The idea of buying, growing, and then selling an online business can seem like a massive challenge, especially for people who are new to online entrepreneurship. But the truth is, with the right mindset, strategy, and execution, it's totally possible to take a small, struggling online store and turn it into a thriving, profitable business that you can eventually sell for a huge return on your initial investment.
That's exactly what this guy named John Chen did. Back in 2017, he bought his very first e-commerce business on a website called Flippa, and he only paid $7,500 for it. It was a jewellery e-commerce business that was only bringing in around $1,000 in revenue per month at that time. But over the next two years, through just relentless testing, optimization, and scaling, John was able to grow the business to over $200,000 in monthly sales at its peak. And then in later on, he ended up selling the whole thing for just over $500,000 - which was an incredible 50X return on his initial $7,500 investment.
In this article, we're going to dive deep into John's full story and really extract all the key lessons and insights that enabled his massive success. Whether you're a total newbie e-commerce entrepreneur looking to buy your first online store, or you're an experienced operator trying to take your game to the next level, there's a ton you can learn from John's experience. So let's get right into it.
John Chen
Finding the right business to buy
When John first decided he wanted to try acquiring an online business, he wasn't really picky or particular about the exact business model or the specific industry or niche. His main priority was just finding a business that offered good value for the price.
As John put it, "I didn't know what type of business I wanted to buy. The reason I ended up picking a jewellery e-commerce business was because, like with any other business, it didn't feel like you were really getting great value in terms of the multiple or anything like that."
Even though the store John ended up buying was only bringing in $1,000 per month in revenue, the $7,500 purchase price just felt reasonable to him compared to other online business models. Like, a content site or a SaaS business generating that same $1,000 per month would likely have been a lot more expensive.
John's main goal in buying this business was to really treat it like a hands-on learning experience. Coming from a hedge fund background, he had experience with due diligence and understood the risks involved. He was prepared to potentially lose that entire $7,500 investment, but he felt it would be worth it just for the real-world education.
As John explained, "The way I looked at it was, I'm going to treat this as a real-life MBA, and I'm okay with losing all of this money. I probably will lose all of this money, but I will learn a lot through this process and I'll be really incentivized and motivated to learn about digital marketing."
Flippa, a marketplace for buying and selling online businesses
Challenges after buying the e-commerce business
Even though John was willing to accept the possibility of losing his entire $7,500 investment, just for the sake of learning, he still did a ton of thorough due diligence on the business before he actually went through with the purchase. Coming from his background in hedge funds, doing really deep financial analysis was already kind of in his DNA.
However, during the process of analyzing the store's revenue and traffic numbers, John ended up uncovering that a significant portion of the sales were actually just coming from the owner's friends and family. This didn't become fully clear until after the purchase had already gone through, and then that segment of the revenue quickly disappeared.
As John explained, "When I bought the business, I found out that most of their sales—not most, maybe half of their sales—were like friends and family. A couple months later, half the revenue went away, because they were just selling to, like, a rec center in Missouri or something like that. And they just didn't want to continue that relationship. Or some of the buyers have the same last name as the owner."
Essentially, what John realized was that he had essentially just bought a Shopify store with a brand name, but not a real, sustainable business. He pretty much had to start from scratch to build up a legitimate, reliable customer base.
Finding the right marketing channel
With this kind of semi-hollow Shopify store that he had essentially just bought, John got to work trying to drum up new customers and sales on his own. In the beginning, he tested out a really wide variety of different marketing channels and tactics.
As John put it, "When I first started out, I tried a lot of different things. I tried influencer marketing, I tried Google Ads, I bought books on SEO, all this stuff, and eventually I just settled on and really focused in on Facebook Ads as the main platform."
John decided to go all-in on Facebook ads for a few key reasons:
- He had seen other e-commerce businesses having a lot of success with using the Facebook ad platform
- Facebook was a massive, reputable company, so he knew their ad platform was legitimate and not just some kind of scam
- He was confident that if he just invested enough time and money into really testing and experimenting, he'd eventually be able to crack the code and figure out how to make Facebook ads profitable for his business
As John explained, "I just thought of it as like, 'Oh, other people are able to make Facebook work. Facebook is a real company. It's not like a scam.' So I was like, 'There's something that I don't know.' And eventually, through a lot of pain and waiting, like spending my own money, I figured out the creative and the Facebook ads."
