Ep 219: [Case Study] From Flipping Houses To Flipping Websites with Gerardo

Jaryd Krause:

You cannot buy business without the mindset, Gerardo talks about in this podcast episode. Hi, I am Jaryd Krause, host of the Buying Online Businesses Podcasts and today I am talking to Gerardo who is a Buying Online Business graduate who had the goal to sell his restaurant business and buy a content website, so he can have less stress and more income which h has now achieved. He has an incredibly strong story from leaving Mexico as a teen to building his way upto big investment and a better lifestyle and why he is going from flipping houses to flipping content websites?

In this podcast episode, which is super inspiring, Gerardo and I are going to talk about his background of work, why he decided to buy an online business out of all the things he could have chosen to do and has done. We also talk about ad-backs and multiples and why we could stop brokers strong arming us to high multiples and paying more for adbacks, and including a big portion of adbacks in the purchase of a site. We also talk about how much he bought the website he bought for, the motel monthly income and how he financed it. We also have a caveat here of not doing exactly he has done, unless you have the risk tolerance as Gerardo has. We also talk about the difference between flipping houses which Gerardo has done a lot of, he is also a real estate agent and an engineer and why he is moving into flipping content websites instead of flipping houses. We also talk about how long it took him to buy the business but also how hard it was to do and how long it took him to do his first due diligence? There is so much things we mention in mindset around his attitude and what he took from karate kid that he used towards buying a business. We talk a lot about mindset challenges that he has put himself through, that you can put yourself through which is important to train your mindset and there is so many examples there as well. This is such a valuable episodes, it is one of favorite podcasts episodes because Gerardo is a high achiever, he has so much to share, he has so much good energy and so many little idiosyncrasies that are super beneficial for you to be learning as an investor in buying your first business online. So, you are going to love this.

Before we get stuck in, we are going to be talking about due diligence a lot in this podcast episode, and I find it super important for you to have help with your due diligence, so get my framework, it’s what I have used and it what all of our clients have used to go away in saving millions of dollars and in making millions of dollars through buying online businessesand you can get that due diligence framework for free at www.buyingonlinebusinesses.com/freeresources.

Now let’s dive in and chat to Gerardo.

Do you have a website that you might want to sell either now or in the future? We have a hungry list of cashed up and trained up buyers want to buy your content website. If you have a site, making upto $300 per monthand want to sell, then head to www.buyingonlinebusinesses.co/sellyourbusiness or email us at [email protected] because we will likely have a buyer. Details are in the description.

Gerardo! Welcome to the podcast.

Gerardo:

Hey you! Thank you.

Jaryd Krause:

Thank you for coming on, I am excited for this chat, it’s been a long time coming.

Gerardo:

Yeah, I know. I am sorry it took me a while but I am here.

Jaryd Krause:

No no. We are here. It’s just good that we get a chance to chat about it and share your experience because you have done a lot of work like you out of a lot of people that go through the course, do a lot of work, you are a hard learner and hard worker and I appreciate that. So I wanted to pick your brain as to why you are a hard worker and what are some of the challenges you came up against and what advice would you give first timers but before we dive into all that juicy stuff, why did you want to buy an online business? What were you doing for work previously and now? And what do you looking to gravitate work towards?

Gerardo:

Definitely, and before I start, I want to make a paid commercial, Jaryd paid me, I was kidding. I just want to tell you thanks man, that’s why I am here because I took the course, honestly I was one of those people who were skeptic, when I see some interview and feedback, this must be a friend of his or you know I am very skeptic but I just want to give some feedback that I truly appreciate the work that you put in. You are truly interested in helping people out and I got to say it’s not easy, it’s simple, easy means no effort, what I have learnt is that it is a lot of effort, it’s not easy but it’s simple, you just follow the blueprint. I think sometimes, we or people in general say I have got a coach or a mentor and he will just do for me and share the secrets, cookie cutter and I am done, it takes a bunch of effort and it’s not easy, and the whole reason I wanted to schedule this to give back to you and your community because not all courses are truly helpful and I have taken a bunch of courses from podcasts and everything trying to learn, I have done some courses on udemy but none of them really materialized into making money but this one was something that now I am making money so that’s why I am happy to share back to you and your community and I just want to tell you thank you.

