Melissa Simonson 3:11
100%. I mean, there’s, there’s a lot to be said for many masterminds in that area. But one of the really differentiating factors from power is that we’re a nonprofit, very little cost to get started. And we have a membership type. As you mentioned, before, that we serve as two types of members, one before the million dollar more per year in revenue mark, that’s a lifetime membership. It’s very cheap, and you don’t pay monthly fees. So if you want to be part of the club, you’re just in, and you always have access to it. And the point of that is make sure that we are there that we are at the Lighthouse of entrepreneurship so that people know where to turn when they have question.
James Thomson 3:50
Okay, so last year and a half, obviously COVID created major chaos for an awful lot of folks. But at the same time, you’ve got all these new investors jumping in FBA private label businesses, they are a hot commodity. Yeah, in your view, what has happened to generate this recent interest that businesses that have been around potentially since the start of the Amazon Marketplace are in such demand?
Melissa Simonson 4:15
You know, I think that there’s some left here did a number on a lot of people, but it did it in different ways. And there’s some people who they might have had a product that was kind of stale, it wasn’t doing great. You know, like, it was it might have been plugging along, but it wasn’t anything special. One example would be a day kind of attachment to your toilet, right? Some people will die. Some people are like me, but if all of a sudden all over the world, people are running out of toilet paper, then all of a sudden that’s gonna start flying off the shelves. So, you know, there’s a lot of things that happened last year that were unpredictable. And so some people suffered for it and some people really blew up They just got really great. And it made some people start thinking, you know, maybe maybe I should consider selling, maybe it doesn’t get better than this. Because the product in a normal season or normal year, doesn’t look better than it did this last year, I should probably consider selling based on the previous 12 months of profits and margins and stuff. So, you know, I think that it made a lot of people’s attention turn toward that where they might not have been thinking of it before.
James Thomson 5:28
So for a lot of sellers that get started on Amazon, my experience is that many of them see this as an opportunity to make some additional revenue, maybe it’s a side job side hustle. But now, these investors are coming in saying, Oh, actually, this company is worth a bunch of money. What are you seeing within your membership with folks saying, I started a business and apparently somebody wants to buy it for a lot of money? How does that mind shift start to change the discussions that you’re seeing within your within your co op?
Melissa Simonson 6:04
Well, you know, I think that there’s a couple of different kinds of sellers, you know, we have we and of course, a couple is probably, you know, there’s many different types of members, and there’s many different types of sellers. So some come into it thinking, you know, I want to make a few extra bucks. And for someone in that frame of mind, where they’re coming into this, just trying to add to their income and help support their family, someone offering them a large chunk of money for what they’ve built so far is this gravy, it’s like, something I would have to like, consider. But when you have somebody who, you know, is saying, I’m building this so that I can quit my job, this is going to support my family, I’d like to pass this on. It’s not as tempting, you know, they have a vision and they have goalposts, and they’re building something. That’s not just one brand, it might be multiple brands. They’re building a company and Empire. And so it’s different for them when an aggregator or somebody approaches them about selling.
James Thomson 7:00
So tell me a little bit more about the kinds of new questions you’re starting to hear within your membership questions that a year ago, nobody was asking. And now they’re common common discussion points.
Melissa Simonson 7:11
You know, I think one of the most common questions that we get right now is what does the actual process look like? When when you’re thinking of it sort of in an ethereal over generalized view? You’re thinking, yeah, I’d consider selling at some point, I probably need to get my books in order. This is kind of a big generic overview. But when you’re actually seriously considering it, then you start thinking, What’s the actual process? What do I actually need to do? What are step by step things that I need to know for what this looks like? So that when I’m diving into it, I’ve done some things ahead of time, and I feel comfortable getting into it. And so we’ve had actually, a few different of our strategic partners come onto our all hands mastermind call to show people that, you know, when you when you use our services, this is what it looks like. And when you’re going through it, just in a generic sense, this is what you should expect. And this is what’s out of the ordinary that you should, you know, raise the red flag where sellers most unprepared today, it’s always gonna be their book. I mean, you know, it’s not something that’s always fun to do. And, and I think that we tend to have a lot of people who want to solopreneur things, they want to try and do everything. And, you know, it depends on what level they’re at. You know, so there’s some aggregators that they’ll only purchase at $5 million or more. And there’s some who go, you know, at many levels in between, so, um, you know, obviously, people are at that level, they’ve got a bookkeeper, they’ve got everything handled and squared away, hopefully, and people at a lower level, usually, they’re still trying to do it all. There’s they’re not delegating, as well as maybe they should, if they’re trying to hand things up. And I think that the biggest thing that people face is, what’s the transition? How do I get from right now me doing everything, to me being able to walk away from this business and still have things happen so that it is an actual saleable? product I’m selling, you know, your business should be something that you don’t have to show up for it to be? Right. Principal?
