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Lerin Lockwood’s Journey From Teaching/Coaching to Shark Tank to TikTok Queen

Lerin Lockwood is the Founder and Creator of Lion Latch, a product that provides secure storage for small valuables like jewelry. After ruining her engagement ring in a softball game,...

Lerin Lockwood is the Founder and Creator of Lion Latch, a product that provides secure storage for small valuables like jewelry. After ruining her engagement ring in a softball game, she was inspired to create a place to store and protect it so it wouldn’t happen again. The Lion Latch was a hit, and she raised $14,000 to get it off the ground so she could meet demand. She’s appeared on shows, including Shark Tank, Good Morning America, and The View. In addition to her entrepreneurial pursuits, Lerin is the Coordinator for the Rising Stars Youth Volleyball League. Before Lion Latch, she taught art and coached youth volleyball.

Here’s a glimpse of what you’ll learn:

[02:06] Lerin Lockwood shares her personal and professional background in education and coaching
[05:42] Lerin talks about what’s unique about her Lion Latch product
[10:10] How persistence landed her on Shark Tank
[14:27] Why you should ignore the “haters” on social media
[17:00] Lerin explains how she began leveraging TikTok to grow her business
[23:00] Why it’s essential to be authentic when marketing your product on TikTok
[26:47] Listening to your audience to modify or specialize your product
[34:03] Lerin talks about the value of being proactive and prepared to seize opportunities

In this episode…

Entrepreneurs who identify a specific need and develop a product or service that caters to it often achieve great success. Some of the most prosperous businesses today started by addressing a personal need. However, how can you ensure your business gets the exposure it needs to take flight?

From teacher and coach to Shark Tank and TikTok, Lerin Lockwood has embarked on an unexpected journey. Born out of a need to store her jewelry safely, Lerin designed the Lion Latch. Her innovative solution resulted in the genesis of a booming business. After appearing on Shark Tank, she gained widespread exposure to millions of people. She began using TikTok since it provides an unparalleled opportunity to engage with a massive user base. By tapping into the platform’s enormous audience and creating engaging and shareable content, she built a loyal following and developed a thriving brand.

In this episode of the Quiet Light Podcast, Pat Yates sits down with Lerin Lockwood, Founder and Creator of Lion Latch, to discuss how to grow a new business. Lerin talks about what inspired her product creation, how Shark Tank and TikTok are integral to her success, and how being persistent and proactive will pay off.

Resources mentioned in this episode:

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Episode Transcript

Intro 0:07

Hey folks, it’s the Quiet Light Podcast where we share relentlessly honest insights, actionable tips and entrepreneurial stories that will help founders identify and reach their goals

Pat Yates 0:32

Hello, and welcome to the Quiet Light Podcast. I’m Pat Yates. Really excited about this today I get a chance to travel with this beautiful young lady all the time Lerin Lockwood, with Lion Latch, she was on Shark Tank much like I was she’s got a great product. It’s really cool, great use, but it’s even better at TikTok. This is kind of where she cut her teeth going out speaking about how to build TikTok, she’s met the CEO, she’s been to their offices, she’s done all the things you need to be able to build a TikTok shop and make things get millions of views. She is so smart and so energetic starting from an educational standpoint as an educator and coach before she started a business which gave her a way to be grounded. I have always been impressed with Lerin and every time we’ve had a chance to spend to get time together, which we’ve done quite a bit. I think she’ll have some tips that you’ll really love if you’re trying to get on TikTok or if you’re just trying to your business, or even get on Shark Tank, so it should be a fun conversation. I can’t wait for it. Let’s get right to it. Lerin welcome to the Quiet Light Podcast. I said it wrong already. Lerin welcome to Quiet Light Podcast. It’s great to have you today.

Lerin Lockwood 1:35

Hi Pat. Thanks for having me on.

Pat Yates 1:37

I tell you what, I am really excited for this today because I’m a huge TikTok fan. I stink at it. I did have some fun with it in the fourth quarter of my business but I know that you’re a super impressive expert in this even better their headquarters talk I think their president right.

Lerin Lockwood 1:53

An expert but I know a little bit of the ropes here. Yes.

Pat Yates 1:57

I agree with that. But so I know that we travel a lot you were Shark Tank person. We have a lot of things to talk about. But first tell everybody where you’re from about your business and a little bit about you.

Lerin Lockwood 2:06

Okay, I’m Lerin Lockwood. I live in Burnet Texas about an hour outside of Austin, but I’m from a little town called Irene in the middle of Texas got about 30 people in it. I don’t know if there’s that many now but no stoplights. No stop signs, I don’t even believe but I grew up in the country. I played a lot of sports growing up, I ended up going to Texas State and the University to incarnate Word for school, got my Master’s in sports management. And I became a high school art teacher and coach. And when I was coaching softball, I was newly engaged. I got this beautiful rain brands, like I never had anything this nice in my life, right. And despite the fact that my student-athletes couldn’t wear jewelry, I thought I was an exception to that rule. But it regards safety, like you’re not supposed to wear jewelry during sports because of safety purposes. And I caught a ball from our centerfielder. And this was a giant girl. She’s 5,10 She could smoke a ball in the glove from centerfield from the fence to home plate. Like, that’s how strong she was, well, this one day, I felt a sting in my ring finger. And I got to the office and realize my finger was still hurting. And I pulled my hand from the glove and I realized she flattened my engagement ring into my finger. And it knocked out a diamond and I was already in the office. So that diamond is still somewhere in left field and Marble Falls.

Pat Yates 3:29

Oh, wow. So it came out of necessity actually through even athletics that you were coaching. That’s amazing. So let’s take a step back on that. So you started your career as a teacher and coach, which is interesting, because as I said before, my mother was an educator and a principal. She’s amazing woman and my wife just retired from the school system and started a business I am a little bit like you a little different. But tell us what it was like coming out of wherever it was college or education wherever you ended up getting education or masters. What made you go into education if now you’re in business.

Lerin Lockwood 4:01

Oh, I really love art. I love coaching kids. I’ve been coaching since I was about 16. And like, you stay young when you’re hanging out with kids all the time. They’re funny. They don’t have a ton of responsibility. They’re having a good time, if you’re having a good time. And my high school art teacher told me it’s not work if you love it. So I really fell in love with art when I was in high school. And so I knew I wanted to be a high school art teacher because I mean, you’re making art with the kids, or you’re creating an environment that they look forward to coming to every day. Like I love being their art teacher that they saw me they would light up smile wave to me, right? And then we’d spend an hour together every day. And that was the class that they look forward to the most. So like I really love that and just, kids are fun. And I even taught like kindergarteners volleyball and I’d be like how’s it going over here on the court and they’re like, amazing, my ball was hit the ceiling and I was like, well that’s so awesome, but let’s try to not get it that high.

Pat Yates 5:02

That’s absolutely amazing. You know what’s funny about that story Lerin is that I’m sort of the same way. I volunteered as a coach for 10 years in high school as an assistant high school basketball coach after playing in high school and playing in college. So I had that opportunity to get around the kids to and it’s funny how that sort of breaks your day up and you have an opportunity. See, I was different. I would work during the day paraprofessional, go coach basketball at night. So it was a nice distraction from our business day. So I’ve been there too. I understand that. So now you’ve told the story a little bit and kind of prep people on what Lion Latches came out of necessity. Tell us all about that company. I’m amazed by it. I’ve known a lot about it, but I’d rather you give the description.

Lerin Lockwood 5:42

Well, I haven’t demonstrated it. But I’ll show you the softball. And since we’re on the topic, so the what makes the Lion Latch unique is I couldn’t find anything to keep on my keys to store my rings inside. And I wanted something on my keys because that’s the only thing I always had on me at all times. And I could only find aluminum foil containers that scratcher rings up. And then when I did just put it on a carabiner on my keys, the keys were scratching up my ring. So I made the Lion Latch because it doesn’t unscrew this carabiner ring is actually what locks it shuts. So you have to remove the carabiner in order to pull the lid off. So now your rings or your earrings. I mean vitamins and supplements can go inside, I gave Mr. Wonderful hearing aids inside his line lunch when I was Shark Tank. Everybody had a good time with that. But now you’re gonna lock it shut so it can’t come open. And now you can attach it to your keys, or your water bottle. I mean, whatever kind of attachment. So now you’re not losing it attaches to something larger, you’re creating a good habit. And I did not expect for it to be like this. I made it. And I did a Kickstarter, and I was like, cool. I have a product that I made. I’m gonna go back to teaching because I love it. And then I started having stores reach out to me a lot of jewelry stores. And they were like, do you wholesale? I didn’t know what that meant. So I Googled it. I was like, heck yeah, wholesale, like, what’s your minimum order, I was like 300 units, and one of them actually bought 300. And then I learned like, okay, that’s a little high expectation for like a first round of an order. But I realized, if people are finding me, I need to start finding them. So I started doing trade shows. And I was discovered by the Grommet. And that was a long time ago. That was like six years ago. And then The View Tory Johnson with Good Morning America, pick me up for the view. And then Good Morning America. And I actually got to go to Good Morning America right before the shutdown in 2020. And I got to pitch my product on live television. And then from there, we went to Shark Tank and then TikTok and I just like slowly going up the ladder, which is fun. It’s awesome. Like, I never dreamed it would become what it has. But it’s been many years of work getting here.

Pat Yates 7:51

You obviously have a great product. But your personality obviously exudes when you get into that stuff, too. Which is why some of the Shark Tank I’m a weird guy too. So I sort of showed out on camera. Now we’ll get into some of our Shark Tank stuff in a little bit. But I am curious like, I have one that I’ve gotten from you that I keep on my golf bag. So there’s a lot of applications for this that don’t really jump to the top of people’s minds, right. So what are the things that people utilize these for? Because you just mentioned one, I actually didn’t know which I actually have new hearing aids miracle here, your hearing aids, I’ve never even thought about putting them in there. That’s an interesting use what other things are out there?

Lerin Lockwood 8:25

With the hearing aids, hearing aids are very expensive, and people take them out all the time because of like wind or just being in a noisy area. So the inner ear wants to fit inside the Lion Latch and then attach to your key so it’s not in your pocket, you don’t wash them, right. But people store emergency meds and vitamins. Also, with the jewelry applications, women use them most often at the nail salon. Rings get left behind at the nail salon a lot or the gym, majorly like the gym, people take their rings off when they’re lifting and put them on the floor and then forget them there. The beach is also a huge place where people are losing their jewelry because cold water makes your fingers shrink and your rings fall off in the ocean. That’s why those guys are out there with metal detectors. So there’s lots of different applications you don’t know you need it until you need it. Like when I was pregnant, my fingers would swell about midday while I was teaching and I would have to take my rings off. I didn’t know I couldn’t anticipate that happening. It was Sundays and some days it wasn’t and I worked seven years for this ring. So I’m not just gonna leave it at that.

Pat Yates 9:34

Funny how you use the word work for that that’s actually really good thing. I like my wife said, Sandy she said to work it’s the me, I’m an interesting one when it says to stay married. That’s awesome. I mean, obviously I love the product. It came out of a necessity and it’s obviously something very easy to use self-explanatory. It’s so much fun. So you mentioned something about getting so much media attention and you and I have one thing in common that sort of took us on the road to speak and do a lot of things going to Shark Tank. So tell everyone out there how that process sort of happened. I mean, I know how mine did. But I’m curious to hear the story behind yours how you got on the fun things, the bad things. What do you got?

Lerin Lockwood 10:10

I went to three open casting calls. Oh, no, each time, my sales doubled, right. And by the time I got picked up for the show, I had done over 500,000 in sales. And that’s what I think the producers thought was like, amazing. Like, they’re like, Oh, my God, you’ve done it. That was shocking. And that was a shock factor to the sharks too. But it was like I kind of wanted to give up there at the end. But I was working on I just had a baby. And this was in 21. And I was working out and my friends Holly Ball texted me and they were like, you should apply one more time. And as I was working on the elliptical, I sent in my online application, and I got a call within a few minutes. And I was just like, oh my god, this is really happening. But I had a newborn baby. He was three months old, right? It’s just crazy. So they fast-tracked me. I went out there I filmed, I killed it. I did a great job. I was very happy that the producers cut and pasted all of my footage to not make me look like a meanie. Like, we had a good time. Everybody was laughing during my pitch. And I was very upset. I didn’t get a deal. And I’m a sore loser. Of course, right? I’m an athlete, very competitive, and I felt like a loser. But the producers were like, it’s gonna be great. You just have to air. We just got to get you to air and I was like, oh my God, was I even good enough to air now? So I was like, I went down like a dark tunnel. Like, okay, I didn’t get a deal. Now, am I good enough to air? Thank God they called me i aired the first episode of the season. I would not have made it past that. But finish, okay. They came though, like how are they gonna make me look on TV? Then I aired and I was like, oh my God, are people hating me? Do they like me? Reality it didn’t matter.

Pat Yates 12:07

That is one thing I tell people like, I talk about a lot of nerve-wracking things and crazy things you got fast track, she made a hell of a long process as some people but it is amazing to me how people have such different journeys in this kind of thing. And mine was the same way, I got turned down in the first season I applied and they call me back because the show is growing. So we both sort of had an opportunity to do that. So for the people out there with Shark Tank that don’t really understand how this works, tell them a little bit about the process. Once you apply to me you have to do these videos and things and maybe tell us about your personal experience with it.

Lerin Lockwood 12:40

Okay, the first few times I applied, I always made it to the video around like, thank goodness, I guess I don’t know if personality just shines through to that. But I did like a professional kind of green screen room because I had a high school media room at my leisure’s those are my first two application videos. But the time I got on was when I set my camera up in my classroom and I just pitched to the camera by myself. And then now that I have so many shark tank friends, most of their videos were the same way. So it doesn’t have to be some kind of big theatre production, right? They just want to see you and your environment. And that’s where it started. But once you get past the video around, then you’ve got like how many pages of information make sure that your books are up to date? Because if not, you will be, I’m lucky I had a very good accountant already that in bookkeeper. So that’s very important because they want to confirm now that your sales are real, whereas the first season, they didn’t even care if you had a patent, it’s a long process. But it ended up being really good for me and it was a step in the right direction for Lion Latch. So very fortunate that they aired me and made me.

Pat Yates 13:50

That’s really amazing. And what’s funny is we’re doing this for the Quiet Light Podcast obviously with Lerin Lockwood with Lion Latch but we just had a person who is a Quiet Light buyer that was just aired on last Friday night. Ramon Van Meer so we’re going to have him back on the podcast just was on Shark Tank on Friday night. So it’s like that groups getting even bigger. So I always like to say that Shark Tank is kind of the best worst thing that ever happened to me mostly best but there’s always negatives that happen with this. So tell us about are there any negatives that happen from the show that you’d say well, it’s all really good but here’s one thing that really stopped, is there anything like that?

Lerin Lockwood 14:27

The one thing for me was like when they put my episode or my clip on YouTube by YouTube and read it just like the hate comments just came in like how dare she come in Mr. Wonderful like that. He was like Mr. Wonderful is like goons, right just talking trash to me. I didn’t know that he had so many supporters out there. But then I talked to Aaron with Scrub Daddy and he was like, oh my God, those guys keep for me too. He’s like, who cares? They’re at home. They’re in their mom’s basement, leaving you these messages. You’re out here seeing the world suddenly something that you create it, I was like, hey, you’re in your right. Like, that’s a great point. And that kind of changed my outlook right here because even somebody who’s making millions on millions a year experienced the same thing I did.

Pat Yates 15:13

You just mentioned something great to we both got to sit on a panel with Aaron Krause, who’s obviously one of the greatest products, if not the greatest product ever be on Shark Tank. So that community becomes really, really big, which is amazing. So yeah, that’s exciting.

Lerin Lockwood 15:26

Like, we have such a fun group. That’s the best thing that came out of Shark Tank for me is like friends like you and our other friends. Like we’re really close. And not everybody can relate. Okay, few people can relate to what we go through as an entrepreneur, right. So we have each other, we get a lot of people that have been there, done that. And then a lot of us have opportunities for others to join in on so it really is just like the best part. That’s what I really needed from Shark Tank. And I got it like I’ve been looking for this group, my whole entrepreneurial life.

Pat Yates 15:57

Yeah, I think there are a lot of people out there that don’t try to leverage it. But I’ll be honest, and this is not bragging just gives you’re on I’ve seen you at like the Chicago home inspired Home show last year, I saw you doing a whole setup for podcasts, and video and doing your TikTok and stuff like that you have leveraged it amazing. You’re doing an amazing job putting your product out there too. So I want to stick to a couple of other things. The one thing that got me about you, first of all, the infectious attitude and being exciting all the time is exactly what an entrepreneur needs. You don’t fake that. That’s you are. But the funny thing is, is I’ve heard you talk passionately about TikTok, which is really why I wanted to have you on here, because you’re one of the people that I think has done an amazing job with it. First of all, I suck at trying to build TikTok, I like watching it, but I’m really boring when it comes to trying to do it. So I’ve done some fun things. But I haven’t been super successful. So I know that the listeners out there, if you’re listening about TikTok, it doesn’t matter about your opinion on it. If you’re looking at it from a business standpoint, this is the lady you really need to understand and talk to, you don’t sell those services, but you’re gonna be able to tell people give us the overview of what your philosophy was day one, when you started on TikTok, if someone started.

Lerin Lockwood 17:00

Okay. It was really hard for me to start a TikTok, my high school students were like Miss Lockwood, you’re gonna love this app. And I was like, I hate that app, because you’re on it all the time, you should be making art, right? So at first, I did not understand why they were constantly looking at it. And then they got me, they got me on it. They were like, look at all these animal videos, you can watch. And I was like, okay, I do like this app. And then I started seeing like, people really like putting themselves out there having a story telling it and then gain a following. And I was on there before TikTok shop. And at first I had one of my college athletes. She was doing the videos for me, but I was telling her what to do, right? And she was just like Lerin, you should be doing this on your own. Like, there’s no reason I’m doing this for you. Like you already have the plan. You’re the creative. And it’s your story. So I finally like manned up and I put myself on camera. I hadn’t done that since my Kickstarter, which I was mortified hearing myself on video for the first time ever because my accent and I was just like, oh, I sound like that, I’m used to it now I hear my voice on other people’s phones around me you and it’s like, I don’t think anything of it now, right? Originally, I was terrified to do it. It ended up really paying off for me because I do have a teacher story, right? I was a teacher, I am a mom. And now I’m a full-time entrepreneur with a headquarters and awesome staff of moms also and TikTok has really paid off for me. And I put myself out there and but that’s what it’s about. I mean, you’re not having to go door to door to people finding customers, you are in everyone’s hands, like millions of people’s hands at once. And it’s crazy. Like and you get used to it, things start to come natural, the more you do it.

Pat Yates 18:48

It is kind of interesting. You got someone young that was younger than you you’re young, but was out there doing and then you decided to go on it yourself. I think that’s where people get a little nervous. It’s like I may not be good enough or funny enough or smart enough to be able to build the content. So how did you get over that reservation? Did you decide, hey, I’m just gonna run and go and this is how it’s going to be and then I’ll figure it out or was it calculated plan.

Lerin Lockwood 19:13

We tested like different kinds of videos, but I caught on to which ones were getting millions of views. And the first day I saw 100 orders come in. I was like, Holy crap, like, this is amazing, right? I paid zero and adspend I just made this video for free. And it popped off. It got over 5 million views. I took all my senior students. We all went to the river for an art day and Chick-fil-A lunch and I was like hey cam will you come over here? Use the Lion Latch for me and I’m going to film it. And what’s crazy about TikTok is once the comments start rolling in, it’s not just about your product. People were talking about the crystal clear water the fish, her fingernail polish was beautiful the bracelet she was wearing, like, but those comments, were keeping it going. And so it got millions of views for free. And it was just like me telling one of my students who used the Lion Latch already, hey, I’m gonna film your hands doing this. And then, like the brains and the eyes of TikTok everybody, like that’s ADHD out there looking at everything else, rather than just the product, but it just kept my video going. And it got to the people that needed to see it the ones that needed a Lion Latch, and so that’s when it started. That’s crazy.

Pat Yates 20:32

That’s kind of incredible. Was it a little scary seeing that many views because what if they all went to the site you envision, you know, that company did a commercial one time they flip their site live, they hit a button when we’re live and these orders start going in? They’re excited then 100 orders come in, they go, oh my god, what am I gonna do? Was it ever like that? Did you get so much attention that it hits you quick? Or?

Lerin Lockwood 20:52

There has been a lot that goes like, yeah, the there has been a lot of moments where we didn’t have the inventory, or the inventory was supposed to be here and it wasn’t. So there have been scary moments. Yeah. And but, I’ve learned to not worry about it, like still put my best foot forward, stay proactive to solve the problem. But I’m a firm believer that God’s got a plan. And this past year really taught me that I need to relax. Because if not, I’m gonna be like, strung out all the time. And then it makes the entrepreneur like, it makes you stressed out and it’s not fun anymore. So that’s why a lot of people get burnout. I think you got to have some grit and always prepare for success, because you never know when it’s gonna hit. It’s crazy how knew TikTok shop was gonna be a thing. Like, that came out of nowhere. I got a call in February of last year, is actually Tory Johnson from Good Morning America. Her daughter was working for TikTok. She was like, Hey, you’re always on my for youth age. Do you want to be a TikTok shop? I was like, Heck yeah, Sign me up. And within a couple of days, I was one of the first to sign up. And I was on everybody’s phones, like back-to-back videos. Because TikTok was a beta. And they were testing that right. But I mean, everyone else in our Shark Tank Group, not everyone else. But a lot of people were so afraid to do it. And I was like, this is a crazy opportunity. It’s like the number one app right now. Why would we not be jumping on this? And because I took that chance. I mean, those it’s risky. Yeah. But I mean, I had the best year ever last year because it takes off. So I mean, whereas other people are just now getting on. And it’s kind of a little light, a little saturated.

Pat Yates 22:32

You know what’s interesting is I was one of those people when I hear you talk about I’m like, okay, I get it. But I’m trying to push you know, these this that the other but then we got on TikTok, we started doing TikTok shop, we obviously saw some success with it. So I can see the promise. So let’s assume that there are entrepreneurs out here listening this going, oh, my goodness, I’m the person she’s talking about. I’m scared to death to do this. I don’t wanna put myself out there. Do you suggest that people go and try to find an agency that might help them with a video? Or should they just jump in and figure out how to make their product fun?

Lerin Lockwood 23:00

Yeah, I would do it myself. No one knows your product better than you. Right? I mean, there are entrepreneurs of all ages out there. I mean, I have a product that fits many age groups, right? Different types of people have a lot of niches out there. But then my friend, Danny, with a little speaker, is this little guy, right? I know, Danny. Yeah, he’s awesome. But he gets on there. I mean, he does all the live challenges and stuff. And he takes advantage of it. He’s just sitting on there talking about his product, demonstrating how it works, how loud it can get, and that’s just really it. Like, people don’t care about your age, if your hair’s done up, like, if my hair is done out, people don’t care. But if I look like a mess, people are like, wow, that’s a real person.

Pat Yates 23:47

You right there because you sort of resonate if you don’t look like you’re fully. I mean, looking, not fully prepared makes you seem kind of normal to people in a sense, probably right?

Lerin Lockwood 23:57

My most viral videos, I was not feeling it. But I did a video anyway. And like, that’s the one and then TikTok wanted to use one of them as an example, when they took me out to Cannes or invited me out to Cannes, France to speak on a panel. They were like, we’re gonna use this as an example. I was like, I look terrible in that video. Like, please don’t post that was like, not that one. But I mean, they’re like that this one’s very relatable. And I understood where they were coming from. But thankfully, they didn’t show that video.

Pat Yates 24:30

This is really, really good. Because I think a lot of people, it’s been easy to understand how to advertise on Facebook and Instagram. Most every e-comm person does that Google is fairly simple. And Amazon people ad but looking outside of that people haven’t been as creative and I need to get better at that too. So are there things inside TikTok that you can usually leverage that will help your sales. I mean, I know that there’s an ads manager, are there other widgets that you think hey, this is way better than advertising somewhere else because of this one option, does that exist?

Lerin Lockwood 25:00

There are definitely challenges like hashtag challenges that are out there that come up like right now there’s a Valentine’s Day sale. So that would be a good thing to jump on. I mean, I haven’t started paying for ads yet, I’m not saying I’m not going that direction. I’m just like navigating where my inventory is going to go this year, because I’m leaning towards the promotional product industry, with my inventory. But I would definitely say pay attention to the trends and the challenges. If you want to get started in this, start watching what other people are doing. If someone’s on your for you page all the time selling something, and you start to recognize them, pay attention to what they’re doing, right. And then just kind of follow in those footsteps. I mean, how they’re talking about their product, they’re talking to their customers questions, they’re responding. I mean, then these people are along for the ride with you. And not only do they love your product, they start buying it as gifts or telling other people about it, and you have a support system. And people, they’re happy to be along for the ride because they’re actually engaging with you. Right, whenever, like when I was growing up, I didn’t know who made the caboodle. Right, like caboodle was like the most popular product of the 80s and 90s. And now I’m friends with them. But I mean, how cool is that, but I would have never been able to engage with her in the 90s. And now you can talk directly to the creator of your favorite product. It’s amazing.

Pat Yates 26:22

It’s really incredible. I think the thing that’s amazing is you found a way not only to build a cool product that’s necessary, but you’ve made it extremely fun to interact with you. And I think that’s what you, when people don’t have to think about a product a lot, that’s when they kind of get engaged and want to be able to buy it. So stepping away from the TikTok a little bit. Tell us what’s going on at Lion Latch. What’s 2024 looks like for Lion Latch. What are you working on? What great things can people expect from there?

Lerin Lockwood 26:47

Let me look, do we have a promo Lion Latch? Okay, so what I’ve been doing is a lot of my followers played sports, right? They take their jewelry off to play, like really any sport because it’s against the rules for high schools, but like I’m just listening to things that they want to see. And then I make it I have like my own special printer. So like I’ve got girls that are showing ag and they’re like we want cow brands. So I made a cow print line latch that goes to like one of our top sellers. It’s just cute ghost with hearts. They there’s also a Mr. Lion that I have as a wedding gift that’s really popular. We’ve got a silicone answer, because people were like, Hey, I’ve got an emerald. It’s very delicate kit. Is there any kind of cushion? I can buy. And then I’m like, Yeah, but I’m really just listening to my customers, right? They’re telling me what to do next. And I’m excited to do that. Like it’s fun. And this is how we are engaging. There we go. Thank you. So I just sent the sample to like Kendra Scott’s team. I will tell you something I messed up on last year, they sent me an email because they wanted to use the Lion Latch as a goodie bag giveaway. And I miss the email.

Pat Yates 28:01

Did you miss it? It was one of those quick deletes like I don’t need a kinder Scout bag. I’m gonna delete that.

Lerin Lockwood 28:06

No, it was a long miss. I missed it by like five months.

Pat Yates 28:11

Hope Kendra doesn’t listen to this podcast.

Lerin Lockwood 28:17

I am a mentor with her Institute at UT in she has a program for young female entrepreneurs. And it’s crazy good. Because they bring in mentors that have been there done that or are doing it like me. And then we get matched with a girl and that’s got a product or something. But yeah, so I made the Kendra Scott one because that was an opportunity right for me to give them something. This one is house. And obviously that one as well. But I mean jewelry stores are reaching out to me, they want their logo on it, you buy a ring, you get a Lion Latch to keep up with it because they get broken rings all the time are rings with prongs that have been pulled loose because the gloves and the diamond falls out that is very frequent. Also, gloves are a culprit. But that’s the direction I’m trying to go. I did send the sample to Lucky’s team. So we’re working on that too. Just my followers are telling me where they want to see the Lion Latch and then I’m pursuing that. I mean, why not? They’re gonna tell me where they’re shopping. I mean, I should, I’m gonna do it. I’ll try it right.

Pat Yates 29:25

Amazing. First of all, I was at buches last time and I’m actually embarrassed to admit I’ll spend like 30 minutes of the jerky bar so I was buying all kinds of different turkeys you can’t stop it buches man you get everything there. Right? That’s amazing. So you’re doing a lot of personalization doing stuff that can be custom if corporations needed or gyms or jewelry stores and things like that. It’s really amazing. So what’s the product? I mean, are you thinking in the future there’ll be expansions or alliterations or is pretty much this and you’re going to market as well as you can?

Lerin Lockwood 29:55

No, I have my sports bag coming out. I’ve done a larger jewelry case, I’ve got other accessories that people were telling me they want to see. And it’s becoming a reoccurring thing, right? We analyze the data from the comments and we log what’s next to come out with. And that’s what we’ve been doing. My sports bag is really special. Let me show you real quick. Like, this is the point oh, that we’re coming out with. But what makes it special is it’s got this lid, that checklist, it comes with a checklist, so you don’t leave your stuff at the hotel. So you like your laptop and your chargers. Or if you’re an athlete, it says kneepads, shoes, socks, those kinds of things. But on the inside, it has like this special pocket for your shoes, so your shoes don’t touch your clothes. Because as a coach, my student-athletes would forget their shoes or their cleats all the time, and their parents would bring them up and add bag. Right? So I’m really this is where I’m listening to coaches and parents on an end. But it’s called the Lion back. This is a 2.0. So it’s great for cheer teams, because your teams have to have bags that sit up, right.

Pat Yates 31:06

That’s actually a really good golf shoe bag too.

Lerin Lockwood 31:09

Yeah. Okay, let’s just keep making a list. Right? Yeah, I mean, I’m just listening to what people want. And then it just happens to fall in alignment with what I would like to see also. It’s working.

Pat Yates 31:21

That’s absolutely amazing. So all your products, you tie them into Tik Tok. So you do a lot of things with that promote them as they’re coming in and cross-promote. I think that’s what really, you know, is so amazing about you, you have such fun products, but you exude even more fun when you put them out there. So not everything is always easy. So what are things that are challenging to you right now in the business world are there maybe some of the people out there experienced some of the same as supply chain everything running smoothly, any things that you’re trying to work to get better?

Lerin Lockwood 31:49

We have almost gotten like the supply chain under control, because like last year with TikTok, we could not anticipate what would happen. We’d have days where we had over 1000 orders we’d had back-to-back days with over 1000 orders. Like we weren’t expecting that right. But now we’ve kind of got it under control. It’s January, so ordered quite a bit of inventory, that I’m confident I can push over the year. But also with the promo. I’ve got a lot of shows planned, where I’m going to be pursuing the promotional product industry, because the Lion Latch leaves home. It’s used daily. If the men don’t want it, they give it to their wife who uses it daily, right? And it’s not another water bottle. Like every show I do. Everyone’s like, oh, thank God not another water bottle. Or when we did the PGA Show, they’re like not another towel, right? Or coffee mug. So that’s something I’ve been learning. I met with Disney. And they also were like, Thank God, this is not another water bottle. And I said, that’s funny you say that because I put that on my card on my promotional card. Right? I already knew what they were gonna say to me. Right, so that’s definitely a selling point. But the Lion Latch, and I’m working with Jewelers Mutual, they are the largest ring insurer in the United States. They are who I had my ring insured with thank God when I broke it. And so I’m gonna be doing some videos for them to try and to spread the word. And I do promotional Lion Latches for them as well. Yeah, it’s like, that’s a really cool full circle that I’ve got with jewelers mutual. That’s very unique tie-in with them, but it’s pretty cool. I’m very excited. Excited for what this year is gonna bring us and I’m lucky I got a really strong team. And yeah, we’re growing over here with Lion Latch, bringing new products, new ventures. That’s

Pat Yates 33:34

absolutely incredible. When you talk about ring insurance companies, it’s like this is one of the least expensive things to protect one of the most expensive and most important things you would have in your house. It’s really kind of an incredible dynamic, people that has a ring obviously needs this. So to sort of sell this up, I know that you’ve spent a lot of time not only have you done so good and TikTok you ended up I think in their headquarters I may be wrong about that are meeting their the principles of tick tock. Anything else you would tell people they want to do or maybe experiences you’ve had around that?

Lerin Lockwood 34:03

Oh, with TikTok, it was just crazy. I mean, again, it’s just being like proactive, like anytime an opportunity presents itself I jump at it, right. So like when they invited me to Cannes to speak on a TikTok panel at the Cannes line festival. And I knew that it was going to be there. And I knew as soon as I saw them, I need to be ready to give them a Lion Latch. And so I got a video of me. And will I am from the black IPs. I got a video of me and Carmelo Anthony. And I met Spike Lee while I was there. And then I saw the CEO of TikTok I met him in like or I can’t say but I met him at an event but they invited me to write but I saw him I knew I was looking for and then I had I was ready for the opportunity to get a video or a photo with them. So I’m just I’m trying to prepare for success always. But also always have your elevator pitch ready because you never know who’s going to be around you or who could really help you go to the next level. So that’s my tip.

Pat Yates 35:07

For me Lerin, it’s so incredible to talk about this because every time I end up picking up tips as well, I know that every one of the rods around the Shark Tank Group where they go the reunion or whatever, we’re all very humble in the sense that we know we can gain things from other people. So I’ve learned a lot from you and obviously I hope you have a great year. Let’s tell everyone how they can get in touch if they want to, and maybe the site.

Lerin Lockwood 35:28

My website is lionlatch.com the animal lion, ignore the accent please. And TikTok I’m Lion Latch. I’m on Instagram and Facebook as well. You can reach out to me on my website if you want to if you’re interested in promotional eyelashes we have or wholesale we also have a little form you can fill out there and it comes directly to us I see them every day. Which is awesome. All right, that’s a new added feature that we’ve got. But we’re just trying to pursue all the outlets and get Lion Latch in the hands of the people that need it.

Pat Yates 36:04

That’s really amazing. Lerin as usual, whenever I see you are saying I see you it’s so much fun to be around, your personality is so infectious. Your product is so cool. You’re obviously killing I appreciate you coming on the Quiet Light Podcast today.

Lerin Lockwood 36:16

For sure. Absolutely. Thanks for having me Pat.

Pat Yates 36:18

Absolutely. Have a great day, everyone thanks for listening in. Reach out to Lerin you don’t necessarily need to reach out but by you a Lion Latch should be shocked how great this product is and how much you’ll love it and Lerin, appreciate the time reflecting on Shark Tank as well as TikTok.

Lerin Lockwood 36:34

Oh absolutely thanks Pat.

Outro 36:37

Today’s podcast was produced by Rise25 and the Quiet Light content team. If you have a suggestion for a future podcast, subject or guest, email us at [email protected]. Be sure to follow us on YouTube, Facebook, LinkedIn, Twitter and Instagram, and subscribe to the show wherever you get your podcasts. Thanks for listening. We’ll see you next week.

The Art of Finishing Strong – Live With Purpose, Passion, and Promise

Scott Couchenour is the Founder and Life Coach at Serving Strong Enterprises, where he coaches business owners over 50 on both personal and organizational empowerment. With over three decades...

Scott Couchenour is the Founder and Life Coach at Serving Strong Enterprises, where he coaches business owners over 50 on both personal and organizational empowerment. With over three decades of business experience, Scott uses his insights to assist entrepreneurs in gaining clarity and devising strategies that produce both immediate and long-lasting outcomes by identifying their goals, overcoming obstacles, and prioritizing their objectives. As host of the Serve Strong Finish Strong podcast, he uses the platform to cater to business owners in their 40s and 50s to help them design and execute a meaningful future.

Here’s a glimpse of what you’ll learn:

[02:26] Scott Couchenour shares what his life is like now
[03:58] How Scott got into coaching people on business and life strategies
[06:35] What does being “relationally rich” mean, and why is it essential?
[12:07] Scott explains life stages and quarters and what the differences are between them
[19:24] Scott‘s approach to coaching people and how he personalizes the process
[25:59] Identifying opportunities and working them into your overall system and strategy
[28:29] How Scott structures the coaching methodology
[31:39] The rich experience of small group collaboration
[37:38] How Scott implements “service over sales” into his coaching strategy

In this episode…

Life can significantly transform as you enter your 50s, and your perspective and goals may shift. It’s beneficial to have someone in your corner who can assist you in creating a strategic plan by identifying what you envision for your life, legacy, and purpose. With guidance, you can realign your direction and achieve a revised set of objectives. So who can you turn to when you need help developing a systematic and consistent lifestyle map that aligns with your values?

As a seasoned businessman, Scott Couchenour is helping people navigate through life’s changes. Having gone through a circumstance that completely turned his life upside-down, he understood how invaluable it would have been to have someone guide him through that process — a coach to get him over the hurdles. Since life after 50 becomes more of a cycle of growth and recognizing opportunities you might otherwise miss, having a coach who can deliver a system, help you focus, and devise a pathway for goal achievement is priceless. Additionally, he notes that continuous learning and development are essential to iterating your mission, and small group collaborations with others from diverse backgrounds and perspectives can offer valuable ideas for personal growth.

In this episode of the Quiet Light Podcast, Pat Yates sits down with Scott Couchenour, Founder and Life Coach at Serving Strong Enterprises, to discuss how entering your 50s can shift your perspective and necessitate reevaluating life. Scott discusses why being rationally rich is essential, how your stage of life impacts your outlook, why small group collaboration reaps rewards, and how a coach can help you realize your later-in-life mission.

Resources mentioned in this episode:

Sponsor for this episode

This episode is brought to you by Quiet Light, a brokerage firm that wants to help you successfully sell your online business.

Episode Transcript

Intro 0:07

Hey folks, it’s the Quiet Light Podcast where we share relentlessly honest insights, actionable tips, and entrepreneurial stories that will help founders identify and reach their goals.

Pat Yates 0:32

Hello, and welcome to the Quiet Light Podcast. I’m Pat Yates appreciate you joining me today we have a great conversation with Scott Couchenour. Scott has the business servingstrong.com. And it’s really an interesting approach he talks about if you’re over 50, talking about your fourth quarter as he would call it, your next life and how you want that to be in business or whatever it is that you’re trying to accomplish in life. It’s really interesting, because I’m in his wheelhouse, which I’m not really excited about admitting I was wishing I’d be like late third quarter, but he is classifying me as a fourth-quarter personnel, which it makes me depressed a little bit, but I’m still going to do a good podcast with him. And we’re going to talk about the things that people are trying to position their lives to be able to be different. It really applies to me, because I’ve been thinking about this a lot how everything that I do fits into a lifestyle of being married long term and having children and what my next time will be, I found it really fascinating that he talks about how you need a business coach, not If you should decide one like you get an attorney, if it’s legal, you get an accountant, if it’s financial, and this you variable may need and most people need to think about how they can improve their business life, and then they will roll over their personal life. I’m really excited to talk to Scott about this. So let’s get right to it. Scott, how are we doing today? It’s great to have you in the Quiet Light Podcast.

Scott Couchenour 1:49

I’m doing great. And it’s great to be here with you, Pat.

Pat Yates 1:52

Yeah, I’m really excited about this. It’s interesting, because you hit on something, if we had a 20-something podcast guy here, he’d be out of his mind today, if I had Ethan Alexander who’s like a guy he tacos with on the road all the time, he’s one of my favorite guys to travel with, he wouldn’t have any idea we’re talking about today gonna have to be his dad or somebody. So it’s really exciting to get in here and talk about something that’s actionable for us old guys. I’m excited. So Scott, I know that you have a great business. And you’ve got a great story of background and actually even better story trying to prepare people. But I’d love to hear about you and your family where you’re from, give us an idea of all about you.

Scott Couchenour 2:26

Sure, sure I have been married 38 years, we have two grown married children who have given us three grandkids, two of them live close, the other one is about two and a half hours away. So we do a lot of FaceTime. They range from four and a half down to one. And we’re loving life that way, we live in Ohio. I grew up here never really moved away from home, I’m one of five children, I’m the fourth of five children never felt the need to moving and get into the adventure. I’m very consistent that way. I’ve been loving Ohio. Yeah, I’ve been married 38 years to a lady who is incredibly organized, incredibly detailed, and just loving life. I can’t believe it’s been this long that we’ve been married.

