The E-commerce Leader

[00:00:00] Chris: people need to be self aware. And be like, okay, who am I? What am I good at? What’s my plan. And, and understand these things from the beginning. And if you hit, didn’t think about at the beginning, stop and think about it now
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[00:01:10] Kyle: You a better business, ultimately. So I think you have to just think about it in those terms. The other thing that I would say. Is Know your skillset. There’s going to be the, you might be an entrepreneur. Who’s great at starting at zero and going to one, right? Like you might be great create, you might be awesome at product development or recognizing trends or recognizing keyword analysis and data and gaps in the marketplace on, on Amazon.
[00:01:28] But what took you from zero to one? You don’t have the skillset or experience to go from one to. The next level of that visit. So recognizing that and selling it, even if it’s a little bit early, even if you’re not maximizing your profits potential for that business, it’s still putting it out there on a high, and you’re going to maximize your profit potential.
[00:01:50] You might not maximize the profit potential of the business, but it is going to be for you because what could happen is that you might run it, but you might start to run it. And it starts to decline because you don’t have the skillset. Do you abuse? Your expertise is going from zero to one. And so just.
[00:02:04] And then you can sell it. You can find the next trend, find the next thing that’s ready to roll. And you can be back to doing what you love to do, because some people just are good at that. And other people are good at taking it and taking it to the next level and maintaining it and growing it a professional, a brand level and kind of taking it to that next role.
[00:02:20] Jason: Yeah. That’s where my mind kind of went with this stuff as the, uh, the realization of a marketplace that emerges around this idea of buying and selling. E-commerce what it makes you realize that. You know, and I always tell my story. I wanted to be an online seller for 10 years, and I didn’t know how to do it.
[00:02:35] I didn’t know how to go from zero to version one of anything. And I just watched other people do it. I watched the Davis Beano infomercial for years, and then finally, you know, in desperation when we needed to, we kind of figured it out with eBay. But now if there’s a ready marketplace where you literally can look at business opportunities that say.
[00:02:57] I could totally run that one, but that’s something I know about. That’s not my life. That’s not my passionate about it really creates an interesting opportunity for new on-ramps for people who aren’t. Dom. I mean, they’re not bad people. They don’t know how I’m one of them. I was like, I’m not a zero to one guy here.
[00:03:15] I’m not very good at that. It’s like, I wasn’t dumb back then. I could have run something. Just didn’t know how to start it. So I, if I could have bought something and there’s so many ways to buy things, you know, you can do, you can do an Earnin, you can do, uh, you know, owner financing where you buy it off, somebody over to.
[00:03:32] That, you know, there’s loans readily available for anything on the plan. Right now there’s so many ways to buy. And so to me, that’s the interesting part of this conversation is the buy side more than the sell side, but that’s just sort of how I’m wired. Um, and so I love the whole thing in the marketplace that’s emerging.
[00:03:48] Um, so you both kind of mentioned this idea of getting your ducks in order being ready to, to sell properly. I think that’s probably a topic. Conversation. So let’s unpack that a little bit. So, I mean, the obvious thing is you want to begin with the end in mind, Kyle, as you said, and Chris, you want to get your, you know, your personal, you know, things set aside and clean, clean out your business.
[00:04:09] Um, what else, what else should people be aware of as they in particular think about, uh, Amazon business, for example, that is going to be prepared to sell. Is there anything that you would just specifically say look into this, look into that, or any further tips on that? Yeah,
[00:04:25] Kyle: this isn’t a, this is not a solo venture.
[00:04:28] You need to put together a team to support what you’re going to do. You need to have the right, uh, you know, CPA. You need to have the right lead, the lawyer. I mean, you need to put together the right team and as your business is growing anyway, you probably have that team. However, I would say you want to go out and find people that have experienced.
[00:04:46] You doing exactly this thing, like you don’t want to ask your CPA, who’s choose, barely understand the Amazon for you at this point. Right. And they’re like, Hey, how do I sell this thing? Oh, you just treat it like any other business, because there are nuances and specifics to this business to tell them where to maximize your profit.
[00:05:01] You got to have the right
[00:05:02] Jason: team members. You were saying that I know we both know insider, like mind here is that you and I are working with someone right now on the sale of their business. We’re helping them prepare their, uh, And presentation docs like the marketing documents for it, just to, you know, the sale of it.
[00:05:16] Uh, and, uh, and thinking through the process with the client, and it’s been a fun process and we’re excited to be able to do that. And I think you’re right. That’s a key part, Chris, what’s your thought on how else to get right before you sell? It’s
[00:05:30] Chris: kind of jumping on to things you guys have been saying, or some, both of you have said, and I think maybe a simpler way to phrase it is the people need to be self aware.
