48 Achieving Financial Freedom Through Online Business Purchases - Sophie Howard Aug 17 2023

Erik Martinez: [00:00:00] Welcome to today's episode of the Digital Velocity Podcast. I'm Erik Martinez from Blue Tangerine.

Tim Curtis: And I'm Tim Curtis from CohereOne.

Erik Martinez: Today we have Sophie Howard on the show to talk about achieving financial freedom through the purchase of online businesses. Sophie, founder of Aspiring Entrepreneurs, has started, scaled, and sold six and seven figure online businesses. She's now focusing her efforts on buying other online businesses and teaching others how to build a portfolio of income generating assets. Sophie, welcome to the show.

Sophie Howard: [00:01:00] Thank you very much. It's very, very nice to be here.

Erik Martinez: Yeah, we're excited to talk about this. This is a little bit not digital marketing, but is a very interesting topic, especially in today's business environment. But before we jump in Sophie, why don't you just give us a brief story of your journey to this point in time.

Sophie Howard: Brilliant. Thanks, Erik. So, I've been selling entirely my products and services online now for, this is the 10th year of being purely online for my source of income. And I started an online business when my daughter was born, and I was on maternity leave and very determined not to go back to the day job. So, she's just about to turn 10. So, basically, I've been growing two children and a third baby, which was my online business portfolio at the kitchen table, from home with no tech background.

I've been playing around with a few of the bigger platforms out there to start with. So, I started with an Amazon FBA business, which went really well, and I sold that. And I had a bit of beginner's luck [00:02:00] maybe with that first product but I got off to a flying start and ripped through that first year, made over a million dollars, 1.6 million in sales in the first year on Amazon. Sold that business for over a million dollars. Started another brand, sold that.

Then I switched into eBooks, and I've been publishing eBooks on Amazon ever since, and that's going really well still, and teach people about selling eBooks and how to create those. So, during all of that, mainly focused on the big Amazon world, learned a lot about how Amazon works and the joys of them bringing the customers to you. But the drawback with Amazon is that you don't have your own customer list, so you're doing everything around your own product.

 I've always, as an entrepreneur, wanted to be creating new things, and so during COVID and that first big lockdown, we had the borders closed. And I was thinking, what do I do here? You know, I've got a bit of a chance to learn things or try something different. And what I did was actually pivot [00:03:00] from selling nonfiction books on Amazon to seeing how it could be a slightly different strategy but try fiction.

But I'm not an author and I didn't know anything about creating fiction, author profiles, writing storylines, promoting eBooks, or any fiction books. It's quite a different model to the standard Amazon books for nonfiction. And so, I bought a business with the sole aim of inheriting a writing team, learning the processes, just understanding a really quick fast track to a ready built team, ready built products, watch and learn by buying one. Couldn't see a quick and easy way to learn how to do that, so I just bought one.

And that business keeps selling those books. And I really enjoyed a team turning up on day one and standard operating procedures, plus all those assets were already up on Amazon selling. There was a production line with more being created and I got taught how to do everything over a few weeks and it was such an instant income stream. I said, well, that was easy and fast and [00:04:00] I'd get that income stream from day one. None of that trial and error and a 12-month program to learn from someone else. I just bought it.

So, then I did it again with another business, which was a newsletter business. And then I found another one that was a subscription business. And none of these were in the same niche. They were all on different platforms. And I bought a bunch of WordPress sites, so I think I'm up to 28 online businesses that I've bought now, in the last sort of two to three years.

So, it's been a bit of a change in how I do things. But the nice thing is you buy a business that has an income stream attached and as long as it's a well-considered investment, it can perform really well with very little ongoing maintenance, not much to learn, just buy and hold.

Erik Martinez: I think that's really interesting because you've gone from building a business to buying existing businesses. Sophie, what are the challenges of building a business versus buying an existing business, and what are the benefits?

Sophie Howard: All right. Well, that's a good question. They're not [00:05:00] mutually exclusive. I still build businesses as well. That entrepreneurial itch and the fun and the excitement of trying a new idea or creating a new product, you still get to scratch that creative side and come up with new ideas and play around with testing things with the market in a business you've bought.