James Thomson 9:15
So what are some of the biggest concerns you’re hearing from your members today, with all this new activity from investors? You know, it’s it’s easy to get excited. But it’s also easy for your anxiety level to go up because you say, Oh, my gosh, how do I get in on this? Am I ready to get into this? Am I the right kind of company to get in on this right to take me through some of those types of discussions you’re seeing?
Melissa Simonson 9:37
You know, those are actually really good ones that you just brought up? I think timing is probably the biggest concern people have. They want to know, you know, is it smart for me to sell right now? Or is the interest I’m being shown right now something I should, you know, take a closer look at and maybe take another year and build this up. So they can sell it for more later that That’s a difficult question, I actually have a free treat for your, your podcast listeners, I actually was just talking to a new company today about partnering with inquiry. And they have a very different way of doing things. This is why we’re considering them even though you know, there’s a lot of aggregators, and there’s a lot of brokers and stuff already in this space. This one is a little bit different. We keep seeing this question come up about timing, and people concerned about whether it’s whether they should wait, whether if they wait, then they’re gonna lose what they would be offered right now. And that kind of puts you in a state of indecision. But this new aggregator, this company, what they do is they actually, they don’t buy companies that are ready to sell, now they want to buy a company, work with you for, you know, nine months or a year, help you scale it up, and then pay what it’s worth at that point when it is worth more. So it’s a very different way of looking at selling your business, so that it takes that unease away, and so that you don’t have to worry like, I sell now, am I losing something? If I sell later, am I losing what I’m getting now? All of that away? And I think it’s a really brilliant way of putting the seller first.
James Thomson 11:16
One of the questions that I’ve been asked repeatedly by some of these these private label sellers, is this question around? How long does this gold rush last? Is it a gold rush? Or is it the sort of thing that this is the new norm that there are investors that are interested in private label brands? What are your thoughts around helping brands to think through? Do they need to get in now and get their business sold? Or do you see there being a window that continues to be open for a while?
Melissa Simonson 11:43
I mean, I think if you have a business that’s worth buying, there’s always going to be someone who will be willing to buy it. I do think that right now there is kind of a sense an energy even in this space about buying and selling. And part of that is because there are many new companies coming into it. And so if you take you know, your own, you know, the sellers and the products, and all of that out of it, and you think only of the aggregators and then competing with each other, then in that situation, you’ve got, you know, people who are trying to develop a reputation a name for themselves, and they’re willing to do things now that later, they may not, they may not do so there is something to be said for that being a factor in timing. But really, that shouldn’t be a deciding factor for selling now, it really should be more about your business and less about, you know, maybe an unpredictable, ethereal, something that you hope that you’re right about that you’re guessing from that perspective.
James Thomson 12:42
I’ve done due diligence for a number of these investors, and I get to see these companies as they’re being evaluated. And one of the things that I find, quite frankly, a little bit amusing looking at these materials is these companies will say, here’s all the growth opportunities in our business. If only we had more time and money, we’d go do X, Y, and Z. And you know, some of these things are logical, little far fetched in some situations. But I’m curious from your perspective, for companies that are under a million dollars, I love your thoughts on how many of them are realistically in a position that they can sell, versus the ones that are 1 million plus. And if they’re actually a position that they can sell? What are you telling them they should be doing in the next three to six months around growth engine? What can they do to actually grow their business so that when they open their books to an outsider, that outsider says, Oh, I see something exciting here. I see growth, growth growth.