Briefly, on the background I am a mechanical engineer, I was born and raised in Mexico, when I turned 19 I moved to the US and I was initially working at McDonalds and Walmart, and that’s why you guys can tell the accent as I learned English when I was 19 years of age from zero. At McDonalds, I can remember a bunch of funny stories understanding what a combo means, no pickles and what do you mean? It was funny. Then I went to college and started mechanical engineering, I studied as International student because I wasn’t UCDC or any of that and three months later after I started my father passed away, so everyone in Mexico say that you got to go back to Mexico and you will not make it and I said I am going to try, if I fail at least I gave it all and I went all the way to Bachelors and Master’s degree mechanical but always wanted to have my own business, but as I was in US as an international student, I couldn’t just live off my parents. My mum was in Mexico so I needed a job so I had to build my own process, I just couldn’t say okay so I live in my parents garage and help build a business and not pay rent so I had to figure out a way to make money and one of them was I going to get a job and I am going to get a job and save money and graduated and worked for corporate America a little bit and I started doing like real estate and flipping houses and in 2015 I got laid off from Oil & gas and bought a restaurant, I have had it for eight years and I didn’t buy a business, I bought myself a job, so for those out there thinking I am in restaurant, they say friends don’t let friends buy restaurants so its way, way too much work and very little profit especially with internet, if it was 1980 and 1960, you would be like lets figure out a way to make it work and you can make it work, it’s not about not making money, it’s about return on investment of your time and money.

There are better options out there, you can make money as a gardener and you can make money as a painter, it doesn’t matter, right? What matters is how can we make money with least amount of effort, how can you be smart about your time. So I was in the restaurant thing and I was in real estate and all of them were too much work. And by now I had four kids and I got a 6 and a 4 year old and twins of ten months and I was like I want to be with my kids , I don’t just want to work, work, work and be with them when they are of sixteen years of age so what can I do? And I think I started googling online companies, own businesses, I don’t remember exactly but I think I came across your podcast or newsletter. I was listening to a bunch of podcasts and I reached out to a guy from Efy International in Vegas and he bought a website and I actually think he is part of your community now, but I do remember I gave you the feedback and I wasn’t a member of your community and you were answering my questions and I was a part of your newsletter and you would send me newsletter and I would reply like hey, what do you mean by this and asking you questions thinking he is not going to reply, I am not a paying member so he is not going to take the time to respond and you were replying to my emails and I think I emailed it that I appreciate you taking the time for responding to my emails so I felt like okay I am going to join and I joined your courses and everything .

So I think the short answer is I got into online businesses because of all the mistakes or all the learnings I got from the physical world of brick and mortar and the fact that they take so much work and so much effort and the margin on my restaurant, a restaurant makes 10-15% average and its crazy hours and whereas an online business, depending on whether its content or ecommerce, you can earn 90-95% working from home anytime, so it was a no brainer and it was due to a bunch of mistakes, that honestly I don’t think I would have appreciated so much or this much, if I had not done so much of all these other things. If this had been my first business, I would have been like that’s cool but honestly the appreciation is not the same after going through all these mistakes and hurdles. That’s how I jumped into it.

Jaryd Krause:

Thank you so much. There is just so much to unpack in what you have just said, and the fact that you joined, I remember you emailed me saying that I am only going to join because you replied to my emails and they were helpful and then you joined and you trusted the process, you worked really hard and I remember when you started sending us businesses saying is this actually fake because I can’t believe this content business is making this much profit margin and is this actually real or am I going to get scammed here, like it was hard for you to believe. I remember this because your background is in restaurant business and its super funny you mentioning this that friends don’t let friends buy restaurants, I know a bunch of people whose goal is to one day start a café or run a bar and I am like, you can buy one and it sucks, imagine having to start one and how hard it is going to be and the failure rate of it and you know hospitality is a rough game, even now some of the stories you are telling me as you are exiting that business, it sounds like a rough business model. It seems to me your goal is to not to just get out of the restaurant business but working hard and being able to spend more time with your kids, right? How old are your kids?

