Kevin Petersen, founder of WebFolio Management, is a serial entrepreneur in online businesses. Starting out in 2013, he has purchased over 50 internet businesses to date.
In Q1 2015, Kevin bought his largest business yet through FE International and we sat down with him to ask him about his strategy, his experiences and his advice for other buyers.
Can you give an overview of your background and career? What have you traditionally been involved in and become an expert on?
I’m a marketing expert with more than 20 years’ experience consulting for Fortune 500 companies and multinational brands. During this time I’ve done everything from trade show management and large scale direct mail campaigns to email marketing and social media management.
Today I’m helping companies set up multi-touch, multi-channel programs on marketing automation platforms. My experience helping hundreds of companies over the past 20 years has helped me to better promote the online businesses I own today.
How and when did you get into buying online businesses?
I launched an online music company called Noisy Planet eight years ago, but I didn’t get into buying existing online businesses until two years ago. As soon as I started I was hooked. It’s amazing to be able to build upon someone else’s initial success and then take the business to another level.
The thing that caught my eye when I was researching acquisitions was that price multiples are competitive with offline businesses. Also, online businesses are somewhat less tangible, but they’re also easier to manage to some extent since for many of them there’s no physical building, equipment, and inventory.
What have you learned from your acquisitions over the years?
Traffic and brand reputation are more important than revenue. It’s easier to build revenue on existing traffic than it is to build traffic from scratch. I also look for untapped potential.
Many online business owners build very good businesses and strong brands while doing very little traditional marketing. This makes it easy for me as the new owner to upsell and cross-sell their existing audience.
What do you look for in an online business for sale?
We’re mostly drawn to B2B products and services since that’s my background. After that, it helps to have a connection with the sellers and get a clear idea of their past successes and challenges.
Ultimately, the decision for me is made based on future opportunities for the business model — is there untapped potential that we can use to accelerate revenue and ROI?
What got you interested in Online PR News?
Two things — one is it’s B2B which fits our model. The other thing is I’m typically attracted to is businesses where customers pay to give us content as is the case with OnlinePRNews. It takes that one key operational function off the table post-acquisition. Also OnlinePRNews fit our criteria for having a loyal customer base that was at least somewhat under-marketed.
What are the most important questions for you to ask when evaluating any business?
- Where does traffic and new leads come from today?
- Does the business come with a qualified subscriber base?
- Is there any recurring revenue?
- What’s the number one complaint from existing customers?
How did you find due diligence?
I appreciate the level of detail that FE International supplies in the seller prospectus. Getting a full appraisal that includes business insights both from the seller and the broker perspective saves a lot of time during evaluation and early negotiations.
How did you find working with a broker?
This was a great experience. Good brokers increase the seller’s credibility and make it easier to negotiate from a good starting point based on traffic and revenue numbers that everyone can agree to. In my experience FE International does more due diligence and has better documentation compared to other brokers.
What’s the biggest acquisition mistake you’ve ever made?
I learned early on that people use escrow accounts for a reason. On one of my first acquisitions I released the funds too soon and the seller disappeared before the database was transferred so I was left with a facade that had no content behind it. I was never able to reach the seller.
What advice would you give first time buyers?
Verify everything. The questions you need to answer for yourself are how much fluff is in the numbers, how much opportunity is there for growth, and ultimately how much are you willing to pay based on what you know about the business.
What advice would you give other buyers?
The more historic data you can get on a prospective acquisition the better. Don’t be afraid to ask the hard questions around what’s NOT working with the business rather than what is working.
For more on Kevin, check out WebFolio Management.
Buying for the first time? You also read about a Marty Enis’ first time buying experience.