Doubling Revenue 6 Months after Acquisition

ho knew Disney-themed scented candles could be so lucrative.

Justin Harris sure didn’t when he started looking for an e-commerce business to buy.

He’d been the operations guy for a couple companies in the recruiting space, then an operations consultant for small businesses.

But he wanted to apply his expertise to his own portfolio.

And acquiring a business was the way to do that.

“When you’re stepping into cash flow, even if it’s smaller amounts, it just makes a big difference.”

It was 9 months of serious searching, plus probably 6 months of light searching before that.

First he looked at buying a service business.

But eventually e-commerce captured his imagination.

“You could grab multiple e-commerce companies and bundle them together and have an operational system to run 1 or 2 or 15 brands, if you get it right,” he explains.

“Once I realized that was possible, I started shifting gears toward e-commerce.”

‘Til His Eyes Bled

The search wasn’t easy.

Justin talked to brokers, both nationally and locally in his city of Birmingham, Alabama.

He subscribed to e-commerce listings sites like Empire Flippers.

He worked his network from his consulting days.

“I just looked at deals until my eyes were bleeding.”

It was 9 months of serious searching, plus probably 6 months of light searching before that.

He made a few offers that didn’t work out.

He saw hundreds of deals, 40-50 of which were interesting enough to dig into their financials.

Finally, an opportunity appeared.

Riches in the Niches

A broker in his area told him about Walter & Rosie.

It was an e-commerce company that sold scented candles.

But with a large Instagram (35k followers) and a 5-year track record of product-market fit, Walter & Rosie was just the shortcut into e-commerce Justin was looking for.

Started by a travel agent in 2016, the scents smelled like Disney locations. (You may be surprised to learn that Disney pipes scents into the vents of its resorts.)

Disney vacationers looking to recapture those memories loved them. “This very much reminds us of our stays at The Beach Club resort.” – a review on walterandrosie.com.

5 years earlier the owner had launched the store on Etsy, then moved to Shopify.

She’d grown revenue to $280k by 2018, with earnings of $80-100k.

In 2019, revenues dipped to $120k, with earnings of $35-40k.

Buy the Dip

This decline in revenue meant that the SBA wouldn’t finance the acquisition with a traditional loan.

But Justin actually liked it because he knew it didn’t reflect fundamentals.

The business was a side hustle for the owner, and she had simply stopped investing the same amount of energy in 2019.

In fact, that’s why she wanted to sell: she’d run out of steam to focus on the business.

But with a large Instagram (35k followers) and a 5-year track record of product-market fit, Walter & Rosie was just the shortcut into e-commerce Justin was looking for.

Not to mention there were obvious optimizations that could immediately push revenue.

For one thing, the e-commerce store was only open on the weekends.

(You read that correctly – a part-time e-commerce store.)

She’d never done paid traffic, no SEO.

“I looked at that and thought, we can crush this,” Justin recounts.

So Justin jumped at it, acquiring Walter & Rosie for $160k.

That was a 3x multiple on a blending of 2018 and 2019 earnings.

He actually did get a $50k microloan from the SBA, with the first 6 months forgiven automatically due to COVID-related incentives from the U.S. government.

“That’s 5 percent of the business the SBA paid for.”

The rest of the money came from him and a few partners.

He also used the infinite banking concept, or IBC, a technique that leverages your whole life insurance policy to provide yourself working capital.

While widely debated and beyond the scope of this story, Justin swears by IBC.

“As an entrepreneur, how can I build multiple assets with the same dollar? For me, infinite banking was just a great no-brainer to do that.”

Quick Hits

He closed on Walter & Rosie in July 2020.

By December, Justin had doubled revenue, generating $200k in six months.

There was so much low-hanging fruit, it really wasn’t that hard.

They optimized the website a little bit. Started running some social ads. Sent a few emails to the list.

In November, they started selling on Amazon.

Beginnings of a Candle Empire

Meantime, another deal presented itself.

The manufacturer of the candles that supplied Walter & Rosie mentioned to Justin that another local candle seller might want to exit her business.

This was a luxury brand called Stack Candles.

Justin’s goal is to 10x both Walter & Rosie and Stack Candles in 3 years.

Coincidentally, Justin already knew the brand. He had two of the company’s candles in his living room that very moment.

The story echoed Walter & Rosie:

The business had declined recently, and the seller wanted out.

It had done around $300k in past years, but because distribution was mostly retail, revenue collapsed during COVID.

The candles were available in 30-40 boutiques throughout the Southeast but had essentially zero online presence.

To top it all off, the owner was willing to fully finance the sale.

So in September 2020, Justin acquired Stack Candles with no money down, paying the previous owner 10% of gross revenues up to $20k (plus some incentives).

“It was a steal of a deal.”

Land & Expand

Justin’s goal is to 10x both Walter & Rosie and Stack Candles in 3 years.

That would mean taking Walter & Rosie to $1.6m by 2023.

Which seems realistic: He projects $500k in revenue this year, with a $1m run rate by year-end.

He thinks Stack will get to a $300k run rate by year-end, getting it back to its peak performance. Then doubling that to $500k or $600k in 2022 would be the goal.

While improving operations and distribution is key, that’s not the whole strategy.