Gerardo:

So, 6, 4 and twins are 10 months old and we are doing the home schooling too as well so my kids are not going to traditional school, my wife and I are educating them and we want to give them a real life and we would like to travel as well, we want to be like nomad families so they can learn about trees and go to parks and all the countries and understand that wifi and malls and chick fillets is not the world, the things out there are different, so get them to learn about real life experiences and also having a quality of life and I think there is a phrase, living your life by design so design your life but design right, and travel and be able to like if I want to work out midafternoon, right now I wake up around 4.30 and 5 in the morning and I like my routine but what if hey I want to do my workout midday, why not? So, you can do your workout and take the kids and have more quality time and again I don’t mind working hard, I just want to make sure it’s a smart, I just want to make sure I am not inefficient and I want to optimize my effort and I always tell people that running okay, you can go run with boots and suit and a jacket and your running of course and exercising but you are o inefficient because you are running with boots not tennis shoes, and not the right shorts and right pants and you still have to put 150% effort to get 70, 80% back and you might get injured as you don’t have the right tools.

So it’s the same if I want to do 5 hours of effort for my business, so I want them to be almost 5 hours of almost no inefficiencies whereas in the physical world, going back to restaurant and real estate, I might go and plan for that restaurant and we are going to do xyz and then I got a call saying, like I was telling you before we got started, that they cut the power so some thieves tried to steal the copper wire and they left us 5 days without power and now your whole plan goes to drain because now you have got to figure out how to get the electrician. You have got to put in so much effort and all that effort is not moving you forward and you are in the exact same spot as you were yesterday, as now you are trying to fix all these things and last week one of employees just quit, she didn’t show up and just quit, didn’t call, didn’t answer my call or anything and she just quit, so you got to work super hard just to get something back and maintain the restaurant.

When I work hard I don’t mind having a day off but that day if I invested 5 hours of my life on my content business but they were like 5 solid hours; I did some articles and I cleaned it and that was almost no losses, no proprietor or maintenance activities on side.

Jaryd Krause:

That’s the difference between when you buy a business model best suited to your lifestyle goals and your financial goals, right? Because sometimes it can be different when you buy an ecommerce business or you are buying a job, not all ecommerce businesses are jobs but there can be more work involved to keep the businesses running versus content sites most work is growth activities typically.

Gerardo:

So I said if I can touch it, I don’t care, I don’t want it, so that’s my view on ecommerce, I am not saying it’s not profitable but if it’s something that I can touch it or feel it okay I am not interested, so that’s why I don’t like ecommerce I don’t want physical products and I don’t any of that.

Jaryd Krause:

Was that your goal when you came into buying an online business, did you have a business model that you wanted to choose or how did you come to the arrival of a content website? Yea I remember us talking through email about it but how did you come to this decision?

Gerardo:

I started very down the road, I am interested in SAS software process service, but I don’t have a background in the software and I know you can hire this technical guys then they can take care of it but if I have a technical guy that manages my software business and this guy/girl quits or dies or disappears somewhere, who is going to do it and how do I start from scratch but in my restaurant I can literally do 95-100% of what everyone else was doing, I will be probably the slowest one, I have a bakery so I will be slowest baker ever, we make sandwiches, pizzas and salads and I will be the slowest one but I can still do it. I can do everything they do, I know how to do it, I almost never get into it but in case they don’t show up or are busy or something happens, at least I can do it.

I have the same feeling on software, I don’t intend to be that technically savvy but the fact that I don’t understand it for me to explain it to someone else I hired, makes me doubt it. I am not too confident with it, so I put the SAS idea, not eliminated altogether, I put it in the parking lot and I am going to do all these other things first you know the content and ecommerce was out of the line like right of the bat because of the physical products and lower margins and dealing with distributors, products and amazon, it was just a big no. SaaS is in the parking lot right now and we moved to content and that’s why I started cracking and I have a guy who writes the articles and stuff but I am lucky if he doesn’t show up or disappears and I understand it, maybe I won’t write it or I will if I need to, but I can explain it to someone else that this is what expect from you and this is how I want it so it’s easier, you know. That’s what I went from that to content.

Jaryd Krause:

I love it! So when you first joined you just started devouring the content, I remember you went through it all very very fast and then you started doing due diligences, what do you think was one of the hardest part of the whole journey, from starting I am going to work with Jaryd and Bob community and the cost to buy a business to you owning this business that you own now, what do you think was the hardest or couple of challenges you faced that will be important for others to know about?

Gerardo:

Getting the discipline and to do the due diligence and being the white belt in a totally new industry and business, there is an uncertainty I am not going to lie because sometimes we become black belt in a field and we don’t really want to become a white belt in something new, we think oh we are so good at being an architect or a doctor and oh man, starting from scratch about content sites or something else is sometimes difficult and why do I have to go to all this trouble, so doing the due diligence in the start used to take me, I think, around 3-4 days and honestly I had no idea what I was doing, I want super discouraged, I was like what am I doing, like I didn’t understand it, I was following your template and I was okay, I would check the box that says traffic but I would also be like I don’t understand what the heck I am doing? I am just going to send it to Jaryd and he would tell me if it’s good or bad. I was so frustrated because I didn’t understand the language, it was solely new language and terminology and it would take forever and it was really difficult.