There's something maybe more pure about DIYing it the whole way, that blood, sweat and tears of the certainly isn't weeks, it's months or years to build a successful business. And that's when everything goes right. And then the chances of success, you know, are probably sub 10% on average. I have to say my batting average is a bit higher at the moment than that. I've had a pretty good run with everything I've started, but certainly you've got to be thinking so hard and be willing to risk a lot of capital and time in what could be dead ends with building a business. So, being a sort of pure entrepreneur, doing everything from the very beginning has higher risk, higher effort, higher cost, and a real lag until there's any income.

Whereas [00:06:00] buying a business, the challenges are you've got to take this big leap of faith because you spend all that money on day one. Well, actually you don't, but you look at the deal and you see its value on the day that you buy it. You usually have a payment plan and you're not paying it all up front, but it's leaping into the deep end, but then you get the cash flow instantly. You don't have to do the trial and error in the learning yourself. You have some more certainty basically.

So, the build it yourself entrepreneur model is really fun and it's a wild ride, but it's definitely a rollercoaster with a few crashes along the way. And buying a business with some really good criteria feels to me a lot less stressful, a lot less hard work. It comes with a lot more just ease and speed buying a ready built product or service that you own if your goal of building a business was to be financially free and have a new income stream. But I think buying a business might be a better way for most people because it's fast and easy. A lot of its de-risked. It's also a smart way to park up money if you're an investor as well. It's a really attractive asset [00:07:00] class. Like that return on investment is, at least for me, in my portfolio, about 30%.

So, when you buy a business, the way they calculate the value for an online business is typically three times the last year's net profit. I'll just do some round numbers. So, if you buy a $300,000 business. These are big numbers, by the way. You wouldn't start with one of these. It's generating a hundred thousand dollars profit a year, which is very nice. That could change how hard you need to work in your day job or if you even keep it. But then three years later, that's paid off if you don't grow it at all. Imagine having a 100K income stream with no debt.

You couldn't buy a house for 300K, get a 100K a year in rent and be mortgage free in year three, and you don't have the opportunity to build on a house to increase the income. Whereas you do with these online businesses. There's overheads you can take out or new things to add to it as it grows. Keep growing it a bit, bring that payback period down to two years. You know, there's no rent, there's no other overheads in it, there's no staff.

So, it's all the joys of online world[00:08:00] and all the benefits of an online business model, but none of the stress and having to be techie to build it yourself. So, I'm not techie at all. All these businesses I've bought, they just come with basically a manual and a team. I buy them fully managed. So, I've had a good set of results off the ones I've bought, haven't had any disasters.

I was pretty nervous starting out doing it as you would be. Because you look at this thing online and if you get it wrong, you could get it wrong, but I think so far I've been choosing certain sorts of online businesses, certain sorts of business models, keeping clear of some platforms, which we could talk about more if you want, but I dunno which direction you want to take.

Tim Curtis: You talked about this with your publishing interest, and we certainly know a lot of entrepreneurs. We have been entrepreneurs ourselves. We understand that process and I think there's something you said I wanted to kind of reemphasize there.

Oftentimes I hear people describing, you know, the process of buying these companies as sort of like playing the slots at Vegas or Monte Carlo and I disagree with that. Is there risk? Absolutely there's risk. [00:09:00] Anytime you're making an investment, there's the potential that the investment may not pan out, but there's a due diligence process. There's certainly not a due diligence process in either Vegas or Monte Carlo.

That's not a really good analogy for what happens in these processes, but you may have a return financially immediately, or the return may come in the form of education. Certainly, when we're in that entrepreneurial seat, that educational aspect of it, that's really, really important because that's gonna fuel or modify your selection criteria going forward based off what you've learned coming out of that.

And I think that's a piece that you just don't hear talked about enough within the entrepreneurial community that there's a learning aspect of this. People will talk about it offline. Sometimes people, when they have some of those investments that don't turn out the way they had hoped that can emotionally set them back in a way that maybe shouldn't so much so. That's a hot button for me, I would say.

Sophie Howard: Yeah. Yeah. No, I think when you [00:10:00] understand the process and see how rigorous the assessment and the screening of these deals is, it doesn't feel like gambling at all. It's not speculation. It's not some crypto coin will go up. It's not rolling a dice. You've got data over years. I never buy a business that's younger than a year old. You've got data on the keywords it's ranking for on Google, the traffic, so all that Google Analytics data.

It's really dry. I don't do that bit of the assessment myself. Somebody who follows my criteria will dig through the tech side for me and double-check those links of quality, and they come in from a reliable source. And yes, there's a subscription of these people paying this much every month and they have done for the last four years. And it's like clockwork. Here's your churn. Here's what you need to do to deliver the product each month. Here are the financials, here are the tax returns.

