Today on Lunch with Norm, How to Sell Your eCommerce Business the RIGHT Way. We have co-founder of Ecom Brokers Ben Leonard. We will be discussing how an eCommerce business is valued in 2021, what makes a business sellable, and what deal structures look like when selling your Amazon business. Ben built a business on a laptop, in a cupboard, in his spare time. Ben grew an international 7-figure business and successfully exited after 3 years; the business holy grail.
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Episode: 214
Title: Norman Farrar Introduces Ben Leonard, Beast Gear founder
Subtitle: “How to Sell Your eCommerce Business the RIGHT way”
Final Show Link: https://www.youtube.com/watch?v=z_-SzhnXM_Q
Back on today’s show we have Ben Leonard, Co-Founder of Ecom Brokers. We will be talking about why and when to sell your business and what makes a business sellable. Ben is a serial entrepreneur, he grew a 7-figure business and successfully exited after 3 years. Now he does the same and helps other with their eCommerce.
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Norman Farrar 0:03
Hey everyone is Norman Farrar aka the beard guy here and welcome to another lunch with Norm. The Amazon FBA and ecommerce podcast.
Norman Farrar 0:23
Okay, we’re having a couple of technical issues today. Hopefully the Wi-Fi will hold up for me. If not, I’ll find another location. Anyways, today we’ve got a great topic, we’re gonna be talking about how to sell your Amazon business. And we’ve got Ben Leonard on. But before we get to that, Kelsey, are you there?
Kelsey 0:45
I am I am. Hello,
Norman Farrar 0:47
How are you sir? You just had a move this weekend?
Kelsey 0:50
I did. So as you can see, I got some new, a new background today. I’m super excited about it. Hopefully the lighting is a little better. But we’ll see. You need to do a little sponsor read, I believe.
Norman Farrar 1:06
Yeah, just give me a sec on that. We have technical difficulties here. So just give me a sec.
Kelsey 1:12
Alright. Well, welcome everyone. Welcome to today’s show. Of course, smash those like buttons to get it started. Super excited about today’s episode. This is the third time Ben is going to be on We Love Ben. Ben is the best. Welcome, Andy. Jessica. We have Andrew from Twilight action. And Rad. Yes, we’re fashionably late. As always. I think we’re getting more late as time goes on. But welcome Manny. Welcome, welcome. Yeah, so we have a couple things going on. It’s November so that means it is November. So you will start to see a luscious moustache growing on this lip. Um, over the course of the next 30 days. We have set up a fundraiser as well. So if you go over to lunch with Norm page norms, personal Facebook, or the Facebook group, you’ll see a donation area where you can donate to november. It’s November, Canada. But all the proceeds go over there. And yeah, if you can like it, share it. I’m going to post it in the comment section as well. But yeah, let’s get the word outs. And that’s it. How you doing men?
Norman Farrar 2:28
Oh, well, I’m not sure. We’ll, we’ll find out after the podcast. You might have to come in. We’ve had a couple of glitches with the Wi Fi but I think everything’s gonna be okay. Let me try to do our little seller or our sponsorship shout out. I’ll try. Anyways, we wanted to give a shout out to seller eyes. solarize is a comprehensive solution for your everyday business needs. It’s everything you need to grow and scale your Amazon business in just one click. For more information, contact him and his team at cellar eyes calm. And that cellar eyes just with one AR. I’m going to be meeting Deema later on today. I’m not in Toronto, I was able to escape Canada. And I’m in Fort Lauderdale. Right after this. We’ll be down at Miami and meeting up with with a bunch of people and then tomorrow speaking over a powwow. And if there’s anybody listening who still wants to go to powwow, I believe we still have that. I’ve got a few more tickets that were given to me. So anyways, just contact Kelsey and he’ll make the arrangements. Okay, Kelsey. It’s yeah, okay. Was it?
Kelsey 3:43
He was oh, no, no. Oh, yeah. Oh, good.
Norman Farrar 3:48
Very good. Can you see most important of all Can you see my morning coffee?
Kelsey 3:53
Oh, very nice. Very nice. See, I have my coffee machines not even set up. So I gotta go copy coffee list today. But yeah, we can jump in today’s today’s show. It’s gonna be a little bit early. So
Norman Farrar 4:07
yeah. So anybody having any questions? Just throw it over in the comment section. I don’t get read into it. Sit back, relax. This my close up my Halloween close up. But anyway, sit back, relax, grab a cup of coffee. Enjoy the show. And let’s welcome back the man mr. Brandt. Ben, how are you?
Kelsey 4:27
Hello. I am really good. And thanks for having me. And I have to ask did you take the lunch with nor mug? All the way to Miami?
Norman Farrar 4:39
I travel with it everywhere.
Ben Leonard 4:42
That is commitment. I love that. Excellent. Love it. Good. No, I’m great. It’s good to be back. I appreciate you guys having me back on. It’s always nice to see your your beautiful faces.
