Host: Welcome to Acquiring Minds, a podcast about buying businesses. My name is Will Smith. Acquiring an existing business is an awesome opportunity for many entrepreneurs and on this podcast I talk to the people who do it. Most interviews on Acquiring Minds are with entrepreneurs who buy a business or businesses and devote themselves to it full time. Vivian Chen is different. She bought a business as a side hustle. It's an online business and a space that she loves hospitality and it offers her a creative outlet, the opportunity to build something for herself rather than for her bosses and the prospect for self employment down the road. And she spent very little money on this business because the previous owner had all but abandoned it. So the revenue had dropped from around $20,000 a to almost nothing. So this was something that Vivian calculated she could grow back to $20,000 a year or hopefully more with relatively little effort and enjoy it as a passion project at the same time. This is a really cool and growing path for entrepreneurially minded people. If it interests you, take some action after listening to the episode. Go to flippa.com or microacquired.com if you sign up for free. These two are the leading sites where online businesses are sold and you'll receive an email every day with interesting little businesses for sale like the one that Vivian acquired. And with that, here is Vivian Chen's story. Vivian Chen, thank you for joining me today on Acquiring Minds.

Guest: Well, thank you for having me.

Host: You are the owner by way of acquisition of a business called Modern Innkeeper which is in the Airbnb services space. I'll let you tell the audience exactly what it's all about. Your story is really interesting. First of all, I find the Airbnb space super interesting, but also because you acquired this business as a side hustle. So many of my previous guests, they're 100% working in the business they acquired, but for you, this is a bit of a longer play. You're acquiring this to work on it on the side and eventually, presumably you'll grow it into something that you can devote more time to. So we're going to get into all of the story and your thinking around having acquiring something as a side hustle. Why don't we start just with your background, two minutes on yourself and what led you to want to buy a business as a side hustle.

Guest: Yeah. So Modern Innkeeper sells bath and shower supplies and guest toiletry kits for vacation rental properties and we specialize in alternative accommodations. So like short term lodging in private homes or apartments. Our customers are mainly owners and managers of short term rentals. Campgrounds, cabins, cottages, small inns, boutique hotels, and bed and breakfast. My background is I study business in College. So in 2009, after college, my first job was a project overseeing hotel renovation. It was 80 rooms hotel, including the public area. And I was like the project manager representing the ownership. Then after that I got involved in new development of a 120 room hotel that completed and opened in 2012. Then right after that I got involved in another 100 room hotel developing from the ground up. And then after that a 200 room hotel project. So it was one project right after another. And each new hotel development project, I was involved in every stage from the land to the opening. So if I'm to describe in general what I did with those projects, I would tell people that I'm like the orchestra co conductor. I had to plan the project, find the contractors, decide which hotel franchise to join, find the hotel management companies, find the financing and oversee the entire orchestra. So each part, each section, when they're playing, they're doing their job at the right time and coordinating with each other. What led me to buy a business is in 2018, I was thinking, I have been doing this for almost 10 years. I'm in the middle of my biggest hotel project to date and it's expected to complete later in the year or early 2019. And I was thinking, what's next for me after this? If I get fired next week or if I quit, I want to be running my own business instead of looking for a new job doing the same thing. I want to have something that's my own, that I can build and be proud of. And it's always been my dream of mine to own my own business. Since college I explored ideas and thought about starting my own business. But I didn't have any skills to create a service business from scratch or the technical know how to create a product. So all those years I had a lot of ideas, but nothing ever became reality. And I would have all these ideas. And after looking further into them, I eventually talked myself out of all of it. But after all these years of working and getting to know myself as a person, I realized I'm good at managing a competent executive. And having developed a number of successful hotel projects, show that I'm able to handle large scale complex projects and work with different types of professionals to get the big results. I know how to put together a team and look for the right resources. And that's essentially what being a business owner is. So in 2018, instead of keep having ideas that go nowhere, I decided to look for an existing business to buy what's interesting.

[6:25] Host: So when you say none of these ideas came that it didn't go anywhere, did you launch any or did you not even really launch any?

Guest: Yeah, I tried to launch and I think my biggest challenge was during the business planning part where you talk about the different parts of the business, the financial, the operational, the marketing and all that, a lot of technical requirements will come up such as building a website and all those. And that's where I was stuck.

Host: So they were online business ideas generally or at least required a website. Guess every business requires a website and

Guest: even for non online based businesses you should have a website because otherwise basically don't exist. Right. So yeah, the website was one big part that I had to think about and that stopped me from going further.

