Interview with Ryan Sorensen and David Carroll owners of Green Rock Network – Part 2
In Episode 7 of the Mad Profit Podcast, is part 2 of 2 of interview with Ryan Sorensen and David Carroll. They are buyer and seller brokers who have teamed up to create Green Rock Network, a Cannabis based Digital Property Brokerage. (https://greenrocknetwork.com/).
In part 2, David and Ryan continue to share their extensive knowledge about trends, speak a bit to the direction that the online cannabis industry is taking on the internet space and provide guidance for entrepreneurs.
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Preamble: Hello everybody and welcome to the MadProfit Podcast. My name is Laurent Truc. We’re about to kick off part two of the interview that we started last week of Ryan Sorensen and David Carroll both online business brokers; one on the seller side one on the buyer side. Last week we focused a lot on what the industry looks like today. We’re going to finish those thoughts and then we’ll dive into a little bit of their new brokerage that they’re putting together that sells online cannabis businesses.
So I hope you enjoy it and let’s dive right in.
Intro: Thanks, and welcome to the Mad Prophet Podcast where we interview active investors, entrepreneurs and experts who left corporate jobs to buy or start successful ventures and live life on their own terms.
Listen to their stories learn from their experiences and heed their advice so you too can create mad profits and the life you’ve always wanted. And now here’s your host Laurent Truc.
Laurent: I love asking people this question… your view on building versus buying. You know building a site is not expensive nowadays. Hosting is pretty cheap, getting a domain is pretty cheap so why is somebody spending the 20 grand or however much to get in when they can just build something.
Ryan: I’m trying not to make this example too adult because that’s…. well essentially dating okay so if you’re going to be dating you put in a lot of effort. There’s a lot of awkwardness at the beginning when you’re first dating somebody right and there’s a lot of investment going into it just to see if it’s a fit.
You might start a business and it might not actually be a fit by the time you even get like three or four months into it, it just doesn’t workout, it fizzles out. With buying a business you can just go online… it’s like online dating. You see the profile and you know exactly what you’re getting. You have a score it, you know, you could have like a score out of a hundred on how good this business is for you and they’ve already done all the hard work. It’s going to be a good.
David: yeah I have a another way I look at it. I think of buying a business buying versus building in terms of a funnel. If you think of building a business, building a business is really when you’re at the top of the funnel. So you a very small number of businesses that start that actually end up being profitable and successful. By buying a business what you’re doing is you’re actually scooting yourself downt he funnel.
You’re moving from the top of the funnel where whatever the percentage is 85 or 90% of all new businesses fail, you’re actually selecting from the 5% that made it. You’ve eliminated all that risk and I have a kind of a personal story or dimension to this. This question for myself, we haven’t talked about I how old we are but Ryan and I represent two different generations. Let’s just put it that way.
Ryan: Well you wouldn’t be able to tell with the white in my beard.
David: I mentioned earlier that when I first got into this business looking at and buying my own sites I went through the same thought process that you’re talking about Laurent where I said okay should I build something or should I buy something and as somebody who’s a little bit in a in mid-career this is really important because I don’t have three to five years to take a shot at something that might not work out. I found that buying existing businesses and tweaking them is a much more efficient way to address that challenge.
Laurent: That’s a great point. For me it’s the fact that someone has done the hard work of confirming there’s demand, confirming that they’ve been able to build a process and that it can be monetized because there’s a lot of different ways you could try to monetize a site and to your point it just as many times as a business fails as a monetization method fails.
To your funnel perspective, you’re going right to the bottom of the line and picking out of the successes and you have access to a seller who has not has only proven the model but now has operationalized it. You’re also getting all that brain dump from the seller in the operational documentation and most of them stay on for a bit to help with coaching. I find it really reduces a lot of that risk.
And it’s funny when I got into the space the itch for me was I want to start something new. I want to build it from scratch.
Ryan: You have to be really good to do that.
Laurent: I’m sure. And nowadays you start a site and Google doesn’t pay attention to you for six months so there’s a lot of content you have to create just to get off the ground and then the content has good and you have to create more and more content nowadays just to keep up with the amount of volume that’s being created. It depends on the niche of course but it’s not easy.