Norman Farrar 4:52
Well, thank you, sir. All the way from Scotland. Absolutely. Yeah. Very good. So for those of us who do not know you Can you just give us a little bit of information about yourself?
Ben Leonard 5:04
Yeah, I’ll keep it brief. For those who haven’t heard about me before. My background is science. I got into E commerce kind of accidentally, early 2016, got sick, had to take some time out of work, started a brand of fitness equipment. Turned out, I was pretty good at it, quit my job, scale it up. And I sold it in late 2019. We were doing about at that point about 6 million US dollars in sales. And so this was right before the explosion and mergers and acquisitions and E commerce. And I sold that business. And I sold it through a broker. And the experience without broker could have been better. So being an entrepreneur, I spotted the opportunity to create a better brokerage. So together with my accountant, Allison, who has about 20 years mergers and acquisitions experience on who somewhat saved the day, during that exit process of that first business, we combined our skill sets me on the E commerce side, understanding what it is like to live ecommerce day to day and Allison on the accounting side on the m&a side. And yeah, that’s that led us to create econ brokers. I’m still building brands today, because I love it, I know how to do it, I know how to create a valuable brand and sell it. And I need to so that I can look my clients in the eye and say, I understand what it’s like to be in your shoes. Not good enough to say I used to understand what it’s like to be in your shoes, you know, it’s a very fast moving space. And it’s important to understand, you know, what’s going on on the ground. And so yeah, that’s awesome. And that’s me, and I’m here I am.
Norman Farrar 6:39
You know, just listening to what you were saying? I’m kind of curious, I wasn’t going to lead with this. But I’m kind of curious if you could go back and do things over? What would you do differently? Selling your brand?
Ben Leonard 6:54
Oh, good question. I would have used a different broker. And I’m not here to slam that broker that I used. They were nice people. But their process wasn’t great. They were working at scale. And rather than having, for instance, a chartered accountant working on the numbers, it was just a problem, you know, a person who was not that background, who had been trained to pull in some reports from Shopify and Amazon, slamming it into Google Sheet and assigning a value to it. And their approach was not particularly bespoke. So I would have worked with a service that provided a bit more of a bespoke service service to really dig deep on the business and get a deeper understanding of it, in order to then work with me to maximize the value of it, rather than just pull some reports and say, it’s worth this. And we’ll stick it on our website and flip it. And in the end, that’s not really what I experienced in the end, because Allison and I, you know, in the end did the bulk of the work ourselves. So I would have, I would have done that. But unfortunately, you know, be if I’m being fair to myself, the environment in early 2019, when I made the decision to sell was very different. And those services were less available. And in any case, I was going off of a recommendation of a friend who used the service that I used. But you know, with the benefit of hindsight, their business was quite different to mine, it was a bit significantly smaller. And that that kind of more flipper style model worked better for them than what I needed, which was a much more hands on approach.
Norman Farrar 8:37
Yeah, I was at breakfast today with another guest that’s been on our show, good friend of mine, Colin Campbell, he sold a bunch of businesses. And anyway, actually, I was in this office when he sold club to GoDaddy, and we did a live podcast with them final paperwork was signed. Anyways, we’re at lunch at breakfast this morning. And he asked me about the current situation. And if go off, Amazon would make a bigger difference nowadays than before, because I don’t know if you agree with this. But when you were selling an Amazon business, a year or two years ago, aggregators, or even the the private equity that was coming in, was focused on Amazon, they really didn’t care about anything else. It was your Amazon business, especially last year, going forward and developing off brand or going into the Walmarts of the world building your Shopify account. Do you think that would add more value now than it did last year?
Ben Leonard 9:39
Yes. 100%. He’s right. More and more if we’re going to talk about aggregators, more and more of them are getting more sophisticated and smarter. Many of them aren’t, that more are and most of them are now beginning to the penny is dropping and they understand that it’s not all about Amazon it can’t be about Amazon if you’re going to have a sustainable portfolio of brands, particularly when very soon, and in fact already, they’re not just competing among other aggregators, they are competing among big boy, old school private equity, who have the operational chops and have been doing this for decades. And it’s, they’ve been patiently waiting to see what happens for the last 18 to 24 months. And now they’re coming in, or very soon, they’re coming in. And they do understand the importance of omni channel. They have brands that they’ve had for a long, long time, which they’re now moving on to Amazon. And they have brands which are purely Amazon, which they’re moving off of Amazon. And I know this because I consult them outside of econ brokers. And I think one thing that’s gonna be fantastic for E commerce business owners is, as probably 80% of these aggregators either die or eaten up, the space that remains will be filled by more mature private equity. And that will bring a more mature environment to mergers and acquisitions and E commerce. Because right now we’re in kind of like a wild west, where all sorts of stuff is happening, which doesn’t happen in more mature industries. And as that dies down, that will suit sellers much more, they will end up benefiting from better deals, and going through a better process than what’s happening now.
