In January of 2019 I was lucky to host JJ Deakins on the show to talk about how he sold a Merch by Amazon business in 2018.
This episode was a lot of fun to make with JJ. He was an open book about the whole process, and his personable nature made for an easy-going conversation. If you’re interested in what it’s like to sell a Merch by Amazon business, this is the episode for you.
Spencer: [00:01:07] Welcome, everyone to the Merch Lifestyle Podcast. Today I am joined by a very special guest. We are going to have a great conversation today in the context of selling your print on demand business. Episode 45. I’d like to welcome JJ Deakins to the show. JJ, how are you doing?
JJ: [00:01:07] Yeah, great. Thanks. It’s finally great just to be on here. We’ve been talking about it for a while.
Spencer: [00:01:28] We have been kicking around some ideas on the Slack group but I remember when you posted on the group and you said that you were kicking around the idea of selling your business. I think I kind of jumped on you with a DM and I was like, “You have to let me know how this goes for you.”
We will definitely get into that. I’d love to give you the floor and let you talk us through everything that happened there and everything else you’re doing. I guess to get started, go ahead and tell us like where you’re coming from, a little bit about yourself, and then walk us through how you got into e-commerce.
JJ: [00:02:03] Yeah, cool. I’m 25 years old originally from New Zealand. I’ve been in Australia about four years now. I first came over to finish off my business management degree. I was here just temporarily after I go home but coming stuck in Sydney ever since. I have worked a couple of different jobs and discovered Merch by Amazon at the start of 2017 on the r/JustStart subreddit.
I can answer where I kicked off the whole e-commerce and online business thing from them, but mostly they have a full time job as well on the side as an SEO consultant for a little digital agency and then in Sydney. I’ve been here about a year and that’s kind of where I’m at this point.
Spencer: [00:02:46] Nice. there’s a little bit of crossover with what you know, with SEO and with Merch. If you’re on the r/JustStart subreddit, there’s a lot of different stuff that comes across there. What made you look into Merch and what interested you in a product based business versus more of a software one?
JJ: [00:03:06] Yeah, I think my first jump on r/juststart was looking at all the affiliate websites ’cause that’s the main kind of core content on them. Neil, one of his posts about selling his Merch by Amazon account It was like “Oh my god, that’s such a great opportunity.”
That’s when I first stumbled into that and I applied and I heard nothing. I think they’re accepting people a lot faster now than they were maybe year and a half ago. I jumped on the idea and I started selling on Amazon who was my third party. I was selling mugs on there. I had about 100 different mugs that are selling maybe one or two a week at the time and that’s kind of my foot in the door to the print on demand services. It’s kind of nuts.
Spencer: [00:03:48] Nice. That’s a good product. I saw a lot of mugs. Were you using TeeLaunch or somebody else is…
JJ: [00:03:54] Yeah, that was TeeLaunch.
Spencer: [00:03:57] Nice. Yeah, man. TeeLaunch is like the mug supplier. Everyone else, I don’t know how they get it so low, but their prices are nice.
JJ: [00:04:02] Yeah. It’s ridiculous.
Spencer: [00:04:04] It’s good. Cool. So you got into Merch and then how long did it take for them to actually give you the account, a couple months?
JJ: [00:04:02] I think applied early February 2017. I got accepted at the start of June.
Spencer: [00:04:19] Okay, nice. Once that opens up, you’ve got your 10 slots. In the beginning before we can get started to the how you’re running it, did you have any, was reaching Neil’s level of success your goal or you’re just curious to learn about it or did you have some kind of goal at the outset or were you just trying?
JJ: [00:04:39] I think I realized the potential when I first started. I didn’t actually know how big it could be. When I first started, I just threw out a few shirts. I do the keyword research, this and that. I didn’t expect too much. I think it took about 10 days for me me that my first sale. That was like that first sale I know you remember the sales which was the like. “Oh my God. I just made four dollars or something”
Spencer: [00:05:04] Decent first taste of blood.
JJ: [00:05:05] It’s good for me, really.
Spencer: [00:05:08] Yeah, absolutely. At that time, the royalties were really nice, too. I remember Shanon and I used to live next door together. I remember specifically when we were both getting started, I think it was June of 2017 right around when you were there. I remember we were sitting at the bar and we’re talking about how you could sell a t-shirt. At the time, a royalty for a shirt was like seven, seven fifty, close to eight bucks for selling a normal shirt and we’re like “One shirt buys this pint and more. This is great. We got to scale this thing up.” It was nice times back in the early part of March, for sure.
JJ: [00:05:43] Yeah. I think I think my second month of Merch, because I don’t really know the whole copyright background as well, Game of Thrones was just being released I think in August so I listed of maybe like 10 different Game of Thrones shirts. I absolutely cleaned up that second month so much. I think I had 100 slots I made like almost $1,000 US that second month, about 97% of that was from Game of Thrones shirts. I’ve told them like a few months later.
Spencer: [00:06:09] I say, trademarks be damned.
JJ: [00:06:11] Yeah, big time. I just had no idea at the start. Just throwing these designs out thinking it was a quick buck.
Spencer: [00:06:16] Yeah, I have to admit I had done that a little bit too in the very early part on Esty with a little bit of stuff that could be considered IP infringing. I made a couple of quick sales. I know the feeling. And then you have this come to Jesus moment where you’re like, “Is this really what I want to do?”
JJ: [00:06:40] The funny thing because I brought these original designs of these Game of Thrones shirts, assuming I will, all the copycats jump on them straight away. This is with my two best sellers, I can still see the copycat’s designs are still out there today. I have still got like a BSR around like 60,000 or something a year and a half. I’m kind of like, “Jesus.”
