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Empowering Women Entrepreneurs – 7 Keys To 7 Figures

Leslie Kuster is the Founder and CEO of Back From Bali, a multiple seven-figure e-commerce brand that offers women ethically-made bohemian chic clothing made in Bali. With over 30 years...

Leslie Kuster is the Founder and CEO of Back From Bali, a multiple seven-figure e-commerce brand that offers women ethically-made bohemian chic clothing made in Bali. With over 30 years of experience as an entrepreneur, Leslie is passionate about inspiring women to pursue entrepreneurship and step into their independence, develop their feminine power, know their worth, and earn enough to create freedom in their lives. Additionally, she is a business lifestyle mentor and inspirational speaker who authored the book 7 Keys To 7 Figures: The Women Entrepreneurs’ Guide to Money and Freedom.

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

[03:13] Leslie Kuster shares her background as an e-commerce entrepreneur
[04:41] Why Leslie started Back From Bali
[06:38] What inspires Leslie’s clothing designs?
[11:41] Leslie talks about her journey as an author and writing the 7 Keys To 7 Figures book
[13:20] Empowering women entrepreneurs to become successful
[19:06] How can women entrepreneurs build a seven-figure business?
[21:02] Leslie’s advice for women aspiring to become entrepreneurs

In this episode…

If you are a woman who aspires to become an entrepreneur or currently manages a business and aims to elevate it to new heights, learning from the experiences of successful women entrepreneurs can provide valuable insights and strategies to help you realize your entrepreneurial goals.

The number of women entrepreneurs is rising, and their impact on the business world is significant. However, women often encounter unique challenges that can hinder their success. Leslie Kuster, who struggled for 20 years to build and grow her brand, knows this firsthand. Despite the obstacles she encountered, she persevered and scaled her business to a multiple seven-figure brand. Today, she supports and guides women entrepreneurs on how to launch and grow their businesses successfully.

In this episode of the Quiet Light Podcast, Pat Yates sits down with Leslie Kuster, Founder and CEO of Back From Bali, to discuss how women entrepreneurs can thrive. Leslie shares her entrepreneurial journey, her experience writing 7 Keys To 7 Figures, and how she’s empowering women entrepreneurs to succeed.

Resources mentioned in this episode:

Leslie Kuster
Leslie Kuster on LinkedIn | Facebook | Instagram | YouTube
Leslie Kuster’s email: [email protected]
Back From Bali
7 Keys To 7 Figures: The Women Entrepreneurs’ Guide to Money and Freedom by Leslie Kuster
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 brought to you by Quiet Light, a brokerage firm that wants to help you successfully sell your online business.

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If you’re new to the prospect of buying and selling, Quiet Light is here to support you. Their plethora of top-notch resources will provide everything you need to know about when and how to buy or sell an online business. Quiet Light offers high-quality videos, articles, podcasts, and guides to help you make the best decision for your online business.

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What are you waiting for? Quiet Light offers the best experience, strategies, and advice to make your exit successful. To learn more, go to quietlight.com, email [email protected], or call 800.746.5034 today.

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 Quiet Light Podcast. Again, I’m Pat Yates. Today we have a great episode for you I actually am talking to a female entrepreneur that does nothing but work trying to empower female entrepreneurs really incredible like, I’ve been married a long time, my wife is sort of a budding entrepreneur after retirement. She’s always been around me as I’ve run a business. And she’s done some things working with the company before but she was a teacher by or an educator by trade and has since retired and as the entrepreneurial bug a little bit. So there’s a lot of people out there post-COVID that are thinking about their next career, what do they want to do with their lives? Well, Leslie really helps a lot of women sort of develop that entrepreneurial bug. And if they don’t understand how to get started, she not only has a book, 7 keys To 7 figures, she also has online courses that can train you how to do some of these things. So it’s amazing to me because I feel that I’ve tried to be very philanthropic with all the things I know in business and give back a lot consulting for free and helping people, their companies. That’s a lot of what we do it Quiet Light, much of what we’re trying to do is add value in any situation, not necessarily sell a business,. That becomes a product of that conversation. But Leslie’s really kind of the same way. She wrote a book and she’s done online courses and a site to be able to try to only help other entrepreneurs grow as individuals really kind of an amazing investment of our time. Not only she done that she has an Amazon brand name Back to Bali, I keep having a problem saying that I don’t know why. Back to Bali, with some really amazing clothing on it. She has such a dynamic background, I’m just really anxious to talk to her and hear what she has to say. But if you’re a woman entrepreneur, thinking about where your career now is gonna go or your entrepreneurial journey, you may reach out to Leslie, I think she’s gonna be a fantastic guest. I can’t wait to be able to talk to her about this. And again, if you ever need anything or advice from me, or anyone a Quiet Light, you can go to quietlight.com and look at our listings or you can email me at [email protected]. Anxious to talk to Leslie. So let’s get right to it. Leslie, welcome to the Quiet Light Podcast. It’s great to have you today.

Leslie Kuster 2:37

So happy to be here. Let’s talk.

Pat Yates 2:39

Yeah, absolutely. I’m so excited about this conversation. I know that you’re an e-comm entrepreneur, Amazon entrepreneur, which is very similar to me, other than my business broker side. And you focus really a book that we’re going to talk about a little bit later about women entrepreneurs, which is really amazing. Because I’ve known a lot of women in my life. No, I’m just kidding, actually, my wife is sort of a budding entrepreneur, I guess you would say. And in my business that I own, I’ve basically only hired women the last 10, 15 years was interesting. So we’d love though to hear about you. So your name Leslie Kuster, and tell everybody where you’re from and a little bit about your background.

Leslie Kuster 3:13

Yeah, sure. So, I’ve been an entrepreneur for a really long time. And that’s kind of like the story, I want to tell people. But I really was not a, quote, successful entrepreneur for literally 20 years into it. And at the 20-year mark, I was in my early 50s at the time, and I just made a very conscious decision that enough is enough. I want to make my business successful, I want to earn more money. And I did and made it happen. And I brought my business from five figures to multiple seven figures at that time. So that’s kind of like my story. And I’m really here to encourage and particularly women to rise and to become successful and to become financially independent and successful. Because basically, I wasn’t for so long. So I know what that feels like.

Pat Yates 4:12

Yeah, I mean, that’s amazing. I think it’s interesting that you talk about that. So a lot of times, if someone hasn’t had a career, maybe early, they ended up trying to change their thing. So tell us, I’d love to hear more about your business background. I understand the book is a reflection. But to get there, you kind of have to do something to be able to write a book, which as I said, when you told me you wrote a book, I’m barely smart enough to read a book much less write it. So I’m curious about your business background where it started. I’m sure this is the first thing you’ve done in this Amazon store. So tell us all about that.

Leslie Kuster 4:41

Yeah, sure. So my business background is that I had no business background, and that is really who I am. And what I’ve really learned was how to run a business by being in business. So the way I really started this business many years ago, we’re going back like 30 years ago, is I simply did not want to get a job any longer and work for anybody else. I was working in New York City at that time and public relations. And I went traveling, I went traveling to Indonesia, and I fell in love with the freedom that I experienced not working in a job and being able to travel for seven months. And so when I returned from traveling, and I was looking through the New York Times, which is how you looked for jobs back then, I was literally on my bed, like looking through all the help wanted. There was just nothing in that paper I wanted. And I remembered in that moment, this beautiful fabrics that I saw in Indonesia when I was traveling, and I just had this idea, I wonder if I jumped on the plane and I went Back to Bali, Indonesia, I wonder if I can sell it. And that is how I started my business. So I literally had no business degree at all. But I do come from a family of entrepreneurs. My dad’s an entrepreneur, my mom’s an entrepreneur. So my risk, my tolerance risk was actually already very high.

Pat Yates 6:19

It’s really cool. I’m actually sort of scrolling our Amazon store as we speak. And the designs are really amazing, are so different. And they’re so specific to sort of a clientele but it’s just so vibrant in color. So what inspired you so much for that? Because you wouldn’t think that that’d be the first thing that comes to your mind on fashion.

Leslie Kuster 6:38

Yeah, totally. Like I said, when I was traveling in Indonesia, I was so taken by the handicrafts that they had there. And in particularly, Batik, Batik is a handicraft from Indonesia, it uses wax and dye process. And they’ve been using it for 1000s of years. So I started to see designs, they’re using Batik, but kind of in more Western modern designs, like trucks, for example, or flower, things like that. And so I just fell in love with it. And in addition, I fell in love with the people too of Bali. They’re incredibly generous, nice people. I’ve been working with them for 30 years, literally doing business. So you get to know someone pretty well when you’re dealing with things like money and stuff, and they’re just absolutely wonderful people. So what I’ve enjoyed, especially about my business is that I don’t work with factories. I only work with really grassroots small businesses. And in fact, most of my vendors and I have several vendors I work with are women, and certainly family-owned businesses. And so I feel really very good about that. It’s something very important to me to run an ethical business and to support the vendors that I work with.

Pat Yates 8:00

Makes total sense, and if people are watching the video, I’m trying to scroll through your Amazon sidelobe it’s really incredible because like I am habitual online shopper for my wife, I buy like 90% of her clothes, if you can believe that. And most people don’t believe that, but actually do and it’s funny, because some of these designs look very similar, some that I see in a catalog that I buy from all the time. It’s such great colors, really amazing stuff here. And obviously you’re doing great with this, how long have you had this apparel business?

Leslie Kuster 8:27

This particular line of the women’s clothes that you’re showing is around about 10 years old. But the business and the name of my business Back from Bali is 30 years old, because what I had done before was children’s clothes. And that’s how I started the business is went back to Bali and really just bought off the rack at that time. And then as the business started to grow and move, you start to understand who your customer is, and what colors sell and when design sell and all of that. And as I said around about 10 years ago, I really wanted to become more successful, I wanted to make more money, I wanted to really bring the business to where I thought I could bring it to. And at that point I pivoted from children’s clothes into women’s clothes because I could relate so much more to women’s clothes than I personally could do kids clothes, for example.

Pat Yates 9:22

That’s really amazing. So do you do most of your designing yourself? Is it inspired by you? Or do you have some designers that also work on it because it’s really amazing. And it takes a lot of creativity to make that, how do you go about finding your products?

Leslie Kuster 9:35

Yeah, I partner with a lot of creative people in Bali. So they’re just naturally creative. Apparently Indonesian and Balinese, there’s no word for artists there’s actually no word because like everybody is an artist. It’s very natural to Bali. And if anybody ever travels to Bali, you’ll notice the way they turn the bed down and the way they do flower arrangements and all of that so it’s a very creative place. So I partner there with several different vendors and women owned businesses to create the designs. And I have absolutely no design background. And this is something that I talk about in the book, I have no business background, we’ve already gone over that. And I have absolutely no designed background at all. But I do have a good eye. And I knew that these products would really appeal and they’re comfortable, they’re colorful, they’re ethically made. And so then you also, as you’re building the business, you get a lot of feedback from your customers. And that’s really how I built the business, it did well in black. So maybe it’s going to do good in blue, it degrade in size extra-large, well, maybe we shouldn’t plus, and this is kind of how you build a business. So regarding designing, it really is a collaboration between me and my different vendors that I have in in Bali. And yeah, I come up sometimes with designs or pictures or whatever that I send to them, too.

Pat Yates 11:07

That’s really incredible. So assume, obviously, Bali is an amazing place to visit. Next time you go to your factories, I’ll go with you. I hear it’s pretty nice over there, I’ll just hang out with you and see what the landscape looks like I hear it’s amazing. So I do want to transition I don’t want to get too fast. And because I love your background into what we see sort of behind you there the 7 Keys To 7 Figures a book that you released last month and unbelievable accomplishment to write a book, publish it and sell it. And as I’m looking here, you got 39 five-star rating, so it must be pretty good. So what made you decide to write a book just out of interest?

Leslie Kuster 11:41

When I brought the business from five fingers to multiple seven, I started to ask myself like, how in the heck did I do this? Because as I mentioned, no business background, no design background, nothing. And I realized that there were really certain things I did attitudes, behaviors, decisions, actions that I did that brought the business from where it was to where it is now. And I’ve always been interested in teaching inspiring, I actually have a master’s in clinical social work. So I have that like side of me, I used to run programs for young girls empowerment programs. So the whole idea of empowering women, empowering young women and older women is always been something that’s inside of me. And so I wanted to share how it’s done and how I did it. And that’s what the book is, the book is 7 Keys To 7 Figures, and it is really a guidebook for more freedom and for more money for any woman entrepreneur, who wants to really build a business.

Pat Yates 11:42

Right, so I’m checking out the site, lesliekuster.com in case anyone is wondering. And it shows on there you have courses book all this information. So you really try to be a resource for knowledge for women entrepreneurs in general, start to finish. Basically, if you’re thinking about being entrepreneur, here’s a course of how to be that way, explain what you’re trying to accomplish, and what all they can get when they come to your site for the book 7 Keys To 7 Figures,

Leslie Kuster 13:20

I want to help women rise. It’s like a passion inside of me, I have way too many friends way too many friends with daughters, who really have not really fully accepted the fact that they have to stand on their own feet and make their own money. And so my site, my website, lesliekuster.com, is filled with resources, I have a course there as well. But what I’m encouraging women really to do is to get the book and to get the book through the website, 7keysto7figuresbook.com. And when you get the book through that website, 7keysto7figuresbook.com, which is a tab on the website, I am giving away bonuses as well. And one of the bonuses is one of the modules to my course. And it’s probably the best module of all, which is action. So what am I trying to do with all of this? I’m literally just trying to help and inspire other women. I don’t really do one-on-one coaching. I do speaking and obviously I want to sell more books. But I just want to really help other women rise because I know the pain of not doing it. And that’s really what I want to share with other women. Because this is how you do it.

Pat Yates 14:40

So you make mention on the side have been able to break free for financial constraints and unlock wealth and prosperity. Is that really the goal? Or is it to enrich? Is it a little bit of both? I mean, I’m trying to understand a little bit about everybody understands financial goals, but if it’s uplifting women entrepreneurs is that a doable there?

Leslie Kuster 15:01

I think we have to be really honest and just say having a business is about making money. And the trouble is, is most women say things like I would do my business, even if I didn’t make any money, or I’m not a money person or whatever these kind of like, I will do it, but they just don’t want to embrace the money. So I am really here to help women embrace loving money, and having the goal of creating financial independence as a real live goal for themselves. It’s very easy to say things and we hear it all the time that I want to help and I want to inspire and I want to do this, and I want to do that. But in order for a woman to do those things help and inspire and pay for charity, and pay for private school and leave a bad relationship, or whatever it is, they have to stand on their own feet with money. And so yes, and no is the purpose just to make money? Yes, and no, the ultimate purpose is for freedom is for control of one’s life. It’s for independence, it’s for standing on your own feet. And when you’re in a position of creating your own money, especially as a woman, you have choices. And that’s really what I want to encourage more and more women to have.

Pat Yates 16:26

Yeah, I think that that encouragement is so big. It’s the oh, I’ve been in your spot. And then you can go here. And here’s how you learn this. Now, no one can walk in and read a book and then all sudden, just make seven figures in a business. So in your online courses and things like that, are they guided or they with groups? Do you do it on your own? What’s the learning process there?

Leslie Kuster 16:46

The learning process is, they’re guided. And I also do a live group once a week once you sign up for the course as well. So it’s both. But listen, you’re right, you can’t just read a book, you can’t even take one course you can’t even just work only with one mentor are one consultant, and all of a sudden have a seven-figure business, there’s a lot of steps involved. And the steps are what I talk about in the book so much, for example, really, really, really wanting it, focusing on it, becoming a ferocious learner, and having the honest conversations with ourselves on our relationship with money and what our money story is, meaning, what you were taught as a child. Money doesn’t grow on trees, greedy people are not good people, whatever those things are. So becoming successful in the business will never happen overnight. There’s a joke, it took 20 years to become an overnight success. And that was definitely, that was me, 100%. I always talk about that being an entrepreneur is like having a PhD in personal development. And personal development does not happen overnight. It’s a series of actions and steps, that step by step by step expands and grows. And that’s how you build a successful business is that way too?

Pat Yates 16:49

Yeah, there’s no question that’s well said. I think that even in this situation, if there’s someone that’s a young lady coming out of college, she may be very valuable to read this book and know how to start correctly. Even people that have been in long-term marriages, might still want to do that. I think that the independent thing is so important to understand that if you’ve never done this before, you still can because so many people, post COVID are thinking about changing their lives in some different career that may not marry him to an office or something like that. I mean, is this something that you’re going out and trying to encourage people to make a change in their life? Maybe they aren’t even thinking about being entrepreneur, they might have a job and minus you’re speaking and talking to people? Is that part of the goal to educate them on, here’s another path for you. I understand that that’s tougher, but is that the way you’re going about this?

Leslie Kuster 19:06

My goal is, in particular, to be focusing on women who are I would say 40 years and older, all right, already have a business. And they just have never passed over the six-figure mark in revenue. And I don’t know, Pat, if you know this, but 90% of women entrepreneurs in the United States do not do over six figures in annual revenue, and only 3% do over seven figures. So there is a huge problem with women and entrepreneurship, not even reaching the six-figure mark. So my goal is really to reach women that ideally already have a business and they’ve been working on their business but they just haven’t gotten over that six-figure mark where they can actually start making some money for themselves and that’s really who I am speaking to, obviously, it will also help someone who is just out of college. And she’s thinking about becoming an entrepreneur, and even someone who’s been in business 30 years and really wants to and is stuck, maybe their business is flat. So it will help anyone who’s in the entrepreneur space. But ideally, I want to talk to that woman who has not yet crossed over the six-figure mark.

Pat Yates 20:26

Right. Well, it’s very hard. I mean, even being a broker at Quite Light work with a lot of Shark Tank company, we tell a few companies make it to a million period. It’s just like the stats are the top 1% earners, people get blown away when they hear that some people that can get to a million dollars are way up there in the percentage of businesses that can do that kind of revenue, it’s really an accomplishment to actually do that. So if there are some top actionable tips, let’s say a woman is listening to the podcast right now she’s sitting her office, she has been an account for 15 or 20 years, what are the four or five things that someone needs to think about initially, before they decide, hey, I want to become an entrepreneur, I’m gonna change my professional life.

Leslie Kuster 21:02

Okay, if they have any even change, if they’re like, in a corporate job or something, they’re thinking of changing to become an entrepreneur, first of all, an entrepreneur needs a huge amount of self-discipline is like one of the most crucial behavioral ways that you need to be. So you need to ask yourself, Do I have self-discipline? So this is really, really important. And the only other way to get the self-discipline is if you’re wanting it or your why is strong enough, you have to have a really, really strong why. So if anybody’s listening to this and wondering, I wondered, should I quit my job? Should I start a business? Should I do all this stuff? The most important question is, why do you want to do it, because you need an incredibly strong why? Because it is hard. I mean, everything’s hard work is hard. It’s hard-working for other people. But working for yourself and being an entrepreneur is not easy, especially what we’ve been through in these last few years. So that why needs to be there. So that’s the first thing, you have to really, really, really want it, you need to know you have the self-discipline to really make it happen for yourself. And one of the keys in the book key number three is to become a ferocious learner. Because no matter where we’re at, in our business, or age, or whatever, we have to always be learning because everything is changing all the time. So I like to talk about being humble. Even if you have a seven-figure business or an eight-figure business or a $100,000 business, to be humbled to understand that you need to be learning all the time. And that’s, for example, listening to podcasts, reading books, joining masterminds, hiring coaches, and consultants, those are all ways to keep learning.

Pat Yates 23:00

Yeah, I mean, that’s a great point. So I would assume that a lot of these times that they come in and work with you, then you’ll find some other things that they can learn from to be able to do it. So, I’m curious, because you talk about the women’s entrepreneur guide to money and freedom and things and it’s focused on really one demographic, which is fine. That’s fantastic. What is it that you feel like there’s an advantage? Some of maybe rhetorical asking this that women have in business right now? Maybe they don’t even understand what advantages there really are?