Norman Farrar 11:26
We’ve talked and I think any anybody that we’ve had on the the podcast talking about building your business, you know, is we started that, you know, what can we do? And we kind of build it out. Very, and technically, if you had three things that you could do to your business right now, what would you do that could improve your overall valuation of your company or brand.
Ben Leonard 11:51
One,
Norman Farrar 11:54
and I’m talking about As for 20, going into 2022, I think that’s the year.
Ben Leonard 11:59
Yeah. So So So, yeah. So if you’re purely on Amazon, don’t be purely on Amazon, right. So diversify your channels. We’re about to sell a business that is on its own website and Etsy, right. So think outside the box, right. Think about these other other marketplaces. So diversify your channels. That means be on Amazon. Yes. Be on Amazon in multiple countries. Yes. But look at other marketplaces, Walmart look at the smaller marketplaces in Europe, ball Allegro, look at building out your own website, look at not on the high street, Etsy, etc. So that’s one is diversify your, your sales channels. Two is improve upon your intellectual property position. So many, many, many sellers now have at least got some trademarks. But what many of them don’t realize is that the pretty crappy trademark that they did themselves, it was just about enough to get brand registry is actually barely worth the paper it’s written on in terms of actual intellectual property. So if they came into an intellectual property dispute, they will be in a pickle because what they do is they register this trademark. It gets approved and they get very smug, saying, Oh, I have a trademark. But actually, what when they think somebody is infringing on their mark, they’re not because when they registered it themselves, they didn’t properly register a mark that has a broad protection. So there’s a live example anyone can look into. And it’s a mistake I made. If you go to Google and search for the UK Intellectual Property Office, it’s something like ipo.gov. UK, but just Google it. You can do a trademark search. If you search for beast gear, this is all public domain. I’m not breaching any confidentiality clauses. Okay. If you search for beast gear, which is the brand that I created and installed, you will find some trademarks from 2016, which I did myself and I was incredibly smug when I did. A year later, I had a conversation with an intellectual property attorney who told me that they were pretty rubbish. And so that’s why a year later these same marks are re registered. And you can look at them and see the difference in the depth of the protection. So number two is broaden and improve upon your current intellectual property position. So if you have no trademarks, get some trademarks. If you have some trademarks and you didn’t yourself or got them done cheaply, have them looked at by unexpensive and good intellectual property attorney. And if you think you might need design registrations or patents, please please please get that looked at as well. All these things help to build a moat around your business, build instability and a sense of legitimacy, which a potential buyer is going to want when they’re looking at buying your business. So that’s number two is you know, improve upon your intellectual property position. I guess For a third one, it would be diversify your offering. So we spoke about diversifying where you’re selling but diversify your offering. Many people have built a reasonably successful brand, if you want to call it that, but they think it’s a brand, but it’s not because they’ve got maybe one or two SKUs. And more and more buyers. You know, when, after the last year emerged, tons and tons of aggregators believed that we can raise a bunch of money purely because e commerce is growing, you know, X percent a year, we can just roll these up, do very little with them. And then, you know, we’re quids in, investors have cottoned on that is not as easy as that. And they want to see when they when when when the aggregator is coming to their investors and saying, Look, we want to buy this. They want to see brand, they want to see sustainability, they want to see growth, they want to see a future, they don’t want to just see a mishmash of products, or one or two products want to meet two products, they’re doing okay, on Amazon, they want to see a legitimate brand, they’re now taking a more mature private equity approach. So if you’ve got one or two skews, you need to build out a brand and start thinking about what other related problems can I solve for my customers? That would make sense? And from their ability, family of products, and a real brand?
Norman Farrar 16:26
Like, and this is going to lead me to my next question, which I wasn’t prepared to ask, but I’m not sure if you have an answer on this kind of talk about brand. So many aggregators were just going in there. We’re, I wouldn’t even call micro brands or micro micro brands. These are just they’re buying anything right now. And it’s not necessarily focused on brand. So you’re getting a multiple on your EBITA. Do it higher multiple right now. And there’s usually an urn out. Are you seeing when more companies are putting a focus on brand? So they’re spending more money upfront, to get their brand out there? Less money on profit? Do you think that you’ll see a time where these aggregators or private equity are going to go move into the, you know, one times sales rather than EBITA? Because, you know, sometimes it makes no sense. If you’ve got a brand that you’ve spent a lot of time developing, but there’s very little profit, because you’ve taken that profit, and invested it into lunch with Norm.
Ben Leonard 17:38
Yeah, or whatever, you know, yeah, I completely see where you’re coming from. Yes, and no. For most people listening or to this, or watching this, that’s not going to apply. And when you’re working with the right broker, who really does the work to maximize the value of your business and properly calculate your EBIT, da or your SDE, they will make the appropriate adjustments on your p&l sheet, which can be half you have to be upfront about it when you’re presenting it to potential buyers, but you can reasonably justify that adjustment to them boost the EBIT, da SD and effectively add back, right, those kinds of costs, right. But I see where you’re going with it. And at a for much bigger organizations. Multiples of revenue happen. But it’s, it’s rare in, in any commerce for what we’re talking about. Right?