Melissa Simonson 13:38
Yeah. So there’s a few of these kinds of things. This is a really good question. It’s really tough for people under a million dollars a year to find a buyer. That’s, you know, that’s sort of the crossing point for these aggregators, especially. And it’s, it’s tough, you know, I have a member in mind that we’re working with right now to introduce them to everyone on our network, it’s really tough for them to find someone who can take their business at the level it’s at right now. It’s a great business, it’s making good money. But it’s just not, you know, that business is not the million dollars or $5 million a year business. So the thing that I think is best is if you know if they’re in a position to take a moment and grow the company, we have a company that we’re partnered with called scalla. And they are really excellent about helping you look at like the organizational chart of your business run, what are the systems and processes that you use? How can you use those to delegate have a few team members now help you scale that and actually run it as a company a corporation rather than, you know, again, solopreneur trying to just make things work and then sell it like that. It’s a better way to to put yourself in a position where Someone says, Yeah, I can step into this and still make money on it.
James Thomson 15:04
So let’s let’s talk through a number of issues that I’ve come across where there are likely evolutions in the way that brand owners are thinking about their business. First and foremost, putting operating procedures on paper. How are you seeing companies now saying, if I’m eventually going to sell this business? How do I identify what procedures need to be documented? How do I need to streamline and standardize these procedures? To take me through what’s going on within your membership?
Melissa Simonson 15:33
Yeah, that’s it’s not that common of a question. Really, that’s, I think, what the question should be. So that’s something that I and, you know, at Empowery, we’re trying to help people look toward and push so that they are getting to the point where their business, again, is an organization, and there’s established systems and processes rather than, you know, there. You know, putting out fires, as entrepreneurs, we really like to put out fires, no good, like, we’re the only ones that can handle this. But that’s not a great thing, when you’re trying to sell. So, you know, again, I think in that situation, there’s a lot of different, you know, CRMs, or organizational software’s and stuff like that, that you can use to get yourself, you know, organized and put slps down on paper, we use persimmony, we’re partnered with them. And it’s really great. It’s specifically for Amazon sellers. So Amazon sellers, product based businesses, it scrapes, reviews, it helps you keep your finances in order. And it also has like an SRP system. So that’s a really good way to make sure that you are not only tracking your slps, and you’re handing something and established customer base and stuff like that over to someone who’s buying your business. But you also have the ability, if you want to scale it to take your new team members through a systems of processes training system and stuff like that.
James Thomson 16:58
So let’s talk about you. You mentioned earlier getting your books in order. Okay, I now have an accountant, my accountant gives me monthly numbers, I can see where costs are coming from. What other common misperceptions or common mistakes, are you seeing where the metrics, the financial metrics need to be improved? And the entrepreneurs don’t realize they’re creating a valuation problem for themselves? Because they’re not managing specific parts of the p&l?
Melissa Simonson 17:27
Um, well, you know, I’m not sure I’m not sure if I can answer that one. In particular, I don’t get into like super nitty gritty valuations and stuff. But what I can say is, I think that people often miss opportunities to increase their profit margin. So um, you know, things like GETIDA right, you mentioned GETIDA. As, as one of your things. We’re also partnered with GETIDA, it’s a great way to see if you can recover some money that adds to your profit margin when you’re going in for for evaluations and stuff like that. There’s, you know, there’s a few different things that you can do to reduce fees, reduce expenses, and increase your profit margin so that you get the most when you’re going to sell.
James Thomson 18:09
Talk to me about how you help members think through this process of building the business from the ground up, maybe maybe this is your zero to 1 million sellers. But the process of building a business when you’re thinking about an exit is very different than building a business so that you can, you know, quit your day job. How does that conversation? How is it shifting now that there may actually be a bunch of pots of gold at the end of the rainbow?