To really help accelerate his Facebook ads education, John also invested in some courses, joined some mastermind groups, and sought out mentors who were experienced media buyers. This helped to really shorten his learning curve a lot, versus just trying to figure everything out on his own through trial and error.
Growing the business
With Facebook ads as the main growth engine for his business, the next big challenge that John faced was just finding the right winning products that would really resonate with his target audience. The existing product mix that was already in the store when he first acquired it just wasn't profitable at all on those paid ads. The profit margins were too low and the average order values were just too small.
This kicked off this long process of product research, testing, and just constant iteration for John and his team. They ended up testing hundreds of different jewelry designs, everything from cat and dog themed jewelry to different stones and materials. The whole goal was to just try to find that one hero product that could really serve as the center point of the brand and the ads.
As John put it, "We did a lot of testing. And I say a little tested—maybe hundreds of different styles and designs of jewelry—cat jewelry, dog jewelry, these stones, those stones."
Finally, after months and months of just constant experimentation, John and his team eventually struck gold with this one particular design and style of jewelry that the market just went crazy for.
In John's words, "Eventually, we came across one style of jewelry that, just overnight, was a huge hit. And the business went from maybe $10,000 a month in revenue at that time to $50,000 a month overnight."
This winning product line ended up tapping into this emerging trend of more affordable fine jewelry featuring things like gold plating, sterling silver, and just really minimalist, elegant designs. The jewelry looked expensive and high-end, but it was priced at this super accessible $50 to $100 price point. Customers just felt like they were getting this great deal on these luxury products.
With this killer product-market fit finally unlocked, John was then able to just step on the gas and rapidly scale the business up to $200,000 per month and beyond. Of course, that then brought along a whole new set of challenges around things like logistics, fulfillment, customer service, and even just cash flow management. But those were good problems to have, for sure.
Mindset and dealing with burnout
Throughout the whole journey of buying, growing, and eventually selling his business, John really had to dig deep and call on a ton of resilience. He had to maintain this relentless, never-give-up kind of growth mindset the whole way through. Because there were just so many points along the way where it would have been really easy to just get discouraged and want to give up.
As John emphasized, "Growth is not linear. It would be nice to think of business as, 'oh, you do X and you get Y and it's a formula', but it's not really like that."
Especially in the beginning, there was just so much trial and error, wasted ad spend, and failed product tests. It could be really frustrating to launch dozens of new designs or ad angles and just see minimal results.
As John put it, "It feels like you're digging for gold. And the hardest part, I think, is believing that the next product that you test, the next design, the next headline or the next marketing message is the correct one. Imagine that you do something 20 times in a row, and they've all failed. It takes a certain mindset to be like, 'All right, 21, this is going to be it.' And still be excited about that.
John's whole mental model was just to approach the business like an inventor, constantly running experiments and just maintaining this real sense of curiosity and possibility. He made peace with the fact that the majority of his tests were likely going to fail, but he only needed to find a few big wins to really move the needle.
In his words, "My mindset was like an Edison, just testing things in the lab and just trying not to lose too much money while every day the ads were not profitable or this design didn't work or this design worked a little bit, but then, 'Oh, it didn't work.'"
But that experimental, never-say-die mindset really paid off in a big way once John finally did find those winning products and ads. The business just took off like a rocket ship after that, and all of those earlier struggles and failures felt totally worth it.
As John said, "When you find product market fit, you'll know it's product market fit."
The decision to sell
After two years of really rapid growth, John found himself at a bit of a crossroads. The business was still doing well, but the growth had slowed down a lot from the crazy triple-digit pace of the early days - it was only growing about 5-10% per month now. At the same time, John was starting to really feel the mental and emotional strain of being the sole owner of the business.
As he put it, "I was running it for a period of a year and a half. And basically, it was my entire life. I didn't have any friends. I didn't go out. I didn't go on dates. It was like I woke up; I checked the sales. I did stuff, and then I went to sleep."
Even though the business was still healthy and bringing in $100-150K per month, the thrill of that crazy, fast growth was just gone. And it didn't feel fun or sustainable for John as an individual anymore. He really longed for a more balanced lifestyle and to reduce the risk of having most of his net worth tied up in the business.