Norman Farrar 18:37
Yeah, I just I’m just really curious, because I have been talking to a few sellers that have been spending a lot of money, building brand awareness, brand defense, and you know, it’s gonna be a completely different number when somebody approaches them. And and I’m thinking it’s more of a savvy seller that would do that. Yes, you’re not and you’re doing it. I mean, you could get hosed.
Ben Leonard 19:05
Yeah, you got to be smart to do that. And these, these kind of ones are going to end up what end up being more strategic purchases, or purchases by, you know, more traditional private equity. I was having a conversation today with an extremely smart seller, we’re going to sell his business. And he got he’d recently come out of a conversation dealing directly with with an aggregator and frankly, the aggregator failed to understand the data that was being presented to them. And because they’re looking at it on a much more short term, just purely financial point of view. Whereas some of the better aggregators and then on the mature, more mature private equity will take a more long term, just strategic approach and understand the importance of this kind of spend on building the brand and the brand awareness, etc, that you’re talking about. And They’re not necessarily looking for a direct ROI on that spend. And so yeah, for that, that kind of play will work. And particularly as m&a and E commerce continues to mature, we’re going to see more of that.
NormaN Farrar 20:12
Okay. Now, going back to one of the more traditional questions that I wanted to talk to you about it, again, high level, we don’t want to get into too much technical, but 2021 2022 ecommerce businesses, you know, the way that they’re, they’re valued. Can we just briefly touch on that for the new sellers that are trying to explore, you know, how do how did the exit?
Ben Leonard 20:37
Yep. Okay, so every business is different. Okay. So but let’s talk keep it really simple for someone who hasn’t heard about this before. So for simplicity, we multiply your something called your sellers, discretionary earnings by a multiple and sellers, discretionary earnings is effectively your net income, plus things called add backs, and things called adjustments. So add backs are things that appear on the last side of your p&l statement, which we remove. And there’s there’s two main types. One is personal related, discretionary expenses. So things like your phone, your travel, your salary, health insurance, office costs, etc. And the other part is one off costs that won’t be repeated and wouldn’t apply to the new owner. So it could be intellectual property, you’ve just paid for your trademarks, you don’t need to do them again, you just paid to have a bunch of videos done to do it again, photography, and sometimes recurring costs, maybe you’re paying a recurring consulting fee or something which then you own is not going to require or maybe you’re paying an agency to manage your account, you are not going to do that. So adding those back properly and having them done by the right person with with an accountancy brain will boost the value of the business by boosting your SDE. And then the other is adjustments. So these are adjustments which recognize change in the p&l in order to recognize what the business is truly worth to the new owner on day zero that they acquire it. So for argument’s sake, we usually value a business based on the trailing 12 months performance. But if you just like two months ago negotiated a lower cost on a product with a supplier, well, it’s not particularly reasonable if it’s only going to boost your SDE for the last two months, but the new owner is going to benefit from that new cost. So it’s reasonable to adjust as if you had been purchasing it from that supplier at that lower cost for the full 12 months. For example, there’s there’s tons of ways you can adjust to recognize the true value of the business. So that’s how you get to your SD. You multiply that by a multiple and E commerce at the minute multiples are, you know, anywhere between three and seven? Somebody I know recently sold a business for 11x. That’s crazy. It wasn’t? Yeah, that was a major outlier. So I wouldn’t want anyone to think oh my god, I’m gonna sell my business. We’re loving it. And so yeah, the SDE is multiplied by a multiple and effectively, that gives you the price of the business. And then after that, that price is is you know, we have you have a deal structure. So there’ll be a proportion upfront, which could be 100%, or could not be 100%. And the remainder will be in the formal usually not always in the form of an urn out. And this is assuming somebody’s selling 100% of their business, and they’re not retaining an equity, of course, which is is the usual case in E commerce, but not always. And so yeah, that is in simple forms, how a business is valued in E commerce, very simple, you know, every business is different. It depends on the quality of the business, how valuable it is, how sellable it is, what vertical it’s in, what the owners want, how the entity is set up, etc, lots of different things to think about, which is why it’s important to work with an expert who can help you navigate this minefield of different things to think about,
Norman Farrar 24:06
right? Even at the beginning. So there’s so many companies out there that will help you set up properly at the beginning and something simple. Like there’s so many tools out there, and a lot of these tools overlap. And if you get rid of it, you hear about running a lean operation. But if you take one, just one simple product, let’s take $100 product a month, that’s $1,200 If you’re getting that five, seven or 1010 a simple for me, multiply that by 10. That’s the money you would be saving or getting at the end of the day,
Ben Leonard 24:44
right? Yeah. Yep. We we were working with somebody recently. They were selling like, like 50 units a day of a product. And three, like three months ago, they increase the price so the profit per unit was an extra two bucks. So over a year, 365 days, that’s like 36 grand extra in profit. When you put a 4x Multiple on that, that’s 150 grand. If you do that across several products, you’re adding six, possibly seven figures to the value of the business, which is a completely legitimate and justified adjustment that a buyer can’t reasonably push back on if it’s presented properly. And that’s just, that’s just when you’re looking at, you know, one adjustment, what if you increase the selling, you increase the selling price of a product, and you didn’t see a dip in sales, right? In fact, sales stay the same or went up because customers viewed it as being more premium. There’s another one or you just hit a threshold where it made sense to send the product by sea rather than air? Well, now the new owner is going to send it by sea, not air, so it’s perfectly reasonable to make an adjustment. In that case, you know, that you can go on and on.