Leslie Kuster 23:28

It’s a great question with the advantages because, often we look at the disadvantages that women have, there’s never been more support for women that that is the advantage right now. I mean, the world of entrepreneurship in the world of helping women rise has never been out there stronger. So I would say the advantages is there’s a lot of help out there. There’s a lot of free resources. I mean, on my website, and many people’s websites, YouTube videos, so the resources and the amount of coaches and women focus coaches out there. There’s just a lot of opportunities.

Pat Yates 24:11

That’s really amazing. So, again, we’re talking with Leslie Kuster, book 7 Keys to 7 Figures. It’s really amazing because you’ve known Joe Valley for a long time and you still talk to Quite Light how is that? I don’t even know because he’s not very nice guy.

Leslie Kuster 24:27

Yeah, Joe, and I go way back, I like to evaluate my company and check in with Quiet Light. If I did an exit, I’m definitely doing it with Quiet Light that is for sure. And I like to get it appraised and everything. But I’ve been saying that for a very long time, I’m going to be selling my business in two to three years and then another years, two to three years and I keep going and going and going. So one of these days. I’ll do it. I guess one has to sell their business at one time. Isn’t that right, Pat?

Pat Yates 24:58

I don’t know. I mean, you would think So but you’re teaching entrepreneurs, so you may just keep going with it. Who knows, maybe if you get busier on your other side, you can, but we’ll always be here. I like to ribbed Joe a little bit. We’re just in Mexico together playing golf. He’s such a good guy. So, but anyway, so Leslie, I know that we’re gonna wrap it up here, are there other things that you think the women entrepreneurs or listeners out there need to know about 7 Keys to 7 Figures, your book or your business or business in general.

Leslie Kuster 25:23

Yeah, totally. So you go to 7keysto7figuresbook.com, because that’s where you get all the free bonuses. And also, if you go to my website, lesliekuster.com, I’ve put together a free I’m calling it the million dollar resource list. And definitely grab this is completely free. And what I have in it is all my contacts, literally from 30 years of contact of the best e-commerce coaches, investing, podcasts recommended, books recommended, Canva, all kinds of ways, where to hire VAs and all that. So definitely, that’s a resource to grab. The point of what I’m doing is really to help women rise, this is what I want to really communicate and make women understand that no matter what age you are, whether you’re 30, 40, 50, 60, 70, 80s, I suppose it’s all possible, and you don’t really need business background, you don’t really need these kinds of things, you need to just really want it and then there’s resources out there to help you do it. It’s all really possible. And this is my message. And this is coming from someone who didn’t do it for 20 years. I didn’t do it for 20 years, I had an under-six-figure business, I had a five-figure business for a very long time. So I really do know it’s all possible.

Pat Yates 26:55

That makes a lot of sense. So Leslie, if they need to get in touch with you? How do they do that via email? What’s the easiest?

Leslie Kuster 27:01

Yeah, thank you, [email protected], or go to lesliekuster.com on my website, and you can contact me there. Definitely check out me on Instagram, YouTube and LinkedIn as well, please follow me there. And I’m actually going to start something new. I’m super excited about it. I’m starting a live stream show, it’s actually starting tomorrow, matter of fact, called She Rises. So I’m going to be live streaming to different platforms. And the point of the show is to really give women an opportunity to be visible, and to really communicate with the world what their businesses are, how they feel about being visible because it’s a big issue for women visibility. And this is what I’m starting tomorrow. So I’m excited about that.

Pat Yates 27:52

That’s really exciting. So those of you listening, unfortunately, right now, when she’s talking, we’re in like the third week of October, this will be airing actually in like the second week of December. So maybe a little behind, but she’s done some. So let’s check that part out, too. Leslie, this has been an amazing conversation. You listeners out there again, the brand is backfrombali.com. If you want to find that Bali like B-A-L-I, and that’s there on Amazon really, really cool products. Then the book you have that you’ve written you’ve got lesliekuster.com, you got 7Keysto7Figuresbook.com. You don’t have much going on, then you’re launching a TV show. That’s really just like you have nothing else to do, I guess. That and pickleball. That’s great. I mean, look, it’s awesome that you’re making a lot of moves. Leslie, it’s been amazing having you in the podcast today. And you guys, everyone go and check it out. And if you’re a woman entrepreneur out there and you don’t know where to start, you have nervous thinking it isn’t your background. Just reach out. She’s gonna help you, she can get the book and learn how to do it. And we just appreciate you being on the Quiet Light Podcast today. Thanks a lot Leslie.

Leslie Kuster 28:51

My pleasure.

Pat Yates 28:53

All right, have a great day.

Outro 28:56

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.

Entrepreneurship for Wealth, Healthy Relationships, and Overall Well-Being

Meet Robb Green, the inspiring host of the I'm The One podcast. The podcast aims to empower individuals to create success stories by providing practical guidance on building wealth, maintaining...

Meet Robb Green, the inspiring host of the I’m The One podcast. The podcast aims to empower individuals to create success stories by providing practical guidance on building wealth, maintaining healthy relationships, and achieving overall well-being. He is an entrepreneur, mentor, and business advisor who uses his skills and time to assist others in the industry to continue learning and growing.

In addition, Robb is a private investor who buys, optimizes, and grows businesses. As the mastermind behind the development and execution of strategies aimed at e-commerce brand establishment, he also helps owners exit their businesses while preserving their brands.

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

[02:16] Robb Green shares his professional background
[03:20] How to successfully create wealth and positive relationships while maintaining your health
[04:58] Advice for balancing work and family life
[09:24] Robb’s experience successfully running multiple businesses
[14:41] The genesis story of I’m The One podcast and its focus
[16:38] Robb talks about self-education and personal growth for entrepreneurs
[23:38] Mergers and acquisitions insights

In this episode…

Success is more than just financial wealth — it’s also about building a life you love. Whether you’re a seasoned entrepreneur or just starting, how can you create a success story encompassing all aspects of your life?

Robb Green is a renowned expert who empowers entrepreneurs to build wealth, cultivate healthy relationships, and achieve overall well-being. Many entrepreneurs struggle to balance their business aspirations with their personal lives. Pursuing success often comes at the cost of their health, relationships, and family time. However, it is possible to achieve both personal and professional success with appropriate guidance and support. By sharing his proven methods and practical advice, Robb helps entrepreneurs create a success story that lasts a lifetime.

In this episode of the Quiet Light Podcast, Pat Yates sits down with the inspiring host of the I’m the One podcast, Robb Green, to discuss how entrepreneurs can thrive in all aspects of life. Robb shares his insights on how entrepreneurs can create wealth, build positive relationships, and maintain good health. He provides valuable advice for entrepreneurs on pursuing self-education and personal growth and also explains what motivated him to start his I’m The One podcast.

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. Again, I’m Pat Yates. Today we have a great conversation. I’m so excited this week to talk with Robb Green. And this is more of a personal and focus type of entrepreneurial conversation not necessarily focused on any one business. I was really taken by the early conversation with Robb about his focus on family, I think we found and struck up a relationship here that is kind of going to endure because we both have family-driven focus on our business how, as an entrepreneur, we both come in, and we focus on business making sure that it’s done right, but also in a way that we have the ability to focus on family. He’s a coach. He’s a wealth builder, he’s done entrepreneurship, he talks about building relationships. And the interesting thing I say on here he did 17 brands, people gave me some bad information, he’s actually done eight. But still, it’s amazing to be able to build that many brands back active in the market looking to buy some other businesses. I mean, Robb’s just a serial entrepreneur, a fun guy does his own podcast that we’ll talk about during this, but it’s just a great conversation to listen to a guy that’s passionate about business, wealth, building relationships, and family. And I’m so excited to talk to Robb Green today. Let’s get right to it. Robb, it’s great to have you in the Quiet Light Podcast today. How you doing?

Robb Green 1:45

I’m doing well. And thanks for having me, Pat. I appreciate it.

Pat Yates 1:48

Of course, I know you have a real history here, you knew Joe Valley, and you’re still willing to come around us after meeting him and Walker and some of these other guys. So I’m super excited about this because when I do the podcasts, I like to do a lot of fun stuff. I like to do a lot of things that are actionable. And obviously there’s sales and business. But you take a really interesting approach, you have a three-pronged approach to how you do business and some of it has nothing to do with business. So I’m anxious to hear all about it. First of all, tell our listeners where you’re from about you maybe a little bit about your background.

Robb Green 2:16

I appreciate that. From Minnesota originally been out in Arizona since college, I grew up in the cold, great place to grew up. But honestly, I’m cold is not for me, man, I’d like to fly to it or drive to it and then fly back home in the sunshine. So I’ve been out in Arizona for 20-some years out here and married two kids loving my life and really focus on the business and it allows the freedom. I mean, I think that entrepreneurism is the opportunity and it creates an extraordinary life. And that’s how I think about it. It’s not just about act acquiring money and making money.

Pat Yates 2:47

Yeah, it’s really interesting you say that, because I’ve talked to some people before about my business. Obviously I have my Shark Tank e-comm Business Happy Feet Slippers, shameless plug, as usual, I usually don’t talk about it very much, truly. But some people sort of go through that and talk about how great it looks on the surface, everything. They don’t realize the struggles, and sometimes those struggles jump, not only from business, they jump into family, because you end up running your days long, and then you’re stressed and tired, you may not want to hear it. So tell us about your three-pronged approach of how you go about your day in your life and business in general, because I was really curious to hear that approach.

Robb Green 3:20

Yeah, I got this from a buddy of mine a couple years ago. And the idea is really it’s three pillars, right? It’s the wealth, it’s the health, and it’s the relationships, how can you be in all three categories at the same time? You see most of the time you see guys that have a ton of wealth, and they’re out of shape. They don’t have relationships, they’ve been divorced three times, right. And a lot of times in the short run, you do need to make tradeoffs, right, because we all had that push entrepreneurially where you start a new business, you start a new brand, you maybe got to pick up the hours, and you got to work extra hard in the beginning. But how do you get back to the point where you got an A in all three categories. That’s the goal that I think about all the time, I try to stay in great shape. I work out religiously spent a ton of time with my kids, I live in Arizona, so it’s super-hot. So we leave within two days of school getting out. And we don’t come back until two days before school goes back. And we’re gone the entire summer. And that is a phenomenal honestly, the business part of it allows me to do that. Right. And so that is something I’ve designed my wife and I’ve designed, more than a decade ago, when we first had kids, I was like, I don’t want to be in a job where I can’t enjoy my time with the children. And I have to not be able to travel during the summer, when is the opportune time when the kids are out of school. So I really think about those three categories and how I can win in each of them. And again, there might be short-term, you know, down a little bit up a little bit here. But how do I get an A in each of those three categories?

Pat Yates 4:41

It’s really incredible. Some people would say how do I get close to an A or something it’s like some people think you can’t be perfect every situation but maybe in that situation if you shoot for that A and you still feel like well, I got to be plus you still feel very solid, about how you’ve done things. You mentioned obviously the family feel. Tell us about that. How old are your children?

Robb Green 4:58

Yeah, two daughters. I have 14, 13 the 14-year-olds didn’t turn 15 next month we’re talking about cars and driving next year, but really close with both girls. They play sports I coach a little bit. My wife’s heavily involved in school and committed to spending time there. Funny enough, we met with our my oldest daughter, my ninth graders counselor recently, she moved in ninth grade this year. And somehow I said, I want to be more involved in the school. And my wife did all the work, it’s all credit to her, I am now eligible to be a substitute teacher. So I don’t know how this happened to be honest. It was my idea and in all fairness, but I want to be a substitute teacher, maybe one day a month, maybe two days a month, where I can go in and I can put faces to the names of all these kids. So we’re involved with the I hear all these kids names. There’s different kids all the time. I want to put faces to names and they know who I am. Know that I’m Dylan’s dad, and I know who they are. So I mean, I’m at the sporting events, but it’s just different to have those interactions with kids. So I like teaching and coaching. So we’re gonna try it and see how it goes.

Pat Yates 6:01

That’s an amazing idea. Plus, you get to embarrass your kids while you’re there. You could like wear goofy outfit or stuff that they’ll hate that you got embarrassed. But out of interest, what do you coach?

Robb Green 6:13

So I’ve coached everything for the kids. I mean, I played a lot of sports growing up, so I’ve coached soccer. I’ve coached volleyball. Right now I’m coaching my oldest daughter, and I’m not a runner. I’m just more of a soccer player. But I’ve coached her in cross-country running to get her out. We did hill repeats out in the mountain on Sunday, actually.

Pat Yates 6:30

The people that are listening, don’t realize we take a few minutes before and kind of talk and I told you I thought we had a lot of synergies because I coached for 10 years in high school as a paraprofessional coach, as an assistant coach. So I knew exactly what you go through that my son was a cross-country runner. Right cross country and my oldest won three state championships in high school and the middle son was on one of those teams as well. So running is big in our lives as well. So yeah, it’s really amazing, because I think you draw so much and you get so much time because one other thing on this, like you talk about lifestyle. And it’s interesting, because you’re talking more about business as a lifestyle than business as a job. It’s those are two completely different mentalities. Because in the afternoon, if you want to go coach volleyball at 3:45, you need to be able to do that. But you’re gonna come back and work from 6:30 to eight, tell us about how you made the commitment to be able to do coaching and things that are extracurricular with your kids, but still balance that time when you had to work. I mean, I know that was tough for me, tell me how it was for you. It is right now still.

Robb Green 7:27

It is a challenge. And part of the reason it’s a challenge is I love what I do, right? I have a great team, and I thoroughly enjoy it, I look forward to coming to the office, which when I had a job, I didn’t really ever get excited about going to work, having my own business and actually creating the right team and the right people, I get excited when I go away from vacation, sometimes I’m excited to come back to work, which that’s the hard part because I love doing it. But I also love spending time my family. So I’ve got to balance a couple of things that I love. And really what I try to do is I try to design it right? So I think of myself as an architect, how do I design my life? The way that I want to design it, right? So how do I create the freedom to be able to do the things that I really want to do? I mean, you’ve got your kids are a little bit older than mine, they grew up fast. And this time is going to be gone really, really quickly. So I’ve got a ninth grader and a seventh grader, how do I maximize that time, and really, they’re at school, these amount of hours, those are my work hours. Sometimes I’ll go outside of that. But the goal is to keep it limited to those hours. And then they’re busy or something, I might do some more work or do some of my wife, but I really, really focus on trying to work when they’re not available so that I can spend time with them when they are available.

Pat Yates 8:34

Yeah, that’s incredible. I think that I think a lot about, what you just said and coaching for me for 10 years when my business was growing was really, really hard. But I said to myself, and I said everyone else, I’m gonna be out the house at 3:30 for 3:45 practice, I’ll be back at about 6:45 and have to work in the evening, or I worked earlier in the morning. But I made that commitment. And what an entrepreneurship lifestyle gave me was an opportunity to spend more time with my children doing that which is really incredible plus bonding with other kids. So I get that part of it. It’s definitely there. So one of the things I wanted to pivot to and kind of talk about I know you’ve been just an ultra-successful entrepreneur building brands and my understanding is you built 17 different brands, which is kind of crazy to think about because when people think about one and how much it stresses them think about if you have them going on concurrently so maybe give us a rewind and overview of how you did that and maybe what some of them were.

Robb Green 9:24

Thinking about I got a little bad information and wish it was 17 Pat but it’s only been eight, so we’ve actually started getting bought one sold three of those and currently have five in place right now.

Pat Yates 9:35

Okay, well then I gave you bigger props than you deserve but let’s go to those then. And they’re gonna have to check your sheet because that definitely says that we probably started maybe not exit them all though. That’s on my team I’m sure. That will be on them and we can blame them. But I’m not going to edit it. Hold on Let’s not edit it, but 17 just sounds better. Just keep going.

Robb Green 9:55

Well, I’ve always been agnostic about it and to be honest with you one thing I’ve got from a lot of my friends in this space, that are really focused on one brand is that I tend to go a little too wide. And so we are actually focused on narrowing our approach now. So we want to go deep on one brand, maybe two, but really one brand. So that’s what we’re looking to do right now is acquire a much bigger brand, and then probably sell off the existing brands that we have now engaged deep into one that I’m really passionate about. So we’ve been looking at what kind of brand new acquire and we’ve been doing outreach, and I built a simple model to identify opportunities that our core competencies and what we can actually do and improve the brand. So we’re gonna narrow our focus, I think my original desire to go wide was we’ve got skills around e-commerce, Amazon, some sourcing skills, how do we actually just find opportunities, and then go into those opportunities. And I think that’s given me a lot of diversification, but probably not the overall reach that I could have reached, if I had gone to one brand only to be honest with you.

Pat Yates 10:58

That makes a ton of sense. So what you’ve learned in your businesses you’ve gone through now you have your eyes set on something much different, that can be a little bit bigger business may be condensed at all. So when you’re looking at businesses you run, what kind of strengths do you have? What do you really focus on? Some people are really numbers driven? They have to look at the metrics, others are field-driven, some are marketing, what are your specialties and you hang your hat on an e-comm?

Robb Green 11:20

Yeah, I’d say it’s data-oriented and then problem-solving really difficult problems, right, I tend to spend some time on the Amazon algorithm, try to reverse engineer what’s happening. And then it’s just data analytics, numbers have always come easy to me. So many sellers don’t even know their lifetime value. They don’t understand their basic dash boarding. You’ve probably seen this a million times talking to a lot of these guys who want to sell their business. When we do an outreach to somebody and we talk to someone, they’re never accurate on how much they make. They always say they make more money. And then we’re like, listen, we’ve got scripts, we can build financials for you pretty quickly in a day, just give us the reports. And then we have to educate them, like, hey, you said you make this much, you actually don’t make any money. And here’s why you don’t make any money. So we’re really good at the financials in the data side, and then being able to solve around that and give the customer what they want. So I don’t think we’re great at product. I think we’re good at product. I don’t think we’re good at sourcing, but really, it’s around the data side and the math side of it, to be honest with you.

Pat Yates 12:22

That’s amazing. So which one was your favorite of all the ones that you had or own or exited any of them? What was the most fun business to run?

Robb Green 12:29

Gosh, I mean, probably the biggest exit would have been the most fun, I think. But I still run into an aggregator a few years, a couple years ago. But actually, if I’d say fun, I have one right now that named after my daughter’s. And it’s just some arts and crafts for kids and hand-casting kit and things like that. So we named it up my daughter’s there and all the videos and photos. And it was a way to incorporate them into the business. So I don’t really believe that you want to turn it off and on right family here business here health here. I like to integrate everything. I think it’s difficult to balance if you switch off. So I took my oldest daughter right before COVID to China with me, she was just turning 10. And I took her to China for nine days. And we had trade shows and visited factories, and she’s been to China, they understand how the businesses work. They have been in pictures and videos, and they’ve done like product research for us. I’ll give them a product and they’ll break it down and try to understand, hey, why does it sell well? What do you think of the packaging? What do you think of the instructions? So we try to incorporate the kids as much as possible?

Pat Yates 13:36

That’s really amazing. Because it’s funny, because when I go on the road, there’s some speakers that I see out there. And one time one of them brought his son and he was just trying to train him on public speaking and the kid had to sit there and watch it. And you know what, after I thought about it was one of the greatest things they ever did. And actually, I went to a Shark Tank reunion, a group that I sort of traveled with, we have a reunion in Vegas every year. And one of the guy that organizes it, both of his sons, our son and daughter had to work in the show that like giving out badges first, setting up stuff, putting up speakers and things like that. And then at one point, they were on stage and they got to interview somebody who was a start-to-finish understanding of how to run a tradeshow and I looked at it and went, this is awesome. They accompanied their kids in it. I wish that I’d have done that more when I was younger as building e-comm business little harder that way. But that’s definitely awesome. So I know that leads me where I wanted to talk about so you have your own podcast called I’m The One and you definitely concentrate on that building wealth, relationships and well-being. Are there any that take priority? Are those in any order? Is the person supposed to decide? Tell us about the podcast and how you focus on that?