It was difficult because I was like what am I doing and I couldn’t even tell what a good thing versus a bad thing is and my brain kept going back to the physical world, like in the restaurant industry just by looking at your sales, I can tell if your food cost is too high and if your payroll is too low or if your rent is high, just by looking at the numbers I can have a good benchmark whether you have alcohol or not, I can tell but in this thing I was like man this thing is moving too slowly and I felt like I was going nowhere, I didn’t want to do it, I was dragging myself through it and I thought okay I will just put in the work, doesn’t matter the results, doesn’t matter how it looks, follow the template and do it and send that to Jaryd and do it again and to Jaryd and again and then you would say this is not good because of xyz and I would be like what do you mean? I don’t know what x means but okay he is the expert, I will just shut up and listen and move on and do the other one and I was so eager to get one, I guess many of us want it now, I don’t want it tomorrow, I want it now and I wanted the money today. You just got to be patient and do it over and over again.

Jaryd Krause:

I have got to say you did it really well. Because what I tend to do is I tend to slow people down so that they can speed up and a lot of people, I don’t how you were feeling but I knew that you took the advice that yes this is what I need and also at the back of your mind you are so frustrated that this Jaryd guy is slowing me down but it’s actually what you need to be able to get results e.g. if you had rushed off and bought one of the sites, there were so many sites that you looked at that were not great, you could have rushed off into buying another thing like a restaurant, that would have been handful or not meant for you. It is frustrating because it’s kind of like what you said in the white belt attitude is you need to go through the disciplines, you need to learn and go through each of those different stages like we have different stages that people get to when they achieve different levels of due diligence, and we have different things like awards and stuff like that you have seen within the community and it’s frustrating just to get to those milestones but if you try to go from white belt to black belt you are going to get your ass kicked as soon as you get into a fight with a black belt because you haven’t done the training, you haven’t got the initiation, it’s the same when you buy a business, you are just going to let it crumble.

Gerardo:

And I will be honest, I made that mistake with my restaurant, I didn’t get a mentor, I was 32 years of age, I was being laid off my company, I wanted a restaurant because in mind I was doing okay in real estate, I wanted to be a business owner with employees, I don’t know it was crazy in mind, but with employees and whole nine yard and I overpaid significantly, I didn’t even use a broker, it was an older Asian owner who had it for a long time and he asked for $330K and I said yes and the thing was honestly under $200K and right now I am under contract, ia m selling it for $145K and I am losing almost $200K and I have had it for eight years and its not like its doing bad, we have renovated and we put it on uber eats but it’s the demand, there is low demand and so many restaurants out there for sale.

Restaurants are, you know, plenty profitable businesses and some of them just sale for over millions and everything, but this one I mean the failure rate is super high. And my point is at that time I did something to enter, I rushed into it, I didn’t get the evaluation and it was honestly my mistake and at this time I was reminding myself of that mistake a while back and I was like slow down, you messed up once, you don’t want to mess up twice, and if you do this twice, then you are dumb ass. Just go back and get a job again. You are doing effort and you do the mistake you did a while back, then you shouldn’t even be here and so I was like I am going to do it a better way, I am going to get a mentor, bought a membership and did the work, did due diligence and had to let, I mean nothing to that look decent and got eventually under contract and I am like that’s okay, keep moving keep doing, so yes I did that mistake once that’s okay, didn’t want to do it again, that’s why I listened.

Jaryd Krause:

Great work. A lot of people ask and I want to ask you, how long did it take you to buy the business from starting the course to buying the business or joining the community to buying the business? The time frame means nothing, absolutely nothing and I want people to hear this because a lot of people join the community and they give themselves strict timelines that they need to buy business by X dates or within certain time frames, and when they don’t do it they feel like they have failed themselves whereas we shouldn’t be measuring the time frames, it’s the inputs that we put in, right? Now, I know you have a family and you have a very busy life with training and you also have a restaurant and flipping houses, you do a lot, but you also get a lot done you put lots of input in, So how many due diligences or how many business did you look at before you bought the right one? And what was the time frame from you joining till closing in on this deal that you bought?