Pat Yates 3:22

It’s really funny that you say that because you and I go on a lot of lines very similar. I’ve been married 33 years, I have three children of which we’re hoping for those grandchildren, I have one that’s married and two that are in relationships. So I think we’re similarly aligned in this. And it’s funny how in reflection, you see all those things, and now your life is about different goals. And that’s what we’re going to talk about. That’s the exciting part is that you’re gonna dive deep into it. So I know that what we want to talk a little bit about is your business Serving Strong. And I know there’s a real background of that a lot of dynamics want to go into, but maybe just give the listeners an overview about Serving Strong,

Scott Couchenour 3:58

Serving Strong, I started that back in November of 2007. I had been doing some coaching up to that point. It has a thread in my previous employment. Being the youngest brother of the I have three older brothers and one younger sister. We were all in our family business at the time. We’ll talk about that moment, I’m sure. But someone had the idea. Let’s look into life coaching as a benefit for our employees. And being the youngest brother, I was tasked with the responsibility. So I started researching life coaching, fell in love with the dynamic because it’s so powerful. It can be very powerful between coach and client that I hired my own coach. And then I became certified as a coach and that coach for a while but then in November 2007 started this Serving Strong Enterprises. And the intent there at that moment was coaching pastors to avoid burnout. That was the right original beginning. And I just kept doing that on the side for many, many years. And then when we closed our family business, went into it full-time. And so it’s basically, I’m a fourth quarter coach, life and business, I cover both sides. And Serving Strong is here to help the person who is generally in their mid to late 50s, who is beginning to have these ideas or thoughts or questions, whatever it is about life and the extent of life, and legacy and meaning and purpose. So we address that. And we create a strategic way to go about life. So I help my clients create strategic plans, personal strategic plans.

Pat Yates 5:50

It’s really amazing, because when I was reading a site, and I spent some time researching this and thinking a lot on it, because I’m basically your age client. And I’m probably someone that looks a lot of the things. So what’s interesting, when I looked down the five things you talked about, you have them, and I’m sure you talk passionately about them and I wanted to go down I mean, you can address them in different ways. One is to be physically fit. Another was to be emotionally healthy, another is financially free, vocationally aligned, I pretty much understand all those, but there was one that really struck me the way that you said it, which is relationally rich, I find that an interesting term because I’m sure it’s not on the surfaces easiest something to understand what that is, maybe jump off by explaining what that would be, because I’m really curious myself.

Scott Couchenour 6:35

Yeah, relationally rich is the phase based on the fact that we don’t live life in a vacuum. And we are built for community, that’s part of the core values of Serving Strong is that we really do need one another. And so as we enter our 60s and our 70s, an interesting dynamic will take place. And that is that the number of people we know, will get smaller and smaller. And as that happens, how deeply are you connected to a small group of people that you can do life with? And in essence, finish life with? Relationally rich is having, here’s a good way to describe it. A couple of ways. One is, it’s 2:30 in the morning, and you’re really, really in need of someone helping you do something. I don’t know what it is, just fill in the blank. Do you have someone that you would call? And would they be willing to come and get out of bed and come and help you in the middle of the night? That’s one thing. A second thing is, in general, not everybody gets buried in a coffin these days. But the idea that, do you have six pallbearers in mind six people in your life who would carry your casket, the depth of relationships with people who are close and very dear to us, we absolutely need that. We have to have that. And that, to me is a definition of being relationally rich, doing real life with people as we face the things that we face in our fourth quarter. If I’ve got a friend and my friend, his mother passes away, will I walk with him through that loss? Yes, that’s being relationally rich. That’s what it looks like.

Pat Yates 8:56

That’s really amazing. And you know what, you have an interesting perspective that some may not have in this kind of situation, you probably worked with a lot of people that may have been, when you started 2007 2010 2011, the world was a little different. So people had different goals and different ideas work are working remotely. And then all of a sudden you have this weird line that people are always going to talk about the cutting point when COVID happened in the world changed and everybody was remote and all these places. Stress added a lot of things added. Have you seen a shift in the dynamic? Are people needing this more after maybe going through all of that versus when you first started the business?

Scott Couchenour 9:31

I’ll tell you what I’ve noticed. Let’s talk in terms of pre-COVID, post-COVID. Pre-COVID we needed it. We all talked about it. It was very important. And leading up to COVID, we also had this rise in technology and rise and social media and rise of looking at a small screen and scrolling. COVID created an accelerant to our basic need for relationship. I think it’s not that COVID caused something COVID accelerated what is already a basic need that we all have. And we were awakened to mileage varies by person, but we were awaken to, it’s time to be authentic, it’s time to be real. I do a lot of stuff on LinkedIn, I live on LinkedIn and have some great relationships that I have yet to meet face to face. But what I’ve noticed is the power pose is going away. The real nature of life is coming across a post, there is a hunger for authenticity, there is a hunger for depth of relationship. And when you can meet someone that you’ve only known online for several years, it becomes a very powerful event. That’s my take on it. I think we all have, what is standard across the board is, we all need each other. We need a close group of friends to do life with, COVID accelerated and brought to the forefront just how important those relationships really are.

Pat Yates 11:24

That’s great. Again, I’m with Scott Couchenour with Serving Strong. So Scott, tell us a little bit about Serving Strong, I ran over the bullets that you had on the fantastic fourth quarter a little bit as an overview, but I’m sure you want to dive deeper on. And by the way, I’m trying to be in the last two minutes, my third quarter, I really don’t want to say I’m in the fourth quarter yet. So I’m gonna deny that I’m in that fourth quarter right now. But I’d love for you to explain because when I first read it, I thought it was q4 stuff advice you could do on q4 when I first looked at it, like, oh, these are marketing ideas for q4. But then I read into it went, wow, that’s interesting. But now I feel really old. So tell me a little bit about the philosophy behind the company and what you do when you’re talking to clients?

Scott Couchenour 12:07

Sure. I’ll take you back to the end of 2021 when I had an awakening to what I was doing in my business. And so I hired a branding coach. And she helped, we spent four months together. And she helped to show me just how eclectic I was all over the map from a marketing standpoint. Out of those conversations came this passion, this identity that I had inside of me, and that was to help at that time, when we started talking about this originally, my brand new coach and I, we started talking about the Gen X generation, which, I will claim to the rest of my life, even though I was born in 1965, which is kind of the cut off, 64, 65, 66, I’m a Gen X crowd. I’m not a baby boomer, I don’t want to be a baby boomer. To me, that’s old. But great people that don’t get me wrong. The Gen X thing then morphed into me looking at the average life expectancy of a US male, a male in the United States, at that time was 78 and a half years is the average life expectancy of a male in the United States females couple of years older. So I got to thinking in terms of math, I love math, and I was looking at okay, so your first quarter is your first 20 years. That’s your learning quarter. That’s where you’re being nurtured. You’re going to school you graduate. Now you’re in your 20s. 20s and 30s is your second quarter. You build in the second quarter, you build your life, your career, your family, your 20s in your 30s this is where you start to have kids, you start to build a family, in your third quarter, your 40s and 50s, I call that the reaping quarter, you start to reap some of the things you sowed in your second quarter, there’s kind of a hill that you kind of go over. Right. And in fact, when I was growing up, I don’t know if this is true of you. But when you turn 40 the phrase was lordy lordy, Luke, who’s 40 and if you had those creative friends, you would come back you come home from work and there’d be all these black balloons in the front yard and all these TED, these tombstones and all that for your 40th birthday. Right? And the phrase is welcome to the over the hill gang right over the hill. That was always a phrase when I remember growing up. The truth is, and let’s pause hear in the third quarter for a second. So you’re in your 40s, or your 50s you are listening to this. We were raised to think there was one hill that over the hill means one hill that we are now over the rest of life is a decline. And what I have discovered, as I’ve focused on my coaching, and strategic plans, my research has shown that I found is that there is a second hill, there is a second strength. In fact, there’s a book out there called From Strength To Strength, which I highly recommend to anybody who is wrestling with this, this all there is kind of thing. There is a second hill a second strength. The first is fluid intelligence. This is where we have a lot of energy, not a lot of wisdom, but a lot of energy. And we’ll throw a bunch of stuff on the wall, and we’ll see what sticks and we’ll make it happen. But that begins to wane in our mid-30s. But there’s a second hill or second energy that begins to build. And that’s crystallized intelligence, where we have a lot more wisdom. Yes, there is decline. Yes, I can’t run the marathon like I did in my mid-30s. As I’m reaching 60, I would have to train totally different as because of stages of life. But in the third quarter, we’re wrestling with the decline of one curve. And I’m here to change the narrative, there is another curve, there is another thing that we can embrace. And actually, my belief is the fourth quarter is the best quarter possible, because in generalities, I will mention some of the dynamics, as you reach the end of your 50s and you come into your 60s, a number of dynamics are happening, some good, some not so good. Your debt is generally down, your income is generally up, your expenses are generally down. Your wisdom is through the roof, your experiences, the things that you have learned. And in this lifetime, we are more likely to live longer, because of the emphasis on health, the emphasis on dieting and eating right and exercise. So when you combine the availability of time, and the awareness of legacy, I think, and I’m going to make this true of my life, make the fourth quarter, the most impactful ever. And so that, yeah, I’m over one hill. But I’m not done. The people I talk with the clients that I work with, they have no intention of retirement, the word retirement is just a title of a fund. And that’s why in one of the six hallmarks, we’re talking about vocational alignment. It’s an alignment of what you do with your abilities, and with your wisdom in a different stage of life.

Pat Yates 18:28

That’s really amazing. So I mean, I think, Scott, when you talk about that, when you talk about the alignment that you would need in that kind of situation. It’s really interesting that, I use different terms, I talk about lifestyle businesses, which is essentially similar that if your goal is to be living in South Florida all year and doing as much recreational stuff as you can but have a business that you run 10, 15, 20 hours a week, in that provides enough income that your lifestyle or your hope for your life can be sustained in a little more simple way, that you’re more fulfilled personally than you are professionally. Are you at that balance? Is there more than probably in your 20s 30s and 40s? So how do you suggest people approach that? I mean, some people have to be tied to an office, others are very fortunate that maybe they have a business that can run with them. I mean, you talk to a lot of people, how do you usually approach that with a client?

Scott Couchenour 19:24

Well, I think you mentioned it, the goal with people who have a goal in mind, that leads to this whole idea of being strategic and if we’re not strategic, especially as we enter the fourth quarter, the ramifications are enormous. The first thing what I do with a client is okay, who are you? I talked about the big 10 the person ability skills, abilities, strengths, weaknesses, core values and that sort of thing. And there’s 10, out of that group of 10, we build a purpose statement. And this is, no matter where they’re at in life, if they’re tied to a nine-to-five desk job that seems like it’s going nowhere, we still take a look at who are you? And then we build a purpose statement out of who they are. If I’m allowed to live for the next 20, 30 years, what is my purpose? Why? Why would I still be alive? And then that leads to a vision statement, which is what the world looks like and what you look like if you’re true to that purpose over the long haul. That leads to a mission statement. A mission statement is just basically, this is how we’re going to go about the vision and mission has goals and goals have actions. So regardless of where you’re at today, if you’ve got a strategy, you can begin living life in what I call 90-day sprints. It’s a 90-day sprint, lifestyle, and iterative process, where if I know my purpose, and I’ve got a vision, and I’ve got a mission, and I’m working on a couple of goals, through certain actions for a 90 day period, at the end of that 90 day period, I will pause. And I will say okay, what do I know now that I didn’t know when I started this sprint? And how can I take that information and go back through my purpose, vision, mission goals, and iterate, and then do another 90-day sprint. What I’ve noticed in that sort of life, in that process, is that it’s like a quarterback, all right, you just did a set of downs head upon quarterback is sitting on the sidelines, got the headphones on looking at the surface tablet, communicating to the offensive coordinator, the offensive coordinator can see the field from a different perspective, right? They saying 68 needs to be double-teamed. 44 is watching where you’re throwing, so quit looking where you’re gonna throw. And so now the quarterback has gained knowledge and goes back out on the next set of downs smarter than the previous set of downs. That’s what this process is, when we get a strategic plan on paper for the very first time, it’s like a lump of clay on a potter’s wheel. And we start working that clay 90-day sprint after another. And what happens is their vision starts to come closer and closer with every sprint. So it’s not a linear thing, in like, for example, I’ve got a 10-year plan right now to build a community of people doing this. Right and I’m on Sprint number two, actually sprint number one of 40 Sprint’s 40, 90-day sprints is 10 years, and I’ve got a very clear vision of what that community will look like, I’ll be a chairman of the board, there will be 5000 plus members, all these details. I just completed month one of this first sprint, and already, I’m further ahead than I thought it would be. Because when you focus on something, when you focus on where you’re headed it grabs a hold of you, it’s part of who you are, and you cannot talk about it. And when you cannot talk about it, you attract the right people and you repel the right people. And you see opportunities. There’s a principle out there called the red car principle. When we’re working on a strategy, a red car principle takes place. And that is if I were if you and I were meeting at a coffee shop, and I asked you how many red cars did you see on the way here, you would probably say what probably I saw a few maybe the odds are I would have seen some. But if I just said before we met that on your way to the coffee shop, when we meet, I’m going to give you $50 for every red card that you saw. Then we get together and I say how many red cards do you see, you would get hand me a piece of paper and say it would be eight of them. You owe me eight times four, 50, whatever that is, because you are focused on purpose. Looking for red cars, you’re not just noticing them. But there’s an incentive. There’s a plan in place. And so not only are you just kind of driving casually, but you’re driving looking for red cars and tallying. That’s what takes place when we have a strategy when you enter your fourth quarter strategically and improving in things like your emotional health and your physical fitness and your relational richness and vocational alignment and financial freedom. That focus helps you to notice opportunities that otherwise would slip right past you. And you grab a hold of opportunities when you’re strategic, you asked me to talk about this. This is what I live.

Pat Yates 25:06

No, it makes a lot of sense. And what’s interesting is, the more that I listened to what you said, it’s like in your 20s 30s and 40s, and especially how the world used to be, you take a job and you look at your future and you say, I have to go into the office, I have to be at this place, I have to do this, we’ll take vacations when we can now it’s more like, well, this is what I want to do. I’d like to go for two weeks to go to Texas and play golf or go out of the country and do something and I’m gonna work a little bit but whenever I can, that’s sort of the lifestyle that people would end up wanting, especially when they get like as an empty nester, I found a lot of time I’ve been coaching high school basketball, I’ve been doing things for my son, there were a lot of activities that we had, and you sort of have to fill that time, which gives you an interesting opportunity. I’m sure that people coming in at up with a lot more time on their hands. So is structuring their day and opportunities and how they approach the day part of that too.

Scott Couchenour 25:59

Well, it can be, you’re alluding to a system. And what I’ve discovered in working with clients is I’m very systematic. I’m the project manager of my clients dreams. All right, so I love consistent strategy and consistent detail. Not all people like that, especially business owners. Don’t give me the details, give me the highlights. What’s the bottom line? So I’ve discovered that there is a continuum of systems on one is utter chaos. And the other is OCD. Neither of which does anybody any good. Every one of us fits somewhere on a level of systems where there’s not too much system, not too little, just the right amount of systems. So a systematic lifestyle, for one may look totally different from another person. Here’s the difference, though. You are living strategically, you are living by design. If you face something, if an opportunity comes along, and you don’t have a strategy to run it through, you’re either going to miss the opportunity, or it’s gonna take you a lot longer to process that opportunity. Because you don’t know how it’s going to impact you relationally physically, vocationally, financially, spiritually. But when you have a strategy and an opportunity comes along, you can simply filter that opportunity through where you’re already headed. And you can decide very quickly at the bottom line, this opportunity will get me further faster to where I’m going, or this opportunity is a distraction or and there’s a third option, this is an opportunity, maybe not for now, so we’ll throw it on the parking board. So it’s either now’s the time, this opportunity is never going to work for me, or this opportunity might work. Let’s hold off to it. But you know that when you’re strategic when you’re living life by design, you know that.

Pat Yates 28:02

What’s interesting is it’s not just a fourth-quarter thing, it could be people’s life all the time when you condition someone to do it, but it’s great advice. So I know we’ve talked a lot about the philosophy around the business. Let’s talk a little bit more hard about Serving Strong and again, we’re with Scott Couchenour with Serving Strong. So Scott, if someone comes in and wants to work with you, hypothetically, how do you structure the business? How do they pay? Is there a length of contract, tell us about how they work with Serving Strong?

Scott Couchenour 28:29

Well, the first thing is we enter a three-month contract, and roughly six sessions. By the fourth session, we will have a strategic plan document in place. After that fourth session, then my clients will simulate a mini sprint where they will take action and check in for four weeks. And then we do a final review at the end of that, when we’re completed with that, then I will support them for the rest of their life. And one main element of that support is a community that I am currently building so you get your strategic plan, you’re starting to work it you are now entering life into a 90-day sprint cycle of life. And the support that I give is how are things going, weekly check-ins and a lot of support. I’m hoping to create, on the hoping, I am creating a community where everybody in the community is actually working their fourth quarter strategic plan and they’re living life and contributing to others and receiving advice from other members. But within that, I offer a private one-on-one coaching at a three month period, three months renewable if they would like and down the road we’ll have some group coaching opportunities for the make a little more economic. But it think of it as a one-two thing, the first stage is let’s get your strategic plan document and let’s get you working on that. And then that’s yours to, it’s built to live with you the rest of your life, we build in a measure of iteration so that you’re always learning and developing after every sprint. The second phase is that support that ongoing support.

Pat Yates 30:33

That is really great. I mean, obviously, they get a chance to be able to talk with you and lean on you for a lot of different things, to be able to join, it’s obviously not very, very, very difficult. So your goal was to have 500? Or what was the number, again, of how many people you want to have that you’re gonna be mentoring about one time?

Scott Couchenour 30:49

Well, at least 5000 in 10 years, which the whole mechanism with coaches, and facilitators all working, as we scale, we will bring in more coaches and bring in more facilitators to handle those small groups and those one-on-ones, then we will do events with subject matter experts from all six Hallmark professions.

Pat Yates 31:15

It’s really, really amazing. Again, Scott Couchenour, Serving Strong, when you come in and work, how often I mean, when you’re adding people they get collaborate together, they just collaborating with you, I mean, are there opportunities to collaborate with others and be able to learn sort of like a, I don’t want to use the word mastermind as the way it is, but sort of an opportunity to be able to network with other entrepreneurs.

Scott Couchenour 31:39

Absolutely. Entrepreneurs, and housewives and pastors. And what I’ve noticed is when I’ve done some small groups, what I’ve noticed is, we do a thing called feed-forward where one member says this is what I’m working on. And then all the other members give one piece of advice. And the recipient, all they do is say thank you. And then you move to the next person do the same thing, then the next person. So a group of five, you will hear any number of suggestions that you will receive from the other four members. But you will also hear members giving advice to other members. And listen, and I’ve noticed that that’s a very rich process, this feed-forward exercise where you might hear Suzy tell Jimmy, a piece of advice for where Jimmy’s headed, and you’ll think, I could use that myself. And I’ve had business owners receive advice from a housewife. And a housewife receive advice from a coach and a coach receive advice from a truck driver. And it’s fascinating because you get the perspective from all different viewpoints of life, different ways we were raised. And it’s a much richer experience. And that’s what I’m building and creating that kind of community. It leads to a relational richness.

Pat Yates 33:14

That’s really, really awesome. So Scott listen, one thing I want you to be able to do is obviously talk about your company. And personally, you’re obviously an amazing guy, family guy, all these things just add up to be able to have a great time working with you. And I think that people that look at this sometimes don’t admit they need this kind of conversation, but it actually helps because it’s for so many thoughts. So Serving Strong is obviously a great business, you’ve had a great background, I know it came from a little strife and owning a business and yourself and some of those things tend to form the opinion of where people go in their life. So I wanted to wrap it up, maybe if there’s anything else you want to tell people about Serving Strong, maybe how your background sort of ate it, and you’ve been able to do this, but what else do people know about Serving Strong and you?

Scott Couchenour 33:55

Well, Serving Strong income is birthed out of an experience a hero’s journey, if you will. I spent 24 years as a COO in our family business, business my dad started we designed to build churches across America. And then 2008 happened in the economy, which we didn’t see it at the time. But it shifted the way churches decided who was going to build their buildings. But it took us five years to really do something the board of directors elected me to become CEO to reinvent our company, which I did. And we were moving in that direction. But the five-year slide that we experienced, made us vulnerable from a cash flow standpoint to one project that had to start in June of 2015. Rather than it starting the pastor had been having an affair and that news came out in June of 2015. That was the last nail in the coffin. I had to close the business. It was a devastating time because I had attached my identity to what I did. And what I did was gone. My identity was gone. I didn’t know who I was. I wrestled for too long spent too much time and energy and money, trying to figure out what I was going to do next. Hit the wall, like I said, got a brand new coach got really serious about what I was doing. And now I feel like I’m in sinus rhythm, I’m moving up ups and downs, but generally upward. And that has now become a metaphor for what I do with my clients, I have determined that I would be the partner I wish I’d had in July of 2015. Because I would have gone further faster with deeper understanding. And if there’s anybody listening here thinking, I’m not going to hire a coach, because that’s admitting defeat, coaching is usually associated with counseling, therapy, all of which are really good benefits. But the stigma is that I’m broken and I need to be fixed. So I’m going to hire a coach. That’s not the truth. What I say is, do you have a CPA? Well, yes. Do you have an attorney? Yes. Do you have a wealth advisor? Yes. Well, why did you hire them? Well, because they know things I don’t know, they give me perspective on my life, that I can’t see myself. Well, that’s just what a coach does. You are strategically bringing in a second set of eyes into your advice circle. And a strategic is on purpose. It’s not admitting defeat, it’s actually, it’s a decision of courage to bring a coach. Now, whether I’m the coach or not, I think coaching will benefit anybody who embarks on it. And that’s what Serving Strong is, it’s a coaching business that becomes the second set of eyes that helps you go further faster with deeper understanding.

Pat Yates 36:49

That really makes a lot of sense. I mean, it is kind of interesting, you put a perspective there that I didn’t really think about, like, entrepreneurs may think in their mind, why don’t need a business coach, I don’t understand business, I’m already doing business, I have a successful business, but they don’t know what they don’t know from the personal side of how those things mount up. And if you go through stress, better ways to manage and people to talk to. So I think it was really amazing how you put it from an attorney standpoint, account standpoint, you didn’t need somebody else that can help clean your house in other areas. It’s really, really amazing. Scott, we really appreciate you being on the Quiet Light Podcast, it’s really amazing. So tell people how they can reach out how they can find you? And also one other questions, so you don’t necessarily have to go into the monetary side of it. But how do people, what did they do when they come to you, you said you have a three-month plan, you have different plans, are there other things that they can leverage, if they’re coming in to work with you at Serving Strong.

Scott Couchenour 37:38

The main thing that I do is service over sales. Okay, and I can say that till I’m blue in the face, you have to believe that it starts with a conversation. I want to help someone whether they, my approach was service over sales is that every conversation I have with people, I’m already assuming that they’re paying me $100,000 for coaching, and I treat them that way. If that turns into a transaction, great, if not, I will have served someone. That to me is of greater value. And ironically, as I serve, then business comes to me, as I serve opportunities open up, I don’t do it for that reason, I do it from a core value of service. So it starts with a conversation, it starts with just tell me a little bit about what’s going on in your life where you’re headed, where you would like to go. And that half hour, 45 minutes could be all you need. If not, we talk about the parameters, the particulars. And we go into a number of things we go as deep as you want to go. But by the end of that call, you know that there is hope. And there is a way to create a plan that puts a lid on regrets and leaves the lid off of freedom. So you can find me at servingstrong.com you could email me at [email protected]. And I’m all over LinkedIn if you just search Serving Strong or search Scott Couchenour, you’ll find me

Pat Yates 37:45

That’s great. So we’re gonna spell it because it’s a little different spelling Couchenour, Scott Couchenour. It’s been amazing having you on the podcast today. We’ll have all the LinkedIn stuff. We’ll make sure that’s on the podcast so people can reach out to you. We really appreciate your time today. I think what you’re doing is amazing. And it’s really, really needed because as I’ve gone through this, some of these thoughts have come to my head or exactly what you’re teaching.

Scott Couchenour 39:50

I appreciate it. Pat, it’s been a great joy to be on here talking with you.

Pat Yates 39:54

Thanks again. Appreciate you, Scott.

Outro 39:59

Today’s podcast was produced by Rise25 and the Quiet Light content team. If you have a suggestion for a future podcast subject or guest, email us at [email protected]. Be sure to follow us on YouTube, Facebook, LinkedIn, Twitter and Instagram, and subscribe to the show wherever you get your podcasts. Thanks for listening. We’ll see you next week.

Jumpstart Marketing Fast With Altus Marketing

Kirk Hodgdon is the Founder and Growth Catalyst of Altus Marketing, a firm focused on helping its clients reach new heights of business performance. As a distinguished business professional, he...

Kirk Hodgdon is the Founder and Growth Catalyst of Altus Marketing, a firm focused on helping its clients reach new heights of business performance. As a distinguished business professional, he has nearly four decades of experience in marketing and business development. Previously, Kirk served in executive roles at CNS, Inc The Breathe Right Company, U.S. Communications & Focus GTE, and Land O’ Lakes. Kirk and his team possess a level of expertise and experience that can benefit any organization seeking a partner to enhance their marketing and business development efforts.

Here’s a glimpse of what you’ll learn:

[03:27] Kirk Hodgdon shares his professional background
[08:49] Key takeaways from working with some of the world’s most renowned brands
[13:47] Kirk talks about Altus Marketing and how it helps entrepreneurs
[17:23] Who are Altus’ ideal clients?
[21:22] Retail strategies for ecommerce entrepreneurs
[32:44] Kirk discusses how strategic partnerships can drive business growth

In this episode…

While the online marketplace offers unprecedented opportunities for entrepreneurs to reach a wider audience and increase sales, it also presents unique challenges. In today’s environment, growing a business requires specific skills and knowledge that only a few possess.

Seasoned expert Kirk Hodgdon explains why business owners must navigate the ecommerce space effectively to stay ahead of the curve and promote growth. From fierce competition to rapidly evolving technology and customer expectations, ecommerce entrepreneurs must understand the intricacies of a complex and dynamic landscape. Kirk recommends that entrepreneurs focus on three critical areas: marketing communications, leveraging technology, and strategic development initiatives. These elements are vital to creating a robust and scalable business that can withstand the challenges of a competitive marketplace. Working with specialists can be a game-changer. Entrepreneurs can capitalize on the expertise and knowledge of professionals who deeply understand the ecommerce landscape and can help them overcome challenges and obstacles.

In this episode of the Quiet Light Podcast, Pat Yates sits down with Kirk Hodgdon, Founder and Growth Catalyst of Altus Marketing, to discuss strategies entrepreneurs can employ to drive growth. Kirk talks about how Altus helps entrepreneurs, what retail strategies ecommerce entrepreneurs can use, and how strategic partnerships can promote expansion.

Resources mentioned in this episode:

Kirk Hodgdon on LinkedIn
Kirk Hodgdon’s email: [email protected]
Altus Marketing
Quiet Light
Quiet Light Podcast on YouTube
Joe Valley on LinkedIn
Pat Yates on LinkedIn
Mark Daoust on LinkedIn
Quiet Light Podcast email: [email protected]
The EXITpreneur’s Playbook: How to Sell Your Online Business for Top Dollar by Reverse Engineering Your Pathway to Success by Joe Valley

Sponsor for this episode

This episode is brought to you by Quiet Light, a brokerage firm that wants to help you successfully sell your online business.

Episode Transcript

Intro 0:07

Hey folks, it’s the Quiet Light Podcast where we share relentlessly honest insights, actionable tips and entrepreneurial stories that will help founders identify and reach their goals

Pat Yates 0:32

Hello again and welcome to the Quiet Light Podcast. I’m Pat Yates. I’m not supposed to be sitting I’m sitting in for Joe valley, but I kind of am, how you doing Joe? Today we have a great guest with us actually a good friend of Mark Daoust founder Kirk Hodgdon. Kirk is with Altus Marketing and he is sites altuselevates.com. He main drive more good companies he worked with in the late 90 or in the 90s and early 2000s, than any you could ever shake a stick at just from Land O’ Lakes to Breathe Right? Just a fascinating guy. I mean, he has all kinds of history and marketing development partnerships and things like that. I think what’s weird about marketing, we do a lot of this on the Quiet Light Podcast is it’s never really a one size fits all. There’s always something small that someone says differently, or has a history or maybe he founded something to Breathe Right that he didn’t do with landing legs. But it’s amazing how Kirk has this diverse background of all these companies he’s worked at, things that he’s beta tested AB that knows what works and doesn’t work. So if your company is out there trying to scale an ecommerce or especially trying to get into retail to position how you could diversify your channels, this guy is someone you want to talk to and it’s funny as we went through the conversation and one thing I think that entrepreneurs should always think about is reaching out and getting as much information around you as you can. We talk passionately at Quiet Light about that about how we want people to come in. You don’t have to list with us you want to come in and find out what your valuation is how it’s changed over the last year. What multiples are doing anything that you want to know. We are here to be able to help you and it’s funny how Kirk is the same way probably adds as much value, why does he does on the things he’s working on giving ideas. I just think it’s fascinating to hear people that have that kind of background that can come in and look at your product and say even though it’s not a one size fits all this is ABC of what we’ve done in the past to make it successful. I’m fascinated to hear this today again Kirk Hodgdon from altuselevates is a website that keeps messing me up. Altus Marketing is the company and I’m anxious to talk to Kirk. Let’s get right to it. Kirk, welcome to the Quiet Light Podcast today. How you doing?

Kirk Hodgdon 2:40

Doing great doing great. Happy to be here.

Pat Yates 2:43

Here as well. I know we’ve talked a lot about getting together. It’s funny because you have an acquaintance that you spend some time with up there in Minneapolis Mark Daoust, our owner, I know you know, Mark, correct?

Kirk Hodgdon 2:53

I do. I do. He’s a great gentleman. I know him.

Pat Yates 2:59

He talked really highly of you. And I think what’s amazing about this is we’re so fortunate at Quiet Light to have so many people around us like you that, when people that have known Joe in the past and Chris and all the guys that are involved. We love bringing people on that have thanks so I know today we’re going to talk a little bit about Altuselevate and Altus Marketing. And that’s really what you do. But truthfully, I’d love for you to introduce yourself to the Quiet Light listeners and tell them all about yourself and how Mark’s an idiot and other net all those good things, make sure we talk about those things.

Kirk Hodgdon 3:27

Mark is not an idiot, we will start there. But no, my background has been in consumer products. I won’t say how many years. When you get to a certain age and colored hair, you try and keep the numbers down. But I’m going to say 35 years. I cut my teeth in the old days at Land O’ Lakes. So if you think about managing things like ice cream and cheese and meat products and so forth, I kind of learned the ropes as a marketing assistant and worked my way up to marketing manager of various products. And then went on from there to healthcare with HMO management early in kind of that industry, and then kind of switched to the agency side of the business. And that was sort of a fun thing where I was hired by a promotion firm. US communications here in Minneapolis and the claim to fame of this firm was that they got involved in Star Wars licensing in the very late 70s, early 80s. So if you think of like Dixie Cups with Luke Skywalker on them or world the toothbrushes or various things this firm was involved in some really early great licensing and promotional things. And at that time I was assigned to The Oscar Meyer business and many people on this podcast will be familiar with a product called Lunchables, and meat, cheese and cracker combinations. And I was on the original Lunchables rollout team and kind of in charge of the promotions and mailing rebates and coupons and in store displays and a number of elements to kind of get that product started and was kind of a fantastic new products experience early in my career, and went on to work on other accounts, in the early days of kind of telephone and cellular things, worked on the GTE account. And that introduced me to sports marketing they did they sponsored the Superbowl, they sponsored golf, the PGA Tour in those days, and just got some experience on the sports marketing side. And that was kind of a perfect prep for being hired to a company called CNS, which is maybe more famous as the Breathe Right strip company. So if you think of the little strips that go on your nose, I became the VP of Marketing there was VP of marketing for about five years and then switch to the business development side. And so business development, I’m not sure I even knew what business development was when I switched but started to concentrate on helping the company grow from an acquisition standpoint and look for various acquisitions. And then also from a licensing and strategic alliance side. And one of the quick highlights was we created a Breathe Right strip for kids for folds. So if you had a cold, it would be great and we had mentholated vapors built into the strip and we thought, this is going to be a great product Breathe Right strips with mentholated vapors, but it was an even better product if we could say it was a Breathe Right strip with Vix vapors, went to Procter and Gamble and met with the Vix team and the licensing team there. And eventually we were able to introduce Breathe Right for colds with Vicks vapors and turned out to be a very fun thing. But after my time at Breathe Rights started, what is now Altus it’s gone through a few, I’m gonna say name changes over the years, but started in 2001 and have kind of been managing the business ever since.

Pat Yates 7:53

That is an amazing name, drop background. Those are some big top brands that you’ve worked with. Please tell me you got to drive the Oscar Meyer hot dog car though.

Kirk Hodgdon 8:03

You know what? I did not but that was the garter. And I will say when the old corporate headquarters for Oscar Meyer was in Madison, Wisconsin, and when there’s about 10 of those Wienermobile is lined up, it’s a pretty impressive sight.

Pat Yates 8:21

I’m going to have to ding you some quality points because you did not drive the hot dog car, there’s no way the Wienermobile wasn’t fired up at some point I’d have been in that first thing when I got the job. I don’t know what you were waiting on. Anyway, that’s unbelievable. So some of these brands, what’s like mind blowing how big, and you went through the transition to those you’ve probably got amazing stories. But what’s the best one? If you say, Hey, here’s one that you just won’t believe it was so incredible how we fell into this or it worked out? What was a great takeaway?

Kirk Hodgdon 8:49

Well, I would tell you, Breathe Right would be one of the launches, if you will, that would be near and dear to my heart. When I was hired into the company, it really was a sleep technology company and delivered for lack of a better way to say it software and laptops to sleep centers around the country. And the inventor of Breathe Right strips brought the product to the company and said, Hey, I’d love to sample this and have you guys measure the quality of sleep people get because I’m an allergy sufferer. And when I put these strips on at night, it really helps me sleep. So could you use your technology to test that and show that you get a better night’s sleep when you have this Breathe Right strip on. And the chairman of the company, Dr. Dan Cohen kind of immediately knew as a physician, he knew you know what these strips are going to help with allergies, they’re going to help with sleep, they’re going to help with sports. They’re going to help with a wide variety of things. And so I’d actually like to license the product from the inventor. And that relationship led to me being hired and hiring a broker Salesforce to roll the product out. And I will say, I’m trying to think it would have been 94. I think our goal for the year was about 1.7 million in sales. It’s a public company, by the way, you can kind of look it up. But the next year, I think we hit 47 million in sales the next year.

Pat Yates 8:50

So you increased a little bit that next year, like 47x or so something like that. It’s real. I mean, gosh, it’s such a cool way. Like looking back on that I’m sure it was a lot to do, and when you were doing it, but it’s such a cool thing to talk about now that you’re involved with that.

Kirk Hodgdon 10:50

Yeah, I would tell you, there were some great, it was a super fun time we, we hired Jerry Rice to be our sports spokesperson, who was playing for the 40 Niners really had some fun things there, we worked with NATA, the National Athletic Trainers Association, and those trainers would work with NFL teams, and hand the strip’s out to various players. So we got a lot of visibility on TV. But the reality was snoring and congestion were really the major uses for the Average Joe at night, if you will. But that rollout taught me a lot about the value of PR, it taught a lot about sampling. It taught a lot about retail and retail management with all of the various retailers like Walgreens or Target or Walmart, and so forth. And all of those learnings lead to kind of a philosophy of every business has leverage, if you can sort of find what are those? What are those things where just a little bit of pressure produces a lot of results? And in the early days of Breathe Right? That was PR, because everyone wanted to know, what are those goofy strips on the noses of all of these football players? And there were a lot of writers and a lot of TV news crews that were interested in telling all of their viewership, what are those strips on the noses. And if we could tap into that PR interest, we could get really a lot of exposure and a lot of awareness really early. And so that helps. And as we approach every business we manage, we’re always looking for those little leverage points in their marketing plan, where can we be scrappy, and spend a little bit of money and get a lot of benefit out in return. So, low investment, high return is always the best way to kind of keep your product growing, and you get to the next level.

Pat Yates 13:03

That makes total sense. And what’s amazing about your background, you’re walking from some amazing builds of brands, like some huge brands, like you may talk small about it’s really incredible. But the takeaway becomes as you do that growth, you pick up so many things. So if you fast forward into Altus Marketing, you walked in with all this knowledge and PR enabled ability to take people’s products to market. And then once we talked a little bit about that you’re kind of concentrate on really three steps and three things marketing, communications, technology, strategic development, things you do at Altus. So tell us about that organization and how you try to take the history of those successes except for not driving the Wienermobile, how did you apply that to people’s businesses and take them forward and help them gain that kind of success?

Kirk Hodgdon 13:47

Sure. You know what I think that at the basic level, one of the things that makes us different is that we really approach it from a business background. I’m a big believer in what I call napkin math, it’s part of our philosophy. And it’s kind of like, for any business, if you can’t write down how you make money, like this is how we make money on the back of a napkin. Something’s wrong or it’s too complex. And so the idea for most of our manufacturing partners is, I have cost a product and I make a product and I distribute that product and it gets to retail or it goes through ecommerce and Amazon, but in the end, I need to understand the margins of that product and how I make money. And from a consulting standpoint, if you don’t understand that, how can you possibly make PPC investment decisions or how can you say, oh, I want to go advertise the product or what have you, you can’t make those decisions in a vacuum. So we really we start by understanding napkin math and making sure that we know how you do business. And then again, we’re looking for those leverage points, be they on the ecommerce side or on the retail side. And we attract a lot of companies that, again, are trying to level up and trying to find unique ways to get their product successful, either at retail, or with Amazon or with other Shopify or their own website. So I would say that understanding those things is huge. We’re data oriented, we do have a relationship with a sales broker group, that gives us access to what is called, well, it’s now sir Kana, but I’ll say IRI data. And this would be data that is tracking every product in every store. So you’re able to manage and kind of understand how you’re doing at retail, how much distribution do you have? And without that knowledge, you’re kind of managing blind wondering, how am I doing at my various retailers or across the country? And so we can help people with that data. And that allows us to be smarter about how do we approach the buyer at Target or the buyer at Walgreens, certainly good conversation about why we deserve to be on the shelf. So it varies by client, but I would say, it all harkens back to us being smart about how are we going to work together and what kind of money doesn’t make sense to invest in these endeavors.

Pat Yates 16:41

That’s really incredible. I think we talk at Quiet Light, really passionately about preparation and making sure people really truly understand what it’s going to take to exit at maximum value. And sometimes details just truly matter. Listening to what you’re talking about. I mean, I envision there’s a lot of people out there that say, you know what, I don’t either can’t afford it, or I don’t need it early on. And they go out and get us try to get a start in their business growing into these markets. And they sort of make some mistakes that you can save them time for, what portion of the business, do they become right to work with? You do they have to have a certain level of sales markets they’re in? Let’s say, someone’s introducing a new product, what’s the best kind of client for you at Altus?

Kirk Hodgdon 17:23

Well, I would say we work from entrepreneurs up to, as we talked earlier, I’ll say divisions of larger companies. But in general, we are very adept at, people that are just kicking off an investment and selling their product in limited ecommerce areas, to others that are trying to get to retail, the beauty of ecommerce and Amazon. I think my latest stats for consumer packaged goods and a lot of healthcare products is that ecommerce is now for many product categories, averaging about 30%. And stores would be the other 70% in general. And so when ecommerce is, number one, when it’s 30% of your business, you need to know it and understand it and pay attention to it. But the other thing is that it just so much it’s changed the nature of the investment for the entrepreneur in terms of how much you need to put into a business, and to figure out whether it can be successful or not. So we think it’s really smart. Most people are going to have their website and they’re going to have Amazon to start with. And there are so many things you can learn about how are consumers searching for your product? How are they interested in it? What kind of need is it fulfilling? How can you benchmark it with other successful products? How big could it be? Those are all things that you can learn on Amazon and as most of our business owners would know out there, there are lots of things that you can test so the beauty of digital sales is you can be AB testing you know a lot of things with regards to what works and what doesn’t work and why not tested at a much, I’ll say an inexpensive level when you decide to go to retail and sell your products to stores. The reality is the quantities and the risks get much higher much quicker, right. And so, if Walgreens says I want to order your product for my 9000 stores, well the reality is that’s going to be a big order and that’s really good news. But the other side of that is if you don’t sell well off the shelf that can be a really big return back to your facility. leak. So you have to be prepared and know where to invest. But I think we can help customers with those decisions. And getting it right on Amazon and getting it right on your own website first is usually a really great step for most people. And so we’ve developed that, I’m going to say the Amazon outlook and the tools to help people do that, in a pretty good way.

