Selling your ecommerce business ($5M+) -advice from Providium
Selling your ecommerce business ($5M+) -advice from Providium

How to Sell your Ecommerce business for a $5M+ valuation

What do you need to do if you are selling your ecommerce business worth over $5 million?

Buyer types for $5M+ businesses

Selling your ecommerce business for a higher valuation is in some ways actually easier than selling a smaller business. Certainly, there are more buyer types for higher-value businesses.

Buyer groups

– individuals who pool their money – informal

Investor groups

Family offices

Wealthy family has generational wealth – instead of outside investment co, create internal office

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Before you start selling your ecommerce business: Get very organised!

  • Financials
  • Ideas and plans for growth
  • Operational standpoint
    • What would right way to scale be?
    • Supply chain etc.
  • Think through what buyer will want to know your opinion on

Common Q from Buyers “if you weren’t selling your ecommerce business and you wanted it to double in size, what would you do?

This can be pretty deep

    • Acquiring new products
    • Finance
    • logistics
    • Marketing

Timescale for preparing to sell your business

If it’s within a few months:

Not a lot you can do to change your business that will have a big impact

6-12 months out

Understanding what market will want – and get it done

Eg you have a brand on Amazon, get the trademarks secured

Start expansion process

Eg sell a lot of kitchen products under brand –

  • 3 new products
    • find a source for them
    • Put them into motion

Global Wired Advisors can help buyers dig into the process

If you are selling your ecommerce business for higher values, you want to move buyers to thinking beyond just multiples.

Global Wired Advisors help buyers strategise around this.

What does that look like?

  • Wholesale
  • Off amazon
    • Other marketplaces
    • Sell on website
  • International

Global wired does a free consultation

Get seller to start thinking about what does it

Do ecommerce business owners have to be based in USA to sell their businesses?

No it’s a very international market – because of how Amazon works and technology.

There are owners based all over the world.
They may live in Spain and sell in USA or vice versa.

Selling businesses across the globe is actually quite easy.

There are a lot of international buyers for US businesses and vice versa

Recent trend: successful amazon sellers are very focussed on non US markets, because the US market for amazon is so saturated and competitive.

Most successful sellers are in multiple countries.

What do you need to think when selling your ecommerce business worth over  $10 Million?

Private Equity

Similar to smaller businesses but it’s amplified.

The buyers know exactly what they want and don’t want.

More money is at risk.

The right Buyer for your business starts to come in a more specific fit.

Eg PE group that really loves beauty products

A great business but which doesn’t do beauty won’t sell to them.

Businesses fall into buckets and  it’s about a right fit between your ecommerce business and the acquiring company.

If someone’s going to pay $20m even though cashflow is in place

  • even more organised
  • Tightly managed supply chain
  • Brand protected

Having a team helps to sell your business

Having actual employees and infrastrcurtue is more important

How do multiples relate to size?

In general: Larger businesses tend to sell for larger multiples

For various reasons

Right now (Nov 2018), larger businesses selling quicker than smaller businesses.

  • Larger interest from pro Inv groups in amazon than two years ago
  • Many more smaller businesses are coming to market – more than 1.5-2 years ago

In reality each business will be different – valuation is based on individual attributes

Larger businesses go for as much as 5X cashflow/EBITDA

Whereas $500k-1m more like 3X cashflow

It’s a function of supply and demand and buyer

The market for selling amazon businesses is getting bigger and more liquid

The market is getting deeper and more robust

You have to know your competition – and what differentiates you

As markets develop, differentiation happens

In certain size ranges

RAISING CAPITAL AND SCALING WITHOUT BUYING

How do I raise capital?

Pure raising of capital in this space is not very easy.

VC and angels won’t normally go for this.

Amazon owners are now left with more traditional capital sources, whether banks, other small inventory finance providers, trade credit etc.

Early stages – Friends and family

Traditional early stage companies – true first round comes from friends and family round.

Some people call it passing the hat or passing the rich uncle.

If you can show a strong ROI (Return on Investment) to potential investors

There are ways to be more professional and effective about this

Unless you have a war chest, it will take time to scale up

It’s likely to sacrifice short term with reinvesting profits.

Talking to banks etc.

Any of those lenders want to see:

  • Organised info
  • A high quality plan of action

Bankers these days are not thinkers – you have to do the thinking for them!

  • Make sure it has serious financial projections
  • Tick all the boxes they need to tick internally
  • Even just 3 years of projections
    • Sure a lot can happen in 3 years
  • It shows you’ve thought about it quantitatively
  • Sound assumptions and you’ve thought it through

Some traditional banks are willing to lend to amazon businesses now.

Is there an in-between ground between these fund-raising techniques and fully selling a business?

Even 2-3 years ago, inventors were a bit doubtful about the e-commerce trend, how long will this continue?
Now we see an acceptance of the trend and Amazon’s position in the market.

Banks are now willing to lend;  Investors are willing to invest.

But the middle ground has not really developed yet.

Diversifying off Amazon

Where is Amazon going?

Amazon is growing up. It’s hitting puberty and starting to mature.

They are investing a lot in PL brands.

It’s getting saturated – sellers need to be more strategic.

They need to think through about value and especially brand.

Amazon will probably squeeze reselling.

The reality is Amazon isn’t dealing with the Chinese sellers or dealing well with hijacking.

The black hat people sellers are driving the TOS changes, e.g.:

  • Review issues
  • Review velocity

Amazon is going to mature and change the way you change through the platform.

It is also very dedicated to become Google – Ad revenue will hit $10Bn – big jump over last year.

You have to grow up as a seller. Bring more value to own business on the platform.

Diversifying off Amazon

There is a risk downside being on Amazon.

It starts to matter to valuation  when you get close to 50% Amazon and 50% off Amazon.

