Shakil Prasla has always worked in the retail space.
He used to own convenience stores. Then, five years ago, he started a website selling men’s accessories.
Three years ago, he started acquiring other online companies.
He wanted to bypass the time and energy spent in setting up a new business and developed a model for creating a passive income whilst still sitting in the owner’s seat of a company.
When looking for a company to acquire, Shakil isn’t particular about the product. He looks for evergreen products which aren’t a fad or trend, but have good cash flow and the potential for growth.
Why having good people around you in business makes a huge difference
In any company Shakil acquires, he always makes sure that he has a good team. When he first buys the business, he starts by spending time with the seller to get to know everything, then he hands all information over to a manager who runs the whole business.
Finding good people is a matter of trial and error. Shakil looks at a variety of places to see the potential of people, interviews them personally, and has a three month trial period of testing them out before they’re brought on full-time.
All of his businesses are online, so all of his people are virtual and work from home. He receives monthly projections and reports from an outsourced agency on the business, and he and his employees track the progress in their Slack group.
Identifying growth potential in a business for sale
When a business comes up for sale, Shakil always asks the seller what growth strategies they would suggest which they didn’t have time to do.
He looks at why people are bouncing off websites and makes conversion lifts. He doesn’t look to see how he can get more eyeballs on his site, he looks to see how he can get the current eyeballs to buy more.
The missed opportunities, product line, and organic traffic rate are all things which influence Shakil’s decision on whether or not to acquire a business.
Finding and financing deals when acquiring a business
There are lots of brokers which exclusively deal with online businesses, but Shakil recommends BuyBizSale when you’re looking to acquire a business.
Banks are now willing to finance internet purchases, with online business becoming a maturing market.
With SBA loans, you can put as little as 15% done and get 85% finance from banks. These loans are incentivized by the government, making them accessible.
The cost of businesses are based on multiples, and are usually around 2x for a new business and 3x for an established business. Shakil says his sweet spot is 2.5x, but there is leniency if a business has a lot of potential for growth.
The risks of running an online business
Sometimes a business you acquire won’t work out as anticipated. Shakil says that online businesses are riskier than bricks and mortar.
The biggest fear for an online business is being de-ranked by Google. If it changes it’s algorithms or you receive a penalty, you can drop from page one to page three quickly.
This happened to one of Shakil’s businesses, and he started doing a lot of targeted content, ads, added products and looked for new keywords to rank for. Within five months, he was back to his original ranking.
You have to have multiple avenues of traffic to avoid this situation. Keep testing email, ad, and video campaigns.
If you’re selling a business, you are more likely to get a higher multiple if you have diverse traffic.
Connect with Shakil Prasla
For more information on Shakil’s passive income business model, go to his website at www.szventures.com.