Norman Farrar 25:54
Well, before I forget, I didn’t forget, we’ve got a giveaway today. And actually, it’s, it’s pretty cool. I get Kelsey to enter it. Ben, why don’t we talk about the giveaway that you’re you’re offering?
Ben Leonard 26:08
Yeah, absolutely. Um, so when we work with clients, for everybody, we will do an indicative valuation for free, we do that anyway. But when we really do the deep work to understand you your business goals, how your business works, and how we can maximize the value of the business and do all that fantastic financial work that needs to be done by a chartered accountant. We charge for that if you decide not to sell with us. So we’re going to do that for free. So somebody can get all that deep work done. No obligation to sell. It’s free.
Norman Farrar 26:50
That’s, that’s great. And that’s that’s anyone correct? If anybody is coming over to your, you get a free consultation. And if they exit, they get a 10% off the fees. Is that right?
Ben Leonard 27:04
Yeah. And we also Yeah, we’re doing we’re doing for with for lunch with Norm we’re doing 10% of fees. Right. And
Norman Farrar 27:11
so the and this is I get I had some technical problems coming on. But I just saw in our private chat that Kelsey was saying for the winner. You’ve got a copy of Ben’s extraordinary Instagram funnel drain, yes,
Ben Leonard 27:27
yes, offer. This is a yes, slightly disconnected from econ brokers. But actually, it’s gonna really help people make their business more valuable. It’s a copy of my extraordinary Instagram funnel, which was a really important tool in helping me to make beach gear extremely valuable. And it’s what I call micro agility, the ability to be like a nimble speedboat in a in a sea of lumbering cruise ships. So use that and you’ll be you’ll be doing really well.
Norman Farrar 27:53
All right, fantastic. So if you are interested in this, this is, this is really incredible. So first, anybody just there’s, there’s no harm in asking a professional and expert how you can develop your business. Yep. And on top of that, if they if you go through with it, you know, you’ll also get safe percent, which not everybody, but if you’re interested, we’ll have Kelsey hashtag, we’ll have Kelsey tag, two people get an extra entry. And this is for the the Instagram funnel training. Then, again, that’s something that I know that we want to learn. And we want to learn more of these different training funnels. And look, if it works for Ben, it can work for you. So check it out. The other thing I just want to talk about quickly, I want to give a shout out to our our sponsor for this episode, which is Z Co. And they are private label art. If you’re a private label seller looking to expand into a larger international market, Z can help Z make selling your Amazon products abroad easy. And with excellent import knowledge door to door solutions, customer service and scalability. You can sit back, relax, enjoy your cup of coffee, listen to lunch with Norman have the peace of mind that z will handle the rest. So in breasted contact z.co. That’s Zen e.co. That’s for you in Scotland, Ben for the rest of the world. It’s z, z e.co. Alright, so let’s get back to this. I wanted to you know, include you in this, you know, so. Alright, a bit more of a serious topic. Now. When do you know, it’s like the stock market? Stack. Something that’s really professional when you’re on a podcast is to put your phone on vibrate. It’s okay. You’re old enough Alright, so let’s talk about, you know, it’s like the stock stock market. When do you want to sell it? When do you want to, you know, get out? When is it too late? When do you have to start, you know, pray prayers, you know, hoping to sell on a decline?
