Over the past 2 years I’ve been researching business, investing & marketing, like any good marketing business owning nerd.
On this journey there’s a lot of content and principles that continue to come up around real estate investing. The general concept of which is to invest in property and then simply earn through the rental income, and you still have an asset at the end of the year, and it generates positive cash flow along the way.
Problem is, that’s a waste of fucking time if you’re a digital marketing bod who’s worth their salt, especially if you have a little bit of capital to invest to get started.
The reason for that is just down to how slow real estate really is.
This is assuming you are not all-in on this though as there are some people who can nail this without a lot of capital if you work full time and treat it like a business.
But for most it’s used as an “additional asset class” to generate 5-10% a year “securely”.
Problem is, if you do your due diligence and you aren’t a donkey, then the majority of online businesses are pretty secure too. If not more so (AKA 2008).
Without getting into to much detail yet, let’s assume you purchase a rental property asset for £/$300,000. Earning £1,000 a month through rental income.
During my extensive research (which involved Googling it for about 3 minutes), average property ROI is between 6-12%. To keep the numbers simple we’ll take 10% for this example.
But this 10% a year isn’t just profit….. Problems will always start to arise;
- 100% occupancy?
- Up-keep of house?
- New equipment/decor etc?
All in all assuming 100% of that £1k a month is going to be profit is very naive.
But I’m not a real estate guy so I’ll shut the fuck up now and get onto my point.
Digital assets (done right) are 10X more valuable, profitable and just as secure. But using the concepts from “building a real estate empire”, we can structure our business(es) and digital assets in the same way. Taking advantage of economies of scale, team synergy, semi-passive income etc.
The Key – Growing The Business
One of the keys before we go into the strategy itself is understanding that growing the business is always the most important part.
If you’re purchasing a digital asset but you don’t think you can scale/grow/increase profitability then what the fuck are you doing there in the first place?
Even if your strategy is “hire the best SEO agency in the world…. Shout out” – At least that’s a strategy, but doing nothing and expecting it to grow or even stay as profitable for that matter….. You crazy.
This is where the difference to the housing market really comes in.
With houses you can’t say “I’m going to work 80 hours a week and increase this house’s value 200% in a year.” – Maybe you get 10-20% putting in some improvements, but those are going to cost you money anyway (and a lot of time if you are constructing yourself).
My point here is this is generally why people doinvest in real estate.
Because the baseline is relatively even.
If your house is the same size, structure and build as your neighbours (and hence on the same street) – It’s going to be worth about the same amount.
Key here though, if you are an investor, give yourself at least the opportunity to grow the business, even if that involves just hiring a bunch of agencies to help.
The key is obviously you need to understand how to operate and grow the business you are purchasing. But, the majority of people reading this will already understand that as this is more of a digital marketing blog.
A lot of the time, simply *not fucking up* will give you an incredible ROI for your money. If you only do the basics and try to keep the business where it is, then you’ll get between 30-50% ROI on your money every year…. AND you still have the asset which you can resell.
Again this strategy isn’t for a.) The faint-hearted, b.) Pussies, and c.) People who have no skills in the digital field.
If you’ve known me for any amount of time you’ll know the one thing that I talk about fucking up most people is fear leading to lack of action.
But you don’t need as much as you think. Below I’m going to outline 3 strategies on how you can build a 7 figure digital asset portfolio in a few different ways. This is 7 figures per year profitable cash flow and not “7 figure net worth” as that’s a very different, easier thing to achieve.
If you truly believe in your skills & knowledge you should also never be scared to leverage debt to achieve this.
Let me know what you think via Twitter/FB about the below.
Strategy 1 – Ecommerce Product Businesses
This is the recommended approach if you have a background in sourcing and broader digital marketing and branding rather than a very specific skillset (such as SEO or link building.)
Pricing for Ecommerce businesses start from around 22X monthly net profit multiples. If you have the cash flow or finance access I’d almost always recommend going for something larger that’s more reliant on organic traffic than paid or social. Organic traffic is a lot stickier and you won’t experience the same drop off in profit if you have an issue with your paid advertising.
A business generating around $15,000 per month in positive income can be acquired for around $500,000.