Host: But you did, but it sounds like you are a creative person and you did have ideas. So it was just getting those ideas from zero to one is where you were getting stuck.

Guest: Right. And at that time I thought I had to be able to at least know how to do the basic of every part business. I was thinking of building something on my own. The idea of acquiring a new business didn't really come into mind until later on during when I really started looking for other ways to try to own a business.

Host: Do you remember when it occurred to you that you could buy a business or why it occurred to you or how.

Guest: Yeah, I initially wanted to build something from scratch but like I said, I would be overwhelmed by the technical aspects of building something like a website. And I'm a very low tech person so I try to avoid, you know, to begin with, I try to avoid working with electronics. Just the thought of having to design a website from scratch is. It can be overwhelming to me. Yeah. And I am more of a creative big picture type. I like ideas and analyzing ideas and scenarios and it's just that after years of having all these ideas that go nowhere and still trying to find, looking up how to start something and eventually I found business brokerage websites. So I realized that's when I can piece together and the help for the technical parts and still have my vision become a reality.

[9:33] Host: So that's funny, I feel like that might have been my own real kind of like the kernel of the realization about a business buying is happening upon some of the business brokerage sites and you see all these businesses that are generating revenue and you can buy them. It's pretty cool.

Guest: Yeah. And I think a big part of, of why some people decide to buy instead of, instead of sell instead of building their own is, I think it's more of a self realization journey because you have to know what you want and ask yourself, is building a business really my strength or is it managing and growing the business afterwards? That's my strength. So getting to the part where I started looking for businesses to buy, it took a while because I had to know myself and what I want and what my strengths are.

Host: Yeah, sure. Well, I think the way I always hear it talked about is are you a 0 to 1 person or a 1 to 5 or 1 to 10 person? It's a different skill set to breathe life into an idea and get those first customers, that first traction than it is to take a business that has traction, customers, history and take it to the next level. But both involve, certainly both involve the ability to grow something and creativity just maybe differently applied. So you were about to tell me, how did you find Modern Innkeeper when you decided to start looking for a business to acquire?

Guest: Yeah, I was looking at business brokerage websites like Biz, Buy, Sell and Flippa and eventually I came across the Shopify Exchange Marketplace. And I had been browsed it and looked for hundreds of listings on Exchange Marketplace. I had been on there for months and then finally came across Modern Innkeeper. And upon seeing it, I first really loved the name. Then I read more about the business and I was thinking, why didn't I think of this idea? It's so simple and it's something that's part of my industry. So I decided I want to own it and I contacted the seller.

[12:08] Host: So you had looked at lots and lots of businesses. You've been looking at Shopify Exchange for a while, correct?

Guest: Yeah. And it was not a, it was not a process where I decide this week I'm gonna, I'm gonna start looking for businesses to buy. It was something that built up over months and years. So. And one analogy I would give is same with real estate. When you're looking for a property to buy, it's not something where you decide I'm gonna find it this week. It's something where you just want. When on your free time you look around and you go through hundreds or thousands of listings and sometimes you have no luck, Sometimes you have something you want to look more into and sometimes you just see something that you really want and you got to take it.

Host: Yeah. Well, did you have criteria for what you were looking for? You must have had financial criteria. Could you tell us what that was and any other criteria you had?

Guest: Yeah, I had a list and at that point of my search, I narrowed it down to the type of business I wanted to buy, which was online based. So it has to be online. It's something I can work on anytime, anywhere. The business has to be selling its own product, whether it's physical product or digital product, no drop shipping. The product offering has to have potential to be expanded, meaning I want to see the long term potential where the business is not just selling random products. It has to serve a category or a market with proven market needs. And I also need to have ownership of all the brand assets, the customer list, the supplier list, the inventory. It has to have an existing business website and social media accounts that are established and functioning. I can improve on them, but I don't want to build them from scratch. I want to be able to build my own team on my own terms. I want to be able to choose who I work with. And it has to be within Vivian.

Host: On that one, just. Sorry to interrupt, but on that one, did that mean that you wanted to acquire a business that didn't really have a team? When you say you wanted to work with whomever you want, what does that mean?

Guest: Yeah, so I was looking for something that. Owner, operator, no employees, but have the possibility to have employees in the future. Gotcha. Modern Innkeeper. The owner. It was just. It was just the woman and her husband. And they have some contractors and a list of vendors, but no employees. It was just them.

[15:06] Host: Okay. And I assume you didn't want to have employees because you just wanted the control to be able to have that much more control and ultimately choose who you work with and not inherit some employees.