Pat Yates 20:27

It’s a really interesting point, you know that I’ve been an e-comm entrepreneur for a lot of time, a long time, you know, I was on Shark Tank, we had a lot of retail opportunities after that our products really not built for the retail environment. But what was interesting about it, we did a lot of specialty kiosk business, which sort of built our web business. So it was a great way to build a funnel and be able to build a lot of understanding about it, the more that retail and especially retail got worse, it became much more difficult to navigate. And that’s where I’m kind of interested, like, some people, if they don’t have an understanding of retail, let’s say they’re very good and e-comm. They think just because I do a good job and e-comm retail is completely different, and vice versa. So do you really believe that if someone’s successful in one of those sides, and then they’re going to venture into the other that they should just assume they can? Or is it better to reach out someone like you and be able to get that base down? If they don’t know what they don’t know, like, we say, what’s the best way? Should they always approach it first? And see, because of that?

Kirk Hodgdon 21:22

Well, I think the one thing that I would tell you is it’s going to vary by product. So I think it’s hard to make assumptions without knowing the product and where it fits in the category and that sort of thing. I think certainly, there’s data out there that would say, hey, I don’t know I’m making it up, if you develop a melatonin product to help people sleep better, the reality is we can look up the data on the ecommerce side and on the retail side and say, you know what, we can see that there are other products that are selling well, and for lack of a better way to say it, there are interested consumers that want to buy a product like this. And so those kinds of, like, if you’ve got a, I’ll say, a better mousetrap, but you’re in the mousetrap category, then I think it’s easy to predict or easier to predict how you might do at retail, especially if you have a point of difference. As you look to other categories, it might or innovations, like you have a brand new solution to a need. That one is, is where we might want to learn more digitally at lower cost to determine whether retail makes sense. The other thing is retail is much more specialized. So in the old days, there were a lot more retailers to go to and a lot more stores to try and figure out nowadays, that might be 10 to 15, major retailers that you have to figure out and the reality is you might not be right for all of them. If you’re a pet food company, the reality is chewy, and certain pet food retailers might be all the retailers you need to get to. And worrying about other retailers just doesn’t make sense. So it’s gonna vary a little bit. But I think, hopefully, that’s good thinking for most people.

Pat Yates 23:26

You make a really good point. And it’s actually when you take a step back from maybe if someone says, hey, I’m ready to go for retail, they just go why’d they think let’s try everything we could go, let’s throw this cast a wide net. I think what you just said, it’s kind of interesting, because if someone comes in, it’s better to have you guys like analyze their product and say, this may be great for you. But this isn’t in this would be an I’d stay away from this. I would think if you look at the product, do you usually have a good idea of what markets can be successful based on some of the historical data you have?

Kirk Hodgdon 23:53

Yeah, I think so. And I think that can be both historical data and, and real data. The other thing, by the way is that Amazon is a great tool to use and analyze for are there some competitive products on Amazon? And how well are those products selling? And what’s my point of difference compared to those products? And so, I would call this like size of the prize thinking or consulting if you will, which is like, okay, here’s my product, how big could this be? Right, like you had your business selling at kiosks and is this a $1 million business or a $50 million business and why? And so, thinking through that and being realistic about it can help you and then by the way, whether you introduce line extensions or new items in the same category. That can be something that will expand your business as you go forward. You don’t just have to have one SKU or one line of products too. But I do think in the old days, one other thing I’ll say about retail that the old philosophy was get your product on all the shelves, like get it out there, and then spend money on what I would call mass media, which would be TV and radio and print and other things, to tell a lot of people about your product, and then they will now that they’re aware of it, they’re gonna go out and buy your product, because everywhere they shop, it’s available to them. Well, nowadays, that’s just much harder, you’re not going to get into all of those retailers at the same time, you don’t really have a proven track record. And so being more creative about that, like, hey, I have a super great product, I want to take it to target and work with them and show them the potential of my new business and new category. And maybe I want to give them an exclusive for a year and not introduce it to any other retailer, because I want to get my product going with them. And they’re going to invest in my business. And by the way, you have to have a very special product. But if you look at brands, like I don’t know, Ali and brands like method, and all of these brands kind of exclusively started at a Target and got introduced, sort of at that loan retailer. And so partnering up or having a strategic alliance with a particular retailer might be a strategy, that could be a good one from that standpoint. I was gonna say one other big concept for people to recognize, too is that media has sort of flip flopped. And if you’re familiar with, the Amazon Media Network, or Walmart now has Walmart Connect, what’s happening is that retailers are creating their own media networks. And so, on Amazon, if you have a video that is essentially your commercial for your product, you can do video streaming to Amazon targeted audiences, and then track whether those people are coming back to Amazon in the next 30 days, or the next 60 days to buy that product. So if you think about investing in that network, and then determining whether it’s paying out, and there’s an ROI to actual advertising on a one to one basis, it’s kind of an exciting thing. Usually, those media options didn’t exist. And if they did exist, they were very, very expensive. And now, we could do a test with a client for $10,000, on Amazon to figure out, will my product respond to some advertising to the right target?

Pat Yates 28:08

Yeah, that’s incredible. It’s funny, because I’ve talked about that we have an NFL line that I’ve talked about how the NFL changed their Sunday Ticket to YouTube TV, which really changes advertising, people don’t think much about that. It’s a little bit different. There’s a lot of ways to build content and do other things that you have the ability to market to, and it’s great that you guys are doing that as well. So back again, with Kirk Hodgdon, with all this marketing, when you’re at all just what I was struck by this reading the site, you can pretty much come to you with conceptual idea and you can help them develop market and then eventually just probably even talk to market exit their business. So no matter start to finish, if they have an idea and want to figure out how to go down this path, they can come to you and just start from inception, correct, even if they’re trying to get conceptual marketing and development ideas.

Kirk Hodgdon 28:53

Yeah, I think, I would say we’re typically engaging when somebody is further in the process, like they’ve got their product, and they’ve tested it with consumers and or they’ve attempted to grow some things on their own website. But the reality is, we are working with real entrepreneurs that just have an idea or they’ve got a patent on something, and they’re not sure how to proceed at this point. The other thing, we have a client right now, that, frankly, is a university in Wisconsin that one of their professors basically created a patent around some really good biology and they’re trying to turn that into a product line in the cosmetics area. And so, like that is from ground zero that a lot of our work is happening with those folks. And it could be super exciting what happens with that particular product, so I’m gonna say yes, but it takes, you know, like sort of special products and special opportunities for that to work from ground zero.

Pat Yates 30:07

That makes total sense. But I mean, I think we’re trying to paint a pictures, there’s not much that you haven’t done if they want to understand how you build a Breathe Right strip that they have that then you obviously understand that it’s really amazing. So for the listeners out here, if you were to give them the 30 second overview of what you do the best Altus, if they want to come to you for the meat and potatoes or want to help grow their company, is that marketing? Or what is the best areas that you can actually make impact?

Kirk Hodgdon 30:34

Yeah, marketing is such a broad term, it really depends. I would say that, if you’re investing in ecommerce and Amazon, right, now we can really help. One of the things that we just our approach to Amazon is a little bit different, because of that understanding of the p&l understanding of your business. I think, too, that people get caught up in losing sight of what their product is, and they just start to manage Amazon on a robust basis, or here’s my financial measurement, and that’s what I’m going to do. And they’re not considering other elements of the marketing mix, like how could PR impact your business? Or how could I mean, simple exposure, things impact your business? How can influencers and social media impact your business and a lot of those outside elements bring people to your product detail page and your purchase page. And frankly, your algorithm can change dramatically with Amazon, if you’re bringing people to Amazon, I mean, all of a sudden, that’s going to be reflected in what your daily sell rate is. So I would just say, we can really help on the ecommerce side, that would be step one. And then if you get to the level where you want to entertain retail, we have that in spades and can do that very professionally and probably save you a lot of heartache in terms of what are the better ways and best practices ways to get to retail. So that might do…

Pat Yates 32:19

I mean, it’s such a necessary thing. And I think the more that people have success in business, they’re sometimes a little bit reluctant to admit, hey, I don’t know how to do this next step, but it’s better to learn it the right way. Having done some retail, it’s never an easy thing. So Kirk, here’s one question. I think that a lot of times there are creative ways for brands to get to market partnerships, alliances, different things. Maybe there’s some opportunities of things you’ve done in the past and might be food for thought for someone to do that.

Kirk Hodgdon 32:44

You know what, it’s a great suggestion. One of the things that I would tell you is we are actually the official name of the company is Altus Business Development. And even though we operate as Altus Marketing, business development is at our core, and one of my big beliefs is just one plus one often equals three. And so the idea is you have your current business, but for example, Pat, on your business, if you partnered with the NFL, could I do even better if I had a licensing agreement with somebody else, and I brought that partnership together. And so we’re I’m going to say relatively famous for some really good partnerships over the years and looking for opportunities where we can help our client find another company or an alliance and put those things together. So some quick examples where Radisson Hotel was a client. And we were able to, and by the way in that business, a hotel room is a hotel room is a hotel room, right? Like, what’s the difference between a Radisson room and a Marriott room or a Hilton room? And one of the things we did is we brought the idea of you know what, if we had sleep number beds in those rooms, and somebody coming to stay in their hotel could actually adjust the bed to their desired hardness or softness. That would be a real point of difference between a regular hotel room and what became a Radisson room. And so that’s an example of a I think, a great partnership, there was a lot of ways they could leverage media together. Another one was a client Carmex Lip Balm, small family owned company from Milwaukee. And we found out in video that during basketball games, LeBron James was actually dipping in his jar of Carmax and using Carmex Lip Balm right before every game, and we were able to and by the way, nobody’s got bigger agreements than LeBron does, in terms of Nike or Gatorade or other spots. chips. And the idea of how could little Carmax partner with LeBron? Well, we ended up just starting small and saying, you know what, let’s connect websites. And let’s do some digital things with LeBron. And that partnership ended up getting all kinds of PR and all kinds of exposure for Carmax over the next several years. And so the list kind of goes on, but I would just say for most business owners there, you think about your own business, but are there some friends out there are there some other businesses where when combined with your product or your service, one plus one really equals three? So and we can help.

Pat Yates 33:10

That’s really a great idea because you get the ability for both sides to strategically develop and it’s really creative because a lot of people can think wildly about what will be good with them. That’s a great suggestion. You obviously offer a great amount of services, your trusted Quiet Light partner, Mark, we’re obviously lucky to have someone like you that is, sort of in the wide Quiet Light family. So people wanted to reach out to you and Altus Marketing. Tell us how they get in touch with you.

Kirk Hodgdon 36:10

Yeah, I mean, it could be as simple as an email or a phone call or through the website, but I would say you can email me directly. It’s [email protected]. And I’m guessing we can provide that to people who are listening.

Pat Yates 36:28

Oh, yeah, for sure. We’ll definitely have a link on the site. I appreciate you coming in to the Quiet Light Podcast today was awesome having you on and if you want to reach out, make sure to look Kirk up, we’ll be in a situation where we can send you some clients and hopefully these people have some success either in ecommerce or in retail. I appreciate you coming on the Quiet Light Podcast today. It was great having you.

Kirk Hodgdon 36:46

Hey, Pat, enjoyed it. And we’ll talk to you soon. Thank you.

Pat Yates 36:50

Hopefully I get up there soon. And we can all have breakfast to sit down with Mark. I love hanging out with him anyway.

Kirk Hodgdon 36:55

It’s a deal.

Pat Yates 36:55

All right. Sounds good. Thanks for being here.

Kirk Hodgdon 36:58

Thank you.

Outro 37:01

Scaling Your New Product to Big Sales!

Annette de Lancey is the Founder and Owner of CastCoverz!, a made-in-the-USA preeminent global manufacturer, e-tailer, and innovator of essential orthopedic soft goods (brace, splint, boot, and cast covers), orthopedic accessories, and patient-requested orthopedic gear for arms and legs. As the Founder and Owner of She Makes Products, she transforms struggling product entrepreneurs into profit-making CEOs. With years of experience, Annette is a career entrepreneur, manufacturer, business and profit strategist, and champion for small businesses.

Here’s a glimpse of what you’ll learn:

[04:50] Annette de Lancey shares her personal background and the businesses she founded
[12:55] The concept behind the Profit First system and how it works
[18:37] How entrepreneurs should structure their financials when developing a new product
[21:59] Annette talks about the typical accounting and financial mistakes entrepreneurs make
[24:52] How to scale an existing business: first steps
[28:46] Why it’s valuable for female entrepreneurs to join business communities
[36:35] Why should entrepreneurs prepare their businesses for a sale — even when they don’t plan to sell?

In this episode…

Being a female entrepreneur in the manufacturing industry is no easy feat. Running a successful business requires mastering a variety of tasks, from ensuring production efficiency to maintaining product quality and keeping costs under control. Without the necessary expertise, these responsibilities can quickly become overwhelming.

Annette de Lancey is a serial entrepreneur who has founded five successful businesses. She knows the ins and outs of running a business and has overcome numerous hurdles along the way. One of her secrets to success is the Profit First strategy, which helped her scale her product business and achieve financial freedom. By prioritizing profits over revenue, Annette grew sustainable companies with purpose. Now, she dedicates her time to sharing her knowledge and helping other female entrepreneurs achieve the same level of success.

In this episode of the Quiet Light Podcast, Pat Yates and Ethan Alexander sit down with Annette de Lancey, Founder and Owner of CastCoverz! and She Makes Products, to discuss how manufacturing entrepreneurs can thrive. Annette shares how the Profit First framework works, how product developers should structure their finances, what steps existing businesses should take first, and why it’s a good idea to prepare your business as if you’re going to sell it.

Resources mentioned in this episode:

Sponsor for this episode

This episode is brought to you by Quiet Light, a brokerage firm that wants to help you successfully sell your online business.

Episode Transcript

Intro 0:07

Hey folks, it’s the Quiet Light Podcast where we share relentlessly honest insights, actionable tips, and entrepreneurial stories that will help founders identify and reach their goals.

Pat Yates 0:32

Hello, again, and welcome to Quiet Light Podcast. I’m Pat Yates. And I have Ethan Alexander with me today. How are we doing Ethan?

Ethan Alexander 0:38

Doing good Pat.

Pat Yates 0:39

I would reintroduce the fact that you’re my taco guy on the road. But we talked about that later in the podcast, which has nothing to do with Quiet Light to begin with. But we always find something to talk about. When I’m excited about this one today, Annette de Lancey, I know she’s in your city, unbelievably dynamic lady does a lot of things entrepreneurial. I’m excited just to hear what she’s doing. I know she works with Profit First, she worked with Lady Entrepreneurs tell it tell us about Annette.

Ethan Alexander 1:03

Yeah, so what’s really cool is we got connected because I had a need. So I ended up acquiring a company that did cut and sew manufacturing. And so we were running the company, we started to run into some manufacturing issues. And I realized, hey, I don’t really know much about this cut and sew manufacturing world. I know about operations and logistics and marketing, like these other things about a business, not so much on like this very specific subset of manufacturing, let me find someone who does, I ended up getting connected with Annette, and she is just so helpful, took me under her wing shared everything she has to know, because she has been in this space for a very long time. And so I am, I guess a testimony of what, just the help and support she provides. And from that her and I built a really great relationship and friendship from that. And so I’m very thankful for her and kind of the wisdom and knowledge she has to be able to share because she’s a giver, she just shares and provides whatever she knows about the subject, she’ll let you know about it, which is fantastic. So she’s never holding back. And she just wants to see you succeed, which I really appreciate. And I know that’s the mentality here at Quiet Light. And so she fits very well with that, which is why I’m excited to talk to her today.

Pat Yates 2:12

Annette is really after spent a bit of time with her. She’s so giving with her time, like you talked about It’s really amazing how we talked to so many marketing agencies, other agencies are always selling us something or here’s new widget, add this to your business, they’re looking for new business, she’s looking to add value in every way she can other people. It’s really amazing. Because she’s almost working a little too much. Not only is she doing a lot, she’s getting ready write a book, which is crazy. Because look, Joe wrote a book and look how that turned out. He was not very good at all. Just kidding, I know he’s gonna be Listen, Joe is gonna text me on now. But now she’s gonna take on doing a book. But I mean, your overall impression of her is just an amazing person giving back right? I mean, what about products? Have you seen anything she’s developed other? What about her new her brand? She has that you’ve been working on? What’s that thing?

Ethan Alexander 2:54

Yeah, so as far as kind of the physical product companies that she’s been a part of, and has established, I mean, she’s been in this space for a long time. And from that she’s gone through a lot of iterations. And we’ll talk more about this later today, just how she has pivoted through obstacles. Not everything is sunshine and rainbows, which is what I like, she’s not afraid to like, hide that part of her story. She’s upfront about, hey, these are the challenges I experienced, instead of the hard decisions I had to make. This is what I had to go through in order to get where I am today. And so like she’s done a lot of cool things. It’s been through a lot of adversity in her life to be able to kind of come out and be able to serve other people, which is what I appreciate. She’s just a genuine person that just tells it how it is and is very upfront and honest with everyone.

Pat Yates 3:35

I think anyone’s gonna get a lot out of this. And especially if you’re a female entrepreneur out there, who she specializes in working for you really should reach out to a niche. She’s an amazingly dynamic lady. I can’t wait for this conversation. Let’s get right to it. Get to Annette de Lancey on the Quiet Light Podcast. Annette is great to have you in the Quiet Light Podcast today. How you doing?

Annette de Lancey 3:53

Thank you very much for having me a little chilly here in San Diego which is unseasonable for this time of year but doing great thank you.

Pat Yates 4:00

You’ve got your advisor sidekick who’s in your same city there Ethan Alexander with us today. How are we doing Ethan?

Ethan Alexander 4:05

Hey, Pat what’s going on? Doing good excited to join today?

Pat Yates 4:09

Ethan is my man we usually tour taco places everywhere we go. He’s got my wife and I eat all kinds of wild tacos all over the world. We were I think we did where we actually did the United States and Puerto Rico. I think that was it last year. That was still a lot though. Mexico maybe.

Ethan Alexander 4:23

There we go. See we make a world tour out of it. So it’s also what I’ve known for. So if you want tacos, hit me up.

Pat Yates 4:29

That’s Ethan’s thing. If you need taco recommendations email [email protected] He’ll be able to tell Annette, enough about that. I know we’re in here to talk to you because you’re amazingly dynamic person on the verge of Ethan for why did nothing but rave about you so why don’t you introduce yourself to the Quiet Light family here. Tell us all about yourself and where you’re from, or you said San Diego. Tell us about your background and you?

Annette de Lancey 4:50

Sure? Well, I originally I’m a girl from Minnesota and I am very proud to say that but I moved to California about 20 years ago when I started a family here, but it was up in the bay area, we had a vineyard and an all of orchard everything you’ve heard the romance about it, everything is true. And so is the work involved. That was a great way to raise the kids, but then landed in San Diego. I am the founder and CEO of CastCoverz a rock and fun manufacturing company based right here in the United States. And we make fun and functional products for the orthopedic patient. And I’m also the owner and CEO of She Makes Products where we help women product entrepreneurs break through the six figure revenue barrier, so they can grow and scale profitably and have fun doing it.

Pat Yates 5:37

That’s really amazing. Because I have a personal story in that now. And Ethan kind of knows this, my wife retired from the school system last year and started a small Amazon brand. So she’s in the same position where she’s trying to empower herself as an independent businesswoman and learning along the way with mistakes and things like that. And that’s really amazing. So tell us a little bit about how you approach that what kind of clients typically come to you is it new product development, or is existing.

Annette de Lancey 6:00

So it’s typically existing, they typically have a year under their belt, they’re excited, they created something, the first thing that I do is congratulate them, because they’re a creator, they’ve actually made something out of nothing that is really unique and very special. And so I want to make sure that they feel very special. And so they continue that because we have our bad days and bad weeks, or sometimes bad months. And we just have to remember that we did create something out of nothing, just like I did with my company CastCoverz. And first of all, they come to me after about a year of being in business. That way, they’ve got some highs and lows, some seasonality, they could kind of get an idea of customers, it’s find out what they liked, they don’t like and then they also realize, oh my gosh, I’m in business now what. And so I helped them get through and a lot of them struggles, particularly women product entrepreneurs struggle to get through that six figure revenue barrier. And I did it took about three years when I started the company CastCoverz, which is 15 years old, by the way, seven-figure company made in the USA, all that good stuff. And then when I hit that six figure revenue, that was a big celebration, and you do have to make a high five win. But what I realized is I only brought home $6,000 in the family conference. That’s it. Now I understand that there are a lot of fees and dollars spent to get something up and running. But I had been running for about two or three years when I hit the six figure revenue. So I realized something wasn’t right. And so I started on this journey with CastCoverz to find out what was wrong. So I uncovered every rock I talked to business colleagues, I talked to my CPA, my business attorney, I talked to so many different people. And the one reoccurring theme that came through was profit. Now I still don’t have my answer like how much am I supposed to pay myself until I discovered or stumbled upon Profit First. And Profit First is a book written by Mike Michalowicz which has over yeah, I think there’s over 15 derivatives in other words, people have written Profit First for Lawyers Profit First for Hairstylist. Profit First for E-commerce Sellers. I think you’ve had Sydney Thompson on your podcast. There are so many different variations and derivatives. Well, one thing that I have discovered is there isn’t really a good system for manufacturers. So Mike and I have talked about having another book presented Profit First for Manufacturers. Currently I am a co-host with a colleague of mine, and we have The Profitable Manufacture Podcast. And I’m very excited about that. Because he and I will be writing the book together. So manufacturing is a unique breed again, we’ve created something out of nothing. And the journey really start with that profit journey. And when I finally stopped doing Profit First ish, or Mike ish, is when it really took off. And that’s when I realized I don’t want anybody else to go through really the suffering that I went through, and the worry and the concern and the frustration, anxiety. There really is a system out there. And I’m a great guide for it because I have gone through it. And I want to shorten that learning curve. And I also I’m on a mission to save 1000 women product entrepreneur, businesses from going under war, accepting mediocre results that sadly, what a lot of women product entrepreneurs do, oh, I can only do this much. I can only do this. I can’t go bigger. I can’t do this. That’s not the case. And they just need somebody that can help elevate, get them on the road.

Pat Yates 9:48

It’s really incredible. Like you don’t have enough to do that. You’re an entrepreneur, you’re writing a book on top of it. Now you’re gonna mentor hundreds of entrepreneurs. How do you have enough time in the day? That’s the biggest question.

Annette de Lancey 9:58

Ethan and I just got together last week and I explain to him I said, I’m an empty nester. My children are grown. I am a grandmother of two and a half year old love of my life. He’s the man in my life. And so my business is set up so I can have that time to be with him unencumbered. And that is what I like to teach my students to come through, she makes profitable products. So we get them profitable. And then they learn how to get their business in operational efficiency so they can actually fulfill success as they see it. Yeah, and everybody has.

Pat Yates 10:42

One thing that’s kind of interesting is I’ve gotten and Ethan will talk about this too, because I’ve spoken him many times about becoming more philanthropic, as I’ve gotten older, Ethan’s still young with me, I started my e-comm business that I’ve built for 20 years, once I sell it work only on Quiet Light, I want to do a lot of consulting and helping entrepreneurs and a lot of ways. So I have that set, got a mission, it’s weird that when you become an empty nester, and you have a little more time on your hands, you’re not doing family, you start thinking about those things. So I’m really kind of in that same boat, and I’m excited you’re doing that.

Annette de Lancey 11:10

And that’s actually been a real motivation for me, the idea of, well sadly, I know a lot of businesses owned by women that have had to shut down. And or they chose to because they didn’t see the options. And it’s such a sad tragedy, mind is a terrible thing to waste. To me, it’s the same thing is, this would be just a tragedy if there were solutions out there, and the support and encouragement that they needed, is out there and they could if they want to, they have to have that passion to grow the business that’s really kind of important. So I love it. And then I’m actually a little preamble here, I am building out an equity fund that I would be able to help women product entrepreneur.

Pat Yates 11:59

So you got another thing you’re doing any other stuff. You got like a night job a bartender.

Annette de Lancey 12:03

No, no, no, but that’s funny. No, no, no, I do want to travel.

Pat Yates 12:08

That’s amazing. I mean, like, you’re so active, and you’re so bubbly, you’re going to add a lot of value to things. Ethan, I know you’ve worked with her for a while. Tell us your thoughts get what are your thoughts on our business and things he’s doing?

Ethan Alexander 12:21

Yeah, so Annette is as active and as energetic as she seems here today. And so I know she’s a woman of many sorts. Annette I want to start off and go over, you mentioned this profit first concept for anyone who doesn’t know what that is what those fundamentals are, I’m going to start there. So can you walk us through? What really is Profit First? How is it helping entrepreneurs get from this place? Like you said to your example, you were making revenue, you weren’t taking home a lot of money, obviously, what matters is what we take home. So walk us through kind of what the concepts are of profit first to help entrepreneurs actually…

Annette de Lancey 12:55

Happy to do that. So basically, if you think about it, it’s turning the general accepted accounting practices on it’s head, which is sales minus expenses equals profit, right? We all know that, right? Sales minus expense. Well, guess what? Most entrepreneurs, we have a very unique brain. And we’re always thinking forward and we’re always looking at what is in our bank balance, typically. And so if I had a $10,000 month was like, whoa, I could spend $10,000, you know, and then my husband would ask, well, where’s our money? Oh, well, we don’t have any. And so what profit first has done is turn that upside down. And taking sales minus you take your Profit First, which is your pay first. And then you take out money for taxes, because how many of us have gotten hit with a tax bill, we weren’t prepared for it. And then that’s what this is in summary, this is what is left over for your business. So then you have to allocate resources, you have to get more creative. It’s like that tiny tube of toothpaste a little tiny bit left, if you squeeze, squeeze, squeeze to get it out, versus the big full tube and use go. It’s the same thing. So if I had $10,000, guess what I would spend 9950 and say, well, here’s $50. In essence, that’s kind of what we do. But if I took 10,000, and then I have a percentage based on my business, that’s the Profit First system, I would take out roughly 30 to 50% for my salary, and then have what’s remaining for taxes as well as for operating expenses. You have to get lean and mean and boy, does that make a big difference in you and so the other thing is as entrepreneurs, well, let’s put it this way. CPAs and accountants will look at your invoices, your credit card statements, your balance sheet, everything what’s has happened, right? Everything that has already transpired as entrepreneurs again, our brain is different. We’re thinking forward, we’re going I made my next marketing campaign. Who am I gonna hire? What’s sales gonna be like next month or you’ve already forgotten what’s going on. So it doesn’t make sense to us when our p&l shows up. And it says, oh, you’ve made a profit. But where did where’s the money in the bank? And I remember even when I had a discussion recently, because I had him on as a guest, on my she makes profitable products in 90 days program. And we talked about the fact that a lot of times you have this profit showing on your p&l, but it doesn’t show well, you got to look at your balance sheet and see what you get owners distributions, what our distributions, what taxes are saved, what taxes are you saving, those type of things. So it makes all the sense in the world when you go through the program. And it’s the way it works for the entrepreneurial brain.

Ethan Alexander 15:42

So it sounds like it’s being very purposeful with pretty much every dollar coming in, as well as spending out and so someone, I guess someone started on this journey in the sense of, okay, this sounds like a good idea. You mentioned okay, you allocate your percentage to what’s going into your pocket? How does someone start in that journey in the sense of how does someone calculate okay, this is how much should be going to my pocket? Like, what are some factors people should be looking at?

Annette de Lancey 16:09

So, can certainly pick up the book Profit First by Mike Michalowicz, absolutely Can you do it by yourself? Most people can’t. It’s very, very difficult. And so you could find a bookkeeper, or CPA there’s over 600,000 of them. Excuse me, 60,000 of them, excuse me 60,000. And, actually, I hope you can cut this out. Actually, it’s 6000 of them. There’s over 1 million businesses that have incorporated profit first. And then I’m a coach, I’m a business coach. And so if I had had a business coach four years earlier, I would have saved myself so much pain, I would have paid myself so much more, so much faster, because we live it, eat it, breathe it. And it can be kind of daunting at first, because it’s very confusing, because you’re just still kind of working on the old principle. But you can read the book, but then I would recommend that you either go to Profit First blogs, and or any kind of YouTube videos, just make sure that Profit First, not somebody else’s, or somebody that’s been certified the Profit First system, which I have, it saved my business twice, twice from going under. That, to me is the biggest testimony. And that’s what I said, that’s what I got to offer. My She Makes profit Products. And to me profit is the X factor of success. If you don’t have profit, you really can’t get successful, and you won’t have a sustainable, successful business. And you could get the Oprah effect where all of a sudden, something comes in some big influencer or whatever, which I’ve had, but that those are anomalies, those are things you can’t count on. So you have to count on what’s real, and Make Friends With Reality. That’s the name of my other book, by the way, Make Friends With Reality, and have that basis and you have those accounts set up for those things that come along, even if it’s a pandemic, but you save for taxes, you save for salary, and it’s all based on formulas of fiscally elite companies. And so you find out what your revenue ranges and you find out what, and we can all help you with that. And it’s it works. It’s just, it works.

Pat Yates 18:20

One thing I’m curious about Annette is how do you pivot, let’s say that you have a brand new person developing a product and it came to market today, and they are going through Amazon, you know that advertising is that they’re going to lose money every month until they build it up five, six months. How does someone in a startup if they know they’re gonna have to bootstrap and begin it even begin to do that? I guess the best way to put it.

Annette de Lancey 18:37

Oh, I love this question. Thank you. So what you do is you take your sales, let’s just say it’s $10,000 and you pay yourself 1%. Just pay yourself 1%. Just put it aside, pay yourself, and then you put 15% for taxes, just put 15% away. And then you have to look at Amazon because I want to Amazon, you have to look at Amazon as a wholesale account. I can’t get over how many people think they’re like a direct to consumer account. They’re not a direct to consumer account, they’re a wholesale account, so you can’t expect the same margins. And so you’re doing well if you get 35 to 40% margins with Amazon depending on products but as a general rule, but so you get started you get in the habit. That’s the key is oh, I got $10,000 I’m gonna take 100 and put it aside. And the other thing that’s important is every three months you take a profit distribution, you congratulate reward yourself and celebrate what you’ve done. Now, an example of that is I had somebody who said, my quarterly distribution be like $300 kind of celebration, can you have and I said you’ve got the Cincinnati Zoo, and the animal pass is $300 buy your family and annual pass of the zoo. You could take them every weekend and say the company bought this she just did just opened her mind up. And you can do it while you’re in debt as well. And we formulas for that and methods and then I’ve added my own because of manufacturing is unique manufacturing, you got to consider your cost of goods that takes a substantial amount of your capital and your revenue that comes in. So getting started, it’s just about building that habit getting into the habit. And then once you’ve got kind of a pattern down, and that’s why I kind of like seeing women product entrepreneurs who’ve been in business about a year, because then they kind of got a handle, they see kind of what’s going on. And then I did have a client who I have a client who was doing about 150,000. And then she got on Tik Tok. And she blew up and didn’t know what to do with the cash, she didn’t know how to do inventory, she didn’t know how to plan for cost of goods, she didn’t know, and so I could help with all of that. That’s the unique thing about manufacturing. And that’s not in, there’s just a small section in the book. And that’s what Mike and I have talked about. That’s why Jason and I, my colleague and I are going to be writing, he’s got the bookkeeping side, that’s just fine. He’s got that book up, I’ve got the octuplet experience. And so between the two of us, we’re going to make a great book for manufacturers. And again, we’re creators.

Ethan Alexander 20:04

And so I know our conversation is very financially focused here today, and Annette you’ve been, through this process yourself, you’ve helped clients go through this process, what are some common pitfalls that you see whether you self-have made them whether you see clients making, or just other businesses, making them kind of in this scenario, that would be just good to know. So people would be like, Oh, maybe I’m making that mistake. And maybe I should be at least aware of that mistake. And if as long as your problem where you can then become solution aware. And so what are some common pitfalls, mistakes, errors, people are making kind of along this line of accounting, finance, planning their profit, things like that.

Annette de Lancey 21:59

Number one, is I’ll do this when I start making a profit, number one, and don’t do that. Because I did that. I kept saying, well, when I get to I will. And or when I make this much per month, I mean, revenue, I will. So get started. Now, just like I explained to Pat, when you get started, take that first. It’s bought habits, it’s about creating habit. So number one, don’t wait. Number two, don’t do profit first ish, or Mike ish, like I did. I started out on spreadsheets versus separate bank accounts. And that just was got messy. And then I did bank accounts, but I still didn’t have all the real bank accounts. And so don’t do profit first ish, or Davis go all in. And we can help you any of us can help you profit first certified professionals. And it’s actually kind of fun, we’re kind of going against the mainstream is what we’re doing. And by taking control of our habits and our behaviors, and putting them into the business. So some of the other pitfalls are not doing your monthly bookkeeping. I’ll get to that later. If you can’t get to it. And that’s not your strength. Hire a bookkeeper. Typically, they’re not very expensive, especially when you’re just getting started. If that’s not your jam, if it’s your jam, do the bookkeeping. And then another is when they get a little bit lazy. And they all of a sudden don’t take the profit distribution, and they’re not celebrating their wins. This is a big thing that has to happen in the entrepreneurial world. We’re in our head, or by ourselves a lot. And we just don’t celebrate our wins. Many times I’ve asked Ethan when something cool has happened. I’ve asked how are you celebrate? And that’s my way of just reminding him and anybody I am. But what’s really interesting is something happened to me recently, and one of my students said, how are you celebrating? Oh, you’re right. I wasn’t celebrated. So again, you just need that support that accountability, that reminder. Even I do you and I need that.

Pat Yates 24:14

I mean, that’s great stuff. I think that they’re really actionable tips. And I’ve checked out the Profit First, I think that people that are established and businesses have a hard time pivoting to it. I think you’re right. It takes incredible discipline. I mean, one of the things I’m curious about, I’m more curious about you and how you help develop women entrepreneurs, give me an example of things that you’ve done. Let’s say there’s a woman entrepreneur out there that’s thinking, hey, I have no idea what to do. But I had this idea of a product. I mean, how can you help them get to market in scale? I mean, what steps do you typically go through?

Annette de Lancey 24:43

Are you talking about somebody who’s already been in business or somebody who’s not?

Pat Yates 24:46

Yes, well, I mean, I guess somebody in business if you’re gonna help them develop to that $100,000 mark, what are the first steps you do?

Annette de Lancey 24:52

So if they’ve already been in business, so they’ve already got their business license, they’ve kind of decided they’re gonna be on Amazon or eBay or whatever the best thing what I do is I review the product I review their pricing and where they’re getting their product made. Is it in house? Is it? Are they farming it out? Is it offshore? Is it onshore? What’s better for them, we look at their distribution channels and what the makeup is going to be. So for example, in my world CastCoverz, so we go direct to consumer. And then we have wholesale accounts such as Amazon, we’re the largest provider on Amazon, or, well, we’re the largest in the world, actually. And then we also have distribution channels for medical supply stores, retailers, and orthopedic surgeons very, very different mix and then have different messaging. And so you have to think about that. And you have to think about, are you going to expand your product line? Is that a good idea? Or will that dilute what you’re trying to accomplish? For example, during the pandemic, I was asked, because I had production facilities to make masks. And I said, no, because my mission is fun and functional products for the orthopedic patient. Masks were not it. And the reason, and I’m so glad it was, I guess some people say this is a smart decision on my part. But I didn’t do it, I could have done it, I did other things for the cause. But I did not do that I did not risk my business. And one time, actually, Ethan and I were at a sewing contractor in San Diego, and they had 1 million masks, waiting to be paid. They hadn’t been paid in a couple of months. And so that’s an example of the risk. And so if you go outside your scope, so we identify what your scope is, we identify what your mission is what your Y is. But then I also get into promotion. And pricing. Pricing is really critical to make sure you get the margins that you need, we identify that. And we also identify the promotion. In other words, how are you going to be visible? Everything’s different now than when I started the business 15 years ago, we didn’t have influencers. I think I still had a fax machine back then. So things that really changed. So we have to look at that. And we have to be able to be nimble enough to pivot.

Pat Yates 27:10

Yeah, it’s really amazing. You say that, because I was talking to someone, I think it was on Friday, and I was reflecting on my business that I still own My Account business. And I said the efficiencies that have come from 2020 have really changed the way that I do my business like even to reverse engineering how I get product in the United States, whether it’s an Amazon FBA or wherever it is, there’s so many new options and people learn so much in the last few years. I think businesses have the ability to overhaul their entire company. And I think, you did that you do that. Ethan, what else do you have I know obviously, the Profit First the manufacturing stuff, I mean, you’ve spent enough time what other, she’s got to have some other dynamic things she can teach people.

Ethan Alexander 27:51

We can probably be here all day. But I do want to continue on this path as far as I have a lot of friends acquaintances who are female and are obviously looking for community. Just because of the entrepreneur, ship world, it’s not the most common things, it’s your most circles is male dominated. But I guess with that, Annette with what you’ve seen, what you’ve built, I guess what would your message be for someone who may be listening a female entrepreneur who maybe hasn’t started a business yet or is in the very beginning stages and is looking for community or like-minded other females out there to be able to connect with to learn from to grow from just because I know there’s a need. I’ve talked about it plenty of times over the years. And so you’ve obviously had a very good experience a good resource and knowledge base here. So any tips? Any other helpful insights?

Annette de Lancey 28:46

Yeah, so it’s really interesting, you brought this up, because so I have, as I mentioned earlier, I have the X Factor, which profit is right in the middle. And then I have my four spokes, which we’ve already talked about, but the circles around it is support. And the support is a really interesting thing because a lot of people say well I’ve got support well okay, let’s talk about that. So there’s a support spectrum. So on the far right are the cheerful people then on the far left are your dollars you don’t need doubters in your world, you’ve got enough critics in your head. You need to make sure you surround yourself with people who support you and have your best interests at heart. And what I mean by that is so you’ve got the Debbie Downer as a negative Ned’s and other ones say who do you think you are? You don’t know anything about this. My dentist had an idea, woman dentists had an idea of a product and it was something far outside her field actually that was a really cool product for her sister, who’s a lawyer actually said who do you think you are? You don’t know anything about this. And I mean, just shut her down. And so you don’t need those kinds of people in your world. And then on the other side you think walk out the positive people? No, actually. So how many of us remember Cheri Oteri and Will Ferrell doing the cheerleader on SNL that did those they were just happy, positive people will sometimes what that can do is derail you, because they say, yeah, go for it, you haven’t given it the real perspective, and the due diligence, it needs to be able to get the right support. So you need the right support. So to answer your question, Ethan is, I would identify with any of my clients, my students that come to me and say, okay, let’s talk about your support, let’s go through the support spectrum, and see and engage them. And often they don’t have the right support, they don’t have the person that has the experience has the knowledge, and has their best interests at heart. And so you want to make sure that that’s around so you can get that from family and friends. But it is better to have somebody and to always have people in your corner, they’re a little bit more experienced than you are always because they have that experience, and they can help you. So where to find that. I think that was also what you were asking about Ethan, there are a number of forums on Facebook. And what I recommend is that you go into the forums, pay attention for the next two to three, four weeks, and then start commenting, asking questions. And if you like the forum, then I would stick with it. If not, then you move on and find another one. There’s also your chamber of commerce, your local chamber of commerce is really a great resource for businesses Join your local chamber of commerce, you’re gonna find other business people. So there are a number of different groups there are. And of course, the pandemic has changed everything, as we all know, and we wanted to go down that rabbit hole. But there are so many other zoom opportunities in my she makes profitable products, we get together on a weekly basis. And we also get together on different events as well. So we support and encourage each other. In fact, I just had a dinner recently. And they were all talking about all the problems that they had and face to face, it was really fun. And talking about, oh, we’ve had this problem, this bag manufacturer, we have this problem with this designer, and so it’s just like they all walk away saying, Okay, I’m not the only one in the world with the problem.