Melissa Simonson 18:39
Right? Well, so I’m pretty, we don’t often have people that come to us and say, listen, we started this business and we weren’t thinking ahead. But um, but I think what you know, what you’re getting at is, when you start your business, you really should know where you’re going from here. And some people have a really firm idea of, you know, I’m starting this business because I want to be able to quit my job I want, you know, freedom and flexibility in my schedule, I want to be with my family more. Some people again, it’s a side hustle, and it sort of evolves over time, and some people just have not decided, but one thing I think is really important in this I’m sorry, we’re gonna get some, some extra voices in the background here. That’s okay. Um, but one thing I think that’s really important for people to know is, if you have not sat down and discovered your why, and you think you’re at the point of selling, this is a big problem, because you might not know your level of involvement that you want to have after the sale. So you might not even know as you’re going into a sell a sale. If you want to continue working with the company for six months, nine months, or you know, or if you want to just like hey, I’m walking away. I’m done. Right, right, right. laughs My hands of this whole thing. You haven’t thought long and hard about that and you’re not firm on where you stand on that. You might find yourself point of selling, and then both you and the person purchasing the business are confused about your role. And that’s really, you know, that’s something that I think is kind of common Actually, I don’t think a lot of people sit down and discover their why. And so to kind of circle back to your point, it’s really important. I think, for people who are starting new brands, or starting new businesses to really understand that you should be building it to sell, even if you are not going to sell it, right, you need to start as you intend to finish, whether you have one product to start or 10, you need to be doing your financials as if this is something you’re going to sell. And it’s just doing it because it’s good business. But it will also help prepare you for later on if you do evolve and change in that,
James Thomson 20:48
when I look at companies that are actually in the process of selling. And now someone asked them to build a data room, that process of putting information, slps contracts, intellectual property documents, putting that all in one place, that’s an overwhelming task for a lot of companies, because they don’t, they don’t have things properly organized, they don’t realize they’re going to need this stuff. And now it’s a sprint to get all this stuff organized into one place, because the clock is ticking. And you’ve got 30 days, 60 days before due diligence is done. Right? How do you help companies get themselves in a place where it’s not just I have good finances? And maybe I can explain some slps? But all this other stuff that needs to go in the data room? What’s your what’s your perspective there?
Melissa Simonson 21:40
Yeah, I mean, I think people need to be realistic with themselves, most people who are approaching us they want to sell within the next six months to a year. So we can give them a lot of good pointers with that kind of timeframe. Yeah, whereas you know, if you’re like, Okay, I’m done, I want to sell right now. And you haven’t done a lot of work that’s just not realistic. And the thing is, you shouldn’t just be thinking about the fact that someone might ask you to do these things. And it might be stressful to try and get it done within a short timeframe, you should also be thinking, you might lose the opportunity for a great buyer, because they might see that that’s not already done, they might not give you that on a task list. So it’s really something that if you’re considering selling, you need to get organized, you need to have things in a, you know, a centralized location. So that is something, you know, imagine if you hired someone to take over your role. And they needed to know everything that you know, what would that look like? Yeah, and you need to have all of that available. So they could step into it and do your job without you saying a word to them. That means SRP is everything that’s in your head, you’ve got to get on paper. And that’s a lot of work. And it’s stuff, you know, if you are a year out or something like that, it makes it much easier, because you can, you can write down these slps these processes as you’re doing them, you know, today, I’m going to go in, and I’m going to respond to customer, you know, reviews, or I’m going to do customer feedback, here is my process for doing that, right. And you write that down for us, we pop it into parsimony, so that the SLP stays up on the screen, no matter who’s in it. And that makes it really quite a different tale. It looks quite a bit different to a buyer.
James Thomson 23:18
So so let’s let’s shift gears here. I want to get your perspective on for many of these companies as they prepare for an eventual sale. There’s inevitably this question of, do I go get a broker? I try to handle it myself. Or what happens if I get a call out of the blue one day from an investor who says, I’ve been looking at your business? What I can see externally? I’m interested in buying it. How do you think about these different types of options? And how do you help your members to think through what might be in their best interest?