Robb Green 14:41

Yeah, so the podcast is something new. We just launched it in August. My team actually came up with the idea they told me in May before we left for summer vacation that I was going to do a podcast and didn’t have a choice. So they came up with an idea. I came up with a name and they said listen, we want you to be able to reach more people. We love what you teach us stuff. We’re going to do this, we’re gonna figure this out. I said, great, that sounds awesome. Let’s do it. So that’s how the whole podcast actually, the idea came to fruition. It’s been a ton of fun for me. And it does allow me to have conversations around some of the topics that I’m passionate about. And then I mean, I share these ideas, my friends, my family anyway, now I could just point them to a podcast and be like, hey, you want to talk about cold plunge and health? Great, it’s episode, whatever it is, go pay attention and go check it out and listen to what we’ve got going on. But I think that the biggest thing for me is how do I scratch my own itch. I’m constantly trying to learn, and it forces me to learn and be prepared, and then share what I learned. I’ve got a mastermind with a bunch of friends in e-commerce that we do this, we get together every four months, we share ideas, we have conversations, I love helping other people. And so for me, it’s an opportunity for me to share what I’m learning and what I’ve learned, and hopefully help other people.

Pat Yates 15:52

That’s a great thing. I mean, I am really the same way. It’s funny because I’m talking with a group here in Louisville, Kentucky about working on some things and e-comm, an incubator to help entrepreneurs grow. And I think it’s all about being a little more philanthropic, now at my age, and now you’re younger than me. And looking at that focus is something that every entrepreneur should be doing, especially if you’ve accomplished a lot of things been a lot of places like, you need to share that knowledge with other people. And I think the way that you’re talking about it is really amazing. So I know that we talked about some questions, I know you’re big into continuous self-education. I didn’t even want to preface that by anything. And I was curious when I read that, because a lot of people won’t admit that they want to continue to self-educate and grow as an individual. They just think, well, I’m here. So what makes you focus on that much? And maybe what are you working on now.

Robb Green 16:38

I’ve got a friend of mine as a PT, and Japanese. And we talked about Kaizen, which is that constant, never-ending improvement, right. And I guess, I don’t know where I learned it. But I’ve always believed that I’m always trying to get better, right, and actually open the podcast with a quote that I love, which is, treading water is like drowning to people like you and me. And that’s what I feel like when I’m sitting still. And I’m not actually growing and learning. So I think about it in a couple of different ways. I do two groups that allow me to work to learn in a couple of different capacities. One, I co-founded a mastermind e-commerce space called no BS. So we’ve got 11 members, we get together three times a year for the last six years. And we all just share best practices. The biggest thing about that the smartest thing we ever did is nobody makes any money off it. So the only way you can attend is by continuing to add value. So if you don’t add value, we all vote. And unfortunately, we’ve had to ask a couple people to not be a part of it anymore. So I get a little bit flack, sometimes from those people when I see them. But the reality is that everybody shows up and very successful people. And you know, once people make a certain amount of money, it’s hard to keep them engaged. So this is continuously everybody adding value to each other. It brings out the best in all of us. And we all learn and get better together. The second thing that I do is I do strategic coach, which is a Dan Sullivan program has been around 30, 40 years, I go to the group in Santa Monica, been in it for years now. It’s all sorts of entrepreneurs, about 40 people in our group. And they taught me all different concepts. How do you get more time? How to get more freedom? How do you understand what you’re doing? How do you get build a self-managing company and then a self-multiplying company? So that has all those aspects to it from the business side, and we end up talking honestly, we all talk about health. Every time I go to the meetings, we’re always talking about, hey, what’s going on? I’ve now become the cold plunge and sauna guy somehow. And so I got peppered with questions last month when I was there about what I’m doing to try to stay healthy and try to stay optimal. I’m trying to Benjamin Button this thing, Pat. I’m going backwards. We’re getting healthy year over year, buddy.

Pat Yates 18:46

There you go. I think that’s a great approach to it. It’s really amazing what you said about the mastermind, though. So as we go to a lot of sponsors are Quite Light will end up going there and doing our speech to add value and stuff. And it does every year, it seems like it grows and the talk the expenses, and some of it seems focused on profit, which I understand they have to cover costs and if they’re making money on a great but your focus of add value or get out that’s not. That’s a rudimentary way of saying it. But yeah, we kind of amazing because you either have to put up or shut up and a lot of people sit around and just listen at masterminds. And that’s not a good process. I mean, how has that worked out for the group? Do you feel like that adds the value just because you do that one simple thing?

Robb Green 19:23

Absolute game changer because I had gone to some expensive masterminds before this. And that’s exactly what you say, when someone pays a lot of money. A lot of people just show up, and they sit down. They say listen, I spent all this money. I’m here give to me, right? So to turn that around, change the paradigm. The difference is when we all share the cost when we get a couple of houses. We’ve done them all over the world, but we do in Scottsdale now here in Scottsdale all time. And so we get a couple of houses, we get a chef. We have a great time we spent a few days sharing everybody has to present and then the idea is that we all have to add value. A lot of us have known each other now for six years, seven years. So we understand the other person’s business. So there’s so much value, I’ll see opportunities in like home goods. And I’ll call my friend, I’m like, hey, have you seen this, check out this product, it gives you a reach. And this concept is not a new concept. It’s from Think And Grow Rich and man going on for hundreds of years. But if you get a bunch of like-minded people that all want to grow in the same direction, and some of these guys have exited, and not even e-commerce anymore, but still in the mastermind, and now they’re doing maybe real estate. And they’re adding value from a real estate or an NFT perspective, or a Kryptos perspective. So the big thing that we do is, that’s the core foundation. And then we typically add three to four guests, every mastermind, and then they come from a brand new, they give their opinion, occasionally, we’ll add somebody, or maybe it’ll be the person who comes once a year as a guest. Right. And that person will come once a year, because they’ve got a certain expertise we don’t have in the group, or they’re just a good person to have in the group to add value and something new that’s going on. So, it’s one of the most valuable things I do from a professional and a personal perspective.

Pat Yates 21:03

That’s really amazing. Yes, that’s a good way to go about it that everyone feels it’s incumbent on them to add something. And usually that’s going to change a conversation versus sitting in learning, I guess this thing would be like a lecture. That’s really incredible. So as we get towards the end of this, you know what, I was really drawn to what you said about family and how you balance that because anyone that knows me knows that that’s been the first focus of my mind. It’s always been family first and business second. But I found a way to make sure that I can balance them all. But the only time that I ever got concerned about it was you carry all the good things everyone celebrates. But when you have bad days, and you’re having bad months, and six months, sometimes people end up different people with their family they carry with them every day, if they’re around with them, being an entrepreneur and not the easiest thing. How do you suggest or how have you balanced that in the past when you have tough times? Because that’s obviously part of this work-life balance you’re talking about? You’ve been in the doldrums of that? What’s the key? What how do you get past that if you’re an entrepreneur?

Robb Green 21:59

Yeah, one of our core values here is radical transparency in the business. And we have the same radical transparency at home. So my wife, and I don’t hide anything from the kids like, hey, if it’s a difficult time, or something’s going on, I share with the kids, hey, listen, we’re having challenges here. Oh, this has happened. And here’s a lesson that we learned from it. I mean, I try to teach the kids like, there’s no such thing as mistakes, just learning opportunities. So that applies in business and in personal life. And I think it’s easy to tell your kids something, but it’s far more impactful to show them. And if they see me go through that, and ride the ups and downs of being an entrepreneur, which we all have, it’s never a straight line. It’s always a roller coaster, right? So there’s always going to be ups and downs. And I just think it sets them up for life. One of the best things I ever heard was our job as a parent, is not to smooth out the road, it’s to enable the children to handle the bumpy road that’s going to happen in the future. So that’s what we try to focus on.

Pat Yates 22:57

Yeah, I 100% agree with that. I think that one thing you’ll find out that I know a little bit more now than you do is how to be involved with adult kids. But the funny thing about that is I’ve transitioned from exactly where you are the father, the coach, the high school thing going in and doing all that and the kids go out and go to college, you come away, and it’s harder to raise adult children but treating him like that and this stuff, the work you’re doing now to make them successful, all pays off in the end, because their lives are much better. And my sons are just great young men. And I think it’d be the same way with your daughter. So Robb, is there anything that you would like to tell the audience that maybe we haven’t covered today? I know we talked about a lot, I got really excited about the personal side, but anything about the business yourself or any other topics you think?

Robb Green 23:38

I mean, I think that this has been a great conversation about, I’d love to talk about a little bit more about what you guys are doing and seeing in the space to be honest with you. We’re looking to acquire businesses, we’ll probably sell some, I try to stay in touch. I’m on your newsletter and watch the pod and try to listen to what’s going on in the space. What do you guys see right now with Quiet Light and what’s happening in currently in the e-comm space and how the valuations are changing aggregators getting upended a little bit. What’s your take on the whole market right now?

Pat Yates 24:05

Yeah. Now, you that are listening, obviously, this is probably in late November that I think we’re airing us. Right now, we’re sitting in the first couple of weeks of October, but it’s not that much different. As far as the climate you’re talking about M&A has been way different this year. Even though Quiet Light is still having a great year, we’ve been growing every single year, we’ve had a good years, the feel that I have, my touch and feel what the industry says that things have been down that entrepreneurs have been struggling that credit lines shrinking because of interest rates and money, cost of money going up. It’s going to affect product flow in for the fourth quarter. I think the only thing I’m concerned about in any market right now is that I think there’s a lot of people that have a lot riding on q4. And if it doesn’t work out, well, I have a weird feeling. There’s gonna be some serious small business problems in the beginning of the year, that’s what I’ve said all year when I go to the Shark Tank reunion. I’ve been to 10 shows this year. And all of them say the same thing. It’s good, but it’s not great. We’re down a little bit we’re down a bunch, how’s the market the same questions. I think everyone just has to fight through the situation right now. We got a lot going on in the world. But at Quiet Light, things are still really good. I mean, people know us, we’re more Nishi. We don’t take every listing. We typically work with great entrepreneurs, and we bring things to market. But I hear some more optimism in the market right now. So every conversation we’ve had in the last three weeks and last part of September, has said that the market is getting better. So I think there’ll be a lot of good lead flow into the last part of the year, it’s just going to be a question of how the economy recovers in the United States into the beginning of next year. It’s like, I don’t care what anyone says we’re in recessionary times, call it what you want, I don’t care. And I think with that, with interest rates so high, it’s hard to get lending to buy up companies, you need things that can have cash. So cash buyers have been in a better position. But I think things will change a little bit as interest rates hopefully drop starting early part of next year. And then we’ll see. I mean, what are you seeing out there you think?

Robb Green 25:54

You hit the nail on the head, almost everybody we’ve talked to is banking on a big q4, whether it’s a couple of new products or selling through inventory. I’ve heard this a lot in the last two months, about, oh, we got this going to happen in q4. And I said, okay, well, if that doesn’t happen, then I’d love to talk to you the first week in January after q4, and let’s see what happens. So that’s one thing but just on a separate note and cut this out if you want but did you go to the Shark Tank event in July this year in Vegas? Yeah. Yeah, I almost went to that. I advised for a company up in Seattle. And we had purchased a business, a brand that was attending the event and we were in Hawaii for the summer. So it wasn’t worth the flight back to Vegas. But I heard it was a great event.

Pat Yates 26:44

Oh, it was an exceptional event. We actually had one of the greatest dinners I’ve ever been to a place called Beauty and Essex and the cosmopolitan but that’s coming up again this year and listeners out there they’re still hanging on with this, we’re talking more structure this. There’s a lot of different shows you can get into I believe the Shark Tank if you’re out there, and you’re a Shark Tank company, been on the show, look up Shark Tank Pals on Facebook, you can join that and then be able to come to the reunion if you’re one of the companies that is air that’s sort of the cutting line, they make sure that you have aired on it, but there are extensions. But I think next year it’s going to be in Nashville and will probably, I think they said maybe Nashville in like July, people are worn out with Vegas. I feel like it’d be on 100 times this year. It’s literally crazy how many shows are in Vegas. But in any event? Yeah, I think that’s a great look at it. I think people that are out there looking to buy businesses, be patient. It’s kind of like the housing market. I think the housing market needs 18 months if someone’s really wanting to try to get in there because interest rates need to go down. I think businesses is more like six months, I think when you get into March and April, I think people will start looking at good solid businesses. And if you’re looking to buy one, get out there. And if you’re a seller, come to a broker like me or anyone and get good advice, at least see where you’re at. And then find out if you have an opportunity to sell your business or keep running it.

Robb Green 27:52

I mean, as a seller and a buyer, I cannot agree with you any more than that, to be honest with you, get advice. I mean, most people never sell more than one business. Right? And so they’ve got no experience. And I’ve helped a bunch of friends sell their businesses, and they have no idea. And there’s those little things, you know this already Pat. So I’m preaching the choir here. Those little things make a big difference at the end of the day, whether that’s negotiating terms, whether it’s pricing, whatever it might be, there’s a lot of little things. If you’ve never done it, you don’t know you don’t know.

Pat Yates 28:23

Yeah, that’s exactly right. At Quiet Light, we say that all the time. You don’t know what you don’t know when you’re buying a business. So that works on both sides. But man, Robb, this has been amazing. I will sit here talk for hours. I love your focus on entrepreneurship, wealth building relationships. It’s awesome. So guys, if you and the podcast is I’m The One, I’m The One Podcast. But if people need to reach out to you tell them how they can reach you Robb.

Robb Green 28:47

Yeah, I think imtheone.com is the best way to do it. There’s a Q&A on there. I’m on Facebook. I’m on LinkedIn, either of those workouts. So it’s Robb Green with two Bs ROBB and then Green last name because of the color.

Pat Yates 29:01

That’s awesome. Yeah. So in there, you can just submit a question. People have fun with that if they go on there. Yeah, absolutely. Man, it’s been great Robb. I appreciate your time today. I appreciate you being on the Quiet Light Podcast. It was absolutely awesome.

Robb Green 29:13

Thanks so much, Pat. I appreciate it.

Outro 29:17

Accounting Done Right With Profit First

Cyndi Thomason is the Founder and President of Bookskeep, which provides SmartCFO e-commerce business advising, Profit First consulting, and bookkeeping services to e-commerce clients worldwide. Her team coaches business leaders using the Profit First method she designed specifically for the e-commerce industry. This coaching helps business owners create a profitable business that allows them to enjoy financial freedom.

Certified as a Mastery Level Profit First Professional and a Fix This Next Coach, Cyndi is a well-known figure in the e-commerce industry. She authored the best-selling book Profit First for E-commerce Sellers and has an online course with the same name. A renowned speaker, she is frequently invited to popular webinars and podcasts. Additionally, Cyndi regularly contributes to Inventory Lab and eComEngine blogs and newsletters.

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

[02:57] Cyndi Thomason shares her background and the genesis of Bookskeep
[05:16] Bookskeep’s Profit First methodology
[09:53] How many bank accounts should an e-commerce business have?
[16:05] Tips for managing cash flow in seasonal e-commerce businesses
[23:06] Amazon accounting and bookkeeping strategies
[27:35] The process of working with Bookskeep
[32:23] Cash versus accrual basis bookkeeping
[36:30] Bookskeep’s customer success stories
[40:20] Cyndi’s accounting tools recommendations for e-commerce businesses

In this episode…

Managing bookkeeping for an e-commerce business can be a daunting task. It requires a precise understanding of e-commerce accounting practices that might be unfamiliar to many business owners. As a result, many business owners face difficulties keeping up with their e-commerce bookkeeping needs.

If you’re an e-commerce entrepreneur, consider hiring accounting professionals to help you with your finances. Working with bookkeeping and payroll services experts can help you scale your business and ensure that your financial records are accurate and up-to-date. Cyndi Thomason and her team offer e-commerce financial solutions using the Profit First philosophy, which provides entrepreneurs with the tools they need to move toward financial freedom confidently. Whether you’re just starting your business or looking to take it to the next level, partnering with experienced professionals can be a game-changer.

In this episode of the Quiet Light Podcast, Pat Yates sits down with Cyndi Thomason, President of Bookskeep, to discuss e-commerce accounting solutions. Cyndi talks about Bookskeep’s Profit First methodology, tips for managing cash flow as a seasonal e-commerce business, Amazon accounting and bookkeeping strategies, and cash versus accrual basis accounting.

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 the Quiet Light Podcast. I’m Pat Yates. Today we have a great episode, it’s exciting to talk about accounting, we’ve got Cyndi Thomason from Bookskeep. Bookskeep as a company that helps do your accounting and bookkeeping for your e-commerce business. And they actually operate it from a standpoint of Profit First, at least for the clients that will use that, which is an interesting book on how to structure your accounting, based on different bank accounts that really kind of deep when people get in there, but it’s a cool process, and this company really focuses on it. So whether or not you actually need accounting is up to individual people. But think about this, whenever you’re coming to sell your business with Quiet Light, we always go through the financials first. We try to find our backs, we try to find mistakes. But if you have $10,000 mistake somehow or accrual problems, or posting issues, or whatever the thing is, and you’re selling it three and a half multiple, you just cost yourself $35,000. So the money that you spend transactionally with an accounting firm can go out the window really quickly if it’s not put together correctly. The nice thing about Cyndi’s business is they’re sort of giving you a philosophy towards your bookkeeping and your accounting and how you run your business as well as giving that feedback quickly doing the bookkeeping work. I think it’s just fascinating how people work and how their mindset is I’m really excited to talk to her about how profit first works then with this, and how the accounting can change if you work with Bookskeep. So as always, if you have any feedback from the show, my name is Pat Yates and you can email me at [email protected]. I’m really anxious to get to Cyndi Thomason here with Bookskeep so let’s get right to it. Cyndi, it’s great to have you in the Quiet Light Podcast today. How you doing?

Cyndi Thomason 2:09

I’m doing great, Pat, thanks for having me on.

Pat Yates 2:12

I’m always anxious to talk to people, especially in accounting. It’s one of my classes I hated when I was younger, like the old school people like, especially some people may not realize this, there was a time when I had to draw those T graphs, we had to actually draw them out and do all that when we’re going through accounting class. I’m dating myself, Cyndi.

Cyndi Thomason 2:28

I still do it. So I’m right there with you.

Pat Yates 2:32

Anyway, it’s great to have you in today. I am so excited to talk to people because I can’t tell you how many times I’ve had clients at Quiet Light that come in, and they have all their stuff on a spreadsheet and they a box of receipts like can I mail it to you and all these different things. They just come in semi-organized or not organized at all. And that’s really where people like you come in. So I’d love to hear about you first personally and where you’re from and tell us all about your company.

Cyndi Thomason 2:57

Okay, well, I live in the middle of the country, North Central Arkansas, honestly a stone’s throw from Missouri. So we’re real close to Branson, Missouri, the country entertainment capital. I have a remote practice. We’ve been in business since 2014. And we got started just because we honestly I needed something to do while my daughter was being homeschooled. And I needed something that was flexible because I needed my time with her. And so from my corporate career, I had done accounting, I jumped in here and started doing some work locally. And then I met Mike McCalla wits from Profit First. And he really kind of guided me to focus on the niche. And so since 2015, I’ve been focusing on clients in the e-commerce space, helping them get profitable with tools like Profit First, and a variety of other cash flow management type of consulting activities that we do with them. We have a team of about 25. They’re distributed all over the US and yeah, we love working with e-commerce businesses. They’re kind of like us, there’s their value, their flexibility they like technology. And so there’s a lot that we have in common.

