ALittleSparksOfJoy.com | June 2024 Update

3In Winter 2023, I purchased www.alittlesparksofjoy.com. You can find my original post about this website right here.

I’m just going to come right out and say it. I messed this acquisition up and there are at least 2 dozen things I could’ve done differently.

In this post, I’m going to explain what happened, why I messed up and in the end I’m throwing in the towel along with all the lessons that should help you massively in acquiring and building a business.

This is an embarrassing “wow, you screwed it up” type of inside look… and while I’ve had a lot of successes, I find that my successes are far less useful, fun to read and the lessons aren’t as definite.

Buckle-in friend… this is a dooooozzzyy.

Let’s start with the beginning…

When I started acquiring businesses I wanted to acquire a variety to understand if my investment thesis was correct and true

I wanted to be in SaaS, Media and Education— ideally bringing the 3 of them together.

When it came to industry it was business and personal development.

At the end of 2022 I saw a business for sale that was super interesting— there was no product, simply there was just advertising. At the same time I was having a lot of luck with sponsorships and non-traditional advertising and so I thought my combination of background in marketing and sales would go well with the business.

At the same time I didn’t want to spend my own money that was I using to grow businesses to buy this business for $800K.

I passed.

A while went by and I was approached to do the deal with effectively zero money out of pocket.

It was a 3-way deal with an investment bank, the seller and some private investors.

While I’ve been part of lots of deals like this I never was the one on the other end. I jumped on it and made it happen.

Everything upfront was smooth — the business was real and the opportunity was bright.

Further— I really believed in this business. I resonate deeply with spiritual practices and helping others find self trust in a divine plan is a beautiful aspect of what I can do as an entrepreneur.

I love investing in things that I love…

When I bought this website and blog, it was very much an opportunity in my mind to be able to have a business revolving around something that I have as a daily practice (spirituality).

The problem is that while it was a passion and a love of mine I had a lot of experience with low ticket, email, and ad businesses with massive success.

There were a lot of things I didn’t have experience with when it came to this business. It was the only business in our portfolio that relied on SEO traffic, we never used advertising engine like Mediavine, nor did we work with low-intent mass-market audiences or sell inside of the spirituality niche.

In short, my bet was going into this:

A. I could turn SEO traffic into a powerful email list.

B. I could use low ticket courses and sell those to the email list and search traffic.

C. I could use partner and paid ads to build the list and the brand to be able to diversify from the advertising revenue.

The problem?

While the thesis in many ways was possible (and still is), there was a cluster of problems all at once that happened as soon as we acquired the business.

A. The deal was over-leveraged, which meant that majority of the money coming from the business was paying for the business (this was the only business I ever bought fully on leverage — we’ll talk about that in a minute).

B. SEO changed massively as soon as we bought the site and on top of this, with AI taking search results our base line revenue decreased by 75% in less than 5 months.

C. Our low ticket product and marketing simply didn’t hit the mark and we were not able to generate enough revenue fast enough as the audience simply wasn’t big enough on email to sell too.

D. We didn’t have enough money to dedicate on this business which meant that many of the opportunities we did have, simply couldn’t work.

E. We didn’t have an entrepreneur-led co-owner of the business and through owning the entire 100% of the business, we simply didn’t have someone who could push forward the growth (even though we had one of the best operator running it that I’ve ever worked with).

When we bought the site the revenue looked like this from advertising alone.

This is the current earnings…

Simply put… as a bottom line reasoning. We weren’t able to diversify traffic and revenue fast enough nor invest enough into the business.

The winds changed quick and this turned from a scaling opportunity to a turn around business :-(

My beliefs for this business? Here they are… 😲 

• In truth, I’m still very bullish on the spirituality niche.

• I’m not bullish on SEO or organic-only websites unless you have a massive unfair advantage.

• I am optimistic on low ticket products, our partnership strategy, funnels and using the email list to drive sales.

• I am not optimistic on turning random website visitors into customers, nor our str

• I do believe that our strategy to partner with spirituality influencers would work extremely well.