It’s always better to have some diversification to sell your ecommerce business more easily.

Indeed, some investors won’t buy a company that is >50% Amazon –  or for that matter, any single channel.

Marketing for Amazon businesses has grown a lot over 1 ½ years.

But there is a lid on the multiples.

You can sell your business now and for good money.
But the multiples are lower than off-Amazon businesses.

Case Study in Diversifying ecommerce business off Amazon

One company heavily focussed on Amazon.

They made a heavy investment in digital marketing – eg FaceBook ads, Google ads, etc. social marketing,

Put up the amazon price by $10

Switched to FBM not FBA and drove consumers off Amazon to look for a better price.

55-60% of people looking for products on Amazon will google to see if can get better price.

Eg coupon hunting etc.

Any final summary advice to Amazon business creators/builders?

Begin with the End in Mind

The motto of “Begin with the End in Mind” is good.

Be aware of what’s going on around you.

It’s easy to get into the details of your business.

If you’re a business owner, you always need to take time to think strategically.

What do I need this to look like?

How do I get there?

More important than ever. There is now a market for your company.
You should take advantage of that in the best way possible.

Being able to pick a strategic time to exit

Continuing education

There is a reason why doctors are forced to have continuous learning.

The same is true for sellers

Don’t be in a vacuum. – be open

If you need to hire a consultant, do it – they have their finger on the pulse

It’s worth taking time out of your month to learn

Join amazon groups – eg LinkedIn etc

Amazon is changing so much. Every day a new email about TOS!

Have a good resource structure

How do people get more help from Global Wired Advisors?

On website – valuation tool – plug in some metrics and some data – good approximation

Based on years of experience in investment banking

Valuation vs. Talking to sellers – approximation is pretty good.

It’s fine for smaller businesses to talk through selling in future

Great white papers too.

SUGGESTED NEXT STEPS

Click below to estimate the value of your business

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To read/listen to more from Chris and Jason, click here for the other podcast interview

 

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TRANSCRIPT

 

Michael Veazey 0:04
Welcome to the 10 k collective podcast. Listen, if you want hacks, my friend, I’m afraid you’re in the wrong place. Our philosophy has grown out of the 10 k collective London mastermind members, by the way, make between half a million and several million dollars a year in e commerce based on how many have doubled revenue in the last 12 to 18 months. If you’re that kind of person, this podcast is made view. We’re not puritanical, we use hacks, we just don’t think you should focus on them. If you’re building a real business, instead, we focus on what’s been proven to work in the real brand building, clear strategic objectives, courageous long term goals and long range thinking. If you like that focus, keep listening. Welcome, a collective.

So guys, thank you so much for your answers on what to do as it as Hello, if you’ve got a business’s worth under $2 million, which I guess for a lot of people listening will be pretty much the ceiling, because thinking about it, if it was a multiple, we can talk about how many multiples you get. But I guess that’s going to be quite hard to achieve. But let’s assume that we’ve got one or two serious people listening who are building mega businesses. And I know that some of the people in my masterminds are pretty damn serious. And there they are on track for this, let’s say you’re building a business is going to sell for around the $5 million value. Tell us a little bit more about we’ve got some different types of buyers, what do we need to do as a seller to prepare for that kind of thing?

Chris Shipferling 1:33
Well, the first thing I would say, which is sounds simple, but you know, that’s to get to get very organized. That’s kind of number one. And that’s not only organized in terms of your financials, which we we’ve talked about previously, but also organized in kind of all of your all of your other business information, organized also around ideas and plans for have organized in terms of, you know, kind of from an operational standpoint, how you believe that as the business does scale, what you know, the right way to scale, it would be from an operational standpoint, a supply chain standpoint, so on. And so the first kind of order of business is, if it isn’t something you’ve really thought a lot about, but would like to strongly consider, you know, doing as far as selling your business for that kind of higher valuation, being incredibly organized, and and thinking through some of the things that a buyer is going to want to know your opinion on and what your plan would be, you know, a very common question from buyers is, you know, if you weren’t selling the business and you wanted to double it in size, what would you do? And what would you do? You know, it can be an incredibly long answer, because what you would you do starts from the beat him all the way a a z in the business for everything from in acquiring product to finance to logistics, to, you know, every single aspect of the business, what would you do with that in order to, let’s say, double it, theoretically. So, note, first and foremost is, is getting organized around your thoughts and your information, that’s kind of, I’d say, kind of the best thing to start with. And then, you know, with respect to, you know, if you’re considering selling your business in kind of the not too distant future, let’s say within a few months, so when this exercise or this discussion would be occurring, there’s not a lot you can do to change your business, let’s say, in that period of time, that’s going to have a big impact. But that being said, if it’s something more like six to 12 months out that you’re considering maybe doing something, then you know, the other thing would be all right, understanding what the markets going to value, and maybe any necessary changes. A good example might be you have brand or you know, you have brand on Amazon, but you don’t have it trademarked like you don’t have any of the you know, the trademarks actually secure. So kind of a very, very small one, but maybe a good one. And then I think that, you know, in thinking about how you would expand the company or starting the expansion process, so you believe that you’ve got a great brand, let’s say you sell a lot of kitchen products under your brand, you know, going ahead, and you know that there’s three more products that you think would do great under the brand, will go ahead and find a source for those products. Go ahead and put in motion, these growth ideas? And if you add anything to that, yeah, I think what I would add to that is, you know, I’m just going to plug ourselves for a minute, Michael, you know, I think that’s where we really, that what we really do best with with with your sellers is that we, we love to help them dig into that entire process, you know, versus just being binary. And just looking at numbers times multiple equals this, this is how we’re going to sell your company. You know, one of the things that I think we do really well as the process that we take is we really like to dig in and and help you strategize, we’d like to help you dig in and figure out what that opportunity looks like. Do you have a wholesale opportunity? Do you have opportunity off Amazon? You know, what would it look like to to sell your products through your own website versus just Amazon? What other marketplaces can you build international? I mean, these are all questions that you need to you need to think through, if you’re serious about selling your large business, and not just selling through Amazon. So plugging ourselves for just a minute. I would say, you know, that’s something that we’re that we all, you know, I would say we’re really good at helping you strategize,