Spencer: [00:07:00] Oh, man. That’s tough. Have you ever gone after any copycats?
JJ: [00:07:05] Nah, I did not waste my time. There’s always going to be more, that’s the thing.
Spencer: [00:07:11] Yeah, I think the same thing. My one shirt on Merch that does well, 21 reviews and it does well for the niche, five-star shirt but it’s just surrounded by copycats and you can’t. It is like playing whack-a-mole. It’s not worth it.
JJ: [00:07:26] Yeah.
Spencer: [00:07:27] In the beginning of Merch, you’re putting up, you’re seeing the potential of it, and you’re refining your strategy. Were you making the designs yourself and then how are you finding niches to design for?
JJ: [00:07:40] That is a good question. I have used Merch Informer. I think most people use this as well. It’s such a powerful tool. I guess I’ll go through my process as well. I was designing about 10 shirts a day consistently for about six months. I’d research maybe 10 to 20 designs at night, wake up early before I went to work, bang on these designs on Photoshop for a couple of hours, and upload them. That’s kind of my routine. Yeah, back to your question. I design every single shirt myself.
Spencer: [00:08:10] Wow, that’s impressive. Were you doing any scaled designs or was it all unique with graphics?
JJ: [00:08:16] Most of them were unique with graphics, but I’ll do the whole one would be like a dark design, one would be a light of the same design. It’s kind of like a two in one. Half will be going on the light shirts and half will go on the dark just to fill slots, mainly.
Spencer: [00:08:28] Nice. When you when you were at the peak of your business, how many designs did you have live? What level did you reach as far as tier and products?
JJ: [00:08:38] If I’m still consistently uploading, I get the 500 tier threshold. I was just waiting to be tiered up from there.
Spencer: [00:08:46] Nice.
JJ: [00:08:47] So my account, it was at 2k. That’s how many slots are available.
Spencer: [00:08:51] Okay, nice. Did you just go t-shirts the whole way or did you ever diversify that?
JJ: [00:08:57] I think it was about 80-20. So 80% of my listings are t-shirts, all the rest were whatever else was available at the time.
Spencer: [00:09:05] Nice. Cool, man. You’ve got this account. You’re growing it and you’re seeing the potential. At what point do you start to think, because you have to make a decision, you have to figure out if you’re going to double down. In this whole time you were working a full time job. At what point did you start to think that you might want to sell or how did that idea get planted in your head?
JJ: [00:09:26] I think it was Neil from Merch before he posts. I think I came across his all blog posts about him selling on the accounts. I was like “Oh my god you sell it for that much? I was like, “Oh my god. It is actually possible?” That was kind of like the first little thing that planted the seed that hey, it’s possible to sell these things. I haven’t even considered before then. That was probably about maybe four or five months and I was making a decent amount I could roughly what I could get for it. I don’t actually sell the account. I actually sell the process of selling for another maybe eight months.
Spencer: [00:09:58] Okay, nice. You were playing with the valuation. You had at least almost a year, maybe even more than a year of earnings to support that. Cool . Neil planted the seed and then was there any strategic consideration.
There is a lot of choices you have to make in print on demand. One of the biggest ones is what channels you are going to sell on. Was the strategy of print on demand or wanting to sell through Amazon, or any frustrations of the business, did that play into wanting to sell or was it just kind of like, “Hey, I see this opportunity and I want to go make the most of it.”
JJ: [00:10:35] I think it’s a bit of both. I’ve been consistently uploading for six months at that point and I was burnt out to say the least.
I was spending maybe two and a half hours, maybe close to three hours every single day, so my nine to five was uploading these shirts day in day out. I think looking back in retrospect, it would have been at that point, I should have started outsourcing. I wasn’t making enough from it. I knew good designer that could have done it but I just never did.
Spencer: [00:11:02] It’s a tough spot to be in when you want to. I remember going to the same thing where not that you weren’t taking it seriously, but having to think about your process and say, like I was doing the same thing, designing myself or hiring a designer, too, on Fiverr and saying “Time out.”
If this is going to grow into the amount of slots that they’re going to give me, I’ve got to revamp the whole thing. I don’t know about you, but I went through a couple painful iterations of not managing my key words correctly and just having to recreate content and. It was rough. It’s hard to make that call.
JJ: [00:11:38] Yeah, you get to that point where you get stuck of how fast you want to scale something. Without a designer tier 1000/2000 you are just not going to grow.
Spencer: [00:11:49] That’s a lot of designs to do yourself, too, especially if they’re all unique.
JJ: [00:11:54] Yeah, for sure. There is only so much you can do in an hour of the day. You got to have value on your own time as well, that’s for sure. If you can pay a guy on Fiverrr or Upwork for like $4 design, that design is essentially making you hundreds. It’s like a no brainer, really.
Spencer: [00:12:12] Yeah, that’s super important to value your own time. I think that is an interesting part of the valuation of an e-commerce business and a Merch business is that sure, you can go have a valuation of maybe $50,000 or whatever but an expense item is never the time that you spend and putting in Photoshop. There’s definitely hidden cost to it.
Let’s get into that. You made the decision, you were following Neil’s post. I remember reading the same thing and he continues to crush it. he seems to do all the right things at the right times. It’s usually a good idea to follow he is doing. You wanted to sell it and there’s a lot of different ways you can go. You can go private or through a broker. Did you do any research on how that process works? Who did you end up going with?
JJ: [00:13:02] I kind of looked around but there was not a lot of information about people selling Merch by Amazon businesses. Neil’s done it, I’m sure other people have as well but there is not many resources out there at all about who to approach, how to do it, what you need to do, and so on. So I looked at Empire Flippers.