These are real businesses, not just, here's something I threw up on Amazon and now I'm trying to get rid of a business and get a quick back. It's definitely the right business [00:11:00] models can be very secure, more secure, and certainly more profitable than a physical business where you've got all those rents and other staff overhead, commuting and, other physical things with people. It's really nice having a business without too many people in it.

So, I don't see it as speculating at all. I think I've bought one offline business. I bought a doggy daycare business in Christchurch in New Zealand. That runs really well. I just thought the business looked really neat and I wanted to play around with a few ideas there. But that's much harder work. There's all these staff, there's payrolls, there's rents and cleaning drains.

Tim Curtis: There's a lot.

Sophie Howard: Yeah. So, and then when I compare it to something like investing in property, which I do a bit of as well, and I'm by no means an advanced property investor. Just so happens my partner does it. So, tapped in on a few deals he spotted, and you know, the returns on that are so much lower and the grind to get the passive income stream out of that. Certainly, at the time of this recording and in New Zealand at the moment, our interest rates, hideous and the rents are going up for sure, but there's not much [00:12:00] left over and there's a lot that can go wrong. And one big maintenance job or one vacant office or something, you can be cleared out.

You've got councils that can change things. We just had a big policy change about tax, so properties in trust, the tax rates shooting up from 28% to be basically effectively 39 for me. You know, you can have things swing around beyond your control in an offline business, I think more than an online business. There's the old Google algorithm change, but that's usually to catch out bad actors. They're closing a loop that someone's messing up with them. They don't want that. I'd obviously be really careful buying a business now where AI could replace something. I'm not going to go and buy a transcriptions business agency or with 50 staff.

Tim Curtis: Right?

Sophie Howard: No translation, no manual lightweight customer service, but I don't buy service businesses. I usually buy things like newsletter businesses or something that I bought recently that's going really well is teaching people to play the guitar. So, the sort of online lessons, [00:13:00] gear reviews, but those gear reviews rank that search for particular types of searches, ranks really high on Google. Every month, a certain number of people do that search, see my link, go to that link, click on the link, buy that guitar or that amp or that drum kit or whatever, and I get really good commission of really high-ticket items. So, that's a really set and forget business model. I paid 75K for that business and it returns about 5K profit every month, and I do nothing. All I do is own those links. So, that feels really steady and low risk.

And with a portfolio of businesses as well, if one does wobble a bit or one's seasonal and another one's seasonal at a different time, that's fine. Although I feel like I should touch wood. But so far, they're all tracking exactly as I'd hoped and dreamed of, and I've grown most of them. I'm trying to shorten the payback period. If on average the asking price is a three times multiple of the profit, I've been able to get the purchase price [00:14:00] down on all of them.

So, off the top of my head, there was one I bought, which is a design subscription business that goes out to about 600 people every month. It's only cheap, but I produce one digital asset once a month. My design team does that. I just have the existing team, creates this online piece, and sends it out to the email list once a month. Everybody's credit card that's on that mailing list gets pinged $10 or something once a month, and I get $6,000 a month for that business. So, I paid 130K for that, but the asking price had been 190. And the multiple was based on a three times the profit on 190. So, I got that price down by quite a chunk.

I bought a newsletter business where every day five people pay 160 US a day to be in a kind of a daily deal site. And that newsletter goes out to a great big bunch of people receiving it who helped those people sell those products. The asking price on that was [00:15:00] $410,000 and I paid 280. So, I've got the price down and then I've grown each business.

So, you get that payback period down to more like the year mark and have a bit of fun with it when you first take it over, you know? Cut out a few things, grow a few things, get some efficiencies across your portfolio. You don't need a customer service person on each company or whatever. Bit of Zendesk or a few efficiency saving moments, a few growth ideas, put them all together. Brilliant.

Tim Curtis: You mentioned pivoting a bit. You know, AI for example and not buying a transcription business, which is a great example. But also the interest rates, you know, and the external or environmental impact that we're dealing with today from in June of 2023 appears to be a sort of a darkening mood economically and fiscally. As an entrepreneur and an investor, how's that adjusting your criteria?

Sophie Howard: Well, there's a few things there. One is that the interest rates and general business confidence make all the other asset classes look really [00:16:00] hard. So, you know, house prices for property. The numbers just don't work for me to do that at all. So, it's working against that where you are gearing up and borrowing against an income stream because the interest rates are so horrid.

