E246: Why I Sold ColorIt.comMay 6, 2019 in Ecom-Crew-Podcast
If you’ve been following this podcast over the past few weeks, it won’t come as a surprise to you when I say that ColorIt is officially no longer ours.
We listed the business for sale in December and we officially closed on April 5th.
Being our biggest brand, you might wonder why we sold ColorIt.com among all our other brands.
In this episode we talk about
- The events that led to the sale of ColorIt
- How the transaction transpired
- Who the buyers are
- How much the business sold for
- What’s next for Terran
This episode is part of a series we’re doing on the ColorIt sale. Stay tuned for our next few episodes where we talk to Joe Valley, the broker who helped me with the sale, and our team in the Philippines who help run ColorIt.
Thanks for listening! Until the next one, happy selling.
Full Audio Transcript
Mike: This is Mike and welcome to episode number 246 of the EcomCrew Podcast, and hello from Cebu in the Philippines. For those of you who have been listening to this podcast for any length of time, that we have a bunch of Filipino VAs and other employees in the Philippines and I love coming out here at least once per year to spend time with them. They’re an awesome group of people and I find that after spending a few days here with them that there’s just so much benefit that comes out of that from just building camaraderie with them, and getting a chance to just spend time with them which is just irreplaceable.
There’s nothing that you can do to make up for not being able to spend time with personal people even in the internet age. But also just the training and the things that come out of it, the things that they end up doing moving forward is very exciting. So here for that for two weeks this time, spending two full weeks in the Philippines. We are spending time doing one on ones with every employee. We are doing a party with our employees, doing karaoke in the middle of weekend or the Friday night. I’m going to spend that weekend also at a resort just taking a couple days off and enjoying the weekend and then coming back and doing some more time with the Philippines employees, definitely an exciting time.
But this episode is about ColorIt and the fact that we sold ColorIt, a big announcement obviously. If you listen to the goals episode, I kind of let that out of the bag a little bit there because there was a part of the goals was to sell one business in 2019, which we have accomplished that goal. ColorIt is officially closed; it is no longer Terran’s or Mike Jackness’s or anything like that. It belongs to another company now officially as of April 5th, recording this in early May. So it’s been almost exactly a month since it’s closed, and man I feel completely different. It’s really changed my state of mind; just my stress levels have dropped significantly which was one of the reasons why I wanted to sell ColorIt.
So this episode is going to pack in a bunch which is going to include why I was looking to sell ColorIt, how I went about selling ColorIt, what we got for it ,what’s happened since then, and a whole bunch more. And then as a follow up to this, there’s going to be three more episodes after this episode regarding the sale of ColorIt. Two will be with Joe Valley, one of them which we recorded way before we put the thing up on the market. The other one will be about the due diligence process and the last one is with the team. I recorded an episode with the team all here in the Philippines about the sale, about the transition, how it’s been for them and their point of view, a lot of really interesting and unique content.
So first question that I get asked is why on earth would you sell ColorIt? Why did this happen? What transpired to make this happen? So, I have been an entrepreneur for a long time and on my own since 2004, doing various things from affiliate marketing to obviously e-commerce and a bunch of other stuff in between. And being an entrepreneur is an up and down journey, there is no such thing as a straight line of business. And that’s certainly been the case for e-commerce over the last few years; it’s not been a straight line up. Regardless of what a lot of other people say out there, e-commerce is not necessarily an easy business.
I have enjoyed most of it along the way. Definitely don’t regret any of it. I want to continue to be in e-commerce, I think it’s still a great space. But that doesn’t mean that it’s easy and it doesn’t mean that it’s going to be a straight line. So the last few years have been tough. It’s been really, really tough on me personally, it’s been tough on my family, personal life just in general. It’s just been a lot of work, a lot of stress again, because it is not a straight line up. And the stages of e-commerce, I kind of joke these days, the math is always the same. You just add zeros along the way, right.
So when you have a business that’s doing $1,000 a month and you’re happy with that, you’re just getting started, then it’s $10,000 a month. Maybe then it’s $100,000 a month that was kind of — we were in mid hundreds of thousands of dollars a month. By the time we got to the point we were struggling to scale up one of our assets. And it’s stressful because as the numbers get bigger, depending on your social economical status, it’s going to mean something different to you.