• I don’t believe that this is a business that can be ran by a large team and likely best suited for someone who has either a strong SEO background, has low ticket products or programs for this niche, or someone who has experience on paid and partner marketing.

• I believe if we went slower, it would’ve caused almost the same issue as the revenue would of dipped lower.

• I believe if we had another $500,000 to invest, we would of solved the problem before it came; however, the risk on that money was far too high and the business wasn’t worth enough to raise that type of capital.

• I believe if we hadn’t been massively over-leveraged due to putting very little money down, there would’ve been enough to at least maintain the revenue as the advertising and SEO revenue dipped.

• I believe we built some amazing funnels, product, delivery and had an incredible team that put there all into this that I was and am sad that I had to let go.

• I believe I should’ve sold this about 6 months ago—entrepreneurs hold on far too quickly, and sometimes the moment you know it’s going to be really tough, is the moment you need to throw in the towel.

• I believe that someone can really turn this around and it has the foundation of something amazing with a niche that is going to grow massively in the company years.

Let’s talk about the financials and the acquisition strategy… 🤣 

Most of the time in business, you generally have the right strategy but it’s the timing that is the issue when something doesn’t work out.

I would consider that’s the case here.

We bought the business for $800,000 in Winter of 2023 and the deal looked like this:

20% from private investors

30% from seller financing

50% from private bank investment

The problem? The payment terms relied on us to subsidize the growth of the business. At the time of purchase, I was okay with this as we had plenty of investment coming into the portfolio. However, as I wrote about in one of my last updates when over 8-figures ended up not arriving for investment into my portfolio, I had to make a sudden U-turn on strategy which created a scenario where this business was starved from the debt repayments.

In general, this was the one (and only) time I tried that whole zero-down financing thing that people talk about.

In hindsight, the deal itself simply didn’t make sense, as the debt repayment each month was almost 80% of the profit of the business.

I went back and worked to restructure this financing, and while everyone was understanding, the truth is, the business went from being a business with a lot of potential to a turnaround project.

Today, it’s for sale! 😐️ 

For a few months, I attempted to find a solution for someone partnering with me on it, however, the problem is that it needs a MASSIVE amount of work and investment in order to get it to a point where it makes sense.

Further, even if it got to $50,000/month, it would take 2-3 years to get to that point and the potential opportunity cost of simply talking about it was too great.

Which is why we’ve put it for sale with our partner, Flippa.com which will go live in the next few days.

We purchased it for $800,000 and we will sell for less than half of it.

If your interested in buying it before it hits the market, simply send me an email [email protected] 

The future after the sale…

A few weeks ago I shared this story with another Entrepreneur who is successful and did the exact same thing as me. We ended up doing it the same time and he also realized that this type of investment, perhaps not the best.

I believe as we go into the future, we’ll continue to invest in high-ticket personal brand-based spirituality businesses that rely more on social media organic, paid advertising, and partnerships.

We tested SEO based and I didn’t like it— perhaps at the worst time.

We tested leveraging with little down and I didn’t like it— it was too high of stress with too low R.O.I

We tested trying to transitioning a business model quickly it didn’t work.

We tested a business we believed could have a lot of growth, however, in many ways the business was almost too small of a business to make sense. As we go into the future, our deal size will need to be much more.

We tested having a business that was primarly operator ran inside of Entrepreneur ran — it didn’t work out, even though we had one of the best operators I’ve seen in years (that was also wildly passionate).

On this one, we’re going to take the loss, take the lessons and move on. I knew this one was going to be a risk, as it went a little outside of what I normally do inside of businesses.

In all, it was stressful, but it was worth it. The cost of the lessons for the future, likely saved tens of millions and it allowed us to further focus on what’s working.

Here’s to allowing for someone else to take it the next mile. Someone who has the passion, the time, some resources, and perhaps the ability to truly make the vision that I had into a reality.

-Scott

For everyone involved thanks for your patience, grace, understanding and rooting for this the entire time and making it happen. This one wasn’t it. However, the beauty about entrepreneurship is you just get back up and keep going.