Combined with that, the online businesses, there's sometimes an SBA type loan or there's a couple of companies out there. There's a new one called Bupas that sort of have some skill in the game with you and do a finance thing, which I can't actually access. You have to be in the US for that. But I don't do any external funding for these deals. So, if I was on a really tight budget and starting again from scratch, I would either do a bit of sweat equity and go in with the vendor and transition it.

I've never done that myself, but I would rather start small and grow a couple of really small WordPress sites that buy for a thousand dollars, buy a bunch of them, as payments come out and make profits on the first few. Start buying a few more, roll up a portfolio that way. But actually, this is the main point, the best way to buy these things is with the [00:17:00] vendor finance. So, that last one I bought that was 130, I didn't pay all that upfront. So, I think I put down a half in the first few months, and then at the six- and 12-month mark, there was a calculation, and I didn't even have to pay the full amount the way the calculation works.

So basically, the vendor is lending to you the balance of payment without interest. I never pay interest on vendor finance. Most of those vendors really want their business sold. And the brokers that they list with are really pushing them for a sale. And the vendors and the brokers are generally really comfortable with vendor finance as the way to buy these businesses.

Banks don't generally lend against these online things because there's no security, which is understandable. I wouldn't lend if I was a bank either. So, it makes it actually a better option. It means, you know, each business has to cashflow on day one, which is what I'd want anyway. It means you don't overextend yourself.

And so, if you're in a position, say you've got a chunk of your mortgage paid off, you're in a good senior [00:18:00] salaried position, you're a bit bored with your day job, you're in your fifties, say, doing really well, but don't want to be working like this for another 10 or 15 years. A couple of investments in online businesses now, especially relaxed in the knowledge you don't actually need to learn a whole load of tech or doing night classes on coding WordPress or anything. You know, this is just buy, set, and forget pretty much not quite set and forget, but very, very passive. But the payback period and building a portfolio of a bunch of these over a couple of years, that could be, now I can retire, now that income stream keeps running.

Erik Martinez: And so, Sophie, you mentioned a couple of things. Let's go back to the finding of these businesses. You mentioned brokers. How do you go about the process of identifying which businesses, because you're buying a lot of different types of businesses. So, that's first question. And the second question is with I think you said 28 active businesses, maybe more, you're saying set and forget, they still need a little bit of eyeball [00:19:00] time. So, how does that work?

So, if we can start with the buying, and then I'm curious about how do you keep 'em going? And then I've got a question later on about if you're just getting started and you have an existing business what are the steps that you want to take? So, three questions. I'm trying to dominate Tim's time cuz he talks too much. No, I'm just kidding.

Sophie Howard: Brilliant. No, that's good. So, where I look to buy these online businesses, there's a couple of big marketplace platforms, Empire Flippers, and Flippa. So, Flippa and Empire Flippers are good. I like them because their internal teams validate a bunch of the data, and they try not to let any junk get listed.

So, if the site says it makes this much income, somebody on that team has gone on, logged on with the vendor, done a video walkthrough of the stripe payouts or the email list or whatever assets that are being listed, whatever cash flows. The Google Analytics, they'll go in and double-check that as a first screen. I mean, I still have to double-check things when it's my [00:20:00] turn but cuts down the sifting through potential deals time.

Both of those stick to the business models I like. So, I don't actually buy Amazon businesses despite having sold on Amazon for years. You just don't have enough data about what's happened in the past with the customers or the supply chains and the products. If I wanted an Amazon business, I'd build one. So, I look for WordPress based content sites.

That sort of goes into the second question because all those content sites behave exactly the same and the same very small team can run them all like one business unit. So, my website that reviews guitars, has a bunch of ads running on it and it has a bunch of affiliate links in it. The day I bought it, those ads only rent like a billboard on the websites that gets traffic every month. And the affiliate links point to various guitars and drum kits and courses and books and things.

I get a weekly report from one person who just tracks the metrics on all those sites. That same person also sometimes goes [00:21:00] out and looks for new affiliate links for those sites. So, they don't all get lots of attention lots of the time. They all perform perfectly well, completely passively as long as plugins are maintained. So, I don't know anything about WordPress plugins, but luckily thanks to Upwork and other platforms like that coming along, it's really easy to find someone who can just maintain basic WordPress sites, check links aren't getting error messages and check the performance of the income streams. So, that side's really easy.