To some people listening out there $1,000 is everything to you and it’s all you have to get started in business and $1,000 would stress you out of beyond belief. To some people that might be 10,000, to others it might be 100,000, to others even still, it might be a million dollars, maybe you’re financially independent and for you to invest a million dollars in a business would be no big deal. I doubt there’s anyone out there who $10 million is no big deal. But the reality is, is that it’s all relevant to you and to your circumstance. And there’s nothing wrong with that. You should never look down upon people that have less than you and people that have more than you should always put you in your place as well.
So you realize that you don’t look down on the people kind of thing. And for me, where we got was uncomfortable for me. And again, that’s just a personal thing just for Mike Jackness and Mike Jackness alone. The company that bought us is on a different scale. They raised money; they have millions of dollars in the bank to pursue this business. And if I was in that situation, I would want to continue to run ColorIt for the foreseeable future. I think it’s a great business and I’m really proud of what we built there. And I think that whoever takes it over, the company that they take it over, has an amazing opportunity to 2x to 5x it within the near term future by putting more money into it and doing the things that I would do if I was in a different scale in terms of money and what that means to me.
But for what it meant for me, it was just becoming a little bit imbalanced and stressful. And I just needed to be cognizant of that and not let other goals of getting to a certain point or let even more importantly, let other people dictate what’s right for me and for my situation. It’s really easy to get wrapped up in seeing and hearing other success stories out there people growing at 100% per year and high-fiving each other but very rarely do people talk about what’s really happening under the hood of all that, what’s the dirty laundry? What’s the skeletons in the closet?
It’s very easy to talk about revenues in e-commerce, especially in e-commerce, but in business in general, you can have a $10 million company and actually be losing money. And luckily, that was not the case for us. But what was happening was because of the growth trajectory that we were on; we were paper rich and cash poor. So our P&L every year was showing this really wonderful profit. And the reality was, is there was never any cash to pay for it. And over time for me, that wore on me. Again, everyone is different. I don’t say that this is what you should do in your life. But for me, that was something that was wearing on me.
And what was also wearing on me was because the stakes were getting higher and higher and the numbers were getting bigger and bigger, it was becoming a situation where if a doomsday scenario of any kind happened, that there was no way out. I always like to have a backup plan where if something goes wrong in life or in business, that you have a plan to deal with that. And we were at a situation where that was becoming unobtainable, the backup plan was unattainable.
And I was talking to my team, just having a very open candid heart to heart with them, of let’s let this event be a positive because there’s definitely been situations where I’ve been in business and these situations have been way less comfortable, way less exciting where for instance, in the online poker affiliate space, when the government passed the UIGA, that was a really uncomfortable conversation that I had to have with a couple of dozen employees. And when Neteller got shut down, or when the event called Black Friday happened where several of the poker rooms got shut down, I mean, over time, we had to lay off 60 something employees.
And that’s really horrible and difficult to do, when it’s no fault of their own. Versus in this situation where now we’ve created a life changing event for ourselves and because of the types of people we are, we pass that along to our employees, we took a significant five figure chunk out of the sale and are distributing that out to employees as a bonus for them being a part of the team and doing this with us along the way. And I feel like this is exciting. And everything changes; the only thing constant is change. And the people that did leave with the sale, I know that this is stressful for them. But this also is a positive life event for them. And they can be happy when they go home and talk to their families or think about things in their life because they’re going to get a significant reward out of this as well.
And so for me, it started becoming a situation of can I create that scenario versus what is the doomsday scenario of our Amazon account got shut down or there’s a huge economic bubble that happens and people stop buying stuff, or we get sued or who knows whatever other things that could happen in business. There’s a whole laundry list of things that could happen that aren’t perfect. Those things happen right? We’ve been through these things, that’s why this has not been a straight line up in e-commerce. We’ve had to deal with hijackers and having to sue somebody, having someone sue us, having the FDA get closed down because of a government shutdown and have our goods stuck at the port for a couple of months and have to pay for that and all the lost sales.