Gerardo:

I think I did probably 30 or high 20s due diligences so considering the first one taking me 2-4 days to do, the whole process took me roughly 6 months. I think everyone is different and the thing that helped is the back end I had as a business owner so you can translate a little bit of the info, e.g. you know you never talk about this, the brokers will write off some expenses, like tis site makes $200,000 a year and the expenses were $20,000 but they add back $10,000 content creation because they feel like it, I would talk to you and you would say talk to the and ask why are you adding back that number as if it wasn’t an expense, content creation is an expense.

< b> Jaryd Krause:

Its pesky, you are right, it’s an expense, it’s necessary to keep the business maintained not just growth, the more content you put the more it’s going to grow but if you don’t put any content in or update any content, the site is going to go backwards because google and SEO is involved in things so it’s absolutely necessary, absolutely. I think any SEO and a lot of people in content game are going to agree with this so we have this pesky fight of ad backs. Some ad backs are damn set legitimate of course but what was my answer to you with this content expenses? Do you remember what I said to you around how to handle these?

Gerardo:

I don’t remember exactly but I think it was around the lines of I wouldn’t do that myself is what you said, I think that the broker is trying to make the business look more profitable and may be someone without experience it looks okay but since I own a restaurant and some says I cannot sell you my restaurant until by the way I want to add back a $100,000 in food cost and i would say dude, food cost is part of the business, you cannot tell me you don’t need the food next year so your business looks more profitable. So then I would say could you expand on that, maybe I forgot.

Jaryd Krause:

Yes, typically I reserve this for paying members, like I reserve some valuable stuff for paying members but because this is an important discussion in the space and if more of us accept these ad backs, then it will become more normal. Unfortunately, we have got a lot of people who buy a business based on a higher multiple or based on ad backs being included and they are uneducated so they would be it but that’s not where the markets’ at. They are increasing the value of these businesses and the multiples because they are uneducated which means us that are educated find it a bit harder to get into the market and buy deal at a valuable price and a good price because we have got these uneducated buyers that are throwing money at it.

The reason I share this is because we can fight the ad backs and the multiples and all that sort of stuff together, I am on both sides like I buy and sell businesses but I am not just like here that’s all the content I spent on and not include that as an expense, I am a realist and I like to be fair here, you can negotiate your ad back and your multiples and that’s what I said to you and that’s what I say to a lot of people as you can say hang on a second this is a necessary expense, you know it, I know it lets meet in the middle here or lets have some common ground at least so I am not paying all the ad backs which I don’t think is fair, lets at least meet in the middle. The more people that buy businesses based on this the head of ad backs are, this list of that and this is the list of price of business, the more uneducated buyer would do that, the harder it will be for educated to get a great deal. So I find it, it’s really valuable for people to get educated for the market and for themselves and that’s what I would like to mention to people with the ad backs is that everything is a negotiation in business, everything is a negotiation.

Gerardo:

Definitely, and another thing while looking at the sites, I don’t think you ever or I speak for myself, I never got a 100% confident like in case people say I am going to wait till I am like 100% possible that it’s the safest investment ever, I mean nope at least not for me, I don’t think anyone would buy or make an investment until they are like 100% confident. I think you can reduce the risks but you can never eliminate it, even having a job is risk as you can get fired. Just deciding to walk out of house every day is a risk, you can get hit by a bus so I never got 100% confident, I was still hesitant and nervous and honestly as of today I find it difficult to believe I own a business that I cannot see or touch, I can see it but I find it difficult to migrate my mid from tangible business world to intangible. And even when I bought it and everything, I was probably 80-85% confident but it was just one of those things that I think this is it and it checked a bunch of boxes and make you feel good, ask you and get opinions from different places and that’s when I jumped in.

And a thing I call it a muscle of the risk, I think is you work that muscle to do a thing so well , it has experience. I talked to my friends over in real estate and they have these jobs and very safe lifestyles and they want to go from that to flipping houses and I am like dude you can do it, anyone can do it but your mind is not there yet so why don’t you buy a house that is moving ready, rent it out tomorrow before you can get that renovation so at least you started working that muscle of risk so you can take high risk little by little. In my case, ever since I left my corporate job 7-8 years ago, the restaurant and I lost a lot of money elsewhere that I had my muscle of risk, okay this is risk, it checks most of the boxes if not all, I do 90-95% of boxes and you say it’s okay, I think you were pretty neutral, not showing too much emotion; positive or negative, it was like man look at the numbers not like holy hell this thing is bad man, don’t do it or If its good, you weren’t like oh dude just buy it right now. You were like hey look good, I had to make my own decisions I guess I was still hesitant and nervous and not 100% still went ahead and did it and so far so good and we will see.