And then, I've got a newsletter business that came with the girl that sends it out each day and so she bills me a few hours a month and reports in once a week on sales. So, literally the work I do on that newsletter business is every single Tuesday morning at nine o'clock, which is when I sit down for my week cuz I'm a day ahead in New Zealand. So, her Monday, nine o'clock, my time Tuesday, get a ping on Skype. You've made $2,000 this week on the newsletter business. Exact number. She tells me how many bookings and profit. So that's [00:22:00] completely passive and her time to do that is very minimal.

And then I've got another business that's a subscription service. And so, once a month, the same designer who came with the business, who's also in Upwork, creates this monthly pack, gets sent out to the email list, pay that person a few hours a month. I think that one costs me less than $800 a month in total overheads to produce this monthly pack. And I've got about 600 subscribers paying 10 odd dollars a month. So, I get about 6K profit a month for that one, and I do nothing, absolutely nothing.

So, most of these businesses, the main negotiation is with the vendor around obviously the price and the terms, then there's the handover process. But I only buy a business that I'm not going to have to operate myself. So, I stick with certain business models. I really like content sites on WordPress that just slowly rank over time with more and more traffic finding them.

And then I really like subscription and repeat business type models. So, [00:23:00] subscription or newsletter businesses. Those are really, really attractive to me. They're sort of ranked on Google. They're not at the mercy of a Facebook group being closed. I don't do anything with social media. I don't do anything with paid ads. Those things take a lot of time and effort and work and are painful, frankly.

I don't like giving Facebook lots of money, and I don't like how expensive the ads are. I don't use social media myself. I don't want to be sitting pinning things. I don't want a business that relies on pins or likes or pretty photos, so I just keep clear of those business models that run on that source of traffic.

Tim Curtis: Smart.

Sophie Howard: So, no paid traffic, no social traffic. Just steady subscribers on an email list. Love an email list business, comes with a big database. And those databases that would cost, you know, say $4 or something per person on them if you created them from scratch, you get that free. That's not factored into the price you pay. You're only paying a multiple on the profit. So, you get all these other assets thrown in that are worth a fortune. Standard operating procedures, the trained-up team, [00:24:00] you don't have to create those things yourself, so you just get the income stream based on the profits.

Erik Martinez: What I'm hearing you say is almost everybody is a freelance contract resource that you're using, so.

Sophie Howard: Yeah. And I have two people reporting to me and that's it. So, one girl's here in New Zealand and she coordinates the tech side of things. We use an agency for some bits behind the scenes behind her. Which is really set and forget, so she's very part-time hours as well. I've got another lady in the States who does the newsletter business and keeps my own eBook business running smoothly. So, she's got a bit of a publishing background.

So, I pay them both really well. One's in the seventies dollars per hour and the other's 20 odd dollars an hour. And I give them bonuses, you know, I really look after those two people cause I'm really reliant on them. I get great visibility reporting. I could run all the businesses myself. I'd have to get some tech help from another freelancer if I got left in the lurch, but none of the skills needed a really special.

I [00:25:00] didn't buy from a fan because they were some wizard something and when they go the business breaks. You know, that just wouldn't make sense. They're really like neutral businesses with daily, weekly, monthly workflows, and I make sure when I buy them I could do those things or somebody I know could do them with some training and that everything's documented in video training lessons. So, if you have a good relationship with the vendor, they're usually pretty helpful getting your own systems up and running and do a few rounds with them, watching over your shoulders to check it's all being done the right way, and then it's off you go.

Erik Martinez: It strikes me that what you're describing sounds really easy, and yet I think most of us think it's really hard. So, as you started this, how did you get over that hump? Cuz you built a business and sold it, which back to your point, it's a lot of work, it's a lot of sweat, blood and tears, a lot of stress, all of those things, right? So, how did you get to the point where you're saying, [00:26:00] okay I want to pivot. I don't want to go back to my day job. How did you get over that hump, that first little bit of fear of I'm really gonna do this?

Sophie Howard: For buying a business or moving into online business?

Erik Martinez: Buying them. Yeah.

Sophie Howard: Buying them. Yeah. Well, the first one, as I said earlier, I just did it to learn something because I could see people with fiction businesses making so much money and I didn't know how they were doing it cuz it didn't follow the rules of what you do for non-fiction. But they were doing 10 times what the non-fiction books do, if not a hundred times. So, I bought that one not with an income goal, but more just to learn processes and buy a team.