And I mean, just again, the list goes on and on, of the not straight up things that have happened to us over the course of time and being better prepared for those. So as a result of selling ColorIt, we were able to pay off all of our debt, and be in a position now where we can survive any events. Literally anything that could happen at this point, even if our Amazon account was shut down for six months, we would be fine, we’d be in a position to survive that versus the doomsday scenario where we maybe could have made it a couple of weeks. So those are some of the things that kind of led up to the sale.
There’s some other things as well, I mean just being completely candid, I was starting to get to the point where I was burned out. And because I’ve been in business for the better part of 15 years now, unlike the previous times where this happened, I was able to identify it in advance and kind of cut it off at the knees. And when you start to get burned out, sometimes you’re way past the point of no return and that’s really dangerous for your business, your personal health and well-being and everything else around you. For me I could see it coming and wanting to make some changes to it before it became to that point.
So by selling, it just completely pushed the reset button on me. I feel no longer burned out. I feel very excited and motivated for the future, both for our business and my life in general the things that it’s going to let me do in terms of travel and other personal interest. So that was really important, being able to deal with that was very important. Other things that were bothering me within our business because we had too many things going on and this is just an entrepreneurial dilemma, most people listening to this, if you’re an entrepreneur listening, you probably have too many things going on.
And I’m not trying to be a hypocrite because I’m in the same boat. And I will probably for the rest of my life, continue to experience this because you are constantly chasing all these new ideas. And it’s a lot easier to come up with ideas in terms of the amount of time it takes to come up with an idea versus the amount of time it takes to execute the idea. So I might come up with an idea right now that I want to sell bubble gum, because it’s a really great opportunity, whatever it is, and that took me all of 10 seconds to come up with the idea. Maybe I might spend five more minutes or 20 more minutes vetting this or maybe I’ll even go and spend a week vetting this and get super excited about it.
But the reality is, is it could take years to fully see that idea to fruition. And in the meantime, while you’re working on that idea, you’re not working on some other idea. And that was certainly what was happening within our business. We have four brands; it is definitely difficult to run all four of them with the same level of intensity, passion, and detail. And that really bothers me because every time throughout the day or throughout the week, something came up of we aren’t doing this, we aren’t doing that, or I noticed something not getting done in the best possible manner. It would really bother me; really wear on me that that was the case.
And now with one quarter of our business no longer here, and I’ve already seen it happening this week, there’s still the same amount of things as our time in the day, but we have one less thing to think about. And even still, it’s not enough time. We’re still splitting hairs and not getting all the things done that I want to get done, which is why I’ve made a goal for next year in 2020 to sell one more of the businesses and I still haven’t decided which one that’s going to be yet. We’ll talk through that as the year goes on. I legitimately have no idea. It will be at least one year can take before we even start thinking about it. And we’ll see which one is the best position at the time for that. And I actually think that all three are really good candidates for that. We’ll just see how things go over the next year.
But we’re in a better position to deal with that now. And then once that happens, we’ll have even more time to focus on the one thing or the two things that are left and eventually hopefully the one thing that’s left and do that and do them in the best possible way so we aren’t constantly treating one or two of our brands as a redheaded stepchild. It’s interesting that the brand for us that makes the most money is Ice Wraps. It’s the one that we talk about the least it seems like but it’s the one that brings in all the money. And it’s also the one that was getting the least amount of attention, which makes no sense in terms of business. Because it’s the least exciting one, it doesn’t mean that it should be the one that gets the least amount of attention.
So this is stuff that we’re going to be able to work on. Again, there is no more — we haven’t added anything new. So the time that I have is now just divided against one less thing. And I think that that’s going to really help. And I’m excited about that. I’m excited about the future there and being able to do a better job of all the things that we have. So what are some other things that were weighing on my mind? Well, as we were growing again, I mentioned just the fact that there was never enough cash but we got to a point where we had 1.2 to $1.3 million in inventory. That is a massive number in my world. I did not come from a spin amount family, a golden spoon family, silver spoon, whatever saying you want to say.
That is a life changing amount of money and having that much money in inventory with a debt of about $650,000 against it that’s personally guaranteed is really stressful. So again, by selling ColorIt, being able to pay off that loan, having no debt, and being in a situation where even if things like completely hit the fan, the money is in the bank from this transaction is really important to me. The competition on Amazon was starting to really weigh on me. And it wasn’t because of the things that I might be doing wrong, but all the negative things that are happening out there, negative reviews, negative up voting, fake IP complaints, just a bunch of other really nasty stuff that’s happening on Amazon.
