us by clicking here Do you love Acquanon and want to see our smiling faces? Subscribe to our Youtube channel. Do you enjoy our content? Rate our show! Follow us on Twitter @acquanon Learnings about small business acquisitions and operations. For inquiries or suggestions, email us at [e-mail]

Welcome back, everybody, to another episode of Acquisitions Anonymous. Back to back, we have two episodes with all four hosts, and I'm still in shock from this listing. We got this listing. It's website closers, a user sent it into us, or a listener sent it into us, and this business is staggering. Over $125 million in revenue, $23 million in EBITDA, and they are an online luxury marketplace. We start to, I think, figure out who this business. businesses and who they are online, or at least we have a pretty good guess. But it's an online

marketplace. They charge staggering commissions. They have really high margins for what they do, but it's a place where you can go online if you're a buyer or seller of luxury goods and buy a yacht or sell a yacht or buy a helicopter, buy, you know, a condo in Mexico. And we talk about just some of the crazy things in this listing, some outlandish things that they say. But we also talk about what would it be like to do a transaction like this and what are the roadblocks and why are they using this type of broker instead of maybe somebody that would be more traditional. It's super fun episode. I'm still in shock and I can't wait to hear how this one comes out. Thanks. Hey, Michael here. Want to talk to you about today's sponsor for the episode, which is cloudbookkeeping.com.

So cloud bookkeeping is actually run by my neighbor, Charlie. So I've met him in person and can attest that he's a real human being and a good person. And what cloud bookkeeping does is offer a full suite of bookkeeping services all in the cloud for you around QuickBooks and other technologies that you're using as a small business owner. So if you're interested in getting the bookkeeping part

of running a business off of your plate and focusing on running your business, Charlie and his team are one to call. They can put together a bunch of other stuff in terms of helping you manage and grow your business besides just bookkeeping, sophisticated reporting, definitely helping you get your QuickBooks online set up in the right way, and a number of things around payroll as well. So definitely know them and recommend them.

If you want to find out more about Cloud Bookkeeping, you can go to their website at cloudbookkeeping.com, reach out to Charlie. I know many of you have and see if he can help you make running your business easier. and more fun by letting them help with a lot of the bookkeeping solutions. And when you call, mention this podcast, it would help us and help Charlie know that we're supporting him as well.

So thanks a bunch, and cloudbookkeeping.com as the sponsor for today's episode. All right. Well, good news. I brought another business that I think might be involved in drug trafficking. So it'll be perfect for our quality podcast.

How's it? These are my favorite ones. Holy, look at these numbers. Oh, my goodness. Oh, do we want to skip the chit-chat part this. We just go straight to talk about the deal part of it. Does anybody have any feelings they want to share? Well, no. You said it might be involved in

drug, and then I'm looking at the sales and the earnings numbers, and I was like, yeah, no kidding. It does look like that. All right. Let me go ahead and read. It's a lot of drops. Yeah, let's get right into this one. It looks pretty entertaining. All right, so it's a new business listing from website closers. And I think this is the first

time somebody's used clip art where it's like a lady in a VW bug with a top down, and like sunglasses, she's like looking over him. So yeah, the first time for that. So this is a technology platform for sale to expedite the sale of luxury items

that has projected 30% year-over-year sales growth, 28% margins, 3 billion in items launched so far. There is no asking price. You need to contact the listing broker. So sales are $127 million, and earnings were $23 million. So $127,000. $27 million in sales, $23 million in earnings.

I mean, website closers just have some of the most interesting deals because you're just like, what? You see him. Well, I'm always just like you had, like, I mean, I'm just going to say it. What legitimate business with $23 million of Veda, da, hires website closers. Yeah. Okay, well, that knocks them off the proposed sponsor list.

That would be like hiring me. Like, you wouldn't hire me to sell your $23 million ebon business. Like, there are, you know, that's not what I do. Right. All right. Website Glissors presents an innovative and streamlined technology platform tailored for purchasing and selling high-end commodities such as art, watches, jewelry, automobiles, boats, and various other luxury items.

The business broker takeaway. Our analysis of this business, I guess as a business broker, has decided just to add their own color here at the top of the listing. Thank you very much. Our analysis of this business shows that the value propositions present are strong for a buyer looking to enter this lucrative online space. We are excited about this business for three important reasons. Catering primarily to discerning clientele of means, yada, yada, yada, yada.