The way it performed financially was like, oh, well that was a fast and easy way to make loads of money. I'll do that again with a different business. So, I jumped in with a different strategy, which was about learning and getting a team so I could fast track to getting my operations up and running. But I think if I were doing it, if that one hadn't come along, I dunno if I'd have ever done it. I like being creative and I like selling, [00:27:00] so I don't know if I would've done it and then continue doing it if I hadn't had that first one.

But what I want to do now is share what I'm explaining today, which is how good it can be to buy online businesses. You've obviously got to start at a budget level you're comfortable with. And it's not like throwing money at the wall and hoping, it's not a speculative thing. It's learn some process stuff about how it works, learn and spend time developing your own individual criteria.

And I can help people do this one-on-one about what business model, I've actually got a profiling quiz. We can probably drop it in the show notes, but I've got a profiling tool that helps identify which business models would be a good fit for you. I've got my own criteria, so as well as a bunch of sort of payback periods I'm aiming for and business models I like and things to keep clear of, you know, dodging lots of red flags.

I have one that's just that I'm interested in this subject, and I like topic. But I always want a business that's really hard to copy and that's not subject to the vagaries of social media platforms [00:28:00] coming or going, being a trend, you know, I want something really steady and boring. So, I quite like education type businesses to buy. I like big email lists. I like really solid non-AI threatened recurring income streams, so subscription businesses.

I've got three SaaS businesses, software businesses. So, they've got really low overheads and massive upside potential, but they need a bit more marketing. So, I wouldn't say to somebody completely new to online business to go out and buy some software thing with a team of developers and global marketing plans, and someone started it. That's like Silicon Valley games, right?

What I teach people is how to buy really steady, reliable, dependable online businesses that with a bit of training of a team, you can pretty much set and forget. So, I'm training the people buying these businesses to operate them as well as what to look for and how to buy them, how to get the price down, how to finance, and basically played as safe as you can. I don't take any big [00:29:00] risks with mine. I've never been burned yet. Touch wood. Haven't got any really wrong.

Sometimes I've bought a WordPress site and thought I could grow it by adding a bunch more articles, and there's a lag between the work you do, getting somebody to write those articles and the ranking picking up, at the volume of traffic, picking up. But starting small with say, a WordPress site would be really easy. Just a little content site reviewing. I don't know, something like my guitar thing or reviewing a tech thing if you're interested in it or reviewing articles about how to grow house plants or something really simple and safe, a nice friendly topic that's not threatening or difficult or expensive to get into and it's easy to find a team of writers who will do the content for you. Just outsource the whole lot and learn the ropes on a really small one and get really confident in the process.

And then next time around, you can scale it up and look at bigger deals and more investment required, but also more payoff. And actually, the deals get better the bigger your budget, because there's fewer people in the market for them. I'm in the [00:30:00] sweet spot. So, there's these big deals that I would never do.

I mean, these private equity boys go out and scoop them up and there's sort of, there's people up on Wall Street looking down at the bigger end of online business and occasionally, you know, picking up these software things or rolling up Amazon FBA businesses. I'm not in that league. And then there's people all around the world, tech guys coming outta the India Institute of Technology, building little WordPress sites and getting the traffic and you know, really clever technical people, but doing the hard operations themselves. They're like right down at the starter mode, just doing all the work themselves.

I'm in this middle band, you know, the smallest deal I've done is a thousand dollars, and the biggest would be 400K. Or maybe in the 300s, probably 300 and something K. I think 320. The one that was listed for 410, I got the price down to 280. So, that's the range I'm in. The last one I did was 75K and I looked for a really quick payback period, and that's been working really well. There's not a lot of buyers there and there's tons of businesses for sale.

There are so many [00:31:00] opportunities out there. I see far more than I could buy and operate or would want to take on at once. So, by the time somebody's gone through the exercise of working with a broker and putting their business on the market and one of these trusted marketplaces, you've still got to do due diligence. There's still work to do on a deal. Not that much, but some. And the bigger the deal, the more the work to be comfortable with pressing the go button. I've found really, really good motivated vendors, easy to search and screen for the right kind of deals. So, my shortlisting takes a bit of time, but I've done all the thinking about my criteria.