Jaryd Krause:

That’s great, I typically don’t get emotional about businesses because we see so many, there was this one case where one of the guys in the group, Micelo presented a deal and I was like wow this hasn’t sold yet, why didn’t it sold? I got excited about it and I didn’t mean to, and then I got him excited about it and then he just went back and the good thing is he had bought property before or invested in multiple things, he would buy multiple businesses and he just said ok fine I won’t go in on a high price, I would stay at Micelo price even though we both think it’s really good and the broker tried to get him up to bid against himself and is aid to him you can do that, a lot of brokers say we got another offer and you are going to have to pay X amount to get the deal and people who are new to this would be like I have got to bid that amount but he was like how do I know if that was true and stick with your valuation so anyway he got it for right price and it was a good business but it’s really important to stay non emotional, and if you do get emotional about it like I did at the time even though that wasn’t the business I was looking to buy, is to come back to go hang on and lets use our logic mind here because that is how we should invest.

Talking about flipping houses and your friends that want to get into it, and you have been flipping houses for a while now, what are you going to do more of? Are you going to continue to flipping houses or are you thinking about flipping businesses and what’s the comparison? What do you not like about flipping houses that you can get from flipping businesses or online businesses?

Gerardo:

On the flipping houses, the human factor, matrons are on any businesses the hardest thing to control whether you sell sandwiches in a restaurant or you sell houses, humans were so unpredictable and even when I was working as a contractor I mean materials may go up in price and because of inflation is very barely as difficult to have people that have same exact work ethic and goals that you want, so for now on my next approach, I jump from ideas and businesses and I don’t know what’s going to happen in 5-10 years from now, for now I want the businesses where I depend least possible on people so that way I can make my own decisions, my own call and if I mess up, its by my own call but I don’t want to depend on people.

At least that leaves me more inclined towards online world but I am still a real estate agent and so I am still used to do real estate deals now and then, that’s as a realtor but not as an investor, may be when I am super down the road and I feel financially stable and I have money, I may become like a passive investor, just lending money to people who are actually doing, I have actually lent money before called hard money lender so you become private money lender that are actually flipping houses, need the financing and you can actually lend money to them, it can be 11-13% for like 6 or 12 months and that’s like technically passive and you get the note, if he defaults on the house and its foreclosing and you can keep it. So I would stay more into the online world, I am also working a little on software but that’s mostly for taxes and sales taxes and stuff but again its mostly software and I want to try now to stay within the online world, so may be buy more content sites, I will work on this start up and on real estate side I am just keeping my license active, may be just for friends and family or maybe I want to see the houses and when I need it, I will use it. But no more flipping houses.

Jaryd Krause:

Do you feel owning an online business is easier than flipping houses?

Gerardo:

Hands down and the only challenge I find and I think it’s in my personality is that I am very hyperactive so I can be outside, I thought I told you I already done two Iron man Triathlons that’s like 240 kms and 140 miles and training and I can but you make me sit down and meetings and work, I mean I can fall asleep, I can go through coffee. I kind of built the muscle of sitting down on the computer and I am working on my content and I love it and I am passionate and grateful, now the biggest challenge is to get myself to be now you have got to learn, like I am learning to take breaks at the computer, it was like 25 minutes and get out otherwise I would fall asleep and I feel I have like ants I want to move around and run and do something but I have got to sit down at least one, two, three hours but your answer isi find it way better, enjoy way better, I can work whenever I want to, enjoy my coffee, like I truly enjoy.

I think its because I have done so much of the other things that makes me appreciate it so much like I wouldn’t have appreciated it as much if it had been my first business 8 years ago I will be honest . Sometimes when you got to the hard stuff, like you said you were doing plumbing isn’t that what you said was your background, so like going from being a plumber to working on your computer for you to also something night and day, now you are on your computer, you can travel you can surf and I don’t know if you felt the same way but I don’t think you would have appreciated it if that would have been the first business.

