Negotiating for PandaProfits

Now that my PTC business has become net profitable, I am banking more money little by little every day. It is easy to become complacent when that happens; it’s a very comfortable place to be. But any business needs to be looking for new opportunity, and the most effective businesses are constantly putting their money to work to generate more business.

So when I learned that Paid-To-Click site PandaProfits was up for sale, I began looking into it, to see if there was a genuine opportunity there.

Before I get into the details here, I want to be sure and say there is no shame in business failure. It happens all the time, it is a learning experience, a smart business person learns from the experience and has the option for a do-over. A business failure is never something an owner plans. It is the last thing anyone wishes to contemplate. But it still happens. In the PTC sector, where it is very easy to start up a new PTC site, failure from lack of experience happens a lot.

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I got wind of the trouble at PandaProfits as most other members did — via an email from owner Tom Waker:

It is with great sadness that we announce the imminent closing 
of Panda Profits.

Why?  Very simply, we ran out of money.  Changes in all of our 
personal lives has put all of us in extreme financial difficulty.

The site is for sale.  If you would be interested or would know 
someone that would be interested please contact us.  It is an 
Evolution Script with many mods, and the most sophisticated anti 
cheat protection available.  For the right purchaser we would 
exchange our site for money owed.  It would be a cheap entry 
into a PTC.

If the worst happens, we intend to get everyone paid.  It’s going 
to take some time, but we completely intend to pay what we owe.

If you are interested in the site you can email me ... Please 
put Panda Profits in the subject line.

Again, I am very sorry.

GATHERING DATA

PandaProfits did not have the most basic of basic financial accounting documents: a Profit and Loss Statement, and a Balance Sheet. But Tom was able to provide some essential numbers to help me evaluate the business.

The site operated for about 5 months.

Cashflow: PandaProfits took in $2,500 in its first month. It’s lowest monthly income was $200. Average monthly cashflow after the first month was $300, half from advertising, half from paid memberships.

Expected spend to reach net profit: $15,000

Actual spend in the first 5 months: $7,500 (Consisting of $5,000 in personal investments and $2,500 from site income.)

Total members: 5,000 (Represents a potential email list.)

Total active members: 1,125 (Members who have clicked in the previous 2 weeks.)

Total upgraded members: 27

Total account balances: $1,830

Total member deposits: $1,843

Average account balance per member: $0.319

Total cashouts paid: $1,255

Total pending cashouts: $276

The cost of site hosting was $137 per month.

With these numbers you can do your own analysis and figure out if this was a business you would want to buy.

FIVE TOP EXPENSES

One more thing I asked Tom: “What are your five biggest monthly expenses?”

1. Advertising
2. Advertising
3. Member Payouts
4. Server Cost
5. Anti Cheat, Domain Service, etc. (less than $100 total)

He also admitted to me their biggest mistake was spending too much money on advertising.

Tom was hoping to sell PandaProfits for the cost of the debt. In other words, just about any buyer who could pay the existing cashout requests could become the new owner. That was an appealingly low threshold for ownership. I was very interested.

What PandaProfits needed in order to continue as a business was more money. Paying off the existing cashout requests alone would not provide any assurance of future success. More money would be needed. It would take ongoing investment to build PandaProfits into a profitable self-sustaining enterprise.

ANGEL INVESTOR

What I had in mind was retaining the team, and providing the funding necessary to survive and reach profitability. I hoped I might be able to provide ongoing management to at least entertain the possibility that PandaProfits could become one of the great ones. In short, I wanted to be an investor, to let the existing team continue to function, but with significant skin in the game on my part to have majority ownership and final decision-making power. There is a name for this: Angel Investor.

I have no experience in owning and operating a Paid-To-Click site, so I’d rely heavily on the experience of Tom and his team to continue to build the site membership and offer a competitive product in this special niche of online advertising.

PandaProfits’ most pressing need was money to cover hosting for the next month. A PTC with a roster of over 5,000 members costs $137/month for site hosting at Liquid Web. It seemed reasonable to assume I could complete a deal to buy PandaProfits within 30 days. After obtaining from Tom some initial numbers about the state of the business (above), I offered to pay the hosting fee in order to be able to have an operational site while I continued to gather data and discuss terms.

It would take a few days to move the money into my own PayPal account, so Tom paid the hosting himself and I agreed to reimburse him. I told him I viewed this payment as “earnest money,” a practice you may be familiar with in real estate purchase agreements. If the deal goes through, the earnest money counts towards the purchase price. If the deal doesn’t complete, earnest money is returned to the potential buyer.

Unfortunately, by the time I had money to send to Tom, the PandaProfits account at PayPal had been suspended. PayPal would not permit me to send money to that account. Tom explained why… A few of the existing PandaProfits members with pending cashout requests had lodged formal complaints to PayPal about not being paid. That was enough for PayPal to suspend all transactions until the disputes could be settled.

THE HATERS

With no viable PayPal account, the PandaProfits PTC was, for all intents and purposes, finished. A poisoned PayPal account is death for any online business. Unfortunately, the “haters” in affiliate marketing are numerous and vocal. Once Tom put out the word that PandaProfits was out of money and looking for a buyer, the haters piled on.

“Scammer!” is the hater war cry. Their first and last thought is that the business was rotten from the start, and it’s only aim was to steal their money.

Well that’s just sad.

Everyone who is serious about making money in Paid-To-Click must realize that any PTC succeeds only if it can manage to operate profitably. Any business needs money coming in to pay the bills and keep the lights on. If a PTC is not successful at doing that, the business fails. It takes capital to start a business and nurture it to profitability. You know from my own story that I put lots of money in at the start in order to achieve a net profit later. It took two years for me to reach net profit in my own business as a player in the PTC sector.

And that’s just as a member in a portfolio of PTCs, not as an owner. (See “What’s in Your Portfolio?“)

Yes, you can make money in this business — if you treat it as a business. But if your first impulse as a member is to whine to your payment processor, then you are nothing but a “hater” and you are contributing to the failure of businesses that showed great promise and could have paid many more cashout requests in the future, if only you could have demonstrated a little more patience and respect for the businesses you hoped to earn from for your clicks.

Business is inherently risky. There is no assurance that a business will make it financially, and no easy way to know how much money it will take in the beginning to get there. In business, failure is never the intent from the start.

With the numbers above, what do you think? Do you believe this was a business worth buying?