Pat Yates 32:20

It’s really funny, because I think those groups, a lot of times entrepreneurs are very guarded to admit they don’t do things well, I think when you get in groups like that, it makes it easier to throw yourself on the sword and understand that other people made mistakes. So until a solopreneur, really reaches out and tries to learn that they could probably be in a situation, they’d worry about it. One thing I found interesting about your site, it’s like you give them an opportunity for free to come in and find out so you do like a free call with someone to say, let me see how I can help your business. I mean, there’s absolutely one out there. That’s a lady entrepreneur that shouldn’t do that. I mean, at least get some great information. So what do you usually do on that initial call, just if you’re…

Annette de Lancey 32:55

Oh, this is one of my favorite things. I love to ask the questions to extract the knowledge out of there. So they’re actually saying things they didn’t even realize were in their head, about their business and about why they started their business and what the problems are. And I can pretty much sense and it’s a zoom call, so I get a good face to face. I’ve never had one where it’s just a call back. I think there was one woman that wanted to call, just voice call. And because of her schedule or something like that. I said, I really prefer face to face. And I really want to get to know you. And she okay. And she said by the end, she was very glad that it was face to face because she really got a sense of the sincerity I had for her business. So what I’d love to do is pick businesses apart and be able to find where the underperforming assets are, and things that you need to kind of like let go of, and sometimes that’s really hard to do. And I’ve had many product lines throughout the history of CastCoverz. One of my favorites was my designer color crutches, loved that product. I was a distributor first and I bought her out and it was a huge seller for us. But it took a tremendous amount of inventory because crutches take up a lot of room because it took a lot of labor because I had to disassemble everything. I didn’t do it but the purchase had to be disassembled, then sent to a powder coder, and then brought back and then reassembled. And so there were these beautiful, gorgeous crutches. Well, what happened is a few years after I bought it Pinterest came out and shipping dimensions changed and shipping dimension when you ship a crutch box. I mean, it’s 48 inches long, and it’s heavy. And so what I had to do is increase the price of the crotch to include the shipping. And so then it became more of something for somebody with chronic like maybe they had maybe amputation or they had cerebral palsy or something like that. And they use crutches all the time. And then Pinterest came out and it was the explosion of creativity, you could put down all your crutches and add ribbons and all that kind of stuff? Well, I would have done that for my daughter, my daughter was broken 22 bones. She’s my inspiration company. And I would have said, honey, let’s go to my goals. Let’s go get the dazzle and does our crutches. So I totally got, I had to let them go. They were taking up huge amounts of storage space. They weren’t selling. I mean, the sales were slowing down. It just wasn’t worth it. And I had to let them go. And so I tried to actually donate them to Shriners to children’s hospitals to adult hospitals and nobody would take them. I got phone calls during pandemic, by the way, do you have any of those crushes left because we could use them. There was a run on aluminum acids already. That was a few years ago. But I remember taking them to the recycler and watching them getting crushed in the recycler. But I had to let them go. And it was a good decision. And even though they were 25% of my revenue, we came back next year like it never even happened.

Pat Yates 35:58

That’s just amazing. I mean, I think that you have such a diverse background, what’s interesting is is that at Quiet Light, we talked a lot about how we want to be actionable for the client first, like we want to give them to actionable tips that improve their business, basically, same thing you’re doing from another standpoint, but at a ground level, which is incredible, because I think a lot of people are in such a formative area less than 100,000 in revenue. So the target of people you have versus saying I’m going to work with someone that’s 500,000 goes to a million. The great news is, is you’re taking those base entrepreneurs that really need that help, and you’re given the opportunity, it’s a really amazing. So tell again, how people can get in touch with you the site and your email or whatnot.

Annette de Lancey 36:35

I also wanted to leave you with, and this is so interesting that I’m on your podcast, because I tell all my clients to always prepare your business for a sale, I’m not going to sell it well, I’m going to give it to my grandchildren, I’m going to do this, I’m going to do that with it. And you could have an ESOP, we don’t know what’s going to happen. But the point is, you’ll become very efficient if you prepare your business for sale, because you don’t know what’s going to happen. You could end up with a catastrophic injury or an illness or somebody in your family and you need to leave the business and you have to leave it like that you don’t sometimes have time to prepare. So I do always tell my clients prepare your business like you’re going to sell it, you don’t have to, but just prepare your business and profit is one of them. And the operational efficiencies is the other one. So they can get in touch with me at shemakesproducts.com. And my email is [email protected]. And my manufacturing company has CastCoverz. And that’s castcoverz.com. And you can find me all over the place. Instagram, whatever I’m all in.

Pat Yates 37:48

That’s amazing and I think that the great news is having someone like you on here that’s I can tell you’re just basically invested in everyone else you work and even though you develop your own products, you’re much more invested in other people, which is where the best relationships I think start. Annette it’s been amazing having you in the Quiet Light Podcast today. I appreciate you taking the time and I’m sorry, you got to work with Ethan all the time, though. You just tell me if you need something he’s not very nice guy. Actually, believe it or not. I’ll brag on him. I think Ethan is the smartest guy at Quiet Light. I’m not going to kid you. Every time there’s an answer needed, Ethan knows about everything there is to know. I’m too old to know everything I just asked him.

Annette de Lancey 38:21

He’s been great too. I consider him a call.

Pat Yates 38:25

Awesome. Well, that sounds good. I appreciate you being here today. And we’re looking forward to talking to you in the future.

Annette de Lancey 38:30

Thank you, Pat. Thank you, Ethan. Thank you everybody.

Outro 38:35

Build and Scale Your Walmart.com Store With SellCord!

Michael Lebhar is the Co-founder and CEO of SellCord, a full-service agency specializing in launching and scaling brands on Walmart.com. As a serial entrepreneur, he is also the Co-founder and...

Michael Lebhar is the Co-founder and CEO of SellCord, a full-service agency specializing in launching and scaling brands on Walmart.com. As a serial entrepreneur, he is also the Co-founder and CMO of Engaging, where he develops marketing campaign strategies. Employing his in-depth knowledge for scaling and selling his own brands in the Walmart Marketplace, Michael has become a leading expert in online and in-store growth strategies. When working with clients, he collaborates closely with brands to understand their unique needs and goals to provide tailored solutions for thriving in the Walmart Marketplace.

Here’s a glimpse of what you’ll learn:

[02:02] Michael Lebhar shares his background as an entrepreneur selling on Amazon and at Walmart
[04:50] Can Walmart compete with Amazon — and why is SellCord’s focus solely on the Walmart Marketplace?
[06:52] The common misconceptions and benefits of selling in the Walmart Marketplace
[09:53] How SellCord starts the working relationship with clients
[13:01] Considerations for those wanting to enter the Walmart Marketplace
[14:56] Michael explains how SellCord helps clients open, manage, and monitor their Walmart accounts
[16:35] SellCord advertising strategies for Walmart sellers

In this episode…

Entrepreneurs running e-commerce businesses on other marketplaces may not be aware of the potential for growth in Walmart’s Marketplace. As the world’s largest retailer, Walmart offers a valuable opportunity for those looking to expand their reach. However, launching and scaling brands at Walmart requires specialized expertise that many lack.

Mastering the Walmart Marketplace is complex due to its many intricacies, as noted by Walmart Marketplace professional Michael Lebhar. To succeed, businesses must manage and monitor accounts, adhere to style guidelines, navigate various processes and protocols, and execute persuasive advertising strategies. For those seeking sustainable growth and rapid success on Walmart.com, partnering with an agency that specializes in navigating this platform is wise. By partnering with industry experts, brands can streamline operations, optimize listings, and create effective marketing strategies, enabling them to stand out in a crowded marketplace, drive sales, and achieve long-term growth.

In this episode of the Quiet Light Podcast, Pat Yates sits down with Michael Lebhar, Co-founder and CEO of SellCord, to discuss how e-commerce businesses can thrive in the Walmart Marketplace. Michael talks about the benefits and misconceptions of selling on Walmart.com, why SellCord focuses its expertise solely on the Walmart Marketplace, what brands should consider before deciding to expand to Walmart.com, and why working with an expert is crucial for scaling an e-commerce brand.

Resources mentioned in this episode:

Michael Lebhar on LinkedIn
Michael Lebhar’s email: [email protected]
SellCord
Quiet Light
Quiet Light Podcast on YouTube
Joe Valley on LinkedIn
Pat Yates on LinkedIn
Mark Daoust on LinkedIn
Quiet Light Podcast email: [email protected]
The EXITpreneur’s Playbook: How to Sell Your Online Business for Top Dollar by Reverse Engineering Your Pathway to Success by Joe Valley
Walmart Connect

Sponsor for this episode

This episode is brought to you by Quiet Light, a brokerage firm that wants to help you successfully sell your online business.

Episode Transcript

Intro 0:07

Hey folks, it’s the Quiet Light Podcast where we share relentlessly honest insights, actionable tips, and entrepreneurial stories that will help founders identify and reach their goals.

Pat Yates 0:32

Hello, and welcome again to the Quiet Light Podcast. I’m Pat Yates. Today we have a great conversation. It’s really exciting and one that we don’t get very often. Most of our buyers concentrate on Shopify, Amazon, I hear people mentioned that all the time. And the one word that I rarely hear people talk about passionately, is walmart.com. Now, it’s a great marketplace, huge, everyone knows that. But some people have decided not to go on there for whatever the reasons may be. Could be tons of reasons. But today, we have Michael Lebhar with sellcord.co. And I like Michael’s approach to this because the agency only works on Walmart, it’s not like, we’re gonna take the smaller one and we’re gonna gain Amazon and get a lot of revenue, they really concentrates, they can be good at one thing, which is to build you onboarding, to get your listings right to look at your PPC, basically anything you can screw blue, or tattoo to Walmart, these guys are going to try to help you. I think there’ll be some amazingly actionable tips and people will still be able to get information from Michael and sellcord.co, if they need to do it anyway. Or if they want to work on their Walmart store in the future. So I’m super excited to hear what he says about Walmart today. So let’s get right to it. Hello, Michael. Welcome to Quiet Light Podcast. It’s great to have you here today.

Michael Lebhar 1:40

Thanks for having me. I’m excited to be on.

Pat Yates 1:42

Me too. I know you and I sort of talked to we’re sort of really alive as entrepreneurs. We’re both excitable. We both like online businesses. I’m really curious today. I know you’ve got a lot of history in Amazon and Walmart at sellcord.co that’s your business. So what Michael, why don’t you tell the listeners all about you where you’re from, and maybe a little bit of an overview.

Michael Lebhar 2:02

For sure. Thank you. So I live in LA, I started selling online early in high school, built a couple brands online, a brand and fitness brand and supplements, started seeing good success. And Amazon allowed me to build like a strong brand, I was doing it in between classes in the morning at night, I was able to build that brand up a lot and expand into a lot of channels. From there, I kind of saw a lot of success with Walmart. So I decided to put a lot more focus there, put a lot of focus on Walmart eventually got one of my brands, the stores nationwide at Walmart and realized that there was a big opportunity with Walmart, it was growing so fast, fastest-growing marketplace, and a lot of people didn’t have a good understanding of it. And they were so busy with their Amazon business to properly address it. But it was such a good opportunity. So we launched our agency around three years ago, helping brands launch scale, manage their walmartbusiness.com, and get them help get them get in stores and kind of a full Walmart ecosystem. And yeah, we now work with over 400 brands manage everywhere from like Amazon brands that are new to kind of getting into some of the largest brands on Walmart.

Pat Yates 3:16

That’s really incredible. I mean, obviously, I think what’s interesting to a lot of people, sometimes you never know where someone’s going until you know where they’ve been. But you were also an e-comm entrepreneur for a long time you said you started with your high school, maybe give us an overview of some of the things you’ve done maybe in your other lives. I mean, there’s some cool businesses people want to know about.

Michael Lebhar 3:34

So because I started so really most of it was e-comm, like I tried other things early on, like everything from a car washing business to like a lawn mowing business. So like all the classics. But once I, because it was so early, it was in 10th grade that I really learned about e-comm and really dove right in, I just like became fully obsessed with it. I started first like reselling products for a few months, and then pretty quickly, I’m like, okay, private label is a great opportunity. And me and my brother were really into fitness at the time. So we’re like, we started looking at fitness products. And we started with that we had like a workout glove that didn’t really well. And from there, we kind of just went down that path.

Pat Yates 4:20

Wow, that’s really incredible. Sometimes it’s interesting because I was an athlete as well. It’s funny how being around athletics and teams, other people sort of motivate you in many directions. That’s amazing. So let’s jump into SellCord a little bit. Again, we’re with my Michael Lebhar with SellCord, you really kind of are interesting, you concentrate a lot. Most of your site is focused on Walmart. And that’s weird for an agency because a lot of people lead with Amazon and then follow with Amazon then they follow up with Amazon and then they go to Walmart like seven. Tell us a little bit about why you’re so passionate about walmart.com.

Michael Lebhar 4:50

Yeah, so our agency is actually exclusively focused on walmart.com, which is cool. We don’t do any other platform right now. And it’s been really interesting because, I noticed that it’s the fastest-growing marketplace in the US. It’s second largest marketplace in the US, and the largest retailer in the world. And obviously, it’s hard to compete with Amazon. But Walmart’s, the only company in my opinion that’s really wants to do it and putting their investment to do it. So they’ve been moving so quickly and really investing so many resources and doing it. And because they have their own philosophies, no one I ologies, how they want things done. So they created an environment that if you just plug and play your Amazon business, it just doesn’t work as well. There’s a lot of things that are very unique and specific to Walmart and learn to be really successful on it. There’s so many unique components to it. And most brands and entrepreneurs don’t have the time to handle it. And building up the resources to manage a channel is really difficult, just because it’s so new, and it’s changing so quickly. And kind of realizing that it’s like a massive opportunity, it’s growing super quickly. But where it is right now, for a lot of sellers isn’t enough sales sometimes to kind of justify that. So realizing a really interesting opportunity there. We built kind of our resources around there. And we’re close partners of Walmart, we’re one of their approved partners, and we’ve worked very closely with them. And we’ve been able to see like so much like awesome success. And it’s been really cool, and just been building around that. And now we’ve been building tools that help support those sellers. So it’s been really cool.

Pat Yates 6:22

Yeah, and it’s really amazing to do that exclusively, a lot of people would try to diversify, I think sometimes concentrating may be the biggest thing. And it’s really amazing, because it’s not the easiest platform. Some people a lot of people really understand Amazon or Shopify, but they don’t really get Walmart, what are some of the biggest, I don’t know, maybe misconceptions about Walmart. So I hear a lot of people say they will go on there, which kind of doesn’t make a whole lot of sense. So if they don’t have a lot of bandwidth, maybe they shouldn’t have time to build it. But is there a reason a lot of people don’t go on there?

Michael Lebhar 6:52

Yeah, so a few different things, something I hear a lot of times, it’s like, it’s not good for my brand. Now, that’s wrong, because it’s a marketplace, right. So if you don’t list your products on there, somebody else is gonna list your products on there, oftentimes, and anybody else couldn’t list your products there and you’re not going to own the content, they’re going to put whatever they want up there. So, number two is on Walmart has extremely high domain authority. So when people shop your brand or products on Google, oftentimes a Walmart link is going to come up and you’re just capitalizing on free Google traffic, right. Walmart also spends a lot with Google ads to drive to those listings. So like, there’s a ton of traffic from there. So that’s like another kind of misconception. And then I think it’s just what people have to realize is like, Walmart is a full ecosystem. And especially now online, there’s like 60 million products that they have, there’s way less sellers, for a ton of opportunity, there’s around 120 million active monthly uniques, on walmart.com. There’s only 100,000 sellers compared to 10 plus million on Amazon. So you’re competing with a way smaller portion for pretty big pie still. And I always like to thing I really, I think it’s really important as it’s like the platform is established enough where you can make enough off of it now where it could be pretty significant. But not only that, you’re setting yourself up building a real estate on this platform that’s growing extremely fast, and is going to keep growing extremely fast. So I think that’s where it’s interesting, like when you’re valuing the opportunity, like to keep those things in mind because they make a big difference. Now, if you want to get your products into stores with Walmart or any of that, like then it’s a no brainer, the best way is you have to launch on .com first, if you go to a meeting 99.9% of the time, and you’re not on walmart.com yet to get into stores like they’re going to tell you first launch on .com. So like that’s a no-brainer, if that’s a path you want to go down. But even without that, if you don’t have any interest of being in stores eventually, it’s just for all those other reasons, it’s just a no-brainer from what we’ve seen for almost all category some categories are much harder than others some there’s just so much opportunity to scale like extremely fast, especially if you’re in really competitive items and trying to launch new really competitive items on Amazon could be really hard on Walmart essential competition on some of these that it’s a lot of very effective ways to do it.

Pat Yates 9:15

So let’s turn to another thing. I know that I sort of as an entrepreneur, when I was first building some e-commerce businesses to be able to do expansion in other marketplaces and things and even to expand to do anything in the business, you had to have a lot of bandwidth and time. I hear a lot of people that sometimes I’ve said and I had one client say this one time, I sell so much on Amazon, I have to restart and just basically be at zero starting out at Walmart. I don’t have the time to mess with that if it’s small ball, which I think is a short-sighted view of it because it takes time to build anything. So let’s assume there’s some monitors out there that really only do Amazon or Shopify. How do they get started with you? What’s the easiest process to begin working with SellCord?

Michael Lebhar 9:53

So it’s pretty straightforward. What’s it called? It’s pretty simple. You go on our site, you could fill out a form with some questions, what we realized about Walmart, every business is different. And every business has different goals. And it’s really for our team to kind of understand like, what are your goals from Walmart, some brands are looking to get into store, some brands are looking to make 100 grand a month, some brands are looking to make a million dollars a month and go really aggressive, there’s a wide range of some brands just want to add in an extra $10,000 in revenue, there’s a wide range of goals. So for us, you fill out the form, we take a deeper understanding of your business, understanding it, get on a discovery call, kind of understand your business and give you more context of the opportunity with Walmart and how would fit into your business. So you can evaluate if it’s the right move for us, we’ll help everywhere from actually full management, so like restructuring your whole catalog, getting it all live on Walmart, managing everything A to Z and acting as an extension of your team at like, a pretty affordable agency cost and month by month, so not like a standard agency, more as like a partner. So we have a lot of things where we do that. And then we could also just plug in the certain parts of your business, if you just want to plug in on the optimization, or on the advertising side, or on the logistics side. Like there’s a lot of different components we have, we also have software tools that can help the seller. So now we have very extensive relationships with Walmart. The biggest difference, I would say, with Walmart and Amazon is Walmart’s a relationship-based company. So it’s like Walmart, the Omni channel, people power. Like it’s very centered around people. And it’s like, so there’s just those relationships within Walmart. So important, we have a lot of those deep relationships within Walmart, every category is owned by merchants, and owned by category leads, and has a lot of people responsible for those and they can help a lot. We’re just coming off Black Friday, Cyber Monday, one of our clients, we got their item and promotion on Walmart, that actually, it was a pretty new item, it was doing definitely like 10 to 20,000 in sales a month. And over the weekend, it did $1.4 million in sales, just because of the power of like a merchant, putting it on promo, giving him more visibility, putting it on another big deal shelf. So Walmart’s interacting a lot with their sellers. And building those relationships. So yeah, we also help as that glue, act as that glue.

Pat Yates 12:26

Also one thing I think about, there’s a reason why you guys are so good at what you do. I would think that if someone’s out there thinking about starting a Walmart store, so they’ve done Shopify, they’ve done Amazon in the past, and they’re a little intimidated to go to Amazon, isn’t it better to come to someone like SellCord so you can make sure you start right first, like in case you make mistakes, it’s garbage in garbage out on listing sometimes, do you see an advantage if people came to you start to finish to have you build from day one will that help them more than them setting it up and you helping along the way.

Michael Lebhar 13:01

So, most of the time, that is the case, most of the time when we go in for clean, like when we onboard an account, and we have to go for cleanup. Because there’s just so many intricacies to Walmart, it’s very rare that it’s done kind of the right way. And I don’t expect sellers to do it the right way. There’s so many intricacies and to figure it all out, there’s pages and hundreds of pages of Walmart style guides that need to be followed. And so when we started off, a lot of times, it’s cheaper when we start from the beginning, because just we have a lot of times the cleanup works much easier. So yeah, and we’re able to start off on the right foot, give the right momentum, use that initial momentum period to actually get a really good launch. And yeah, like we’re able to kind of scale a ton from there. If you got the right products on Walmart, also, it will make the journey a lot better. Like if you’re I would say this if you’re a seller in home Heartlines one of those categories. So if you sell patio furniture, home accessories, kitchen accessories, all those sorts of items, like there are so much white space on Walmart, and you can make so much money to volume. They’re ridiculous. If you’re in health and wellness, beauty, like there’s definitely a lot of volume to be made there. And there’s a lot of money being made there. But it’s very difficult, because you’re competing a lot with nationwide brands and there’s, you know, less volume on some of those categories. But they’re just all categories have a lot of potential, it’s just some are much stronger than others sporting fitness, like fitness is just extremely strong. So depends a lot on your categories, like how much success you could get at least in the short term, obviously, all those categories will grow. But yeah.

Pat Yates 14:35

Now see on your site, one thing is kind of interesting. And a lot of people talk about this, anytime you get dings in your account, or why always go back to Amazon and just focus is there like A to Z claims, things like that account health that they need to be paying attention to. It looks as if you help people navigate that process and maybe something that at Walmart that you could have some pitfalls that you really don’t know about. Tell us a little bit about how you guys help with that.

Michael Lebhar 14:56

Yeah, for sure. So I guess the first stage of that is like accounts acceptance. On Walmart and like not everybody can account you have to get accepted. So we can help with that process of getting your account accepted. When you’re applying for a Walmart account, it’s best to reach out to us and do it through our link, we have our own link, maybe we could put it in the podcast, like, option, because if you apply through our link, and there’s any issue with you getting accepted, we could work through our partnership team at Walmart to help kind of escalate and take another look at it. So that’s kind of a big thing. But then, Account Health, like we’ll monitor all those things that actually cause Walmart accounts to get suspended, there is a lot of suspension on Walmart, but very different than Amazon, it’s almost never based on like, rank manipulation review manipulations, I’ve never seen any suspensions for those, it’s usually based on customer experience. So like not shipping your products on time, not uploading tracking time, things like that. So we’ll help with some of that, monitoring listings, making sure that there’s just as any marketplace that can be hijackers or anything like that. So we’ll help with monitoring those and handling those concerns as well.

Pat Yates 15:24

That’s amazing. So one thing I do want to turn to, because a lot of people wonder about this, because I think one of the biggest advantages of come someone like you, especially as in PPC management that maybe you get them off to a better start. So instead of wasting money for five weeks, and they lose 10,000 $15,000 advertising in bad areas, you may have information that helps them get off to a faster start. Now maybe jumping off as a lead there. And it may not be the case, but maybe you can explain how you guys manage PPC and if that can help them get off to a better start.

Michael Lebhar 16:35

For sure. So we see this often misconception that it’s like, let’s just run it the same way as Amazon. It’s very different. The things that work well, for Walmart very different than the things that work well for Amazon. For advertising, a lot of it’s tied to small listing details that have to be adjusted for the list to advertising to work properly. And we see that all the time. I think the biggest thing is by the 10s of millions of dollars that we spend with Walmart Connect, which is Walmart’s advertising arm, we have a lot of insight into the things that work well the things that don’t how to spend the money so that you actually build product rank and build ranking. And then instead of just spending money to drive just sales off those ads, but how to really grow that. So there’s so much that we do within that context that like once we jump into an advertising and we create the strategy from scratch, like we’re able to create, like a well-defined strategy for like what the goals are like, are we trying to rank for certain items for certain keywords, creating ad management strategies that kind of aligned with that. And just using insights of like the type of campaign setups that work, the type of bid adjustments that work the type of automations that work well, like, a lot of on Walmart, it has to be done a little bit more manually than some of the automations and things that could be done in Amazon. But as long as just paying a lot of attention to those things. There’s so much levers that can be pulled within advertising. They’re just it’s growing so much advertising ecosystem on Walmart, now they’ve just launched video ads display self-serve, headline search ads, now they’re also just launched brand shops, which people been waiting for a while. So it’s evolving like crazy and extremely quickly.

Pat Yates 17:32

That’s amazing. So again, we’re with Michael Lebhar with SellCord, obviously one of the biggest influence of people to be able to get you into walmart.com and sell. So, Michael, we’ve touched on a lot of things today and obviously, there’s a lot of printers out there that struggle decide what marketplaces and stuff to go onto. And obviously people that I think anyone thinking about Walmart should reach out to Michael and SellCord Is there anything that we haven’t touched on that you think people need to know about SellCord or you or the company of how you can help?

Michael Lebhar 18:08

Yeah, so if you’re already on Walmart and doing well on Walmart, I would still suggest kind of reaching out we have certain tools that like are pretty cool. So on Walmart, there’s enhanced content similar to Amazon A plus content, but you need to use a provider to host it. So you could use us to host that we actually just launched the only complete p&l tool for Walmart where we integrate with your ad account and your Marketplace account and pull out data to help you with profit analytics and insights so that’s pretty cool. So yeah, we have ad management portal now so there’s some cool products we have if you are selling well on Walmart we have different services to help with ranking as well and kind of one-off services for Walmart so that’s kind of one thing to know and another thing is like if you are interested and you think your brands are right fit for in-store and you want expand to in-store like we do have some services we can help with that and my own brand is sold in-stores and work with implants and getting them in-store so there’s definitely some interesting things there.

Pat Yates 19:36

That’s amazing. So obviously the website is sellcord.co, how can they get in touch with you Michael or maybe LinkedIn and email what’s the best way to reach out?

Michael Lebhar 19:43

Yeah, so best way to get in touch with me is email [email protected] or even .com now, we just were able to finally get the .com So [email protected] or .com and then you could just email me, I’ll be sure to kind of reach out or you can fill out the form on this site. If you Want to speak to me specifically, you could just mention in the form that you want rather, you want to speak to Michael. And that will get routed to me as well. And then yeah, I can answer any questions even if you’re not ready for services. Like if you just have questions about Walmart or anything like that. And you could connect with me on LinkedIn as well, just Michael Lebhar. I try to answer my messages there as well.

Pat Yates 20:19

That’s amazing. And again, folks, if you guys are interested in setting up a walmart.com account, it’s a way to create a channel. I mean, everyone talks about how you can increase your current sales, how you can definitely increase it, but I’m doing another channel, and there’s an opportunity to be able to grow it. These guys are experts, they’re going to make sure you understand it. And obviously you said it’s something affordable that you could go in and get the right expertise to do your Walmart store ahead of time, Michael, we appreciate you coming on the Quiet Light Podcast today. You’re a great partner with us. We love having you around. And if there’s anything we can do for you let us know too.

Michael Lebhar 20:48

Awesome. Thank you so much for having me.

Pat Yates 20:49

Appreciate you being here.

Outro 20:53

Today’s podcast was produced by Rise25 and the Quiet Light content team. If you have a suggestion for a future podcast, subject or guest, email us at podcast at quietlight.com. Be sure to follow us on YouTube, Facebook, LinkedIn, Twitter, and Instagram, and subscribe to the show wherever you get your podcasts. Thanks for listening. We’ll see you next week.

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What’s a Legitimate Add Back

This week we are talking about add backs, what is a legitimate add back, and how they affect your business valuation. The value of a business is dependent on earnings...

This week we are talking about add backs, what is a legitimate add back, and how they affect your business valuation. The value of a business is dependent on earnings but it is also dependent on the company’s discretionary earnings such as the add backs of owner salary and benefits. Then there are those one-offs – those non-recurring expenses which are also known as add backs. Those are the add backs what we are dissecting on today’s episode. A seller’s due diligence when it comes to discretionary earnings can help buyers see their potential ROI without any grey area.

Episode Highlights:

Why we work off the seller’s discretionary earnings and what that is.
How discretionary earnings are a case by case calculation for each business.
The three levels of add backs.
Why it’s important to take a scalpel to those third level add backs.
Questionable add backs – what can fly what cannot.
How math and logic are the key tools to determine legitimate add backs.

Transcription:

Mark: Alright, welcome back Joe. I know you just came back from Blue Ribbon Mastermind; Ezra’s event. It was up in Seattle, is that right?

Joe: Yeah, a beautiful city and a great event. On a personal level, I had a great time. I took my 17-year-old with me and just explored the city in off-hours. Business-wise I’m telling you Ezra Firestone is sort of the Tony Robbins of the e-commerce world in my view. He gets up there, he’s real, he says it like it is, he shares his own information to the Blue Ribbon Mastermind members and it’s such actionable, transferable information. And the level of entrepreneurs and intelligence at the Blue Ribbon Mastermind I think is nearly unmatched; it goes very politically correct I think, right, nearly unmatched?

Mark: Yes. I think every conference that we come back from is our latest favorite conference. But Blue Ribbon and Ezra’s events have been fantastic since we started going to them. And you’re right he’s just a fantastic guy. He gives a ton of information and has a ton of insight to share. So one of these days I’m going to get to go to the event instead of you because I want to get in on some of these. Awesome, glad to have you back, we do have a couple of conferences coming up. We will be sending these out in our email; our newsletters that go out every Thursday or Friday depending on when we get our stuff together so pay attention to those. Alright, this week Joe you and I are going to do the podcast.

Joe: That’s right we have two very special guests.

Mark: Two very special guests; that’s right. We’re not bringing anybody else in on this one because we want to talk about add backs; what is a valid add back or what is a legitimate add back? And I know for a buying perspective this can be a little jarring the first time. If you’re just coming into the acquisitions industry; if you’re looking for your first acquisition and you look at a profit and loss statement that we provide you might be wondering well why are these guys throwing all these expenses back at me, these were on the tax returns shouldn’t they be included? So Joe why don’t we start with that? Why do we work off to this number of seller’s discretionary earnings and what is seller’s discretionary earnings?

Joe: That’s a good question and a great place to start. Just defining it simply is the best way to go. So when you’re running a profit loss statement as a business owner; hopefully in Quick Books or Xero or something like that, you’re going to get a net income line at the bottom. So let’s say you do it for the trailing 12 months you get a net income. But there are certain owner benefits that you get as the owner of the business. You have an Internet-based business; you may write your car off in that business. You may pay yourself $200,000 salary in the business. All sorts of things like that they’re generally owner benefits and then there are some one-time non-recurring expenses; these are things that do not carry forward to the new owner so they’re classified as add backs. So net income plus add backs equals seller’s discretionary earnings or SDE. It is what business is in this general category are multiplied by; they’re valued at a multiple of the trailing 12 months seller’s discretionary earnings. So that’s the critical nature of an add back; it can make a tremendous difference in the value of the business when using a proper formula. If you don’t do that the add backs properly you’re either going to under inflate or in some cases, unfortunately, some inexperienced brokers might over-inflate the value of your business. So it’s critical for both buyers and sellers to know how to calculate seller’s discretionary earnings and what is a valid or legitimate add back.

Mark: Yeah and I think on that the thing I would like to just add here and emphasize is that there are rules to seller’s discretionary earnings. I know I’ve talked to some sellers, I’ve talked to some other brokers frankly outside of Quiet Light Brokerage and they feel as if well if you can make an argument for it then we can add it back and they approach this almost as if it’s just a free for all as to who can make the best argument. The fact of the matter is there is an actual definition for seller’s discretionary earnings and there are rules to follow. Now that doesn’t mean that there aren’t some situations that require interpretation. And we’re going to go into some of those scenarios in this podcast today where you have to try and figure out is this a legitimate add back or not? But at the heart of seller’s discretionary earnings when we are showing seller’s discretionary earnings what we want to do is we want to show a baseline number for buyers to understand what is my potential return on investment? When you think about all the different buyers that are going to look at a potential opportunity, every buyer comes with their own set of assumptions, right? Some buyers might already have infrastructures set up to run a business; maybe they already have a marketing team in place or maybe they’ already have a warehouse if it’s an e-commerce business or if it’s a SaaS business maybe they already have a development team in place. Those assumptions need to be worked into their own evaluation of the business. What we want to show is a baseline number so that you as a buyer can figure out what your potential return on investment is for you. And that’s going to vary from one buyer to the next. So seller’s discretionary earnings that’s all it is; it’s a baseline number, we want to be consistent from one business to the next that’s why there are rules as to how we calculate this number.

Joe: Right and even though combined we’ve got 20 years of experience doing this and have sold well over a hundred million in transactions just the 2 of us combined it’s still a case by case basis and you got to dig into each particular business and get an understanding of the nuances of it to determine whether or not it’s worth doing an add back based upon the size of the business and the total number of add backs and if it should be done. Generally speaking, there are 3 different levels of add backs; the first 2 are pretty standard, it’s the third one that we want to spend the most time on today because of the nuances of them. But let’s run through that first and second level. Mark, if you want to start off with that first level why don’t you address the owner’s salaries in add back.

Mark: Yeah, absolutely. Joe, I like the format you put together here. You created these 3 levels of add backs; the obvious, the one time expenses, and then the ones that require a bit more interpretation. So the very top of the list here are these a level one obvious add backs. We have things like charitable donations; obviously, that’s purely discretionary nature. We have accounting expenses such as amortization and depreciation. And then we have one owner salary. And I know there are buyers out there that look at this and say well why are you adding back somebody’s salary; like you need to pay yourself some money? But this is a standard add back that we always include and it’s part of the standard definition for seller’s discretionary earnings. The reason for this is how you pay yourself as an owner, how much you pay yourself, and the format you pay yourself is completely discretionary. You could in theory not pay yourself any salary and just take distributions from the company from the profits. Or you can pay yourself a very large salary and run all your payroll tax through that which will show up on the profit and loss statement. What we do for the owner’s discretionary earnings we do add back one owner salary. But there is an exception to this and that’s if there’s multiple owners that are working full time on the business. Because we know that if there’s multiple owners working on a business you can’t add back all of their salary. You can only add back one. Did I explain that well Joe or does that need more?

Joe: Let’s go a little bit more. What happens; what do you do Mark if you have 2 owners that are working a combined 25 hours a week, one is doing customer service and logistics, and the other is doing sales and marketing. Do you add them both back?

Mark: I would add both those back.

Joe: Okay. Let’s flip it up; let’s say that one is doing sales, marketing, logistics, and the other is a developer. And the level of work that that developer does still only takes 15, 20 hours a week but it takes a different skill set than the average person has. Do you add them both back?

Mark: No, I would not add both those back. Although we will discuss this in Level 3 add back. I might adjust that second owner salary depending on what they’re getting. But the reason I wouldn’t do it is because of the specialized nature of it. So what we’re assuming here is that the buyer is a single person who is coming in and needs to run this business. I wouldn’t expect most buyers to have developer skills to run a business. So maybe you do; if you do, that’s great you’re going to do really, really well. But most people can’t be that sales and marketing plus developer role. I’ve done this for over a dozen years now. I’ve run across that skill set a handful of times. It’s not very, very common.

Joe: That’s right. So those are the; even though these are just Level 1 add backs there are some complexities to it that require some attention to detail on the nuances of one business to the next. The only other things that are pretty obvious in there are personal meals and entertainment, travel, mobile home…mobile phones; everybody’s got their own mobile phone that expense doesn’t charge for. You’ve already got that expense. Things of that nature are pretty much Level 1 add backs. Jumping on the Level 2 add backs it’s really focused on those one-time expenses; things like a trademark or a copyright, patents, things of that nature. And then there are some that are a little bit deeper like legal expenses and lawsuits and enforcement letters and things of that nature even the thing that we have to do often Mark which is referring potential clients; people that we do valuations for that are not using a kind of software. We’ll refer them out to a bookkeeper. So in this situation Mark, tell me if we’re on the same page. We will get a call somebody has got a great business but they’ve got 3 years of data in an Excel spreadsheet that is not using any accounting software. Or they might be using Fetcher and piecing different pieces together. I would refer them out to a bookkeeper like CapForge, MuseMinded, Stellar Accounting, Catching Clouds; one of those and get them on Quick Books or Xero. And generally, that’s a one time expense for them to build that, put that data in the software in arrears maybe $1,500, $2,000. To me, that is without a doubt a one-time expense and an add back; would you agree with that?

Mark: Yeah I would and I’m glad that we agreed because if we don’t it’s just going to be an absolute brawl on the podcast, right? Inaudible[00:11:27.2] here is fighting with the microphones. No, absolutely that would be a one time expense. It’s something that does not carry forward. But we have a great example of that with somebody who’s been a friend of Quiet Light Brokerage for a while; Scott Deetz from Northbound Group. He’s a strategic advisor who helps clients in a lot of ways. He does a fantastic job with his clients. Specifically a lot of Amazon stores but he also works with other companies as well. He does forecasting and a lot of preparation for an exit. And his fees are all one time expenses. Even though that you can see a monthly fee during that preparation, the goal is to prepare for an exit. So those are fees that get added back in the bottom line. So recasting books going back and trying to recast those books either in accrual format or just cleaning them up I would totally consider that to be a one time expense. As with the other things that you mentioned; the trademarks and the logo design, you shouldn’t be punished for the expenses that are really necessary to be able to run the business or only occur once or will occur in the future.

Joe: Yeah. And there is again always nuances; sometimes an owner is going to buy a new computer. But it’s their new laptop that they use and they’re going to keep that and it’s not going to carry for you then that’s a one time expense; things of that nature, a case by case basis from business. So again nuances, deep-diving into the business, no 2 are alike.

Mark: I have been hearing you say this for a long time our own kind of sliding into this Level 3. But in Level 3 you always say math and logic Mark; it’s for math and logic. What makes sense? How does the math work out? And look this actually works out for Level1 and Level 2 as well. You have to use math and logic. But Level 3 is where we start getting into the interpretation of different expenses, right? Because these are the grey area ones where maybe it’s not as straightforward as saying amortization and depreciation; that’s a pretty obvious add back. Charitable donations; pretty obvious add back. So let’s go into this Level 3 and get some examples on a case by case basis. Here are things that we’ve seen in the past which; look at Quiet Light we’ve actually had some pretty big discussions with all of the advisors of Quiet Light that we have this large group chats and sometimes we’ve disagreed in trying to work out how we should actually treat these expenses. And I want to start out with one that Joe you and I have talked about a lot and that would be events, trade shows, and Mastermind fees; how do you handle those?

Joe: I almost moved this to the bottom of the list so we didn’t start off with one that is pretty tough and it was talked about a lot. This is a case by case basis. If somebody joins a Mastermind group in the trailing 12 months prior to selling their business and they pay $20,000 to join that group, it’s a one time expense; absolutely an add back, it kind of moves up to Level 2. But let’s say they also choose to go to an annual event that that Mastermind group has. And they do that at their own expense; let’s say they go to Seattle, I was just at Blue Ribbon, those people that were in Blue Ribbon; I’m sorry at the Seattle event not all of them were at the Miami event just 6 months prior and so it’s definitely a choice to go to the event or not. Some people never go. There are lots of people that are in eCommerceFuel that we’ve never met because they never go to any of the events. So the choice to go to an event, it’s an expense that doesn’t carry forward. It’s one that I see as an add back. Our team has talked about it quite a bit; that’s an add back. But there are other types of Masterminds and events; we’ll call them events in this situation that are not add backs that you and I have talked about. So if you are an advertising agency or any kind of company that’s going to these events to build your company brand and reputation even amongst the people that are part of the Mastermind it’s integral to your business. Like us, we go and we sponsor. That’s integral to our business; our business models. We are sponsoring, we’re getting our own brand and our own name out there; that’s not an add back. An ad agency does the same but might just be a member of the Mastermind or events and is doing training courses in free valuations or free testing things of that nature we would have to really dig down into that one and determine if it’s an add back or not. And it’s probably not an add back. But for the rest of the folks most likely an add back; the only adjustment you and I have talked about that is we’d have to look at and say logically does it make sense to add this back? Do we have 2 lines of add backs? Is it a business that’s valued at 250,000 or 2.5 million? Sometimes you say you know what at this level it’s not worth adding it back; let’s just leave it alone it’s only going to add you another $300 per month back to it and you can play with a multiple in that situation. Would you agree?