Ryan: It’s a long haul to get there, it’s a big mental barrier to have something be successful so like David was saying if you can just jump the gun and jump past it and then just go straight to it. It makes a big difference.
David: You have to understand however when you go into this decision-making process if you were to build something you’d build exactly whatever your vision might be. If you’re buying something you often have to be flexible because you’re not going to find the dream business that you’ve envisioned in your mind. You might find something similar but that requires a little more flexibility and I find that some people are troubled with that. They want a business, they have that vision of the business they want to own and they know they could build but they just want to find it but it may not exist.
Laurent: yeah that’s a great point. I never thought of it that way. Very good. What are some of your success stories that you’ve seen? Have you seen a buyer buy something and really grows it and turns it into something? Do you have a couple of examples that you can shoot at us?
Ryan: yeah I got one… my favorite one is this one…a few years ago this guy was selling TV boxes that allowed people to watch local Chinese stations. This was probably like four years ago and they sold them in the US and Canada and it was making probably about 2000 bucks a month in profit. Somebody bought it for only twenty five thousand because it was considered pretty risky. People just weren’t feeling it and this guy took it and within nine months he started making about $15K/month and he ended up selling it $350K. That’s my favorite one. You know of course you’ve got the good ones and you’ve got the bad ones. That’s just one that I like to share just because it’s so random.
Laurent: yeah David have you seen a couple of big success stories?
David: When I think of it actually they were small transactions where the seller got a nice high multiple because of a good fit. I have a couple in mind that there’s a Content business that I represented last year that specialized in green hosting. It was a Content site, an affiliate site, that promoted green hosting and that site was rather small but I was representing a buyer at the time who was looking for an entry level business. That person didn’t know it at the time exactly what they wanted, which is common but when I presented this business to them it was just sort of a click that this was the perfect business to enter the industry with.
The seller was pretty firm on the price and the buyer was a newbie. I felt very confident, encouraging the buyer to purchase that business at the healthy multiple that she paid and I actually just spoken to her recently and she seemed to be doing very well with it.
One of the things i I’ve learned to really enjoy about working at the low end of the market in terms of price is I find that you are impacting someone’s life in a much bigger way, very often. You’re helping a person get their first online business and get started in this industry or you’re helping someone.
I’ve sold multiple businesses where the person’s selling at I don’t want to say a life crisis but at a strong life need. Several people having babies or need to buy a house and it brings me a lot of joy to be able to help that person sell the business and buy that house or feel comfortable having a baby. Those are kind of the success stories that I think of.
Laurent: That’s great and I think a lot of people think of success in a direct correlation to money but just being able to move somebody into a space that they enjoy versus a job they hate, that’s a huge success story in and of itself. You guys get the benefit of seeing people do that on a daily basis which was great.
With different multiples and different business models what would you say is kind of the ideal (after having made the comment that it’s great to see people get into new spaces and enjoy the lives, I want to talk about money). If somebody really wants to focus on wealth creation what are some of the models that you would suggest? Is it more the buy/flip model or is it more the buy/hold and reinvest model? Do you guys have a perspective on that?
Ryan: Whether you’re starting it, purchasing it or anything else you have to have the end in mind: the exit. Always be running your business in mind for the exit because if you focus on the exit you’re focusing on the things that are important like making sure that you have SOPs in place, that you have as much of it automated as possible. Looking at it in a way that’s going to increase the value of the business is going to help you make more money in the meantime. So focus on the exit.
What I say whether you’re going to sell it or not it for the long term if you’re just building a portfolio you still build it and run it like you’re going to sell it.
Laurent: That’s a great point because if you always got that in mind then you can kind of Judge the market and if the market’s at a high cam sell.
Ryan: People wait too long to sell their businesses; when it’s on a decline and they’re not getting maximum revenue. if you’re always in the thought process of let me optimize this thing for growth, let me get all my numbers always ready to go then if you see a sudden peak you’re, selling for maximum profit.
You got to be looking for that peak to sell because that’s going to be the max. That’s how you’re going to maximize the value of that particular asset…it is trying to sell it at the peak if possible. You know sometimes it comes and goes and it’s not always predictable at all when that peak is going to be but if you can get it while it’s still going well and saw it then, you’re going to maximize the value of that.