[00:05:39] And be like, okay, who am I? What am I good at? What’s my plan. And, and understand these things from the beginning. And if you hit, didn’t think about at the beginning, stop and think about it now, because I’ve seen a lot of sellers on Amazon who are like, they see big numbers. They’re like, what you mean? You can sell on FBA account for like this much money.
[00:05:55] And they’re like, yeah, I want to do that. And it’s like, whoa, dude, you don’t know how to do that. Okay. Like you haven’t built something that can be sold, right? Like surprise, you built yourself. And not a business where like, you can’t actually sell it. So if you want to sell it, you have to be aware of what it takes to sell.
[00:06:12] You have to be aware that why do we need to get a lawyer involved? You have to be aware of like, wait a minute. What’s what’s going on. And a very common thing that I’ve seen where people are not self-aware and myself included when we started scan power and it was growing and it was like, I didn’t know what we were doing.
[00:06:26] We just kind of did it. Cause it was fun. And we got really popular or the right place at the right time. Um, my business partner, Paul at the time said, look, we can either have control or. And I’ve thought about that constantly, because if you want full control, if you have 100% ownership of your business, then you do have a max of how big you can get.
[00:06:42] Like, it might be pretty big, but it’s, they’re still going to be a limit. Now, if you want to grow past that, you need to be working with and partner with, uh, people who know how to take something to the next level, to a higher level than, you know, or you’re capable. Of taking it, whether it’s needing extra people or extra knowledge, extra connections, whatever that might be, that means giving up control.
[00:07:01] And I’ve seen so many people unable to give up even 1% of control because it’s their baby. Right. Like I get it. I’ve been there like, oh no, I think this is mine. Like connected to me is it’s on, it’s literally like, say they say baby, cause it’s literally feels like. Right. Like there’s a strong, emotional connection to it and know I can’t sell part of it.
[00:07:19] I can’t have someone else come in who may not care about this as much as I do. And you have to overcome that and say, yes, if I want to grow, if I want to reach more people, I want my message to be out there to more people in the world. I want to help more. If you want that growth, you’ve got to be able to give up control and it’s something.
[00:07:33] I think people just need to stop and think about it. Doesn’t flip the switch right away, but think about it and be like, you know what I do want to grow. I do want to help more people. I do see a big opportunity here and I can do it. I can give up some control and then do that and then say, okay, what’s, what’s the point in as your team grows and say, look, we need to sell.
[00:07:50] We need to bring somebody in. We need to give up. Uh, what that takes and build a team of trusted people who know what they’re doing, and then, then you can really grow and change the world.
[00:07:58] Jason: Well, you’ve mentioned an interesting idea, which is of course selling part of your business for strategic purposes to have cash, to grow, have a strategic advice from a new partner, et cetera, et cetera.
[00:08:10] So that’s a whole different split on this, which is awesome. I mean, that’s, that’s a topic in and of itself. That’s a future podcast for sure, but where I wanted to go with the conversation a little bit. So we’ll leave that as an open loop for another. Um, where I wanted to go with this one is also the top end of the deal where big companies, multi-billion dollar companies, there are CEOs of the world are rolling up e-commerce operators, uh, and just buying people outright and making it pretty darn easy.
[00:08:36] Or at least you guys tell me what you think in terms of, uh, you know, the acquisition offers they’re making to smaller sellers. Um, what’s your thought on that? Trend. And is it going to continue? Is it a, is it a moment in time or is this just the beginning of something new where people start little operations and they sell them to bigger operators?
[00:08:55] What’s your thought on that? Kyle, you go first.
[00:08:57] Kyle: I think that, uh, it’s just indicative of the maturing of a market. I think most markets go through sort of an aggregation phase. And then, then after it sort of stabilizes, then the innovators. Move on to sort of the next piece of it and they start to innovate again and then it starts the cycle over again.
[00:09:15] So I think that’s kind of where we’re at with it. We’re in the aggregation phase of this, where you have big brands, like you mentioned, they’re Osseo and there’s a handful of others that are. Venture backed or equity backed and they have billions of dollars and they’re really making smart, they’re making smart acquisitions.
[00:09:30] Oftentimes they’re structuring these deals where they’re not putting out a ton of capital that there isn’t earn-out with it. Right. So they’re, they’re paying the profits and they’re paying for the business over a timeframe. And, uh, and then the benefit to the, to the seller is one, they get some infusion of capital, but two, um, Is that they get plugged into these systems, right?