Pat Yates 2:57

That’s really good. First of all, the people in Nashville are gonna take issue with a comment about Branson, Missouri being the country. I used to live in Nashville. There’s some people pretty fanatical about that. So I think there’s some people might disagree with that. But we’re gonna…

Cyndi Thomason 4:30

Well, they got to come out here and check it out right.

Pat Yates 4:33

Now, you mentioned something right away that I’d like you to comment on, because your company’s about bookkeeping. But there’s also a philosophy like I can see it behind you that you actually adhere to. And it’s really interesting because my dad will tell everyone that Profit First is a complete rip-off of his budget growing up. When he was younger, he used to legitimately keep envelopes and if there was no cash in the envelope, he didn’t do it. My dad talks passionately about that. I think they still do it. He and my stepmother share And they still do that same kind of thing. So when the money wasn’t there, they couldn’t spend it. So I think that this, that’s a rudimentary explanation is really the foundation of what Profit First is about. Tell us about that. Because I am still really curious about that and how it’ll tie into the bookkeeping we’re talking about later.

Cyndi Thomason 5:16

Okay. Well, your father would be exactly right, it is a complete rip off. And Mike gives credit to the envelope system and in all his material. I think his grandmother was the one that taught him about it. It’s just putting a modern twist on it, we can do that now with bank accounts. And we can do it for our business, not just for our personal lives, which is how most of us are familiar with it. I can’t tell you how many people come to me as clients, and we start working together and they’re like, I do this in my personal life, it just never occurred to me to do it for my business. And so it’s really just taking that concept and applying it to business. And here’s why it’s so important. Profit First is based on this theory called Parkinson’s Law. And Parkinson’s Law is you use what you got, you may remember, as a kid, maybe you weren’t this way. But I was just way, I got a little bit of money in my pocket. And then I couldn’t wait to figure out what I could spend it on. And my parents would say that money’s been burning a hole in your pocket. And it’s that kind of thing, we start to see money showing up in our one bank account. And we think, oh, things are looking really good. Or if we don’t have money, we start to really panic and start to worry. And what Profit First does is it gives us different bank accounts for different purposes. And the one I specifically find very important for e-commerce clients is a bank account for inventory. Because inventory, most of my clients will buy a big load of inventory, and then they’ll sell through that over a period of weeks or months. And then they’ll have to come up with another big amount of cash to make a down payment, pay it off, and then they’ll sell through that. So this inventory, cash flow is like a lot goes out the door, and then you start to build up some money, and then a lot goes out the door. When all of that money is placed into one bank account, what tends to happen is we start thinking, wow, I’m doing pretty good, I’m making a lot of money. Look, my bank account is big. Without thinking about in two months, I’m gonna have to spend some money to get my next load of inventory here. And so the idea of just segregating that inventory money into a separate bank account, so you know what it’s for, you’re putting money in it based on what you’ve sold, you can look at your cost of goods sold and know, okay, for this $10,000, I had $3,000 in product, put that $3,000 over in that bank account, and let that money just continue to grow until you have to replenish and buy more inventory. And that takes out a lot of this up-and-down craziness that you might be seeing in your bank account, with all your OPEX, your OPEX bank account will make a lot more sense. Plus, your inventory bank account will make more sense. And you’ll just have a better handle on your business. Now, that’s just kind of a rudimentary way we do Quick start. And there’s other accounts that you can use, I’ve got one client that was with me for a number of years, he sold his business not too long ago, but he was up to 23 bank accounts, and he kind of did use it as a budgeting tool. He said, okay, my advertising budget is 20%. And he would put that number in, and he could tell when he started spending more on advertising than he was replenishing. That would give him a clue. And he would say, hmm, my advertising is not being as efficient as it was because I’m running out of money now. And if I were selling as my advertising should lead me to do ought to be banking a little more money there. So it is a budgeting tool. It’s also a cash flow management tool. And what’s really beautiful about it is you don’t have to wait until the end of the month, and your bookkeeper gets her reports done or his reports out to you, sometimes that’s as much as a month later than when the activity took place. You can log into your bank accounts and see your balances and know at that moment how you’re doing.

Pat Yates 9:11

So let’s do this. I wanted to jump into some accounting. But now you’ve sort of opened up with Profit First, which opens a whole lot of questions. Now, you mentioned and I understand the concept of being able to have extra bank accounts. And these days, it’s kind of easy, because you can go to the same bank and have like seven or eight sub-accounts, and you just hit and transfer tech two minutes. So to me, I can see how this is easier than it used to be in the past. But here’s the question. Can you give the listeners a little example like of the guy who had 27? That’s a pretty complex p&l, but how many do people let’s say if you have a half a million dollar e-comm business, and you run Amazon, Shopify, everything, how many bank accounts is typical? And what are those usually consist of? What are roughly the ones you would set up if you’re a bass customer?

Cyndi Thomason 9:53

Okay. If you’re primarily an Amazon business, Amazon’s collecting all your money, right? They’re gonna keep it for a couple of weeks and then they’ll send it to you.

Pat Yates 10:02

If they feel they’re in a good mood, they’ll send it to you.

Cyndi Thomason 10:05

Yeah. So once that money comes into your account, then we recommend the first account is replenish your inventory account, move that money from your settlement payment over to your inventory, whatever that amount should be. I know we were talking earlier, and you’re a middle-of-the-line guy. So you’re gonna look at your gross margin and know how much your cogs were. And once you know that, move that over so you can do that, again, that’s your lifeblood keeping that business going. Then I recommend people to have an account for profit. And the profit account does a couple of things. One, it ensures that you are profitable. And it’s not this paper profit that you might see at the bottom of p&l. It’s true cash dollars in the bank account that if you have a family need, you can take the money out of the business and you’ve got that profit. The other thing is, it’s starting to build up a little bit of a savings account a little bit of a rainy day fund should something go wrong, maybe Amazon doesn’t send you your settlement check as expected. Or maybe they’ve lost your inventory. It gives you that rainy day fund so that you have a little bit of runway to think a little clearer and make better decisions. Then, of course, we have OPEX, which we’ve talked about, everybody’s kind of got this basic checking account where everything runs through, we call that OPEX. And then there’s two other accounts. One is for taxes, and one is for owner pay. Taxes, of course, is setting aside some money so that come April, you’ve got money to pay that tax bill for your business, because you may be paying estimated taxes along or maybe you’re not even doing your bookkeeping along, and you just get a surprise come, March or April and your tax accountant tells you you’ve got a big bill to pay. Well, if you’re doing Profit First, you’re preparing for that, and you’re setting those dollars aside. And then of course, if you’re working in your business, you are your business’s most important employee. And when things happen, if something you know made you where you weren’t able to work, maybe you got sick or a family member got sick, you would have to turn around and pay somebody else to do the job that you’ve been doing. So you want to be creating some money that would flow to you, as an owner, working in the business, the person working in the business, not the business owner collecting the dividends, so to speak. So those are the main accounts. I mean, it’s pretty basic accounts that we talk about in my book and my talks about his book, with the exception, I add inventory into the formula, because it’s just so critical to understand inventory cashflow.

Pat Yates 12:47

That makes a lot of sense. So let me back up and give you a practical example. Let’s say one month, you do $100,000 In sales, and you already had all your product, you’ve already bought it paid for it and the cost of goods that accrual, let’s just say for the sake of saying it for that month was 30,000. You already had it. So we know the cash basis is zero if you’d already if someone’s doing that. So are you suggesting that if someone went through that month that they take that $30,000 accrual amount and transfer that to their cost of goods? or whatever you call it for product? Is that as simple as you would say it is?

Cyndi Thomason 13:22

Yeah, that’s it. That’s what it’s all about. Just knowing that you’ve set that money aside, so that when you have to replenish that inventory, you’re not going to have to rely on saving it in this one account that you’re just kind of thinking, Okay, I’m looking to buy inventory. It’s actually earmarking it, put it somewhere. So you know you’re preparing for that next inventory.

Pat Yates 13:44

That totally makes sense. And the operating expenses the OPEX is you’re talking about as any it’s a catch-all for everything. Do you ever segment that? Are there reasons people would segment it?

Cyndi Thomason 13:53

Oh, yeah, that’s where the 23 accounts come in. One account would be advertising. Advertising can get, besides inventory, advertising is where a lot of our clients money goes. So we like to understand how efficient is our advertising? So if you tie a allocation amount in the way we do that with advertising is we say okay, let’s come up with a percentage. What’s your percentage? Is it 10 per two? Is it 20, 40? What is that number? And then whatever dollars you get from your payout, let’s move that percentage to that advertising account. And then as you pay for your advertising, you can start to see am I running out of advertising dollars? Because I’m paying more than I’m getting into replenish it? And if so, that is a big red flag that your advertising is not performing as you expect it to. I mean theoretically, if you’re getting the row as an and return that you’re expecting, you should be getting a return that’s actually allowing you to put more in that advertising bucket so that it’s growing, and you theoretically have more money to use for advertising going forward. But if that’s not happening, then your advertising dollars aren’t working for you like you expect.

Pat Yates 15:14

It’s interesting because it really makes sense what you’re talking about, the more you think about it there, one answer begets another question of how you do this. Because companies that are struggling, let’s say they’re not making money in a month, or if you’re seasonal, and you’re doing a lot of investment of things early in the year, and then you get most your sales late here. This can be a difficult program to adhere to. I mean, because you either need a bunch of cash that you can put in place to be able to hedge those expenses for when your busy season comes. Or you have to start robbing Peter to pay Paul, which is where everyone takes one account, and it dwindles down. So how do you see people handling that kind of situation? I know that’s really two scenarios, but if your light on cash in a month, and you can’t just transfer it? How do you see doing it, is that where you see that you’re transferring money back into your business and it worries you, what is the outcome when you’re flipped upside down and can’t do it this way?

Cyndi Thomason 16:05

Well, that’s where it does fall apart. And that’s where you really have to do a deep dive and understand what’s going on in your business, is it because you’re starting Profit First, in the middle of the summer, and your busy season happens, you know, from November 1 to Christmas Day, and at that point in time, you’re going to be flushed with a bunch of money, and then what to do with it. I like to be talking about profit first right now, because that is the case for a lot of our clients. And they tend to then just use that money in a variety of different ways. But it’s not setting themselves up for avoiding this pitfall in the summer of not having any cash. So let’s say you’re seasonal, and you have a great summer season, I mean, a great winter season to look forward to, in January 1, you’ve got a big payout in your bank account, what we recommend is looking at your profitability for the whole year. And setting aside some dollars for those months that are slow, that we put in what we call a drip account, we put it in this account, and segregate it. And we know that we’re going to pull it out of that drip account whenever things are slow. And we’re having trouble being able to make the rent or whatever it is that gets hard in the summertime, because all our dollars are going to inventory. And we just don’t have the dollars coming in to keep the business going. And that’s where clients end up in debt. Now, there’s a different situation you described. And that is maybe you’re upside down, maybe you’re relying on a lot of debt, maybe your gross margin is just not high enough to be able to afford all the expenses that you have in your operating expenses. Advertising can eat up your gross margin in a hurry, looking and getting yourselves involved in subscriptions and things that are not really bringing a return for you, that can put you in a situation where all your dollars are going out the door, and you don’t have any to put in these buckets. And so what happens is, you get the money in you allocate it, and then a bill comes due when you pull it back. That is the quickest way to come away from the situation and say, well, Profit First doesn’t work. Because you haven’t really addressed the problem in your business, because it’s pointing to a huge problem in the business, which is you don’t have enough of a gross margin to cover what it takes to run your business. And there’s a couple of ways we can address that. One way would be what can we do to beef up this gross margin? Is there some way you can get, save on shipping or reduce prices with your supplier? Or perhaps you can raise prices? What are the things you can do at that level, but then there’s also look at what you’re spending money on and go through an exercise. And we try to do this at least four times a year with our clients, where we pull out all their operating expenses and say, all right, what can we cut? You just signed up for something. You tried it, it didn’t work, but you forgot to cancel it? What are those things? What are those things that maybe there’s a way that we can replace it with something cheaper? Or we can reduce it, maybe you got the whiz bang subscription but you really only need this basic park? Can you cut back on some of it, and then you’re left with those things you can keep. So systematically looking at your business understanding OPEX, understanding how you may be able to make some adjustments, so you actually do have the money to put the system into place.

Pat Yates 16:30

I really like that. I mean, when I saw Profit First I thought this is something that is fantastic in theory, and then it becomes something completely different in practice. I just have this feeling like I know myself, and I know how I do things and this would actually be a really good check and balance for a lot of people in a lot of ways, and actually keeps you in a position to where you wouldn’t be doing anything. But this is great information. Obviously, people can pick up a profit first book, and I know that it’s the backbone of what you’re talking about. And what’s great about it is no matter how good or bad your business is, this sort of gives you a roadmap to how to make it good. It’s like it sort of forces you in a position to where you can be successful. So let’s talk a little bit more as we go for really profit first there about your company Bookskeep obviously, a great company, still hiring people have a lot of clients, tell us an overview of what books keep does your company.

Cyndi Thomason 20:36

We primarily do bookkeeping from start to finish. So we will take on our clients get them set up with a good chart of accounts and good practices for doing their accounting. And then we do it for them, it’s a done-for-you service, every 15th of the month, which just happened yesterday, we make sure that all of our clients get their financials, so that they have the data that they need to make decisions in case they’re not doing profit first. And so they’re getting their financials, they’re able to understand what’s going on, it’s more from a management perspective, so that they can manage their books effectively. Also, we’ve worked with a number of clients that have sold through Quiet Light, and we know what’s expected for a successful business sale. And so we understand the need to have the books organized in a way so that the accounting is done in accrual basis for at least do the gross margin line. And so it looks good for a potential buyer broker or whatever. And then for clients that are really ready to start selling, and they’re entertaining offers that kind of thing. We work with them through that due diligence process to get their seller discretionary earnings segregated on their p&l, so that it’s clear what the potential buyer would be looking at from a profitability standpoint.

Pat Yates 22:11

That makes a ton of sense. So you take the same profit first stuff, you apply to this, and people come in, and you help them maintain their accounting. So let’s talk a little bit about let’s say, like, if we’re talking about Amazon, it just cracks me up every time I have someone come in, that post their actual net deposit number as their top-line sales number. And they assume that their Amazon is there. And I’m like, no, you’ve understated your revenue, and you’ve understated your expenses to get to a net number, talk a little bit about philosophy and things that have to be done, especially for e-comm people, because I think this is a big part. People don’t understand how to post Amazon and subsequently don’t know. And people have different philosophies on Amazon fees, should they be in cost of goods? Should they be in expenses? Where should it be? Talk a little bit about some of the nuances of Amazon and why it’s important if you’re an Amazon seller, to at least understand these bookkeeping methods if you don’t have a company like Bookskeep?

Cyndi Thomason 23:06

Well, one of the biggest things that we see, well, there’s two, one is, as you described, people come in, they think their deposit is their top line number, and it’s not, Amazon’s already taken out those fees. From our perspective, we put these in cost of goods sold, because it’s not an option you don’t get to go and say, well, I’m gonna put this off or next month, it’s operating expenses, a lot of times we have some flexibility about how we’re going to manage it. These are direct costs of doing business, so we put it in cost of goods sold. The other thing that happens, though, and everyone should be aware of this, we get clients come in, and we start working with their tax returns from the prior year to be sure we’ve got a good starting point. And a typical scenario is their CPA has taken their 10.99 from Amazon, and used that to book their income for the prior year. And the problem with that is that the number that Amazon reports is product sales includes your sales tax. So if you’re a very big seller, and you’ve got sales tax being reported out for multiple states, that income is grossed up and you’re going to end up paying taxes on something that really was just a pass-through number going to a government agency, you’re holding it until it gets to Amazon. Well actually you don’t even hold it now, Amazon holds it, so it’s not something that you even got in your account. But because of the way Amazon books their income, sales tax is included in that product sales number, and if you turn over on the back, it explains all of that on your 10.99 but most many CPAs the ones that we end up working with their books, what we see Is that they haven’t segregated out that sales tax. And as a result, the client is paying sales tax or paying income tax on revenue that was actually a sales tax out.

Pat Yates 25:12

Let me ask you a question about that. So you can see where the sales tax comes in transparently when you got to a product sales, sales tax in total, you’re saying it doesn’t come off any of the expenses on the report that you’re getting.

Cyndi Thomason 25:24

On the 10.99, Amazon locks your sales that sales tax passed through as an income item on your 10.99. It’s included in product sales.

Pat Yates 25:34

At the end of the year, but what about in your normal monthly reporting?

Cyndi Thomason 25:38

In the recording, it’s pulled off. But what I’m seeing is that CPAs are or tax preparers are taking those 10.99 without understanding and looking on the back where it delineates that out and using that product sales number from the 10.99 to put that as an income number on their tax return. Yeah.

Pat Yates 26:06

So most people when they come in, I don’t know if you do it like this. And you may teach me something here, when I get my Amazon statement, actually just create a journal entry, I show the sales, then I deduct the advertising to its own line, its fees, Amazon fees, I really don’t break them out to another line. And then it gives me a net number. That’s the difference, which I put to a ghost bank account until I get back to where the actual monthly report is posted. And I posted like one to 30 or one to 31 and then offset? Is that the kind of process you all use? Or how do you guys post Amazon monthly reporting?

Cyndi Thomason 26:38

We do it using a tool, A2X Accounting, it’s a software tool that allows us to integrate Amazon Shopify, multiple channels, they connect into those different accounts and connect back to the software. And then they can post it on an accrual methodology. So our job is really to map it properly. Make sure the accounts are connected, make sure it pushes over properly. And then that gives us our rule entries when we need to make them throughout the month.

Pat Yates 27:14

That makes great sense. So when you get into accounting, let’s assume that someone’s coming as a brand new client, they have Shopify, they have Amazon, they do eBay, maybe Walmart, a little bit of wholesale, what is the process to work with you guys? So they just sending you stuff during the month, you’d have an end-of-month wrap-up? Do you have an interface? Tell me how the client interacts with you?

Cyndi Thomason 27:35

Well, onboarding is a big thing, because honestly getting started right is critically important. So they go through an onboarding process where our onboarding specialist understands all of these different accounts, do they have enough volume, say in eBay, to justify a subscription to a tool like A2X? Or is that just a passing-by thing, and maybe they have a return, they sell one a month or something, we can do that in a more straightforward manner, and save the client a little money. So this onboarding specialists sets up their chart of accounts, connects all of these stores to the QuickBooks and the interface A2X. And then she goes through and make sure everything flows through properly, that we have the proper coding setup, if there’s payroll, we get that going, if there’s bills that we pay, like throughbill.com, we get that going. All of those pieces are set up, both working with the client and for the client, but also setting them up in our internal system so that our bookkeepers, when they start working, going forward, they’ve got everything they need to be able to manage that account smoothly going forward. The onboarding specialists just have a lot more experience in working with a number of different accounts, a number of different bank accounts, they just have seen it all. And so they’re the best ones to get things started and moving smoothly, then the bookkeepers take over at that point. Once we get everything working like we want it to, we have what’s called our first statement review. And my husband who’s a partner in the business, he will meet with the owner and just go through everything that we’ve done. A lot of times, there’s questions we just don’t quite, we made some assumptions. We do want to check it out. We want to be sure we’re right. And so that first statement review is critical to knowing that yeah, we’re in good position here to move forward. It usually takes us six to eight weeks to get through that. And honestly, inventory is the piece that’s a challenge because clients have a struggle keeping up with their inventory. So once we get all that dialed in, then it goes into monthly bookkeeping, they’re assigned a bookkeeper, that bookkeeper is honestly already started work with our onboarding specialist is starting to help her and learn the account. So they’re not like brand new at that point. But they’ve had somebody to ask questions to as they’re getting used to this new account, then they take over, they do the done for you bookkeeping they watch all those bank accounts, they record all those transactions, they push all the stuff from Amazon. And then at the end of the month, they do all the reconciliations, they generate the reports. And then they will meet with the clients every quarter to go over the reports and be sure we’re all on the same page and answer any questions.