There is other one that I got recommended by. I don’t know who it was but I didn’t end up going through with him. I ended up listing on Flippa but that is an all new deal in itself.
Spencer: [00:13:37] I know a little bit about the brokers and I’ll try to add to the conversation. We can maybe compare them based on what we both know. There is one in there I want to throw in called FE International and they’re are broker, too.
JJ: [00:13:51] That was the other one.
Spencer: [00:13:52] Okay, good. I’ve actually got my business valued from them. I don’t have the paper in front of me but I think it was like a 22-24x monthly profit multiple and I think their fee structure was very similar to Empire Flippers and it was about 15%.
Their service that you’re paying for is that they will handle the escrow, they have this network of buyers, they will handle of due diligence on your behalf and then once you make a sale through, somebody that they connect you with, you are good to go. How does that differ from maybe your experience with Flippa or the fee model in that experience?
JJ: [00:14:31] It is pretty similar. The fee model for Flippa they have two different things. You can either go through I think just generally escrow, it’s 15%. We can go through Flippa’s private escrow for 12%. I went for the latter, I went for 12%. But I think compared to Empire Flippers and was it FE International?
Spencer: [00:14:49] Yeah, that’s it.
JJ: [00:14:50] It was more like a marketplace, so you list it and you do all the communication, everybody and so on. During my time, it took about a month, six weeks, to get my listing actually live through Flippa because the account manager never seen it. They had no idea what Merch by Amazon was, no idea how to value the business, anything like that. There’s so much back and forth between them trying to explain what that was and how I want them to sell. That was an ordeal, to say the least, just to get the thing live before I even started to talk to anybody.
Then I think throughout before listing actually goes live and you can see a live auction day, so that was the option I chose in between two weeks or something. I had about 50 to 60 people message me, like half the time wasted. So there were heaps and heaps of people messaging me about the business, what it is.
Spencer: [00:15:44] Oh, man. Sorry. I didn’t mean to cut you off with my sigh there. That is a lot of people. What was your price point, what was your target, what was your profit multiple. I’m trying to dial in why so many people were excited.
JJ: [00:16:00] Yeah, of course. I wanted to sell it for at least 2.2 times the amount of the monthly net profit between 2.2 and 2.7. That was quite what I wanted to stick in between. I marketed it in the way that this account has a lot of potential because at the time, it was averaging about $500 net profit a month over that one-year period. I only had 169 slots full of those 2000.
The way you market it was like it’s got all these free slots, all this potential. It’s sitting there waiting to grow for the right buyer who has the mindset. He wants to scale it, outsource, and what not. I lost my passion at that point. I’m done with all Merch by Amazon side of things. I’m ready to move on. That’s kind of how I pitched this business.
Spencer: [00:16:53] Okay, I got you. At a 500 a month, did you mention it was 20-22x monthly, or like 2.2x annual?
JJ: [00:17:03] Yeah. I ended up selling for 2.4 times a month in and out, so 24.
Spencer: [00:17:11] Okay, nice. The unit up to and well, that was around $12,000 US.
JJ: [00:17:15] Yeah $12,000 US.
Spencer: [00:17:18] Nice. Now I am starting to see there is a totally passive business that is new, that is within a price range. There’s a lot of highly valued businesses on Flippa. People are chomping at the bit to get into this new thing. Merch has a lot of buzz at this point, too. People have probably heard a little bit about it, there’s probably a little bit of scarcity because people haven’t been able to get an account.
JJ: [00:17:45] Yeah, for sure. One of my actual buyer, he had the most [inaudible 17:47] on account, Lory, which I found very interesting. I was only in tier 10 it it’s just been accepted. The way he was thinking about it was you can either take it in six months to grow this business to where mine was right now.
Spencer: [00:18:03] Yeah.
JJ: [00:18:05] At the same point, mine was, or you can jump into mine, which is already there and scale it straight away.
Spencer: [00:18:11] Nice. I think that’s a fair point. It takes a long time to get into Amazon’s good graces to figure it out and to get the tiers. At this point, I just crossed 8000 sales. If you don’t have those kind of viral shirts that really take off or you’re not just completely filling up all of your slots, then it is totally a lot of time and it is really hard to break that free. I think there’s definitely value for people to buy your account, too, for people who are willing to set up a better process or who have the time or who wanted to the outsourcing. I think burnout’s totally valid, too, in Merch.
JJ: [00:18:48] Yeah, for sure. It is definitely a grind you process to say the least, isn’t it?
Spencer: [00:18:53] That’s a great way to put it. Oh my god. Everything that comes with some of the uncertainty and dealing with Amazon. There can be some risk in it, too. You have 50 or 60 people messaging you. That’s crazy. You said half of them were time wasters and half were valid? Give me some examples of what you had to talk through and what people wanted to know.
JJ: [00:19:17] Most of them on the know my design straight away. “Oh, can you share your designs with me?” I was like, “Do I really have to?” Is it just some other Merch by Amazon big boy wants to know my designs that selling well. I picked out three designs out of my life on Sunday and shared them. I wasn’t showing them all 500 designs I’ve had in the past. I just picked out a couple. This is roughly what they are, they are all designed by myself. This is what you can expect if you buy the account.
Spencer: [00:19:47] Were people happy with that? I think that’s a happy medium.
JJ: [00:19:51] Yeah, there’s a few that I can you share a couple more.
Spencer: [00:19:55] Get out of here. Can you share a couple more thousand dollars?