Mark: Yeah I absolutely agree. You have to pick your battles on this and if you have to really fight to be able to justify an add back you should look at it and say is it really worth it? Like is it is a big enough expense where I’m going to gain enough potential value out of adding it back and making that argument. I want to throw a little wrinkle at you, Joe. We have not discussed this before and it’s a question that I’d like to get your opinion on. The difference I see between these Mastermind fees, events, travel-related expenses would fall under this idea of is it a personal development or business development, right? I don’t add back the business books I buy. The business books I buy are personal development and I consider that to be just for myself. Obviously, there’s a business application for that. I want to become better at what I’m doing but I think that’s more personal related. So the line I see is again this idea between is it development for business or is it personal development? So if I go to Pubcon without really putting Quiet Light name on it I’m just an attendee I would consider that to be a valid add back. Let’s go into a scenario where you have an employee; let’s say that you have somebody who works specifically as a content writer for you and is possibly doing SEO and you send them to MASCON because you want them to become better at SEO for the purpose of your business. How would you handle something like that?

Joe: It’s off the top my head not an add back. But then you’ve got to look at the history of the business because that’s business development, right? You got to look at the history of it; is that something that they’re going to do every year, are they’re going to get new information every year and develop their skills, are they going to send different employees, have they done it for the last 2 or 3 years? You got to look at all those nuances again and determine whether or not it’s an add back. But because it falls in that business development versus personal development I think you and I know everybody on the team would lean towards no that’s not an add back.

Mark: I would agree. So again this is where you have to kind of take a fine scalpel here and kind of slice this up and really understand what’s going on behind this add back. And again as you went out with this Joe math and logic and I think reason as well. You have to be sort of reasonable with some of these so that it’s not just you’re going through; sometimes I see sellers come back with their own add back schedules and they’re super aggressive and every last dime is trying to be added back. And it’s a question at some point where you have to ask them what can we really say is a reasonable add back versus just being as aggressive as possible?

Joe: Right. So let’s take that scalpel and dig down into a P & L for instance; of course we’re not doing it live here, but one of the things that that when you peel back the different layers that we always ask the question okay you’re spending a lot of money on advertising here; what type of credit card are you using for that advertising? And then are you getting points back on that, what are you doing with those points? 9 times out of 10 people are doing cashback credit cards or converting them over to travel but they’re pushing all that over on the personal side of that’s an owner benefit. It’s income, right? You’re getting cash back, you spend $10,000 you get $400 back. If you spend $10,000 a month on advertising and you get that $400 back and you slide it over to your personal side and it never shows up on your profit and loss statement we need to look at it closely. It’s an add back. You can multiply that times whatever number you want and then make the decision, right Mark whether it’s worth it to add that back or not. Jason and I had a listing that we worked on last fall where there were about $24,000 in cashback points added up over the course of 12 months and it was very, very measurable; clear and distinct because that person spent a lot of money on advertising plus he bought used inventory that was going to be refurbished. And he bought them from different places on the web. And all of that was done with a credit card. All of that was converted to cashback points that moved over to his personal side; amounted to about $25,000 on an annual basis. It’s a significant number. The business was listed at a 4 time multiple. It was cash in his pocket so we did add that back and it bumped the valuation by $100,000. If we’re talking about a business that’s $4M but that amounts to $3,000 then maybe you don’t add it back. You just got to play around with those numbers a little bit and again use more math and logic there.

Mark: Yeah and I think here that the key that I would look at would be the consistency of it. If you’re advertising budget is over $100,000 a month for example and you’re putting that on your Amex gold card and part of your strategy is look I’m getting some margin from the points I’m getting back; that’s pretty obvious in that category of its part of your existing business model. But like you said if you have just kind of a small amount of points, it’s probably not worth the effort to put that in there and try and justify that. So I think that’s pretty reasonable. Joe one question that we hear a decent amount would be website redesigns and we can also throw in here product development or even in the SaaS world development on a SaaS product. Why don’t we start to unpack some of these and we’ll start with the website redesigns. Obviously, most people who have a web-based business unless you’re purely Amazon have a website and part of that is you’re going to have to redesign the website every now and then. I mean there are some sites out there that have look exactly the same since 2000 but most businesses do update that and those can be expensive. You can easily drop 10, 20, 30, $40,000 on that if not more. So how would you approach website redesigns or website redevelopments?

Joe: I would look at the history in the P & L to get a clue of the way the business has been run because that’s the way it’s going to be operated in the future. And if there’s never been a website redesign and it’s on a good current up to date platform like Shopify and the business is trending in all the right directions then; obviously there’s been a website redesign because that’s the point of this add back so let’s say that it’s been done in the last 12 months but had never been done before and the business is 7 or 8 years old and it’s just been put on a new platform and they spent $20,000 on it I would say that; and I have in the past done 100% add-back on that website redesign. But again it varies from business to business. If I’m looking at a business that’s operated like Quiet Light Brokerage just by example you have a tendency to redesign the website often. I think there’s been 3 or 4 versions of it in the last 7 years that I’ve been with Quiet Light. So, in that case, it’s either simply not an add back or you do some math and let’s say you’re going to redesign a website every 3 years you might take that cost; $10,000 website redesign and add back 50% of it or a third of it and things of that nature. Because if it happened in the last 12 months it’s not an expense that’s going to happen in the next 12 months so there has to be some mathematical adjustment there. And again math and logic; look how often it’s been redesigned, do the math on when in the future would you redesign again, and just do partial adjustment more often than not.

Mark: Yeah, I would agree 100%. And the thing to look for here obviously if it’s on the last 12 months it probably isn’t going to get looked at too closely. But I think you have to look at why. Like the Quiet Light website gets redesigned a decent amount and that’s simply because I get anxious about stuff like that. That’s just kind of what I do. I’m always tweaking; always thinking that I should dust scraps and start it over again. And so I actually do think with Quiet Light it’s mostly discretionary in nature but again this reasonableness needs to come in.

Joe: Not always discretionary but it takes 12 months every time that you start.

Mark: It’s absolutely ridiculous.

Joe: Why don’t you touch on product development? It’s interesting you bring that up. I’ve got a physical products e-commerce business and I’m developing new products; do I get to add that cost back?

Mark: Yeah I think again we need to use math and logic here, a little bit of reasonableness, take a look at what type of business you are in. Here’s the thing about e-commerce; Chad Reuben when he was on the podcast about a year ago mentioned this, product development is the lifeblood of most e-commerce businesses; you rarely, rarely run across a business that is truly evergreen with its product or you never have to iterate. Apple comes out with an iPhone every year. Android products are constantly coming out with a new phone every year. Car companies constantly come out with a new car every single year. Product development is the lifeblood of businesses. So on that note no I don’t think that you can add back product development costs. I do think maybe if you’re coming out with like a large truly one time sort of burst maybe I would look at it.

Joe: Maybe if there’s a mold, right? If you paid $5,000 for a mold of that product that mold is going to last 10, 20 years perhaps. That mold maybe partial add back but yeah I’m 100% on the same page; product development is the lifeblood of a business. The molds thing is so rare; 105 businesses I think I’ve sold in the last 7 years and I think maybe only Sean van der Wilt’s business has actual molds that are part of it and that he owned. In other cases, it’s generally the manufacturer that has the mold anyway. So yeah adding back product development expenses can’t really do it. What about the SaaS development? We’re not all e-commerce here; we’re selling content and SaaS and things of that nature as well. You’ve got a developer that’s been doing some certain projects within the last 12 months; are you adding that back? Is that black and white?

Mark: It is not black and white but I do think that if you are looking at for example your initial build of the software that’s going to be very intense, very cost-intensive. That I think could be added back. Regular maintenance, regular feature updates; absolutely not because a SaaS business needs to have updates, needs to have new features added. If you’re going to redevelop the entire SaaS product from the ground up; maybe you’re switching technology stacks, that’s something where I would take a look at that and again reason and logic need to really…math and logic really need to reign with this. But generally speaking no; just as product development is the lifeblood of an e-commerce business, software development is the lifeblood of a SaaS business.

Joe: We are 100% on the same page. There is no question about it.

Mark: No fights here, thank goodness.

Joe: Yeah. We’ve got 3 points left and really the last 2 points I think are ones that get missed most often and can add a tremendous amount of value to the business. But the first one of the 3 here is pretty obvious and maybe we could have we actually talked about moving this up into Level 1 but it’s a repaid relative. I sold a business a couple of years ago where the owner of the business paid his brother to do customer service. They paid him $20 an hour for 20 hours a week worth of work. I talked to the brother. I talked about his job and what he did. He said yeah I really only put in about 5 hours a week. Most of what I do is automated; it’s canned responses with customer service. And so we talked about the work and the level of detail there and just added some logic there and some math and said look you are grossly overpaid. Your brother loves you. I’m going to suggest that he fires you; and again this is just before Christmas, of course, he didn’t.

Mark: Oh my you told him to fire his brother. We’ve talked about this before.

Joe: I know. It was a $10,000 add back or whatever the number was. So we just did some math, right? We said alright how much does it cost to get a really good high-quality virtual assistant; $4 or $5 an hour. Okay, let’s double that. We know you’re only working 5 hours a week but we’re going to go with you 20 hours a week times whatever the number is and we’re going to add it back. So instead of the $20 an hour times 20 hours we took $10 an hour on those 20 hours a week and we added back the adjustment there. It’s in black in white in the add back section with an explanation of why. So math and logic applied to a situation like that; that overpaid relative and it absolutely works and is am add back. And it has to be a big enough number to be an add back. In this case, the total add back was a pretty sizable number. So pretty clear there in my view would you agree with that on Mark?

Mark: Yeah I had a guy who had a really cool business. His mom was doing his bookkeeping and he was paying her $250,000 a year for her bookkeeping services.

Joe: What?

Mark: That’s a pretty expensive bookkeeper. That’s a pretty obvious case of look it’s a relative; he’s paying his mom good for him, what a great son; better son than I am to my mom, and pretty obvious add back. And look I’m going to tie in something that we had from Level 1 here and that is where you have 2 owners and you brought up the example one owner is business development and marketing, sales and marketing and the other one is a developer. And I said well we should take a look at that developer side probably and probably not add back his salary but you’ve got to take a look at how much is he getting paid. I’m dealing with a client who has that sort of set up and the developer side; they’re both getting paid the same amount of money and it’s basically the profits of the business. We’re going to add back in a reasonable and a pretty generous salary for a replacement development. And that’s kind of the way that we would look at that is what is a replacement cost? You don’t want to be super aggressive on that. It’s got to be reasonable. It might be a little bit generous to say here’s what the replacement of this person would cost. So you can do that with relatives. It can get a little bit tricky. I had one company that I dealt with where literally the company was basically run by this guy’s family which brought up some issues with the transferability of the business. Because there were so many people involved that were family related but they were all getting these big fat paychecks. And so if we had gone to market; we didn’t go to market with that one but we would have had to go in and try to find reasonable replacement costs for most of these people which will be then a little tricky.

Joe: Yeah. Look, I can assure all sellers out there; all business owners that are smart enough to do some thinking and planning in advance of a sale, your buyers are going to be intelligent people that are going to be thorough and diligent. And doing that logical adjustment that Mark just talked about for that developer who’s your business partner that is a non-transferable skill you’ve got to hire that out. You’re just going to have to do that and it’s going to help build trust and help you achieve your goals in getting your business sold. If we have to push the multiple if it makes sense because there’s other amazing trends in the business then we can push the multiple a little higher as long as it’s still within a reasonable area. The next add back is one that I just did this year as an example with Mike Jackness when we sold Color It. And I’m going to go ahead and mention the podcast series that Mike and I did because I think it’s invaluable for both buyers and sellers to listen to and Mark I’m going to just tell you right now I think that you and I did a decent job in doing the intro for the podcast and then me doing an interview with Mike on our podcast. Mike did a much better job on his podcast. So I’m going to point people…

Mark: They’re actually pros at this. They’re very good at it. We’re just kind of fly by the seat of their pants.

Joe: Yeah. He did an amazing job. And he actually did a series of 4 in total; 2 of them were with me and the one at the beginning one at the end was with his staff, his staff down in the Philippines before and after the sale. So he went through the whole arc. But it’s episode 247 of the EcomCrew Podcast and the first one was Preparing Your Business For Sale and the second one was What It Was Like Going Through Due Diligence And Actually Getting It Sold. Now one of the things that we focused on in Mike’s add back schedule was cost of goods sold. Let me give some just general numbers here; broad examples, these aren’t actually from his business but let’s say that what he did do was he renegotiated the cost of goods sold on one particular ASIN. He could have done it on more if he had planned in advance of selling his business instead of deciding to sell his business because he was emotionally ready to move on. We could have waited another year and he would have had a much more valuable business. But we didn’t do that because he was ready. So in this situation again it’s magic and loss; math and logic; oh my goodness, see this is why Mike’s podcast is better…math and logic.

Mark: Well I’m sure a lot of buyers out there look at sleaze and say this doesn’t look like magic; it doesn’t make sense.

Joe: I said magic and loss; oh man, oh man. We’re not editing that out. Chris, don’t touch that. Alright, so Mike renegotiated the cost of goods sold on 1 ASIN. The reduction in cost was it came down $1.60. It was already on the books. He already had product in Amazon FBA and it was shipping and it’s been in FBA already for 2 months. What we did; it was a $1.60, so what we did was we looked at the sales per month of that ASIN for the other 10 months going back in the P & L took that dollar amount and multiplied it times $1.60. Let’s just say for simple math it was 1,000 units a month, right? I say simple math but here I am looking to the other calculator. If you got 1,000 units a month times $1.60 we’re looking at 1,600 dollars a month times 10 months it’s a $16,000 mathematical and absolutely legitimate add back; math and logic there. That times the multiple applied to the business; let’s just say if it’s 3 times that’s a sizable add back, it’s $54,000, no, $48,000. How’s my math?

Mark: We’ll 48,000. On this I want to go back to where we started this conversation; why do we do these add backs at all? Again it’s the idea that we want to show a buyer they’re expected return on investment and we want to show a set number standardized approach so that you can interject your own assumptions. And the reason that this is completely valid to do even though you can take a look and say well the actual expenses were not this is because this is the forward-looking numbers that we know are going; the way that the business is going to be run in the future.

Joe: That 10 months of expenses there will not carry forward so we needed to make an adjustment for that.

Mark: Exactly the only thing we would need to verify would be in due diligence the supplier is going to give the same or similar terms to the new buyer. That would be the only thing that we really need to confirm there. So I think this makes complete sense.

Joe: 100%.

Mark: Did you get any pushback from buyers on that?

Joe: Not an ounce and the buyer that bought the business is; I mean he went to Harvard, he’s a very smart guy, he’s bought 4 other businesses from Quiet Light Brokerage, and he understands all of this. And he’s got investors that review everything so no pushback at all.

Mark: Yeah. Alright, next one on your list you have here reduced fees times units sold.

Joe: Look, everyone listening that’s considering a sale of their business this last one is why you cannot have one conversation with a business broker for 30 minutes and decide that that’s the one you’ve got to go with because if they’re incredibly good at sales they’re going to talk you into something in 30 minutes. Now I shouldn’t say that because; well, look you’ve done research on Quiet Light, you’ve listened to the podcast, you’ve listened to different examples so maybe you can but you got to dig deep. This happened to me recently in like the third conversation on having in a review of the profit and loss statement. This is why we review profit and loss statements. We learned that the owner of this particular business that I’m talking about repackaged; worked on repackaging all of his product SKUs and in doing so it changed the level of pick pack and ship at Amazon. So he was at let’s say Level 5 and he came down at Level 4; now these are costs. They’re not called that but his fees at Amazon went down. Let’s call it a dollar. So instead of $5 pick pack and ship fee, it was $4 because it was a smaller package, lighter package, things of that nature. So he did that. Again let’s go to the same thing we did here with Jackness’s business. He did it in the last 2 months, it’s on the books for the last 2 months, so we’re going to the prior 12 months and went okay how many units did you sell during those prior 12 months or 10 months times a dollar per unit and we’re doing an add back for that because that adjusted expense in the past went away and it does not carry forward; same thing, different scenario.

Mark: Yup, absolutely. So I think there’s 2 ways when we’re looking at some of these kind of I don’t want to creative add backs but the ones that require a little bit more explanation. The one thing that I would just encourage people to keep in mind is that when we see some of these add backs which go back and recast numbers there are some situations where it makes sense to rather than going back and doing that add back bake in some of the value into the multiple as opposed to the trailing 12 months. If we keep in mind that the basic approach to estimate in value in a basic valuation approach would be your trailing 12 months discretionary earnings times some multiple, it doesn’t matter if you increase your discretionary earnings by 10% or increase your multiple by 10%; the result on your valuation is going to be the same. And so I think there is a little bit of discretion and strategy that needs be taken into account by both the broker and the seller when it comes to determining where do we want to get this value in. The thing you need to always keep in mind is are you actually offering real value to a potential buyer? Is this really going to be valuable for the forward-looking future for that; I don’t know if there’s a backward-looking future, for the future of the new owner of the business and where are they going to get that value? So you might be hearing this and thinking this is pretty complex I don’t know if these things would be really a legitimate add back or not. Look if you find this difficult that’s because some of it is and some of it does require discussion. And as I said at the beginning we have these discussions at Quiet Light all the time. We will share something with the entire team and say what do you guys think this? Here’s what I’m thinking, I should have it added back. And sometimes we disagree but we always are able to figure out where that line should be. So I’m going to just throw this invite out; if you have a question on whether or not something would be an add back ask us. Hound us and say what do you think of this; do you think this would be a legitimate add back or not? And that would be on the buy-side or on the sell-side. If you’re look at an opportunity and maybe with another broker or directly with the seller and they’re adding something back and want to know what our thoughts are let us know. We’d love to weigh in on it.

Joe: Let’s route another invite there and let’s find a way to do an actual valuation; we’ll do video as well as audio. We’ll remove the client’s names. We’ll just use first name and we won’t use the business name. And we’ll do it sort of Mike Jackness, Ecom Crew Under The Hood Valuation and record it so everybody can hear the process we go through. Man that being in a 2 or 3 part series because it’s such a long in-depth, detailed process. The only thing I want to throw is that we are developing webinars here at Quiet Light that will be up on the new 48-month long redesign that Mark’s been working on. Yes that’s a little wise-ass comment there but the webinars will be up, they will be available in detail for you folks to dig deeper and see us go through some of this add back schedule in the process of doing one that is titled “What’s a Legitimate Add Back?” and all of this will be in webinar format where you can see actual profit and loss statements and whatnot.

Mark: Sounds great. I look forward to doing those. I don’t have anything else on add backs. I think we’ve just covered the entire topic as deeply as you possibly could actually no we could probably talk for another couple of episodes in some of these things but I don’t have anything else to add for this one. Do you have anything Joe?

Joe: No, we’re good. It was great having 2 very special guests on the podcast; one much more special. According to Andrew Youderian, you’re special.

Mark: I like that guy. He’s such a good guy, isn’t he?

Joe: Andy Youderian. Has anybody reached out to him with my little Easter egg stuff that I did on the video? But we’re not showing the video yet, right?

Mark: I had and actually we are showing the video and that’s something for you guys to know. Subscribe to us on YouTube at Quiet Light Academy. These podcasts are now up in video form so you can look at our pretty faces while you listen to us argue about add backs. I don’t think anyone has reached out to him about the little Easter egg we had in that podcast episode. Because I talked to him recently and he didn’t bring it up.

Joe: So for those that have no idea what we’re talking about and have stuck with us at the end of this podcast here’s the deal. I was driving down the road listening to the Quiet Light Podcast where Mark had Andrew on with state of the e-commerce.

Mark: One of the best episodes I think we ever did.

Joe: Whatever you say Mark. I think this is the best episode we’ve ever done. Alright, so Andrew says yeah you guys have been doing a really good job. I got to tell you Mark I think you have a bit of an edge over Joe. Because Mark and I always competing with who’s got the best episodes and the most downloads. And I swear I almost; I had to pull over I was laughing so out. It was so, so funny. He’s a bit of a prankster. So I figured I’d get him back. And so I had an Incredible Exit Series on, we had somebody; actually it was an Incredible Acquisition, right? Karl Selle bought Smart And Fresh and so we had Karl on a podcast about that and during the podcast I pretended that our producer Chris interrupted us and handed me a sheet that it was kind of an emergency, he was looking to get in touch with somebody named Andy Youderian. I could not pronounce Andrew’s name properly. But for those that go to the YouTube channel you’ll see that I have an EcommerceFuel t- shirt on and that the EcommerceFuel podcast is in the background; a mouse pad is in the background. So clearly I know Andrew Youderian. I want to call him Youderainan from now on. Clearly I know Andrew. My kind would call those Easter eggs. I think that’s what they’re officially called in Marvel movies. So I just threw in a few Easter eggs there. It was kind of fun. We did get one person that sent an e-mail to me and he goes I think the person that your producer is looking for is Andrew Youderian for EcommerceFuel. And I said well that was kind of a joke. I had to send a note back. But it was kind of fun.

Mark: Well he was right though. It is the person we’re looking for. We have an Easter egg coming up in one of the movie quotes so you guys have to dig deep on these movie quotes. And I don’t know which episode it’s going to be live on. Listen to the different intros. There’s going to be one that you’re going to have a really hard time finding but I’ll tell you what I want you to find this one whenever it airs. That’s really, really difficult and I will get with our producer next week’s podcast and make sure that we give you a little hint as to which podcast to listen to for this movie quote because it’s just an absolute gem.

Joe: Awesome. Let’s wrap it up with that.

Links and Resources:

ECom Crew Episode

Quiet Light Academy YouTube

Using SBA Loans To Buy & Sell Ecommerce Businesses With Stephen Speer

Many larger deals are SBA-oriented. This is a better method for buyers because they get a 10 year repayment period, and it is better for sellers because they can get...

Many larger deals are SBA-oriented. This is a better method for buyers because they get a 10 year repayment period, and it is better for sellers because they can get more money. In 2018, SBA lending limits are changing and they will be bringing 90% of the funds to the deals. It is really good for buyers and sellers.

Today, we are talking with Stephen Speer who is the VP and Business Development Officer at BankUnited Small Business Finance. Stephen is a lender, not a banker. Bankers have a tendency to over-promise and underdeliver. We had a bank deal that took over 90 days to close. Both the buyer and the seller were beside themselves with frustration. With a transaction we recently did with Stephen, we got a commitment letter in 34 days which put us two weeks away from closing.

This is an SBA transaction that will close in 30 to 45 days which puts us on the same playing field as cash buyers. Today, we are going to cover benefits of the new SBA guidelines and how they benefit both the buyers and the sellers.

[Download Our SBA Starter Kit PDF]

Episode Highlights:

How the SBA aspect of buying and selling online businesses is becoming more prevalent.
Stephan has been lending for 25 years and is now located in Tampa, Florida.
He works in the ecommerce business acquisition space.
He has been with BankUnited for the last two years.
The SBA allows lenders to take a greater risk by guaranteeing 75% of that loan.
The purpose is to encourage small business lending.
Stephen has formed an ecommerce lending team around him.
BankUnited is a preferred lender and everything is underwritten and funded in house, but the loan has the SBA default guarantee.
Buyer qualifications include income, assets, assets after closing, credit, and collateral. Does the actual business cash flow based on the structure of the deal.
Asking the right questions to make sure the buyer is the right fit for the ecommerce space and business that they are purchasing.
Getting financials up front and looking at a solid year of tax returns and a ramp up year.
How most sellers in ecommerce sell within three years because the trajectory is going up in large multiples.
Profit and loss statement plus addbacks equal total earnings. Interest and one time expenses area add backs. Most people want to minimize their tax exposure.
Do not commingle two businesses together when you are trying to sell one.
Getting off of schedule cs and doing business tax returns.
Having an independent third party do a business valuation.
Have someone do ecommerce due diligence to poke holes in the financials.
25% injection or down payment with 10 or 15 from the buyer and 10 or 15 from the seller in a seller note.
In 2018, the buyer will only have to come up with a 10% injection, and the seller won’t have to come up with anything.
This will have more sellers open to financing.
BankUnited feels comfortable up to a $5 million loan. There are different variables, but with the right buyer they can go high.
They will work with buyers on the SBA process.
What does an SBA loan cost? There is a deposit for third party fees like business valuation, appraisal, titles, and attorneys. It’s usually about $12,000 that is financed into the loan. Plus a 3.5% SBA fee.
It the deal falls apart the money can be used on the next deal.

Resources:

A Step-by-Step Approach to Transferring an Amazon Seller Account

Rochelle Friedman was a corporate lawyer representing some of the top products and brands in the world. A few years ago she jumped ship and started the Walk Law Firm....

Rochelle Friedman was a corporate lawyer representing some of the top products and brands in the world. A few years ago she jumped ship and started the Walk Law Firm. Now more than 50% of her business is representing both buyers and sellers in transactions that involved the transfer of an Amazon Seller Account.

Because of her specialty and expertise, I wanted to have her on the Podcast to share her approach, and what she sees other brokerage firms in the industry doing. In today’s Podcast she covers the risks and pitfalls of transferring an account through an asset sale, and talks about the different types of transactions she sees occur.

Rochell also delves into the two big “stomach ache” clauses in a typical asset purchase agreement, and how to address them up front so the due diligence and negotiation process is successful.

As you’ve heard us often say…”don’t decide to sell, plan to sell”. The same holds true with legal matters. Make sure you are properly incorporated, that your trademarks and copyrights are up to date and transferrable. All of these are part of the assets of your business, and hiring a firm like Walk Law Firm to review them in advance of a sale is advisable.

Episode Highlights:

Learn Rochell’s approach to transferring an Amazon account. Hint…it is the same as ours.
Transferring non-US accounts is the same process.
Both buyers and sellers need to be happy at closing, or a deal falls apart.
Having a qualified contract attorney truly matters.
The same attorney will fight differently if their client is the seller vs. the buyer.
There are TWO MAJOR stomach clauses in every APA. Address them early on in negotiations.

Transcription:

Mark: Joe how are you?

Joe: I’m doing good Mark. How are you doing today?

Mark: You know ever since you got back from Italy you are kicking my butt again when it comes to the number of interviews you’re doing for the podcast. I think like three to one, four to one as far as the ratio is concerned and I’m sure our listeners are ecstatic.

Joe: I don’t know. I actually have the easy part. I just do the interviews you do all of the stuff in the background so thank you and I appreciate it. I just do the interview. And this time for this show I don’t … falsely, folks, I talked to an attorney and it was actually a really good call and here’s why I had; her name is Rochelle Friedman, she’s from Walk Law Firm and you know look with physical products businesses and the transfer of an Amazon Seller Account everybody has questions about how to go about doing it, whether it’s a US based account or one that’s international. And I came across Rochelle through some other folks that I worked with and I had a call with her. And I just picked up the phone and I called her and chatted with her. Look she does close transactions for Quiet Light Brokerage, for Empire Flippers, for Website Closers and you guys know who they are so it’s okay to mention them right? And I know she does that so I wanted to confirm with her what processes, what she does and shockingly Mark it’s the same way that we do it believe it or not. And she goes into detail about it, and she goes into great detail about it. Not only that she talks about contracts in general, she represents both buyers and sellers. She’s a contract attorney that came from the corporate world representing businesses, every day household businesses, she was their attorney a very good one in the corporate world last went out on her own and now represents both buyers and sellers in transactions. And I think it’s worth listening to. I think it’s really really important as you and I have talked about how important planning is. Don’t wake up and decide to sell but plan to sell, same thing should be said for an attorney; talk to one. Get your ducks in a row and make sure that you’re doing the right thing as you go into your transactions you can do it with confidence.

Mark: I’m gonna put you on the spot because you said we’re going to address in this podcast episode how do you transfer an Amazon business and how are people doing it pretty much across the board. But for anyone that already knows how to do that or has done that what else do we cover in this episode?

Joe: She covers the two big stomach ache clauses in contract negotiations. That being the non-compete and the indemnification clause. I think the indemnification clause is the bigger of the two because we do a pretty good job up front addressing the non-compete. And so if you do that work up front in the client interview and work with the seller on that to make sure they understand what a non-compete is and make sure there aren’t going to be any issue is never really a problem. The hard one to wrap your brain around, your hands around is the indemnification clause and what that is from a seller’s standpoint. You sell your business you think you’re done, you get 100,000 200,000 a million dollars in your bank account and you move on about your merry way. You sleep really well at night because you got a bunch of money in your account. Well, your buyer’s attorney is going to have something in there that is going to have them reach back into your bank account and take some money out if you lied or cheated or stole or did anything fraudulent in anyway. Now you should sleep well if everything was done right but if there’s anything that wasn’t they’re going to put that in there. And they’re gonna put that in there anyway and the big question is how long is that grace period for? Is it six months or 12 months or 18, and then how much is it for? And Rochelle you know towards the end of the podcast she laughs and she chuckles and she talks about how … well she has one standard when she’s representing the buyer and she has a completely other standard when she’s representing the seller so it’s good to hear from both sides for sure. But the stomach ache clauses are really important in there as well.

Mark: That’s fantastic. And those are easily interest almost guaranteed at it every time we send out a purchase agreement on those two clauses.

Joe: Guaranteed.

Mark: You always see stuff. All right let’s get in to see what she has to say about all of this including in the indemnification stuff. Let’s get to it.

Joe: Hey folks it’s Joe from Quiet Light Brokerage and today I’ve got Rochelle Walk from Walk Law Firm on the line with me today. How are you doing Rochelle?

Rochelle: I’m doing great Joe, how are you today?

Joe: I’m doing well. I have a sister in law name Richelle so if I mispronounce your name during the podcast at all today that’s the reason why. I’m apologizing in advance.

Rochelle: Not a problem at all.

Joe: As we talked about a little bit before recording we don’t do fancy introductions so if you could just give the audience a little bit of background on yourself. Tell them about who you are and the work you do that’d be great.

Rochelle: Sure. Thanks, Joe. First off all thanks for having me on, I appreciate the opportunity. My background is actually a little bit complicated because I have been practicing law for 33 years but unlike a lot of other lawyers, most of my practice has been as a general counsel or as the chief administrative officer of very large public companies. So most of my time spent as a lawyer has actually been as a business person. And I like to explain myself as a business person who happens to also be a good lawyer.

Joe: Excellent.

Rochelle: And when I started this firm I was at the point where I was leaving a major public company, decided I wanted to do something different, and decided I wanted to use the same skills I garnered as a business person and lawyer for really large public companies and turn it into something that would work well for small to mid-size companies. So during my years in my big company world, I worked heavily in consumer products. I was head of license brands for Sherwin-Williams, brands like Martha Stewart, Ralph Lauren, I worked with Dutch Boy, I worked with Thompson-Minwax, Krylon, very famous brands. And then I left there and I was at a company called Oglebay Norton it was mining and minerals. We had clients and customers like Home Depot but we also had heavy industry as clients and lots of engineers. And then ultimately I went to a company called Anchor Glass and it was consumer glass, some of your favorite beverages, as a matter of fact, would be bottled in the glass containers whether you know beer, wine, Maker’s Mark you know some famous brands. So my career has always been around famous brands and lots of retail. So when I looked at what I could do seven years ago when I started this practice, I thought about it and said I can really understand consumer brands. I really understand branding. I really understand intellectual property but it’s a new world and we need to be able to do it online. And I dove into e-commerce understanding how Amazon works, how eBay works, how Jet works, of course, some of those came later, how Walmart.com as a marketplace work … Walmart used to be my customer at Sherwin-Williams and now here at Walmart.com it’s a completely different animal and I dove into that. My practice has always been heavily mergers and acquisitions so about 50% of our practice is the mergers and acquisitions of businesses. And seven years later that has become a huge footprint of Amazon sellers, online sellers, e-commerce businesses that are seeking to flip. Entrepreneurs who have created … you know they have created great brands but in order to take them, to exploit them to the next level they need a lot more bandwidth. And it’s, therefore, their time to move out of that business. Having spent a lot of years buying and selling Mom & Pop tank stores for Sherwin-Williams and Mom & Pop paint brands and Sundry brands it’s no different, it’s just now we’re doing it through e-commerce instead of bricks and mortar.

Joe: Okay. So about 50% of your business is the M & A side, the other side is what; working with people on intellectual property, branding, things of that nature?

Rochelle: We’re like their outsourced general counsel. It can be everything from intellectual property and branding to possibly contracts, employee issues, independent contractor issues, tax issues-

Joe: Okay.

Rochelle: Really almost anything they need. Leases, fire agreements, everything you might imagine a general counsel doing.

Joe: I got you. So for folks listening, the reason I have Rochelle on the line today is because a lot of you have asked during the buy or sell process if Quiet Light can recommend an attorney. We have several that we work with; Shawn Hussain at the Ecom Law Group is terrific. We work with him often and Rochelle knows him and came across Rochelle and we were talking about the transfer process of an Amazon business. And I know now that you’ve worked with all of the website business broker firms that are at a high level like Quiet Light and you’ve been on both sides of the transaction.

Rochelle: Right.

Joe: Do you prefer or do you most often work with the buyer of a business, representing the buyer in contract negotiations or do you find yourself on the seller’s side more often?

Rochelle: It’s really about equal and we don’t really have a preference. We’re perfectly prepared to work with both buyers and sellers. Buyers and sellers have different needs and one of the things that I think we’re pretty good at and just so you know we’re a firm of three full time lawyers. We are about to affiliate with a bigger national firm who also does quite a bit in e-commerce and emerging business and we can … I’m not prepared to tell you who and the details of that but that’s coming down the pike so we’ll have a lot more bandwidth. But what’s important about us as we understand the difference between what a buyer needs, what a seller needs, financing it; if both you’re a buyer and a seller how it’s being financed matters, and understanding how this Amazon accounts transfer. Sometimes transferring the account actually isn’t in your best interest or the buyer, sometimes it’s the only solution for the buyer and-

Joe: Let’s talk about that-

Rochelle: You have to assess that.

Joe: You know that the listener’s ears just perked up because we’re talking about the transfer of an Amazon account.

Rochelle: Yeah.

Joe: You and I both know as does everyone who has an Amazon account that the Terms of Service says that the Amazon account is not transferrable and that-

Rochelle: Generally.

Joe: Right there’s a bracket in there that says generally. To me logically it never made sense that you could build an amazing brand on Amazon and never be able to sell that. And I’ve had experience direct with Amazon and they’ve proven that they do in fact allow the transfer of accounts but-

Rochelle: Of course.

Joe: Tell us, tell the audience, tell me how have you seen an Amazon account most often transferred with the different transactions that you’ve done with the top websites and business brokerage firms.

Rochelle: Sure you know a lot of times it’s very much behind the scenes. If you are actually selling the ownership interest in the business you’re not really transferring the Amazon account. Although Amazon may disagree with that but you’re really not transferring the Amazon account, you’re transferring the ownership interest in your business. And the only thing you’re doing with the Amazon account is actually maybe changing an EIN if … depending on what you’re buying and if you’re getting the EIN of the new business and probably changing where you want the banking to go. I’ve even had situations where we haven’t had to change the banking at all. If you’re buying the assets however and you’re leaving the ownership interest of the business behind by getting all of the assets of the business you’re going to need to go in and possibly change the name of the owner of the account, change the … certainly, the EIN or the Employer ID Number, change the bank account number, and there may be some other things you’re going to change as well. But there are some things that we recommend sellers do and frankly, it’s better for buyers to help ease the pain of that process. First of all, we’ve never had Amazon stand in the way. As a matter of fact, if you text Amazon they’ll even tell you how to go on and do it. So as much as they say it’s generally not transferrable they actually don’t get in the way as long as what you’re doing is not disruptive. So where will they get in the way? If the IP address of the person making the change is different than the IP address of the person who has been running the account Amazon is going to have a big flag for fraud and they will get in the way and they may shut down the account. What they usually will do is let the sales continue. However, you can’t access your account until somebody verifies that it was an intentional change. And they use to give you a couple of weeks to do that verification although my clients are typically through that verification process within a couple of hours. It may take Amazon a few hours to flag you but watch for the flag it’s usually going to come to the seller. One of the great ways to avoid any of those issues, if you’re using a VPN to access your account in the first place then you transfer the account with the VPN it has all locked in. You’re not changing the IP address and that way when you do this transition there is no issue of the buyer or the seller plugging in the information as long as they’re all going through the same VPN. Similarly, let the seller make the changes. Generally, the seller makes the changes. If it’s a big enough account Amazon may flag it for fraud anyway but within a couple of hours the seller will get that email or will get contact from his or her account rep and that pain will be immediately fixed. We do it all the time and we haven’t had an issue.

Joe: So do you end up having to have a contact yourself with Amazon if there’s an issue or is it just something that the seller contacts them and it’s resolved eventually?

Rochelle: So my rule of thumb, leave your lawyers out of Amazon at all times. We may be in the background helping draft the e-mails, helping respond to the emails, they always come from our client who has the most contact with their Amazon rep.

Joe: That’s the sellers.

Rochelle: We want-

Joe: That’s the owner of the seller account.

Rochelle: Exactly. We want the least amount of disruption in the communications. Amazon really doesn’t need to hear from your lawyers. You just need to work directly with Amazon and frankly, it’s a fraud detection problem. Amazon doesn’t want to be caught where somebody somehow hacked into your system changed your accounts and you later come back and accuse Amazon of having changed your accounts or having diverted your money. So you can’t blame Amazon for what they’re doing. You just have to be able to work with them and be prepared for maybe a day or two of disruption. But typically we haven’t seen it disrupt sales.

Joe: Okay.

Rochelle: We’ve seen product takedowns disrupt sales but we have not seen that transfer of the account disrupt sales.

Joe: Excellent. Okay. Well let’s take a few things, we talked about you’re seeing the most method text and then we talked about the VPN and then you talked about … well, I want to talk about different Amazon countries so-

Rochelle: Okay.

Joe: What I’ve seen in the transfer process is the same. You know we wrote the 10 steps to transfer an Amazon account in 2016 I think and the process that we see is actual phone calls to seller central saying “Hey look I’m transferring the business, one of the assets of my business to the Amazon Seller Account. How do I transfer control to the new owner?” and they do the same thing you just talked about in Texas-

Rochelle: Right.

Joe: They give you written instructions and they’d sent it via email.

Rochelle: Exactly.

Joe: Our clients tell us that sometimes they get lucky; in the 1^st call it works and sometimes it takes 10 calls.

Rochelle: Right.

Joe: At 1^st hold on you can’t do that and then on 10^th oh yeah exactly I know what you’re talking about, they do it. I’ve had some chats with Amazon chats do the same thing but you said text. Now do you mean email, do you mean the chats, what do you mean by text?

Rochelle: I mean the chats.

Joe: You mean the chats, okay.

Rochelle: And it’s usually the Seller Central chat system and we even have videos and screenshots of the chats that some of our clients have had.

Joe: Okay.

Rochelle: Remember with Amazon Seller Central you are dealing with … I’ll describe this way my husband describes pizza. It’s only as good as the 16 year old making it; when you order a pizza from a pizza parlor the quality control is a little bit lax. Well with Amazon it’s not a quality control problem but the experience of a customer service rep is only what that person has had as experience. And depending on how specific you are, on how clear you are on what you’re trying to ask them will depend on how good they are at getting it to the Amazon separate instructions and pulling back and telling you what to do. The more experienced reps are very good at telling you exactly how to go into Seller Central and make the changes.

Joe: I like that. I wonder if on the chats that the more experienced reps answer the chats versus the phone calls. DO you know if there’s any data behind that or is that just an assumption?

Rochelle: No, I have no idea.

Joe: Okay.

Rochelle: I have not seen that and I really don’t know and remember the chats are being answered by people all over the world.

Joe: Okay same as phone call side too.

Rochelle: Exactly.

Joe: Okay, good. So just to back up a little bit of what you are saying I’ve had many many Amazon … Quiet Light Brokerage has many Amazon transactions transfer just that very same way. I personally have a situation for folks listening who or had an Amazon account that had a gold status, I don’t know if that exists anymore but it was called a gold status and that meant that. It was old enough and large enough where they had an Amazon representative assigned to their account. So they had somebody they could always reach out to and during that process, they reached out to that person and said “Hey look transfer selling the business one of the assets of the business is my account how do we take care of this?” And that individual went to Amazon legal and said hey look this is what we’re doing and Amazon Legal provided a form-

Rochelle: Right.