Pat Yates 30:32

That’s really great. So a new client is going to come in and you guys are basically on a handhold how you set it up. So you give feedback, like I don’t know why you have five different lines for this, let’s combine it, let’s clean your QuickBooks p&l up like this. And then the first time you get you go back and you get feedback on those things, as well as maybe some guidance as to how to make it better as you’re going forward. That’s really good that they get that feedback early. So you mentioned something I do want to make sure everyone out here understands we have such a big struggle with cash versus accrual when it comes to cost of goods and inventory. And you just talked about it. It is really one of the biggest struggles and I’ll give you a personal example. I had a business I won’t say who it was a couple of years ago that he came in and he thought he was making like 300, 325,000s what his p&l showed and went through it and we’re gonna think about listing I’m like something doesn’t seem right. You’re soul Radek? And I said are you on cash basis. Last minute I check on this, as we’re getting ready list of business. Turns out, he really didn’t understand what cash basis or accrual was, he had no idea. Turns out he was on cash basis, it was really kind of understated in the p&l is because you could barely tell it, he went back and did a rework of it and turned out as ST was like 600,000, he sold the business for 2.2 million. So there are a lot of big mistakes here, people that don’t understand this out there, I let the accountant, I’m not an accountant. But I did stay at a Holiday Inn Express one time, that’s a shameless plug here on the podcast, by the way, Holiday Inn, but I’m just dangerous enough to know how to screw it up. But cash is what when you post it to your p&l, when you pay for it. Like if I buy 1000 units today, and they’re five bucks, I pull $5,000 today, but if I only sell 100 of them in the month, and they’re 500, you’re truly supposed to post the 500 and leave the other $4,500 in your asset inventory account. So maybe you can talk a little bit about the pitfalls and what might be a good thing for people to do. Even if they don’t have a bookkeeper, they’re coming in to see you.

Cyndi Thomason 32:23

If you’re gonna just run this business, and it’s retirement, it’s just gonna be something you play with until you decide you can’t deal with it anymore, and then you close it down, then do cash, it’s easy, but if you’re ever going to sell, and if you’re really wanting to grow, you need to understand your profitability. And you need to understand that at the gross margin level, you can cut all your expenses at the operating expense level. But if you’re not making money at the gross margin level, then you don’t have a business is going to support your life or support the growth of the business. So by doing the accounting and an accrual methodology, that’s what gives you the visibility into your profitability on a month-by-month basis. Yeah, over time, cash would work out and you would be able to say, well, sort of towards the end of the year, I can see I made some money. But that’s a long time to wait. People that are in this to grow their businesses need to be able to look at their performance from the prior month, and understand where their problems are, and then make a plan for doing something different. And if you don’t understand your accounting at the gross margin level, you’re not going to have the data you need to run your business. So to me, that’s the number one pitfall. I mean, yeah, from down the road for selling. That’s a long time off to wait for a payday. But let’s manage your business all the way along so that you’re not depending on your broker helping you solve the problem at the last minute where, maybe if you had known that all along, you would have run your business different. And who knows, maybe they’d have gotten 4 million for it because they operated different to create a business that was performing better.

Pat Yates 34:13

Right. I mean, that’s amazing stuff. See, I think the one thing and I’m the biggest offender of this and I can remember so many years where the last thing that I ever wanted to work on were my financials, I just didn’t have time for it. It’s working on my store or new product or whatever it is, and people leave it and then they binge QuickBooks because it seems easy, but then you’re three or four months past it and you forget a little transaction and so things are tough. How do you do your customers work with you? Is it all basically electronic? Or do you do that one meeting a month when you submit it or do they have a portal? They just go upload all their invoices? How easy is it to work with Bookskeep?

Cyndi Thomason 34:48

Well, mostly what we do is we’re watching activity come through the bank feed and we can we know when your settlements are we’re connected into Amazon as admin, so our approach is do as much of it as we can without having to bother our clients. At the end of the month, we obviously need some information to be able to get inventory and cost of goods on the books correctly. So at the end of the month, we’re interacting more. But if you’re working on payroll, if you’re working with invoices, etc, we can handle all of that through those types of tools. And it’s very simple to work with us because those platforms were created with this exact model in mind. We use a bank account that is relay bank, I don’t know if you’re familiar with relay. Relay it’s got our relationship with profit first. And so we’re even able to get into Relay Bank and work with our clients through relay to manage Profit First, so that our clients don’t have to work on moving money between their Profit First account. So technology’s come a long way from the days where we had envelopes and shoe boxes.

Pat Yates 36:04

Well, it’s amazing. It’s funny, because when sometimes when people let down their guard, and they allow people to come in, because solopreneurs, and entrepreneurs in general have a death grip on everything they do. So sometimes, it’s better to lay this down, because not only are you going to get something done that most people don’t understand that, well. It’s not the easiest thing in the world to do. And you’re gonna get quicker and better feedback about where your businesses, correct. I mean, I think that this is a positive for many standpoints.

Cyndi Thomason 36:30

Well, we had something happened last week, and this is not the first time it’s happened. It’s like the fifth or sixth time it’s happened. But it’s always exciting. We got into a client’s Shopify account, and we’re looking at it and we’re like, why is this money sitting out here? Why haven’t they taken the money? And usually Shopify, send you your payouts every couple of days, why are they not taking their money. And so we did some digging, and we realized that their bank account wasn’t connected, that this was an acquisition. So this client had just bought this business, had acquired it, the seller, of course, disconnected his bank accounts. But something happened when the owner, the new owner didn’t connect his bank account properly. And so the money was just sitting out there. Now this is at a time when the seller is also working with us because he’s cash strapped, he’s like, I don’t know what happened. Sales have slowed down, he attributed all to sales slowdown. But in addition to the sales slowdown, the money that he was making was staying at Shopify. And this has happened multiple times. So an e-commerce bookkeeper, somebody really knows how these platforms work can get in there. And they can see when things aren’t connected and working properly. And so the client didn’t know this, they felt they had done everything, right. And if they hadn’t loosen that grip up just a little bit so that we could help them that $40,000 would have still been sitting there. And they would still be working through what’s going on with my cash flow. And so, there’s a benefit to working with somebody who’s used to working with these platforms. And the biggest payout we’ve ever found was over $100,000. And it was all we could do. My bookkeeper was working in the evening late, she has children at home and her husband had gotten home from work, and she started her day. And it was about 11 o’clock at night. She was so excited. She knew what she had found she had found this in one other client before. And she wanted to send the client a message. But she’s like, it’s midnight his time, I think I should wait. But she worked her husband up and her husband was like, I don’t care. So, that was a pretty exciting day to find $100,000 for a client.

Pat Yates 38:51

Wow, that’s really amazing. It’s hard to believe that somebody didn’t realize that was coming in. It’s just one of those things, but it’s always good to have checks and balances and that stuff’s important. Like, some of the things we’re talking about people think are kind of small. But I can explain this to people that if they’re accrual cost of goods sold, say, of a million-dollar business, and somehow it’s off by $15,000 in a full year sounds like a small window. But if you’re selling that business for say, three and a half X, you just cost yourself what $57,000. People don’t understand that every dime that leaks out when you’re not doing good accounting and Profit First, maybe the best way to optimize that. It’s definitely going to hurt you in the end. So that feedback is actually probably gonna make you money long-term if you’re looking to sell, correct?

Cyndi Thomason 39:33

That’s right. Yeah, I mean, makes you money at the time you solve the problem, but just think about how that money can then work for you to help you grow your business. I mean, it kind of compounds at that point, because not only did it not go out the door, you were able to put it to work to something that’s going to actually grow your business.

Pat Yates 39:52

One of the predetermined things I had in my mind when I was setting up QuickBooks was that I didn’t want Shopify and Amazon to be flowing into QuickBooks because if you try to tie it back to a statement or a pay date, you may not know which ones. It seems to me that was something I was concerned about having everything flow in versus pasting it as full journal entries. What’s your philosophy, when you use A2X? Obviously, it brings in everything, is that a pretty easy thing to navigate, or how’s it set up?

Cyndi Thomason 40:20

No, it does not bring in everything. And that’s one reason I love it. And you control what you push, and it pushes into as a journal entry. So you push it, and then you’d like this is a right, this mapping is off or whatever, you just delete it, go fix it and push it again. So it is separated and all that they push through is the summary data, they do not push in every transaction. And I really strongly recommend you do not want to be pushing every transaction every order over to QuickBooks. It is a cloud system, it does amazing at what it does, or N02. But every transaction if you grow and become a successful business with 1000s of orders on a weekly basis or daily basis for some of our clients, it’s just gonna slow down that system. And then it makes it impossible to get in there and actually do the rudimentary things that you need to do. The data is already saved for you in another system, Amazon, you can always go there and get to your data. Shopify, you can always go there and get your data, you just need something to bridge and make it easy for you to bridge that data over into your QuickBooks without bogging down your QuickBooks.

Pat Yates 41:35

So people have the ability to choose where they’re posting it daily or monthly, or does it just automatically do it daily?

Cyndi Thomason 41:40

No, you set all of that up, you can set it up to post it on a daily or weekly at the time of settlement. However, it makes sense for how you’re running your business. The other thing while we’re on this topic is and this is where I see a lot of clients thinking that they’re really automating and doing great things. They want to automate and connect their inventory management system or their ERP system into QuickBooks. And I absolutely say no do not do that, you would never want your warehouse person to come in and do your accounting and QuickBooks right, they’re worrying about something different. But their ability to go in and adjust orders and information in your ERP or your inventory management system allows that data to go directly into your financial records if you connect it. So we need two numbers at the end of the month about inventory, we can log into your ERP pull the report and plug that information in QuickBooks with a journal entry. That is infinitely easier to fix, if we get it wrong, than if somebody on the floor pushes something through, and it was incorrect, and now your whole ERP system is corrupted, and your financial records are too. So just don’t go there. Don’t do that.

Pat Yates 43:01

I agree with that. It’s a great check and balance. So I know we’re coming close to the end here. And we talked a lot about profit first, which is amazing. Obviously, people can buy that book on Amazon. I know you have a link on your site as well. I’m actually pretty sure I’ll have it here somewhere.

Cyndi Thomason 43:14

Okay. Yeah, My book’s talking about inventory. I want to be sure people understand the inventory is a little bit different twist and regular profit first. And that’s what I try to go into in that book.

Pat Yates 43:29

Yeah, definitely. I think that people get challenged with that. But it’s not difficult. I find it better to do either a system that already has your cost of goods in there, you can pull it up or some sort of spreadsheet system that shows your beginning and ending inventory. I’m sure that if they’re working with you guys at Bookskeep then you’ll teach them how to do that, too. So as we wrap up, I’m sure we haven’t touched on everything with Bookskeep what other things can they take advantage of if they come in to work with you guys?

Cyndi Thomason 43:55

Well, unfortunately, this has been a hard year for e-commerce clients. COVID was like everything going gangbusters. And then all the government programs for PPP and EIDL. That came into play. Now that money is starting to disappear. And clients are really struggling much more with cash flow, and with understanding how their business should operate to be able to be profitable. So we work with clients in our smart CFO program, where we take them down a path, we make sure they have a good foundation with their goals and their planning and understand where they’re trying to go. Then we work to be sure their financial data is serving them well. We make sure that their cash flow is working well then ultimately get to the point where we can start forecasting, looking at your financials kind of looks backwards profit first looking at today, but you also need to be thinking about where you’re going and being sure that you’re set up for looking into the future. And then what are you doing operationally, to be successful, how are you managing inventory? Are you correlating your inventory and your advertising to each other, so you’re not advertising something that you’re actually out of stock on, or in danger of running out of stock. So making sure those things are working operationally. And then finally getting ready for that exit or expansion. But getting ready now that you’ve got things optimized, how are you going to grow? Or is it time to exit. So that’s the other piece we’ve worked for years around profitability. And by doing that, we’ve started to see that it’s this path that you go down to get a business that really is going to be operating and humming. And then set you up to make a successful exit at the end.

Pat Yates 45:44

It’s amazing. I mean, anyone out there listening understand, I can just tell that if someone’s running a business, they’re eventually going to sell, you’re going to find a way to get all this money back, plus some because they’re going to help you get in a position where your expenses, your cost of goods and stuff are in line. It’s just amazing that you guys do such a great job doing that. So if someone really wanted to reach out and reach out to the team at Bookskeep, how do they get in touch with you?

Cyndi Thomason 46:07

The website bookskeep.com. Or they can reach out to me directly. It’s [email protected]. And I’d love to chat with anybody that’s listening, see how we can be of help?

Pat Yates 46:24

Well, Cyndi, it’s been amazing you have been in the show today. Obviously you’re a friend of Quiet Light, we’ve said a lot of people each way to people, it’s always great to have you as a vendor partner. And if you folks out there need help with your accounting. Obviously, you have a lot of different resources amazing to me how many people will not do their own legal work. They won’t draw their own contracts up, but they’ll do their own accounting work. That’s an interesting mindset. Most people probably need someone like you, and hopefully everyone will reach out to Bookskeep. Cyndi, it’s been great having you on the Quiet Light Podcast today. Appreciate you joining us.

Cyndi Thomason 46:52

Thank you Pat. I’ve enjoyed visiting with you.

Outro 46:56

Quiet Light Advisor Spotlight – Brad Wayland

Brad Wayland is the Managing Director and M&A Advisor at Quiet Light, a brokerage firm that helps online business owners execute successful exits. As a thriving entrepreneur, he has almost...

Brad Wayland is the Managing Director and M&A Advisor at Quiet Light, a brokerage firm that helps online business owners execute successful exits. As a thriving entrepreneur, he has almost 20 years of experience marketing and operating online businesses.

Starting in 2003, Brad helped create an online custom t-shirt company that became a multimillion-dollar enterprise. Later, he started building other e-commerce businesses and investing in existing companies. Over the last 10 years, Brad has constructed, purchased, or sold more than 30 web properties.

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

[03:08] Brad Wayland shares his professional background growing a multimillion-dollar t-shirt company
[09:44] How Brad entered the advisory world and started working at Quiet Light
[12:11] The value of working with a Quiet Light advisor
[15:10] When is the optimum time to sell a business?
[20:38] Brad explains the importance of having an M&A advisor before selling a business
[23:41] Benefits a buyer gets from acquiring a business using Quiet Light’s services
[27:51] How to prepare a business for an exit

In this episode…

Are you looking to sell your business? What do you need to know to maximize the value of your business during the exit process?

Seasoned entrepreneur Brad Wayland knows selling a business is a daunting and complex task that involves a lot of preparation, strategy, and negotiation. To increase the value of your business, it is crucial to have a clear and realistic plan that takes into account market trends, competition, financials, risks, and opportunities. This plan should include a thorough assessment of the business’s strengths and weaknesses, a clear value proposition, a realistic timeline and budget, and a careful selection of potential buyers based on their compatibility, financial capacity, and strategic fit. All the moving parts can be overwhelming, so Brad recommends hiring an M&A advisor or agency with the expertise, network, and experience to guide you from valuation and marketing to negotiation and closing.

In this episode of the Quiet Light Podcast, Pat Yates sits down with Brad Wayland, Managing Director and M&A Advisor at Quiet Light, to discuss strategies for a successful business exit. Brad explains the right time to sell a business, the importance of having an advisor to guide you through the process, and how to prepare a business for a smooth and lucrative exit.

Resources mentioned in this episode:

Brad Wayland on LinkedIn
Brad Wayland’s email: [email protected]
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
Amanda Raab on LinkedIn
Chuck Mullins on LinkedIn

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. Again, this is Pat Yates sitting in for Joe Valley. I’m super excited to have my man Brad Wayland on today. If you don’t know Brad Wayland, he is an exceptionally good advisor at Quiet Light. One of the guys that I met with first when I was starting the process of joining him because he happens to be from Bowling Green, Kentucky and I’m from Louisville, Kentucky, interestingly enough, was a Western Kentucky guy who my whole family pretty much is my mother and father graduated from Western Kentucky and Bowling Green actually had the ability to walk across the graduation line. So I feel like I’m a pseudo-graduate when my mom was pregnant with me a long time ago. My three sons all graduated from Western Kentucky. So Bowling Green is an amazing city that’s very close to our heart. So great to have Brad on today. One of the reasons that I want to do these spotlights on the advisors at Quiet Light is for the listeners out there to understand the person behind who’s working your M&A. I think that Brad has such an incredible background in business not only building companies, but starting out in a cubicle, working a job and having the perspective to go in and become an advisor Quiet Light to work and sell his company through private equity after building it from scratch basically, just an incredible amount of information. He has so much knowledge about deals doing over 50 deals at Quiet Light some of the biggest ones we’ve ever done, and he’s sort of a walking commercial for what we do at Quiet Light. He is now a managing adviser, of which Amanda Raab and Chuck Mullins also are that helped guide our team at Quiet Light. But he has so much experience done such a good job. If you’re looking to work with someone at Quiet Light, just about anyone is good. But Brad is towards the top of that list of anyone that sold companies in the past. I’m super excited for you to get to know him a little bit and hear about his background, his family what he likes, so I’m anxious to get right to it. So let’s go to Brad Wayland on an advisor spotlight and if you need to reach out to me anytime you can always reach out to [email protected] or check out our listings on quietlight.com This is exciting. We got Brad Wayland an exceptional advisor at Quiet Light. Let’s get right to it. Brad, it’s great to have you on the Quiet Light Podcast today. How you doing?

Brad Wayland 2:37

Great. How are you Pat?

Pat Yates 2:38

I’m awesome man. I’m really looking forward to this. To the people out there listening and writing your car watching on video, whichever one you are, one of the things about Quiet Light that’s so amazing is we have some really unbelievable entrepreneurs that are advisors here that have so much experience. And obviously Brad you’re way at the top of that list is one of the main guys that has been at Quiet Light for a long time. And I want it today just to profile you and your background, but maybe introduce yourself to the listeners if they don’t already know Brad Wayland and give them a little information about you and where you’re from.