Ben Leonard 30:16
Yeah, I’m going to give a couple of answers, which will be kind of both wishy washy, which whatever it wants to hear wishy washy, qualitative, and then a little bit more quantitative. But I promise it’s going to make sense. So, first of all, your business wants to be growing but not maxed out, there needs to be some meat on the bone for the potential new owners, they want to take the growth you’ve enjoyed and accelerate it and then probably, eventually exit themselves. So that’s one some obvious meat on the bone could be, you have products ready and waiting to be launched could be that the brand would lend itself very nicely to be taken straight away to another country, or onto another platform could be combination of these things. So growing, but not max down. Another part of this, and this is where we’re going to get a little bit more wishy washy. And it’s some advice I received before I sold my first brand is I make no apology for this, this this slightly more emotive description of when to sell. Because I think it’s true is to sell at the point of peak romance. So what does that mean? It means that you’ve reached the point where they there is a romantic notion of Boy, this can be huge. And if you sell at that point, going in your favor is the fact that boy, it could be huge. So there’s a lot of great potential energy in there, which means you have quite a lot of power to negotiate. And potentially you can negotiate a deal that really helps you to enjoy the upside of what could come when the business is then in the hands of an organization with the resources to take it there. On the other hand, if you saw that point, and it doesn’t quite go, you know, the way that you would like it to, then you got out at the right time. So that’s another way of thinking about just another part in thinking about the timing is to find out now what your business is worth. Because if you don’t know your it’s like orienteering without a compass and a map, to find out what it’s worth now. And it could be you say, oh, boy, that’s fantastic. I want to sell now, or it could be that you say, Okay, it’s worth, you know, approximately a million, I want to sell it for, you know, no less than 1.8 or two, whatever it is, and then from then you you can think about how you get from A to B, stack up the dominoes and get there. And very often you can work with organizations that will help you do that there are agencies will help you accelerate your growth, we actually mentor people on a route to exit if that’s something that they’re looking for, it’s a little bit more hands on and bespoke. So, you know, that’s kind of my view on timing, really. It’s also really important to think about the wider environment in your niche and industry, what’s going on, right? Are you in a vertical that’s not very regulated? And is about to get regulated? Can you see foresee that there’s a whole bunch of competition coming in, has a whole bunch of money just been raised in order to acquire businesses in your particular niche, not just in E commerce, of course, you know, a lot of capital has been raised for buying ecommerce businesses, but in particular, perhaps you’re in a particular industry that applies to you know, all these things need to be thought about.
Norman Farrar 33:31
Very good. And I’ve just got one comment about that. Due Diligence. Yep. So some people think that, okay, we got an offer, I’m gonna go check, I’m gonna cash it, put it in the bank, and I move on. Yep, due diligence, I saw something. And we’ll get to this in a second from Marsha. But due diligence can take a long time. So be organized right from the start, The more organized you are, the more information that you can provide, will put a check into your pocket quicker might not give you a bigger evaluate any zeros. But if you can cash out in weeks, or a month rather than nine months, is a lot
Ben Leonard 34:15
better. Yeah, really good point. And that’s why we get our clients on a head start on the due diligence before they even enter any due diligence with a potential buyer. Because what it does is it gets their business really neat and tidy with a ribbon on top, which really helps in several ways. It makes your life easier and less painful and less stressful when it comes to entering the due diligence period with a potential buyer, but it makes the buyers life easier and smoother, and they’re far more impressed with your business when it arrives. It arrives when you provide all the information they need in a neat and tidy format. And if they do uncover anything that they don’t like, it’s a much sweeter pill to swallow for them. And also if you know if Bobe inaccurate He’s presenting your business to his investment board meeting, they’re going to be a heck of a lot more impressed when they are looking at a business that’s neat and tidy with a ribbon on top. And something that’s a mess, which is why we get business owners really moving on getting everything organized ahead of time, everything in on the commercial side, the financial side, the legal side, so that you’re good to go. And then it says, as smooth as possible, because they’re going to want to uncover every stone and look in every nook and cranny because potentially they’re going to part with a lot of money for your business. And they want to know that what they’re taking on is good to go.
Norman Farrar 35:37
Okay, I know that you have to take off early. Well, not early, but yeah, in 10 minutes. Can we touch on a couple questions Kells?
Kelsey 35:48
Yeah, absolutely. So let’s see, our first question is from Andrew. He’s asking, does this all apply to Australia as well?
Ben Leonard 35:57
Yep. Just Yep. In general. Yes. You know, obviously, every country has specific specifics. But more or less in general, yes, this applies globally.
Kelsey 36:13
Okay, great. And from Nathan, when should you consider an exit versus keeping growing yourself? Think you might have done this already?
Ben Leonard 36:22
Yeah, we kind of touched on that. But Nathan, it’s important to think about different deal structures. So you don’t necessarily have to completely step away from your business, you may wish to retain equity, or you may wish to sell, you know, we’re working with a seller right now who’s selling the business at a really good multiple, is going to get paid a salary to continue to run the thing for the next two years, a much, much bigger salary than he could have paid himself from the business as it was. But now the new owners have big resources, they can fund it. And they’re going to fund the growth. And then in two years time, he’s going to get an even bigger multiple. So that’s something to consider, you might have the chops to run it. But if you don’t have the resources to grow it, you can partner with the right buyer, so that you can combine their resources with your skill set. So lots of lots of ways to do it. And when you work with the right experts to help you do it, you can you can have your cake and you can eat it. Very good. I like cake. Everyone loves cake.
Kelsey 37:15
Awesome. And then we got one more question. And then a couple comments from Marcia that I think we should read. But from Nathan, what are multiples these days? Where do you see multiples in six to 12 months from now.
