How One Seller Made $54,000 From Working Only 40 Hours – Per Year
Updated on March 16, 2020
If you work the typical 9-5 you’re well aware how 40 hours per week feels.
For some that might mean clock-watching, waiting to escape at precisely 5 PM. For others, 40 hours may not feel like enough time to get any work done. Regardless, you’ll most likely know that the 40 hours a week it takes to earn your salary carries a lot of weight. After all, you spent 2,080 hours to make that money.
Imagine you could make the same amount of money you’d make by working 40 hours a week, by only working that many hours in a year.
One seller was able to do just that by turning his 40 hours of work per year on his FBA business into $54,000 within just 48 days.
We interviewed the seller to see how he did it, so you could do the same. He shared his insight on making the deal process a success for both buyer and seller, and why FBA is the best model for passive income.
Want to know how to work smarter, not harder? Read on.
Why Sell a Passive Business?
You might be asking – if this business only requires an hour of work every now and then, why would you sell it in the first place? It earns passively, it’s kind of a dream come true, right?
The seller and his business partner both had full-time jobs and new life changes that were keeping them from being able to focus on the business. One of the partners was getting married and wanted to buy a house. They knew the business needed some TLC to grow, but they wouldn’t be able to give it the focus it needed.
At first, the seller didn’t know what to do with the business he no longer wanted. He recalled the moment he first learned he had better options: “Other than running it into the ground, the idea of selling it hadn’t really occurred to me. I heard Empire Flippers on a podcast and that’s when I realized I had the option to sell it and could move on to something else.”
The business they needed to exit was a fairly simple FBA business selling four SKUs of a particular costume item with different themes. The themes could be tied to events or holidays which caused some seasonal spikes, mainly in summer, but overall drove sales throughout the year. The business had secured a trademark and Brand Registry 2.0.
A Shopify site was added to the business and was integrated with FBA, but during the time of sale, it wasn’t responsible for much traffic or earnings. Two domains were included in the sale that redirected to the Shopify site.
The business was growing 10% year over year. Though it had been doing well and had been built to be truly passive, the seller had already been eyeing other opportunities to build FBA businesses. A business still takes up mental space even if it is passive, and he needed to be clear of mental clutter so he could move on to his next opportunity.
At this juncture, he turned to our marketplace for a solution.
Dual Seller Accounts Lead to Issues in Vetting
When the business arrived in our vetting department there was one major hurdle that needed to be cleared up.
The business’s SKUs had been divided across two different Seller Central Accounts. The reason for this was the seller and his business partner had different ideas about the profitability of two of the four SKUs. Since the seller believed the two SKUs would make a profit, he added them to his own personal account and sold them from there.
The issue was, his personal account was not included in the sale. So he needed to figure out how to separate his personal account from the two SKUs he wanted to sell.
He came up with a solution that seemed to work. Deciding against moving the SKUs to one store and paying a relabeling fee, his plan was to sell out of stock in one store and restock the brand for sale with new SKUs and house all the products together under one store.
While it seemed like he had the right solution, the two accounts set up did pose issues throughout the sale.
While in vetting, the sales data and building of the P&L had to be done against the two accounts. The seller’s personal accounts had fees associated with his other SKUs that threw off the data of the SKUs he was trying to sell. Vetting worked with the seller to clarify and sort the data correctly between accounts so that it would be clear to buyers.
This can act as a cautionary tale for those looking to sell with us who have multiple Seller Accounts that share SKUs. Be clear when you do have multiple accounts not to cross SKUs, products, or branding between accounts as this can make the sale of your business more difficult, and it can confuse buyers.
The seller thought he found the solution, only to have that solution unravel down the road.
The Deal Negotiations Begin
This business was a great find for buyers so it’s no wonder that within a day of going live on our marketplace the first buyer-seller call was scheduled. By the end of the first week, there were eight active potential buyers interested in purchasing the business.
The interest in the business ebbed and flowed until one buyer came in strong, keenly interested in the business.
The buyer came in and made his initial offer. The offer was lower than what the seller was hoping for, so our business analyst offered to help get the price to a level the seller would be comfortable with.
A number all parties could agree on was within reach. By request of the buyer, inventory was thrown into the final tally. This also included a credit with the supplier due to issues with an order that was underway.
The final offer was on the table:
Sales price: $54,000
Inventory Included: Current Stock + $1980 credit with the supplier
The seller would give 60 days of support to the new buyer.
Both buyer and seller agreed to the deal. All was meant to be done, but it was too soon to celebrate.
The Deal Isn’t Done with the Final Offer
Though the deal had been struck, there had been some ongoing negotiations that carried into the other parts of the deal process.
“The actual transition of materials during migration went flawlessly, the only issue was that we were going back and forth on the inventory details during that time which made it difficult,” the seller recalled. His intended plan of selling out his inventory from his personal account and restocking to the new account was kicked back by the buyer. After many conversations with the buyer, the seller ultimately had to destroy the units in his personal account as it was the most cost-effective way of getting rid of the stock, and it was the only outcome the buyer would agree to. It wasn’t the most ideal way of closing the deal, but the seller was more than ready to move on from the business.
Hindsight is 20/20, and that is certainly the case with this seller. His biggest advice was to “know your numbers up front, and what you’re willing to accept. Be clear about what you are selling and what is included because the buyer is obviously the new person, and they might not know what questions to ask and they’ll be a little nervous. I could have been more clear about the inventory in the other account and could have worked that out before closing the deal.”
He emphasized, “Work out all the details before the deal is made.”
Despite the back and forth with negotiations, when we asked the seller how he felt when he sold the business he said it was a relief. “The day it sold, I was all in on my next FBA business,” he said. “That business had way more that I could scale up and do with it.”
He’s actively grown his next business since the sale, and this business now acts as his newest passive asset.
Why FBA Is a Powerful Business Model
The seller was passionate about the power of FBA.
“Never before, in the history of all time, has a single person been able to scale up a business to this size until the FBA model. Customer service, shipping, and logistics – you used to need teams of people to do that and you can now outsource that to FBA. You can focus on growth, adding new products, and marketing to new customers while FBA handles all those other logistics. It’s truly amazing what you can do as a single person with FBA.”
It’s the support FBA gives business owners that allowed this seller to run his business so passively. Once the upfront work was done it was generating revenue, and freedom, for him and his partner.
He didn’t realize how valuable his passive asset would be until it came time to sell.
“(Selling your business) is extremely lucrative because you’re getting two to three years of profit upfront without the risk of maintaining and operating the business for that time period. It’s a good way to transition when you don’t have the desire to keep growing the business.”
The seller seems to have found his stride with the FBA model and already turned his next FBA business into a profitable asset he’s looking to sell. When it came to exiting he decided to return to our marketplace.
When asked why he came back he said, “You have the biggest marketplace, most professional team, and most buyers out there. All in all, it was a great process and that’s why I’m selling with you again – and I may do it a third time.”
If you want to escape the 9-5 like this seller and acquire a passively earning business, give us a call. We want to help you escape the salary grind, so if you’re a seller looking for a lump sum to fund your freedom, you can reach out and our business analysts can help you plan the sale of your business on the number one curated online marketplace.
