Business Innovators Radio - Interview with Justin Cooke, Co-founder of Empire Flippers

Episode Date: December 14, 2023

Justin Cooke co-founded the company Empire Flippers, a leading marketplace for buying and selling online businesses.He’s also a co-founder at WebStreet, an innovative investment platform that pairs successful online entrepreneurs with passive investors looking for cash flow.Learn more:https://empireflippers.com/ | https://webstreet.co/Influential Entrepreneurs with Mike Saundershttps://businessinnovatorsradio.com/influential-entrepreneurs-with-mike-saunders/Source: https://businessinnovatorsradio.com/interview-with-justin-cooke-co-founder-of-empire-flippers

Welcome to influential entrepreneurs, bringing you interviews with elite business leaders and experts, sharing tips and strategies for elevating your business to the next level. Here's your host, Mike Saunders. Hello and welcome to this episode of Influential Entrepreneurs. This is Mike Saunders, the authority positioning coach. Today we have with us Justin Cook, who's the co-founder of Empire Flippers. Justin, welcome to the program. Thanks for having me all, Mike. I appreciate it. Hey, I want to dive into what you do and how you do it, but get us started with

your story and background. How did you get into the industry? Yeah, so my business partner and I worked for an SEO company out of California, and we were mid-level managers of the company, and they found a need to, you know, build some like back office team. And so we had from a previous business had experience in the Philippines. And so we effectively, as managers of this company, set up our own company where we created an offshore company in the Philippines to do kind of the back office processing for them. And that eventually led to my business partner and I setting up an office, moving to the Philippines, kind of setting up our company. And, you know, within a year, our previous employer had completely cut us out. They were going to do some financial difficulties

and cut us out. So we looked for something else to do. And we started building these small niche websites that made money with AdSense. So you can build these small niche websites around a particular topics and get them to make money, 50 bucks, 100 bucks, 200 bucks a month. We started building these. I need a place to sell them and there wasn't a good option. So we created a marketplace that we eventually called Empire Flippers that allowed us to sell these websites, these profitable websites we were building to people that were looking to invest in profitable websites and online businesses.

And we started to kind of create our own supply and then eventually let other people sell their websites with us. And they were making 100 bucks a month, 500 bucks a month. And that grew to where they're making 2,000 a month and 5,000 a month. And eventually they were able to sell them for $50,500 million. And our largest sale to date is just under $15 million. So we went from this small company building our own niche websites to being a business brokerage where we sold like just under $500 million in websites. Yeah, you know, as you were describing that, I was, I was reminded of, you know, the traditional business broker.

I own a brick and mortar shop that does whatever. I want to sell it. So I go to a broker. they come in, they assess it, they say you can sell it for X and now let's list it and get it sold. Well, you do the exact same thing for virtual and online businesses. And is that, do you have a process for at first establishing a value for the business? Yes, definitely. Just to be clear, you know, one of the terms of you're in offline and online businesses is that,

you're an offline business, let's say you run a laundromat, which is pretty popular and people talk about online. A laundromat, well, that requires local employees. It requires local knowledge. It requires location, right? You need to be or someone needs to be near the business, whereas internet businesses don't at all. In many cases, our sellers are Americans living in Bali, Indonesia, you know, or a British person living in Prague. So it really opens up what types of businesses you can sell and what types of buyers can buy the businesses.

Like our buyer pool is not limited to Sacramento, California. It's worldwide. But yeah, when someone's coming to sell their business, one of the first things they want to know is like, how much is it worth? And a lot of times they have a thought in their head. Like, I think my business is worth this much. And so a lot of times we have to like dissect that and say, well, my business is worth, you know, 2.6 million. Well, why do you feel that way? Well, because that's kind of what I want and, you know, it should be worth this.

And we have to break down that all of the businesses we sell are based on a multiple of profit or sellers discretionary earnings or however you want to say it. So if the business earns, let's say, $10,000 a month in profit over the last 12 months, it's going to sell for some multiple of that $10,000 a month profit. Typically, that's somewhere between 22 to 40x, the monthly net profit over the last 12 months. And is that going to be dependent on the industry? A little bit. I mean, that's kind of the basics. It's going to be based on a profit multiple.

And the multiples will be dependent on a lot of things. So is the business, is the trajectory growing? Is the income recurring? What is the kind of like moat around the business? What's the competition look like? And typically you're going to get larger multiples for larger businesses. So as you scale up and you're doing, you know, 100,000, $150,000 a month in profit, that's typically going to sell for a larger multiple than a business doing, you know,

three or $4,000 a month in profit. And for a lot of reasons, a lot of times there's a team that comes with it, sometimes even a management team. There's a lot more, there's more of a moat around the business. It's more protected or insulated from competition or it's already faced competition. So, yeah, there's a lot of things that go into it. But basically, it's going to be some multiple of net profit or SDE. So obviously when you are creating a marketplace, you are putting buyers and sellers together.