Michael Veazey 5:54
make sense, to make that a fraction bit more general. I mean, obviously, you guys are experts, which is why I’ve got you on. And the fact is that this is the beauty of content marketing, which is basically one in the business or more, you know, I hate to break it to you, if you’re listening to me, and you thought I was doing this for the good of my health, but I do enjoy it. And the point is, though, I find people who are expert, and you can tell it their expert or not, because they explained stuff that’s complex, and it’s simple, clear away, which you guys have done. So it’s really obvious that you guys know your business, but also just in general, when you’re looking at complex area, to go and strategize with somebody who’s an expert in it is kind of a no brainer. And yet quite a lot of people associate ambitious being sold into something that they just try and do everything on their own. I just think that’s the saddest thing in the world, because you’re working 90 hour weeks to desperately try and sell a family business. You know, this is not smart. If you get the right input from the right person at the right time. It’s always valuable. And it’s the same whether you’re absolutely newbie or completely advanced. And one of the things that always strikes me and I keep going back to Tiger Woods is a good example. But probably really bad idea now and says a brand Tokyo brand changing overnight. But I mean, he had a point, apparently seven coaches at some point, it’s not because the guy can’t play golf is the opposite. You could really, really, really, really play because he had seven coaches. So it’s not a question of, I’m really big businessman, therefore, I don’t need advice. I’m like, actually, the smartest people I know who, for your purposes, quite small, maybe the businesses only be valued one $2 million. But they’re they’re scrappy as hell, but they are the hungriest for input. It’s very hard. But that’s a consistent pattern I’ve seen. So anyway, that’s in lecture over but yeah, yeah, I couldn’t agree more. Yeah,

Chris Shipferling 7:27
talk to an expert is always a great point. You know, it’s one of the reasons why you know, with with going into the business, and with the with the type of sellers that we’re that we’re working with global wired, we do a free consultation, you know, we do a free, we call it 15 to 20 minute consultation, those typically last a little bit longer. But, you know, the idea behind those consultations is to do exactly what you just said, you know, kind of give some high level coaching, and to Jason’s point to really get the seller to start thinking about what is it like to organize your business in a way to where we can take you to market.

Michael Veazey 8:04
So it’s also win win, right? I mean, the thing is, ultimately, this isn’t going to be something where you do a quick, sell something quickly to somebody and run off into the night, I mean, you’re going to have to educate your sellers, you’re gonna have to get educate your buyers, I guess, as well. So it’s an education based thing is this complex business. So let’s move on then to the next level up, if you’re looking at the if there’s anyone lucky enough to be building or ambitious enough to be building a business is worth more than $10 million. Just before we get into that, actually, because we keep mentioning dollars all the time. Let’s address this also always awkward transatlantic question, we have said, you know, divided by common language, okay, we all speak English. And a lot of people are very familiar with New York, it feels like it’s next door. But the fact is, it can be very, very different. How does it work in terms of you guys specifically, being able to find buyers for businesses? To they have to be American based entities as companies? Do they have to be accepted in America? Or can it be more international? Now? How does that whole picture look?

Chris Shipferling 9:04
No, they definitely don’t have to be American. And in fact, one of the things about this market, which I would say, is as much or more than any market that we’ve seen, is very much an international market, it’s you know, because of the way that Amazon works because of you know, just technology, there are a lot of different sellers and and owners, if you will of of Amazon businesses that are all over the world, and they may live in, in Spain, but actually sell in the US or vice versa. And so and because with it, because it’s Amazon all really one large, you know, company, the selling those businesses and transferring those businesses across the across the globe is actually quite easy. So no, I think that in there are a great many international, no buyers, for us businesses again, and vice versa, I think to one of the things that is, I’d say a fairly recent trend from the standpoint of successful Amazon sellers, either looking to grow their businesses or you know, position their businesses more favorably are very focused on non US markets. Because the US market for Amazon in particular, is so saturated and competitive. Most really successful larger sellers are in multiple country. And most Amazon businesses of any real size, if it when taken to market will have interest from buyers from all over the globe.

Michael Veazey 10:47
I that answers the question, those are the two sides of the question by neatly so the business is can be based pretty much anywhere. So I suppose there’s three elements right on there one and one is where the legal entity is based. Second thing is where they sell the stuff. The third thing is where the buyers based and from what you can what you said it sounds like anywhere you like, is the answer to all three questions. Is that is that right? Good. Well, that’s reassuring. I mean, just to make sure because obviously, a lot of the listeners will be British, I’m not I’m you know, I’m not obsessed with the Britishness I’m going to even though it says it behind me. I’ve got around to creating the new or the new branding for the 10 k collector, but I’m quite happy to serve more advanced sellers, but anywhere in the globe. But that’s a very interesting point. So geography really doesn’t play much of a role here, which is good to know. I mean, we’ll see what breaks it brings up but I think if anything, I mean, this is another reason to consider, you know, having an international angle to things if you live here right now. It’s a scary business. I mean, I guess you guys have Trump, you know, Commiserations But that ain’t nothing compared to Brexit, trust me. So yeah, that’s good to know that we have some kind of window to the outside world, at least via you know, I was in business buying selling. So let’s get back to the $10 million valuation business that has, you know, a value. That’s pretty impressive, but achievable, I guess. Well, obviously, you’re saying that private equity, private equity, the main buyers at this point, possibly family groups, possibly then I suppose maybe less common informal buyers? Have you said before? What sort of things we really need to think about as we’re preparing businesses sell at this kind of higher level?