Jaryd Krause:

If you understand to appreciate then the all you get, the more you can appreciate. I mean yeah I still to do this, quitting my 9-5 job as a plumber is my greatest achievement I believe because that was the hardest one I had to overcome. Now, with more money, time and resources in business, I can make these moves and do things that are less hard and less stressful so I still appreciated that back then but now it’s really insuring I keep that muscle built up and appreciate where I am at.

So, a lot of people will want to hear, I already know, the details of the business that you bought? You bought a content site, feel free to share anything you do want and anything you don’t want reserve for yourself. How much did you buy the business for? Rough figures or how much is it making? What were the multiples and what were the components of the business that you liked about business and why you bought it?

Gerardo:

Within the content sites, I learnt from you that there are different fields; there is the affiliate, the direct advertising, display advertising, the one that you recommended the most and I agree and I like that one as well were display advertising is more than 90-95% or 85%. I think or something where you had mostly display advertising and very little affiliate and very little anything else, so you know this one makes I think up to 90 or 95% of mostly display advertising which I think is good, so mostly display advertising and a little bit of affiliate but not so much, and I bought it. It was at first the numbers people will think oh man, but this niche is in pets and I also learnt you want to stay within pets, babies because its ever growing content, and I am not sure your audience already knows this or not, but if you get a site on technology it’s going to expire in 6 months but if you put a post about babies about how to potty train them that content is going to last forever, so that was the criteria pets and babies, mostly content so diverse content and its honestly higher than what I expected it, it cost me roughly around 572 or around that number, and people are going to say oh man you have got a lot of money and I don’t have that kind of money so that’s not me but I will say it that I don’t know if I am right risk taker or I am stupid. I take huge risks and like I mean huge and some pays and some don’t and that’s my personality. I don’t have the money and I didn’t have it, I got so many loans, I got a loan from bloopers and I took all my saving and my retirement, and that’s not good for someone with kids so that’s just me, I am not saying do what I do, but that’s just me, I am all or nothing. And that wasn’t my target, I wanted to get something way smaller but I just liked that and numbers were good and everything else just said and sometimes the universe.

Jaryd Krause:

I think we should put a caveat on this, I would never ask somebody to go away and put and get that much finance unless they understood the risks. I always tell people you need to understand the risks and if you are comfortable with the risks meaning that you are open to taking on that risk then you can go ahead with it. You have a different risk tolerance to most people, and then we would recommend that not everybody should go down this route, what Gerardo is doing. Because you are a hungry man and I appreciate that and you will take on more risk than I would take and it’s cool to see if that’s what you are open to.

Gerardo:

Yeah. So the multiples was 43 or something and that might mean that business makes the 11-13 grand a month but and that’s a big but 80 if not 90% of that in the first year, and this is going to sound dumb, is going towards payments, I got so many loans, used my retirement and everything so I told my wife I am selling my restaurant so hopefully some of the income from my restaurant, I can put it towards the payments and debt and I will probably be using this year my real estate license so that we can live off real estate and not the business. So technically, this business will probably pay me almost nothing the first year because I have got to pay all the loans, and I will not be able to pay off all of them but the biggest one within a year and then it will free up a lot of cash flow. Another thing that I learned and it was probably a big learning and it was a dumb mistake is that I didn’t know that content website; media wine are net 65 so they pay you 65 days later so your first month they pay you 2 months later and I didn’t know that, so we closed in December and I thought cool I have got this money coming in and I will get paid in January and then I am like when do I get paid and they say its net 65, so I bought it in December and I don’t know when this podcast us going to go out, its February and I still have gotten paid anything yet so I will get first pay checks sometime in march, so I had to tell that to one of the lenders because they didn’t know that either. I was like listen dude I know your payments started 1st of January but listen I have no money like I am serious, I emptied everything I had, my stocks, my retirement, I cannot pay you back, can you wait for a couple of months?

Then they waited for a response that man we cannot wait for payments for 2 months, so like charge me 2000 or something but make your payment, so right now I am just ragging up my credit cards, I have got business and personal and right now I am just flooding them because whatever cash I have left is for the mortgage of the house because you obviously cannot pay that with the credit cards so for now I am putting bunch of my payments on credit cards until I don’t start getting my payments. Some people are like, dude how are you able to go to bed and sleep peacefully with 4 kids knowing that you have so much debt, I don’t know man I think it’s my blood type or I don’t know what’s going on.

Jaryd Krause:

It’s probably because of your background, I would say and your willingness and your hunger and your drive is insane.