That was starting to stress me out a little bit and I wanted to kind of just hit the reset button a little bit, those things are still happening certainly for our other brands. But again, by just taking a little bit off the table, it seems like I feel like it’s just kind of hit the reset button in terms of the risk to reward which is important to me. I started hearing the stories of people’s accounts getting shut down, just completely out of the blue for seemingly no reason. We’ve had lots of individual listing shut down over the last couple of years for this but never our entire account but either way, really stressful, really upsetting situation. No fault of your own, you’ve done absolutely nothing wrong, Amazon takes a seemingly I can care less position; you’re just a bug on their windshield in their quest for world domination.
And again, this was something that was weighing on my mind. Seeing Amazon launch their own products against us, just not a funny feeling when you see an Amazon brand going up directly against you and what that’s going to mean for you. For me I was also getting sick of the nine to five office grind. Even though I’m obviously in the office this week and next week while in the Philippines nine to five, it isn’t really something that is for me. My working style even though I might work 10 hours a day is not to do all that at one spot, one sitting to maybe spend two hours doing something and to take an hour off and another two hours doing something and take another hour off, go for a walk or go for a hike or take a drive or read a book or just something that refreshes my mind is really important for me, especially in this 24/7 world where I’m working on USA time zone plus Philippine time zone plus doing things in Asia.
It’s basically become a globalized business in life for me. And it’s hard to just push through and continue to work let’s say 16, 18 hours a day under those circumstances. So that was something else that I really wanted to fix. And by selling ColorIt that’s going to really help alleviate that because a lot of the reason I needed to be in the office nine to five was around ColorIt. So I’m working on the lifestyle change as well. I’m going to definitely spread out my work week a lot differently and spend time in nature more and just kind of getting away which is important for me. Again, everyone is different; this was something that was a lifestyle change for me.
The next one that really worried me was just the fact that we had three marketing people quit over three years, just that the effort that went into training these people and then having them leave was I posted somewhere else that this was soul crushing for me, definitely really difficult to swallow, having put a lot of time and effort and the fact that I’m a real big people person. I mean, I care about our employees and the relationships and the people that are around me way more than the money by an exponential factor. It’s just way more important to me to make sure that the people around me are being treated fairly, that I’m thinking about them and doing everything I can. And when that isn’t enough, and they still leave, that’s really difficult.
And that happened with the marketing person three times I think for that particular position specifically, because when you hire someone who’s green or new or a novice, neophyte, whatever, and train them, you are inherently making them worth a lot more money on the open market. And when they are younger, like the three people that were working for me were, they probably don’t realize all the extrinsic value or the things, the intangible things that came with working for me and working at Terran.
Those things are the fact that I treat them with respect, that I’m open minded about their ideas, that we had an open door policy where they can just come ask questions anytime that they wanted, that I’m there to help them, that I invest in their future, that if something goes wrong in their life, that I’m not going to fire them for missing time from work because they’re sick or they need something else in their life, that we’re going to be there for them, that I would spend hours every day with them side by side helping train them and was invested in their career, unlimited vacation, benefits, etc.
And again, when you’re younger, and you don’t have a background on this, and you maybe only have one or two jobs, you might leave just for the sticker price of I can make 10% more, 20% more, 30% more in salary, and not think about all the things I just kind of mentioned. And most employers don’t treat their employees very well. And I think until you have that experience, it’s hard to realize, again those intangibles. So, all the marketing people that I had working for me went to work somewhere else. They went to work for agencies, and very quickly, they realize that they become a cost of goods sold at an agency, and they’re not going to be treated the same way as they were at a company like ours, and they certainly aren’t going to be looked after in the same way.
But that doesn’t make it any easier for me and it was definitely difficult. And I got to a point where I didn’t want to go through that again. And ColorIt was the main reason that we needed that person. So that was another reason that ColorIt became a candidate for sale. So just something where I didn’t need to go through that particular thing again, give me some time to kind of detox mentally from that before needing that position again. So that was something else as well. I already mentioned this as well, but just growing at 100% per year without any outside help really freaking stressful.