Guest: Correct. Yeah. And as I was looking for a business to buy as a side hustle, so I would not. The time that I put into the business would not be stable enough to sustain existing employees.

Host: Sure.

Guest: It was. It would be based on my own time. So I can't have someone just be on standby all the time.

Host: Sure. Makes sense.

Guest: Yeah. And.

Host: And what about your financial criteria? What was your budget?

Guest: My budget was between 25,000 and 50,000. And modern innkeeper, I acquired for a lot less than that just because of the. A lot of it has to do with the background of the business and why the owner was selling. She. She started modern innkeeper in 2015, and shortly after that she started another business with her husband that's different from Modern Innkeeper. And they eventually started spending more time on that business. So it was kind of abandoned. And that's why she put it up for sale. She was eager to get rid of

Host: it great for you. Can you tell us how much revenue it was doing?

Guest: Yeah. So given the background, the sale included the Shopify store, the main business website, and an Amazon business account. When I acquired Modern Innkeeper, it was in late 2018. It had been in business for about three years, and the seller created the Shopify store in 2015, didn't get much luck with sales until she started selling on Amazon and that's where things took off. So sales were at highest in 2016 and 2017. And after she kind of neglected it starting in 2017 and 2018, if we were to take 2015 to 2018 and think about the limited time that she spent running it, the total revenue was around 50,000, which is not much at all for three years. But it was a good starting point for a new owner to step in and take over something that was doing well but had been neglected.

Host: Sure. And it's also. Yeah, it's not enough, but it's definitely. It demonstrates that there's demand for what she had built, that there's quite a side hustle. You mentioned real estate and how people who are looking for real estate deals, similar to looking for a business deal, you look and look and look for a while and you have to be patient.

[18:07] Guest: Small.

Host: Speaking of real estate, given that that's your background and that's your expertise and I mean, you took us through your history and you worked on really sizable projects with a lot of complexity. So obvious question, why? If you have some money to invest, why not become a real estate investor? That's a classic path for a lot of people who want to do side hustles, particularly people who already have professional real estate experience.

Guest: Yeah, good question. So my focus is on hotel real estate, large complex projects, and in order to start my own firm doing the same type of. Same type of project, it would require me to do it full time. And that was not something I was ready for. I wasn't ready to leave my job to start my own firm. I was just looking for something additional on the side. So the starting my own commercial real estate firm was not really an option or it wasn't something I considered.

Host: What about just buying a single property? Maybe an apartment to rent or a smaller commercial property to rent?

Guest: Yeah, that's not really my interest. The smaller properties. And having worked in the hotel industry for so long on the real estate side, I know that with any size of real estate investment, you have to have a lender, funding or investor or partner. And having dealt with all that from my job, I didn't want to get into that. So no lenders, no investors. I was looking for something where I could manage on my own.

Host: Okay, so you wanted to buy in cash. You didn't want to say you had. Your budget was 25 to 50,000. You didn't want to buy something that was 250,000 and you're putting down 10%. You wanted to own it outright.

Guest: Yeah. And after just exploring and thinking, I kind of came to the conclusion that an e commerce business would be something that fits me better. And another reason is that at my job, it's a lot of numbers and legal stuff, so very black and white. And if Modern Innkeeper is something that sort of acts as a platform for me to create, I can get creative and I can explore ideas that I otherwise wouldn't be able to do at my job.

[21:08] Host: That's awesome, Vivian. I agree. It really does seem like a creative outlet. Okay, well, but back to the black and white numbers. Boring stuff. What did your. What did your. What was the deal structure? I assume it was just you paid, you paid the money and you got everything. Nothing fancy because it was a small deal and there was no lender involved.

Guest: Yeah, it was. So it was an asset sale. The professional would call that an asset sale. And the acquisition price was less than 5,000 because of the situation that the owner was in and she was trying to get out of it. So I paid with my savings. No financing, no lender, no investors. Don't want any of that. Want to be on my own.

Host: Vivian, that sounds. That's a remarkable deal. Less than $5,000. Even if the revenue had essentially dropped to nothing because she wasn't working, she'd abandoned it. Like the domain name alone is probably worth. I don't know, I'm no domain name specialist, but it's got age on it. It's a five year old domain name, and that alone is worth something. So that sounds like a great deal. Okay, well, my next question was going to be what you perceive to be the biggest risk when acquiring Modern Innkeeper. But you were putting so little capital at risk. You were probably just like, if this completely fails, it's not that big a deal.