JJ: [00:20:00] That was one of the many questions. A lot of them just did not understand what the business was. They just had had no idea. They’ve never seen it before. “Oh, it’s making this amount of money. Can you explain it?” So there was a lot of explaining. I had this copy and paste I would send back every single time rather than typing it out.
The way I got recommended by my Flippa agent to put an NDA on it because the whole selling process isn’t exactly okay in Amazon’s eyes. We had to view my little profile and then have to send a request to me after and you have to sign an NDA, a nondisclosure agreement, to actually view the details of the account and what it was.
Spencer: [00:20:50] Okay.
JJ: [00:20:51] At least 100 of income through just accept them so they can see the profile themselves.
Spencer: [00:20:57] Wow, interesting. The NDA is a one-way, or is it a two-way NDA where you can’t discuss or they just can’t discuss your account?
JJ: [00:21:08] Exactly. It’s kind of like to cover me and me selling the account itself because in my eyes, I’m sure Amazon doesn’t mind the selling of accounts. More like a specific thing of the terms and conditions. “You can’t sell accounts.” That was always a big thing. I think that’s more to stop people from farming the tier 10 accounts so I don’t think we’ll just compile email addresses and maybe acceptance of 10 a month, they don’t sell these things. That’s where the real issue lies with Amazon. That’s where they got the issue.
Spencer: [00:21:41] Okay, this was a big point when I met with my broker from FE, too. I asked, “What are we actually selling? Are you selling a password? A design portfolio.” I think the way you would put it before was you’re selling a business asset that includes Merch by Amazon. Walk me through. If you’re going into escrow and somebody’s buying, what are you putting into escrow and how is that structured?
JJ: [00:22:12] I definitely pitch to the selling business rather than account. All my 500 designs I upload to Google Drive for the bi-access. I have all my logins for the actual account itself. I think I had my research method as well written out for the buyer to use. Those are the three pieces that were included in the business ad.
Spencer: [00:22:42] Okay, that makes sense. Were you providing any support? Ongoing, I think some people might ask for a little bit of ongoing Skype calls or some email support. Did you offer that or was it a clean cut?
JJ: [00:22:55] Yeah. I had it in the bottom of my listing, like I’m happy to help out the buyer in the coming months during transition and what not. I jumped on a Skype call once the auction was finished for the buyer. I’ve been talking with this guy back and forth throughout the whole two weeks litter. I jumped on Skype with him and told him from our research process. He was still fairly new so I was going through the basics. I let him know that in the future like just reach out to me on Skype or whatever. I’m happy to like do some advice here and there.
Spencer: [00:23:31] Nice. That is awesome that you support it. I am impressed and also a little surprised that people were willing to throw down and just really get into it without knowing some of the basics of SEO, how to evaluate a listing that is selling.
JJ: [00:23:45] Yeah, for sure. He took a little bit of a gamble for that. I think we covered in the conversation on our discussion, but the actual process from the buyer buying the account and need receiving the funds from them was almost two months. There is a reason for that as well because once you bought the account, we’re discussing before. He wass like, “Yeah. I will put through like a bit to the minimum reserve if you can get it approved by Amazon to sell this thing.” I was like “Yeah, don’t worry. I’m sure I can get that from Amazon” Oh my, how wrong was I.
Spencer: [00:24:20] This is the meat. Let’s get right into it. Just Amazon in general is so hard to understand. The internal workings, it’s very difficult to get feedback, accountability, and any kind of transparency. Please tell us how that went for you.
JJ: [00:24:40] I said “I was happy to do it for you because it’s peace of mind for you, peace of mind for me as well.” I lnow people who sold like Fulfillment by Amazon businesses in the past, that happens all the time. I mentioned Amazon’s not that different. How hard can it be?
I initially decided to stay away from the Merch Amazon Customer Support and go straight to the legal team. It seemed like the obvious thing to do, get in contact with legal team. All I knew is yes, you can sell your Merch by Amazon business. That’s all I need from them. I think I ended up sending four or five emails back and forth the legal team. They had nothing. I called them. I faxed them. Nothing
Spencer: [00:25:25] You faxed them! That’s old school. You were really trying.
JJ: [00:25:27] That was just the style as well. It says, “All right, who else is my contact?”
Spencer: [00:25:32] There is no response on that?
JJ: [00:25:34] Nothing at all. Even if you try to find the Merch by Amazon, just the Amazon legal team contact details on Google, it’s near impossible to find. It doesn’t exist almost.
Spencer: [00:25:44] I was going to say. I bet that’s buried so deep. I have to go super deep on Amazon just to get to the help chat.
JJ: [00:25:53] It is ridiculously tough. They’re not there for their sellers, that’s for sure. There’s no way. Anyway, from there I ended up contacting customer support, not even Merch by Amazon support, just general customer support on Amazon. Didn’t get anywhere again.
Alright, I’ll contact Merch by Amazon’s support and just see what they say. I was like, “Oh, this is a bit risky. I sold my account.” I thought they’ll just ban my account, which they did not luckily. The first guy that I said that I got in contact with he is like, “Oh, yeah. It’s directly against our terms and services.” I was like, “I’m not selling the account and selling it as a business today. It just happens to include the Merch by Amazon logins that are included in the sale.”
There was maybe four or five back and forth with them and just went nowhere. He escalated it to his managers, managers escalated it. It just went nowhere. That six weeks of a back and forth communication just was a waste of time. I ended up doing an agreement with a buyer. “Alright, I understand you have similar email trail going back and forth. There has been no kind of resolution.”