David: I’d like to add something to that okay. From my personal experience so this is a quick story when I entered the business initially. I think I mentioned in my previous life I was a banker and so I have always had kind of a maybe a long-term investment view on these things and when I looked at the industry I noticed that the two leading brokerage firms both had the term “flip” in their name: Empire Flippers and FE international, which some people know stands for Flipping Enterprises.
So I thought to myself I wonder why all of these Millennials (they’re younger folks), why are they flipping these businesses? Why not build a business that can last over a longer period of time. And this is actually what I thought when I entered the industry. This is something that I could add in my business. I’d like to hold them for long periods of time, take a longer view. I was more comfortable with that.
Well after I got involved in the industry I think I realized why flipping is maybe the smarter strategy. It has to do with the dynamic nature of the Internet. Businesses are affected by many more factors in shorter periods of time and so you may be able to take a business from as Ryan was saying a thousand dollars a month to ten thousand dollars a month and there’s a certain skill set required to do that (while the skill set that is required to take it from ten to a hundred is an entirely different skill set) and so flipping should be part of your strategy.
Focusing on the exit I think is a very smart way to think of it.
Laurent: It makes a lot of sense. Absolutely. Let’s dive into our favorite subject: the cannabis industry. You guys have definitely doubled down seeing what is possible in this space so can you tell us a little bit of what you’re seeing, trends kind of in the online businesses that are popping up.
Ryan: Yeah the first one that I had sold was a Content site that had been around for about eight years and in internet terms eight years is a longtime. I’ve made this connection before but it’s like internet years or like dog years. I don’t know what the actual math is but one internet year in real world years maybe like three or four. I don’t know everything moves a lot faster and so even closing on a deal.. a traditional business deal could take anywhere from six to nine months or even a year to close if you’re selling it but online you can sell it in a day or you can sell it in a couple weeks or a few months at most.
So this one in particular I had listed it and within I’m not even kidding within two days, 48 hours, we had I think six offers on it and it had sold for twice the asking price. So I ended up going fora 2 X listing. I was just kind of testing the market out and of course there’s the demand for it. It was a smaller listing it was under a hundred thousand but it was just a solid content site in the cannabis space. And they sold info products and affiliates and a little bit of advertising.
And all of those things are don’t touch the plant. There’s nothing illegal about it. Across the board it was all good and the demand was pretty incredible. That’s kind of what got us going in the space and because it’s just the start of the wave we’re all in…like surfers over here.
Laurent: What are you seeing most of right now? Is it content sites?
Ryan: Content & ecommerce.
Laurent: Is e-commerce a difficult play with the legalities of it?
Ryan: We have experience! We got lots to say about the subject. We do. You can guide us in this minefield of awesomeness, David?
David: Well the eCommerce that Ryan was just alluding to is our own experience…so just to backup a moment Ryan was talking about his experience that got him very interested in in this niche. I have a similar experience where I took a listing for a pre-revenue hemp company. It made all the arrangements, had a brand and had a manufacturer relationship and some inventory but had not sold, they had sold a very small amount. I was able to sell that business in a very short period of time at a multiple that was way higher…well a multiple of zero. It sold at a multiple that would have been consistent with a business that was making about a thousand dollars a month for a pre-revenue company so that caught my attention.
When Ryan and I entered the business you know in earnest we decided, well I think one of the initial things we noticed is that there are two kind of pools of businesses. There are these old legacy businesses, most of them are content well they’re almost all content businesses where people had blogs and different types of information businesses about the industry that have been around for a long period of time.
Some of those people are now selling because they see they see opportunity. They see they’ve held these businesses for a long time and suddenly there’s a bump and you know not everyone knows how long that bump will last. We think it will last for a long time but not everyone is so sure.
Then there are these brand-new businesses where everyone has jumped in the market and most of those are not for sale for the reason that you mentioned Laurent in your notes. Because it’s early, people want to hang on and see what they can do with these. So Ryan and I decided at the beginning of the year that because we were having a hard time getting small new fresh businesses that perhaps we would dive in and generate and build one of these businesses ourselves.