As John recalled, "My life flashed before my eyes, and I was like, 'You know what? I'd like to take some chips off the table.' I had 90% of my net worth in this business. I was 27 years old. When I first started, I was trying to get food stamps because I didn't have enough cash."
So John ultimately decided it was time to list the business for sale and move on to his next chapter, even though he probably could have held on longer and kept growing it more slowly. His thought process reveals how personal factors often drive an entrepreneur's exit decision, beyond just the pure financial side of the business.
The actual sales process ended up taking 4-6 months and had a few false starts with buyers who backed out at the last minute. John had to juggle running the business while also handling all the due diligence requests and negotiations, which just added a ton of extra stress. But eventually, he was able to close a deal for just over $500,000, with 75% cash up front and a 25% seller note.
While John probably could have gotten an even higher valuation if he waited for the "perfect" buyer, he was content with the outcome. It allowed him to de-risk his position, recharge, and get ready to try his hand at entrepreneurship again in the future.
Rinse and repeat - Scaling another e-commerce business
After John successfully sold his first e-commerce business, he was really eager to take all the hard lessons he'd learned and apply them to starting a new venture. With the $500,000 he got from the sale, he had a much bigger bankroll to work with, so he started looking for a new business to acquire.
"The next site I bought was Poshe Shoppe, a plus-size women's apparel business," John said. "I got that for $60,000, and it came with $30,000 worth of inventory already. It was doing around $10,000 a month in revenue at the time."
So when John bought it, this business was generating between $120,000 to $150,000 per year. But he saw a ton of potential to really scale it up by using the same customer-focused growth strategies he'd used in his first business.
Over the next year and a half, John and his team worked their tails off to optimize the product selection, really dial in the marketing, and expand the customer base even further. And sure enough, they were able to grow the business to $1.8 million in annual revenue in less than two years - that's more than a 10X increase from the original $60,000 purchase price!
The success of the second project was a powerful demonstration of how John's proven playbook could scale up even bigger with a larger starting capital base. And it provided strong validation for his overall investment thesis around acquiring niche e-commerce businesses with product/market fit, and then pouring rocket fuel on their growth.
Building an investment portfolio
Today, in addition to running his own portfolio of e-commerce businesses under his company Ampify Capital. John also launched a fund to allow other investors to participate in this model. The plan is to raise $1 million to acquire and scale up 3-5 smaller e-commerce businesses using John's proven playbook.
It's been a remarkable journey for John, going from a solo entrepreneur buying his first $7,500 website just 5 years ago, to now building an impressive track record and reputation in the e-commerce acquisition space. Through a combination of smarts, skill, risk-taking, and perseverance, he's managed to build something pretty impressive.
Key takeaways:
Throughout the episode, John shares several key insights that can benefit aspiring e-commerce entrepreneurs:
- Understand the job your product is doing for the customer: John emphasizes the importance of identifying the specific problem your product solves for your target audience. By understanding the "job to be done," businesses can better tailor their offerings and marketing strategies to meet customer needs.
- Focus on building a valuable business: Whether the goal is to hold onto the business long-term or eventually sell, entrepreneurs should prioritize creating a business with reliable, recurring revenues, a strong brand identity, and a loyal customer base. These factors make a business more attractive to potential buyers and increase its overall value.
- Maintain a healthy work-life balance: John's experience with burnout highlights the importance of striking a balance between dedicating time to the business and maintaining personal well-being. Entrepreneurs should strive to create sustainable growth strategies that don't sacrifice their mental and physical health.
- Diversify traffic sources and revenue streams: Relying heavily on a single marketing channel, such as Facebook ads, can expose a business to significant risk. John advises entrepreneurs to explore multiple traffic sources and revenue streams to create a more stable and resilient business model.
- Always keep testing: Finding the perfect product-market fit often requires extensive experimentation and a willingness to fail. John encourages entrepreneurs to view the process as a journey of discovery, believing that each iteration brings them closer to the winning combination.
Conclusion
Through his story, John emphasizes the importance of conducting thorough due diligence, finding the right product-market fit, building a valuable business, and maintaining a healthy work-life balance. He also highlights the need for resilience in the face of failure and the willingness to iterate and test until discovering the winning formula.