What we ended up doing was I gave him a little bit of assets to escrow, he put the money in escrow, and I gave them access to the account. He changed all those details on them to his, all the bank details, so on. Split the accounts for month. Once he accounts it for a month, release the money in escrow to you so we’ve both taken a bit of a risk in that scenario. That ended up working out fine. Nothing happened to the account and just sat there after monthly, released the funds.
Spencer: [00:27:45] Okay, interesting. He changed the password, changed the account, his email, his bank account, so it’s pretty much out of your hands but then the money’s in escrow and then for those of us like myself who don’t know how online escrow works, you have to provide some kind of proof that you’re satisfied with the transaction for the escrow to release the assets.
JJ: [00:28:10] Yeah, that’s correct. I upload mine and he uploads his assets. And then, I can release mine and he can release his. That’s what comes into it if there’s any disputes in the matter.
Spencer: [00:28:23] Sure, that makes sense. And then you just let it sit there so there was no activity. The only time that he logged on from a different IP to your account was once.
JJ: [00:28:31] Yeah, that was it. I was like, “Don’t upload any designs becauseI told him about copyright, but don’t touch the account for a month and let it sit” because I don’t want him uploading designs and getting copyright infringement and whatnot, just before the money was released. I back myself in that sense.
Spencer: [00:28:50] Yeah, I think that’s super smart to do. It sounds like it was successful. Even though that process took a while and you probably could have avoided the six weeks, but you didn’t know that the time because there’s no clear guidance. It seems like you figured out escrow and it was pretty it was fairly painless after that. You had a good buyer.
JJ: [00:29:10] I wish I had someone guiding me throughout the that four-month period on selling this account because it was stressful, to say the least, I give my account away on a whim almost. I have talked to the guy like a fair amount so I trusted him in that sense, but there was no guide how to do it or what to do if this happens. It’s kind of like going into it blind.
Spencer: [00:29:33] That’s the thing about evaluating whether you want to sell through a broker or not. One thing I think we can get into, we don’t have to get into me now but if I were to sell, I noticed that Empire Flippers now has a Merch section that you can sort their marketplace by. I have a spreadsheet here on my desktop that has a couple multiples and of ones that helps sold already. You can look through on EmpireFlippers.com and you guys can go sort by Merch.
You can see a couple examples. It seemed like on there, if they have a Merch category, they’ve done it before, they’ve proven it seven or eight times and the multiples there looked pretty good. Similarly, to FE international, they seemed confident that they could navigate that like craziness that you just had to go do yourself is wild to me that you actually got that done.
JJ: [00:30:27] It was such a relief. All the merch, like actual, the amount sitting my back. I had biggest relief like Ooh my god, I did it. Thank God”.
Spencer: [00:30:36] Dang, that’s awesome. Did you just rely on the marketplace? I want to learn a little bit more about how the auction works if you were promoting or if it was strictly Flippas organic traffic, maybe their email list that was going on? Did you think that was enough traffic? What was the auction activity like for you up until the sale?
JJ: [00:30:57] Yeah, I think there’s two options on foot for memory. You can make a listing and it’s live straight away and people can bid on it and what not or you can put it live, let it sit for a few weeks, and then make it go to auction for 24 hours. I did the second option. I sat there for two weeks. It was on featured in Flippers. It’s in a daily email, the top blah blah blah. It was featured in that one day and I got a whole, maybe, 20 to 50 responses just from that and just from the sheer number of people looking at it, I didn’t think I should or need to advertise it anywhere else. Flippa is enough traffic and enough attention for that just to be all you need.
Spencer: [00:31:38] Absolutely. If you had to do it again, given the choice between your 12% flip of private escrow experience and, let’s say, one of these guys like Empire Flippers who has a Merch section wants to charge you 15% plus, I don’t know if it’s $297 or $397 listing fee, but they take that pain process of navigating the actual sale of a merchant account off your hands. Which one do you think you would choose?
JJ: [00:32:07] I think I’d pick Empire Flippers at 15, to be honest.
Spencer: [00:32:11] Okay, just because of the uncertainty with that process?
JJ: [00:32:14] Yeah. Hopefully I can provide enough information during this podcast like if I was someone else watching this now, I hope I give you the confidence to go to Flipper and be able to sell it yourself. That’s my goal from this podcast for all the people.
Spencer: [00:32:33] My goal for this podcast is to learn how private escrow works and then to tell everyone I’m selling a Merch account on the show and to pay no brokers and have people come direct to me.
JJ: [00:32:43] Yeah, for sure. That’s the best possible outcome.
Spencer: [00:32:46] Yeah, I think I’m overestimating my reach just a little there. So it sounds like if you have an account, let’s think about maybe the criteria for why it would make sense for people to sell. I certainly believe there’s still a lot of opportunity there but let me talk about who is the right person to buy or to grow an existing business and who’s the right person to sell. I think the right person to buy a Merch business is somebody who is totally into setting up a process and outsourcing and can do something repeatedly over and over again. I think if you’re just doing the one off or you’re doing it for yourself, it might not even be worth your time. What do you think about that?
JJ: [00:33:34] Yeah, I think in terms of buys, it depends what your end goal is. From this point when I first started I just want to make a bit of money on the side to help out my everyday expenses, whereas you can really treat it like a business and you can make a lot from it. I think if you’re a buyer looking to buy a Merch by Amazon account, make sure you want to treat it like a business and you want to scale it like a business. Don’t come in there and just buy it and expect it to keep making X amount a month. You’ve got to put the work in.
