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How an entrepreneur made $500,000 buying and selling his website

  • John Chen bought and sold a number of e-commerce sites using Flippa.
  • He bought his first business for $7,500 and sold it for $550,000 two years later.
  • “It’s almost like what people do in the housing market,” said Blake Hutchison, CEO of Flippa.

John Chen, 31, has taken an unconventional approach to e-commerce entrepreneurship. Rather than build a direct-to-consumer brand, he acquired small online businesses, increased their sales, and then resold them.

About four years ago, he used Flippa, an online business buying and selling marketplace, to buy a jewelry business called Blush and Bar for around $7,500. Two years later, Chen said, he had increased his sales to around $1 million in revenue and he sold the company for $550,000, again using Flippa to close the deal.

He used this proceeds to buy a wedding gift business, which he bought for $20,000 then resold for $40,000, and then Posh Shoppe, a plus size women’s clothing store which he bought for $60. $000. Posh Shoppe made nearly $2 million in sales in 2021, which Insider verified using screenshots provided by Chen. Chen said the store was making around $10,000 to $20,000 in revenue per month when he bought it in the summer of 2020. Chen also hired six people to run the business.

Chen said he became interested in flipping e-commerce storefronts after working as an investment analyst at a hedge fund. Part of his job was to invest in research funds, which give money to entrepreneurs to acquire small businesses and grow them.

He decided he wanted to do the same thing but on a smaller scale. That’s when he turned to Flippa to find a business to buy.

“I didn’t have an MBA. I didn’t have any investors. I didn’t have any of that,” Chen said.

So far, all of the businesses he acquired run on Shopify. His main method of increasing sales was Facebook advertising, but he also explored email, text and


influencer marketing

.

“It was just a great learning process about e-commerce,” he said. “There are tons of ways to grow e-commerce businesses, many different channels. And we’ve tried many.”

“It’s almost like what people do in the housing market”

Founded in 2009, Flippa is an online marketplace where people can buy and sell businesses online. This includes e-commerce apps and Amazon sellers as well as online stores powered by Shopify, BigCommerce, Wix, WooCommerce, and more.

Flippa is in Australia, but 50% of its business is in the United States. Shopify stores account for about half of Flippa’s transactions, said Blake Hutchison, CEO of the company. The typical Shopify store for sale on Flippa is around three to five years old and generates around $250,000 in annual sales.

Flippa isn’t the only marketplace Shopify store owners can look to cash in on. Shopify has its own exchange for buying and selling stores, and companies such as MicroAcquire and Empire Flippers offer similar services.

Flippa sees nearly 20,000 new buyers on its platform each month, Hutchison said. He said he sees different types of buyers on Flippa.

Blake Hutchison, CEO of Flippa

Blake Hutchison, CEO of Flippa.

flippa


Some are serial entrepreneurs who want the challenge of building a business before selling it.

“It’s a classic case of buying, investing, renovating, then reselling,” Hutchison said. “It’s almost like what people do in the housing market, although obviously the operations of a business are slightly more nuanced.”

Companies such as Thrasio, which acquire and aggregate Amazon sellers, also sometimes use Flippa to find acquisition targets, Hutchison said.

Although Thrasio has faced its own challenges in recent months, Amazon’s aggregator space is crowded, with some players raising billions of dollars in funding to acquire third-party Amazon sellers.

There aren’t as many companies targeting Shopify stores, but activity in the space is heating up. OpenStore, a startup that offers algorithm-generated deals to acquire Shopify stores, has raised more than $100 million since its launch last year. It has acquired 40 brands to date and plans to keep pace.

“Instead of starting from zero and increasing to one, you start at 5 and increase to 10”

For Chen, using Flippa to buy and sell businesses online has allowed him to enter the world of entrepreneurship. He had tried to launch DTC brands before, but struggled to get them off the ground. Buying an existing business helped him avoid having to find a clear product market fit, he said.

“It gets really daunting if you don’t have any sales or get any traction,” he said. “When you buy a business, you already have something there, so it’s a lot easier to believe you can do it.”

Hutchison said that’s a common draw for Flippa buyers.

“Instead of starting from zero and going to one, you start at five and go to 10,” Hutchison said. “You have all the traction, all the energy and excitement that comes with building this brand ahead of your time.”

Screenshot showing the homepage of plus size women's clothing site Posh Shoppe

Chen owns Posh Shoppe.

Classy boutique


When deciding which stores he wants to buy, Chen said he looks for products that elicit an emotional response from customers and avoids commodity items.

“The example I always use is a stapler,” he said. “If you wanted to buy something that looked like a chair or a stapler, you would just go to Amazon and search for it. I wanted to be more in the business of something that didn’t lend itself to search.”

But Chen said he was no longer looking for a “quick return” and wanted to keep Posh Shoppe for the time being.

“I think in the beginning, I went into it — like a lot of entrepreneurs — to gain personal freedom or generate wealth,” Chen said. “I’ve learned that it’s going to be a slow and difficult process no matter what, so might as well enjoy it and create value for others in the long run.”

“I think it’s better to focus on building a sustainable business that people love, customers rave about, and people will tell their friends about.”