Its commitment to ensuring the highest level of security and authenticity, meticulously verifies the identities, the company is implemented a minimal seller commission and buyer premium, which is highly attractive to all parties. It generates supplementary revenue through shipping, handling, and specialized services, yada, yada, revenue. Revenue generation, the company derives revenue from four primary sources. Sales commission, it levies a 6% commission for the seller and a 6% buyer premium on the gross sales price. Additionally, sellers are responsible for fees and associated with insurance storage preparation

and other industry standard services. So 12% sales commission is number one. Number two, concierge services. This facilitates the sales process by securing escrow funds, covering expenses related to transactions, and so on. Fees are typically paid upfront using the escrow funds. Advertising revenue, management anticipates generating advertising revenue from luxury brand seeking to reach a fluent clientele, including the esteem names like Ritz-Carlton,

Rolex, and Louis Vuitton. Notice that they are not doing it, but they anticipate it. Yeah. They just slid that in. We anticipate generating. And then they get carry on the money. The company earns interest on escrow funds contributing to its revenue stream. So they sit on escrow funds and they collect interest, which in a world of five and six percent interest is not nothing. Management team in IT, the business boasts a management team with a proven track card of

success. They have whatever past success and app successful on Apple store and Google Play. All right, unique services. I guess we're doing the same thing again here. They orchestrate transactions with the premier concierge, handling wires, assessment reports, concluding the sale, blah, blah, authentication guarantee, price protection, and only site offering loans to buyers and to sellers. Once the company security, oh, they're going to go get additional funding through this initial exit process. They also have a New York-based reputable PR firm that's being paid, and an initial media blitz has been initiated. Consequently, the company's website has towards the top of Google rankings. The burgeoning online resale sector known as re-commerce,

so like e-commerce with an R in front, is currently one of the most dynamic markets marked by a flurry of IPO activity. Moreover, the company's adept management team possesses ambitious plans for significant expansion outlining a clear and comprehensive roadmap. Potential buyers or investors outlook stand to gain substantial returns on their investment, represented by website

clurgers.com, and then some ads below this that look like they were done in Microsoft paint. Okay, so do we understand what this business does? What do they not do? Tusha. This is, so this is a marketplace for luxury goods, right, for high-end commodities.

such art, watches, jewelry, automobiles, boats, and other luxury items. So this is, like, crudely, eBay for expensive stuff. This would be similar to the Real, if you guys are familiar with that. So the Real Real and,

other people that kind of look for try to compete in this re-commerce market, authenticity is like a huge part. Right? Like, you want to know that you're getting an authentic Louis Vuitton bag, you know, Birken bag, like whatever it might be.

They have to authenticate it. They have to stand behind it. That's the value that these types of, of things bring, which is that you're sure you're not going to fake. And if you still get a fake, they make it right. That would be entirely my question is, how are you doing those things? Period. I mean, this is a big business. This is this $23 million of EBIT. I would want to understand if that is real. I would want a Q of B so bad on this business, like, instantly. I wonder if like, is the 127 million? Is it gross merchandise value? Is this like the amount

that's been traded through their platform, and then the EBIT guy is the... No, I think they said $3 billion has been traded through the platform. Holy smokes. Why have these people hired website closers? This makes no sense. I'm confused about the profit margin because the commissions are 12%. You would think that's where most of the revenue is coming from, and yet the actual margin is like 18%.

So that would suggest they're making even more than that on some other sales chance. some of these other things that they're pointing out. But that math doesn't seem to add up to me. I would think that the margin would be closer to 12% or less rather than higher. Makes me wonder if the 127 is not GMV gross marketplace value, but it's actually net commissions and net revenue, not gross. I guess that's right. Yeah, that's the only in their defense.

and I'm trying to, I'm trying to, I'm trying to go full bill in the first three minutes about this deal. So that would be the end of their defense that maybe it's not GMP. Then the actual revenues from the sales of the products would be huge, if that's right. You know, like I'm just, the numbers are sort of. Well, but it's, they wouldn't, it's almost like they wouldn't recognize it as revenue, although they hold it, they hold it in escrow, but maybe they don't recognize it in revenue. They say three billion in items.

