If you’ve ever tried to launch your own online business and failed to get it off the ground, or have thought about buying your own business and found the whole experience too complicated, then this interview is for you.
I decided to sit down with Deven Soni and ask him some questions about his journey from being a Niche Pursuits reader and online business newbie, to owning an online business empire.
Today, in addition to building his own portfolio of companies, Deven and his partners help other entrepreneurs acquire their ideal business and provide them with the tools to succeed post-acquisition. They do this through Kingmakers, which is an elite accelerator for business buyers.
Before you read further you should know that Kingmakers is offering free consultation calls if you are interested in buying an online business. I suggest you take advantage of that now! They also just launched a new podcast about how to buy and grow businesses.
But without further ado, here’s Deven’s story.
Spencer: So Deven, let’s start by having you tell us a little bit about your background.
Deven: Sure! My background might be a little different than a lot of you reading this. I had a very traditional finance background. I studied finance in school and then worked in investment banking and venture capital with large firms like Goldman Sachs, Highland Capital and others. My job was to basically help billion dollar companies buy billion dollar companies. I was also heavily involved in the Silicon Valley startup and tech scene.
Spencer: So what got you interested in online businesses?
Deven: It was while I was heavily involved with the investing community in Silicon Valley that I realized two things. Number one, I wanted to be doing something more entrepreneurial. I wanted to build my own dream instead of building someone else’s. And number two, I wanted to focus more on value investing. That is, putting your time and resources into existing earnings and cash flow with a plan to take things to the next level. This was the opposite of the venture capital scene in Silicon Valley, where you would invest money into ten different three month old companies comprised of three people and their dog valued at $50 million and hope one of them paid off big time. Nothing wrong with that, it just wasn’t for me.
It was during that time that I became interested in buying small technology businesses like websites and software platforms that were cash flow positive (typically mid five figures or low six figures per month). I learned that that you could actually buy these businesses for 3 or 4 times their earnings, which meant that you had a lot more room for error post-acquisition and if you could grow the thing or combine companies in interesting ways, you could get some significant ROI.
Overall, the risk to reward ratio of this direction compared to what other entrepreneurs were doing on the startup side was much more attractive. If you’re going the startup route, you’re going to start something from scratch, then probably raise some money and spend the next couple of years building it. Then statistically there’s like a 5% chance it will succeed, and if it does succeed, the odds are that the only way you will do well is if it’s acquired by another big company, so you actually end up losing that control in the end – as you only have a strong financial outcome if someone else decides to buy your company. To me, that just didn’t seem like the best way to go. So instead, I really focused on learning about buying these small existing businesses that were already profitable. I always felt that when you own owned a profitable company, you had a lot more control and power because you don’t have to sell it to make a buck. You can just sit and collect checks, continue to work on growth, and you’re going to do great financially. So again, I just thought the risk to reward ratio was overall much more attractive.
Spencer: So, I have a feeling that this is where I come into the story?
Deven: Oh yeah! So I started reading lots of blogs on this and kind of fell down the rabbit hole of how to buy websites and grow them. That’s when I discovered the NichePursuits podcast and blog. I was intrigued because I saw this entire community of people that were focused on starting, building, and growing these smaller businesses and carving out their own path. I had literally zero experience in this world – and got started by (1) buying a wordpress for dummies book and (2) reading blogs like yours & Pat Flynn’s.
It was also through your podcast that I actually met my partner, Hayden Miyamoto. Hayden had the marketing and growth skill sets that complimented my finance background, and so we decided to go into business together.
Hayden and I started Wired Investors and our relationship very organically, by buying 1 business together. We quickly stepped on the gas and started buying several different types of online businesses at a pretty fast pace ( almost 1 a month). You could say our mantra those next few years was “move as fast as possible to learn as fast as possible”. Our goal was to completely immerse ourselves in the process, make and learn from as many mistakes as possible, and carve out a small empire of online business for ourselves. Oddly enough our first purchase was your company, Long Tail Pro.
Spencer: Yes, indeed, I remember it well! 🙂 And I’m glad I could play a small role in your journey. Let’s talk about what happened after that.
Deven: After that, we quickly realized we had found a product/market fit. There were many of these small businesses available to buy from entrepreneurs, and there were a lot of people that wanted to invest their capital into this asset class. In addition, we found people that wanted to operate and grow these businesses after we acquired them, so that we didn’t have to be involved in the day-to-day operations and could focus on buying more. We put all these things together and grew our portfolio exponentially. In what felt like the blink of an eye, we went from our first purchase from you, Spencer, to owning 20 online businesses in just a couple of years.
This obviously required us to build a ton of systems and train a big team. It definitely wasn’t as easy as I’m making it sound. I had operated some small businesses before, and tried some startups that never really went all the way, but I had never tackled anything of this scale. It really forced both Hayden and I to learn the kinds of skills, systems, and management required to operate and grow a portfolio of 20 companies. We definitely over-invested in systems and really dissected what it meant to source businesses to buy, do diligence on them, acquire them, and then operate and grow them at a rate of like 1 business per month. It’s all the same concepts that are covered here at Niche Pursuits, but for instance instead of needing to write 10 blog posts for one site, we had to figure out how to write 1,000 posts across 20 sites!
Spencer: That’s incredible. To dig in a little deeper, what are some of the specific ups and downs you went through? What was a specific mistake you made and learned from?
Deven: Haha yeah I mean there were many of those within every business we bought! A really clear instance was when we bought a business in the marketing/content niche, and we thought it was an absolute no-brainer because it was monetizing at a certain amount per visitor through an offer, and we already owned a site with a similar offer that was like 2x more profitable.