Spencer: [00:34:04] Yeah, for sure. If you were just to let it sit for a year, the money would not increase month over month. It would just slowly go down. You have to account for competition. Another thing to add is that if you’re looking to build a brand that you want to sell on multiple channels, Merch is probably not the place to launch. Maybe it’s a place to launch and test, but I don’t think that’s where you want to grow your brand because you’re not going to get any meaningful customer feedback other than like, wrong size, one star.
JJ: [00:34:35] Yeah. “It smelled funny.” That was it.
Spencer: [00:00:34:37] Oh, I have a perfect one. I had one that was like, “Great shirt. Fits awesome.” Three stars. That’s not unique.
It’s not really the best place to build brand. You’re not getting the customer data, you don’t control any analytics, can’t build an email list. The list goes on. Not to mention Amazon controls your margins. But to your point, if you’re willing to take it seriously and scale it either with how many you upload or the amount of designs you’re making, for sure, big opportunity still especially with the royalty change and Merch kind of encouraging us to go more into hoodies and long sleeves that there’s a lot left on the table. They haven’t even expanded beyond Germany in the UK yet so I can see both sides.
JJ: [00:35:23] For sure. I sold the IP that all the designs, 500 designs as well. I think the big selling point in that sense is that they could go and list it on Etsy, Prinful, all the other print on demand services as well. You’re not exactly stuck on Amazon. If you buy an MBA account, you can take all these designs and let’s just spead them on all these other services.
Spencer: [00:35:46] Yeah. In preparing for this conversation, you’ve got me thinking a lot about selling my business and then what I would include. When I engaged with the broker initially, it was Merch account and then Redbubble, too. I’ve been mulling over how to pitch it and I think it’s exactly what you said, you’re selling designs. They just happen to be on skus, they just happen to be SEO optimized.
You’re essentially selling pre-made designs, content if you’ve got descriptions loaded, and then just the fact that you’ve done the work and put the content and the design in the right place at the right time. I think a huge selling point for me or whoever else is if you’re looking to expand into multi-channel or even take the designs and you could resell them whatever you want to do. It’s not just Merch that’s your sandbox.
JJ: [00:36:37] Yeah, exactly. There’s opportunity there. You’re not just buying that $500 a month. You’re getting everything included in the business. I guess the money is more that the proof of concept’s working and let your designs down more than anything else because the other 2000 designs up there with your crap, they’re all optimized and you’re making $10 a month.
Spencer: [00:37:00] That’s a good point. The income proves the concept. I couldn’t have said it any better. I don’t know. I think there’s arguments for both sides. If you care about the process and you want to scale it and you’re excited about the new products, if you if you have faith in Amazon to not treat you like garbage, which I don’t, it might be good for you. Even if you wanted to diversify into a second account like your buyer, which is really interesting to me. If you ran them on two different computers and two different IP addresses to diversify your risk. The other way is that you can’t build a brand and then your margins are going to get squeezed over time.
I’ll give you an example. Yesterday I made $2.50 cents on Merch. I have over 2000 products up and then today, so far, I made like five bucks. Meanwhile on my Etsy store, I made one sale which is $100 profit. I know it’s going to shake out the end of the month for Merch to still perform better than Etsy. I see a lot of potential in a platform that’s way more seller-friendly that you can push higher margin products. You probably even saw some better margins when you were doing Seller Central. I would argue that’s a brand that you can control more than Merch, anyway.
JJ: [00:38:19] Yeah. I think all these other print on demands, they’re more about quality rather than quantity where Amazon’s all about getting as many shirts and saturated market and what not. Whereas, Etsy is more about unique designs specific to like a certain niche.
Spencer: [00:38:36] Yeah. They charge you per listing so it’s harder to flood with your scaled designs like I do.
JJ: [00:38:40] You can absolutely flood a niche in a day if you wanted to.
Spencer: [00:38:52] Oh, it’s unreal, man. I don’t want to log in at the moment. I think it’s something ridiculous like 800 products. To me, Amazon’s not encouraging a marketplace of quality. When you’re encouraging people to do like best acts in the world. I’ve been very transparent, I take advantage of the scale designs. My portfolio is mostly scaled into different niches, but they don’t work and I don’t try to put those on the other platforms, especially not in Redbubble. That doesn’t fly there.
JJ: [00:39:26] No, not at all.
Spencer: [00:38:28] At the end of the day, you made your sale and then you got your money a long time later. Once the money was in the account, your list was 12,000 and then after it comes out to around 10,000 USD or close to that?
JJ: [00:39:44] Yeah, I reckon that’s what it was. I sent my reserve price for 1350. That was 27 times the monthly value. As soon as the auction opened, I got all the 12,000 just like that. I was kind of like that. That was what I want the account go for, so I was watching the whole day, refreshing and at every five minutes. There’s about an hour left to go and I dropped the reserve price to $12,001. As soon as I did that a bid came through for $12,002.
Spencer: [00:40:19] Get the bidding war going again, come on. Stir it up for me.
JJ: [00:40:25] Yeah, I was like, “C’mon. Is there going more people bidding out or not.” I was a happy little guy for that. The whole lengthy process to lead up to it and what not, “Oh my God, that’s done. I’m happy with that.”
Spencer: [00:40:32] Very good. The reserve price is essentially the minimum you’re going to let it go for and if someone’s going to take this and list their own account or their own business, the strategy is to set your reserve price above what you’re willing to let it go for like you did because you don’t want to give up that upside immediately.
JJ: [00:40:54] Yeah, a hundred percent. What else happened on the day?
Spencer: [00:40:56] You popped some champagne and celebrated a little bit?
JJ: [00:40:58] Yeah, it didn’t really hit me because I didn’t have the money. I knew I still had, I guess… I’m like, “Sure, it’s great.” I haven’t seen any money yet or when I’d see money or if I even would see money. There’s no popping champagne or anything at the time then. I was kind of “Woah. I did it. Yay.”