Joe: And all they wanted to know was the name of the buyer. And it’s always been a theory that Amazon wants to make sure that those that have been banned are permanently banned so they wanted to know the name of the buyer so to do that search to see if they’ve been banned. That’s all they did was check the name of the buyer and the transfer went through with no problem at all. So just backing up what you said there. The VPN, I had Norman Farrar on the podcast, Norm is an expert in SOP’s and marketing Amazon. He guested on many many podcasts. Norm recommended the same thing and for those that are listening that do a lot of traveling to different events and whatnot, you’re all at mastermind groups and you’re getting advice if everyone is using the local VPN and there’s a hundred people that get it sitting in listen to an expert and they get a great idea they’ll all log on to their Amazon account using that IP address in the local wireless, local hotel, or whatever it might be-

Rochelle: Right.

Joe: The Amazon bots are gonna go crazy and you’re all going to get shut down.

Rochelle: Exactly.

Joe: So Norm does that. Norm recommends VPNs. Rob Green who does the same thing, high level seller, a lot of podcasts, a lot of speaking all that events. He’s got three or four different seller accounts, different VPN for each one so he goes even to a further level.

Rochelle: All of my biggest clients are using VPNs. It is the smoothest, simplest way … as you said it’s not just a matter of selling your business and having the VPN set up, it’s actually an operational benefit. Because what it also means as you get bigger it’s not just one person who needs to get into that account. You may have a team of people who have to go in and do different things at different times. They could be all over the world. But everybody coming in through the same VPN there’s no confusion to Amazon bot. And frankly, it’s a lot more secure.

Joe: I agree. And it’s you $10, $15 a month.

Rochelle: Right.

Joe: You should be doing-

Rochelle: Absolutely.

Joe: Okay. Let’s talk countries, you haven’t talked about countries yet.

Rochelle: Right.

Joe: You haven’t said Amazon.com eu whatever it might be.

Rochelle: Right.

Joe: Are you finding the same transfer process to be successful for Amazon.com, UK, Germany, France, Italy, etcetera or are you doing something a little different depending upon the country?

Rochelle: So generally we are using the same transfer process. Now one thing that I have to pull out when you are dealing with other countries you may have a V-A-T or VAT or Ad Valorem tax issue and generally that is not transferable. So you are going to need … the new company is going to need to set up their own tax ID in those countries. And there may be a change that has to be made and it may lag a little bit. Typically we use the same process. Most of our clients are driving their business through Amazon.com in the United States. It’s a much smaller amount of traffic and a much smaller amount of sales going through the other countries. Although it’s starting to pick up, it’s starting to get a lot bigger. But we haven’t focused as much on those international accounts but we haven’t any trouble transferring them either. We just use the same process. There’s been no disruption except for making sure that we have the Ad Valorem tax information necessary for those businesses.

Joe: Got you.

Rochelle: And it’s been pretty seamless.

Joe: Got you. Okay, we’ve experienced the same thing. In regards to the value added taxes for people listening we did a podcast with Alex Lyon-

Rochelle: Excellent.

Joe: From AVASK Tax Advisors three weeks ago depending from when this is launched is it.

Rochelle: Right.

Joe: Let’s put it this way, it launched 1^st of June or so. Great detail on how to set it up, what the pitfalls are in trying to do it on your own and the cost associated with it. And we also addressed the transfer of a seller account when to set that up and what comes first.

Rochelle: Right.

Joe: And she sort of detangled everything and it’s not all that complicated.

Rochelle: Perfect.

Joe: Have you had a situation where the seller wanted to keep their seller account but transfer the brand out to a new owner and if yes tell us about it, please?

Rochelle: We have. Actually, we’ve had it both ways where the seller wanted to keep their account because maybe their seller account had multiple brands, multiple A Sense and they were only selling one set of their product lines, maybe one brand. And if that happens it has to be up front at the beginning of the deal. Everyone needs to understand at the beginning of the deal whether or not the account is going to transfer. And the buyer needs to appreciate that they may not be getting the seller account and frankly sometimes it’s not the worst thing. For instance if the buyer is already an active Amazon Seller, the buyer may be very happy to have its current Amazon account just take over the A sense and that is a very smooth transition and it’s literally a relisting of the A sense moved over and then the seller account just delist those; takes them off their registry.

Joe: The only challenge with it, you know it just piped it’s … is the inventory. The inventory in the FBA account, Amazon will not transfer it from one FBA account to another. So you’ve got to time it so that new inventory is coming into that new seller account. You might leave the older account open, it still sells through that inventory but the new owner gets the revenue or the profit.

Rochelle: And the seller, if they sell through the existing inventory, may do it for the benefit of the buyer.

Joe: Yeah.

Rochelle: So that the money still transfers and all of that inventory and we just do an accounting.

Joe: Exactly.

Rochelle: You’re exactly right Joe that is what happens. Let me give you another scenario and I actually have this scenario right now. I have a seller I represent who has multiple seller accounts and he … they have multiple brands in their seller account and they’re about to sell that business. That particular seller account is poorly rated. It has had lots of negatives for a whole variety of reasons part of it’s because it’s very old and part of it is because of mistakes that were made early on. But the nature of that particular business, the products they sell makes a lot of money but the seller account itself is not great. And the buyer is actually going through the process right now and determining if they would be better off just starting a brand new seller account and not taking that history because again, you’re picking up the history of something that isn’t really great.

Joe: Yeah I guess it’s better to have no history if the old history is very poor. But the challenge is let’s back up and start with for those listening buyers or sellers if you have multiple brands in one seller account think about that transfer process. Someday you may wake up and say you know what I’m tired. I want to just unload something and put some money in the bank, set something aside so I can see something for the worth that I’ve done. The best way to do that is to have a clean transaction; you know separate LLC, clean documents, clean financials, and a separate seller account.

Rochelle: Separate VPN.

Joe: Separate VPN, exactly. You can have multiple seller accounts, I’ve talked to people that have six seven different seller accounts. You just have to get permission from Amazon and they will grant it again like Rochelle said at the beginning you just have to talk to the right person at Amazon.

Rochelle: Or … and you have to do it right, you have to keep those businesses as separate businesses with separate seller accounts. They’re not going to let one business have multiple seller accounts.

Joe: Okay that’s good information and it’s hard for people when they bootstrap things and they test and certain things take off and they think this is great. Selling a business is more of a challenge and you got to have those things as separate as possible. I can tell you right now if you’re going to spend a thousand dollars setting up a separate LLC and an extra thousand a year doing the accounting for it; you know $600 a year for separate Quick Books account you will get that money back tenfold in the sale [inaudible 00:28:26.9] your account so it’s absolutely worth it to do it. So in terms of transferring the brand out of an account here’s the drawbacks is that your buyer has to have another Amazon account with good or better ratings than the one that you have. Otherwise, your buyer pull is going to shrink and when your buyer pull shrinks the potential value for business shrinks as well.

Rochelle: That’s right.

Joe: I’ve talked to many experts and I’ve named a few whom here that I have talked to about the transfer of a brand into a brand new Seller Account and they all think that’s crazy. If it’s got … if a good brand is in a good Seller Account you’re transferring that to a brand new Seller Account they don’t know anything about it-

Rochelle: It makes no sense.

Joe: And it’s just risky.

Rochelle: Exactly.

Joe: I have a transaction that’s going on now where the buyer had just purchased an Amazon Seller Account, it happens to be in a different country than the US and has got a great seller rating and they’re going to buy another brand and move it into that same seller account into that same country versus taking over their Seller Account. Because the seller feels that there’s a risk there that he doesn’t want to take on.

Rochelle: Right.

Joe: So there’s a lot of different ways to do these transactions and I hope that people can hear Rochelle through your communications that you’re an attorney that actually thinks a little bit outside the box and understands that there’s always two parties that are coming to the table and both have to be happy and satisfied in order to close a transaction. And you agree?

Rochelle: I absolutely agree and you know Joe one of the things that I’d like to talk to people about is, remember it is the Seller Account you’re selling and very often that’s what’s driving the value. But also keep in mind there may be other things you’re selling such as techniques or technology that you’ve invented to support your Seller Account that helps to drive the business to that account. Or possibly even your own know how and they may need you as part of the transition team. There may be issues with a non-compete especially if you’re running multiple brands and you’re selling one channel or one brand. So as you’re getting ready to sell your business you really have to think about what it is you’re selling. It’s the Seller Account, it’s the brand, what else is being sold and can you really sell the things that the buyer wants?

Joe: Yeah all of that should be done up front. What … the worst thing to do folks is to wake up and go okay I’m tired I want to sell my business so I’m going to call a broker.

Rochelle: Right.

Joe: That’s the worst thing that … the best thing to do is to do what Rochelle is talking about and plan it in advance. Think … okay, maybe someday I’m going to sell my business let me just sort of get my ducks in a row.

Rochelle: Right.

Joe: Maybe I never will and maybe I’ll pass it on to my kids but in the event, I get tired and want to move on I want to be prepared. And you want to think about all those things in advance and have those sort of all those ducks in a row.

Rochelle: Right.

Joe: In any contract negotiation let’s touch on this briefly, both buyers and sellers you see both sides of the transactions all the time. What other stomach ache clauses that you see in an asset purchase agreement and how do you rectify them? Give me a couple of examples.

Rochelle: So I can tell you the top two are always the non-compete and the indemnification provisions. Those are always numbers one and two sometimes you know in whichever order you want to put them in. But those are the two things that are almost always the most concerning. So the non-compete; the non-compete sounds easy. I agree I’m going to sell my business that sells paint brushes and I promise not to compete in paint brushes. Well, the buyer may be looking at it a little differently. The buyer may say, I don’t want you to compete in anything that has anything to do with paint or anything that has anything to do with art or possibly anything that has anything to do with home or other kinds of activities. Very often they’re going to look at Amazon categories and they’re going to say I don’t want you to compete in the category in which the product you sold is in. I’ve even had a buyer say I don’t want you to be a … will compete in any category on Amazon or in any category in which I, the buyer may be in now or in the future.

Joe: Definitely nuts because I would tell them they’re nuts.

Rochelle: Well, of course, we say as politely as we can. We don’t like to queer deals but those are always fight issues. And my suggestion although I know people don’t like to deal with difficult issues up front when you’re in the dating period but my suggestion is that you understand the non-compete from the start of the transaction and the LOI point.

Joe: Absolutely. We put all of that in our client interviews in depth, we ask about the non-compete, we talk to our sellers in detail about it because that is an important part of it from the seller’s side. Look if this … the person selling the business is selling class fishing poles and they want to sell that business but still sell fishing poles it’s too close and I’ll tell them right up front as will any broker at Quiet Light Brokerage it’s not going to work. Buyers are going to have a problem with that. I’ve never had a situation though I got to tell you, Rochelle, where a buyer has made an offer and said that we don’t want you to sell anything on Amazon. That’s simply too [inaudible 00:34:05.0]. I’ve never had anybody narrow it down to the category either because if you think about Home and Garden it’s just too broad. It’s usually been specific to the product and sometimes you know a little bit around that product. Let’s say that if it’s pick one that is not an actual-

Rochelle: We can talk about your fishing poles.

Joe: Sure.

Rochelle: Some people will say nothing in marine so does that mean I can’t sell a boat? A boat is really different than a fishing pole. Does that mean we can’t sell a [inaudible 00:34:38.9]?

Joe: Fishing tackle or things of that nature. I would say that it’s … you can you can dance beyond that specific product a little bit but you can’t go okay fishing pole and maybe lures but you can’t go to boats, right?

Rochelle: Right. And the reason I bring it up is I have had and I will tell you where it is the … a lot of the buyers today are private equity firms.

Joe: True.

Rochelle: And they’re doing roll ups, and those private equity firms feel like they’re buying the expertise of the person, not just the product and they are all over the idea that the expertise of the person could be used to teach or develop somebody else to sell against them. And as these private equity firms are rolling up multiple brands, multiple areas and their diversifying they have gotten very aggressive on this non-compete language. So we actually have seen … this may affect, I saw a language that was so broad that I said we absolutely can’t have our client sign it because she couldn’t even work at the makeup counter in Macy’s. Because Macy’s has an online site and even though she’d be working at the store it would be technically a violation.

Joe: Right.

Rochelle: And the private equity guy said to me well we didn’t mean that. I said well that’s your language says though. And he said I see where you’re coming from. We were able to bring it back and this is really where the skills of your lawyer and your broker come in. Because the combination of the two helps bring people back to reality but it’s important that conversation happens up front.

Joe: I couldn’t agree more. I find the vast majority of deals go off the rails at some point and the difference between a good lawyer and a good broker and a great lawyer and a great broker is pulling that back on the rails. I think the ability to have open communications and occasionally you know maybe I’m wrong I don’t mean to throw you in a category here but-

Rochelle: Yeah.

Joe: You know I think attorneys when they respond to an asset purchase agreement and do edits and send it directly via email and make comments. It’s vastly different than if they actually get-

Rochelle: Get on a phone.

Joe: When they get on a phone and speak to the other attorney, it’s-

Rochelle: Absolutely.

Joe: You guys are brutal in emails and comments but then when you get on the phone you can generally work things out.

Rochelle: So one of the challenges Joe is that really it’s more than there was but today there are very few lawyers who have experience in this kind of business.

Joe: Yup.

Rochelle: And the typical document we’re seeing has all sorts of stuff in it that makes no sense for an Amazon business. It’s got loads of employee representations on employee benefit plans, it has loads of pages on environmental reps and warranties because they’ve taken the standard ABA form or the standard form they always use and they send it and say this is our asset purchase agreement.

Joe: Right.

Rochelle: And people like … and I’ll use Shawn Hussain as a great example I do a lot of deals with them, people like us look at that and we just simply white out all those pages. So we start off with 75 pages when we’re done it’s about 35 and 40 of them were just garbage.

Joe: Let’s jump to the indemnification clause.

Rochelle: Yes.

Joe: Stomach ache clause number two, tell us about that one.

Rochelle: So indemnification, for people who don’t understand what it is, it’s the clause that says if something goes wrong after the sale here’s when and how I might be able not I the buyer may be entitled to get some money back. Or get some protection get some defense. So understood anything that happened in your business prior to the sale of the business is certainly the seller’s responsibility. Anything that happens in the business after the sale of the business is the buyer’s responsibility. But then there’s the foggy world; what about product that was produced by the seller but not sold until the buyer owns that inventory? What about claims made on the websites, claims made in the marketing materials, claims of natural or organic that the buyer is relying on that the seller created, or what about simple … the business didn’t do very well? You told me this business is a million dollar a month business but when the buyer takes it over the think tanks, the lightning deals go away. There’s all sorts of speculation, the supplier doesn’t supply quite as well to the buyer as the seller, and then the buyer comes in and says how do I get money back for this it’s not what I expected. It’s really really important that going into the deal you understand what the caps and limits are, what’s the maximum amount of money a buyer can get back and under what circumstances, and is there a deductible. So for instance fraud; okay everyone understands that if the seller committed fraud, the buyer is going to expect their money back and probably all of their money. At the same time let’s just assume that what really happened is that the seller had representation, some warranties and in it it said that the financial statements that are attached are true and correct and it turns out one line has one number transposed, it doesn’t change the business, it doesn’t change the quality of the business, it is an immaterial mistake, should the buyer get money back? Should they get all their money back for that? Should they get any money back for that? And so that’s what I would call a typical representation warranty. Let’s assume there was as a result of that mistake there really was a little bit of a material implication. Well, it will … let’s say turned into a $10,000 problem, so what should the buyer get for that $10,000 problem? The language and the representation warranties are very important. What we recommend is that going into the deal there be a very clear conversation about the difference between fraud which might mean you get your purchase price back or maybe even the right to unwind the transaction versus an unintentional misrepresentation or mistake or something hiccups that you didn’t anticipate. And we recommend that you have a clear cap, what’s the maximum amount that the buyer can get back in the event of those issues and it might be we … generally, we see somewhere between ten on the low side and 30% on the high side as the range; that’s today’s market, as the range for those kinds of indemnifications. We might see a basket, so we might see something that says but if it’s all under $25,000 or under $50,000 depending on the size of the deal the buyer gets nothing back. It’s just a small de minimus issue whereas if it’s hundreds of thousands of dollars of issue there might be a cap on it. There are fundamental representations such as title to the assets and if it turns out the seller sells you something it didn’t have title to it, of course, the buyer is going to expect to be completely reimbursed for that. There are questions about whether or not you’ll pay for the attorneys. These are provisions that both your broker understands and your attorneys understand. I strongly recommend that you line up an attorney at the beginning of the deal at the LOI for the base of this and you also line up an accountant who and as a seller.

Joe: Well in advance.

Rochelle: Well in advance.

Joe: Yeah for sure. I hope you have one already for those listening that are sellers you know the four pillars that Mark and I talked about; the risk, the growth, the transferability, and the documentation are all critical. And you can’t have that documentation in place without having a good a. bookkeeper and b. CPA to figure out what’s going to be and left with after the sale. That’s why I don’t want you to wake up and go okay I’m ready to sell, list my business, please.

Rochelle: Right.

Joe: You want to think about those things in advance. I did a podcast with Dave Bryant from EcomCrew way back on importing from China and Dave talks about how he planned in advance selling his business and renegotiated the cost of goods sold on certain skews over a 12 month period. Saved himself about $40,000 and got that back in a multiple of three when he sold the business so all of these things are really important. As you talk about the indemnification, and as you talk about the non-compete for those listening you know I’m sure some of you nodded off right? Just like you did when I talked about the doing the valuation in cash versus accrual accounting. You can make so much more money in the sale of your business someday if you ever decide to sell or your heirs do when you take care of these things in advance when you plan when you have proper documentation. Now all of that will make these stomach ache clauses like the indemnification, not an issue. Proper documentation in advance of the sale you’ll know that you did the right thing with your customers, you know that you don’t have any cash and potential liabilities; you know that your financials are correct. That transposing of the number you know is it material, is it immaterial?

Rochelle: Right.

Joe: I’ve never had it happen pretty small if it’s immaterial to material. I always go back to things can be worked out for the most part with math and logic. Emotion is the wild card, a good attorney a good a broker will help keep those emotions in check and on track to closing. And I think one of the reasons why I wanted you on the podcast Rochelle is because you seem to apply that math and logic into the conversations that we’ve had and you realize really really strongly that both buyers and sellers need to be happy.

Rochelle: Right.

Joe: Otherwise that transaction is not gonna close. There’s no point. A one sided deal is never going to close folks. So if you have an attorney that is fighting tooth and nail for indemnification clause it’s going to have the seller not cover anything, not cover any risk for the buyer, it’s not going to close. It has to be comfortable for both parties. I always tell a story, I’m not going to tell the full story but it boils down to I will not take on a clients that is married to an attorney that has an attorney’s her mother father sister brother that’s going to do their contract negotiations because they fight like rabid dogs for things that you know there’s one tenth of 1% of it happening but they fight like crazy to make sure that their client, their relative is fully protected. Because they’re gonna have to have drinks to that relative at the next 4^th of July barbecue. Deals fall apart for those clauses that we’ve talked about more the indemnification in my experience than the non-compete because again a good broker will handle that upfront and take care of it upfront and it should be both buyer and seller free LOI. Now one last thing on the LOI face in terms of when to hire the attorney Rochelle, our experience is the letter of intent is non-binding and fully contingent on the asset purchase agreements on due diligence and the further detail of asset purchase agreement so we don’t recommend that clients hire an attorney for the language in the letter of intent. Because it says right in there is non-binding and contingent on those things. I think as long as some of these points or all of these points are worked out in advance you know particularly the non-compete that it’s in there that 9.5 times out of 10 it’s not an issue. Occasionally we have a little further negotiation in the asset purchase agreement, would you agree though that you should be hired once the LOI is signed and for the asset purchase agreement negotiations?

Rochelle: Let me frame this a little differently.

Joe: Okay.

Rochelle: If you’re getting ready to sell your business you should have a lawyer lined up who’s taking a look at your business to make sure your ducks are in a row. Make sure if you have supply agreements that they are written signed enforceable supply agreements because if you’re planning on selling those supply agreements then they have to have assignable supply agreements. So what I always suggest is just like you have your accountant in your back pocket you ought to have an attorney that you work with that’s helped you think through your business. So I actually believe that you need to have a good business attorney lined up early on. Now having said that, 90% of my clients don’t even though that is my advice and I wish we would be there. Joe is exactly right we are very often hired after LOI or right as the LOI is being prepared. And the only catch we have with LOI is if you have an LOI that doesn’t address indemnification, it doesn’t have a cap in it, when we go to do the asset purchase agreement the attorney on the other side will say the letter of intent didn’t have a cap, the letter of intent said purchase price because it didn’t say anything else. So when you’re silent on those terms in the LOI you might have uphill battle. What you could do to protect yourself is to say a … indemnification with cap and basket to be agreed upon in the definitive document. So then you’ve at least left open the possibility that there’s a negotiation to still be had on that topic whereas if you simply leave it silent the buyer is going to say that … I know I’d say when I’m a buyer I’m going to say no no no no no there were it said indemnification there were no caps, there were no baskets.

Joe: Yeah, you’re going to say different things as the attorney for the buyer than you are for the seller.

Rochelle: Absolutely I’m very good at switching hat, as a matter of fact, I have represented clients who have been both buyers and sellers and they laugh about the fact that my tone changes and the way I look at the document changes. But we do what we have to do for our clients.

Joe: Yeah for those listening look like many of you had … you don’t want to contact a broker to talk about the valuation of the business or what it might be worth and I’ve had people tell me that because they don’t want to feel like they’re committing. You’ve got to do the same thing with the attorney, I think you should have a call with a broker a year two years in advance just to understand the valuation process and how to gauge what your discretionary earnings are on a monthly basis, quarterly basis, so you get an idea for the value instead of just listening to podcast, instead of just listening to people in mastermind groups and their experiences because the full story is never told. Instead of just looking at listings and oh that’s a 2.5 multiple, that’s a three multiple, it’s a four multiple, you don’t get the full story. You can’t do it that way. You should have a conversation and have it directly applied to your business and your business only because every business has its own unique qualities. The same applies I think as you’re saying Rochelle to having a conversation with an attorney in advance because if there’s a problem with the way that you set up your LLC or the trademark or a design or anything like that-

Rochelle: Right.

Joe: You should have those things addressed in advance. Well worth it. Do you do any … do you have an hourly charge for that first call? Do you have a free consultation? Do you just talk about business what it … how does it work if somebody wants to reach out to you and have that conversation?

Rochelle: Well we offer a 20 minute free consultation to all new clients. So we do it telephonically, most of our clients are not located. We’re based in Tampa Florida which is a lovely place to live and do business. Most of our clients are all over the world. So we do it telephonically or through Skype or some other online method and we offer … we say 20 minutes and sometimes it goes a little longer depending on how in-depth we get. And in that call, we can then talk to you about what you need and how to price what you need. So sometimes what you need immediately is really just a few hours of our time and consultation and we’ll bill it that way. Sometimes what you need is for us to dive in … as a firm we will do flat fees, we will do structured fees meaning that a certain price to cover the LOI and other price to cover due diligence a 3^rd price to cover the asset purchase agreement and actually do it in phases. We will do capped fees, it all depends on the nature of your transaction and on how well we can get our arms around what you’re asking us to do. So for instance, if we’re doing it capped fee or a flat fee we’re going to be very specific about the services you’re getting from us and things that are outside those services might be in addition. If we’re doing an hourly rate, of course, we’ll have some sort of retainer up front and we will be specific about what’s included in those services but you’ll be billed by the hour. We try very hard to be transparent and easy for our clients to understand what they’re being billed for and how they’re being billed.

Joe: Excellent. Rochelle listen we’re going to wrap it up here, appreciate your time today. Can you tell those listening how to reach you, how do they find you either online or via phone call?

Rochelle: Absolutely so by phone, our number is 813 999 0199 and I am in extension 115 if you press 0 when you call that number ask for Layla and she will set you up with me or one of our attorneys for an additional counsel. And by e-mail I am [email protected] And we have a policy of responding to people within 24 at the most 48 eight hours but we’re usually pretty good about popping right back to you and getting something set up.

Joe: Terrific we’ll make sure that that phone number the e-mail address and the website address are in the show notes as well.

Rochelle: Thank you.

Joe: Rochelle any last thoughts for those listening that may be either buyers or sellers that you want to share?

Rochelle: I just think in closing that when you think about buying or selling a business due diligence is the most important thing you can do. So even if you’re an experienced Amazon seller whether you’re a buyer or a seller you need to know who you’re doing business with. Get some … if you’re the buyer certainly understand the brand you’re buying and understand what you’re trying to accomplish by buying those brands, what services you need and frankly if you’re the seller and you might be taking back seller paper which is a promissory note a seller promissory note you’re going to want to know who the buyer is. Make sure you understand are they equipped to run a business like this and if they’re not what kind of transition services do you need to provide them so they can hit the ground running. Know what kind of people there are, check them out. If you’re dealing with people who are squirrelly get out of the deal in the … before you even sign the LOI. But if you’re dealing with good people try and figure out how to make them successful because your success as a seller especially if you’re taking back a seller’s promissory note or consulting agreement your success is going to be very much related to their success.

Joe: I love your approach you know if you’re … if you ever decide to leave the law business give us a call. You may be a very very very successful advisor here at Quiet Light Brokerage.

Rochelle: Thank you, Joe, I appreciate that and look forward to working with you again on some transactions.

Joe: All right. Well, thanks for being a guest I appreciate it. We’ll talk to you soon.

Rochelle: Thanks, Joe.

Links:

www.walklawfirm.com

Walk Law Firm, PA

The Wells Fargo Building

100 S. Ashley Dr., Ste. 620

Tamp. FL 33602

Phone: 813-999-0199

Fax: 813-839-4896

Is Buying an Amazon FBA Businesses a Good Investment?

A lot of buyers come to us and ask about the risk of buying an Amazon business. Likewise, when setting an Amazon business up to sell, what are some things...

A lot of buyers come to us and ask about the risk of buying an Amazon business. Likewise, when setting an Amazon business up to sell, what are some things to consider? Buying up businesses and creating a profitable portfolio is something that some very savvy buyers are going all-in on. Today we are talking about Amazon FBA with someone who has been doing just that. If Amazon is the past, present, and future of e-commerce and all the others are just playing catch where do YOU want to put your money as an online business owner?

Carlos Cashman, CEO and entrepreneur, has started over a dozen companies as well purchased, sold, and taken public many others. He is now CEO of Thrasio, an FBA business acquisition company. Thrasio has a wealth of experience purchasing businesses from all over the world. At Thrasio, the team guides the seller to a deal in record time backed by expert law, due diligence, and financial teams.

Episode Highlights:

Carlos’ take on the Amazon consolidation model.
The importance of sku concentration, consolidation, and product stability.
How many Amazon deals Carlos has made.
Whether he places weight on secondary metrics such as email marketing.
Where the efficiencies are in Thrasio’s portfolio.
Navigating a bad purchase and when to cut losses.
Cross-collateral investing and how Thrasio sets that up.
Why Amazon?
Some statistics that cannot bely the retail ecosystem that is Amazon.
If and how any business can compete, in the long term, with Amazon.
Product creation and innovation best practices to follow.
The importance of having representation when selling your business.

Transcription:

Joe: Mark, I have a lot of people that come to me and talk to me as either buyers and they say, Joe, what’s the risk of buying an Amazon business? And I talk—5, 6 years ago everyone thought the risk was really high but today there are people that are a lot smarter than you and me and you and me combined and maybe all of our team that have raised 10, 20, 30 million dollars to buy up Amazon businesses and build a portfolio. And I understand you had Carlos from Thras on the podcast talking about just that.

Mark: Thras.io; he’s very careful to approach to actually correct me on that at the beginning of the podcast and he tells me the meaning behind their name which is really cool. I’m going to save it for the podcast so people can listen to that. But yeah what I wanted to know so many buyers look at Amazon only businesses and they discount them for channel risk because they’re like do you really want to be on this one platform or competition and products could be sort of ubiquitous, competition can be really tough and your subject in mercy to the whims of Amazon. And so here we have Carlos putting together a fund and buying up a lot of these Amazon Asense and the question is you’re a smart guy, you’ve done a lot of business in the past and we’ve talked about how he had grown multiple businesses and sold them, so why is he going all-in on this platform and also why are people giving him money to go all-in on this platform; what’s the reasoning here to say this is where the future of e-commerce is. And so we talked a lot of statistics on this. We talked a lot about what is the future of Amazon. And here’s a spoiler alert Amazon’s going all-in on FBA. It’s one of their 3 biggest platforms, it’s one of the 3 legs to their stool that they have with their aid of US being one and their sellers—their 3rd party services being one of the largest profit centers that they have. In addition, when you take a look at where do they stand in the marketplace, it’s staggering. Everybody knows that they’re huge. They’re 49% of online e-commerce sales. When you look at this in terms of total retail sales; total retail sales make up about roughly 10% of all—e-commerce makes up about 10% of all retail sales. Amazon makes up about half of that. So what do we do here? What are we going to do? Okay, online sales is only 10% which means it’s going to grow. Amazon is already half of that online marketplace. What’s the future here? Well, the future is Amazon is trying to become the e-commerce internet. They’re trying to become the de facto way of ordering products online and everybody else is playing catch up right now. And so they are betting and saying we get it. We know that Amazon growth is going to continue. We know it’s going to continue at a rapid pace for a long time; there’s lots of room to grow, and yeah there are competitors and we talked about this. We talked about; Shopify just announced recently that they’re investing one billion dollars in their Shopify fulfillment network which is great news and he was ecstatic to hear that. He’s like competition like this is good. But the fact is Shopify is playing catch up, Target is playing catch up, Walmart is playing catch up, and they’re not there yet at all. They’re more difficult to work with than Amazon. They don’t have the same draw. And so it made me rethink this if we’re looking at where do you want to put your money as a business owner.

Joe: That’s it right there the multiples are going up on Amazon businesses tomorrow guys; that’s it.

Mark: It’s more sure of investment than maybe we’ve thought about in the past. It was; you know what? We talked to some of these guys that are doing this professionally that are on the Amazon space only; fascinating conversation. I enjoyed it thoroughly to talk to somebody who’s doing this and sees things from maybe a different angle than what most buyers think about.

Joe: Well I think it’s great because probably half the audience here is made up of buyers as well and they ask that question all the time; should I buy an Amazon business? And we know that I say we’re going to raise the multiple on Amazon businesses, we actually don’t as we always say determine the multiple. The buyers do because we do our best based upon historic numbers and then we get the feedback from the buyers. If we’re wrong they let us know by driving the multiple down or driving it up in some cases. Year to date; this is end of June that we’re recording this year to date I’ve seen the multiples on Amazon businesses at levels that I had never seen it in the past. So I think that the buyer pool is getting much more confidence in the Amazon channel. I think that that one channel risk is if you’re focused on adding new Asense in growing the business worldwide on other Amazon platforms in countries the risk is diminished a little bit. Historically we’ve seen multichannel businesses sell for 10 to 20% more than single-channel Amazon businesses but I do think that’s creeping up a little bit and catching up a little bit. So it will be really interesting to hear what Carlos has to say. He’s a super nice guy. One quick aside I had Amazon businesses that I had for sale and Carlos had to call them, the guy loved him and they both happened to be traveling to Singapore at separate times. They actually got together and had coffee and dinner with their families just because they had met on a phone call. So Carlos is a super nice guy, very, very good at what he does, and obviously an expert on the Amazon site. So I’m looking forward to listening to this one myself.

Carlos: Oh that was all good stuff.

Mark: Yeah it was all the good stuff you see that’s the thing, we always record the good stuff before I hit record. And I’m actually going to enter with that. Carlos, thank you for coming on the show.

Carlos: Cool. I’m glad to be here man.

Mark: Yeah so tell us who you are. I know who you are but tell everybody else who you are.

Carlos: Yeah everybody come look at LinkedIn, they usually do. But I’m a serial entrepreneur. I’ve started—it depends on how you count them size or whatever but you know over a dozen companies. I was thinking about this in a way because people are like wow, tell us about that. I started I think it’s about 6 to 8 I got to figure out better multi-million dollar companies. I’ve taken company public, I sold them, I bought them, I’ve sold several for 9 figures, dealt with some amazing people along the way and it’s always been tech-related. So software, advertising, some services related to that stuff and e-commerce stuff. So I’ve got a lot of miles on the road that way.

Mark: Yeah no it sounds like the profile for any of our brokers. So if this whole Thras.io thing doesn’t work out for you let me know. So you’re the CEO of Thras.io.

Carlos: I know we have the worst name in the world but let’s just make it clear for everybody; Thras.io.

Mark: Thras.io, I’m sorry. It’s good that I know that now because I’ve been saying Thras.io; so Thras.io, okay.

Carlos: So it’s based on the review of your site, it’s based on the greek word thrasos which means boldness or confidence but it was actually an Amazon warrior queen hence the kind of Amazon connection.

Mark: That’s pretty cool. See I learned something. This is awesome. I love this. I love the name now.

Carlos: Josh came up with the name in just a second and I’m co-CEO and co-founder with my partner Josh Silberstein. And yeah he just came up with it and yeah I don’t like to spend too much time naming companies even though I’ve done that professionally before so we just went with it.

Mark: So it was an Amazon goddess, is that what you said?

Carlos: It was an Amazon queen. So we actually had a whole lot of sub-companies for our Amazon warrior queen. I mean like things that do different parts of what we do in the ecosystem. It’s got to stay with that theme or words.

Mark: I got to ask now I mean is Josh like some Amazon queen ruler aficionado and connoisseur?

Carlos: We’re both aficionados of mythology and things like that but it just made sense getting into Amazon that we would do something like that.

Mark: I like it. I mean I like names of businesses that have secondary and deeper meanings and now I’ve got something if I’m really bored I’m going to go out and procrastinate by researching Amazon queens.

Carlos: There are a lot of them and their names can be very difficult to spell which is kind of a mess when we’re trying to do with legal documentation and stuff but it’s fun.

Mark: That’s really cool. Alright, so I had a few companies that I would say is in a similar vein to what Thras.io does and that is this idea of consolidating multiple Amazon businesses under one roof. That said everybody’s got a little bit of a different twist on it. So I would love to get your twist on this Amazon consolidation that you guys are doing in trying to acquire companies and anything that you’re able to share as well. Like I mean how many acquisitions have you done and how long have you guys been in business so far doing this would be really interesting and if there’s something that—alright I’m not going to tell everybody this then don’t worry we’ll just say it and only the 3 people that listen to the podcast will know.

Carlos: Alright so I hope you’re calculating right—I’ve been listening to this for a while now. So I hope you’re keeping track of these questions because I’m not taking notes. You just asked me about four questions right there so let me try to take them in any order that I kind of remember them. In terms of do, we have a particular twist on the market; now I don’t think we do necessarily. I mean I heard Richard when you had him on here with 101 Commerce I mean that’s—the idea is fairly simple. I think people get it. In terms of—I think what they see in this Mark is you know when you mention other people like there’s someone who has built a great home goods business and now they want to expand and so looking for other home goods products to roll into that, right? We are really kind of vertical agnostics. So we’re only looking on that from that point of view. We would just believe in the ecosystem overall, we believe in the fundamental transformation that Amazon has brought on the way we do commerce and particularly e-commerce, and we just see an overall appearance. We’re looking for just great business. I mean look we want great products and now some people have top ranking, great ratings, and good number of reviews; all that stuff. That’s really what we’re looking for but as far as what it is, it could be all over the board really. Again the most important thing is that they’ve built a quality product. And it really comes down to the Asense; the Amazon listing itself; the product, the SKU, whatever you want to call that. So that’s really what we’re most focused on is we look at our business as a portfolio of those. So any business may have a handful of them and I know a lot of people in this marketplace some of the acquires in this place market space or tend to be still I mean you’ve probably seen a lot, you know, people looking for a single business, right? So yeah with the executive leaving some big company taking an SBA loan whatever we could talk through all that stuff later but for that person they’re concerned with customs to concentration and rightfully so. It’s going to be their one business wonders and they take out a big loan for it. It’s actually kind of the opposite for us. So as far as our interest we are interested in the more concentrated your SKU’s are the better because it’s less for us to take on and manage the whole thing. And we’re not concerned about the individual performance of that one because we’ve got hundreds and hundreds and hundreds of others. But I mean we are concerned about in terms of how it does but it’s not going to sink us or make us by the performance of anyone SKU we acquired in one time. So that’s kind of how we—that kind of answers how we look at the business and again we’re not looking for fad products either just something clear to say. So if you got fidget spinners we’re not interested in that. Those are hot for a year. My son has a dozen of them sitting all over his room and he’s never going to spin them again. So we don’t want things like that. And so we want stuff that is really stable in terms of its demand.

Mark: Yeah, I’m just going to put a note to everybody that’s given up fidget spinners for swag, thank you for making my room, my kid’s rooms just filled with stuff that’s lying around because you’re absolutely right and you know I will disagree with you on something here. You said that you guys really—you’re not sure if you really having any expend but this idea that you guys have of looking at Amazon businesses not so much in terms of the business side of it but you’re looking more at the Asense and trying to evaluate individual Asense and the strengths of those relative to everything else that’s really what you’re looking at. That is a unique way of approaching the marketplace and it allows you to look at something that has SKU concentration or a unicorn product and we do see that from a lot of buyers with a business that has a unicorn product kind of thinking I don’t know if I want to bet 2 million dollars on this is unicorn product here and you guys are saying well no we’ve got a lot of products like that so that’s a twist.

Carlos: Oh that’s good to know. I mean alright so we do have a slight twist on it.

Mark: So how many deals if you’re able to share even broadly how many deals do you think you guys have done so far?

Carlos: I’m going to be a little cooler here about some of these things. But we’ve done dozens of deals so not high but we’re moving quickly and that number is increasing over time.

Mark: Yeah.

Carlos: So it’s been exciting for us and then going back to the ego of the SKU concentration question, I just wanted to add something. You guys are talking about like because there’s a lot of interesting; Amazon sellers [inaudible 00:13:56.7] you get this real business straight where they’ve used these products out there, viral launch or fellows got a [inaudible 00:14:02.6] and they found four different holes in the market so they’re selling pot holders and humidifiers and some sort of potted plant for the fruit product you know great different [inaudible 00:14:13.5] and I got 4 of them. And you know to somebody external coming in looking at that would go sheesh they’re all over the place. They’re not just sporting goods and that’s crazy. But we get it. We get that that’s how Amazon works and what matters is the listing and it’s position relative to its competitors in the keyword space, right? And that’s what we look at and we care about. So it’s usually like in that sense also that business is attractive to us because it’s again concentrated even if it’s in strange different products. We don’t have to have like this suite of products around like I said one vertical where you’re building a brand into it. Again that’s an interesting point to discuss is the position of brand in the Amazon marketplace because let’s face it were all talking about FBA businesses here and frankly most people who buy these things; I see a product in the wild all the time and I love it. You go to a friend’s house and they’ve got one of your products sitting there. Like oh, it’s great but where did you get it? Well, do they say the little brand that we happen to buy? No, they say Amazon, right? They got it on Amazon. They got it from Amazon, if they had a problem they would drive it to Amazon. We’re at a place right now where we’re still; we’re all sitting on the coattails of Amazon; the brand halo that Amazon provides. So we recognize that and we’re going to be very clear about that and how we look at the products and the ecosystem.

Mark: So do guys place much weight at all on a business building a brand or even building customers outside of Amazon such as email list and being able to drive that to products and new products or is that kind of a secondary metric that you look at?

Carlos: It’s a secondary metric. I won’t say we don’t look at it, we certainly do and there is some value there but it is dwarfed by the value presented by the Amazon ecosystem. And so we care 1st and foremost about how you are positioned on Amazon. But of course it’s nice to have someone that you know the e-mails and people that love your product or you know if you do because what happens now is oftentimes we will have or we’ll acquire a product that is in the same space but we have 5 more. And so that becomes what we start to now as a business uniquely perhaps accrue some value from things like that. Because if you have that email list of 40,000 chefs or something; people who love cooking and I have 4 other cooking products now I can cross-promote our stuff right through there. So it does start to have some value the longer we go out there. I think that value will increase the more we do this but right now we’re still pulling stuff in all sorts of different spaces. They don’t always overlap and it’s something we look at but it certainly is a secondary metric.