Guest: Well, that's one way of looking at it. But another thing is when I. Even if I buy a business for such a small amount of money, I would hope that it doesn't fail. Of course, the. Yeah, the biggest risk in terms of acquiring Modern Innkeeper was that the previous owner solely relied on Amazon for sales, which was a good way to test the market and build A business short term. But my plans for Modern Innkeeper were longer term. But the biggest risk was getting the business to be less dependent on Amazon and move it out of Amazon back into Shopify where I have more control in running the store. The upside was that I could establish long term relationships with my customer and really get to know who they are without Amazon in the way, building the business slower but the more proper way. The downside was losing some customers who would only stay on Amazon. And we did lose some customers.

Host: And for people who are not fluent in e commerce on the back end, entrepreneurial e commerce tell them if your business is on Amazon and you're selling through Amazon, Amazon makes it very difficult or nearly impossible to really have a direct relationship with your customers. Like you don't have their email addresses, you don't have their contact information. Amazon as intermediary really makes you kind of blind to your customers. Is that a fair assessment?

[24:21] Guest: Yes. And you're absolutely right. When I took over and I was getting orders on Amazon, I was not able to, I was not able to get access to the email of my customers. So because of that I won't be able to do email marketing. And email marketing is one very important part of e commerce. Without that I won't be able to establish relationship with my customer because Amazon is in the middle. And yeah, that, that was just something I didn't want and I had to find a way to become less dependent on Amazon if I were to build a long term business.

Host: The pro and the con of Amazon, it can bring you as an e commerce seller, a lot of customers. It's just like in this business it wasn't really doing anything. But when she turned on Amazon all of a sudden, revenue really popped. The flip side is that she doesn't control those relationships. Vivian so one of the things that you'll often see, I'm sure you saw on listings of e commerce businesses for sale, if they're only on Amazon or they're relying mostly on Amazon, they'll say as a way of marketing themselves to potential buyers, hey, there's so much potential for this business. We're only on Amazon. Put the business on Shopify and on Walmart.com and other places and there's all this opportunity to grow all these different channels. Of course now I've heard that enough and I've heard e commerce buyers talk enough about the fact that that's way easier said than done. It's actually quite, it's not as simple as just turning on Shopify. So talk to me about what your experience has been there or what you found.

Guest: Yeah, the process of acquiring customers without Amazon or Walmart or ebay and those types of sites, it's a lot longer. And you would need to first find the customers yourself. Whether that's through content creation or Google Ads or search engine, the process is a lot longer. But the advantage of that is once you have the right people, the right customers find you. They tend to be more repeat customers and more loyal to you because you establish a relationship with them. You know who your customers are, you can talk to them, you can find out what their needs are and serve them better. So that's, that's the advantage. You might not see it short term, but I really believe long term that is the more proper way of building a business. Sure.

[27:20] Host: So have you started executing the strategy?

Guest: Yeah. So in 2018, when I bought Modern Innkeeper, I was sort of first, I limited the quantity of inventory available on Amazon and I reopened the Shopify store. I also started to be more aggressive on social media and we had an existing customer list that I also started utilizing and send out email marketing. So we were able to acquire some new customers that way and some of them have been with me since then.

Host: Excellent. What's funny about Modern Innkeeper is that you actually found the business on the Shopify app Exchange, but in fact it was really was generating the vast majority of its business on Amazon. So it was really primarily an Amazon business, but being sold on the Shopify marketplace.

Guest: Yeah, she the. So the original store was created on Shopify, but then she kind of paused that and then, you know, moved everything over to Amazon, but still keeping the Shopify store. So she was getting, still getting orders, but not many because the majority were already from Amazon. And I think one of the reasons why I was able to acquire it for such a low cost was because Shopify, based on your historical revenue, they make a suggestion on the store price. So I think the previous owner followed that suggestion when she was listing the business. But in, in the listing, she also stated that all the sale includes the Amazon account,

Host: which was where. Where all the value was. So Shopify kind of comes up automatically with a price that it suggests to sellers selling their Shopify store based on the sales that have come through Shopify that Shopify knows about. But Shopify doesn't necessarily know about all the sales that have come through Amazon, so they don't compute. That doesn't factor into their calculation. What have you learned since the acquisition that you wish you'd known before you Acquired it, anything.

Guest: So any goals, any milestone, any expectation you have for the business will take a lot longer than initially expected. So if someone says, I expect to have the business turn a profit in two years, it will probably be more like five years. Things just take a lot longer than we all expect. And I come to learn that in not only my job, but also with Modern Innkeeper.