launched so far, which would maybe be everything that's available on the marketplace, total. Regardless of whether or not it's transacted. Yes, just launched. Right. I mean, I could see a need for this. You know, if you're selling or buying a $50,000 watch and it's not happening in the town that you live in or you're not buying it, you know, retail, you want somebody to make

sure that it's authentic. and you're probably going to use a third party. And if you don't have a guy who you're flying out to go buy the watch, then you need somebody to authenticate it. And then you're not Venmoing them the money, right? You want there to be escrow services in place so that both buyer and seller protected. I get that. But then like all the other stuff that they're talking about doing,

we're going to provide loans and we're doing a media blitz and like all this stuff. Where's the $100 million going and cost is what I'm trying to figure out between revenue and even up? I mean, it could be a huge team. Like, if this is a business with a, it's not an insane margin profile. If you have 127 million to revenue, it's plausible that you might have $23 million to be to die and you might have a team of 500 people and, you know, you're advertising for your marketplace to try to attract buyers and sellers.

And like, I don't think that is off base. Like, if this business exists and functions in this way, I mean, this is a big business. Just why in the world is it on website closers? I don't, like, that's the thing that is just throwing me for a huge loop. Like, this should be represented by a Wall Street and a bank that specializes in, you know, in marketplace startups. And it should be asking for a billion dollars. I mean, it should be priced at 10x rapid.

I mean, it's just so far from a website closure's deal. I mean, it makes me think that you're going to open, you're going to kind of pull back the onion here and go, oh, my gosh, it's a disaster. So I think this might be it, James Edition. I'm sorry. Okay, so here's the trick I did. If you find sentences that kind of sound a little odd in the listing,

you just go Google that sentence and see what comes up. And then so I googled this, technology platform, Taylor for purchasing and selling high-end commodities, there's Rwatches, jewelry, automobiles, boats, and various other luxury items. Like, that just sounded to me like that was copy-pasted from somewhere. So I searched for that.

And then this thing came up, James Edition, which is the world's luxury marketplace, that appears to sell this kind of stuff. Like they have 45 jets listed, cars. It looks pretty awesome. I wish I had a lot of money. Like a San Juan, Puerto Rico house.

I guess at 6% on a $50 million yacht, you don't need a lot of transactions for $100 million in revenue. Now, here's a lot of stuff, like a Hubello. How do you pronounce this? Hugh Blot, Hubello. It shows how unbousy I am.

I don't even know what this stuff's called. He lays. Who blows? Who blows this rollets? how do you pronounce that guy? Patac, philap,

who would be interested in that? Man, there's a lot of, I still tell us to be away people spend $15,000 on watches when you get a perfectly good

Cassio for $12. Yeah. That's not either here and or there for this podcast. Oh, helicopters. So, so let's also address the other elephant

in the room, which is, are these transactions legitimate? I mean, there is a massive, massive money laundering risk on this platform, right? Where you could have basically bad actors. This is a way to wash money for 6%, which has got to be like one of the cheapest ways to wash money. I would think in the world, right? Yeah.

Like, you know, I sell you a jet, you sell me a jet. You know, the jet has traded five times on the marketplace, you know, and now all of a sudden it's clean money. I don't even know how you mitigate that. I don't know if that's bad. Like, are you going to prison? Like, you didn't wash the money, but you provided a marketplace where people were washing money. Like, I don't even know where to start on mitigating that risk.

Do you guys have any idea? I don't know. To add to that, have you read about how much of these big transactions in the art market are just rich people using it as a way to move, like, money easily between jurisdictions without like the Chinese art market, for example, like it's hard to get money out of China. So they just like buy some art and they go ship it to the U.S. and then it happens to show up and sell two years later.

That's how you get $100 million out of China easily. And circumvent, you know, controls on currency. Right. And you don't, even if you sell a loss, you still got the money out. Yeah. You're happy paying a 20% Vig to Sotheby's. There is also a elaborate tax scam that I learned about last year, which is interesting, which I'll share with you guys,

which also is around art. and tax write-offs. So what you will see is there rings of wealthy people in pursuit of tax write-offs will choose a young artist who will kind of like become the Patsy, like the up-and-comer.