Mark: When I look at companies like yours not just specifically within the Amazon space and I want to talk about that in little bit here but when I look at companies like yours that are consolidating businesses and millions of them the portfolio the approach is typically to find efficiencies in combining things together. So if you’re looking at a content network of websites so completely divorced from the Amazon world what you have usually is a staple of writers, editors, and an editorial process that can turn out new content to be able to build up a network that way. So bringing a new content site isn’t as labor-intensive you have this natural efficiency. E-commerce stores in the past what I’ve seen have been logistic efficiencies. You’re able to have maybe the same warehouse staff fulfill more products. When you guys are doing what you’re doing and again I think it blends itself maybe to this Asense approach I think from my evaluation; I’d love to get your comments on this, it seems like you’re doing this for 2 reasons. One I would imagine efficiencies which I’d love to know where those are but also a portfolio sort of approach to things and that you’re spreading out over lots of different Asense niche vertical agnostic as you say but it’s more of let’s not bid on one winner let’s bet on a lot of winners potentially. But I’d love to get into 1st of all have you confirm that and then get into are you doing this also for efficiencies within your company that you can run these businesses may be more efficiently and if so where are those?

Carlos: So that’s a great point and something worth to think about. So I’ve done your traditional rollups before. We sold the company in the late ‘90s to a company called US Web; a lot of people may—you probably remember a national brand of webshops doing person websites and stuff. But you know the traditional kind of rollup looks more for the—like those efficiencies are more important there because it’s all about pulling costs down, right? If you go acquire a 100 30 person companies and each one of those 30 person companies has inside person finance team or a 3 person finance team whatever and 3 salespeople I am sure you don’t need all those, right? You need 3 finance people for all 100 of them or maybe 6 but still not a linear scale. So that kind of efficiency is certainly more important in a traditional rollup. Like you said rolling up content on websites that would be important there also because you have editors and writers and HTML people and designers and that can be where there can be leverage across more stuff certainly if you template size that. It’s less of a big deal in this Amazon ecosystem. And what some reasoning about what Amazon has down here in creating all these millions of solopreneurs is they’ve taken not just Amazon also it’s all the supply chain companies, it’s the manufacturers. They’ve simplified this interaction so much that you can get a single person running a 5 million dollar business which is unheard of in history. It’s incredible. So it’s taken out a lot of the complexity. Now, most of the time when you get to that scale you’ve got a couple of assistants; part-time assistants, VA’s, someone like that so it could be drive efficiencies there. Yeah, we certainly can if they’re good but it’s more about being able to improve the performance than it is a simple efficiency. So [inaudible 00:19:54.9] a lot of these, we meet a lot of great sellers who I just love them. Like classic entrepreneurs that dropped out of college or I just got out of college and started selling on Amazon and I travel the world and living the life and they built great products and they just hustle. And they’re smart. That’s great but when it comes to global sourcing and your supply chain I mean from all over the world and getting into different places in Amazon you’re not going to be as good at it as the team that I have here. I’ve got a leader here who ran a 2 billion dollar supply chain in 140 countries for one of the largest shipping companies in the world. And we have a whole team of people under this on the side doing this work. And so we can do it better and more efficiently. We can negotiate better. We can do both on the shipping side and the manufacturing side with volume discounts. So we can do that better and we, therefore, carve out more profit from these products. I mean I’d look at it from creative; we’re doing stuff across hundreds of products in all sorts of different areas. We know things that are working that are very likely work what the impact is and what is it and we are—I can afford to have photographers on staff if I want to because I don’t have to try a different outsource for all this stuff all the time. Let’s say advertising and marketing that’s another key place where it’s not necessarily about the efficiency of having less people doing it for more things. It’s really about the knowledge. I’ve come from a performance marketing background. I sold 2 companies with our Google performance marketing company and a Facebook performance marketing company that were top of the line but we did. I’ve got a team here that is 2nd to none in understanding performance marketing and driving traffic from all these various sources. And Amazon is just another PPC marketplace so should we be able to do better than the individual seller who did a good job with their business? Yeah, we should. So I see it as efficiency in deploying new resources for new revenue; resources to improve the performance of the products where they are. It’s not like a cost efficiency, right?

Mark: Sure. Now that makes complete sense. I want to ask; you know one of the problems I have seen companies run into when they’re consolidating either businesses or in your case Asense but I would still consider them businesses to some extent but be the consummate of Peter robbing Paul. You buy a dog and it starts draining the resources of the companies. What have you guys done to protect yourself against that? When you do multiple acquisitions you’re going to buy a bad one at some point. It’s just going to happen. So what have you guys done to help protect yourself against draining the resources of the company? When do you pull the plug?

Carlos: You know it’s not even so that you buy a bad one in this ecosystem; it’s that you bought one that has bad competitors; but screw with that, right? I mean Amazon sellers know what I’m talking about very well. I mean the wrong complaint even if it’s fake even if it’s not correct put into Amazon can shut you down or slow you down or cause problems. So yeah look I mean we have to know the difference between a problem like that that we’re going to fix versus someone like you said just a bad egg or we’re going to pull the plug. I think we’ve done this a lot. My partner Josh and I both started a bit part of a number of startups, started companies ourselves. He’s one of the most creative and experienced financial dealmakers I’ve ever seen. He’s done more debt deals and equity deals than anybody. I think we look at those dispassionately with—I mean I think that’s the key, think about capital allocation which is really what we’re doing and you can go listen to a podcast about that all day, there’s some great ones. You’ve got to know when to cut your losses and do it fast. That’s the key. And we don’t get emotional about it. That’s hard to the seller who builds their family of 20 products and each one is kind of—this business is their baby and each one of those is another baby of theirs and they may be getting chilled on the [inaudible 00:23:47.8] or something or letter openers but they love it and they think they can get back to it and they’re going to hold on to it longer than they should. We don’t have that. We have no baggage on it. If the letter opener just sucks then we’ll cut it off. So quite often if we buy a business that has a lot of SKU without the SKU concentration we like, we’ll look at it and we’ll cut the losers day one. I mean we’re not even going to pay for them if we’re not making money on it. In some cases we will actually—sometimes it’s underperforming ones and the seller may want to keep them and keep working at them. We have actually—we’ll buy individuals SKUs or separate SKUs from somebody so our Asense—I think everybody knows [inaudible 00:24:21.5] Asense it but more people have SKUs and SKUs are so. I think it’s just a question. You just have to be dispassionate about it and have a financial mindset towards it. And you know look sometimes it’s worth setting because you know you can get back but sometimes you cant.

Mark: I mean you may not have emotions related to some of these products but you do have investors within your company, right? I mean how much has that play into it as far as not wanting to pick that losing SKU or an SKU with bad competitors as you put it?

Carlos: It doesn’t. I mean we have great investors but they’re not that involved in the business for the looking at individual deals we’re doing. We cross call there early on a decision we made that was really—I think really important. And that was the only way we’re going to do it was we cross collateralize investors across everything we do. So there are some people who look to this market by saying hey I’m going to do an SPV and acquire this—

Mark: What is SPV?

Carlos: Social Partners Vehicle. So you can raise money in a single; it’s almost like separate companies and then they’re all related in some point in the future [inaudible 00:25:22.7] together and rationalize based on revenue and EBIDTA or whatever it is. But then we have a different set of investors and that ends up; that’s a really bad idea because then you have your intent and what you want to do can be across purposes, right? At this group of investors over here their product is going down and I shouldn’t focus on it anymore but this group over here the product is doing great and if I put more effort there I’m going to make a lot more money. The right thing for me and for the business is the focus where I need to and approve there but if you’ve done your financing that way then you’re kind of shackled. That’s what we did not do. We were not going to do that. It just doesn’t make any sense. So it was important to talk about cross collateralizing across everything and say look everyone we buy that was into this and you all are part of this. So that allows us to have that broader focus.

Mark: Why Amazon? I mean there’s a lot of different rollup place within the online space and you’ve got a really remarkable resume with tech companies. You could have gone for ad networks, you could have gone for content sites, you could’ve done any number of things as in the video—

Carlos: The advertising space.

Mark: Alright so maybe not that; bad example. But why choose Amazon?

Carlos: It’s funny. This started actually as an e-commerce rollup. So you go back to it because maybe I [inaudible 00:26:39.0] why Amazon is probably one of the reasons you said why we were kind of coy about talking about what we’re doing for a while and now we are talking about it. We discovered this and it looks super easy. It’s not as easy as we thought but it never is. So we originally were going to do e-commerce like my Facebook Advertising company Orion CKB, we were all performance marketing which is not [inaudible 00:26:59.0] you know change names again but a fantastic group but we were very, very good at performance marketing on Facebook and so all of our customers were either e-commerce or lead gen but people who made money from what we did. And so we started looking at that and saying hey e-commerce companies are getting smaller and smaller and they’re able to produce more value and this whole supply chain kind of thing is figured out maybe there’s an opportunity to go out and rollup the small ones and take what we know how to do which is all the performance marketing which ultimately was adding value to these businesses more so than the other piece of it and we could create additional value by putting them together. So we were doing and looking at e-commerce and when you do that you start to look at Amazon as a channel obviously. So we thought Amazon would be a channel for our e-commerce play. I just started looking into it and started meeting people in the ecosystem and at the same time my e-commerce customers at my Facebook advertising agency were asking us like you guys are good at Facebook can you run our Amazon ads for us because we’re not doing well there. So we started really looking into that. Once we looked into the Amazon ecosystem it was really—it was amazing. I mean to me to see the leverage that you’ve got. We all pay for it certainly to Amazon but like it’s the green traffic; that’s a sure thing. You’re paying for it but anyone who is looking for product that you’ve got to build [inaudible 00:28:13.6] you’ll get it. Or you can have great product and you don’t have the right team driving traffic to you on Facebook and Google and no one is going to know about it. You’re not going to get it. You’re not going to get it to [inaudible 00:28:22.8]. So we just started to see that the Amazon ecosystem was really, really much more powerful and we think the deals were better and the opportunity to move here was quicker and to find these companies and then I think we—I would rather be lucky than good any day Mark but I think we just hit the right time when we sort of started looking at this and there were more and more businesses. We really just kind of went out to sites like yours and looked around to see what was on the internet available and we started to see these Amazon businesses and we said let’s give it a try. Let’s nab a couple of these. Then we really all started to gel from that.

Mark: So many Amazon sellers look at Amazon obviously with big eyes of opportunity but also wary eyes of distrust for what Amazon is going to do. And frankly for some people that have been selling on Amazon; let’s talk about Amazon vendor central you know maybe that’s been justified. Amazon as of the time we’re recording this podcast well it was about a month ago they sent basically non-renewal just to so many vendors that saying we’re not going to be buying any more products from you and poof those businesses are basically gone; not entirely but very, very damaged. How do you get over the suspicion of Amazon bad or evil I don’t trust them but I’ll make money from them?

Carlos: We get asked this a lot and I’ve dealt with these behemoths. That’s all I’ve done for the last like 10 plus years 12 years. So Google I thought; I have an SEO company I’ve been doing SEO for a long time there we did Google PPC the company we grew here before we sold to the post companies like Facebook and Facebook Advertising company. I’ve dealt with these you know the fangs whatever these giant companies that seem kind of harmless in a move without caring and you can try to read the [inaudible 00:30:07.7] in what they’re doing but I think the most important thing—I have longevity in all those places by doing a couple of simple things. Like by following the rules, being a good actor in the ecosystem, and understanding what they’re looking for. And frankly this vendor central change; it’s tough for a lot of those guys and you can go back to 2002 and start reading Jeff Bezos’ shareholder letters and these telegraph—not telegraph I mean just really writing down in words this is what we’re going to do, this is where we are. People asked if he was a competitor of Barnes and Noble back in ‘99 and 2000 and he said no. He’s always had a vision for building a platform and a marketplace. He said they sell books. We’re a marketplace. They needed to be the 1^st party seller to be the whole vendor central platform to get it to the scale and size that they want to be. He’s been writing about the marketplace since then and there are some great quotes about—he talks about the businesses they get married to that are great. They try a lot of stuff. And third party seller marketplace is one of them. It’s that, AWS, and product. Those are the 3 pillars of their business. So think if you think about that, they’re not going to destroy one of the pillars of their business. And then if you get into their numbers outsized portion of their profits is driven by—actually all of their profit is driven by these 3 businesses. And we all know that AWS provides an enormous part of profit for them and the marketplace they don’t want it all breaking out independently. You can kind of read between the lines there and see its producing profit; a lot. And that’s where these decisions are gotten from. And again profit is not always his goal that’s why he’s moved so much inventory and product over the years. But again I think it’s been telegraphed there. So I really think that Amazon’s positioning in this space is to be the marketplace to do what they’ve done. They say they have 500 million things or items for sale on Amazon. They didn’t get there by having a sourcing team like Walmart does you know going out and sourcing individual products. You got to have a 20 million person sourcing team. They have 6 million person—there’s 6 million accounts on seller central. We all know that a lot of people have double ones whatever the Chinese companies do different things but there was probably a couple of million sellers there for real make any kind of money. And they are doing all of that for them. So I just think if you look at the business it’s clear what Amazon is all about and where they’re going and from that standpoint [inaudible 00:32:28.5] after the ecosystem and you’d be in good shape.

Mark: Yeah I’ve quoted the actual number here and I don’t do show prep but I actually prepped a little bit for this here and looked at some Amazon statistics 229 billion dollars in 3rd party services and then in 2018, 1 million new sellers joined their reseller services. About 3,000 people per day. Now again probably some duplicate accounts and there’s probably some even 3rd or 4th accounts in there.

Carlos: 6 accounts yeah. There’s a lot of real; I mean they’ve released the numbers. There’s 200,000 sellers that make 6 figures and up, 100,000 a year and up US dollars. I mean there’s 2 million who have made any money I think as the states or you know the 50,000 might be a lot of money to somebody I’m just saying in a year, right? So I think there are 50,000 sellers that do half a million a year and up someone like that. So that’s a city man.

Mark: Yeah, I know absolutely, in fact, one of these statistics was if Amazon was a country they would be 140th largest country in the world something like that in terms of gross domestic product; absolutely amazing statistics. I tend to agree with you in the past I’ve been pretty publicly bearish on Amazon because I felt like it was a gold rush. However, seeing where they’re going and you are ahead of the curve on this reading what Bezos was saying that they wanted to be a marketplace and they want to be that de facto ecosystem of the internet where people buy stuff. Alright, they want—when you think I’m going to buy something online, they don’t want to think about any other solution other than I’m going to buy it through Alexa or through the Internet or through my app or whatever because that just works and that’s where all the products are. So I agree I think they’re going all-in on that. I don’t think it’s much of a mystery and so because of that, I think 3rd party sellers are actually really well positioned especially right now because it’s still relatively immature but I have to ask you about competitors. Shopify recently announced that they are going to spend over a billion dollars on the Shopify fulfillment network which is going to be able to power all of their sellers with customized packaging and full-on fulfillment services. Obviously, Target and Walmart are offering free today shipping without having the Amazon Prime subscription. You said you don’t want to read the tea leaves but I’m going to ask you to read the tea leaves. Let’s talk a little bit about the future here with some of these competitors. Do they even stand a chance and are we going to see a consolidation of the marketplace or do companies like Thas.io—I’m going to get this right, need to have more of a multi-channel approach?

Carlos: I think that Shopify announcement was awesome. I love that. I think it’s a brilliant idea and I hope it works. I mean we would love to have more channels. And we sell in other channels I mean in small amounts. It’s really for us it’s a question of focus; I’ve started a lot of companies and you know the platitudes and stuff about it you’ve got to focus strategy and saying no. If we have lived through that a bunch of times you don’t really get it. It’s like you don’t always have to feel if the oven is hot to understand that we can have someone tell us. But it really is about having that—the focus is about saying hey look this is what we do, we do really well right now, let’s perfect this and then let’s worry about other things. If that thing is big enough and takes enough of your time that’s worth doing so there’s a lot of complexity in the Amazon ecosystem alone with some of it like I expected it’s been more than I thought I expected it’s been crazier and surprising but there’s just some stuff in there that’s even surprised me. The competition is quite [inaudible 00:36:11.1] stuff on there. But we fully intend to look at other channels and well I mean we are exploring. As I said we have some small alternate channel sales already. We’re looking at retail. I mean let’s face it as large as Amazon gets that I think retail is over 10 trillion [inaudible 00:36:26.7] or something like that and 90% of it is still transacted offline. I mean people are still buying a lot of stuff in stores so you’d be crazy not to be looking at that as a channel. So it’s really a question time for us of when. So where we’ve been at this less than a year really, around a year, so that’s a lot to do in a year where we’re both acquiring all these products but then having to operate them and having to worry about improving them at the same time we’re building the company. We’re building the teams and the systems that allow us to do this and the processes and procedures. So it’s really just a question of looking at that way and that’s kind of just traditional kind of start-up thinking and how you go about this stuff. But I do think that whether they succeed enormously or not; Shopify, they have a good chance of succeeding with this. It’s always just a question of what portion of revenue it accounts for. I mean we looked at a lot of these businesses that say they’re going to start to sell on Walmart and stuff. We’ve seen people that are selling on Walmart and have been doing it for a while and it’s 5% of their sales on Amazon, 10% of their sales and I’m like Amazon is so dominant when you talk about sort of pruning like how do we deal—what do we do the bad product. Well to an extent like if I can focus on that 90% of revenue that’s on Amazon and do better with it I’m going to make more than my trying this hack out a little bit more on Walmart which is a more difficult to work with ecosystem right now. So I think those guys are going to have to up their game. I mean for everything I hear they’re not as easy to work with and let’s forget all the other channels beyond that. Shopify I imagine will do a good job of that. I mean they understand user interface. They understand simplicity as well better than anybody. So I’m excited to see what they do. But let’s face it so I’ve been throwing around the statistics, some like 50%, 56% of product searches start on Amazon now. From all the products ranks and more than all the search engines combined including Google. But I just saw a new figure that among millennials and below it’s like 76% chronic searches are starting on Amazon. Come on it is [inaudible 00:38:26.8] great when you’re looking for something and you want to toothbrush you just pull up Amazon now and you go and you get it. It shows up at your door anywhere from 2 hours depending on where you are to 2 days, right? Or even 3 whatever but you don’t have to think about it anymore. So I think that dynamic is just going to continue to play itself out. I don’t think of Amazon as this company so to speak anymore really. It’s a commerce internet. And so you’re telling me you have channel risk, it’s like telling me I have channel risk because I’m on the internet. People told me that and you probably too like 15 years ago [inaudible 00:38:58.1] problem that you’re only selling yourself on the internet. I was like, okay, next [inaudible 00:39:02.6] person, right? And so from that perspective, I hope these other things are successful. I hope Shopify makes a go of it. We will certainly be in all these channels over time but right now Amazon is a great place to focus your efforts to drive value.

Mark: Yeah to your point about 90% of all retail sales are still happening offline and validated by the statistical research I was doing before this that Amazon accounts for 5% of all retail sales. So what does that mean? That means that the 5% of this highly fragmented online sales happening and that’s been fragmented by Walmart, Target, and other big box stores that have gone online but then also the millions of onesie twosie sort of sellers online that are playing in 100 to $500,000 of revenue per year and there’s a lot of those little businesses out there doing just that. So I think your point is right. Right now in the marketplace where we’re at Amazon is dominant. Amazon is the new Google as for just e-commerce transactions online. So then that leads us to the question of how do you compete on Amazon? What are the most and this is going to round out our conversation, we’re almost coming to the time here but how do you compete in the long term? The one criticism I hear about Amazon is look it’s a marketplace so products tend to be somewhat ubiquitous and you kind of get into a race on the bottom because the only way to differentiate yourself in many ways is on price. You don’t have better customer service because that’s been equalized by Amazon. So you can differentiate on product or on price and where do you see the best way to set up a defensible long term position?

Carlos: So 1st I would say that I slightly disagree in a way customer service is handled by the companies themselves. Like how quickly you respond to queries, what you do if something has a problem, grand Amazon is kind of front line there but there’s a lot you can do in that space. Yeah I mean look overall people don’t always buy the cheapest product. Heck I know I don’t. Maybe it’s dumb but I’m the guy who goes to the page and I’m looking for a 2 grand [inaudible 00:41:15.4]. I don’t just buy the cheapest one on the page. Some people do but I got to look for someone and someone I got to go researching, I look for quality. I mean it really comes back to what I was saying earlier like about playing with these giants these ecosystems is being a good actor in the ecosystem. Now people used to ask me about Google SEO like how do you guys do this? I’ve been running SEO properties for 10 plus years now through every Google change with penguin, panda, whatever animal name you want to bring up. They change multiple times a month and people will say what’s your secret, how do you keep doing that? And my secret was I said those pages on Google, those site where they explain to you what to do for SEO. And that’s what we do. We follow their rules. There’s a lot of rules and we follow them all and we do a good job of that. Amazon says here’s how to play, here’s what to do, have a great product and make sure you’re treating customers well and you’re responding well. If your ratings are going down is it a problem with your product or how you deal with that right. So I mean I may sound silly hear [inaudible 00:42:18.2] but like the reality is make a great product, service the customer—where you can do customer service do a good job of it and be a good actor in this ecosystem. With that being said there is an element of Amazon that is cheap [inaudible 00:42:33.2] race to the bottom and you’ve got to think about how you differentiate yourself. I mean look if your supply chain is more efficient and you’re better off than going to the bottom you’ll win that battle and you’ll sell a lot. I think you’re going to start to see some branding differentiation over time. Right now as I said earlier we kind of discount that because everyone feels like they’re buying from Amazon and this is just the evolution of marketplace as I think a little bit. But if you’re in a category where you know tennis shoes or something someone is going to buy a Nike or Adidas or whatever they like. You got to think about some categories that will matter some it won’t. I mean if you’re buying a letter opener you don’t really care if it’s a Nike letter opener. Not really, right? So you have to be able to play by the other things I’m saying. Just be a good actor, have a great product, and make sure your supply chain is tight. I think for individual sellers looking at this marketplace, certainly new ones, I mean it’s just tough to get into now. I mean that certainly is an issue because it’s really just blown up in the last 5 years; 4, 5 years. And so there’s people in almost every space crowding it out. But I don’t want to—again it’s a price differentiation already. We’ve actually seen products, deals, and you may have heard some of these said once or kind of funny like where they raised the price every week for like 6 months and kept selling more. There’s counterintuitive examples of all these stuff and there’s reasons people do things when they’re buying and shopping and you don’t necessarily know all of them but it’s not necessarily just one [inaudible 00:44:13.2] press.

Mark: Yeah, I agree I mean I obviously look at a lot of Amazon businesses and more and more I’m seeing the ones that are consistently growing over the years are the ones that never really actually compete on price, to begin with. They’ve looked at a product or maybe even in a crowded category and said how can we innovate on this and create something just different enough that nobody else is really going to want to compete against us but we’re going to create something that’s super useful and then magically; of course it’s not really magical like you said it’s being a good actor and doing what Amazon wants and creating a good product that people like. It works for the long term and it’s more sustainable. So I’m happy to hear you say that because of the broad experience with different Asense that you guys at your group have just kind of validates that. Now the last question I’m going to ask you it revolves around this idea of product creation. I am going to ask you for more of a general rule maybe it’s not the right way to go because I do think that there are multiple ways to compete on Amazon but I want to see if we can get to a generic sort of here is maybe the best practice and how to be a good actor in the community. Where would you recommend sellers put most of their effort or break up their efforts and I’ll put it into product creation and innovation and quality versus the Amazon-specific metrics of making sure that you have high ratings and maybe even going out and gaining those if you have to or being aggressive of as ways get those versus the PPC side I’m going to try and get as much sales velocity as possible whether that be on Amazon or setting off Amazon traffic as well to Amazon to get that most sales velocity. So kind of 3 groups here, right? You have the sales metrics that kind of influence things, the customer service and ratings, and then the product quality. Where do you think people need to really be giving up their time and again you might come back to say Mark you’re thinking about this completely wrong. That’s cool if that’s what you think.

Carlos: No, but I would just say you just kind of summed up how do I be good Amazon business. It’s all of these things. Like I don’t think there’s anyone magic bullet. PPC works for some parts, it works great. It doesn’t work for all of them. I mean it’s like—the thing I love about Amazon, to begin with, it is that there are certain products you can sell stuff on there you could never sell directly in another channel unless you somehow had magical viral take off or something. But like when we were on Facebook for instance; Facebook advertising, it’s going to cost you 30 bucks an hour give or take something to acquire customer leads for a consumer kind of drive by product. Which means [inaudible 00:46:49.8] for 70, 75 bucks at least to make any money back after your COGS and all these kind of stuff in advertising cost. It’s expensive so you can’t sell a $10 item. Can you sell $10 items on Amazon? All-day, right? Because they’re bringing to the people they are taking so much stuff out of the equation. But then you just have to play in the Amazon ecosystem well whether that product may not make sense to advertise to be paying to acquire customers on that one. It’s tricky. I mean I think for individual sellers a product launch and new products are important. That’s not something we sort focus on and particularly care about again because now you’re talking about having more Asense and we’re interested in having less. Lots of sellers that we’ve talked to it’s actually they have—now you’ve learned all this and they know how they can launch something and they know how to do the quality of the stuff and how to get the initial purchases, they need capital. Again we don’t focus on that [inaudible 00:47:48.4] one capital to do and so we will buy in like the top-performing Asense from them and they take that cash and put it back into these things they want to do and test out advertising and purchasing new product and stuff like that. I think the most important thing is just that there’s more stuff now there, it’s the quality question. It’s the number of reviews and quality reviews. I would not—going back to what I said earlier, I would not suggest being aggressive with that or—being aggressive with following Amazon’s rule is great and so whatever they say you could do. You can’t ask for 4-star reviews or good reviews hence I wouldn’t break in [inaudible 00:48:24.8] because my experience going back to 10 years with Google is you get away with it for a while but they catch you. They ultimately catch you and they’ll burn you for it. I mean Amazon is coding reviews every month and their system is going through that probably every day but I mean they’re going through it doing cleanups. And if you’re doing something that’s a bad actor thing in that space you’re going to get busted for it. So I say do that but there are things you can do that are legit. Now if you’ve seen your ratings are going down because you’ve got some product quality issue then go fix that and send out free versions to all those customers whatever it is. Be a good actor in the system, have a voice, respond to queries, the question, and FAQs as quickly as you can and let people know you’re on top of it and if that takes an external site that’s informational where you talk to people about where you are who you are what your product is then do that too. I think that’s an important to focus but it’s hard for people to get a tall hold here now if you’re not already in the ecosystem and with a product.

Mark: This has been fantastic. Carlos thank you so much for coming on. Do you have any last thing that you would want to share with the audience here or maybe a question I didn’t ask that you think would be useful? Just something general Amazon or what you guys are doing over at Thras.io.

Carlos: No not really. I mean it’s an exciting time to be in the space and it’s a good time too for people to be selling their business and we’re happy to do that help them—I’ll buy them. I think you guys are an excellent brokerage. I’ve really enjoyed working with you guys. And I’d put a little plug there for you would. Getting someone on your side that understands what they’re doing and how to represent your business and how to talk about it and help you understand what you should get and what you shouldn’t; that’s very important. And not all brokers are created equal, not all business people help you sell your business or equal and you guys have all done it and I’ve really appreciated that work with you guys.

Mark: Yeah, we’ve always appreciated working with your group as well. You guys have been fantastic to work with. I really appreciate you coming on here and sharing as much as you have. I mean I know what you guys are doing is pretty innovative. Not a lot of people are doing it. There are some doing it but it’s great to get the insights from a company that is working with so many diverse different Asense because it just brings a different perspective to everything. I’ve greatly enjoyed this conversation so thank you so much. I know that the Amazon queens of the past are smiling down on your company and will continue to do so. So thank you for sharing that with me as well. And there you go. One moment do you sell that on Amazon; just curious?

Carlos: We don’t sell those. [inaudible 00:51:03.8] I bought them on Amazon. It’s great.

Mark: [inaudible 00:51:08.1] on Amazon. Alright, awesome. Carlos thank you so much for joining me.

Carlos: Cool. It was great talking to you, Mark.

Links and Resources:

Thrasio

Company Profile

Incredible Exits: Ramon Shares Story of his High 9-Figure Sale

Today’s guest is truly the epitome of what an entrepreneur looks like. As an immigrant to the United States, Ramon Van Meer spent many years self-employed, just making ends meet....

Today’s guest is truly the epitome of what an entrepreneur looks like. As an immigrant to the United States, Ramon Van Meer spent many years self-employed, just making ends meet. So while a rags to riches story it is not, considering that he has been out of school and working for over 20 years, it’s still somewhat of a surprise when you learn that someone in his position just signed a nearly 8 figure deal.

Ramon is sharing his backstory today. A few years ago people wouldn’t have invested a few thousand with Ramon, but today they are lining up to work with him. A high school dropout who came up with an idea for a niche business that has grown exponentially in just a few short years? The growth and subsequent sale of his company, SoapHub, is an incredible story, not just for the size of the transaction, but also because of what Ramon accomplished to get there.

Episode Highlights:

Ramon shares his difficult upbringing in Holland.
How that time shaped his life and made him who he is today.
The lesson here is not to quit school! Why a network and connections are so important.
How this sale is 20 years of work in the making, even though on paper Ramon looks like overnight success.
You’ll hear the full roller coaster story of the sale from not one, but multiple buyers and offers that resulted in the final sale price being nearly double of what was originally set.
What made the difference for the end buyer, both the buyer himself as well as the money behind the buyer.
What Ramon has learned from his mistakes.
Ramon shares his number one recommendation when preparing to sell a business.
How essential the right lawyer is in these types of transactions.

Transcription:

Mark: At Brand Builders Summit back in August … that was August, right? Yes, it was August. Joe you brought somebody to me. You introduced me to somebody. We had dinner with him a couple of nights and he’s a client of ours, we worked with him on multiple deals but he’s just a quiet guy, very very nice kind of understated and didn’t stand out to me too much; other than the fact that he was a client of course and I wanted to get to know him better. But it wasn’t until lunch on I think the third day that we were there and you told me a little bit about his back story which was a heart wrenching, moving, inspiring, all those things in one and you have him now on the podcast sharing a bit of that story.

Joe: I do. He’s really the American dream. He moved to this country nine years ago I think. He had a really really tough upbringing. He could have gone down many different paths. He could have wound up in jail very easily. He dropped out of high school at the age of 15. He started becoming an entrepreneur, working construction, doing whatever he could, has been self-employed more or less for the last 20 years and even up to three or four years ago was living month to month as an entrepreneur. Overnight success? Absolutely not. A long long road but we just closed a transaction that was nearly eight figures and you would never know it. Unless you have an eye for picking out the guy that … I think you told me just pick out the worst dressed guy in the room and he’s probably the best well off or they at least get the most money. This particular gentleman Ramon he was very chill, very relaxed, people just talked to him, got along with him and then heard his back story and just blown away with what he’s achieved. A few years ago people wouldn’t give him $5,000 now they’re just throwing money at him. Of course, he’s not taking it because he’s going to do this all on his own but it’s an incredible story not just for the size of the transaction and what he’s accomplished but what he’s overcome in life to get there.

Mark: Yeah now well let’s get to it. That’s a really good story.

Joe: Hey folks, its Joe Valley here from Quiet Light Brokerage. And today our guest is my friend and my client, Ramon van Meer. Ramon, welcome to the Quiet Light Podcast.

Ramon: Thank you so much Joe for having me.

Joe: It’s good to have you here man. You and I have been working together now for … gosh almost eight months right? We started in January.

Ramon: Yeah.

Joe: I got a call from our mutual friend and former broker here at Quiet Light, Darren Harden. He sold a smaller business of yours a couple of years ago and he called and said hey look you’re looking to sell your business and he gave me a number that you wanted and I thought okay well let’s see what happens. I took a look at your numbers. I knew you had a good history from Darren about you. And we kind of overshot that number a little bit. It took a while but we did it and I want to talk about that process here today. I want to talk about your background, your history, the type of person you are, the things that you have achieved in spite of your upbringing, and the challenges that you’ve overcome. And I’m going to dig a little deep and I hope you don’t mind because I think it’s a great lesson.

Ramon: Uh-oh, all right.

Joe: So with that why don’t you tell the people listening a little bit about yourself, where you’re from; all that big story there.

Ramon: All right very brief story. I’m originally from Holland, the Netherlands. I have a big accent so … but I came to the United States nine years ago. I now live in the Bay area close to San Francisco. I always have been an entrepreneur before I would say before entrepreneurship was a trend; even back home from construction companies, to promoting parties, to selling piñatas online, to running a … bootstrapping a site about soap operas of all topics.

Joe: You seem like a big soap opera guy. You’re really into them right? I mean just a passion that you followed.

Ramon: Yeah because you know I have zero to do between 12 and four o’clock afternoon … no, and you know I know we go on that delay there down the line but I think it’s really cool. A lot of people would say you have to really be passionate about the stuff that you sell or do. I have zero passion for soap operas and it turned out to be probably the biggest exit I have so far.

Joe: Yeah and clearly folks I’m being sarcastic about that because it’s an ongoing joke that Ramon has never watched a single full soap opera in his entire life. Are you going to go to your grave someday never watching a soap opera or do you think you might sit down one afternoon and just watch an episode of Days of Our Lives or General Hospital or whatever is airing these days; just one?

Ramon: The problem is its … okay, so the show is one hour long. Of that one hour its 30 minutes commercials and all that 30 minutes is just very painful to watch. I’m sorry soap opera lovers it’s just not really my cup of tea. I never spoke … said it out loud because of anyone, friends … you know my audience but it’s … yeah.

Joe: These are words from a guy that had millions and millions of people visiting his website and YouTube channel every single day and he never watched a single full soap opera. All right we’re going to get into that a little bit. So as I said for those listening he would not go deep enough so we’re going to go a little deeper. You moved here from Holland nine years ago. Let’s talk a little bit about your upbringing so that people that I think have had some challenges in life and are hoping to do what you’ve done can hear your story. You at one point in your life were homeless correct?

Ramon: Well.

Joe: Briefly.

Ramon: I think … well yeah. Well, it was more the fact that my age was very young but yeah I had to … I have slept on the streets. Not really on the street like I don’t want to make it sound too dramatic and more-

Joe: I did that for you. I started off with that question. So at the age of 12 you had to spend a few nights on the street at the age of 12. And then friends’ couches and then eventually worked it out and did you move back in with your dad or did you stay with friends from 12 to 15?

Ramon: Well yeah not to make it too long of a story my parents were separated. My mom eventually … I was living with my mom, eventually, she was not able to take care of me anymore so I had to move to my father’s house. And he basically just kicked me out on the street when I was 12. He had a lot of issues with alcoholism and a lot of other issues. So I was … the first couple of days on the street then at some friends’ houses and then one of the parents of one of the friends I was staying at tracked down my mom and my mom took me back in. But she was actually not in a state of mind to raise a child but there was no other way around it so … yeah.

Joe: And I’ve made you very uncomfortable in the first five minutes of this interview.

Ramon: Yeah thank you, Joe.

Joe: I do it because honestly every time I talk to you and I hear your story, I’m blown away with what you’ve achieved. I think there must be something just ingrained in your DNA that made you believe that you were going to be a success in life. Is that sort of … you always kind of knew you were going to go off and on your own and overcome these challenges that so many would just give up on and go down a terrible different path? Did you have a belief in yourself that you were going to be a successful entrepreneur even at a young age?

Ramon: Yeah and not every day but in the big picture I always believed that one day somehow I would be successful. I always had that entrepreneurial spirit in me. I was not good at school in that same phase of the stuff that happened at home. I got kicked out of some high schools and eventually just stopped going to school when I was 15 because … yeah and I started doing stuff for myself like as a business owner. So I always knew that with hard work and just being … keep on going. I think the stuff that happened to me in the past actually helped me. I almost now have a mentality that I survived all that stuff back then so the things that I’m dealing right now is actually nothing compared to back then if that makes sense.

Joe: No it’s certainly made you who you are today and a better person for it. For those listening just to get the full picture, we just sold Ramon’s business for just shy of nine million dollars. It’s the second business that we’ve sold for Ramon through Quiet Light Brokerage and he’s a serial entrepreneur. And I think you said to me a couple of weeks ago Ramon that just two or three years ago you could not get someone to give you or invest $8,000 in you and now there are people coming out of the woodworks to give you money to invest and buy businesses on their behalf; which you’re not doing, you using your own for the most part. But when you have such a big success like this you’re looked at very very differently. And you’ve done some incredible things and on top of that all you’re a good person which makes a big difference. And the buyer saw that and I talked to him yesterday and he repeated that several times during my interview with him. Now first off for the children listening if there are any young entrepreneurs don’t quit school just because Ramon did and he sold his business for nearly eight figures. Don’t quit school, stay there, please.

Ramon: Stay there because look I’m 37 now right? So this is 20 years in the making. It’s not that yeah I started this soap opera website three years ago so someone will say yeah you became … you went from zero to hundred in three years. But honestly, it actually took me 20 plus years to get this. So it’s not the smart … it’s not the easiest, it’s not the smartest way to go about. The more and more now that I’m … especially the last year and I got to know a lot of other super successful entrepreneurs it’s that networking and connections are so important. So if you are in school you will get all these connections and relationships with really key people that are going to be key people in your life and I had to do it the other way around.

Joe: Yeah and I think something that you and I saw at the Brand Builders Summit and the other events that you and I both go to is the connections with the people that are attending those events and the relationships that you build in the masterminds that you join, sharing ideas. Everybody has a different experience. Everybody has a different level of expertise on different things and for the most part, they’re willing to share. Unless you’re a direct competitor which is really … it’s such a vast marketplace, selling … doing content sites like you do which is your niche and your level of expertise versus even a physical product site like Moyes, he … great success; huge story … willing to talk to you about tax liabilities and things of that nature that you have to deal with now; a very good problem that you have to focus on. So let’s back up a little bit. Let’s focus in on your niche and your specialty. I think you’ve looked at now a number of different niches now that you’ve sold your largest business content advertising site in a soap opera niche. You had considered building a portfolio in either physical products or SaaS or content sites and advertising sites, have you narrowed down where you’re going to focus on now for the future?

Ramon: No, I have still not. So my dream is so to speak building a small … you know I call it like a private equity model where we have a small team, an in-house team where we can start or acquire or buy a stake into an existing company. Because our background is content and driving traffic, sales or viewers, eyeballs through content. And so using that strategy to either push sells for a SaaS product or for an e-commerce or for content. But yeah you and I have been going back and forth, I do think I need to specialize in one niche and every … e-commerce has its pros and cons and so is SaaS and so is content. And like you’ve mentioned to me many times before like the grass is always greener you hear stories, the success stories of people selling their e-commerce business for a hundred million dollars but it’s not easy to do and there’s a lot of … there are downsides of running an e-commerce and the same goes for content and also with SaaS. So I’m now taking the time to talk with as many people as possible and do research and then go from there.

Joe: So let’s talk about SoapHub and the site that you sold.

Ramon: Okay.

Joe: We don’t have to get into too much in terms of specifics but I want to talk about the path so that business owner sellers out there understand what an emotional roller coaster it can be.

Ramon: Yeah.

Joe: We listed the business for sale in … I think it was February of this year. We had multiple offers. We listed it I believe at five million dollars and came pretty close to asking price and put it under a lot of intent. I was driving home from Georgia probably I don’t know 20, 30 days into due diligence moving along very well. The buyer was very happy. He flew out there to see you. And things are going extremely really well and you called me on a Saturday afternoon. Can you recount that conversation for the people that are listening?