Chris Shipferling 12:19
Well, the short answer is, it’s a lot of the same things, except the larger you go, the more amplified everything gets. And the reason why that is, is because the buyers get a lot smarter, they get a lot more sophisticated, they know exactly what they want, and exactly what they don’t want. And obviously, there’s a lot more money that’s being put at risk. So I think that what happens is, as you start to get above $10 million, is, you know, buyers start to say the right buyer for your business will start to come in, I would say just kind of a more specific fit, let’s say. So you would have a private equity group that really loves beauty products give you an example. But you have a business that doesn’t sell beauty products, but it’s a great business. Well, that private equity group, they’re not going to be your buyer. And so you start to actually kind of, I’ll call it we say bucket, so the buyer start to kind of get bucket it and it really becomes a lot about the right fit, you know, does your business specifically fit this larger buyers mandate and their thesis around what they really, really like. So as far as the core attributes of the businesses go, and how important they are to attracting a buyer at a 1520 plus 10 plus million dollar price tag, they just again, they get more animal five separate, if someone’s going to, you know, pay $20 million, even though you’re showing the cash flow to support it, they’re going to care even more that you’re organized, they’re going to care even more that you have your supply chain tightly managed, they’re going to care even more that you know your brand is protected. So it really becomes more of an amplification situation and a more of a bucketing of buyer fit than it does, you know having a you know, then there being a completely different list of of things or attributes that you need to have or things you need to be doing.

Michael Veazey 14:27
It’s very interesting. So it seems to me like that, actually, the big sort of dividing line comes around the $5 million valuation Mark from what you said, if that’s accurate, because that’s when you really need to be organized. And the only difference that I can tell from what you’ve just been saying, in in sort of a step change if you like there’s that there’s a level of amplification and professionalism that’s needed. But then each step changes that it becomes all about the right fit between the type of business and the type of buyer. So but other than that, I guess it seems like $5 million is sort of cut off below which you’re looking at individual. And things are less pressured for you, but presumably, tell me about multiples? And is there a relationship between the value of the business and the multiple? You can get of the cash flow? And obviously, in a sense of bigger businesses worth more? So that’s not the question I’m asking, just in case that’s confusing to anyone listening. But I mean, if you’ve got a business that is worth a million dollars, what’s a multiple of cash flow? you looking at? Roughly there?

Chris Shipferling 15:24
Sure. Well, one thing I’ll add, before I move on to that is that I didn’t mention that I would say probably does get more important as you get larger is having having a team behind your business. So having some some actual employees and having an infrastructure does start to get more important as you get into those larger dollar figures. So I’ll mention that. But as far as multiple goes, the short answer is, the larger businesses are going to sell for higher multiples. And there’s a lot of again, reasons for that both theoretical and just kind of market based. But that’s that’s where you see the highest multiples are going to be for your larger businesses. So what we’re seeing right now in the market, you know, today and these trends, you know, they move around. And so what’s true today may not be true six months from now, but right now, the larger businesses are selling much quicker than the smaller businesses, in large part because there has been a much a much greater interest level from professional investment groups than there was, let’s say, even two years ago in Amazon businesses in general, but also there are more smaller businesses coming to market. So there’s a supply dynamic there to where if someone wants to buy a business for this work, let’s say $500,000, they have a lot to choose from now, where, you know, maybe they didn’t have so many to choose from a year and a half or two years ago, and that that has also affected multiples a little bit. So, you know, I think that what we’re seeing with regard and this is, you know, it’s a very, very broad generalization because it’s a nuanced thing, where every business is going to be looked at individually, and the multiple for that business will be based on in large part on the individual attributes. But you know, larger businesses, we’ve seen go for as much as five times, you know, cash flow five times, even typically, for the larger businesses, whereas kind of something that’s more in that 500 to a million dollar range is more likely to be more like three, around three times cash flow. So that is a quite a big difference going from three to five. But you know, that’s, again, it’s a function of supply and demand, and the types of buyers that are looking at buying those businesses and what they’re willing to pay. That

Michael Veazey 17:54
makes sense. I guess it’s like anything else, if you got a few things going, and people want them, then the price is going to be higher, right? It’s pretty straightforward. I mean, supply and demand determines pricing. And that’s one thing from classical economics that seems to stick pretty well in in real life. So yeah, that makes a lot of sense. And as you say, in seeing the things have changed, I mean, I suppose the two changes, you put your finger on, just to put, just to reiterate that is that many small businesses are coming to market and I spoke to a couple of guys who who buy and sell businesses on a smaller scale with even six months between last time I spoke about a year ago in mid or late 2017, I guess. And yeah, even in six months, that market changed. So there are lots of small businesses available now. But I guess from Amazon business owners point of view, the good news is that a large interest from professional investor groups is suddenly they’ve woken up to and to you guys, you know, forming previous videos, sorry, and global wide advisors to tap into that trend. So I guess in some ways, that’s a lot of good news. But it also means that if you’re going to make serious money, you need to be more ambitious to scale up to a bigger level than you immediately in the past by the sound of it.

Chris Shipferling 19:02
Yeah, I think I think that, you know, again, the bigger you are, the more you’re going to make, you know, from a multiple standpoint, and just obviously, just in pure mathematical terms, but, you know, I think I think what if you have a smaller Amazon business, the thing that you I think are very comforted by is that the market for Amazon businesses, you know, selling those has gotten more and more liquid bigger and bigger, there’s many, many more buyers out there that are interested. So that market is continuing to get more robust, deeper, etc. Like anything else, you have to know your competition. And if you’re going to go you know, to market, you want to understand why you have differentiating factors that frankly, make you a better choice than, let’s say, the other Amazon business that that you’re up against, or the other 20 that you’re up against. So that’s where differentiation now, and then this happens in a lot of markets as they develop, you’re starting to see now in certain size ranges, where in order to get a lot of buyer interest, let’s say I mean, doesn’t mean you can’t still sell your business, get an area and and and have a strong asset, you have to start to differentiate a little bit into some of the things we you know, we were talking about before.