Spencer: [00:41:20] When I finally reached a good goal for Merch in December and cleared more than I ever had, but then I look at my earnings and it’s about, 75, 70% of what I earned and I’m like, “Okay. I guess I’m on that 30/45 days to pay schedule. Okay, we’ll celebrate then.”
JJ: [00:41:41] You never make it to the next month, right now?
Spencer: [00:41:41] Yeah, they just found a way to sneak it in there. Oh, man. So good. It sounds like overall it was a crazy process but you made it through. Now you’ve got a little war chest to do what you want with. Are you thinking about moving, are you doing anything else in print on demand or do you have other skills and aspirations that you want to follow?
JJ: [00:42:05] Yeah. I still stay up to date with the whole print on demand community. I see all the updates. We’re in the Slack group together so I follow along with that still. But in terms of what I want to do next? Or were talking about before prior to the whole podcast, but I’ve been teaching myself to code for last year. I think in terms of what I’ll move to next, I’m very interested in software as a service.
SaaS businesses. If anybody who’s listening hasn’t heard of the Indie Hackers website, go there and have a read of the few articles. Learn about what SaaS is, it’s an online product they sell for a monthly subscription. I think there’s a lot of potential there and that’s where I see myself moving into the future.
Spencer: [00:42:52] Think Merch informer from Neil, think merchant long from Shannon. Those are just print on demand specific but yeah. So many different SaaS businesses that you can do. What interests you about it? Is it that you want to find another passive income business? Do you think that it’s more defensible, you can build a better competitive advantage? what makes that interesting to you?
JJ: [00:43:16] I think the most attractive thing about a technical or an online software as a services is the scalability of it. If you go to the product, there’s no reason you can’t sell it to 100,000 people. There’s no reason. It’s just a product. Just host an online service. In that sense, I think the scalability is really attractive. I was very burnt out with Merch. I wasn’t enjoying it anymore.
It’s time to move on. Whereas, this is more of a passion project. That’s how I see it. It’s something I enjoy doing. I want to do it full time in the future. That’s kind of where I’m at. I haven’t actually pressed the go button. I’ve done all of the reading and research and taught myself to code and how to build these other things. I haven’t pressed the go button. That’s kind of where I’m at with the whole software as a service.
Spencer: [00:44:04] You got to just start, man. That’s where this whole thing started from, it’s the r/JustStart.
JJ: [00:44:10] Back in the Subreddit r/JustStart, yeah, for sure.
Spencer: [00:44:13] I think it’s cool. I love that you’re teaching yourself new skills and that you’re going in that route because if you’re building a product, regardless of whether or not it’s financially successful, you’re building your own skills. You’re learning something, you can change it. Merch at some point gets very static.
I think you and I both felt burnout to a point where it’s like, “What are my variables? What niche is hot this month? Am I going to play the seasonal holiday game? Are my designers cranking stuff out? Am I doing scale designs? Am I just hitting uploads, whether I do it myself or I automate it?” There’s not a lot of room for skill development other than feeling like you’re pushing your creativity or maybe you’re improving your SEO. I think if you’re building something yourself, that can be way more attractive for yourself and then for future employer. You mentioned you want to do that full time.
JJ: [00:45:05] Yeah, definitely. I think the other thing about software as a service, I work as an SEO consultant now day to day. I’ve tossed out there of maybe freelancing them around so I’m out of agency moving forward. I keep coming back to the thing like if you’re providing a service, you’re trading your time for a dollar amount, whereas, if you’re building a product, you’re selling that product and not your time. Sure you got the time in building this thing and maintaining it, but you’re selling the product itself not your time.
Spencer: [00:45:35] Interesting. Help me through that a little but. Software as a service can be either active or passive, depending on how you set it up. I think they’re both kind of similar, where if we take a Merch shirt for example or a software as a service business, both take time to build and optimize and put it in the right place and but both can sell passively. What are you looking for with the time aspect?
JJ: [00:46:01] Once you go products, you can sell it over and over again. Let’s say every single t-shirt. Sure, I put in all this effort. I designed the t-shirt and they can sell a hundred times.
Spencer: [00:46:18] Oh, I think we lost you there a little bit. JJ.
JJ: [00:46:22] Only in that in that make sense?
Spencer: [00:46:24] Sorry. You just cut out for a little bit. Would you mind going over the last like 15 seconds?
JJ: [00:46:29] Yeah, of course. If I was to do consulting in the future, I will put a value on my time and they almost only in that sense. Whereas, the product, I’m selling it to them and they’re buying it.
Spencer: [00:46:24] Yes, okay. I’m following you now. I’m following you. Yes. Because I do a little of consulting, too, and there’s definitely a reason it costs money because your time is valuable. To your point about wanting to do something you can do over and over again, software as a service is beautiful for that because you’re coding something. The beauty of software is it’s not tied down by a physical supply chain. It’s really about distribution, marketing, and your ability to make something that people love.
JJ: [00:47:10] Yeah definitely. If you’re passionate about something and you really want it, there’s a lot of people that will say, “Oh yeah. I want to do this and that” but there’s not a lot of people actually go out and build something. I’m after being successful.
Spencer: [00:47:25] Yeah. You can make a killer product but if nobody buys it, it’s almost like if a tree falls in the woods and there’s no one there to hear it. It depends on your goals, I guess. The nice thing about your goals is that you’re going to win either way because they’re going to learn something or you’re going to be financially successful or both, hopefully.