Mathematically you cannot grow at 100% per year, and have cash. So again, it was just a situation I’ve said this over and over again, but a situation of where on paper we were doing really, really well. My accountant would say, man, congratulations on another great year, we were posting really great financials and net profits. But because we were taking all that money, every single penny of it and investing it back in our business, and then some because then we would also because we were growing, we would be in a position where we could get more lending. So it was just a continuous cycle of we were making more money so that goes back in the business, we were making more money, making more revenue. So we were more lendable in banks eyes and that number gets bigger. And that was stressful.
So again, taking your foot off the pedal of that and allowing this to kind of catch up where we can reach some of the rewards I mean is important every now and then to take a victory lap which is kind of like I’m on that tour right now, the victory lap tour. There’s money in the bank from the sale, there is no more debt from inventory. We have no personal debt of any kind at this point. So just being completely debt free, personal and business, having a business now that cash flows mid five figures a month from our existing operations of our other things that we’re doing, and being able to see that money go into the bank and see our bank balance grow month after month is a completely different frame of mind than pushing the envelope as far as you possibly can.
And one small quick crack in the heat shield and the whole thing melts down was something that was important for me. Again, don’t prejudge anybody. I have lots of friends that are still pushing the envelope. And that’s their thing to be thinking about internalizing and maybe they’ll be lucky like I have been where it all worked out in the end. Certainly we took a lot of risk over the last few years but it just got to the point where I didn’t want to push the whammy button one more time. For those of you who are older and used to watch the show, Press Your Luck, I felt like I was pushing the button over and over again. And eventually it was going to be a whammy and I didn’t want to be in a situation for that to happen.
So, definitely something where I’m really happy that we took this step in our lives. And again, I fully expect that in a vacuum of making a good business decision that this is a bad business decision, right? It’s a bad business decision from a standpoint of “this business was continuing to grow.” I think that the people who bought the business are going to double or triple it over the next couple of years and be able to resell it for significantly more than they paid for it. And so from that perspective, it was a bad business decision. But it’s a good personal decision when it comes at the peril of your health and just the stress and the things that that puts on your body.
And at some point, there’s the whole philosophical thing of like, how much is enough? And I felt like what am I – why? For what reason when I continue to put myself in the position of all of this like what is enough? I certainly have everything that I need in life and more. And it just, was a question of why, what’s the Why? And there was no good reason, so for me again on a personal decision level, that’s what makes sense.
So let’s now talk about the other dynamics of like how all this transpired which was me talking to a broker – Joe Valley. He will be the next two episodes, the first of which will be before putting the business up for sale and then there’ll be the due diligence part. But I’ll talk about that here for just a minute, which was in the summer of 2018. I went to Joe originally and said, look, man, like I need to sell some stuff, really spent, I feel burnout. And the original conversation was because I was burned out was potentially selling the entire thing. And he talked me off the ledge of that which would have been a bad business and personal decision.
And we identified ColorIt being the one that was the best to sell. And then spending the next few months just getting our house in order which is to get that profit as high as possible, not doing anything unethical but certainly by launching new products, by getting a little bit more diligent about getting our PPC costs down, our Facebook ad costs down by just doing a better job, spending money more efficiently, cutting all the SaaS costs for things that we weren’t using, not taking additional trips and things of that nature for business, things of that nature. So we were able to get our revenue number up significantly year over year, month over month, pretty much every month throughout 2018. It was up 50% or more and our net profit was up between 50 and 60% more every month.
That was really dramatic and significant because we took our foot off the group pedal and started pushing the profit prep pedal, so that was really significant. So what ended up happening was against Joe’s advice, we put the business up for sale in mid-December. I wanted to just see what kind of interest is out there. I knew that we were going to have a really good December and that was going to make the business look way more attractive. But the reality was, is that there wasn’t anybody that was interested because the December number hadn’t posted yet. And it was just a couple of days before the Christmas break and holiday when people aren’t really interested.