Michael Veazey 20:21
Actually, what’s interesting is that the buying and selling of businesses, the basic a marketing of it, I suppose in economics as well, is no different to buy and selling it any individual product line that you’ve created them. And differentiation is meat and drink shiny, intelligent amazon seller, I guess differences, we’re trying to consider the business as a as a whole asset. So it’s very sub business to business selling, and it’s a different mindset. But having said that, I guess the idea of differentiation and knowing your competition is is not rocket science. And a lot of us know our competition very, very well on Amazon, because it’s a hyper competitive space. But I guess the difference is we consider it from the consumer sort of lens. And we need to now think about it from me the other side of it from the owner side of it. But yeah, interesting how it’s just almost as this more mindset shift that over time, I think will yield big dividends. So now let’s let’s get on to another subject, which I know you’re not you guys are not the specialist in doing this. But you are involved in these markets you buy and sell businesses are also you broker those deals right. And I know you have individually bought them yourself as well Jason in the past. But if you’re going to scale them to the point, there’s obvious that scaling up is not just about a bigger version of the same thing, but the actual chance of getting your business owners quicker. And the multiple is bigger. So it’s not just more of the same. So there’s a value in itself of having a large scale business. So obviously to scale the first question with an inventory based businesses where the hell do I get the cash from? So let’s get into a bit of this that the first question is really how do I raise cash? How do I raise capital? Because that is a desperate cry from any serious seller that I know is ambitious?

Chris Shipferling 21:52
Well, I think, you know, what I will say is kind of pure raising of capital in this space is not terribly not, you know, there’s not a ton of resources to go out to and and say, all right, well, again, we talked about venture capital and in you know, angel investing, and that sort of thing, there isn’t a deep market for just purely, you know, going out and raising some capital to grow your business. So, so what what really Amazon owners are kind of left with now is some more, you know, your more traditional capital sources, whether it be small bank lenders, you know, other kind of smaller inventory, financing providers, things like that, you know, getting traded credit from your suppliers, stuff like that. And then then I think that traditionally, early stage companies, their first really round of funding and of true funding and true capital raising normally comes from what we call the friends and family round. And that’s been around for a long time, and in lots of different industries of, you know, whether you some people just call it passing the hat, you know, or calling the rich uncle or whatever. But there are ways to do that, by the way, that’s much more professional and likely more effective. But, you know, kind of, if you have if you believe you have a great plan, and you believe that you have a way to scale the business, and you can go a strong ROI to potentially and return on investment to potential investors, then what many, many entrepreneurs do at this stage, early stages, they do the friends and family round. And and that’s, that’s likely going to be the very best source of capital in the short run. And then I would say, you know, from that point forward, it does take a little bit of time, unless you have a war chest of capital that you can access, you have to kind of understand that it will take a little bit of time to scale up, it’s not going to happen overnight. And it will also likely require a little bit of action profile in the short term, reinvesting profits back into the business, but the payoff Will you know, down the road much, you know, we’ll make up for that in spades. So

Michael Veazey 24:11
the say, yeah, I mean, it’s funny we did around in a mastermind, I run a mastermind, by the way, not being a master class, why stand at the front and pretend to be the expert, but they’re all quite serious sellers, I guess collectively, I guess collective. They’re doing about 10 million pounds in revenue, which I guess for you guys is small potatoes, but most people is quite serious. But and we were just went around and just asked about capital raising and everyone. So yeah, like is hard. But your friends and family seem to be top choice followed by actually amazingly, some people managed to get loans from traditional retail banks for their own business, which is it’s really early days for the banks. And they’re kind of stuck in about 1960. Or they banks, I don’t know why but they seem to be and and it gradually that is dawning on them. There’s this thing called the inter webs and they’re like God, maybe this is actually a solid investment. I’m like, well, let’s just look at the stock valuation of every single brick and mortar retail ever versus Amazon, eBay like, yeah, it’s about 15 years late, but you’re beginning to wake up. So obviously, for those who live online, it seems ludicrous. But have you got any tips for I mean, obviously, this is an American perspective, sorry, was that if you’re based in Britain listening to this, you might have to take this with a pinch of salt or find your own version. But have you got any thoughts on how to approach anyone outside the friends and family thing? What’s the next step? If you’re talking to a bank, or anybody else like that? Any tips?

Chris Shipferling 25:34
Well, again, that this is going to sound a little redundant, but what any of those lenders are going to want to see is, again, quality information, you know, organized information and a very high quality plan of action. What, what bankers, you know, are the these days that they’re not thinkers, bankers are not thinkers. So you have to do the thinking for them. And, and then when you you know, give them something that that is that makes sense. And that, you know, has real financial projections that you have thought through, you know, all of the all the boxes, they need to tick with their internal, you know, credit officers, then that’s the, that’s the most important thing is to is to have a really solid plan, have your information, a well thought out and organized and an actual financial projections put together when I say projections, even just three years, which may seem like a lot to some people. And yes, we understand a lot can happen in three years. And projections are not a crystal ball. But what that shows is that shows that not only have you thought about it in a qualitative way, bankers think in quantitative terms, you know, and like I said, and they don’t like to do a lot of their own thinking. So if you can put together even a three year projection that has really sound assumptions behind it, or or certainly sounds like you’ve really, you know, thought through it, then that’s going to give you a fighting chance, at least,