So, I'm not going to go and buy a Facebook community and I'm not going to buy an e-commerce business. I don't do any physical products at all. So, I figured out what works for me and everybody who does this will have slightly different criteria, but I'd have some strong recommendations for anyone on what to do and what not to do as well as then fine tuning it individually.

So, I'm not techie and I assume anyone I'm helping is not got a techie background. And I also assume that any of these businesses we buy, the vendor is going to finance most of it [00:32:00] for a year or two. And then that lets you get in the game without spending all that money upfront and gives you security too. You know, if the thing keels over, then those payments aren't due.

Tim Curtis: Exactly.

Sophie Howard: They haven't been keeling over.

Tim Curtis: You know, one of the things that maybe is a bit of a vulnerability for a lot of entrepreneurs is there's a tension in when you're deciding what kind of investor or entrepreneur, you're gonna be. And there's a lot of people who generally don't know how to answer that, and they don't know how to answer, what kind of business do I go about?

Obviously, you've identified those content sites, those subscription sites as good ones for alternatives generating passive income. I think you called it a profile analysis that you have. That would be very helpful I think for a lot of people, because in observing and working with entrepreneurs, there's a tension and the tension is knowing yourself versus self-awareness, and where the gap is between those two. And that's a real tension that we don't often talk about.

We talk about things like imposter syndrome and the [00:33:00] impact that has on investors and entrepreneurs alike. But when we come down to what kinda investor you're going to be and who are you as a person and where do you best align, that's where that tension comes in. We sort of have to work through that. How did you do that? Did you have that struggle? I know you indicated early on you kind of knew what you wanted to do, but you were thrown in this COVID situation and that really, I'm guessing that was clarifying for you.

Sophie Howard: Yeah, it's totally your identity, and so we're already touchy on that one because we've got a reputational sort of risk and we've got our egos and personality, and we've got our parents voices in our ears. You know, the psychologist would've a field day with us. You'd probably send us all back. So, it's a very personal journey.

So, my parents, well, especially my father's very entrepreneurial and was retired really early, so I was a little bit pre-programmed that I wouldn't work hard for someone else all my life. He was retired at 40. We lived really good lifestyle. I [00:34:00] sometimes think for marketing my own courses and things I've done over the years, it'd be great to have some rags to rich's story, but sadly, no. I actually went to the same boarding school as the King of England. So, had a really good education and I was always brought up a high achiever. I'd be top of the class. I did really well academically.

And then I was working with my young children. The track of carrying on working hard for someone else was a bit of a pay rise, a corner office, more tax, more stress, management. Hated being a manager. When I had young children, I was like well I'll have to be good at something else. Can't keep being good at that one. Don't like it very much anymore. So, the thing that I really get a buzz from with this investing and the same thing was from building them myself, is that sort of playing a game, pitting your skills and wits against the market and an opportunity and trying to win.

So, I'm really competitive and so I get all my energy and all my motivation and focus on winning. So, not to beat anyone else, but just to beat the market or buy a deal at a really good [00:35:00] price and then grow it. And I feel really good when I do that. And I'm not at all motivated by the dollars in the bank. If I lose one or it doesn't go, or I get all the way to the end of the due diligence and find some fatal flaw, I'm really pleased. I'm like phew, I avoided losing there. So, I really hate losing, and so that's sort of in my mind. I make it quite playful.

 Yeah. I'm talking today because you're asking questions about what I've bought and how they've worked and things like that. I don't tell anybody, normally what I do. I do the school run, pick up my kids in my wooly jumper and unbrushed hair. I'm pretty casual. So, I'm not living the high life with a really high need for high cash burn. So, I keep my overheads really low. I live a really simple life. I live in a modest house. I drive an old Jeep. You know, I don't do the sports cars and bling. I travel a lot and sending my daughter to, she's about to start really good private school. So, I put my money into that sort of thing. And then done a little bit of property, but I don't really feel like I am a property investor. I'm not all that interested in it, to be honest.

I find the business online stuff really fun because I get to be [00:36:00] creative. So, that's what makes me tick. And when I work with other people, we do kind of a profiling tool, which measures risk preferences. Are you really high risk or really conservative? Are you really comfortable with learning something new and techie or really not? Are you really ambitious or really just want an easy life? Do you want to build an empire or be a lifestyle? So I'm right at the lifestyle end and really comfortable with that. And when I go to a conference or speak on a stage, everyone before and after me set these big kids with big numbers and different league and I never feel envious about that. I'm really comfortable in my patch.