And, you know, potentially you start off with, you know, I own a business. I want to sell it. So I'm going to list it. But are you now seeing a shift of people that are looking to, you know, buy and sell? I mean, the name of your company is Empire Flippers. So does that connotate that I want to buy a company, do a little bit of polish and then flip it? Well, a lot of times a seller, once they've sold a couple of businesses and a lot of times sellers are like zero to one guys, right?

They, you know, build from scratch. They build a business. And over a couple of years, they sell it. A lot of times they have multiple irons in the fire. So they'll have multiple websites or online businesses. Once they've got a few of those sales under their belt, they start, not always, but they often transition into a buyer. So what they do is, you know, they have a particular skill set. Let's say it's SEO or Facebook advertising or whatever.

And they build these businesses on the back of that kind of like marketing channel or whatever. And they start looking on the marketplace and they see, wow, there's this business that's really poor SEO selling for $400,000 that I know within two or three years I can turn into a $1.2, $1.3 million business. why don't I take that on? I've made a couple million dollars selling my businesses. Why don't I take a flyer on this business that I'm pretty sure I'll be able to turn around the next couple of years. And so you see oftentimes we see sellers transition into buyers once they've done a couple of sales themselves. Yeah, I would suspect that you're going to find some people that come in and, you know, whether you're a actual turnaround specialist. but they've got, you know, kind of the eye for what are some of the low-hanging fruit come in,

polish this, tweak that, you know, eliminate doing this business practice or start doing that business practice. And they kind of, like you said, just kind of come in, buy it, do some of these things, six to 12 months down the road. Now let's flip it and see what the profit is. I would think that that is going to become a really powerful model that your platform is going to allow people to do because starting a business from scratch, from ideation to getting it to $100,500 million, that's a slow road. Yeah, once you've made some money too, it's much more

difficult to kind of put in the grind of like creating a product from scratch or service from scratch, like trying to find that product market fit and doing that kind of like on the ground hustle that's required to get something from zero to one. Right. Because you've already had some success you've got some doubles and triples under your belts like man do i want to go back to like you know learning how to swing a bat and i just i can't i can't be bothered with that so a lot of people will buy businesses that already have that product market fit right that already have some traction and are in a direction where they know how to make changes to it that will improve the business and that's actually you know a lot of how our business is successful is that you have this

disconnect between the buyer thinks and the seller thinks like a seller maybe they're selling for a bunch of reasons. A lot of times they're trying to take money from one project and put it into the one that that needs fuel on the fire, right, to grow. Other times, there's, you know, sadder reasons where they're going through a divorce or they're having, you know, problems with their business partner. Or in some cases, they just don't think the business can grow anymore, right? Like, they just, they're like, I've maxed this out. This channel is completely maxed. This business is as big as it's going to get. I might as well sell now to some buyer and let them deal with that consequences. And you have a buyer that goes, wow, I barely would bother with the business that's this small.

But based on the fact that they haven't done, you know, this Facebook strategy or whatever or TikTok strategy or whatever it is, they're like, they totally miss the bus on this. I know how to grow through this channel all by this business because they've done nothing in this area. So you have, you know, buyer and seller that have completely different ideas about its growth trajectory. And one of us would be proven right, right? Yeah. At some point, somebody is right, but that momentum has already been started. You know, you mentioned about helping the business owners who are looking to sell, kind of come up with a valuation so that they know what multiple.

Do you have some support or guidance for the buyer? If they come to you and say, I'm looking to buy a business, I'm looking for kind of like a real estate agent. You know, I'm looking for a three bedroom, two bath, and you can go, oh, let's do look in this direction. But with your buyers, are you helping them to, watch out for landmines or hurdles in purchasing something online because being a passive online business buyer, there's got to be some landmines that you must be aware of, right?

Yeah. So on the buy side, if you go to our marketplace, you create an account. We do KYC for everyone that signs up, know your customer. You can sign up and you can put in your parameters. Specifically, I'm looking for a business in this range, this type of business, and you can review the listings that we have available in that range. change in those markets. What's interesting to note is that all the businesses listed on Empire Flippers are vetted by our team. So we don't have an open marketplace where anyone can list anything.

