How I bought two businesses from a listed company

The internet deals sector has had a rough ride in 2012, but eSold, founded by Ben Stefanescu and Adam Rowson, has gone from strength to strength. The company turned over $14 million last year and is continuing to record over 100% growth.

Last year was certainly a bigger one than most – eSold bought two companies, Off Your Trolley and Dealfox, from listed telco wholesaler CellNet.

Stefanescu spoke to SmartCompany about the industry, and the process of buying from a listed company.

So how’s the last year been for eSold?

I think it’s been a wonderful year. We hear a lot of retail businesses complaining, but we’re doing very well. We’ve had growth of about 500% this year. Well, I could complain – it could have been 1,000%.

It seems the discount or coupon space is really having a hard time right now.

They are, particularly in the coupon space at the moment, they’re really dying a slow death. The Groupon model which they’ve all adopted is failing. It’s interesting, because you see things like Click Frenzy gain all this excitement, but really it’s just not that exciting at all. We’re offering something better, I think.

So what happened between your own company and CellNet? Can you describe how the communication started?

We had communicated with them at some point, because – and I can’t exactly remember whether they contacted us or the other way around – about stock we were selling. We get contacted by retailers a lot, actually, because we’ve focused on product more than coupons. We get contacted all the time.

So we were approached by one of their buyers, and we ended up talking with the directors and one thing led to another. They were in the wholesale business, and then tried to move into what we were doing. It’s not easy, it’s a very tough market with very thin margins. Unless you have the experience and the technology to do it, it’s very tough. It’s way tougher than in a normal retail shop.

What convinced you to consider buying the companies?

I think at the time I was making some enquiries into their assets, because we were looking to grow, and I thought the timing was good. This was a very difficult business for them to run, and they were trying to get it off their hands.

I was surprised we actually got the opportunity, really. A lot of it is just about talking to people and creating opportunities. I think at the end of the day, everything is about people: If you’re not out there and creating opportunities and talking to them, you’re not going to get a good deal.

Did it surprise you they were looking to sell them?

They’re responsible to shareholders, but you have to also remember they have to justify any sort of move. If they try to launch a new operation and it’s not making money after two years, they have to justify why they should keep pumping money into it, and the board will decide whether or not it’s worth it. But I think they really did the right thing, and it’s helped the company become more nimble as a result.

What ultimately convinced you to buy?

We looked at the database, we looked at the traffic. We didn’t so much care about the profit, because we knew we could make a profit at the end of the day. We didn’t take on their liabilities, only the domain name and the rest of it. We basically just added those customers to our offering and we’ve rebadged it.

At the end of the day, we run a much leaner operation because I think we have the experience and the know-how. It’s very tough for other businesses to do it, because when you come from a corporate background to running this type of business, it doesn’t work.

It didn’t bother you it wasn’t very profitable?

Not really. At the end of the day, the business had a certain amount of customers and it’s all about acquisition. The more people who know about the deals we’re doing, the better, and the more we’re going to grow. So you just have to make sure the price is right, and that it works. It was the right time and the right place. In the end it works out for everyone, because we’ve bought two of their businesses and now they’re able to stick to their own game.

They’re a really nice bunch of people there. They’re entrepreneurs, they love what they do and they’re very good at it. But obviously, you can’t do everything. Stick to what you do best, and I think that’s a good rule. You should really just try and focus on whatever it is you’re good at. If we tried to become an online Myer type department store, or a luxury department store and charge full retail prices we’re going to fail.