Brad Wayland 3:08

Great. Thank you, Pat. Yes, I’m Brad Wayland. I have been at Quiet Light for the last six years. I live in Bowling Green Kentucky, about 50 miles north of Nashville, Tennessee. And Pat lives in Kentucky, about 90 minutes north of me. So beautiful country out here. I didn’t plan on living in Kentucky that was not really in the cards on Kansas City boy, I’m an avid cheese fan season ticket holder, I always thought I would go back to the city and kind of live there. And I got a finance degree that I wrapped up at Western Kentucky University. And instead of going into financial planning, which was always kind of my plan, I ended up doing a corporate accounting gig. And about three months in I felt like man, I’m gonna get fired from this job. Like, I felt like I literally like would walk to the cube. And I would like pretend in my mind, like I was opening the jail cell. And it was 10 hours a day of sales and use tax and balance and GL accounts, some of the best accounting experience for me. But after about three months, I was like I got to get out of here. And I had a couple of friends that had gone to the t-shirt business. And they had six employees and they just started selling T-shirts, to fraternities and sororities and other clubs and groups. And I had a job offer from Edward Jones. I was going to take it and they said hey, what do you think about coming over and running business development for us? I came over and within about six months, I became enamored with the idea of selling T-shirts on the web. They had launched a website. They had a firm in town that have built this site for them where they could get leads. And I thought this is really interesting that people from all over the country are ordering T-shirts. And so I started looking at it. I became very enamored very quickly with search engines. And so, those two friends of mine didn’t give me much of a plan. They Basically just offered me a pretty meager salary and some promise for future growth and said, hey, if you can come in here and figure out how to grow this business from, they just crossed a million in sales, then we can pay you well, if you can figure it out, but we’re busy with other things. And so you’ll be kind of on your own. So I sat in an office for a good two long period of time trying to figure out search. I want to learn how to rank in search engines, started going to search conferences, I didn’t really have anybody in the bowling green area that was into tech at all, of any sort. So out a hub of tech in Bowling Green, Kentucky. Yeah, besides my friend, Sean. But other than that, I mean, there just wasn’t a lot of people here that were kind of into it. And so I kind of went down that rabbit hole. And there’s a lot of failure in there. I actually kind of failed at the search thing for multiple years to the point where I think even those guys that brought me on thought, does this guy have any idea what he’s doing? Like, I didn’t have any real results from what I had worked on. But it was a big learning curve. And so we launched a new site in 2007. That was 2004 and 2007, we launched a site that we’d spent a year and a half on that I built from the ground up to rank in search engines. And then the firm that we were partnered with had built a really cutting-edge interactive tool in flash at the time, right. And we launched it, and actually, by the day, we launched it, I thought, are we ever going to make a single dollar selling T-shirts on this website? Like I really thought, how are we going to actually get people to use it, woke up the next morning to the phone ringing off the hook, and Gizmodo, the tech blog and found the site and wrote an article that said, blue cotton creates Adobe Photoshop like interface for creating custom T-shirts. And there wasn’t a social media at the time as this is like just right before those were coming on the scene, site crashed, we got 1000s of links to the site. And all that work I had done to build it to rank started to come to fruition. And we ranked going from ranking for one phrase blue cotton, to ranking for 16,000 over 16,000 phrases about 60 days later. And that sent us on a whirlwind. And then about 30 days after that adobe.com link to the site. They had a program at the time called Site of the Day, it was a PageRank seven of 10, which PageRank is a logarithmic scale, not that anybody wants to know. I’m sorry, PageRank, nine of 10, they nine of 10 is worth like a billion one PageRank links. So we got this one super relevant link. And that is where my career sort of took off. So they partnered up with me very quickly, we did an equity exchange, I had some other e-commerce businesses that I had to do some creative sales and stuff to get in. We took that business from six employees to 130 employees, we went on multimillion-dollar run up to where we were buying warehouses, we bought 110,000 square foot warehouse at the end of that. We’re producing massive piles of custom T-shirts every day. And I had done it, a lot of that work was done on search to start with. And so that gave me some pedigree inside the walls of that company, got me into ownership. And then I kind of got tired of the factory component, we started to be more about producing the shirts and trying to like, do production for other e-commerce players then we weren’t about e-commerce myself, I was the only guy in the building that was really interested in e-commerce, we had 130 employees. And so I was kind of a one-man show. And so just my one-man show is our buying content. So I did 26 acquisitions rolled up a portfolio of content sites, I thought it was pretty cool, started to get pretty overwhelmed by the work, exited the private equity in 2015. And then found Mark Daoust kind of found me. We were both speaking at a conference in New York, went to dinner together. And he said hey, you got to think about coming on a Quiet Light. And honestly, my response to him was, hey, man, if all my other opportunities in the world dry up, maybe I’ll consider.

Pat Yates 9:38

You’re in the mix, but you’re way down the list. That’s pretty much how you started it as…

Brad Wayland 9:44

Mark was like, let me send you some information about Quiet Light. And I was like, Okay, send me some information. So he kind of slowly lured me in through that but honestly, it’s been a great joy to be at Quiet Light. Actually I’ve done I think I’m 57 deals in here up in here six years, I recently was named a managing director. So I work on the executive team, doing some things for other advisors, helping them with their deals and trying to give them the support they need. And I’ve really enjoyed my time here because I think Quiet Light kind of represents. We’re in an industry with a lot of like, slick, shady salesmen. I always tell people like, hey, our competition is kind of like watching Boiler Room. That’s like my best like, way that I kind of feel like a lot of people we compete with our like. And Quiet Light it’s not like that, we’re really more of like, it is a team of entrepreneurs. And these entrepreneurs have an immense amount of knowledge about how things work, actually, Pat, not to brag on you. But Pat just sent me seven pairs of Happy feet Kansas City Chiefs slippers last week for my whole family. And we all put them on, you know what’s great about it is like my boys are putting them on like this amazing. And I’m like, hey, let me show you something. You know what I pulled up? I pulled up Happy Feet Pat on Shark Tank, doing this pitch for the sharks, and did a deal with Robert. Like, are you in business with Robert today? Yes, yes. I never even realized that. For some reason. I thought like a lot of people I hear they like get a deal. And then they don’t do the deal for one reason or another. Just like Robert tells you he tried to give him a pair of penguin slippers. Yes. It’s kind of offended by like, you gave the shark to Mr. Wonderful. You gave the penguin to Robert and Robert was offended. And he was like I’m out. And then the next thing we know, Mr. Wonderful is trying to work one of his crazy royalty deals, and you were smart enough not to take it. And then Roberts like, I’ll do that deal. And you said, done.

Pat Yates 11:54

Yeah, it’s funny you say that, Brad, because I’ve talked about this a lot on podcasts and mine, people don’t realize those in their taping really about 75 minutes, and it’s cut to eight. So if people can imagine 10% of the compensation gets higher, and it was going really horribly for a long time. So it didn’t…

Brad Wayland 12:11

You know what’s interesting about that, though, is like my kids, I’ve got five boys, they’re 16, almost 17, they’re 16, 15, 12, almost 13, nine, almost 10 and then seven. And you put those Happy Feet slippers on and then you put you on TV, they’ve seen Shark Tank, and they’re like, how do you know this guy? And I’m like, I work with this guy. You work with him? What do you mean, you work with him? He works at Quiet Light. He’s one of the advisors of Quiet Light. They’re like, oh, man, their friends are coming over in the afternoon. They’re like, my dad works with the guy that created he’s on Shark Tank, you want to watch his episode. So that’s a really cool testament to you. But also, that sort of summarizes a little bit about the team, like, I heard a lot, I’ll just be honest with you, like, I got the emails when I came on at Quiet Light. And people were always talking about man, I’m so honored to be on this team. I’m so honored to be on this team. And I will tell you, it took me several years to appreciate what we have here in terms of the people that we work with. And so it’s just something I’ve been in, I’m kind of ashamed that it’s taken me so long to realize it. But at the same time, like I just am so impressed with what people do now when I send emails out to the team, and I’m like, hey, I got a deal. I’m having this problem here is anybody have any advice? I’m getting advice from in the trenches for people that have got an immense amount of experience. And so, as I talked to people about, you know, what I do, and I do have a lot of experience in content in e-commerce. But when I talk to people, I always go back to my journey, and I just tell them like, hey, like, it had some ups and downs, I definitely have my fair share of failure. Don’t try to pitch it as the most glamorous show on earth. And I feel like that really resonates with people that are going to come to us and sell their business. And I think that the buyers like it, as well, because the buyers start to see like, hey, we’re getting a bit of a curated list. If these advisors are Quiet Light think that a business is worth selling, then they’re kind of a little bit saying, hey, this is a business that somebody could do something with, which is they’ll get on the marketplaces where it’s just kind of like, hey, list whatever you want, you can just kind of throw something out there.

Pat Yates 14:24

I think you make a great point Brad and not to go off on the same tangent but I didn’t realize it either. When I first came in at Quiet Light, I heard about everyone that was there, you and I had a chance last year before Derby and I think it was 2022 we got a chance to play golf and talk about how you had gone through this crazy time where you were so busy, then you took a hiatus and what I learned from you talking about that was really amazing. I think that’s the one underrated thing about Quite Light. I think that people don’t realize how the entrepreneurship approach to it makes us differential the things that have happened the past like the strife that you went through in your shirt business helped you understand something to go forward. So maybe talk to the listeners a little bit about your philosophy on when a business might be ready or if they’re ready, or what kind of timeline it takes to make a business really successful in the sale with you, Brad.

Brad Wayland 15:10

Yeah, I do love to talk about this. Because I will tell you, and no one wants to sell when everything’s great. And that’s basically when you need to sell, if you’re out of the mind of selling. And so it’s so funny because people come to us, generally speaking, people come to us when something has happened. They figured out that something’s not working as well, the growths run out. That’s a very common thing people come to us. And so, in a talk that I think you saw me talk recently, I did this whole segment on kind of the do’s and don’ts of when to list your business. And I did that comparison from Direct TV commercials where you got Rob Lowe came on, and he’s like, hi, I’m Rob Lowe. Rob Lowe is this super good-looking guy. And he’s got this great personality. People loved him on Parks and Rec and these different things. And then it’s like, I’m Rob Lowe. And I have DirecTV. And then they bring on this other version of Rob Lowe. And he’s like, super ugly. And it was the one that I chose for the talk that I did was painfully awkward Rob Lowe. He’s just like this super, like, and he goes into the bathroom to go and he’s like, the real Rob Lowe is like fat. DirecTV has all these channels and all this stuff. And then the painfully awkward Rob Lowe is like, fat. It’s hard for me to go if people are in the room with me. He’s like, at the toilet. He can’t go. He’s basically like comparing these things like, and I think that’s so much like how the businesses are people come to us. And they look like, hey, I’m ready to sell. Oh, so what’s going on? I just haven’t had time to market it the last few months. And so sales have dropped off a bunch, but like, hey, it was really good it how can we sell it. So what we’re trying to get people to do is understand like, look, we’re not here to push you to sell, we have no desire to like timing of a sale is your choice. I always tell people, I’m not here to push you to sell, I’ll make a recommendation. If I become close with you, I’ll hit you over the head with a two-hour call and say, hey, you’re waiting too long. If you want to sell we need to get it going. I’m willing to say the tough thing. But it’s hard to get people to sell because it’s a little bit of a counter, it’s sort of like investing in the stock market. At the point when no one wants to sell Tesla stock, in a point where no one’s to sell it, it’s just all time after all time, after all time. That’s the point you’re supposed to be selling. But what is happening is, before we get to the realization that we’re supposed to be selling, everybody’s buying heavily, heavily, heavily. But it was the same way with these internet businesses. In 2021, we saw multiples skyrocket, we couldn’t keep anything listed. Every single advisors put stuff out there and it was selling for higher multiples. And we were listing it for is doing all these things. And so when you’re thinking about philosophically, what’s the mindset of how I want to sell? It’s a little more of you have to think a little bit backwards, first have to decide is selling important to me. If you tell me like Pat, you got Happy Feet, that’s a business you still operate today, if you tell me Brad, Happy Feet’s a cash flow machine for me, I don’t have any interest in selling it, I want to keep it I want to pass it down to my kids I want to do, that’s fine. That’s what you’ve decided to do. That’s great. And you know what, you can probably have a business that makes money from now until the day you die if you’re willing to keep working on it and doing it. But I think that if people are of the mindset of like, no, I do think I want to sell I want to sell because I’m tired of this business I want to sell because I’ve got other things I want to do with my life. I want to sell because I got other businesses I want to run, if that’s the mindset. Then what we have to do is we have to start trying to build a business to sell and we got to sell before we get tired or before the growth runs out. So much of the time, we see entrepreneurs looking at this, I do this all the time and talk to people on the phone. And they’re this mark on the chart, it’s going straight up. And they’re like well, I mean, why would I sell right now things are going so well. And my first thing out of my mouth is like, look if selling is important to you, you don’t have to sell today. But you can’t wait for that growth to be gone. Yeah. Because as soon as you get if you get to the peak and you’re like I timed it perfect. This was my best all-time high. I think next month, it’ll probably fall off some and you reach out to Brad or Pat or whoever. What’s going to happen when it gets under diligence? The buyers are going to be looking at it. You said you want to list it at the peak. Two weeks later, three weeks later, it’s like hey, how’s September gone? Oh, well our results are a little bit off. That’s a deal that’s a prime candidate to fall apart. Yeah. So selling into the growth is such a great thing to do and their timing is hard to get right. But I think that my philosophy on it is like you want to sell when you don’t feel like selling if sell to you.

Pat Yates 19:59

You know what’s interesting Brad, because I think that you’re hitting on something that’s really important for entrepreneurs. I think a lot of sellers might have an apprehension of reaching out if their business say, is barely growing or is steady, or maybe had a down month and had several up. I really feel like with my clients, I like to come months and months before they think about selling so we can help with the prep. Is there a time that you think it’s important for someone to start contacting you i they’re thinking about doing it? Let’s say they want to do it in the next year? Will there be actionable stuff throughout the year that maybe they change their mind or the market changes, or you find a buyer that’s in their vertical? Tell us a little bit about how the buyers would need to approach that with you?

Brad Wayland 20:38

Yeah, when people come through, I mean, I would say my preference is to talk to people as soon as possible. Like if selling into it, and I do have that I get people reach out all the time and say, hey, I’m looking to sell in a couple of years, I want to make a plan. That’s a certain type of personality, that they kind of begin with the end in mind and Stephen Covey kind of thing. Like, there’s a first note that comes through that, I think, is of that mindset, but I will tell you, and also the kind of go back to my previous point, I’m not trying to say that a business that has flat or down trends doesn’t sell. I’m seeing businesses with downturns right now, all the time that I’m listening for sell. And so it’s not so much about that it’s about if you want maximum outcome, then you want to sell into the growth, everything is sellable at the right price, it’s all a pricing game. And so in terms of when people come to me, I look at it as like, every time I get on a valuation call, I say the same thing. I tell people, I’m like, hey, I just want you to know whether you ever want to sell with me or not as punching on my door is always open. I’m always here to talk, we give out free advice all day long. That’s what we do Quite Light we’re here to talk. There is no strings attached, there is no hey, you’ve had four phone calls with me. So if you’re not gonna list now, we’re going to have to dial this back. I’ve had people that have talked to me, month after month, every quarter after quarter, year after year, and they never list with me and they go sell somewhere else, it’s totally fine. Because what we’re trying to do is just establish ourselves as a trusted authority, give you another set of eyes on your business and give you the right kind of exit planning advice. So that you can be prepared for the sale. So to your question of like what’s ideal, I mean, there’s nothing I love more than a seller that gets to me and is like, hey, I’ve got a business. And I’m like, this looks sellable in there, like I’m ready to go right now, that’s great. But if you are listening to this, and you’re thinking like, hey, it’s something that I want to do a year down the road, it’s something that I want to do two years down the road. And I don’t even know if I want to do it. I want to talk to somebody about whether or not I want to do it. I want someone to help me think through the process and whether or not there’s something I want to do or whether I want to hold on to it. These are all things that Quiet Light advisors can help you with, and we do it free of charge because we make our money on fees generated when we sell your business. And so, if we sell your business, we engage, that’s when we would get paid, and we wouldn’t get paid unless you got paid.

Pat Yates 23:00

Yeah, I mean, it’s a great point. I think some things people, whenever they look at selling something like this, they may look at the fee and think it’s a lot. And sometimes you got to look at what goes into that and how much deep knowledge you have. One of the things I’m curious for your comments on is people are out there deciding if they’re deciding between M&A firms. One of the things I believe a Quiet Light that we have that’s so great is the trust from buyers, we have an incredible buyer list that understands the kind of docs we put out, you’re one of the guys at the forefront of that when Quiet Light was really growing. Tell us about how our approach to being an entrepreneur centric can help the buyers have more confidence too, because I feel like that’s really big as to why people will buy from us based on our Doc’s, our research and our understanding of those businesses.

Brad Wayland 23:41

I actually just got off a call with some guys that are buyers that wanted to do a call with me to just kind of understand kind of my perspective, and things like that. And we do quite a bit of that here Quiet Light, but those guys were doing cold outreach, looking for things to buy. And they said like, what do you think about cold outreach? I was like, man, it’s interesting, you say that I did a lot of cold outreach. In my buying days, I was buying in one category. So going to the Quiet Lights of the world and looking for their listings, they likely wouldn’t have anything in the category I was looking for at any given time. And so I would go and search just and do cold outreach to petite people that were like in the industry trying to find people to buy. But what’s interesting about that is like as we were talking through it, this is a new theme for me. But we’ve seen an influx of marketplaces come online in our industry. So these are just places where you can go shop things for sale, and they’ve come online and people can just look at there’s no personal touch to it’s not a white glove service like Quiet Light, it’s like, hey, here’s a business for sale. Here’s what the person says the business is. Here’s what the person says the business earns. Do you want to buy it? You can say yes or no, and that’s kind of the approach. With Quiet Light, you do get a little bit of a curated approach because Quiet Light advisors are paid based on fees generated by sellers. So just thinking about the economic principle here, the incentives for Quiet Light advisors to list things that won’t sell, where is that incentive? Yeah, doesn’t exist. If I list something that’s not gonna sell, I’ve created a lot of headache for a lot of people, I’ve created a massive amount of time for myself. I’ve created a seller that thinks well, Quiet Light doesn’t know what they’re doing, they told me they would try to sell my business, they didn’t sell it. So I’ve got to sell early doesn’t like the outcome. And then we’ve got buyers that are like, why are you listing stuff that’s not sellable, like this isn’t a very good business. So it hurts us from all those standpoints. So I feel like for buyers, one of the advantages that they get with Quiet Light is, we’re not guaranteeing anything, we definitely want you to do your due diligence on all the businesses. But when you come through as a buyer, when you see a listing, that listing says is that some advisor, which all the advisors at Quiet Light are seasoned entrepreneurs, they all have bought, built, sold, operated businesses online, they have an immense amount of experience, they speak a very technical language when it comes to how business is done online. And when you come to that you’re seeing every single listing you see is a listing where an advisor has said, hey, I think this could generate fees for Quiet Light. So I’m going to take time, I’m going to prepare this for sale, I’m going to put up 20 to 30-page packet out there, I’m going to spend an immense amount of time on the phone and over email with people, I’m going to spend an immense amount of time on the phone and on email with my seller. And so when you’re coming in as a buyer, you’re seeing a curated list. It doesn’t mean that every business is great. But what it does mean is we put our eyes on it, we’ve gotten deep into it, and we think that somebody is going to be interested in buying it. And so that’s giving you some assurance as a buyer of like, hey, why is this thing listed? Why is it out there? Somebody over Quiet Light thinks this is something that will be worthwhile for some buyer on their list?

Pat Yates 27:13

Yeah. I think there’s a lot of apprehension for buyers, sometimes they come in and maybe embarrassed that their books aren’t good. Or maybe they haven’t done their SOPs, or they’re on a downtrend, I think, a lot of vanity with people when they come in to sell. How do you help people understand that timing? I know it seems simple to say sell right now. But what if someone is having challenges? What kind of things can Brad and Quiet Light do to really help them, say if you look at it, and they’re not ready yet, but they could be ready with actionable things. A lot of people might try to list it and take their chances. But we would probably turn them away and say, do this, this and this, and it helps them in both ways. Maybe talk about that philosophy?