You can just go on there and put in whatever numbers you want and whatever that's not like that. So all of our sellers and the listings go through a vetting process where our team verifies the seller that's selling the business, fairifies that the business is real, that the traffic and earnings are legitimate. So it's not guaranteed to be a good fit for you. It might not be the right business for kind of your needs or where you're looking for. I might not be in the right niche that you need. But in terms of making sure that all the

numbers are verified, that's something we do. Now, in terms of due diligence, it's always the buyer's responsibility to do their own due diligence. We run a platform. It's a vetted marketplace, a platform, though, to find listings. But ultimately, we're not, you know, we're not vetting each listing for your particular needs. So it's important for the buyers to do their own due diligence. On the sell side, we actually have a valuation tool that's based on the data from the thousands of businesses we've sold and gives a seller an idea in terms of what the range on their multiple will be. So if you plug in all your information based on all the factors that you have and you plug it in

honestly, you're going to get a range. You're going to get kind of the average range. You're going to get the typical range we call it. And then you're going to get the kind of extended range. If you're willing to hold that little longer and sell for a top dollar here's where you can get. If you need a faster sale, kind of here's what you can get. And both buyers and sellers can use that tool and plug in the numbers to get an idea on

what that range looks like. So it really gives both sellers and buyers a starting point in terms of like what the valuation should be and what the range should be in. And if a buyer sees a deal at the higher end of the range, they know the seller's willing to hold out a bit more. If it's in the lower end, maybe they need a quicker sale. It's really interesting. As a buyer, sometimes you want a business with more of a moat. It's more established. That's even at a higher multiple.

So it's okay to pay more money for a business, even in a higher multiple as long as you're getting more value. Now, I know that's convenient for me to say for the marketplace. I don't get sellers more money. But the fact of the matter is, if a business is selling at a lower multiple or cheaper, there's going to be some, I mean, it's a market, right? So there's going to be some inherent flaws or problems of business that make it sell for that cheaper multiple. So, you know, it's not always about getting it the cheap.

It's really about getting the best business for the best value. You know, and it reminds me of like in the real estate world, when you find that house to buy, you go get your mortgage. and you get pre-qualified and you submit your W-2s and pay stubs and tax returns and get an appraisal in the house. Well, you've created a kind of a sister company to help facilitate these sales. So talk a little bit about your capital company. Yeah.

So we have a company called webstreet.com. And, you know, this is born out of our customers basically beating us over the heads for this from us, right? So what happens is we kept running across people that had the means, but not the, the time or the skills to necessarily run an online business. I always use my aunt as an example of this, but my aunt had reached out to me and she, she's got some money. And she said, look, I like to get involved in this.

I'd like to potentially buy an online business. But I don't know the first thing about running an online business. You know, I've got the time, but I don't have the skills. And I told her, I was like, look, you know, there's not much. You really got to go get those skills. And they gave her a bunch of websites she can go to learn how to run online businesses, but like that's not really what we do. And so we realized there's this huge gap.

And there are people with skills, but they don't have the time. They're working 70 hours a week. And they don't have time to devote. You know, they need 10, 15 hours to this e-commerce business. And they just don't even have that if they want to spend any time of their wife and kids or whatever, right? So we said, look, is there a way we can match experienced operators with investors that have the money, but not the times of the skill sets, right? And so what we did is we created a separate marketplace called Webstreet where we pair experienced operators with these investors. Now, at Empire Flippers, you know, over the years, we've seen thousands of deals happen, right?

Buyers buying businesses, growing them and selling them for much more money, sellers, you know, successfully repeating business creation from scratch. And so we've got this, you know, unfair advantage of having all of these experienced successful operators, people who have run these online businesses. So all we need to do is pair those operators with investors looking at a passive investment opportunity to get involved in the online business space. And in many cases, for Webstreet, we have people like, I'll give an example. There's an SEO I know.

He's a well-known and does great at search engine optimization. But he has no exposure to the e-commerce space, right, to the physical product side of things. And he wanted to take some of his SEO money and invest in the kind of e-commerce side of things because that's not, that's a part of the online business space he's not exposed to. And so you have all these like entrepreneurs or executives that are like, look, I want to put some money in the space. I want a passive way to do that. And Webstreet was kind of the solution for that. Yeah, I love it. When you listen to what people are saying and needing, you know you don't currently provide it,

but you bring them together. And it's kind of like in the old days, the commercial, you know, that the person carrying the jar of chocolate, the person carrying the jar of peanut butter bump into each other. It's like, hey, that combination is awesome. So that is just really neat that you just are iterating and improving and just giving both parties. buyers, sellers, operators, the opportunity to come together.

And that is just a really powerful thing because we see the virtual world we live in. And if we can do virtual business, commerce, things like that, you're helping to facilitate that. So I just love what you do. And Justin, it's really powerful. If someone is listening and wondering about how to learn more and then also reach out and connect with your team, what's the best way they can do that? Well, obviously, you can go to empireflibers.com. And there you'll see the marketplace with all the listings of the business. So if you're looking to buy or sell the businesses, you can go there.

If you're looking to take a more passive role in kind of the online business space, then definitely head over to webstreet.co. And we can walk you through the steps there and get you started. Excellent. Well, Justin, thank you so much for coming on. It's been a real pleasure talking with you. Thanks, Mike. I appreciate it, man.

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