So we relisted the business in early January. It went up at a like 3.2, 3.3 multiple, something in that range. And we were under LOI, so letter of intent. We had someone — we actually had multiple offers in the business, multiple people interested in the business. And we went under LOI, letter of intent with a company on February 5th. So less than one month later, we were under contract. The next two months were spent doing due diligence, which was incredibly stressful. There’s a whole episode about that in the following episode to come. So I won’t get into it here. But basically you have a company; they hire an outside company to look under every freaking rock, every pebble of our business which was also really stressful.
Not because we were worried that they were going to find something there that we hid because that was certainly not the case, but because they were finding stuff that I didn’t even know was wrong with our business, really stressful. And just the unknown of how much more time was this going to take. It’s stressful when someone keeps on asking for more and more and more information. It definitely was not an easy few weeks. We also then negotiated the asset purchase agreement. And then finally, once we had everything under wraps and agreed on, one of the things that we agreed to do was sell our one Amazon account with this business, which led to another whole series of stress, which was they were going to get the Terran or the ColorIt Amazon account and in the next few weeks, which we didn’t have a lot of time to deal with this.
We had to make three new LLCs, three new Amazon accounts, get all the inventory that was in our warehouses to the new Amazon account but not have it available for sale because you can’t sell the same item in the same place or two different places as the same person. And then recall all the inventory from the other accounts, get that back and relabel it, repackage it, because a lot of it comes back in damaged, and deal with all that, definitely a lot of work and a lot of stress. So my recommendation is if you have multiple brands, multiple businesses to definitely get them in their own company and do it now. And if you’re going to start anything new to just do it under a new company, a new brand, because you will thank yourself later, I can tell you that for sure. I’m certainly in that boat right now.
And the next thing that I do, we will definitely start another e-commerce business in the future, I will start it as its own company from day one. So, all that transpired. In the meantime, as that was all happening, our three people gave us notice that they were closing down as effective April 30. We were set to close on this business on April 5. So that was another curveball that I wasn’t expecting. So we had to go through that all throughout the process. We also had to get all of our billing changed over to new companies, prepare ourselves for this transition to handoff with the new buyer, get our staff segregated because they were commingled within the business. So we transferred over four employees and had to get them ready for that sale.
And then we did, we closed on April 5. I went out to Austin, which is where these guys are based. I was already out there just crazy happenstance for a mastermind so I extended my trip to be out there. I think it was April 7th and 8th. I spent two full days with the new buyers. I got incredibly lucky. I mean these are two amazing individuals. They couldn’t be nicer, they always have a smile. They have gone out of their way to make my life as easy as possible. I think probably in return because I’ve done the same for them. I did everything I possibly could in good conscious to make sure that this business handover was as smooth as possible.
I have seen everything from people completely ghosting you which has happened to me, where after they write the check you never hear from them again and you can’t get ahold of them for any reason, no matter how big or small to just giving you a pile of rubble and saying good luck and not caring that the business might go down 25 or 50% over the next six months while they deal with all the mess that you left them. So my goal was to leave this in a situation where they could pick up the baton and run as close to full speed as possible without any hitches, and it’s gone off pretty well. There’s been a couple small hiccups on their end, which you would probably expect, but for the most part, everything went about as smooth as it could go.
And I’m really proud and happy about that because my goal, I was sitting down thinking about this is when Matt and Nero, the guys that bought this, are talking to their friends in a private conversation, what are they going to say about Mike Jackness right? What’s like the real outcome from their perspective of me and how I treated them and how I did this. The business that they bought, were they deceived in any way? Were they treated in the right way? All these different types of things, I want them to say nothing but amazing, great glowing things about me because again, I want to treat others like I like to be treated. And so that was my goal. That was my standard. And it’s a lot to live up to.
I mean, it was a lot of work to make sure all that was — all those ducks were in a row. It cost us tens of thousands of dollars to make sure that that was the outcome. I invested extra time and money with my current staff. We paid for a lot of inventory transfers and things that could have happened on their watch and not ours and things of this nature, where it cost a lot of money for us to be in that position but I felt like it was the ultimate right thing to do. And again, hopefully when they’re talking in private, that’s the opinion that they have on me. And I am a firm believer in what goes around comes around, they may buy another business from me in the future. They might tell someone that ultimately ends up buying a business from me in the future. They might be a reference for me in the future.