Brad Wayland 27:51

Yeah, we do a lot to try to prepare for sale. So very common for me, someone comes to me, and they say, hey, Brad, I’ve been in business for 18 months, I’ve been in 18 months, I want to sell my business look at this. What do you think? Well, I have over the years tried to take a business with 18 months of history and get sold. It’s been a challenge. I don’t know about you, I’ve had a hard time getting businesses to move that are 18 months now. So one of two things need to happen here. If we’re going to try to sell something with a really short history, then we’re going to have to do something to account for that short history, that’s probably going to be in the multiple. So what we try to do with folks is let them know like, hey, this business that you have, it’s got a good growth trajectory, if we had 24 months. And just to make a point to those listening 24 months is a very important inflection point, because 24 months is the first time when we can have a month-over-month trend, year over year. So that means we can compare January to January, February to February, December to December, July to July. 24 months is the first time where someone can look at and see what does the growth look like. And they get a year-over-year, month-over-month trend for each of those months. And so 24 months ends up being super important. In fact, I would say like, if we had 24 months, I think that you can make a case that like anything more than 24 months, is a lot of times it’s not even looked at that seriously by a lot of buyers. They’re really most interested in that recent history. So in a case where someone calls in they say, hey, I want to sell I’ve got 18 months a history, my first thing is going to be what would you think about waiting another six months? And I’ll tell you why. And then I tell them like hey, for your business, it looks like if you had 24 months looks like it’d be a three-and-a-half multiple. But if we need to go right now on 18 months, I think we would need to drop the multiple down into the mid-twos to get interest because the buyers are going to push back so hard. And so now I’m presenting them with options. I’m saying like, hey, I’ve done this enough to know I can’t just go put an 18-month-old business out there and say three and a half, can’t just put a multiple, slap the multiple on it, and say just deal with it. Because the buyers just won’t, they just won’t, they’ll deal with it by ignoring it. So, I think that we try to lead them to where they’re trying to go. But we do put people off. And I don’t think we put people off necessarily, it’s not necessarily to help our own schedules, it’s actually to help the business have the amount of time that it needs, like, it’s not that complicated, we can simplify the process for you. So if you’re like thinking about selling, we definitely can simplify it, we can help you with the books. I have people come to me all the time, like Brad, I read Joe’s book, he said, my books have to be on a cruel. Okay, that’s fine. I’ll flip into a cruel for you. Right? I’ve had two or three people tell me, oh, no, I thought I needed to hire a firm to do that. No, I’ll do it for you. I’ll put it to a cruel for you. So you don’t have to be buttoned up at all, in my opinion, you can come to us and say, I don’t even have a p&l, and I might give you a homework project. I’m not typically build these P&Ls from scratch. I did do it for seller in 2023, a unique circumstance. But you know, if you’re going to build it from scratch, I’m going to give you the tools to get it done either affirmed. Or something where I can say, hey, you could do this yourself, you do this way. But I do think you’re right, like the timing is always perfect. But when people reach out, we can help you with a timing thing, you’re not going to get slapped on the wrist by us, we’re here to support you, we understand that running these businesses is very difficult. And selling them it’s pretty difficult too, like we’re trying to make a process that’s painful, not be so painful, and be something that you can be like, hey, Quiet Light is there, they helped me they held my hand all the way through the deal, start to finish, and I was able to move on and do my next thing.

Pat Yates 31:54

I think you make a great point because I’ve talked to so many entrepreneurs that come in, because here’s kind of the way people have to look at it. If you’re listening out there thinking about selling your business, you call Brad, you’re gonna expect them to say, here are the steps we got to do, here’s a price. Some people are really shocked, we say you don’t want to sell right now. Because that’s what we do. We don’t make any money consulting with people, we don’t make any money doing that we only make it selling it. So what’s the motivation? And typically what I tell people, the motivation is it’s about you, not us. And if we can find a way that even over a six or seven-month period, you can add $15,000 in income somehow and these little things that becomes 45 to $55,000 on your sale. And it matters because people don’t realize how little money can jump out. So my point in saying this is, is sometimes I think the preparation before the sale is even more important than the sale itself. And I’d like for you to tell the listeners your philosophy of working them as people and advising them. And I know that that’s sort of a broad thing there. But you see a lot of these the people are ready, right when they come in? Or do they need to do this preparation?

Brad Wayland 33:00

It’s a mixed bag. But I would say that in most cases, we’re not ready to go on day one that we talk, or whatever reason, I’ve got a guy to reach out today, you know, he came to me a month ago. He knows our stuff. He’s been following us for a long time. He kind of understands how we do it, he wants to be SBA pre-qualified. So once we SBA pre-qualified, but we need the 2023 return. So, I told him, he’s like, hey, can we just go to market, like, maybe by the time it closes, we can have a return. Now we can’t do that we’re gonna have to, if you want to be SBA pre-qualified, and it’s gonna be a big sale, it’s gonna be a 5 million plus sale. So, in this situation, it’s worth it for him to crank out, get 2023 done, but stay in touch. Let’s keep working on it. We’ll get everything ready to go. And we’ll be prepared when we get there. But yeah, the managing the people part is I mean, we have to kind of go where the people are. So, someone comes to us and says, I just have to sell today, tell me what I need to do, then the game has changed. Most people come to us are wanting maximum outcome. But that’s not everybody. Sometimes people have circumstances in their life going on that they’re like, I just need to sell. I know it’s not the best time to sell, but I just need to sell Can you help me sell now? Now’s the time. And so I do kind of feel like we are kind of forced to go where the people are, but we generally go from the perspective of, hey, don’t you want maximum outcome? I do think, one things I tried to do, like, and they probably think I’m trying to do this as like reverse psychology, but I think is a fair exercise when I get on the phone with somebody, I always ask him, so, hey, you got this business. You’re making a lot of money on it. You got great trends. Do you enjoy running it? I do. Oh you do you enjoy running? Okay. Do you think You can continue to grow it. Yes, I do, really? So when it was 2 million now you think you can make it 4 million? I do. I think I could do the work. I think you get it 4 million. And you enjoy it and I enjoy it. Why are we talking about selling? I’ve had many people tell me, well, I just thought that selling was like the next thing I’m supposed to do. And I would tell you right now, as a guy that has done a lot of operating, buying and selling over the years, if you have a business that you enjoy operating, and it is growing, and you think your prospects for the future for growth are good, why would you sell that?

Pat Yates 35:37

Yeah, I agree with you. I think that many people don’t realize that the natural transition isn’t always to sell. And sometimes in your vertical, it really depends on if you can be successful. So again, we’re talking with Brad Wayland, Quite Light advisor here, Brad, I mean, I think that we want to wrap this up so people can understand you as an advisor, I think sometimes this is such a huge transaction, people have to choose someone they can trust and interact well with. I think you probably have a philosophy around how you run your business much like all Quiet Light associates do. It’s pretty much entrepreneur-centric for me. So tell everybody a little bit more about how they can get in touch with you, what you might want them to do if they’re coming in to talk to you about their business, just things that they could have that’s actionable to work with Brad?

Brad Wayland 36:19

Yeah, sure. So you can email me, [email protected]. So if you’re looking for me, you want to do valuation, you want to just discuss your business, you want to talk about exit planning, want to talk about just like the psychology of how do I decide what I want to do, happy to go through all those kinds of conversations with you can email me at [email protected]. And once you email me, then you got access to my cell phone, you got access to my email, pretty easy to get in touch with me. If you can’t find me, for whatever reason, there’s plenty of support queues at Quiet Light, if you’re looking for me. So I definitely want to give you that opportunity. The other thing is, there’s a team of 14 of us and not every advisor is meant to work with every seller. So generally, when you come in to Quiet Light, you get assigned to an advisor, and you’ll probably work that advisor from here on out, doesn’t mean you have to, there’s somebody that you have seen information on that you really would like to work with, you can request to work with someone specifically. So, don’t listen to this podcast and feel like you have to come work with Brad Pat, even though he’s those are the podcasts. He’s also a high-powered broker. He said, you’ve done a lot of deals in his time at Quiet Light. And we already talked about some of his entrepreneurial experience. So there’s lots of folks to choose from, but our door is open. And I do think that that is sort of the mantra that we want to communicate to people is that we want to hear about your business, we want to discuss how we can potentially help and that does not mean that you only come to us, if you think that we’re gonna end up listing your business, we can actually help you get through that thought process of, should I sell? And is now the time, what are the steps I could take, we give you the roadmap to kind of getting from here to there. So I’m happy to help in any way do appreciate the opportunity to come on today and kind of talk about me and some of the ways that I kind of look at deals.

Pat Yates 36:23

Absolutely. And for the listeners out there, Brad is a little bit humble. He’s done some of the biggest deals in Quiet Light histories when you were on the edge of the aggregator start when things started 2021, Brad has an enormous amount of experience, not just in M&A, but really in business. I think that’s what I want the listeners to understand. If you reach out to one of the advisors at Quiet Light, we’re probably going to have a conversation about how to make your business better, as much as we are how to exit it in sometimes that timing is not the exact thing and as being through this so many times, Brad has a massive amount of experience not only selling his companies, but after selling 50 some companies or more Quiet Light and seeing so many verticals. So utilize that information. Make sure you’re reaching out to Brad talk with him get your business and a potential to sell. Because I can tell you right now there’s not very many guys that I know that has many connections that Brad does to try to get your business sold. Brad, I appreciate you coming on today man and obviously we hope that anyone will reach out to you at that [email protected] and appreciate you having on the Quiet Light Podcast. I appreciate your time.

Brad Wayland 39:14

Thanks a lot Pat. I really appreciate it.

Outro 39:18

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.

Matching You With the Right Digital Marketing Agencies

Behdad Jamshidi is the Marketing Broker and Founder of CJAM Marketing, which provides access to digital marketing partners that are ideal for your brand's current and future goals. His unique...

Behdad Jamshidi is the Marketing Broker and Founder of CJAM Marketing, which provides access to digital marketing partners that are ideal for your brand’s current and future goals. His unique background in marketing, engineering, consulting, leadership, sales, and strategy makes him the perfect intermediary for connecting business owners with vetted marketing teams that fit their objectives. Behdad’s work has been featured in several publications, including MarketWatch, Bloomberg, National Post, and the Financial Post.

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

[02:31] Behdad Jamshidi talks about CJAM Marketing and his professional background
[04:39] Common mistakes marketing agencies make and how to avoid them
[06:07] The scope of services CJAM Marketing offers
[09:43] CJAM Marketing’s business model for matching businesses with the right marketing agencies
[15:16] Behdad explains the challenges associated with matching businesses with marketing agencies
[17:11] The onboarding process for working with CJAM Marketing
[21:10] How CJAM Marketing vets marketing agencies

In this episode…

Are you frustrated with the marketing agencies you’ve worked with because of the lackluster results they deliver? Where can you turn to connect with an agency that meets your needs so you can end your search and focus on running the business?

Marketing is the backbone of any successful business, and finding the right marketing agency is essential to drive growth. But let’s face it — finding the perfect marketing partner can be a daunting task. You may waste a lot of time and money looking for a marketing partner that ultimately doesn’t meet your expectations. However, Behdad Jamshidi recommends hiring a marketing broker to take the guesswork out of finding an agency that meets your needs. His business can match you with qualified and vetted marketing partners that will take your business to the next level.

In this episode of the Quiet Light Podcast, Pat Yates sits down with Behdad Jamshidi, Marketing Broker and Founder of CJAM Marketing, to discuss how businesses can source a marketing partner that delivers results. Behdad talks about his marketing background, the scope of services CJAM Marketing offers, its business model for matching brands with marketing agencies, and its vetting process.

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 again to the Quiet Light Podcast. This is Pat Yates sitting in for Joe Valley. We have a fun conversation today kind of interesting. When I look for podcasts, I’m starting to look for lot entrepreneurs. So if you’re an entrepreneur out there want to talk about great experiences, I’d love to hear from you. Vendor partners like today we have CJAM Marketing and Behdad Jamshidi is coming in to talk about his firm. I think it’s really interesting. A lot of times when people go looking at marketing, they find a group that they like they have a great conversation with someone an intro and they go with it three or four months later, they look at the results and say was this the right relationship. Behdad’s business has a chance to really get through some of those problems, he actually will give you referrals into marketing firms that maybe within your vertical, it might be that their product they’ve had success with in your kind of space before. I think sometimes it’s kind of interesting, because I’ve even gone more ad-hoc to work with companies that I meet in marketing and just sort of build a relationship versus going in inventing that relationship ahead of time, especially based on results. This really gives people an opportunity to find the people that they need keep a relationship in between them. So if the marketing say isn’t doing well, you have an opportunity to be able to change it or whatever it’s going to be. This is kind of fascinating, because a lot of people look at decisions they make within their business, especially solopreneurs that they love, they know everything. Sometimes it’s good to be able to give up that thought and say tell me what’s been successful for you, or partners you’ve worked with. This is exactly what they do. So I’m anxious to talk to him about it and see how can help your marketing. So let’s get right to it. Behdad, hello, and welcome to the Quiet Light Podcast. How you doing today?

Behdad Jamshidi 2:05

I’m doing great, Pat, how are you doing?

Pat Yates 2:07

I’m doing fantastic. It’s a great early morning, we’re taping this around the Labor Day time. I know it’s gonna air a little bit later. But it’s great to have you in today talk a little bit of marketing. It’s something that I know that every entrepreneur that we have can use no matter if they’re marketing for a direct-to-consumer business or b2b business. So I’m anxious to dive into this today. So what I love you to do is tell us about CJAM Marketing and yourself and maybe your background a little bit.

Behdad Jamshidi 2:31

Absolutely. So I mean, around CJAM Marketing, I’m actually a marketing broker. So I’m not like your typical marketing agency that does all the work. But I’m the guy that basically talks to businesses understand what businesses need, and then I match them with the right marketing partners. And so that’s kind of what my business does. And a little bit about me and kind of maybe the one-minute background on how I got into it. I started out as an engineer, so I used to work for a company very similar to Verizon, but up in Canada was called TELUS. I was working with businesses in the b2b space. So typically working with businesses, anywhere from about 50 employees up to 1000 employees, talking to C-level executives, IT, understanding what’s going on their business, and then basically building out a roadmap of like, how do you get from A to B to C, and typically with touch technology, and then all the other aspects of business. And so that’s where a lot of like my business consulting, sales, leadership and technology experience came from. But on the other side, I started getting into marketing. And how I got into that, I started basically doing websites, Google ads, SEO for small businesses, I started hitting a point where I just didn’t enjoy doing ADR websites on the weekend. So I started basically looking for partners to work with. And as I did that, I noticed that most marketing agencies didn’t understand business and most business people didn’t understand marketing, massive gap in the middle. And when I put partners in the same meeting, I’d be like, well, first of all, why is the agency picking up that work? That’s not what they do. And two, they don’t understand what the business is actually asking about. So I thought, oh, there’s a big gap here. What if I was able to bridge that gap. And so I spent the last four and a half years talking to over 688 different marketing agencies and partners, and vetting that list down to about 90 plus partners that I work with. And today, all I do is I talk to businesses, see what they need, and then match them with the right marketing partners.

Pat Yates 4:15

It’s really amazing. I knew that. And I think that sometimes though, your depth of understanding of marketing may need to be deeper than a lot of people’s because to put them with the right partner, sometimes you have to think outside the box in their business. Correct. So tell me a little bit about when you’re vetting people, what kind of businesses you look for in the complexities of the decision-making, because they may come in with an idea of what they think they need, but you may look at it and see something different, correct?

Behdad Jamshidi 4:39

Yeah, exactly. Yes. So if we’re talking about the business side, when a business comes in to me, I’m always trying to talk about the high level of what they’re trying to do and what they’re trying to accomplish. I think what a lot of mistakes that marketing agencies make does go straight into okay, what did you for your business, great, okay, what are you doing for marketing and they miss all the other stuff that’s going on in the business from, where they’re trying to have, what kind of competitors they have? Do they have the operations in place to scale? What are their biggest drivers? What are their best resources and assets? You need to understand the business as a whole initially, before you can say, okay, it makes sense to go down this marketing path. I mean, especially for what you guys do, some businesses want to get sold in the next two to three years. So are you going to invest in a really long-term brand strategy, versus, maybe you just try to find the levers that you can do short term to get the business to a place where you can sell it and let someone else take care of the brand. So it’s all about really understanding what the goals of the business are, what they’re doing currently today, and then what levers can be pulled, and the appetite for the business owner, what way they want to go.

Pat Yates 5:38

That’s really incredible. So a lot of the listeners that we have that come into the Quiet Light Podcast are either entrepreneurs that are building a business looking to exit or buyers that are looking to buy businesses. So let’s talk a little bit about the scope of services. So let’s say that someone comes in and wants you to look at their e-commerce business, tell us all the things that you can help them partner with, is it just marketing? Or is it logistics? Are there other things? Tell us about the top things you talk to your clients about to try to help them with?

Behdad Jamshidi 6:07

Yeah, that’s a great question. So for me in a lot of the stuff that I do is around digital marketing. But I do have partners in some different areas. So when we’re talking digital marketing, I’m talking like brand websites, Google ads, SEO, influencer marketing do you need copywriters? Like you literally name it from A to Z, like I have partners that do that type of stuff. Video production and things along that sort. So anything that’s around digital marketing, I basically have partners for. On the other part is I’ve met a lot of really cool people, I’m a connector at heart. So I met people that can help with logistics, finding 3PL partners, that kind of stuff. And then recently, like, no fractional CMOS is a massive thing. But last year and a half, I started noticing that most businesses don’t have a proper marketing strategist inside the business, which always makes marketing fall flat. And it doesn’t allow a business to scale. So I’ve been in putting fractional CMOS into companies. And then I have partners that also helped with some in-house resources as well, especially when you’re trying to hire at that like C-level, exec-level, I have recruiters that I work with that help input in-house resources, too. So that’s basically like the scope of services that we typically help with.

Pat Yates 7:17

Really amazing. So let’s talk a little bit about marketing for, say, an e-commerce company. That’s kind of a low-hanging fruit of people that listen to Quiet Light Podcast, or come in selling their companies. So for marketing, let’s just talk about, say, SEO, let’s say someone had a background in SEO, they dealt with a company, maybe it did work out, maybe it didn’t. How successful are you finding someone when someone comes to this initial client? I mean, do you go to someone and maybe that will work or you move them on to another partner? How long does it take to find the right ones? What are the things that matter in that decision to match the right partner?

Behdad Jamshidi 7:52

Yeah, no, that’s a great question as well. So I mean, if we’re gonna use the e-commerce SEO example, I mean, I’ve helped many e-commerce companies find SEO partners to work with. And so in the beginning, it really comes down, let’s say you haven’t worked with a partner before, is really just assessing on the marketing agency side, do they actually have the talent and the skill set to run SEO well? And so a lot of SEO companies, they come in and say, yeah, we’ve been doing SEO for two or three years, I used to do it at a bigger company and now I’m doing it for myself and helping other businesses. You really want to find those agencies that have been around for a little bit longer. They have the systems, they have the processes in place, and that they are doing the right things for your business. And some of the best SEO agencies, you want to make sure that they’re able to do the three different aspects of SEO, from technical to on-page to Off Page, and a lot of SEO agencies will, when you go to them, they’ll say, oh, well, we do technical and On Page, but we don’t do the Off Page stuff. And that’s typically because the SEO agency hasn’t built that team yet, or doesn’t want to bring in that service, because it just increases cost. But a proper SEO agency will be able to do all three of those things within their own house. And so you’re always trying to be aware of do they have all the skills and the resources to help the business grow? Is that going to help answer that question like you’re looking for those?

Pat Yates 9:11

It definitely does. I think what I’m trying to do is make the listeners understand how you can really help them diversify and get, so when someone comes in on boards in an online business, you probably take a look at all of the facets, you look at how those pieces fit together from an SEO standpoint into social media. How do all these things tie together? Because I think one of the biggest time sucks and what people have to do for what you do is working with different companies for different parts. Is it possible that you’re putting all this together that makes it logistically even quicker for people to implement the things they need in their business?