[00:09:52] That these big aggregators have, and those systems allow them to sort of take that to the next step. And therefore they make the company potentially hopefully more profitable as it goes. So their actual earning potential on the sale of the business is actually expanding. Over that period of time. So that would be the pro Arctic.
[00:10:09] The con argument is that, you know, they don’t run the business successfully or something happens in the marketplace or something happens with that product, you know, that they have, and it doesn’t work out. And therefore you don’t are not able to capitalize on that money out of the gate. But I do think that that trend is here and I think it’s here to stay.
[00:10:26] Jason: Chris, what are your thoughts?
[00:10:27] Chris: I think it’s the exact control versus growth. The thing we just touched on, like, yes, you can grow. And a lot of these aggregators are run or are closely tied to people who formerly worked at Amazon who have, I don’t say like inside scoop, but definitely, you know, knowledge of marketplace systems, you know, the Amazon way of doing things, how to optimize listings and say, look, we have this information and we can scale it out across multiple brands.
[00:10:48] Let’s find some. That have like a passionate fan base and have a great products and let’s use our knowledge and, and systems to grow those brands. I think it’s smart. Yeah. Uh, I think it goes back to being self-aware and being like, Hey, you know what? I really like going from zero to one, I really like launching a brand and getting my first 10,000 customers and growing it to a million dollar a month.
[00:11:11] That’s not necessarily what they’re even good at, or even like doing to where they can say, look, I want to buy and sell the threats. You and I won’t do it again. I’m gonna make another brand and sell. So they keep doing what they’re good at. They’re self-aware and then they now have a partner to say, yes, perfect.
[00:11:25] I’ll do what I’m good at. And I’m like, I’m a handy, this little thing over here and you take it and I’m going to get my cut and you get your cut and that way everybody’s doing what they’re good at and what they like doing. Without trying to be someone else like self-awareness is a, is a bigger part of this than I think.
[00:11:42] Jason: Yeah, totally agree. Okay. So next hot, hot question. Ho take, we need from you guys is what are your thoughts on the multiples available to people who sell and, uh, you know, what, what you can expect to get for your business? Um, what’s your thought on how that works? Your opinion on it? I have a point of view on this as well.
[00:12:00] Kind of what, what do you think, ha how does this work currently for e-commerce operators in. Yeah,
[00:12:07] Kyle: the, the value of your business is what someone’s willing to pay for it.
[00:12:15] but let me break that down because that is true. So there isn’t, there is no fixed, like, you know, shark that you look at and be like, okay, this is it. Now there are there guidelines for what I mean by that is that those multiples can change. And I would say on average, You can see a multiple in the, like the four X range or an FBA business.
[00:12:35] It has been trending up over the last, I would say 24 months. So people are willing to spend more pain than you more as a multiple. So let’s say like a four X multiple on an FBA business is not uncommon. Um, what do you mean by
[00:12:49] Jason: full Rex, but break it down for people who are not like for my answer, watching the show, what does that mean?
[00:12:54] Kyle: So you’re typically gonna see four times. Your, um, your, your net profit or your EBITDA, right. Which is, you know, your earnings before taxes and all that fun stuff. Right? So that number is you find that number on your rolling 12 months, uh, on it like a P and L, and then you multiply that by four. And that is typically the, the price that you, you are going to get.
[00:13:20] Jason: Step one, have a P and L done. You do step two. Decide if you’ve made any profit or not. Step three, multiply times four.
[00:13:28] Kyle: Exactly. Here’s my time. Zero is still zero. Exactly. Right. My other take on this is that you, if you don’t care about your numbers, like ultimate, you’re not a numbers person. You’re not driven by your numbers.
[00:13:38] You will. By the time you get into the process of trying to sell your business because you have to be right. And if you want to lose money and leave money on the table, you ignore what your numbers look like. And how do you, you are thinking about those things. Chris. Yes, a four X
[00:13:54] Jason: four X. What’s your thought on the multiples available and how that nuance?
[00:13:58] So I am not
[00:14:00] Chris: a multiples guy. This is not an area of expertise for me at all. Uh, I do want to help people split up the ideas of different types of Amazon businesses. Uh, we were talking about an Amazon business. I think people are defaulting to selling, um, and then defaulting back to probably FBA type of business using seller central.
[00:14:15] Um, there are two other main ones that, that I work more closely with merchant by Amazon and Kindle direct publishing KDP. They’re both going to be royalty based. So you’re going to simply get royalty checks. For the products that Amazon sold now, how you drive traffic and how you get sales and do all of those things is of course in the marketing and the brand building and all that stuff.
[00:14:34] But it’s a very different, I said, look, this is how much world. That’s it without having to get into inventory cost and lead times and all this other stuff, that’s going to be a little more complicated in the FBA side. Um, there are some stories of people who have sold merch by Amazon accounts. Um, I don’t know the exact numbers of how they were breaking it up four to seven X.