But even if none of that happens, I know I did the right thing. And at the end of the day, that’s the most important thing for me is that I know that I’ve treated these guys the way that I would want to be treated, which is just, it doesn’t happen a lot. It doesn’t in a situation where I bought a business in the past, and the person I bought the business from showered me with an overwhelming amount of support. It’s always been like pulling teeth at a minimum to get any help. And I just didn’t want to be that guy. So that’s kind of where we’re at today.
The business has officially sold, its transferred. And the money is in the bank, the vast proportion of it is in the bank, there is more to come in terms of the money that they owe us. So let’s talk about that because it’s always something people are interested in in terms of the deal points, how did this come together? What was the offer? So we got 3.1x multiple on EBITDA which is earnings before tax and interest. And then we also had some add back, so we put into that which is things like interest expenses or one time legal fees. And that was how we came up with a number that they owed us. And we’re never going to pay for the business, I should say, not necessarily owed us.
So I wanted something that was as close to an all cash deal as possible because I don’t like being in a position where people are paying me with my money. If I was to sell for 3x multiple and got paid over the course of a year for the business, I feel like I’m really only getting 2x because they’re using one year of the earnings to pay me back or they get an extra year to pay me back, certainly not something that I felt comfortable with. I wanted the money in the bank, and also be able to pay off the loan that I was talking about and get to the point where we were debt free.
So we got 90% of the purchase price in cash on April 5th, so it was a huge wire transfer that hit our bank account. It wasn’t the first time I’ve seen these types of numbers, so it probably didn’t feel as it did the first time it happened but it was still awesome nonetheless. That money hit the bank account on April 4th, April 5th, the day that we closed. We paid off our loan, we transferred the Amazon account to them, and then the other 10% was due 90 days after close. So that’ll be April 5th, May 5th, June 5th and July 5th, we will get the rest of the money for the business.
That 10% was held back to ensure a smooth transition, something I felt completely fine with. I didn’t argue with that point at all, because that’s something that I would probably ask for myself and again, and treating others like I like to be treated. I thought that that was important. Now, the other part of the deal was the inventory. And what I agreed to do with the inventory was to take a seller finance note on inventory, mostly because we were a little bit over capitalized on inventory. And again, in sticking with treating others like I like to be treated, I wouldn’t want to purchase as much inventory as we were selling all at once because it was too much.
By financing it over the course of one year at 5% interest, now we are the ones that have an asset not debt. So I’m collecting payments now versus sending out payments. It’s actually kind of cool. And those payments start on July 5th as well, will be paid in one-twelfth increments for the inventory, which is great. And we’ll be getting that money in the bank over the course of next year. We had a substantial mid six figures amount of inventory for ColorIt. So that’s more money that’s coming in for the purchase price. And that’s it. I gave up to 100 hours of transitional help. They haven’t used anywhere near that much. These guys again, have been absolutely a joy and amazing to work with. They may be asked for five minutes of my time at a crack to help them with things. But it’s mostly because we made things as easy at transition as possible.
So the other question that comes up a lot is what’s next, what’s next for me? Well, I’ve committed to myself and to my mastermind that I’m going to take a couple of months and just clear my head a little bit and focus on what we already have. We already have another amazing business as I already mentioned. We are still going to do around $4 million in sales this year and we will be at a much higher net profit now that we don’t have an interest expense. And we’re going to be cutting some of our other expenses, probably running at a 25% like net profit on our business, which is incredible on our $4 million of sales a year.
So we have a great business, we still have a great business in e-commerce that I’m very excited about what’s going to happen over the next year with that and continue to work on building that and positioning one of those for sale in 2020. Again, not exactly sure which one that’s going to be and then also focusing more on EcomCrew, this exact type of thing I’m doing right now. It’s been really interesting and fun for me. The past month has been really rewarding from an EcomCrew perspective. I’m going to do an episode about this specifically coming up here in about a month. We have a lot of things that we’re going to do around ColorIt here for a bit.
But I’ve helped a couple of people in particular with EcomCrew roadshow. A couple of them aren’t even going to air because it just was just so emotional and kind of raw, and maybe a little bit embarrassing, I guess is the right word where I don’t want to do that to somebody. The goal is not to showcase somebody at someone else’s expense that’s for my gain. So I’m going to probably do a summary episode of this but helping people with their accounting, helping people that don’t fully understand the numbers side of business, that think that they’re on the right path but are actually losing money and heading towards ultimate doom has been really rewarding, helping them get out of that predicament.