Michael Veazey 27:09
it makes a lot of sense. And, again, I mean, in a way, you know, some of what you said it sounds redundant. Sure, fair enough. But on the other hand, I think I don’t think it’s we’re done in to emphasize differences in mentality sometimes that mentality shift is what we really need to start with. And again, it’s basically a selling situation, right? I’m I guess I’m a marketer, by by nature. But yeah, if you understand what the other side is looking for, and also what the problems are, if you’re gonna make somebody look stupid in front of their boss, there’s no way they’re going to take it to their boss, right? If they go in with something, which ticks no boxes. So it’s important to be able to get your head into the fact that it’s quality quantitative. So the story in the buzz of it, which and a fellow entrepreneur might get these bypasses them, ticking the boxes, and three years of projections. And, and the mentality, you got to do the thinking for them. I think that’s actually very valuable. Because again, it’s a question of a lot of life, I find that getting whoo about it is it comes down to understanding a very different perspective from our own, but about the same object. So the object is the business, we own it, we’re passionate, we care about it, blah, blah, blah, somebody else sees it as a completely of thing. And if we can get our head around that, I guess, we have some fighting chance, as you said, so I think that’s, that’s really helpful. Is there any, anywhere between the Full Sail of a business and something between talking to friends and family and talking to banks, and then Full Sail? Is there any sort of in between ground that, you know, often that you could get us on?

Chris Shipferling 28:34
There’s nothing that we’ve seen yet develop in the market. And I think that that’s because it’s such a new marketplace, as far as I think that even just as as short as two to three years ago, there were very few stores, Amazon businesses that so I think at the time, as you said, a lot of people feel like, well, Amazon, is there a juggernaut and they’re, they’re interesting, but I’m not really sure what the sustainability is. I’m not sure, you know, this, this whole e commerce trend, I don’t really know, you know, how long it’s going to last. So there’s a lot of there was, and still is a some sort of cynicism around, you know, all right, well, how long is this really going to continue to grow like this, this this shift? I think now, what we’re finally seeing is the acceptance of that trend, the acceptance of Amazon’s position in the market funding around that has started to change a little bit, as you said, there are some traditional banks that are actually willing to link to Amazon businesses now, where that wasn’t the case two years ago, are you now people interested in buying Amazon businesses, that wasn’t really the case two years ago, and that middle ground a lot of times is the little bit that’s usually the last two to develop a lot of their lives, it’s quite possible that there are some small pockets out there that have started to develop, that would offer, you know, more of a traditional kind of a capital growth capital type of a of a solution for for Amazon store owners, we have yet to come across it in our travels, but it will very likely develop, I think, in the not too distant future. Because we’ve seen how the market as a whole has developed. And it’s it’s only a matter of time before that those solutions start to present themselves.

Michael Veazey 30:26
That same thing. So basically, you’ve seen the trend developing for the investors taken seriously in the banks to take you seriously presume being in the bankers case, debt. And in the case of obviously, you guys, you know, actually buying the entire business. So yeah, that implies to me there’s obviously middle ground is conceptually, it’s not hard to say, Well, what where is the middle ground? And the answer is, well, it doesn’t exist. I guess if there’s a need for something and it doesn’t exist yet. The chances are, somebody will come up with a way of doing it. I know that Matt Ward’s been on he was on the show, while ago now must get him back on to see how that’s developed. But he was developing a revenue you share that model, which is a bit different, I can’t quite figure out how it works. Off the top of my head, I did talk some detail. But a couple of people are coming out with smaller scale solutions, specific Amazon. So I imagine that will be a watch this space number and be interesting to see how that develops. So talking about what Amazon and where it’s gone. I think it’s just talking a little bit about diversifying off Amazon for the last segment of this. And specifically, obviously, you guys have got a certain view of it from the point of view of people who help buy and sell or, you know, to sell to other people, Amazon businesses. So with that hat on, where do you think Amazon’s going? And I guess, Chris, is that the Amazon person, you’ll be the best place to answer this. Where is Amazon going over the next while they’ve their growth story has been so phenomenal. We finally seen dropping the share price of 9% recently jolted downwards. So something’s going on. What’s your take on that from Wall Street?

Chris Shipferling 31:54
Jason can give a lot of color this too, as well. I mean, I’ll say from from, from our view, you know, I think Amazon’s growing up, right, you know, I think I said this to somebody the other day, I think it’s hitting puberty, and it’s starting to mature, you know, no one really knows exactly what that looks like, per se. They’re putting a lot of investment in their own private label brands. I think that sellers, it’s becoming more saturated sellers need to get smarter, they need to get more, you know, I use the term scrappy, but you know, it needs to be more strategic than that, you know, they just can’t go out and just start throwing punches around, they’ve got to really start thinking through going back to what we said earlier about value for your company, they got to start thinking through brand, you know, and they also need to start thinking about diversifying themselves. You know, renting space from Mr. Bezos does present a risk downside, right, you want to develop something for yourself, you know, that you can really say, that can bring a lot more value to your company as well, you know, moving yourself off of off of Amazon, you know, Amazon as a whole. I think they continue to, I think they will continue to suppress resellers. They need to it dress, hijacking, you know, anybody can sell on the marketplace. But, you know, I do think that’s a that’s a big problem right now, obviously, they’re trying to address the whole idea of counterfeit product in relation to hijackers, you know, they’ve obviously come down pretty hard on reviews, I’m sure that’s something that you have had some pretty large discussions about, not only on your show, but with your own with your own, you know, mastermind sellers, then so, you know, I think taking that as a proxy, Amazon, Amazon is going to mature and change the way that you sell through their platform. Amazon is also very dedicated to becoming I call it the Google firing of Amazon, you know, their, their advertising revenue, this year is going to hit $10 billion. And it’s a significant jump over last year. And that’s going to continue to grow, you know, so, you know, with that, again, you just got to get a lot more you gotta get, you gotta get smarter, you gotta grow up. And you gotta, you gotta bring more value to your own business on that platform specifically, so build up, you want to add anything else to that, Jason? Yeah, I mean, I think from this specific question around diversifying off Amazon, I think that it starts to matter, when you get something close to 50%, Amazon and 50%, another channel, that’s where it really starts to make a difference in your valuation and make a difference in your market. So if you’re 100%, Amazon, or you’re 80%, Amazon or you’re 75, 70%, Amazon, it’s always better to have some diversification, but you won’t really see a big difference in your valuation. But if you have something that’s more half and half, and I know there’s a number of investors out there, that actually have a in their investment criteria, they they will not buy a company that’s more than 50%, Amazon, or really more than 50% anyone channel was, it’s another marketplace, you know, or Amazon itself. So that’s where you will start to see an effect on the valuation. So what we’ve seen is the market for Amazon businesses has gotten really, really strong in the last year and a half the multiples though, they’re still kind of a lid, if you will, on the multiples for businesses that are so heavily concentrated to Amazon. So now all of a sudden, you can sell your business, and you can, frankly, sell it for a lot of money. But if you look at the multiples for Amazon businesses, versus the multiples for other, you know, similar retail e commerce businesses that are just more diversified, those those businesses are trading for higher multiples than the Amazon only or heavily concentrated to Amazon businesses.