Now, let’s go back to our house example…..
Let’s say you buy a house for $500,000 (now these calculations are going to vary massively depending on where you live in the world), but let’s assume the following figures – As these were pulled from the tool at; https://www.openrent.co.uk/rent-calculator-property-value-by-postcode
This is for the UK so fuck knows if this is cheap or expensive, but for reference, asking a friend who rents their place which they purchased for around £450k now rents for £1750. So rounding this up to £2k a month seems accurate.
So option 1.) Purchase a house for £/$500,000 & Earn £/$2,000 a month.
Option 2.) Purchase a business for £/$500,000 & Earn £/$15,000 a month.
And some of these even contain some potentially insanely valuable deals. Looking at digital assets doing around $15k/month net profit (first figure) vs their recommended selling price point (second figure). Shows you just how shitty value your “secure” option really is.
These are all Ecommerce model based aside from the Amazon associated noted.
Increasing the business by 100% across 2 year & acquiring 3 other brands (implementing the same) get’s you to that 7 figure goal. Obviously you can also acquire 1-2 larger brands and scale those, but the principle remains the same.
Don’t take 5-10% a year when you can generate 30-50% a year by simply being smart and proactive in the process!
Strategy 2 – SAAS & Informational Products
This strategy works incredibly well when you have a reliable developer onboard. Usually a partnership of a developer and a marketing nerd with a 10X attitude works perfectly. One of the strongest relationships in business if some of the top companies in the world are ones to go off…..
Unfortunately not having a CTO or developer onboard we haven’t been able to launch this strategy to add to our digital assets portfolio yet, but the key is acquiring small SAAS products that have the potential to grow. Small SAAS companies tend to go for a higher monthly net profit multiplier than eCommerce stores or FBA businesses, usually starting at 30X+ but this is usually due to the value of the software itself or having a very strong reliable MRR.
If you have or are a developer and have specialised online marketing experience, this is 100% the way to go. Picking up a SAAS product that hasn’t been shown any love and adding creative inbound marketing techniques is a recipe for success.
The key to this model is targeting a sub-niche with a very useful solution. Don’t try be the next “social media software” as your going to likely lose. Instead be a tiny sub-niche software and focus on expanding that massively. Companies that have done this incredibly well recently (and are definitely not small anymore as a result are Oberlo & Feedbackwhiz.
Strategy 3 – Dominate a Channel & Leverage (YouTube, Amazon FBA, Instagram etc)
This is the strategy we’re currently leveraging internally, through the Amazon & Youtube divisions of the agency. So I’ll explain the model in general to achieve the £100k/month net profit goal.
Instead of building one digital asset (Amazon FBA business) to the £100k/month we’re going to build 3-5 brands out to a smaller level, acquiring brands in the 3-10k/month profit mark initially and scaling each one using our marketing techniques that have already been achieving great results for clients (Which asks as aproof of concept).
The first brand was purchased for $70,000 in January 2019, originally purchased with an average profit per month of $2,700. This brand has already been increased to $4,500 profit per month (in a month) and will continue to rise over the coming months and years. Becoming one of the core 3-5 brands.
The profit will then be re-invested into acquiring the next deal on a slightly larger scale ($150k price point / $5k profit per month). And the marketing & exponential growth stage will start over again as these processes are repeatable.
If you have a repeatable process and experience in a specialised field of online marketing, the digital asset empire creation really is the optimal way to build a substantial empire that you can grow far beyond 7 or 8 figures. Simply follow the model of property investing and replace these with the digital asset class of your choice, whether that be SAAS businesses, ecommerce stores, affiliate sites, FBA businesses, instagram accounts, Youtubers, literally anything you are specialised in and scale.
Financing & Investments
If anyone is interested in discussing financing and investment into our of these digital assets, please feel free to contact me, we’re always looking for additional capital to speed the process whether that’s on an equity basis or a debt financing. Give me a message at tom (at) ghostmarketing.co.uk if you’re interested.
We’re also running a live case study of an asset we acquired in January 2019 and how that’s going here; https://amazonseoconsultant.com/fba-case-study-part-3/
Cheers and get to building the digital assets empire and start thinking bigger.