Ramon: Yeah and I feel still … I still feel bad about that. So … but picture it as SoapHub was doing really well already, not just revenue wise but profit wise. And between the time that you sit down with Quiet Light and come up with a valuation and an asking price until that time you know, there’s … time goes by right? Like I think we spoke first in December. It was the first initial and now we were at three months past and literally the revenue and profit of SoapHub was skyrocketing. And it took me a while to okay what should I do here? Should I keep going with this process and with this buyer that was under LOI with me or should I just say you know what let’s hold off for a couple of months and increase the 12 month trailing? Because most businesses or all businesses that go through brokers their valuation is based on a multiple of the last 12 months of profit. So the more months of higher profit you can show, the higher the valuation. But yeah on that Saturday I also remember I was nervous. I didn’t want to call you but I thought that’s … when you’re dealing with such a big event, this is a life changing event for me. Not just for me but also my family; my mom, my dad, my son, everybody involved, and the employees. I thought I had to do it. So I had to call you up and say “Joe, I’m really sorry but I think it’s best for us to take the listing down for now and then and relist it again in four, five, six months.”

Joe: You’re having as much trouble telling … say we’re just recounting the story as you did the day you called me on that Saturday. It’s kind of-

Ramon: I know.

Joe: You still feel bad about it. I knew when that call came through on a Saturday I thought okay this can’t be good. Ramon’s calling me on a Saturday afternoon and that’s really odd. And I knew it was going to be a tough phone call. So you had recounted that basically we went through the numbers on the call and you had said look just I got to think about my family. This could be … this is a lifetime event sale and the business is growing so much that this initial … I think we’re at a four time multiple now is dropping so low that you feel like you’re giving the business away. And I think you and I went through the numbers and we said all right look if we wait another six months even if we just held the same multiple we’d be at a valuation at around seven and a half eight million dollars. The goal at the end of the phone call was just to step back, run the numbers, talk on Monday, and then break the bad news to the buyer if we needed to. And we did that and it was hard and he felt bad. He felt … he was very upset because it’s great opportunity. So we pulled it back and we were going to just wait right? We’re going to take the listing down and wait another six months more to pass. We updated the financials just as a recounting of the story. The numbers jumped tremendously and we reached out to the backup buyers based on the conversations you and I had. At the very least we’ve got to tell the current buyer of the situation and what we’re going to do in six months or so. And then of course two other backup buyers were constantly reaching out to me and said if anything changes please reach out. So we pulled out of that LOI, it was a non-binding letter of intent and we backed out of that and ended up having multiple offers. It pushed the value of the business up well in advance of that six month period because we ended up closing well before that time ended. Was that an easy process? You know a lot of sellers think oh I want multiple offers. Oh, I want to be in a situation where it’s getting bid up over asking price. Was that an easy process for you? Was it comfortable? No stress, really easy to go through or was it emotional?

Ramon: It was super emotional because you have multiple offers that most of the times are not identical. They’re a little bit different and you also have to think who is this buyer? Of course, you’re talking on the phone a couple of times but you have to think about “Okay who is most likely to close?” Because it’s one thing to make an offer and sign an LOI but not everyone will be able to close. And then if the buyer at the last minute is not able to close then you lose two months of work. Due diligence periods and also lose that momentum where there are several buyers trying to outbid them. You know you have that momentum going that you are getting more over your asking price but if you have to go back after two months then you kind of lost that momentum. So yeah it was a very tough decision because especially the two top offers were from two buyers that I was … would like to work with them … both of them.

Joe: Right.

Ramon: So it was a difficult decision.

Joe: All three buyers were highly qualified and heck of a lot smarter than I am and brought a really good offer to the table. The difference for those buyers out there that are listening when you’re in a multiple offer situation, the difference for the one buyer that ended up eventually buying the business was that he had some investors behind him and he brought them to the conference call, Ramon, right?

Ramon: Yeah.

Joe: So we got to not only speak to the buyer itself but the money behind the buyer. We got to have conversations with as well. Did that make a big difference for you?

Ramon: Yeah, definitely. Because that gave me confidence that this buyer is most likely to close and also close faster. People that are more experienced is more easier to work with. And so as a sellers point of view … because I’ve been sitting on both sides of the table, as a seller’s point of view yes, of course, you look at the money, at the offer, the money … you know a mug money first but you also look at okay who is the buyer because you’re going to have to work with this person for quite some time. How is he financing? Is this person being able to close this kind of transaction? So if you are in the race to buy something try to also make sure that the seller knows that yeah the seller goes with you that you’re ready to close and you’re able to close and you have experience and it will be a smooth transaction.

Joe: So we were going to close in … I think it was going to be 30 to 45 days. It was investor money behind it and we were marching along doing very well and then it fell apart again right? You pulled out of one LOI and then the money behind our buyer disappeared. They’re … it was a family fund for those listening. It was a family fund and the two people that came forward and were on the call with Ramon and the buyers were fantastic … are still fantastic and I would still work with them if they came forward to buy a business from Quiet Light with either this buyer or another but the general manager of the Family Fund made a decision that he never makes and he said soap operas no I don’t think so kill that deal. Just like that, it was gone. And did you call me and let’s say vent … did you vent to me on the phone shortly thereafter? Out of stress and emotion, you said that you’ve yelled at me a few times but I call it venting. How were you feeling when that fell apart quickly and we put it back together obviously because we’re having this conversation today but I mean what was going through your mind when you were literally … I think probably what two weeks away from closing this transaction and having an enormous amount of money deposited to your account and life changing life for you and your family. How were you feeling that day?

Ramon: Well it was two ways like of course I was disappointed because we put a lot of our work in to it. We were literally two weeks out right? So not only me but the whole team, everybody involved. We moved all our lives around that magic closing date of … in my case it was June 30 I believe or something like that right? It was the end of that month, we were two weeks out and then the deal fell through. So it was just more like man we worked so hard, we were so close and it now falls through. And it shows that there are so many moving parts and in my case or in this case everybody involved wanted to get this deal done but still, something small happened and out of everybody’s control and that made the deal fall through. So there are so many moving parts in order to close a deal like this that yeah everything has to fall in place.

Joe: It was tough for sure.

Ramon: But it was tough and more also that a lot of the employees they got proper chance to sell and they were already in their mind shopping around. And I felt really bad to break the news to them because all this time leading up to it was like okay guys we’re almost there, a couple more weeks let’s keep the hard work going and stuff like that and then I had to break the news like oh sorry guys we have to move it up again. But I did … I did was you know … I knew that eventually, we’ll be able to sell because it’s a great website and it’s you know … so.

Joe: Yeah that’s the thing it fell apart for the strangest reason. One, because it was growing so fast you made a very tough but obviously financially intelligent decision and you took a little bit of a risk but you pulled back and said this is growing so so fast. And we’re not talking about 10% month over month growth here folks. We’re talking 200, 300, 400% month over month growth. So it was an easy decision yet tough on your part because you were disappointing the buyer and making a tough call to me. And then it fell apart but we go back to the value of having multiple calls with buyers in advance of signing a letter of intent. Because this particular buyer he really wanted the business and he had other sources of revenue or investors and he pulled it off. He convinced you and I that he had another path that he’d been working on the whole time. He hadn’t gone down to that out of respect for the other buyers but as soon as the other investors as soon as they were out he opened up that other path and went down it very quickly. You and I did the same thing again. We needed to jump on calls with other people to have them instill confidence in us that they could get the job done. And you’re right it was June 30 was the initial close date with that buyer and then I think it was near the third week of August where we ended up closing so another six or seven weeks does that sound all right? Okay, so the downside-

Ramon: Those were the longest weeks of my life.

Joe: I know. But the downside is that they are the absolute longest weeks, days, hours of your lives. Boy that does sound like a soap opera; days of our lives.

Ramon: Exactly.

Joe: But looking back in the blink of an eye it’s gone. The time passed. And you benefited financially from that because you got to hold the business for another let’s call it 60 days and got the profit from that business for another 60 days.

Ramon: Yeah.

Joe: It’s almost like a bonus because you closed anyway. Was it worth the extra 45 days, 60 days that it took or do you wish that you went back instead June 30^th I would have taken it all day long even today knowing what the end result is closing 45, 60 days later? Would you do it all over again and close on June 30^th?

Ramon: That’s a good question. Probably now, no I would have taken the extra because it’s … we’re talking about a lot of money. Two months extra of profit plus the buyer increased his offer a little bit as well when the deal fell through. He said I’m working on other things just give me some more time I will be able to close up if you give more time and then he increased his offer also a little bit. Now that everything fell exactly how it was supposed to be yeah I would have taken the money but it was a really good learning experience for me going into this. I’ve sold a bunch of websites; I bought and sold a bunch of websites but way smaller all in the … not even close to this one. I think the most was like around 200,000 I sold. And then dealing with an asset purchase agreement you don’t really deal with attorneys, you don’t really deal with a lot of things that now came on my plate. And it was dealing not just with my own attorney but then the other side’s attorney and it’s just so many people are involved and it was an emotional roller coaster. So I think now looking back its good because now it made me better for the next transactions if that makes sense.

Joe: You know most people would hang up their shoes and say I’m done with your kind of transaction sale but you’re already focused on growing other businesses, buying other businesses and building up portfolios so kudos to you. You’re a young guy you can do that.

Ramon: Yeah.

Joe: What would you recommend to people that are listening that are in a position to sell their business for a lifetime event sale for them, whether that’s 100,000 a half a million, a million, five, ten million dollars; what are the most important things to consider as they begin that process and go down that road, things that you’ve learned?

Ramon: So the thing that I’ve learned and I did wrong … and you hammer on this on many podcasts is clean books. Clean books people, I made a mistake of having … it was not on purpose it was just out of laziness I think that I co-mingled different websites in what … so I had one LOC, one bank account, one account with Google. The issue is that Google does not allow you to have multiple AdSense accounts. So even if you have 100 websites with AdSense tags on it and all comes down in one Google account. But yeah I had … I bought different content sites in that last three years. I sold content sites. I invested in things all from that one bank account. So thankfully we were able to make it work but it was a lot of work from my end to really … I had to go back literally three years and every transaction I had to … oh this was for SoapHub, no this was not for SoapHub. And then whatever was not for SoapHub I also had to be able to back it up with proof or listing this was for this and here’s the proof. And so it was a very tedious, long, stressful work including my CPA and my bookkeeper and thankfully it was able to … we were able to work it out. But I know for a fact in other cases that where people co-mingled and then they had real issues with their valuation. They were not able to get the top dollar because the buyers were not able to really dissect what is the real profit of that company. So that’s … learn it from me, I did it. I learned it the hard way. So now I’ve set up different companies, different LOC’s and run everything as clean as possible.

Joe: Okay.

Ramon: So that’s one, the second is read on asset purchase agreements. The first time when an asset purchase agreement got sent to me it was so complicated for me, I didn’t know what to look for, what did we have to be in it and then whatever my attorney advised me I basically say yeah well it makes sense why not you know. So the notes of my attorney I just blatantly copied and then send that to the buyer and said this is what we … I want to change in the asset purchase agreement. And then the buyer’s attorney they came back with their notes and then went back and forth back and forth. I think now looking backwards now I kind of know what is important. I think attorneys try to … and I understand the reason but they try to overprotect their clients. So my attorney tried to overprotect me, the buyer’s attorney tried to over protect them and somehow we have to find a middle. There are tons of examples where attorneys ruined the deal. You probably will have a lot of stories of that. So I think it’s good if you kind of get advice from people, learn, read up on it online and see what is really needed and what not. So now I’m working on the deal right now with a great attorney but now I’m more experienced and I can say well this is what I don’t want in attorney. I don’t … I understand why you advised me that but it’s not needed. I’ve done it before this is not needed and let’s just keep it as simple as possible. Because … yeah, attorneys can ruin deals. Those are the two biggest advises.

Joe: Well I can agree with you on the attorney part wholeheartedly. I’ve been in situations where a relative of the seller completely killed the deal. I had a deal where the young guy just out of graduate school and he had a great business that he started in his undergrad and literally graduating from graduate school about to start his professional career and we’ve got a business that was under contract with three quarters of a million dollars … way way over the standard valuation but there was a problem. The problem was that his mother and father were both attorneys and his wife was a law student and they took that asset purchase agreement, shredded it, and fought tooth and nail for the tiniest tiniest little thing and were completely unreasonable to the point where the buyer who honestly was very reasonable walked away, threw their hands up in frustration. At the Brand Builders Summit you and I attended in Austin a few weeks ago Richard Jalichandra from 101 Commerce got up and he’s bought three businesses from Quiet Light in the last six months, eight in all. And their goal is to buy 101 hence 101 Commerce. They’ve got enough experience where they are going to say look you can only work with this group of attorneys, there’s no conflicts … [inaudible 00:36:00.5] have conflicts with us and our legal team. But these attorneys understand e-commerce and contract negotiations you got to work with one of those. It’s almost you’ve got to have a contract attorney that understands fairness and balance and that it has to be a good deal and a good transaction for both sides. So I agree 110% on both of those points.

Ramon: Well just to piggyback up that also when you look for an attorney make sure this attorney not only has experience in internet space but also the niche where you are. Because an e-commerce deal is totally different than an asset … a content site where you’re just buying an asset or a SaaS, so also try … if you find a … if you go out there and try to find an attorney that can assist you with an asset purchase agreement is see if they have experience in not just internet marketing but also the niche.

Joe: Okay. So overall the moral theory is that when you’re selling your business it can happen very quickly. We put it under contract very quickly and we could have been through the entire process from listing it to closing inside of 60 days, 75 days tops the first time around. But you made the tough decision to pull back because the growth was astronomical. You made a good decision and you ended up almost doubling your value and that’s a pretty huge number when it comes down to it. And not only that you made a lot more money along the way because you still held on to a great business that was doing great numbers and growing. There were times where it was tough and we collectively said look there are multiple options here and one of them is to stop this process, hold your business, take care of your family, take care of your staff, hold the business and keep running it. It got that frustrating at times and that emotional at times because it is a big deal if you sell a business of this size. And again it’s actually a big deal to sell a business whether it’s 100,000, 500,000, a million, or 10million, it doesn’t matter. It does get emotional. I think the number one thing that people need to look for in an advisor is one that will set realistic expectations and that can manage emotions. And not just their own but those of the buyer and those of the seller and sometimes the third parties that are involved with their investors involved as well because no matter what most of these deals go slightly off the rails and it’s our job to get them back on. But I couldn’t have done it without you, Ramon. You’ve been fantastic. You’ve set some new goals in life though so I want to kind of wrap up with this. You and I had a conversation so people understand a little bit more about who you are and what you’ve accomplished and what you’re gonna do in the future. You have a goal to help a certain number of people be successful in life based on the goodness that you’ve received I think. Is that … am I somewhere along the ballpark? Can you touch on that just briefly if you are comfortable enough sharing that?

Ramon: Yes.

Joe: Am I embarrassing you by the way?

Ramon: Everything I told you you’re using against me, Joe. No, I’m just kidding.

Joe: Not quite everything.

Ramon: I just … as you might know, like I don’t really like to be in the spotlight. I never really do podcasts or I had … I made one exception for a news outlet to do it but yes. So because I’m very entrepreneurial I think it’s almost … it’s your duty so to speak that when you quote unquote get to a level that you have to give back and help other people and which you can help … you know there are millions of ways of how you can help other people. I think for me is that I want to help people … like I see that I was blessed to achieve the American dream so to speak and I want to help achieve other people to to do that as well. And I have a number in my mind, I want to help 500 people not just by helping a … you can pay a year for school or something; no, helping to change really their lives how my life has changed. Like three, four years ago I was really literally going from paycheck to paycheck and not knowing where … how next month is going to look like. And three years ago and now three years later I’m in this position. So change can really happen and I want to help 500 people by … if they have a business idea by funding their ideas and helping them in starting their businesses or maybe I am able to acquire a business and then have somebody run that for me stuff like that. So it’s more or less helping 500 people in achieving the American dream by starting their business or helping them grow their business.

Joe: Do you write down these goals? I think in talking with Ben the other day when he said he came to visit you in your office that you had some stuff on a whiteboard and he looked up and he said man just incredible goals that you’ve set and he said it’d be foolish for anybody to bet against you. Do you write these down on a white board? Do you just think about them in your head? Do you hear about a goal setting? How do you … what’s your process?

Ramon: Yes so I write them down … actually, because I’m about to move today I’m at a house office and because I’m packing, I’m moving next week but I have notes almost everywhere of my goals. So for some weird reason I believe in re-civilization and so when I wanted to buy a specific house that was my dream I would print out pictures of my quote unquote dream house and I will just pin them everywhere. But I have a list of life goals so to speak and yeah I have printed that and that’s in my office at the house.

Joe: Amazing. Ramon it has been a complete real pleasure working with you for the last eight months. For those listening, we’ve got somebody that overcame some pretty serious challenges in life. He has been an entrepreneur for 20 years even up for the three or four years ago as he said living paycheck to paycheck, buckled down, worked hard. As my baseball coach used to say … and I was not very good, he always used to say the harder you work the luckier you’ll get. And I think Ramon worked very hard, visualized those goals, wrote them down, put them up on the board, and has achieved them. He made some tough decisions along the way. It was not easy. I can tell you that now. Some of it was quite emotional but it worked out in the end. Ramon, it’s been a pleasure. Thank you for sharing your story with me and with the audience of Quiet Light Podcast. You’re a good man; I look forward to doing business with you for years to come.

Ramon: Same here Joe, thanks a lot.

Joe: Talk to you soon.

Links and Resources:

Ramon’s Email

How To Buy Multiple Businesses Without Going Insane

Since 2013, Shakil Prasla has bought 8 internet based businesses ranging from smaller 5-figure businesses up to 7-figure enterprises. Obviously, acquiring and running 8 companies in just 4 years is...

Since 2013, Shakil Prasla has bought 8 internet based businesses ranging from smaller 5-figure businesses up to 7-figure enterprises.

Obviously, acquiring and running 8 companies in just 4 years is both time consuming and requires significant capital. In this conversation, we talk to Shakil about both managing 8 companies as well as the capital resources he uses to continue acquiring online businesses.

Rather than try and do all of the work himself, Shakil developed a system in which he hires a business manager before he even closes an acquisition. By doing this, the manager is able to work with the seller and learn, first-hand, how to operate the nuances of the business. Business managers are compensated on a salary and bonus structure with goals oriented towards business and revenue growth.

Shakil has used a variety of funding sources to close deals. While he has done a few deals using SBA loans, he has also managed to secure friendly bank financing on Internet acquisitions outside of an SBA loan. He believes strongly in the power of carrying debt to leverage your overall value.

Episode Highlights:

Shakil has been in ecommerce for 6 years. It took him a lot of time to build his first site.
He saw a Quiet Light ad and looked into buying a business. He bought his first business for $60,000.
He was able to make his money back in about 6 months.
He has now acquired 8 companies from 6 figures to 7 figures in various niches.
That is buying roughly 2 companies per year.
Buy smaller and audit. Take less risk, learn, and grow intelligently.
Save your cash flow for larger acquisitions.
There is more competition when buying small, but there are more opportunities to grow.
Larger companies have more complex strategies including having employees and SOPs. The bottom line will be higher.
When Shakil acquires a company he keeps the previous owner on for 3 months to transfer their knowledge to the business manager.
He uses a hiring company to find someone with a marketing and business background. They are paid on salary and incentives on next year’s growth.
Shakil uses agencies for marketing and email campaigns.
The business manager comes up with high level goals and then they work backwards. They use software and weekly calls to track things.
Shakil’s time is valuable, so he delegates so he can focus on growing the business.
Shakil takes on debt and does paid advertising, so he tests strategies and grows the company. He looks at growing the overall value of the business. He is ok with sacrificing short term cash flow. He does want to see an ROI on the new manager.
He has done SBA, owner financing, owner holdback, and unsecured short-term five year loans.
The bank asks for tax returns and balance sheets. The seller needs to provide the information.
Making true money through financing.
You have to have a stable income and high credit score to get the bank financing. Shakil reached out to multiple banks. With smaller banks it is easier to move the process along.
Shakil looks at about 80 deals a month. He has a set of initial questions. He places one or two offers every quarter.
Patience is key, don’t rush into buying a business unless it is the right fit.
Put yourself in the seller’s shoes and build trust with them.

Resources:

Transcript of Interview

Joe Valley: Hey, good morning Mark. How are you?

Mark: I’m doing really good. How are you, Joe.

Joe Valley: I’m doing fantastic. I understand you had a multiple Quiet Light buyer on the podcast.

Mark: Yeah, get this. This guy, Shakil. He’s bought eight businesses since I think it was 2013 or 14. It worked out to about two per year. Anywhere from high five figures to low seven figures for acquisitions. That’s absolutely bonkers to be able to do that many acquisitions.

Joe Valley: He must’ve learned a process that’s worked very well. Did he talk about that in the podcast?

Mark: We talked about really focused on two things really, really heavily in this. First, we listened to his story of buying businesses and the very first businesses that he bought. Right? The first one he bought was about $60,000. It was something we sold him back when we were doing more in the five figure range. He talks about the questions that he asked then, were not really good questions. Then we went into the process that he has to buy these businesses and how he manages it. Anytime he buys a business, he puts a manager in place before the business even closes. He’s got somebody in place for that transition. Doing that, he’s been able to again, buy eight different businesses. Unlike a lot of the advice that I’ve given people in the past, there is no real connecting thread between these. Right? They’re anything from e-commerce and Amazon to software. He’s able to manage all eight businesses really well. We talk about his story, we talk about how does he manage to run eight businesses concurrently, and then finally we talk about financing. He gets bank financing outside of SBA, which shocked me. The terms he gets on these loans, five year notes with like 4.5% interest. They’re covering about 70, 75% of the loan, of the purchase price.

Joe Valley: I’m going to have to listen to that one myself because buyers are always asking about financing outside of a, outside of seller notes. Let’s get to it. I’m looking forward to hearing what he has to say.

The Interview with Shakil Prasla

All right. Good morning, Shakil. How are you?

Shakil: Good morning, Mark. Good, good. How are you doing?

Mark: I’m doing really, really well. Thanks so much for joining me on this podcast. I’m excited to have you on.

Shakil: Oh, thanks. I’m excited to be here this bright and early morning.

Mark: That’s right. Down in Austin, I’m up here in Minnesota. We were just talking about the differences in weather, much warmer down there although you guys are a bit cold. It’s really cold up here. Again, appreciate you coming on. For those that don’t know who you are, and I would imagine that a lot of our guests may not of heard you unless they listen to the e-commerce [via 00:03:09] live or capitalism.com, and freedom [inaudible 00:03:14] podcast, and other ones. Could you just give a little quick background on your experience in buying online businesses and why you approached me about coming on the show? I’m excited to have you on. Why we’re having the conversation.

Shakil: Yeah. I’ve been in e-commerce for about six years now, started my first website in 2011, built it to a nice sizeable business but to get to that size it took so much time, energy, stress, strategies. In 2013, I started looking at other ways to grow my business and so I came across an add, it was a Quiet Light Brokerage ad and it said, “Buy online business.” I was intrigued by it. I clicked it, I subscribed to the newsletter so I could start getting emails about, and the summer of 2013, I received a prospectus from Mr. Cold, a .com, it was making around $36 thousand a year, and asking price was about $60 thousand. About a 2X multiple, little less than 2X multiple. I didn’t know anything about businesses so I just wanted to due diligence, placed an offer, and asked a bunch of questions that I thought were good questions.
Looking back now, they were not good questions. I was able to buy that business, that business particularly was getting all their sales on their website, all organically. I think they were spending like 50 bucks a month on Google ads, not much. All I did was take that business, listed those products on Amazon, turned on Google ad words to about $500 a month, and I was able to make my money back in about six months. I was able to grow the bottom line from $36 thousand a year to about $60 thousand a year. I was able to make my money back pretty quickly.
After that experience, I was like, maybe there other opportunities like that. I just listed, I subscribed to every single broker there is. Fast forward now, I’ve acquired eight companies through Quiet Light Brokerage I’ve had a great experience with your firm [inaudible 00:05:34]. Yeah, so I’ve bought eight companies ranging from six figures to seven figures in purchase price, all various products, no sort of niche. You know, I’m here to keep acquiring online companies. I think we’re all very lucky to be making money online. I could be on my bed still making money so I think we’re all just very lucky to be in this era and I definitely want to take advantage of that opportunity of buying websites that are selling at 2 to 3X net multiple of the profit.

Mark: Yeah. I’ve got a ton of questions for you. I mean, eight companies since 2013, that’s roughly two per year if my math is correct there, which is break neck speed to be acquiring companies. Pretty awesome. I’m going to start with a question that I hear all the time and I want to get your feedback on it. Since you started with Mr. Cold, $60 thousand acquisition, which we would classify as a pretty small acquisition, but obviously for somebody first time coming in, you know $60 thousand is probably not something that is play money for everyone. I get this question a lot, and that’s, should I buy big or should I buy small? You’ve done both. You’ve bought the big companies, you’ve bought the small companies. I’ve addressed this on the blog as well as far as the benefits and drawbacks of each. What are your thoughts for somebody who is coming in new, or maybe lets say that they have some experience like you did and are looking to do their first acquisition. Do you think they should start small with something like a $60 thousand acquisition? Should they be looking for something that’s going to give them on a larger payback and spend a little bit higher?

Shakil: Yeah, so looking back, and I get this asked by my friends and family too is, I would definitely recommend to buy smaller business. When you, you know with every business I’ve bought it’s the same experience. You have to place an offer, you have to put on your detective hat. Where you audit the financials, you audit the operations, you see if everything that’s said in the prospectus is correct. Buying small means your risk is lower, you learn from that experience, and you’re able to grow more intelligently. You know, the type of questions I was asking in 2013 is different but I was only able to get there today because of the experience of buying online businesses. I think I would definitely recommend just buying something small, learning from that experience, and then growing from that. When you buy small, you’re able to invest those cash flows, save those cash flows for larger acquisitions in the future as well.

Mark: Yeah. That’s what I’ve often recommended for people that are new. Well for today though, you’ve got eight companies under your belt. What would you say for somebody who has experience? Buying big versus buying small. Is there an advantage to buying larger versus smaller?

Shakil: If you’re buying smaller, you’re going to have more competition in terms of other buyers trying to buy the company. I think that’s the only drawback. When it’s a larger company, I’ve been able to … Let me back up. If it’s a smaller company, I’m able to look for more opportunities to grow the company. A lot of the smaller companies may be a mom-and-pop store that aren’t utilizing technology, that are not utilizing paid marketing, that are just getting sales from one channel. When you buy a little smaller company, you’re able to exponentially grow it by adding it to other channels, by adding different types of advertising. When you get to larger companies, and it’s doing over seven figures in sales, profiting over 400 thousand, 500 thousand a year in profit, there’s more complex strategies. In order to sustain that, you need to be doing different types of strategies. You have employees, so you’ll need SOP’s for this. There’s a lot more strategies that are involved, yes there’s more headache, yes there’s more stress, but the bottom line is higher with the larger companies as well.

Mark: Right. Okay, well that actually leads really nicely into the next thing I want to talk about. I recently, as a lot of the listeners know, I recently bought my second business. I’ve bought more of my own businesses in the past, but I’ve only had Quiet Light for the past several years until this last April I bought a second business. You have eight. Now, with two I’m going kind of crazy because of the amount of work that both companies take to run. How do you manage eight companies?

Shakil: Yeah. Well, it’s not easy. I have to file eight different tax returns, that means I have eight different PNL’s. I have eight accounts, Google ads, you know. It is hard. The way I’ve structured it is with each company, it’s me at the top. I do have a couple other business partners as well, but underneath me I have a business manager. When I’m acquiring a company, I keep the previous owner on at least three months whether it’s a consulting agreement or whatnot. During those three months, the goal of that is to transfer the knowledge to the business manager. Right? It’s hard to learn everything about the business if you’re buying a business that’s been in business for five years, it’s hard to learn everything within 30 days so I keep the seller on for at least 90 days.
During that time, I transfer that knowledge to a business manager. I usually find a business manager off Indeed, I’ll use a hiring service to find someone. This business manager has some type of management, leadership, marketing background. They’re paid on salary, plus incentives. Those incentives are based on the growth of next year. If the company’s doing a million dollars and this business manager’s able to grow it to $1.3 million, they get an incentive on the $300 thousand growth. There’s a business manager underneath me, underneath the manager is customer service staff, and as far as marketing goes, I use agencies to do all the marketing for me, to do the email campaigns for me. It’s kind of outsourced to another agency.
The business manager’s goal is to come up with high level growth goals with me. What we’ll do is come up with yearly goals. The way I do it is I try to keep very minimal, specific goals. I’ll say, “For the next year, I want to get to X amount of revenue, I want to have X amount of customers.” Then we’ll work backwards. How do we get to X amount of revenue? Okay, we need to do this type of marketing, we need to start ranking for this type of keyword. Then we work even more backwards. How do we rank for that keyword? I break these down into monthly actionable goals. We use a bunch of softwares where the business managers are able to, or I’m able to track how we’re doing on this on a weekly basis. We get on a call every week, business manager updates me, we’ll tweak a little bit, and we’ll go from there. That’s how it is, is the manager is in charge of the business. I empower them, I let them make the decisions, and that’s how we run the business.

Mark: That idea of working backwards from a goal is something I read recently from I believe it was, Noah Kagan, talked about that with mint.com when he came on with them. He had a goal, he was told we want, I think it was like half a million users by the end of the year. At first that sounds extremely overwhelming but what he did is he worked backwards and said, “Okay, I know if I go to these places I should be able to get X or Y number of users.” By working backwards was able to fill in. It’s a fascinating way to look at a problem like that. When it comes to working with these managers, I think a fear that a lot of people have, especially even if you’re not looking, even if you’re looking to buy a business and still run the day to day operations, you still have to empower people at some point. I think the fear a lot of entrepreneurs have is letting go of that control and being disconnected from the nuances that you really need to have intelligent decision making. How do you attack that in your businesses? How do you stay close enough to the businesses where you can advise properly versus staying so disconnected that the business manager’s coming to you and you don’t really know what’s going on in the business? Is there a balance that you’ve found there that works?

Shakil: Well, it’s incredibly hard. As entrepreneurs, we want to be involved in everything, in all parts of the business. As you mentioned, I’m part of the e-commerce field. There’s a lot of owners there that are able to, are wanting to just run the complete show, they’re wanting to just grow the business, they want to provide all the customer service, they want to be on the front end and listen to what the customers are saying. It’s hard to delegate tasks, it is as entrepreneurs. What I’ve learned is at the end of the day, my times very valuable as well. I want to be able to focus on high level growth goals. Right? Me being on the customer service level is not really helping me on growing the business. What I’m trying to do is delegate the tasks so the low skill tasks onto my staff, and I try to just grow the business.
In terms of staying connected to the business, I use Help Scout for email services and you’re able to see all the emails coming in, going out. You’re able to see the feedback customers are giving for your products as well. You’re able to see if the customer staff is giving good answers to the customers as well. What I do is, I still check in on the business, I look at the reporting, I look at how much the revenue has grown, I look at how many orders have came in. I’ve become more I guess, a numbers person. I’m looking for results. That’s how I’ve kind of shifted myself is, okay if I want to get to A, to B, how do I get there and what do I have to do. I guess in a way, I’ve been able to delegate these tasks because I’m looking at the high level growth goals.

Mark: Yeah. That’s fascinating and a good way to approach that. Let me ask you about hiring a manager.

Shakil: Sure.

Mark: The expense that bringing a manager brings onto your business when you’re just recently acquiring it. We haven’t talked about financing yet so maybe you can touch on this a little bit as well. Let’s say that you’re buying a business with an SBA loan, or with some sort of external finance so you have that monthly debt to be able to pay to wherever you have the financing. You add in a business manager, and I imagine if you’re hiring from Indeed.com or a place like this, they’re not coming at low prices. You have their salary on top of that. How does that leave any room for you to make any money off this? Are you banking entirely off the growth of the business? Do you work that in from the start to say, “I still want to be able to take a little money off the top here with these additional people in place.”

Shakil: Yeah. Just like you said it, from a lot of my acquisitions I do take on debt. I do bring on a business manager. I do a lot of paid advertising initially and some of them don’t work out. Yeah, during the first six months I’m barely even making money but that’s the whole idea of it, is to test out different strategies and overall grow the value of the company. Right? Even if I’m taking on debt, financing, and it’s making $100 thousand a year, my debt loan is $50 thousand in payment, I’m left with $50 thousand at the end of the year. However, if the company starts to make more money, lets just say it makes $150 thousand a year, I still have the $50 thousand in debt but when I sell the company it’s valued at the $150 thousand. Overall, I’m looking at growing the value of the business because I do have cash flows coming in from the other businesses, I’m not really tied to the cash flow of my new acquisition. Yes, it’s nice to receive a payment from the business every month but I’m okay in the short term sacrificing that cash flow for the longterm value of the business.
When I do hire a business manager, remember I’m a big numbers guy so I like to an ROI on the new hire. If I’m paying them $70 thousand a year and they’re incentivized to grow the business, I’m expecting to at least receive that $70 thousand worth of value to the bottom line. I’m expecting them to grow the business. I’m expecting them to free up my time. I’m expecting them to run the whole business and reduce the stress on me. You know, those intangible, there’s value on the intangible things as well too but at the end of the day, they have to produce the ROI on what I’m paying them.

Mark: Sure. Okay, well lets talk financing real quick here with eight companies. You’ve probably explored different types of financing. Have you done chiefly SBA or have you looked at other sources of funding?

Shakil: Yes, I’ve done an SBA. I’ve done owner financing. I’ve done owner holdback, and I’ve done what is called is non-collateralized loan, which is kind of a non-secured loan. Those have worked out the best for me because they’re short term, they’re five year loans and I’m able to get 60 to 70% in financing. I bought socksrock.com recently and I was able to finance about 70% of that. The bank already had my financials on file so when I went into due diligence I told the bank, “Hey, I’m looking for this business to buy.” “What do you need from me?” Usually they’ll ask for two to three years tax returns, balance sheets, I think I mentioned tax returns. You know, those two, three things are very important. Performance for this year. I’ll just pass that onto them. I’ll tell the seller, “Look, I’m looking to get financing on this, I’m not going to do an SBA, I’ll close within 30 days but I do need this information.” I want to move on with the business as well too. Usually the seller will be able to give those information because it’s part of the financial due diligence anyways. I’ll give it to the bank and they’re usually able to approve it within 30 days, give me 70% financing, five years, 4.5% interest. That’s able to move very quickly.
You know, bank financing is big, seller financing if that’s available, holdback if those terms work out. Then I’ve taken a personal line of credit as well too. I’ve tried to utilize all types of financing. I think some people are scared of debt, some people like to brag about how they don’t carry on debt. I like to brag about how much debt I’m carrying because I think the way you can really make your true money is by financing. Right? With online business usually you’re able to buy around 3X lets say, that if you see how the ROI works on that, that means you make your money back in three years, which is a 33% return on your money. If you’re able to borrow on 5%, you’re making that 28% pretty much spread as your income. You know, I would borrow as much as I can.

Mark: Interesting. With the bank financing that you’ve been getting, the non-collateralized loans, how did you, without giving away maybe anything that you want to keep secret here, how did you find that? We talk with buyers all the time who would love to find a loan like that with their bank, but so many banks just don’t know internet businesses and because there are no hard assets, thus the non-collateralized portion, they get just kind of scared away from that. Did you have a relationship with your bank before? Is that how you got in? How did you find banks that would be willing to extend a five year loan at those rates? Those are fantastic rates as well.

Shakil: I think it has to do with a few things. You know, I think you have to have a stable income, high credit score. Besides those, the bank mainly looks at the income, the debt to income ratio. Is that business going to be able to pay the debt income? Usually, if you’re buying at a 2 to 3X multiple, it should easily pay for the income or the debt. The way you’re able to find it, and the way I did it was, just like I reach out to multiple brokers for buying a business, I reach out to multiple banks. These are banks that I don’t even have a relationship with, you know I bank with mostly one bank right now. Here in Austin, there’s a lot of small banks. What I’ll do is I’ll look online for local banks that are here in Austin and I’ll just email all of them saying, “Hey, I have an opportunity.” “We don’t have a relationship with you but I’m interested getting this financed.” “Would you guys be willing to listen to it?” A lot of these smaller banks, they usually have one banker and one underwriter and they sometimes may even be the same person so it’s easier to kind of move that process along.
The timing has to be right as well. I remember once when I approached the same bank that gave me the loan they said, “Right now we have too much risk going on.” Sometimes the bank just has the right appetite, it just has to be the right timing. The goal here is to reach out to as many banks as you can. Build the relationship with them first, and once the opportunity comes, present it to them and it could work out.

Mark: Yeah, awesome. All right, we’re almost out of time here. We have about five minutes left so I’ve got a couple of fairly quick questions for you here. In order to get eight companies, all right so eight companies, we’ve already said about two per year. I know a lot of buyers that have been looking for a business for two years and they haven’t found anything after two years. They’re registered with all the different brokerages out there to try and get as much information as possible. How many deals do you say you would look at in a given month?

Shakil: Oh, I would say I probably look at maybe 80 deals a month out of which I will ask … I have a set of initial questions just to kind of peak my interest. I’ll probably ask questions to about maybe 10% of them, so maybe eight of them. Then from then on, I’ll probably try to place an offer one to two every quarter. I do look at a lot of prospectus. Again, I like to just kind of see what other businesses are doing, if it’s going to peak my interest. I look at a lot. If you’re registered to a bunch of brokers, that’s good. Also, check out [bizbuysell 00:26:20]. It’s a great resource. All you do is click on the criteria of the type of businesses you want, the income you want, you click search and you see a popup that says, “Do you want to save this alert?” Just click that, save the alert and you’ll get daily or weekly alerts on that specific criteria. When a business comes for sale, you’ll see that in your inbox as well. I think patience is key. Do not rush into buying a business just because you’ve been looking for a long time. You want to make sure it’s the right fit for you.

Mark: Yeah. Out of the, you raised that about 10% peak your interest. Do you have, I’ve talked to other buyers in the past who have even written down checklists. Do you have either a mental checklist or a written down checklist of criteria that you need to see from a business?

Shakil: Yeah, I do. You know, there are products I like to buy. I want to make sure it’s not a fad, it’s been here for a while, it’s not a technical product either. I like to see the business on an incline or flat is fine in terms of revenue or growth. I like to see the business at least in business for at least two years, that usually means it comes with some failed strategies, it comes with strategies that it’s worked out and I want to utilize that. I like to look for opportunities where the seller has not been able to utilize growth. I think the way I’ve been able to buy these eight companies is I’m always looking for the right opportunity. A lot of sellers are not utilizing paid ads, they’re not utilizing their email list. A lot of these sellers have 10, 20, 30 thousand emails that they don’t even email and that’s a great way to set up mail chimp, or set up on Facebook … What do you call? Retargeting ads and such. I always look for the right opportunity that’s there.

Mark: All right, well our last question here. What would be one of your top tips for negotiating with the seller when you’re actually in, if you find something you want to acquire, you want to make a bid with that, and you’re going through due diligence? As you know, there’s a lot of psychology that goes on during the deal, a lot of emotions that can go on during the deal, and complications. What one tip would you give to somebody whose maybe going through this the first time? What to expect and maybe how to manage themselves during that process?

Shakil: Put yourself definitely in the sellers shoes. Remember, they’ve spent a lot of time building those financials, building their prospectus. They’re anxious now to sell the business, they’re opening the business to strangers now and there’s a lot of anxiety that goes there too. Number one thing you should do is build that trust, be empathetic, get to know your seller and let them know that if you are to take over the business, you’ll take great care of it. You will help grow the business. You’re taking over their baby pretty much so definitely recommend to build that trust and be empathetic towards the seller.

Mark: Yeah, absolutely. After doing as many deals as we’ve done over the past 10 years, I can say that is probably the number one tip I would give as well, is that empathy and understanding that the things that you need to know as a buyer are not necessarily the things that a seller understands you need to know. They don’t get necessarily why you’re asking the questions you are. That empathy really helps get deals done. I have like two pages of additional questions so I may have to have you on again in the future because you’ve been really helpful and I think a lot of our listeners are going to love this interview and some of the information. Thank you so much for coming on.

Shakil: Yeah, thanks. Thanks, Mark for having me.

Mark: All right, we’ll talk soon.

Shakil: Take care.

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The Interview with Shakil Prasla

Thinking of Selling Now or Later?