Gerardo:

Crazy I know. When I did my first iron man triathlon, everyone was like how many triathlons have you done and I was like none, this was my first when I did the iron man, were you a runner, swimmer or cyclist? I was like no! I learned to use my bike, I borrow bike to do a half triathlon and I just jump into stuff and figure out later, I don’t recommend it because I make a bunch of mistakes.

Jaryd Krause:

I don’t recommend it either, everybody listening, this isn’t our recommendation at all. Through this journey you have made a lot, just through you learning to you leaving Mexico, all things that you have learned along the way, you had many mistakes, just like this restaurant business but you have been learning from them. A lot of people take risks and it won’t pay off and they don’t learn from their mistakes and they may completely give up on everything they want to achieve in their life, for you if this turned out it didn’t work, you would come back kicking and screaming wanting to make it work in another capacity whereas most people don’t and that’s a another massive reason that it’s not a high recommendation at all because not everybody has that like you have.

Gerardo:

the title of this podcast will be like, “listen to this guy what not to do when buying an online company”.

Jaryd Krause:

As we wrap this one up, what would be the advice you would give to somebody, because your journey is you went at it and you did a lot of due diligence and you did more than you said as I actually mentioned in the podcast because we track all that stuff, you did a lot of work and you were very hungry and you learned a lot of lessons along the way, what are some of the advices that you would give to somebody thinking about buying a business or may be thinking of joining the community or thinking about going down the same route as you did?

Gerardo:

Have you watched the movie “the karate kid”? and how he was being taught some skills that looked like totally unrelated like cleaning the fans or putting the jacket on, at first its totally unrelated but eventually it all connected, so my approach for tips on buying business are one is to start working on sporting goals and challenges it could be fitness, speaking in public, things like that might be unrelated to business, like if you don’t have the risk tolerance yet, starting these risks outside while you have a job may be. When you are buying a business online, you want to do the work and everything but on the side you are working on the muscle of risk tolerance like maybe I don’t like the speaking part, you know what I have done, once I went to do standup comedy and I don’t have it but I just went to do it because I had to check a box, I went to a club and you got to wait in line and I was the last one I think you know and I did the standup comedy and there were like five people there and you just telling jokes for like five minutes but like find ways; go to Walmart and talk to the strangers like all these challenges on the side to start building the risk tolerance, sign up for 5K, 10K to support this and on online business just do the work, there is no short cuts, that’s the way just do the work. I would say the effort that does get easier and in the end I book mark, I end up bookmarking all the pages that I needed to do the due diligences so I would just click click and click and open 10 pages at once and I would just see what is the traffic, what is the domain rating and all these things and many due diligences never got to you because I was able to dissect them myself, as I was doing it an di would think I have caught this an di have caught that, it’s not even worth it to bother Gerard with this one so some of them wouldn’t even pass my own filter.

So at first I would send youall of the ones I would do but eventually I was like sending you 1 out of 3 or 5 because I would kill it myself before you got that file like no this isn’t good, and I was getting like faster and faster but it is one of those things where you just get in and do the work and then eat the frog, like get to it the first thing in the morning, what is it that thing you hate the most, do it first thing in the morning, like wake up early in the morning, I don’t want to due diligence, do it first thing in the morning before your work, before your anything and it just gets easier. So get there, do the work over and over again and eventually it gets easier and just be grateful and discipline. That’s it. Simple, not easy.

Jaryd Krause:

I love it. Simple but not easy. It’s simple to go and just walk in a club and do the standup comedy but is it easy? Hell no. And I am so glad you mentioned this, this is mindset, stepping out of your comfort zone and all growth happens outside your comfort zone. All the personal development things that I teach and that you guys learn in the start of the preparing for success in the course and stuff and it is so important. We have so many people in the class and the some of the bob groups as well as accountability and networking groups talking to one another and setting challenges for one another; go and lie down in a book store, or go do this thing that are you know outside your comfort zone so when it comes to the time for you to do due diligence or business it’s not that much mental strain because you have built your mindset so much so I am so grateful that you mentioned that Gerardo and thank you so much for coming on. I greatly appreciate it.

Gerardo:

No problem and thank you for all the help and good luck and keep growing it and keep helping people out. Appreciate it.

Jaryd Krause:

Thank you so much and thank you for your kind words. Everybody thank you for listening and I will see you in the next one.