JJ: [00:47:42] Yeah, it’s more about consistency. I know we talked about this. In any kind of online business, it’s more as long as you can consistently do something and not give up and stay up day in day out, sooner or later, you will be successful. You will see some kind of return on your time investment.
Spencer: [00:48:00] I think that’s definitely true, especially if you’re willing to learn and change what you do, test, and even lose a little bit of time and money. You have to be willing to do that because there’s no free lunches. Nobody’s just going to give you a formula that works. If I were to go even just give out my top five selling shirts, you would still have to go do work. If people wanted to copy them and do it themselves and take that shortcut, you would still have to market, do it, post it, and make it different than competitors. Nothing can be handed to you.
JJ: [00:48:32] Nothing will ever be 100% of passive as well. Everybody’s chasing passive income. Make sure that you go to a point where it’s almost passive you’re taken to the account at the time that you got producing that and then maintaining as well.
Spencer: [00:48:46] For sure, yeah. Passive income is such a misnomer because it’s 100% active up until the point you stop. I would argue at the point you stop, it starts to decline in value.
JJ: [00:48:58] I agree 100%.
Spencer: [00:49:01] So if you had any advice to give to our audience, our audiences is in a lot of different stages of print on demand. Some people love Merch. Some people love Etsy. Some people are just starting out. What would you say to people haven’t gone through the entire process just maybe two years ahead of time for some other folks, what would you say to help them get to a successful point where they want to exit and do well for themselves?
JJ: [00:49:27] That’s a good question. I think I’ve got a different answer but I think going back again, consistency. Refine your processes. Keep doing it day in, day out, you will see results. That can be applied to anything in life, not just online businesses.
Spencer: [00:49:43] love it. I’m reminded of the Shia LaBeouf video, “just do it”. That one always gets me ready to go when I have to go grind and upload Merch shirts. Based on what you told me today, I think I’m going to go forward with a broker. I don’t know which one yet but I think you’ve convinced me or maybe I’ve convinced myself and you’ve put the nail in the coffin. I’m feeling a little burned out on Merch.
I’m looking at the empty slots and it’s looking way up at this wall I have to climb. I’m like, “Do I really want to go do that again?” I should be a process guy. I should have this stuff scaled and set up but also my heart’s really in more of the brand building and the higher margin products. I’m head over heels with Etsy. Everybody knows that. It’s on the show. I think I might do it, man. I’ll either go call up my FE broker again or I might go through Empire Flippers, but I’m probably going to try to go with somebody who’s handled the process before. I admire your bravado and your willingness to forge a new path man, but it terrifies me
JJ: [00:50:54] Definitely wasn’t easy. Just a little one other that kind of pushed me to sell my account in the first place. I always had my personal email account, I’m guessing like most people do as well, attach their Merch by Amazon account. It might be on the Slack group told or drop that bit of info that can change. That was kind of like “Oh, I can actually sell it without giving up my personal details to my email” so they actually change your email associated with your Merch by Amazon account. You can go to Amazon and you can change your email on there and it has a knock on effect.
Spencer: [00:51:24] That’s a good point. You know what? You reminded me of another thing. When I initially talked to my broker about evaluating it, I was selling on Seller Central and actually I don’t think that Merch or Amazon can separate the two if you’re running both at the same time. That’s part of the reason I wanted to shut down the momentum on Seller Central is because I think if you have two accounts, they don’t have a way to separate that that login or that password. If you do sell on FBA, maybe keep in mind that that might be a complication.
JJ: [00:52:00] For sure. Anybody that doesn’t have a Merch account, set it up with a different email than your personal email.That’s just one thing. Keep it all separate.
Spencer: [00:52:10] Yeah. If you’re doing it the right way, you’re running it through an LLC, then keeping your expenses and your everything separate. I think in the future, if I had to imagine the best way to do it, it would be here in the US LLC with your Merch account, your expenses, and income underneath that so then your sale would be the LLC and then you’re hands free on that.
JJ: [00:52:36] Yeah, definitely. I think of it as a business from the start rather than when you want to sell it because then you come into complications for sure.
Spencer: [00:52:41] Oh, yeah. I’m going through that now Especially when I go to list it, too. It’ll be like “Gey, go grab your portfolio of 2000 designs.” It will be like, “Ugh.” Most are on Merch along but they’re scattered. Cool, man, this has been awesome. You mentioned to me before the show that 2019, you’ve got a couple goals related to getting out there and building a presence. Help me expand on that and show people where they can find you.
JJ: [00:53:09] Sorry. You just cut out slightly.
Spencer: [00:53:11] I was just going to say tell people where they can where they can find you.
JJ: [00:53:15] Yeah, of course. I am pretty active on Indie Hackers and you can find me on Twitter. I’m kind of new on the air, but it’s DEAKINS_JJ.
Spencer: [00:53:26] Absolutely. I’ve got you covered. JJ, thank you so much for coming on, man. You and I are totally going to be talking. I’ll definitely keep you informed of how I stumbled through this process. I really, really appreciate your time and I can’t wait to see what you do with SaaS going forward. It’s going to be really exciting to see what you settle on.
JJ: [00:53:47] Yeah, thanks for having me. If anybody has any questions, if you’re watching this video in three months’ time, drop some comments down below. I’ll reply you there.
Spencer: [00:53:54] Oh, fantastic. Cool, man. Well, let you get in to your, is it Saturday night?
JJ: [00:53:58] Yes, Saturday night here in Australia.
Spencer: [00:54:00] Oh, I shouldn’t stand between you and that so I’ll let you go. Thanks to everyone for watching and we’ll catch you guys on Monday with another interview. Thanks.