Behdad Jamshidi 9:43

100% yeah, so that’s exactly it. Because when you look at the agency landscape, I always say there’s no one agency that can do everything. And if they say they can, you need to run. The number of times I’ve interviewed an agency and they’ll throw up the beautiful PowerPoint slide that says hey, we do websites and Google ads and SEO, we do the social media and I go, okay, listen, guys, I’ve done enough of these interviews, tell me what you’re actually good at. And all of a sudden, it’ll go from doing nine things to hey, we’re really good at these two things. The other ones were just kind of like we’re doing, but we’re not that great, not better than average. Right? So when you look at the agency or the marketing landscape like that, you start thinking, oh, wow, okay, if a business like an e-commerce business needs a Google Ads partner, Facebook partner, and SEO partner and influencer marketing partner, that’s typically going to probably be two or three different agencies you need to work with and bring together to make your strategy work. And so for business to do that, by themselves, is pretty much impossible to be able to hit that right the first time. Right now I have about an 80% match rate, right? Like at the end of the day, like I’m matching personalities to personalities, right. And so sometimes the personalities don’t work, or the model of how people don’t work. But if I’m right 80% of the time, that means if I’m giving you three or four different partners, like at least two out of three is going to be good, or all three out of three. And the more that I work with certain partners, I have way higher competence in like, for example of an e-commerce business came to me and said, hey, I need a Google ads, Facebook and an SEO partner, I have those guys, I’ve worked with them, I know they’re good. It’s just now are you at the stage and your e-commerce business to be able to afford that type of partner, right? Because most people also don’t realize that there’s like five different levels of marketing partners and agencies. And so they start, so say, an e-commerce business is doing less than $3 million, they’ll try to go for like the stage four agency where they’re gonna be paying retainers or like, you know, $10,000 a month, that e-commerce business thinking, oh, if we pay this amount of money in three months, they should be able to pay their ROI back and more, and we should be in a much better place. But the reality of that is, is you need to be making probably 20 million $30 million a year before you can use an agency of that level. Right? You need to understand like at what stage your business is, what stage and agency is at and how they can help you get from A to B and then use another agency to get from B to C and then move up that way.

Pat Yates 11:57

That makes sense. So that actually brings me to another question. Let’s say someone comes in and says, I’ve just started my business a few months ago, and I really need to ramp up my marketing. But my budget is not to the level of sum. I mean, are there levels of client that someone needs to be able to generate to be able to work with you or to help them get in the beginning to the right partner? So they start everything off right?

Behdad Jamshidi 12:19

Yeah. So I mean, it really depends. It’s kind of like a low threshold where like, you need to be at least spending two to $3,000 a month on some sort of marketing for it to make sense to even start using agencies. Otherwise, like just use, Upwork or freelancers or whatever, to kind of just, like, get some of your time back as you’re growing this. But for me, like when I’m working with businesses, I’m trying to reach them where they’re at and go, okay, well, if you’re not at the stage, where you can really invest in marketing, you need to invest in the foundations, right. So maybe it’s more one-time cost, we’re like, okay, get your website to a point where it actually can convert to make sure that you have email flow setup, because those are automated, right? Like, you want to make sure your email flows are working really well. So that if you’re doing any type of funnel stuff to bring traffic in, at least, you know they’re coming to a website that can convert, which then goes into an email list. And that email list is automatically working. And you know that that machine at the fundamental level works. Once you get to start scaling that and you’re like, okay, now we need to put more money in the top of the funnel to feed this machine more and more, because we know it makes money, that’s when you start kind of getting to that next level of marketing. And at that point, you’re likely generating some sort of revenue in the seven figure range, so that you can start investing in the next levels of growth.

Pat Yates 13:23

That totally makes sense. I think that so when you were talking a little bit earlier about sort of comparing marketing agencies, it’s kind of interesting, because when someone comes in and talks to you, they could be talking to 10 or 12 agencies, in essence, versus having a meeting with one. So sometimes I think doesn’t become really more specialized as a decision. Like let’s say that someone comes in and you know a marketing agency works better with I don’t know, shoes, let’s make that up. So they is the vertical, something that might help someone be able to be successful, because you’ve had so many partners that work in so many diverse industries?

Behdad Jamshidi 13:58

That’s exactly it. Yeah. So if I’m talking to different businesses, Let’s even say I mean, we’re talking about e-commerce, but even in the b2b space, there’s agencies that are specialized in different verticals, right. So a lot of times, I’m talking to say, like e-commerce shoes, I’ll go to my SEO agencies, I don’t have one SEO agency, I work with like, 15 to 20, after have talking to how many I’ve talked to, and they’ll go, hey, yeah, we actually have done a bunch of different shoe brands, these are the ones that we worked on. We’re totally fit for this, right. Versus there’s other agencies that be like, well, we’re not really getting that space. But in the health, pet wellness, like that stuff we’re really killer at. So in my database, I basically just kind of tag like what people say they’re really good at what verticals they’ve worked at. And then when I get a customer coming in, I’m going, here’s the people that you need to match with. So that’s how that works.

Pat Yates 14:43

So they’re building a relationship with you, you’re ultimately the vendor for this. So tell us a little bit about how you handle it post-engagement. Let’s say that they work with a company and let’s say six months in, it’s not working out. Maybe there’s an example. Technically that would probably work. reflect on you and the company a little bit. So how do you deal with issues? Let’s say someone gets in, and it’s not exactly what they thought about or becomes more expensive. How do you deal with changes in the situation? That’s one of the things I think about is if it goes wrong, it seems to go wrong a lot of ways. Maybe I’m overanalyzing that part of it.

Behdad Jamshidi 15:16

Yeah. I mean, I haven’t had like any crazy, terrible scenarios. So in terms of like, how I follow up, so every two or three months, I’m checking in with my customers, I’m going, hey, how are things going? And what is this agency doing well? What could they be doing better? And is there anything that I should know that I don’t know? And so always having a communication with my customers is really important to me. My door’s always open. I had had times which I actually had customers go, hey, like, we use these guys? They did well, but like, we’re looking for someone else. Do you have any other recommendations? And that’s like a massive testament to me, because like, I get really excited when my customers come back to me and ask me for another referral, because they know that I’m like, super transparent upfront. So in the email that I send, or say, hey, I’ve worked with this company this many times, these guys I haven’t worked with. But here’s what I’ve done on my deep dive and why I think they’re good, right. So ultimately, I work very similar to like an HR Recruiter where, similar to an HR Recruiter, but even deeper, where all that I’ll talk to people, I’ll do my best to make sure that I’m getting rid of a lot of the red flags for you. Because out of every, like 100 agencies or partners that I meet, I only allow 15 into my network. That’s the average. Right? So there’s about 85%, that I’d say sorry, you’re not at the stage where I would want to send you any customers. So just imagine being a business and you needing to meet 15 different companies to hire one. How many people are doing that? Yeah, we’re very close to zero. And then when you start thinking about, oh, you need two or three partners, for the thing that you’re doing. Now that 15 becomes you need to talk to 45 different people. And no one’s doing that.

Pat Yates 15:16

Yeah, that’s definitely I think there’s value not only is it a sort of a best way to put it, maybe a time suck, looking around at 15 to 20 different companies, if you can compartmentalize that, and also get referrals of someone. That’s good. That’s great. So tell me how someone gets started with CJAM Marketing? And what do you do? I know you can book a free consultation, people can think about the ideas tell us a little bit about how they onboard and how the process works.

Behdad Jamshidi 17:11

Yeah, I mean, my process is super simple. Like, as you see on my website, it’s literally just book a call with me. And let’s have a discovery session, I used to do these discovery sessions for larger companies anywhere between like 50 and 1000 range. So I basically take that same concept of like, okay, let’s talk about your business, see where you’re at. And then based on that, I go, here’s the way that I would move forward with your marketing, and whether that’s like, hey, we need a fractional CMO to come build a strategy. And then we’re bringing the agencies in, or, hey, you have the right in-house resources, we just need to supplement with this. So it kind of help with that kind of like thought process. And once I get the buy-in, I have a small engagement fee that I charge upfront for my marketing broker engagement. And then I work very similar to like a recruiter where if I successfully match you with an agency, I get paid a successful finder’s fee. And then the front-end fees from your very low, because I also get referral fees from marketing agencies, they have their whole model built out. So using me is actually way cheaper than using a fractional CMO or anyone else to kind of help you find agencies. And then from there, I come back and I go, well, here’s what you asked for you wanted a fractional CMO. Here’s the SEO person, the Google person, and here’s two or three options for each with descriptions. And who would you like to meet, and the customers typically will come back and say, hey, B, I’d like to meet with this person, this person, can you schedule this meeting with this person and this person, two weeks down the road, they have a conversation, and then they choose to work with people if they want to. And if they don’t, that’s totally fine as well. But at least they know, they’ve got kind of like the cream of the crop in terms of what I’ve found in the marketing world over the last five years.

Pat Yates 18:42

That’s really great. I mean, I think that people underestimate how difficult it is to be able to especially like, you can have the greatest initial meeting with a marketing company or any supplier. And then two weeks later, the expectations kick in, and it’s a little bit different. So sometimes it’s really good to have that other voice. So again, tell us a little bit more about how clients end up coming in and changing up everything they do. Do you find that most people come in and just concentrate on one area and then they expand with you? Or is there an area that you think is the hottest right now that people need to understand that you guys can really propel their business?

Behdad Jamshidi 19:18

Yeah, I mean, it really depends on the business. And so it depends on where the business stage is that what kind of marketing but they have. I mean, I have businesses that come in, and they have the marketing budget, right? So they’re like, hey, we need to get these four things going. Whether it’s SEO, Google ads, Facebook, they’re already running at these to run at a higher level. And so I help them find better partners for where they’re currently at. And most of my partners will do audits, right. So you can get those free audits upfront from agencies that I think are very, very high. Sometimes there’s partners, we’re just like, well, we’re just looking for a really solid Google Ads guy because that’s our main channel right now. It’s working really well. And so in those scenarios, I’ll just give them one partner to work with. Like for example, we had a reason a few different successful wins, but if a customer comes in and says they’re on the b2b side in the service space, I have a Google Ads guy that I’ve worked with nine customers, and he actually kills it, he helped one of my customers basically sell their business 18 months later. And he increased our profits from 20k a month on the Google ads and the Bing to 400,000 in just one year. And so you can imagine the multiple that that customer had got after selling. So there are like, those types of scenarios where I’m like, I have partners that have done this stuff before I have background like, let me just save you so much time and effort, just hire this dude. And just doing that can put the business so much further ahead than trying to figure it out yourself.

Pat Yates 20:36

It’s interesting you mentioned that because it is correct, as an M&A agency Quiet Light sees a lot of people that come in, and sometimes the marketing spend maybe a little bit higher, but the efficiencies of those, if it adds money to the bottom line to your SDE, then you’re gonna get a multiple that’s very high from that. It’s really an incredible thing. So tell us a little bit about the process with the vendors. Once someone comes on and onboard, let’s say they come to you, and then you give them all to XYZ agency, how does the communication work? Do you stay involved in it? Do you help the client? Or is it just turned over to the agency? And then they report back to you? How does it work post-transaction?

Behdad Jamshidi 21:10

Yeah, so post-transaction, typically, I’m not in the middle, right, like, so I build trust with my businesses and my customers. And I kind of stay in parallel to it. And so I go, hey, if you ever want to have conversations with me, or something that’s coming up, reach out to me, and I’m happy to chat. But ultimately, I don’t want to sit in between the relationship between the agency and the business that are working together. So once I pass off that relationship, and they end up working together, I want them to become naturally inorganic, the only times I will ever basically get involved is if I follow up and say, hey, can you kind of reach out to them and kind of tell them this, or typically, businesses will say, hey, B, they’re really, really good at this. I wish they were a little bit better at this. And then they’ll just talk to the vendor themselves. And so I’m just getting like, inside info of like, how is the relationship working? And it makes me better at matching continuously in the future. My business just keeps getting better and better, the more I match. And then on the agency side, I think you asked a little bit on how I vet the marketing partners. Yeah, so typically, I will have a conversation with any agency and have those conversations. And usually the agencies that I get are within my network, where it’s like, my good partners are referring other good partners to me, I’ll always have a 30-minute conversation with them. And on that high-level conversation, it’s really I’m just trying to understand what their values are, what their goals are for their agency, are they actually good? And then I request a ton of information after that first initial meeting of like, okay, well, you told me you can do this, this and this, whether it’s websites, or branding, or Google ads, or like, walk me through that, send me emails and videos and stuff, and tell me show me that you actually know what you’re doing. So after I review all that, and I go, okay, well, it all looks good. Now I do a one-hour deep dive into the agency, and I go through like a 30, 40 plus questions. Basically understand the agency inside and out from like, what their goals are, where they’re headed, what their team is, how their team is structured, and plotted out? Are there certain specialties within that team that I need to be aware of that if that person leaves, you lose an entire service line, all those like, deep questions that most businesses won’t ask, I’ll do. And then even after that, to get into my partner network, I charged the money to get in. So I have like, multiple levels of filters, to make sure that at least if I’ve never used an agency, before, I’ve done my due diligence, at the highest level to say, hey, based on everything I’ve seen, I haven’t seen that red flags. These guys seem to know what they’re doing in these areas. And here’s their specialties. And agencies are typically a lot more transparent with me, because if they know they lie to me, or they’re not transparent with me, they just paid to get into my network. And if they fail one of my customers, they get to my blacklist, and so it’s not in their best interest to do so. Versus just working with the customer, taking them on, and then they can do stuff it failed, the customer likely might write a bad review or just leave, right. And so they don’t get that same hit to their brand.

Pat Yates 23:53

Are there certain areas of say, an e-commerce business you don’t cover? Like, some people may say, Well, I’d like my email, top marketing to tie into my social to tie in to everything else that I do. Or can they find this as a one-stop-shop that can do basically everything you need within marketing or company?

Behdad Jamshidi 24:09

Yeah, so the only area of service that I don’t cover right now is affiliate marketing. So that’s the one product don’t. But if someone’s saying, hey, I need email that I need that tied to my social media and all that different kind of stuff, the question comes down to is there an agency that can actually do those two or three things together, right, like some agencies do, do two to three things? Well, can you find an agency that does email social media and that? That becomes a question and if not, it goes, okay, well, here I have an agency that does social media really well. And someone that does email really well? Do you have someone internally, like a marketing director or someone running marketing to help bridge that gap. And so you get the best of both partners doing what they do really, really well. And then an integrator within the company to do it. A lot of the times when I’m working with businesses, let’s say e-comm businesses or other type of businesses in the three to kind of $20 million range because you’re almost getting to that point where you’re getting to that next level of scale, right? Like you got to get operations in place processes in place so that you can and scale. In those scenarios, usually, if they don’t have someone strategic on the marketing department inside, I’ll actually recommend, hey, let’s get a fractional CMO into the company, let them build a strategy, let them build a plan. And then we’ll feed that fractional CMO, the agencies that you need to build out that plan. And the cool part about a lot of it is you can use that fractional CMO to hire a marketing director underneath them to basically run and execute the plan. So you’re not paying the high cost of fractional CMO over time. And so that’s typically how to structure it and just kind of have conversations with my customers to go, which route do you want to take? Do you want the more strategic route where you have a plan and that can input those agencies? Or would you like to, hey, I’m only trying to get like one or two channels going, and Google and Facebook is what we’re focusing on, B, can you just give me agencies for that. So it’s really just having that conversation with my customers and understanding where they’re at what their appetite for marketing is, and kind of where they want to go. And then just saying, here’s the two different ways or three different ways we can do this. Which one would you like me to go out and basically bring you a team to do?

Pat Yates 26:00

That’s actually amazing. I mean, again, I think it’s really kind of wild that, back in the day, everyone struggled to find partners, they wouldn’t even share information. But with you guys, you have an opportunity to come and start to finish and be able to take their marketing to the right partners without having to go through that pain of actually going through the bad situations. Like that’s one of the biggest pain points to building a business, you go out and make all these mistakes, and you screw up your marketing, then you figure out better ways to do it. Sometimes the good thing sometimes the bad thing, but I would assume with you guys, you can get a right, a perfect start right away with the right partners have been in your industry, is that pretty much how you operate?

Behdad Jamshidi 26:35

Yeah, I would say that. I’m a transparent guy. And I like running my business super transparently, like my relations don’t work 100% of the time, but they’re gonna work way better than you doing it by yourself. Even just having a conversation with me, for example, like I had a customer I talked to about a month ago. And they were telling me they’re spending $8,000 on SEO a month, and then the retainer for like Google ads are up $4,000 a month. And I just said, okay, well, I said some very simple questions. What are they doing on the SEO? What are you getting for it? What kind of business does this guy have before he built his SEO company? And after literally a 30-minute call, two days later, he goes, hey, I fired my SEO guy and I fired my Google Ads guy, because I realized they were overcharging they weren’t giving me enough stuff after kind of looking at a lot of it. Can you help me find the next piece or the next partners? And so just even sometimes a conversation of like, hey, am I getting the right value for what I’m spending? Is there someone out there, that’s better. And then I can tell you, because I’ve talked to over 688 of them, of what the pricing should look like for what you’re getting, so that you’re not getting hosed and spending more money than you should at the stage that you’re at in your business.

Pat Yates 27:39

Yeah, and I would imagine that, especially in pricing, and things like that, working with vendors, that a lot of volume is going to help the client save a little bit of money, maybe, and at worst case scenario, they would be able to sort of go through it. So let’s also ask one question. So let’s say that something’s going poorly, as we talked about with a vendor, are they able to come to you and maybe you get involved in that situation either helped mitigate it to make it better or find a way to move on to another partner? Is that happen very often? And if so, is that a difficult thing to keep the relationship good with both you and the vendor itself? I mean, that seems like it’d be a difficult situation.

Behdad Jamshidi 28:10

So I have to have somewhere in my contract, I thought about this clause way pre handlers like, hey, look, if I have a customer that’s not happy, and they don’t want to tell you that they’re not happy, I have the ability to step in and find another partner that will match better. It hasn’t happened that many times when it has happened, customers will come to me and say, hey, this agency hasn’t been able to do this. And this or I don’t know if they’re actually doing good work. And so there was actually one situation where I actually brought in two other partners to audit one agency to see how they were doing their work. And one of the other agencies kind of like spotted a bunch of things were there like this can be done better that can be done better. Because for me, I want my customers to be happy. And I expect my agencies on my site to be doing the best work possible. And if they’re not doing that, I want to know. And so there are situations where I get involved, and I’m happy to find another partner, because at the end of the day, I want the business to be happy. And if I’m allowed to, if the business allows me to, I’m always happy to talk to the agency and go what’s going on, right, that adds another piece of fire underneath, because they know I’m a referral partner. And having you not happy with them, ends up adding a little bit more fuel to the flame, especially when I’m, as well connected in the marketing world. It doesn’t look very good if you’re not.

Pat Yates 29:18

You’re kind of like having a fractional CMO, you come in and you help them understand what they need, where they can go and what’s been successful, correct.

Behdad Jamshidi 29:25

That’s exactly Yeah, that’s exactly right. I just don’t want to be one.

Pat Yates 29:29

No, I completely understand that. Well, this has been great. Is there anything else that you’d like to listeners to know about CJAM Marketing, and also tell them how they can get in touch with you?

Behdad Jamshidi 29:37

Of course. I mean, if you want to get in touch with me, there’s kind of two main ways I’m on LinkedIn a lot. So look up Behdad Jamshidi. I’m on there quite a bit. So if you’re going to message me, you can do it there. And also on my websites with www.cjammarketing.com. You can book a schedule a discovery meeting, or even email me from there. I’m always happy to chat. And if you go to my website at the bottom, there’s an agency resource section down there with questions. For example, 10 questions to ask your agencies and also five things to watch out for when working with agencies. So if you want to grab those, they’re in the bottom footer on my website or www,cjammarketing.com/resources.

Pat Yates 30:15

We will definitely have all these links up for the podcast as well as into your LinkedIn. And I think that it’s been a great conversation. There’s so much that can be learned getting into this. And Behdad, I just really appreciate you coming on the Quiet Light Podcast today. It’s been awesome conversation. Thanks a lot.

Behdad Jamshidi 30:30

Awesome. Thanks for having me Pat. It’s been a pleasure.

Outro 30:34

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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?