Michael Veazey 35:54
And then Chris, I know you got a cool case study about that, that you mentioned to me before we came on the show. So perhaps you can give us some idea.

Chris Shipferling 36:02
Yeah, absolutely, I’ll be sustained. There’s a seller that was heavily concentrated on Amazon and decided to invert and bring more value, you know, direct to consumer. And, you know, there’s a lot of detail on that. But you know, one of the tactics that they took was, you know, heavy investment in digital marketing, obviously, to to drive more ramp awareness on the brand through through various advertising channels, Facebook, ads, so social marketing, but then also Google ads as well. But what they did is they drove up the price of their product on Amazon, they switched it to an FB m model, not FBA, and drove people off Amazon to look for a better price. Because the stats say that happens, you know, last step that I looked at, it was somewhere around 55 to 60% of people that are searching for consumer products on Amazon will go off Amazon and Google to see if they can get a better price. You know, whether that’s our retail me not coupon or whether that’s some type of coupon hunting, they will do that. And so this particular seller was able to drive traffic off Amazon to their own website, and they were able to invert their sales, you know, over that 50% mark that Jason mentioned. And subsequently, yes, that will fish a higher multiple for your business. It’s a smart tactic. That’s what I mean about getting smarter.

Michael Veazey 37:26
Yeah, I guess the the seduction of Amazon is the fact that you can go to one place, and they’ve done a lot for you. And as you said, the downsides can be pretty hideous. And a rather more hidden and more subtle downside is the fact that you can’t sell your business for so much money. And I suspect also, the markets mutation very quickly, as more and more Amazon businesses come up for sale, and desires and squeezes them more and wants more and more advertising revenue, which is basically coming out of our profit margins this Amazon sellers are then because the price competition is such they won’t come out of the consumers pocket profit margins, consumers prices, rather. So yeah, that’s going to make it more and more important. ISIS bets is a very clear, simple long term trend, if you project from whenever anyone started selling on Amazon to now I mean, it’s just squeezing the sellers harder and harder. So I think, I suspect and we’ll we’ll talk again in two years time and see how true that is, I suspect very strongly that is only going to get more important. So again, projecting forward from the past is always a difficult game. But the the Amazon past is extremely clear. It’s like the third party sellers and tolerated and squeezed to the pipsqueak and then they’ll come and find your product directly in private label themselves. And that’s the truth. Right. So ultimately, it is a pact with the devil on the other day, you know, this is this is that I just show my true colors on my background is a musician and not just a musician, but sadly a classical musician, which probably doesn’t, I don’t know how the hell that impacts my my business credibility. But I was working on the profile as you do. Sorry, that sounds terribly posh. And files is a classic, classic story and basically is an old man who makes a pact with the devil. And it seemed like a good plan at the time. But obviously, path to the devil is only going to end one way. And I have to say whilst without painting Amazon in quite such bright colors. I have to say, my biggest advice to people and this is a podcast specializing and Amazon selling is do your best to get off hand. Because it’s a risky business. I don’t be not Amazon, I mean, just away from it as much as you can. Yeah. So I’m really glad to hear that story. Because it’s very heartening that it’s not just possible, but actually, you know, it can be done in real life with some smart tactics. And as you said, we have to grow up as Amazon sellers these days. So guys, been fantastic education experience talking to you about the whole business and getting the wall street of angle on it with more of, you know, a sort of investment mindset than we’re used to perhaps a small business people run around doing stuff all day, instead of thinking, Well, what am I aiming at strategically. So if you got any final summary advice to Amazon, business creators or Business Builders, that you think is important, if they’re thinking of reading, possibly thinking of selling?