Ben Leonard 37:26
They’re certainly higher now than they were. We’re seeing everything between, you know, three and six, little little less than three, sometimes. Six to 12 months, really depends. I saw really interesting the results of an interesting survey published the other day, which was funny, because I’m glad that it was published. It was really, really interesting. But it was the results of a survey interviewing aggregators, and asking aggregators, what they think of multiples, which is an interesting way to look at it. And it was funny, because some were saying they’re gonna go up, then come down, and some are saying they’re gonna go down and then go up. And somebody said, they’re going to go down, and some said, they’re going to go up. So, honestly, it’s about your business. If you have an excellent sellable, valuable business, regardless of what’s going on in this so called bubble, there will be a buyer for it, hopefully, multiple potential buyers, and the more of those you have, the more valuable and sellable and better you make your business. The higher the multiple is clearly going to be. Of course, there is a market and the market to some extent dictates what the more than that people don’t get too caught up and worrying about this existential stuff and focus on what they need to do to make their business valuable and sellable. Overall, I see the multiples going up a bit more than they are and stabilizing. But try not to worry too much about it. Focus on what’s right for your business.
Norman Farrar 38:56
I’m back right Ben when you get out. Just
Ben Leonard 39:02
don’t look back. Like I sold my business. Yeah. And. And on the back. Yeah.
Norman Farrar 39:10
Okay, so what were some of those comments?
Kelsey 39:12
Okay. All right. So from Marsha sharing part of her story. So the first one was when I sold my toy company, I spent nine months of due diligence with the company. The deal fell apart and it was so sad. But we became super friends after the deal ended and we’re still to this day, one week later, I was approached by a different company and the deal closed in five weeks because all the due diligence was done. And perfect order. Attention to detail is really important when you are selling
Ben Leonard 39:43
spot on. Listen to Marsha.
Norman Farrar 39:47
She knows herself. Okay, so I’m just kind of looking at aggregators in general. They’re everywhere. We’re I don’t even know between Tim don’t know how many aggregators in our inbox every day, even they don’t even know the brand. We have brands that come in from our clients. And, you know, we have mailing addresses in the US for them. And there’s already offers on the table, they have no idea what the sales, I mean, these are people, I just tell them run like don’t even don’t even look at the offer of somebody saying, Oh, we’re going to give you 50,000 100,200 50,000. That’s don’t even look at it, just rip it up, you know, put it in box or delete it. But I’m just looking at where does the bubble break with aggregators, like, is there going to be an implosion are the big guys going to buy everybody up?
Ben Leonard 40:43
Yeah, 80% are going to die soon. Either, because they just die, or they get eaten by bigger, bigger fish. And this is going to be fantastic. Because we’re in a new, we’re currently in a wild west of m&a and E commerce, right, there’s a lot of stuff going on some of it pretty shady. That doesn’t happen in more mature industries. In in every other industry, the normal thing to do is take your business to a process to maximize its value, and then market it to find a competitive environment, a pool of potential buyers, and then sell it with the help of legal representation on your broker for a deal that is fair and suits you. In E commerce, what is happening right now is, is nuts, and really hard working business owners are selling or effectively having their business taken from them because they’re a bit naive on this for Far, far less than it’s truly worth. And it’s really sad. And so when this implosion happens, the industry is going to mature, more mature private equity, who have the operational capability, and probably more ethical systems in place. And I’m not saying that all the aggregators are bad. I like most of them to be fair, or like a lot of them on businesses business, it’s purely natural, they want to get deals as low as they can. But as the industry matures, it’s going to be much, much better for everyone, including the aggregators, because when a business goes through a process, they end up with a business, which is much better and ready to be absorbed into their system. And they’re still making a ton of money, right, the moment they buy it and roll into their portfolio, it’s worth, you know, four or five times more anyway, so they can well afford to pay what it’s worth.
Norman Farrar 42:24
So my my last question, and I think it’s, I think there might be one other one. But my last question is, When are there any tips that you can give when your spidey senses kind of go up? Like, what are those five pieces? What should people be looking for? To turn and run? Any signals
Ben Leonard 42:46
that yeah, you just it’s very simple, right? You just you’re talking to an aggregator, right? You just say, Look, I know your background, you guys are strong financially. You’ve raised a ton of money, you know what to do, but am I doing the right thing and working with you directly? Or actually, should I go through an experienced brokers take my business through a process? Because then you’ve got them in his check me? Because they know the true answer is yes. So if they say, Come with me, you can dig into that and say, so that’s, I guess your bid will be bigger than everyone else’s. And if they say yes, well taken to the cleaners, but it’s unlikely they’ll say that, they’ll say, well, it won’t be bigger than everyone else’s. But you should come with us because you know, X Y, Zed, and then it’s clear, they just view your business as a commodity. And so then it’s very simple. You say, Well, that’s fantastic. Thank you so much. I look forward to working with you when our broker finds you as the preferred option. You know, and that’s it. And then you you take your business to a process, and you end up with a much better deal. That suits you.