And I think that the reality that I found is that this happens more and more than you realize in e-commerce because a lot of people don’t realize how to do proper e-commerce accounting. They are putting so much into their business, they don’t realize that they’re slowly leaking like a sieve and heading towards ultimate disaster. These are the types of things that I really I’ve got a lot of rewards out of by helping someone avert that disaster is awesome. So spending more time on EcomCrew is definitely going to be something that’s going to happen over the next year or two and we’ll see where things take beyond that. But that’s kind of where we’re at right now.
And for me, for me, personally, I can say, it’s been a hell of a ride. I wouldn’t trade it for the world. It’s been a fun several years. But I now realize that this is where I needed to go. I needed to take this break. I needed to get myself a reset button from the stress. There really is very little stress now for me, and it’s been a month removed from the sale, not having any of these things over my head, knowing that we can handle just about any situation is a completely different frame of mind. Having the money in the bank, like when the things that happened bad in the only poker industry happened, we already had the money in the bank. It didn’t really matter. It just was like less money we were going to earn moving forward, but we had ourselves in a financially secure position.
And I didn’t want to give that up and not be able to make sure that we were in that position. And by doing this, it’s taken away all that stress, it’s night and day. It’s just been a great month. And I’m looking forward to the next several months, because I’m looking forward to whatever life has to throw at me rather than stressing about what might come next. I’m excited about it. So that’s kind of where things are as of right now for me, and for where our business is. So the next three episodes, guys are going to be more about this ColorIt transition. The next episode will be with Joe Valley. We recorded it in December before we put the business up for sale.
So you can kind of get a little bit of an insight into my head space for where things were back in December. And then we recorded another episode right after we closed so you can get insight into the process of the due diligence, the letter of intent, the sale and all of that. And the final episode which I think is really interesting unique content is with the ColorIt team. So I put them in a room with the guy, one of the guys who bought ColorIt. And we had a candid discussion about the transition, why they bought our business, how things have been going since then and how the team feels about all this, announced the awesome surprise to them about a bonus that they’re going to beginning as a result of the sale.
It’s really interesting, like real behind the scenes fly on the wall kind of content. So we’re going to end the ColorIt stuff there. So it’s four episodes in total, about everything about buying and selling a business, in this case selling a business. And I think you guys are going to find all that content interesting. If you have any questions or comments about this episode, please head over to the show notes. I’d love to hear from you, episode 246, so it’s Econcrew.com/246. Let us know what you think of this episode in particular, what you think of what’s happened over the last few years of ColorIt.
If you feel any of the same stresses or problems, I’d love to hear from you. This is again, I feel like my new role is becoming therapist in a lot of ways and talking to people about these problems and things because I’ve been there myself, I can relate. So EcomCrew.com/246 if you want to get to the show notes and comments for this episode. Again, I’d love to hear from you. If you guys love the content that we’re doing here at EcomCrew, head over to iTunes, leave us a review. It’s your way to help pay us back for the things that we do here for the community and for EcomCrew.
And if you’re new to the podcast, and you haven’t heard about the free stuff we have yet over at EcomCrew.com/free, go check that out. It’s free mini courses with no strings attached. There’s no credit card to give us or anything like that. Just some free content that Dave and I work really hard to put together for the community. And it’s the same model that we used to build ColorIt to the brand that it is. So go check that out over at EcomCrew.com/free. All right, folks, that’s going to wrap it up for this one. So until the next one, happy selling and we’ll talk to you soon.
Outro: Thanks for listening to the EcomCrew Podcast. Follow us on Facebook at Facebook.com/EcomCrew for weekly live recordings of the EcomCrew Podcast every Monday. And please, do us a favor, and leave an honest review on iTunes, it would really help us out. Again, thanks for listening, and until next week, happy selling.
Michael started his first business when he was 18 and is a serial entrepreneur. He got his start in the online world way back in 2004 as an affiliate marketer. From there he grew as an SEO expert and has transitioned into ecommerce, running several sites that bring in a total of 7-figures of revenue each year.