[30:28] Host: And how has it gone?

Guest: It's going. It's doing great. When it was at a time when everything started locking down. But In June and July 2020, Florida opened up. When Florida opened up and some states opened up for the summer because everyone thought things would be starting to get better. I had a lot of vacation rental owners getting orders from them. And these, some of them manage, they, they come in all sizes. Some of them manage anywhere from a few houses to over 100 units. So summer 2020 was busy. And this year 2021, we already had more sales than entire year of 2020. So we're doing, I think we're moving at a positive direction.

Host: Excellent. Can you give any sense or any range of the revenue above or below 5,000amonth?

Guest: It's close to 5,000amonth. Below 5,000, but close.

Host: Excellent. And what are the margins? Because you obviously have to buy all the toiletries that go into your guest kits.

Guest: Yeah, depending on the product, but all the margins are between 45 to 60%.

Host: Great margins. So you will have paid back the asset purchase price within a few months. I mean, if you haven't already, but at the rate you're going.

Guest: Yeah, that is correct. But no profits yet because we're putting everything back into marketing.

Host: So what are you doing for marketing? You say you're creating content, you're active on social. What does that look like? I'm doing the same. So let's compare notes.

Guest: Yeah. We have a blog, the Art of Hosting, where we publish useful articles and resources for vacation rental owners. So if you have a chance to take a look at it on the website, we, we publish one blog each week and one example of an article is like popular outdoor portable pizza ovens for vacation rental properties. It's something that vacation rental owners and hosts can look at and get ideas for their own place. Our goal is to help them improve the guest experience. So if, for example, if you, if you book a vacation rental and you walk in and you see you have the living room, the family room, the kitchen, the bathroom, the bedrooms, and maybe even a backyard. Every room you see and every, every item that you see, it could be a touch point. So that is one that is something that can be improved on. And with Modern Innkeeper, we're starting with the bathroom toiletries. So eventually we hope to move out of the bathroom and into other rooms of the house.

[33:53] Host: Well, going back to why you immediately fell in love with the brand name, it is a great brand, Modern Innkeeper. And yeah, it's not bathroom toiletry specific. It's anything related to becoming a better host. A better Airbnb host. I keep saying Airbnb host, but at the top you said that you could sell to B&Bs and anybody in the hospitality business. But I imagine the majority of your customers actually are in the Airbnb ecosystem. Or am I wrong?

Guest: Actually, no. A lot of them are independent vacation rental management companies. So I have this one customer in Northern California. She manages vacation homes near the wineries. So it's her own company, her own business, but I don't think she's listing them on Airbnb. I think it's. Besides Airbnb, the other popular vacation rental website is Verbo V R B O. So a lot of. A lot of hosts choose to toast on there instead of Airbnb. There's Homestay, Home Away, and all the other platforms.

Host: Do you have goals in mind for, say, revenue? If it reaches a certain point, then you'll go full time with Modern Innkeeper. How are you thinking about eventually transitioning into this as your full time thing, which I assume is the goal at some point? Correct me if I'm wrong.

Guest: Yeah, well, I didn't think about it from a revenue standpoint. I thought about it from repeat customer standpoint. So say if we have 100 regular customers that are ordering from us on a regular basis, then that, then the revenue stabilizes and that's when we can start looking at going full time.

[36:01] Host: So that's the number. 100 repeat customers?

Guest: Well, no, I was just throwing a number out there. But 100amonth sounds like something that. Sounds like something that you can work from.

Host: Yeah. Okay. Would you have any advice for people out there who are considering acquiring a business as a side hustle specifically?

Guest: I think you have to find something that fits you. So know yourself first, know what you want, and then look for what fits you. And if you find it, just start and keep it simple. Really keep things simple. Because I was. For many years, I was caught up with all the different ideas and some very complex ideas, and then it really, really got nowhere because everything just became so overwhelming and so, so confusing. So I would say keep it simple and just start.

Host: Where can people reach you, Vivian, if they have questions about business acquisition as a side hustle or the hosting space? Hospitality space?

Guest: Yeah, you can reach me on the Modern Innkeeper website on the contact page. Just fill out the form and I will probably answer back in a few days or within a day. Or you can find me on LinkedIn. Connect with me there.

Host: Okay, that link. I'll put these links in the show notes. Well, this was really interesting, Vivian. Business acquisition as a side hustle in a really interesting space. Thanks for coming on.

Guest: Thank you. Will.