Norman Farrar 43:43
Very good. So I think, Marcia, this is a very quick question. It’s how long have aggregators been in the E commerce scene? And it really started with the big turnaround was with the ratio when they came out, right?
Ben Leonard 43:56
Yeah, they formed in September 28 2018. Yeah. But most many of them, you know, less than a year. Many of them. Yeah, there’s been an explosion. Even even a year after the last year formed in September 2018. There weren’t many at all. And now we’ve we’re, you know, we’re talking around 100. Yeah, yeah. But it’s important that people remember when you go through a process, you may not sell your business to an aggregator. It could be private equity, family office, competitor, etc, etc. Nothing wrong with selling to an aggregator provided you go through the right process. Right.
Norman Farrar 44:34
Okay. But look, if you want to stick around, I think we got a minute to go. You got time for Willa, Kelsey,
Ben Leonard 44:40
let’s do it. One minute. Let’s go. Alright.
Kelsey 44:44
Okay, here we go. It’s the will of Kelsey. Enjoy everyone.
Norman Farrar
Okay, Kelce Let’s spin that wheel. We’re gonna go out on time.
Kelsey
Just email me. You guys email me at lunch with Norm calm if you are the winner. Here we go. Winner is for Brian. Yay. Goodbye. That’s it, Ben.
Ben Leonard 45:28
Thanks so much for having me guys. I have to shoot a I can feel. Great to talk. Let’s catch up again soon, guys.
Norman Farrar 45:35
Fantastic. We’ll see you later, man. Thanks for coming on.
Ben Leonard 45:39
I have a great time down in Miami.
Norman Farrar 45:41
I will thank you. i Okay, so Kelsey, that was good. That that went, Man. Ben knows a lot about a lot of things. He’s a great guy. He’s also been on in our Patreon group as well. He did some private training there. Not so much on this, but I think it was an email wasn’t it? He was talking about email
Kelsey 46:03
marketing. It was actually part of the Instagram training that he shared with us also as part of his okay very paid training that he Yeah, yes, that’s awesome. Okay, so
Norman Farrar 46:14
I just before we we close off here, can’t do this without our sponsors. So we just wanted to give another shout out to go global wired advisors. I will be I think I’ll be meeting Chris this weekend as well. A big thank you to our sponsor for the episode global wired advisors. They’re leading digital investment bank focused on optimizing the business sales process. For more information contact Christian Sperling and his team over at global wired advisors calm, they’re awesome. Okay, so this is Monday the newsletters coming out, go to lunch with Norm comm. If you want to get a copy of that. We’re going to be changing that up in the next couple of weeks to even add more content to it. Who do we have coming on Wednesday counts.
Kelsey 47:00
You have Stephen black on. So it’s gonna be good. Barry’s gonna be very interesting. Yep. So Stephens going to be talking about? How, where did it go? Sorry, how audience building is better than product picking. So it’s going to be an episode dedicated to finding that audience and it’s going to be good. Can’t wait. Yeah,
Norman Farrar 47:22
I saw him at the billion dollar seller Summit. This this guy blows me away. Anyways, he’s gonna show us how to build audiences, which is gonna be awesome. All right. So I think that’s it. We can wrap up. Is there anything else that you have to say sir squire?
Kelsey 47:38
Yeah, just smash those like buttons. Today, we obviously had some Wi Fi issues. So hopefully Wednesday, we’ll get them ironed out for you guys. And yeah, we’re on every Monday, Wednesday and Friday 12pm. Eastern Time, join the Facebook group. Lunch with Norm Amazon FBA and E commerce collective. And I just wanted to shut it one more time that we are doing a Movember fundraiser for the mustard for the massage to raise awareness. And all the proceeds are going to go to Movember, Canada for cancer, men’s cancer and health issues. So you can find that on the Facebook page facebook group on normal personal, so you’ll be seeing a lovely stash. And then that in the next 30 days, it’ll probably show up on like day 29. But
Norman Farrar 48:30
you’ll have a competition what to call it.
Kelsey 48:34
Well, you should grow your hair this way. Because Oh yeah, I like making
Norman Farrar 48:39
miracles will happen and stop stealing my lines. I got to at the end of every podcast.
Kelsey 48:45
Alright, say it again. Alright,
Norman Farrar 48:46
so tune in every Monday, Wednesday and Friday, Eastern Standard Time. And thank you for watching. We the community is always growing. We’ve always got new members coming into the electric norm community, Facebook community, please engage in that community. We want it to be like this podcast, we got tons of engagement. We can’t do it without you. And we look forward to your questions. Everything just we love engagement. So we will talk to you next or on Wednesday and enjoy the rest of your day. And Roslyn, I’ll see you in Miami. Entre entre
Transcribed by https://otter.ai