So working with a consultant from Providence Rhode Island whose name is we developed a hemp product targeted at pets dogs actually. And here’s the plug…the product is called Calm Down Rover. Nice or the site is called calmdownrover.com and we’ve learned an awful lot in developing that business. We’ve learned about the challenges of promoting those kinds of businesses. We’ve just begun to understand the legal environment which is so complex.
And most importantly we have worked the thing that’s really held us up in the near term which has been payment processors because in the States it may be different in Canada but in the States the FDA and the FTC have not really agreed on whether or not cannabis or CBD in particular can be sold legally. So the banks have been on the sidelines waiting for the government to clarify its position. There have been a few payment providers who have dabbled in this and offered payment processing and then removed themselves from the market. You can imagine that headache for a site owner…huge!
There are payment processing solutions that are mostly for the high-risk industries so there are offshore opportunities or we found one recently that was based on a Bitcoin backbone. But they’re expensive, these solutions. News flash, this week we think Shopify has finally begun to offer through Shopify payments a payment solution for Shopify.
Laurent: That’s huge for them to make that call. That’s great!
Ryan: Shopify is now the second biggest online retailer after Amazon and then it’s eBay after that so Shopify going on board with that is going to just keep the market flowing.
Laurent: They’re not restricted by Canada versus US? They’re opening this payment processing up globally or North America?
Ryan: I think it’s probably just US. We’re just learning about this now, hot off the press.
Laurent: All right very cool. I have a little bit of research to do as well on that side, that’s awesome. One of the questions I had was why would cannabis companies look to sell at this point when we’re all kind of talking that we’re at the impetus of potentially a huge growth. I mean I bought one and quite frankly the seller was just tired. He had been writing about cannabis for seven years and was just exhausted. Is that what you’re seeing or is there another reason somebody would sell?
Ryan: That was the case for the content site that I had sold. The first one was kind of the same thing he’s been running it for eight or nine years and eight or nine years ago talking about cannabis online was kind of a frontier / trailblazer. Like the Oregon Trail type of thing where he’s getting dysentery, he’s just tired of the grind of going and it just happened to be a good time to sell becayse he saw the opportunities to get the multiples and the interest. It’s going to be more so people sticking with it for the next few years though there won’t be a lot of sellers for another couple years I think but that’s why we’re in it now is to kind of get a foot-hold and once it starts going good then we’ll be here.
Laurent: Makes total sense. very good. Anything else you guys want to bring up around the cannabis industry that you think listeners should know about?
David: I just want to say one thing about competition and this is something that we, the Post Script to what I just said about calmdownRover.com. In a very short period of time, six months we started this business, learned about the things I just mentioned (payment processing, marketing struggles and I think we thought if we can solve the payment thing and the marketing thing this is going to be a really good opportunity. I think the thing we underestimated is the competition part.
Ther are so many people in the market right now. You can argue and I think this is probably true there are a lot of people who maybe aren’t so experienced, let’s say jumping in and but that’s competition too. From the consumers point of view very often they don’t know that one brand is better than another and there’s also a lot of particularly we noticed this in the pet niche cannabis or CBD for pets that there’s a lot of misunderstood information about dosing for example.
How much CBD do you give your dog? Your dog can’t say okay I’m good now. I no longer have anxiety. These are dosing and understanding how to use the product is a really big challenge. But competition I think is the big thing that we underestimated and that I think we’re going to see a cycle of. We’re going to see more especially now with Shopify offering payments are going to see a huge surge of new businesses which is going to make the market really choppy and sloppy for a while. Then there will be a shakeout many of them will consolidate and disappear and maybe it’ll be too as Ryan said two or three years from now the healthy companies will still be around and that’s what we expect to see.
Laurent: Cool That’s so interesting between the different countries at the federal level trying to figure out what they want which is a hot topic for elections in the US, re-election here in Canada. We are legalizing edibles here in Canada, it’ll be formal in December and businesses can start positioning them in October so the amount of news that’s coming out is incredible. There’s a lot of misinformation that’s out there. So it’ll be nice when things start settling and once things are legal. I think there’s going to be like you said a lot of consolidation. The big players are going to start really pushing for profitability and it’ll be interesting.