I look at the people buying online businesses who've sort of come down from the Wall Street end of town, and they've got different language and much more aggressive negotiation style, but it wouldn't actually work for me. It would be awful for me to try and learn their lingo and adopt their style. I just do things my own way and it works for me and for the size of deal, which I think are lucrative and worth doing.

I wouldn't want to have one massive online business, and I wouldn't want to have a thousand tiny ones. I think that sweet spot's maybe [00:37:00] 10 to 12 income streams in total in your life, and maybe half a dozen of those are from online business. That's totally learnable, manageable portfolio and really healthy. I like not having staff. I like being in charge of my days. Look after my children, look after my health, have fun, have travel. Those things are good. Working endlessly does not motivate me at all, so.

Erik Martinez: Sophie, as we look to close out today, I think there's so many different pathways that we could talk about, but I think one of the key insights that I'm getting from our conversation is, you have really done a great job of defining and picking a path that works for you. And like we were talking about earlier, as some of our listeners know, I coach fast pitch softball.

So, I work with teenage girls, and we talk about head junk all the time. We talk about the head junk when we're hitting, fielding, whatever it is under a pressure situation. We're always out thinking ourselves and you have provided some real great [00:38:00] clarity about how to put that aside and pick what's most important for you and the best life that you wanna live, and then going out and making it happen.

That's a pretty important lesson for all of us to be able to learn. Like we don't have to always follow the script that everybody else follows. And there's a lot of naysayers out there who say like, you can't do that. That won't work. But you're living proof that those things work. So, as we move to close out the conversation today, cuz I think we could keep talking about this forever and I would love it.

Tim Curtis: Forever. I have eight more questions. I know.

Erik Martinez: Tim's like, can we go for like six hours on this? What's the last piece of advice you'd like to leave listeners with? What's the one thing you would say to the people listening, from your experience and what you've learned, on how to change their future outcomes?

Sophie Howard: Certainly, to have a future outcome, you need to make a change today. Otherwise, obviously that track you're currently on is really predictable. You'll [00:39:00] still be at the same desk, still on the same commute, still battling with the same things on your mind, loops that you never close.

So, I think buying an online business, if you park up the preconceptions that it might be really expensive or really techie, which it definitely is not, that might be a thing to explore. And even if you start with it really small, you'll get some great learning as you learn the ropes and play around with a really small site. And then maybe, two or three years from now, you've paid off two or three businesses that generate six figures each. And suddenly what looks really impossible and daunting, if you break it down and start with a small step, you've got the skillset set to continue along a new path.

It's not massively time-consuming. It's not as expensive as you'd think, and it's really fun and liberating. It means that in the future, whatever your actual lifestyle goals are, never mind the financial ones, maybe you've got a better chance of hitting those than working hard doing what you're currently doing. And they're not mutually exclusive. Keep the day job while you try these things, or [00:40:00] keep your other existing business. It's not like you have to stop anything to try this. But you can dedicate a couple of hours a week and learn a new idea, get your head around it, and it could be the best thing you ever did.

Erik Martinez: That's the key thing, right? You just said a couple of hours a week. I think a lot of us think this is, I already work a full-time job. How do I add another full-time job to this? And you're telling us, no, that's not really the case. So, I think that's a really important takeaway from this as well.

Tim Curtis: Yeah. And we should also mention that Sophie has a book Freedom Navigator. It caught my attention because of the title Freedom Navigator: How Buying an Online Business is the Fast Lane for Financial Freedom. So, it's out there on Amazon for those of you that like it in print format.

Sophie Howard: You can have it for free. We'll put a link to it in the show notes.

Tim Curtis: There we go. Perfect. You cannot beat free.

Erik Martinez: You cannot beat that offer. That's a great offer.

Tim Curtis: Yeah. But again, Sophie, thank you so much. This is one of those things that I think [00:41:00] you know, for a lot of people, they're sitting on the sidelines. They've contemplated this. And I think this is just the right amount of coaxing to get them to understand and demystify and clarify some of the what's fact and what's fiction. Thank you so much for joining us. This is Tim Curtis from CohereOne.

Erik Martinez: And I'm Erik from Blue Tangerine.

Sophie Howard: Reach out by email if you want to discuss it. I'm really, really happy to help anyone.

Tim Curtis: Awesome. Thanks so much.