Chris Shipferling 40:02
Well, I mean, a couple things that I’ll repeat, one is, you know, I kind of, I think that the motto of begin with the end in mind is, is a good one to have, I think that Amazon sellers should understand what’s going on around them. With regard to the market for their company, it’s very easy for any entrepreneur, and especially, you know, Amazon sellers, it’s very easy to just get, you know, into the day to day of your business, the details of your business, and really focus on that. I think that if you are a business owner, you always need to take some time to sit back and think strategically about where is this all going? And where is my exit for this? And what do I need that to look like? And therefore How do I how do I get there. So you know, having that end in mind, and having that part of your strategic planning and thinking, I think now more than ever is, is really important, because there’s actually a market now that’s developed for your company, which is a great thing. And you should want to take advantage of that in the in the best way possible. And so knowing about it, knowing what matters, and being able to strategically pick a good time to exit, I think is important. And I think that that’s something that any Amazon business owner should should incorporate into their process. Yeah, I would just add from a seller perspective, I think, you know, Michael, you nailed this earlier. But there’s a reason why doctors have continuing education, right, there’s a reason why they’re forced to go to certain conferences, and you know, why their, their firms or their hospitals, ask them to to keep learning and or they’re forced to keep learning, I’d say the same thing with sellers, you know, don’t put yourself in a vacuum. Don’t become myopic about your business be open, if you need to hire a consultant to help you scale, do it, because those consultants are coming starting with, you know, a lot of different brands, and they’ve got their finger on the pulse to Amazon, they have to, it’s worth the money, it’s worth the money to take time out of your day out of your week out of your month. To go and learn join, join Amazon groups, find people through LinkedIn, you know, grow your resources, I think that’s highly, highly important. Because Amazon is changing so much. I mean, it feels like, feels like we wake up and we get an email from Amazon. And all of a sudden, they change something new in the CEOs. And then of course, everybody goes into panic mode, right. But if you’ve got a really good kind of resource well, and you’ve got a really good resource structure to lean in on, you know, a lot of those things don’t become nearly as scary. So that’d be my one piece of advice from a selling perspective.

Michael Veazey 42:45
Well, I have to say him, and this is a bit of self interested. But as somebody who ends now, three masterminds to start at one, four, people are doing me minimum of a million pounds a year. So, again, fee, this is revenue. So if you guys more potatoes, but still significant relative to that absolutely vast majority of people. And again, I’m really, those are the people, they actually couple of the members of that actually pushed me to start it that shows you that and that, you know, the hungriest people are the people who are doing the best numbers because they know the importance of education. And yeah, I think also, as you said, Don’t be in a vacuum. I mean, even without getting whoo, whoo about it, people who are doing any kind of serious numbers whatsoever, even just a family business style, perhaps more there than in the corporate structure, you have to have, you know, a harness, you have to have balls, I’m trying to avoid, say the word balls on my podcast, but I have to say, to be strong, but nevertheless, you know, the strongest people recognize that actually, they’re strong, partly because they connect to other people, I think that connection to people is, is vital. A lonely fight is really one that you begin to lose. I think if you feel lonely, you’ve already lost as you say, if you want a structure of great resources, and when it should be everything. Like I said, Tiger Woods, seven coaches, find a new reference me tiger, you messed up my reference. But yeah, if you can tap into be good experts in how to sell your business, even if you’re not going to do it for three years, if you can tap into lawyers about the legal IP structures to protecting your accountants to get really quality projections, friendly bank manager worth their weight in gold, etc. It’s a whole team of people outside of your immediate business structure. I couldn’t agree more. So guys,

Chris Shipferling 44:16
and I would add just one more thing, if that’s okay, again, I’m just going to plug I’m going to plug our website for a minute and us as well, that’s it, that’s cool. But you know, on our website, you know, one tool that we do provide for sellers is evaluation tool. So you can plug in your some some important metrics and a couple different points of data. And it really does spit out a really good approximation of what your valuation would look like. And this was created by it was created by US was created by, you know, years of experience in investment banking. And so, you know, instead of just having some random number spit out, these numbers are pretty what we have found in valuation versus talking to sellers who are interested in selling their business and that we’ve engaged with our approximation is, is really good. We have found out once we really dive into some more details about that business, and, you know, and go back to set to one thing to and you mentioned how, you know, a lot of your listeners, you know, they may be small potatoes, or they may be smaller, that’s okay, you know, we’re here, we’re here to, to help you, you know, you know, Jace, like Jason said, beginning with the end in mind, you know, if someone wants to get on the phone with us and have a quick 15 minute consultation, or just to kind of talk through what they should be thinking about for selling their business. Yeah, we’re here, we also have some great white papers to that, that really kind of help guide your thinking in terms of selling your business. So I just felt it was important to plug some of those important points not from a selling perspective, but just from Hey, you know, we want to be that resource for your for your listeners.

Michael Veazey 45:49
Great. So what I’m going to tell you guys set to keep things simple, because premium sounds a bit scary to sell and global wide advisors will give you RSI on your keyboard, I’m just going to put a link from amazing FBI conference is global. And I’ll probably change that to be in 10 k collective link at some point, but we’re in transition. So we’ll be honest about it. The branding is a mix. Hopefully this will be on a new branded podcast, but with all the amazing FBA stuff behind but amazing fba.com forward slash global, and will will point them through to that valuation tool, and any other sort of white papers and things you’ve got to download. And they can take advantage, also of your very generous offer to talk things through people feel free, which is very useful, why not take advantage. So that’s it. For me, I just think that’s been a really interesting insight. And the biggest the big pictures in a way for a business owner is to contemplate handing it over to somebody else. And then you’re out of the game with that. Of course you probably if you’re an entrepreneur be back in about 10 minutes, because that’s the nature of the beast. But I do think that as you said begin with the end in mind couldn’t say it better. So, guys, thank you so so much for coming on.

Chris Shipferling 46:53
Thank you, Michael presented by you. Hey, take care. Bye Bye.

Michael Veazey 47:01
Thanks for listening to the 10 k collected podcast. I really hope you found this show helpful. I mentioned the London based masterminds we’ve been running since September 2017. Members of the 10 k collective mastermind making minimum about 480,000 pounds a year, whatever. 600,000 euros or dollars. To find out more about that mastermind. Get to amazing fba.com forward slash 10 k si k for killer. See for Charlie million pound mastermind members make a minimum 4.2 million pounds a year that’s about 1.5 million US dollars for years. To find out more about that mastermind. Go to amazing fba.com forward slash MP endless empanada.