And they will start to go, oh, this person's art is brilliant. Like they'll start booking them at all these art shows and they'll buy a bunch of their paintings. You know, which for nothing because it's a new artist. And then you kind of build up all this hype around the artist. And then they start to trade the

paintings between each other to create precedent transactions to start to drive the value of this person's art up. And then once it reach a fever pitch, they donate the art to a museum and take a tax right off at the inflated value because you can say, oh, there's enough proof. So now you don't need someone to buy the painting for $100 million, but you need to credibly be able to wave your hand at a few other press in and transactions that were in and around that price with your buddies, and then you just donate, all the paintings end up donated to museums, and Uncle Sap takes a bat. Wow. That's pretty sad, but it doesn't surprise me. I think what there's a little, I don't know, a little hint as to whether this is truly legitimate in the supply of luxury goods and real estate

that's on here. Why would, you know, there's lots of better ways and platforms to sell luxury real estate than James Edition. And the fact that there's no shortage of luxury everything, including helicopters and yachts on here, is a little surprising on a brand that we've never heard of. And, you know, that sort of gives me an uneasy feeling. Maybe it is the platform that does the least diligence on their sellers. And that is their advantage.

That could be. Yeah, I didn't see anything on the front page kind of telling you about how your purchases were guaranteed. Like, if I was actually going to go on this website and buy one of those watches, that would be the first thing I'm looking for. I didn't really notice that. Maybe it's there.

We just didn't see it. But it would seem like if it's legitimate, that's what your profile, you're first and foremost going to tell everybody how you're legitimate. And don't worry, you're not going to be ripped off here. Yeah. So, Heather, to your point,

like, you would want to understand here if you're going to buy this. Why are the sellers and the buyers choosing your platform. Like what of, if you have a, a multi-million dollar home in Mexico or a yacht or a plane, you know,

like there are private aircraft brokers. There are private yacht brook. Like there are, there are realtor. There's already marketplaces for those. For all these things, right? They may not be online. Yeah,

they may not be super efficient. But they're mature and liquid. I mean, like there are, yeah, there are ways to sell all of these things. And so I really want to understand what is it that is drawing all, like if you're in the biopsychology,

how do you choose the list? it with this business versus calling your friendly neighborhood yacht broker. Right. Because they're all specialized items. I don't need a, I don't need a luxury place for a yacht, a helicopter, and a watch. You know, it's like the Walmart of luxury goods, and that's a little odd. But this one specializes in selling some under the tables, scammie, cartel-driven purchases at sales.

This is your group. Oh, man. I don't know. I got a lot of questions starting. with why the heck did they hire website closers? And which also gets to, like, why am I the lucky one seeing this deal? You know, there are so many more people who are qualified to be buying a $23 million of a dot two-sided marketplace and luxury goods than anyone website closed to talk to.

I'll give you Occam's Razor, Bill. Behind this is some scummy drug dealer shit going on, pardon my French, and nobody else would take the listing. That's Ackos Racer, that's what I think. But why would this person take the listing? You know, I mean, I guess I wouldn't want to, it's just a question I would have as a broker, you really want to put your name on this? It's a little scary. I'm not going to make a comment about website closers.

I will not comment on website closers. I have no comments about website closers. I mean, Heather, like under that line, you know, I've, there's business brokers who sell strip clubs and payday lending and all that. Fireworks company. So I hear what you're saying. But the thing, I mean, I would love to see, like, what are the last five years of financials look like on this business? Because the, I mean, they're saying they grew 30% year over year. So, okay, they were at $100 million last year.

You know, it looks like if we're right about who it is, you know, on their website, they talk about getting some outside investment and having some, you know, partners and investors and stuff like that. Can you imagine, I mean, can you imagine the adjustment? that if you're looking back through the financials, the stuff that you would find, you know, if you peek behind the curtain on even just normal businesses, you come across some really weird stuff and some really like, wow, that is, you know, completely immoral or unethical or just very much in the gray.