David: One other thing we’re speaking of cannabis like it’s you know it’s one it’s one thing but really the big opportunity today is in hemp-based CBD. In the states that’s a twenty-five billion dollar potential market in, a in a total market that’s probably sixty billion. This is over the next ten years let’s say. So CBD is going to be a third to a half of that overall market and CBD is really the only thing that’s available to everyone here in the states today. That’s really the market that we’re focusing on in terms of the commerce side of things.
Laurent: Very good just to kind of tapper this towards the end of this interview here what are some resources that you guys suggest for entrepreneurs or wannabe entrepreneurs to listen to? Are there books that you guys have listened or read or podcast that you listen to on a regular basis that you suggest for our listeners?
Ryan: yeah one of them I like is Authorityhackers.com. Those guys are really good and because they just present their information in an easy digestible format and they’re always trying to provide a lot of value upfront. That’s a good one. The place that I got started online in 2008 was it was warriorforum and that I like. It’s a really newbie friendly place. Some of the strategies you just gotta pick and choose which things you pay attention to out there but it’s a good resource.
Laurent: Okay very good. David I don’t know if you have any yourself?
David: yeah I do. I made a little shortlist here so when I started my personal journey I stumbled on a gentleman, a Canadian guy actually named, Yaro Starak. He got started back 2008 and I think I got started learning about this industry through reading Yaro’s blog. That’s Y-A-R-O, Yaro. If I was getting started now I would direct people to resources like the Empire Flippers industry report that just came out for 2019 and really gives you a sense of all the different monetization strategies, the multiples in each and the risks and the skills required.
Laurent: That thing is huge! I was actually very impressed that a broker would come out that open about multiples.. the true multiples that businesses are selling for versus kind of what the “asks” are. They were very open about information. It was a great read.
Ryan: Yeah those guys are cool. A very useful resource.
David: I completely agree and I have to also mention Centurica’s reports, Chris Yates. Centurica and Rhodium weekends. We got to give a shoutout to them that’s another great resource and there’s another relatively new Facebook group that I’ve come across, it’s called flipping websites. Richard Patey and that group seem to be also very newbie friendly. I would recommend it as well.
Laurent: Perfect, all right. I’ll add that to the show notes. Those are great resources. Okay before we close any last recommendations or suggestions to entrepreneurs who want to get into this space in general?
Ryan: When you really think about it don’t do something unless it feels right and you know us brokers we understand that and we don’t take things personally. We constantly get rejected just like it’s the real world if you feel like something is off and you’ve done your research and it’s just not a good fit, you know don’t feel bad about saying no and backing away from the deal. It happens all the time and you know we know that and so the we can get to a better fit and the right fit. It’s fine so yeah I don’t feel bad.
Laurent: That’s great advice. I just walked out of a six-month negotiation and I didn’t feel bad about it.
David: I’m going to give something that sounds like contrary advice is that I think new buyers should perhaps not put so much pressure on themselves to get the perfect property on the first time. This is a because you may flip many of these businesses over time. Learning by doing is the most effective way, in my experience. Learning by doing is the best thing.
Ryan: I love that. Learning by doing.
David: yeah you really have to pull the trigger at some point and jump in on something. Take a risk, a calculated one but take a risk and get in and learn by doing. You’ll then know your second business that you buy will be much more well informed.
Laurent: if people were looking to get a hold of you where should they go?
Ryan: Contact us at GreenRockNetwork.com ist he one for both of us. We check it. And personally Ryan@acquisitionstation.com and David at David@DJCdigitalbroker.com.
Laurent:Perfect. Guys thank you so much for spending this much time and providing us with this much insight. It’s absolutely phenomenal. I’d love to invite you back on the show down the road as maybe we evolved to kind of a next stage of questions that we might have but I really appreciate you guys taking the time to help us out.
Outro: Thank you for joining us on this episode of the Mad Profit Podcast and we hope you enjoyed the show. Don’t forget to subscribe on iTunes GooglePlay or the listening platform of your choice. Also check us out at MadXCapital.com for more useful information and resources to help you achieve your investing, entrepreneurial and business goals. See you next week on the Mad Profit Podcast