[00:14:49] Uh, I think I’ve heard kind of thrown around a little bit if you’re bringing in consistent royalties, um, without, you know, needing to be there as the owner, doing specific marketing things to actually drive sales, where if all of a sudden you’re not there that goes away and the royalties go down. Uh, but that’s what people are going to look at it.
[00:15:02] If you’re looking at a merchant by Amazon and a KTP business and those businesses can be rolled up and sold just like an FBA business.
[00:15:09] Jason: For sure. Now I love that. Um, yeah, my, my thinking on this is, um, if you get, let’s just say for X w what you’re saying is that you’re going to get four years of future earnings at your current level of.
[00:15:24] If your business has grown quickly, then you have to think through that math and think, well, that’s, you know, if I, if I doubled in the next four years, then that if I retain the business, then what, what am I giving away in terms of future growth? I really, really debate the merits of selling an enterprise you’ve built for, for.
[00:15:48] And I think it’s a circle. Now, if you don’t like the business and you know, you know, you’re going to ruin it, should you stay in it, then you should dump it. But if you’ve built something that you can hand off to a manager and there’s margin to retain it and have basically little to no personal day-to-day involvement, you know, have a manager where you meet with once a week and you draw a hundred dollars a month out of the.
[00:16:14] You’re still retaining an asset that could grow and grow and grow and grow. And, you know, so to me, I’m not a huge fan of like, oh my gosh, I can sell my business. I’m going to do that. I. I don’t see the logic in it. That’s your
[00:16:29] Chris: self aware that you actually like what you’re doing? You’ve built something you enjoy, not just, I need to make money.
[00:16:35] I heard you can make money flipping wholesale. So he brought this wholesale business full of products that you don’t care about. You’re like, I don’t know what that is. I don’t even know what’s in that box, but we’re going to send it FBA
[00:16:43] Kyle: and sell it. Yeah. Now I would also say though that for ex. It’s typically going to be on an FBA business that has an owner operator, and they’re still day to day in the business.
[00:16:56] Once, soon as you move it over to what you. Where you have a team in place, you are not doing day to day management. Your multiple can push closer to six or even seven. Really? Yeah. Yeah. So it does change the dynamic and also the growth curve that you’re on, that you mentioned to the higher your growth curve is the more you can sort of make a claim for a higher multiple.
[00:17:18] If you’re starting to flatline your growth, then obviously you multiple starts to then hit a cap and maybe.
[00:17:25] Jason: Yeah, no, this is a great thoughts. Uh, final commentary from me, which is another open loop for another conversation. So I think we’ve got two of these. We’ve got bringing in equity partners for growth, and then this is another open loop, which is be the roller of the ups.
[00:17:38] Uh, you, you acquire more and you roll up and you build an enterprise. Puts together three or four or five or six companies. Uh, that’s the journey cinnamon and I’ve been on for the last three and a half years or so. And, um, so I think that’s a hot topic to consider for people who, uh, like the idea of scaling in a different unique way.
[00:18:00] Um, and so I would say that’s another open loop that we can unpack in a future podcast. So guys, I love this topic. I think this is just genius stuff. And so let me read it. The opportunity to sell your business or even buy a business is becoming more and more readily available for us to do it. Right. You want to think through your financials, your process, and get your business ready to sale.
[00:18:23] As Kyle said, begin with the end in mind on it and have it ready to sell to someone else, um, consider the valuation and the multiples you might be able to get think through whether that really makes sense for you. And then of course, get a team around you of why is practitioner. Uh, lawyer CPA business coach can really help you put it together wisely so that you optimize your situation.
[00:18:45] Does that sound like a decent summary of the topic? Absolutely. Yeah. Love it. All right, guys. Let’s wrap here and thanks again, everybody for listening with us. It’s an honor to be able to do the show. Um, love to have you subscribe and follow us on the call and app. And then if you’re watching this subsequently anywhere else, once we push this video, To our groups and be sure to come in to the Collin app, find the show, the e-commerce leader, uh, show and we’re did you know, we’re ranked in Collin app and we’re in the top 50 business podcasts in Cali.
[00:19:19] And there are more than five.
[00:19:22] Kyle: Cool. That was my next question. So
[00:19:24] Jason: yes, our subscribership is growing. So, but you know, it’s a beginning effort for going from zero to one on this deal, so it’s fun. Right. And there we go. All right. You guys good times. Good times. Thanks for hanging out with me today and thanks everybody.
[00:19:37] We’ll see you soon.
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