On something like this, where you're talking about huge transaction volume, very kind of, you know, concierge, we hold your hand, you know, yeah, we'll meet you in Mexico, you know, to receive the yacht or whatever different kind of concierge stuff they're doing. I mean, you could only imagine the stuff that is happening that is getting expensed. They probably want it adjusted back. Yeah, so I'll throw out one more theory, which is, and I don't know this is the case. Maybe this business is represented by a different sell-side advisor, and website closers has a plan

to draw you in as a buyer and get a buy-side fee or a referral fee from the actual sell-side advisor. Maybe they're just throwing hell Mary's here. I don't know. I don't even know are they authorized by whoever's actually selling this business. That could be another guess. Here's another version of this marketplace style for the ultra-rich, and they're even more, like, in your face, they call it billionaire edition, which I guess is what you call something if you

want to get somebody who's a hundred-billionaire. You're like, okay, we'll call it a billionaire. I don't think it's this one because this one's, this billionaire edition is really high on this like conchiorge type service. And it's only 500, $500 a year. I mean, it is kind of, it is funny if you do look at any business that seems to target like the ultra high

net worth folks, they all love this like gold, black and white like color scheme. And what's the name of the, What's the name of the YPO for like ultra rich people, Bill? You know what I'm talking about, right? It's like Tiger, Tiger 21. Tiger 21.

Are you guys familiar with this? Tiger 21. I've heard about it. Look, it's like, see what I'm talking about? They all like, like, oh, you're really rich. You know what you're going to like? Black, gold, and white as your colors came. We're going to make our whole website look like that.

So this is, Heather, this is an exclusive global community of ultra high net worth entrepreneurs, investors, and executives. So basically they want you to have 25 million in investable assets or something like that. Maybe they've, oh, they've lowered it to 10 million. So it's very pedestrian. Core people. 20 million in investable assets. I think one of the early tenants of Tiger 21 was that, like, it is a peer group.

You know, you get broken into smaller cohorts. But once a year, you have to completely, like, unveil your portfolio and let people poke holes in it and you defend it. That was one of the early things about it that I thought was really kind of. To show you how pathetic, San Antonio's been on the upcoming market forever, and freaking Winnipeg has a group. It's like, oh, man. Michael, this isn't your first time on the website.

Oh, no, they, they DM'd me once. They're like, hey, do you want to, do you want to start a group in San Antonio? And I was like, uh, no. Not that I qualify, but like, I was just like, oh, whatever. turn your success into a new kind of significance, helping rich people figure out what to do with their money. That is significant. Is that how I'm going to find meaning in life, Heather? But, you know, I'm thinking about a deal we did a while back.

I think it was something related to staging homes or something. And Bill, you had this line that I thought about a lot, which is like being transaction adjacent, or just being adjacent to a large transaction, the fees associated with something like this. or kind of not a complete throwaway, but hey, I'm selling a million dollar home. Yeah, it's going to cost me $12,000 to stage it, but I get my home sold or whatever. This kind of, you know,

it has that underlying dynamic, even if there's a bunch of iffy stuff going on around the periphery. The charging a 1% or 2% transaction fee on a $100 million sale is a big deal. It's the title insurance scam, right? Oh, it's just going to be a modest point-fifference. percent charge on your.

I mean, this is, I wouldn't call it limit to title. I mean, this is every Wall Street bank. This is ever, like, if you can shave fractions of percent on massive transactions that are, companies do massive volume, individuals only need fractions of percent to get very wealthy. Realtors, that, hopefully that's changing. We'll say. Yeah. Visa, MasterCard.

Yeah. I mean, the story I like most about Visa is they're the only, they're the only company that intentionally tries to make their financials look worse in their filings. Have you guys heard this story? No, that sounds smart, though. It's too, their business is so good because they have a monopoly on basic transactions that people have analyzed their financial statements and have caught them trying to make their, make themselves look less profitable.

We're really not making that much. Don't worry, everybody. There's no drug. Don't regulate us. Don't worry. There's no drug dealer margins over here. You don't have to worry about it. of this stuff.

All right, well, this is going, should anybody buy this? Uh, not me. I'm out. For that reason,

I'm out. That is a very interesting deal, though. That's not something you see every day. I'm kind of amazed that it even made into, like, the public, you know.

So that came from a listener and continuing on with our, our strategy of some of our best, our best listeners came from, our best deals come from listeners. All right. anything more from you guys all right we'll click stop there bye