Is Opening Up an Online Jewelry Story Worth it?

In this series, CapForge’s owner and founder gives us a little behind-the-scenes on what a good or bad business would be. CapForge helps tons of clients either buy or sell business and Matt was a business broker before starting CapForge. Let’s look at some of these businesses up for sale and see if Matt would be interested in buying them.

Video Transcript: 

Alright in today’s version of “Would I Buy this Business?” we’re looking at an online jewelry store that is claiming 5 thousand dollars average monthly profit. They’re asking $75,000 for it and they’re saying their gross revenue is $300,000 which is okay it’s about a 16% profit margin not terrible not amazing. But the big problem that I see here is that these are projections and that if you read the description they’re only they’ve only been around for five months. So the question immediately is if you have a good successful business going it’s only 5 months old, why are you already looking to sell it? If you’re thinking about selling a business you usually wanna have run it for at least two or three years even if you built it with the idea of selling it just so that there’s some track record and some history and you can demonstrate that the business is successful on a longer than five-month basis. The other thing that immediately jumps out as questionable to me is they’re saying they have over 6,000 customers. If they have 6,000 customers and $115,000 in sales that means that they are not selling very expensive jewelry and that may be okay but the cost of running paid ads and shipping just means you’re gonna have to sell a ton. You’re gonna have to have a ton of conversions to really grow this thing into anything sizeable. They’re also not selling anything unique. It says they’re buying their jewelry from a wholesale jewelry supplier so there’s just nothing about this business that makes me think I’d rather buy this than just start my own. If I have $75,000 with a couple thousand dollars I can build a nice website. I can put together a branded ad campaign and I can test the waters myself and if I make money with it I’ve got $70,000 left to continue the growth. And if it doesn’t work out I’ve only spent a few thousand dollars to try it rather than giving somebody $75,000 for a low margin barely started business that is not at all unique. So easy answer on this one, I wouldn’t buy it. There certainly lots of good online businesses that I’d be very interested in buying but it has to have something unique about it. It has to have some competitive differentiation it has to certainly have more than five months of history and hopefully better than a 15 or 16% profit margin if I’m gonna be interested in and paying you know a reasonable price for it. So I would definitely pass on this business.

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