So we just thought we would buy this site, switch out it’s offer for our higher earning one, and take it to the bank. But because we thought there was such low hanging fruit in one area, we neglected to look at other crucial areas and analyze the broader risk profile of the business. What was happening is that only one or two landing pages where driving the majority of the traffic and so post-acquisition those pages dropped a few places in rank and we immediately saw a significant drop in traffic and revenue.
The business dropped like 50% overnight, so we had to go out and spend a dramatic amount of effort and resources to try and grind to get it back up. It’s important to understand that you don’t necessarily have to get the revenue back from the same place it was coming from. You can get creative and find new ways to monetize.
On the flipside, we’ve bought businesses, made some minor tweaks to take advantage of easy wins and saw immediate growth. The thing is you don’t learn quite as much from those experiences as you do from your mistakes. With every challenge we would analyze what happened and make the necessary adjustments to not make the same mistake twice.
Spencer: Yep, I can relate! So, how does Kingmakers come into the picture?
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Deven: Absolutely, so through Wired Investors we got really good at all things having to do with finding, buying and growing online businesses at scale. We had a lot of proprietary systems and tools we used to scour the internet for great off-market deals, do deep diligence on them, finance and acquire them, put together and execute detailed growth plans, and finally leave a trained operations team in place to run things.
We got so good at these things that we thought, why don’t we just productize this and help other people build their own private equity portfolios? We would continue to build our own, but this would allow us to scale even further into the space. So we launched Kingmakers.
Spencer: So tell us a little bit about Kingmakers. What is it and how can people get involved?
Deven: For sure. Kingmakers exists to help clients source, diligence, acquire, and grow their ideal business. Even beyond that, we want to help clients build a portfolio of businesses.
We don’t work with just anyone, because unlike your typical service providers, we actually want to partner with our clients and invest in many of these deals. I think what sets us apart is our desire to become a long-term partner more than just a service provider.
We have experience financing online businesses in just about every niche possible (content, services, saas, etc). I think a large part of what attracts people to this space are the low valuations these businesses sell for. We typically see these companies sell for ~3x their annual profit. Meaning if a business is making $100,000/year, you buy it for $300,000. Assuming the business doesn’t grow and doesn’t decline, this delivers a 33% per year return.
What’s even more compelling is that it is pretty common to structure these purchases in a way that minimizes upfront cash out of pocket. As an example, it is pretty typical to structure a deal with 25-30% seller financing. This financing is generally at a 5-8% interest rate. This enables you to use the profits of the business to pay for itself – which can really improve your returns.
Even more exciting, there are tons of banks that are willing to make loans with the same types of interest rates – for up to 80% of the purchase price of a business. Basically as long as you have a good (700+)credit score, relevant experience in your industry or in business management, and ~20% of the purchase price for a down payment, there are a variety of different ways to get a deal done. Note here that while we’re most experienced with lenders in the US, I understand that there are some similar programs in other countries (like Canada).
Our specialization is in helping people purchase a business that is earning anywhere between $300,000 and $1mm in profit per year, although we have helped people buy something smaller as well. So as an example, let’s say a client wanted to buy a business making $300,000/year, with a purchase price of 1mm.
With the right structure and financing, you can potentially put down $100,000 for that business, and make 80k per year AFTER debt repayment (assuming the business just stays flat, doesn’t grow and doesn’t shrink). That’s an 80% ROI, and you can turn around and flip that business after 3 years with over $250,000 in profit, or you can hold onto it for the cash flow. If you only have $20k to put down, just divide those numbers by 5. You don’t have to be a millionaire to do this!
Spencer: That’s amazing. I understand Kingmakers hosts workshops as well?
Deven: Yep! We host business buying workshops where you get a backstage pass to how we built a private equity firm that acquires 6+businesses per year. We keep these workshops small and intimate so that we can spend plenty of one-on-one time with attendees working on their gameplan. If you’re curious about the practical systems, structures and tools that make what we do possible, and if you’re serious about buying a business, this workshop is for you and at the very least you should go apply.
Spencer: Sounds like you guys are moving quickly with this business. So Deven, what kind of person are you looking to work with then?
Deven: We’re basically looking to work with a select group of individuals that have entrepreneurial experience, want to buy an online business (or multiple), and have the time and energy to devote to this. It’s not fast or easy, but we certainly have the experience to help guide motivated partners through the journey.
Note, that It’s also important that you have a good credit score (if you plan on using bank financing) and enough liquid funds for a downpayment.
Again, we would rather just get on a brief phone call with you to find out if it’s the best fit. Plus, we really do enjoy talking to other like minded individuals.
Spencer: Now before I let you go, I have to play devil’s advocate a little here and ask, what makes you different from other website brokers or marketplaces out there?
Deven: Great question. I think a big one is that our deal flow is exclusive and can be highly customized, whereas when you work with other brokers or business marketplaces, you get limited and non-exclusive exposure to available deals and so you are competing with many other buyers. More buyer competition often means you are paying higher multiples as well for the business.
I think it’s also important to point out that because we’re reaching out to thousands of founders at scale, we find many off-market deals where the founder hasn’t really considered selling prior to us connecting with them. Much of the time this means the business is running along at a steady baseline or growing. As opposed to sellers who list on marketplaces because the business is going downhill and they can’t figure out how to fix it, or they built the business rapidly with the initial goal of selling it as soon as possible, and so it may be built on more or less a house of cards.
Also by working with us, you can save more since our success fee on a closed deal is less than most brokers typically charge, which is around 12-15%.
Spencer: Fantastic. Well thanks so much Deven for sharing your story. Again, I’m glad the NichePursuits community could be such an important part of your journey, and I love that you can return now to help others succeed with Kingmakers.