Melissa Simonson 23:51
Yeah, yeah. I mean, I think it’s definitely on an individual basis. So thinking it through really, that’s, that’s what you have to do. You have to sit down and think you know, what’s in your best interest. And a lot of that, you know, you need to have multiple opinions, you need to have more than one company that you’re talking to, that you can compare what you’re getting what you’re giving, you know, when people are trying to decide between a broker or an aggregator, you know, I think it can be hard to decide it. Sometimes it is based on the revenue sometimes. There’s, depending on the aggregators and the brokers, there could be more aggregators who are willing to buy Amazon centric businesses than brokers. that’s changing. So that might not be true a year from now, right? What we try and do at Empowery is we connect people who are interested in selling with our brokerage firms and our aggregators so that they can talk to each of them and each of them are going to ask them questions, find out you know, if they would qualify to work together, if It would be a good fit. And those questions sometimes are telling in the things that you need to prepare for. So the sooner you contact somebody like that, even if you’re just thinking, I wonder if I should prepare to sell at some point, we should know those questions that they’re going to ask you, so that you have an idea of what you should be preparing in advance
James Thomson 25:18
of your members who have already sold. What kinds of learnings Have you been able to bring back to the rest of your membership, that maybe thinking that that’s possibly an exit one day?
Melissa Simonson 25:31
I think that, you know, peer to peer, a lot of our members are able to kind of help each other out. That’s, it’s one of those things that you get from being part of part of a community. It’s, I think, for me less top down than it is peer to peer, you know, having someone who has had that experience before that they can go to within our community and say, you know, how was this for you? Does this seem normal to you? You know, how long did it take for this part to happen? Yes. It’s just nice to have that. When you’re going through something, especially for the first time, it’s nice to know, someone else has done it before you and that you can kind of calm down, take deep breaths and know that there’s, you know, those answers around the corner.
James Thomson 26:14
So in your view, why should private label sellers be selling now? versus waiting a year waiting 18 months, so they can continue to grow? How do you help people think through that very challenging issue?
Melissa Simonson 26:30
yeah, I think, again, it really depends on the individual business, I don’t necessarily think that right now is the right time to sell. For some businesses, I think that 18 months might be a better time. I think that if anyone is trying to rush you into a sell, right now, that’s a red flag, I think you need to talk to somebody else get a second, third, fourth opinion. They might be right. They might be right, that this is the best time for you to sell. But you need to be sure of that. Because especially if you’re feeling pressure, if it’s something you’ve hadn’t considered. Nobody can tell you what’s right for your business. But you so you need to form your own opinion based on, you know, collecting more information from many different sources, who have different agendas, so that you’re only acting based on your own agenda.
James Thomson 27:17
With all this new activity happening from investors, how is this changing the way that you’re having to manage Empowery, a co op? What what are you needing to do so that you can evolve as an organization to better support sellers?
Melissa Simonson 27:32
You know, it’s tricky, because some people, they will sell a business, and then they’ll start another one, they’re serial entrepreneurs, they want to keep it going. Some people are like, I can’t believe this worked out, I’m going to sell it wash my hands back to my day job. So for those people, you know, we’re going to miss them as members, because if they’re not, you know, sellers, there’s, there’s no benefit for them being part of the co op. And so we hope, you know, to stay in touch with them, but they’re not someone that will see regularly at events and stuff like that going forward. So that’s definitely a change to the co op. But in terms of, you know, this sort of being a gold rush, like you mentioned, we’ve had to look at having multiple different types of partners, like I told you, I met today with somebody who has a different way of approaching the aggregator side of things, because there’s concerns and things that come up. And as this branch of service continues to evolve based on the needs of the sellers, so too, does their offerings, and you know, the way they approach things, and that’s really important, it’s good for the seller, the more competition there is there, the better it is for the seller, and we and Empowery or a seller focused, you know, there’s other co ops that they essentially will share lead lists, or they might be a buying group. For us, we are seller focused, we want to help sellers find solutions, reduce their costs, and make more money.
James Thomson 28:54
It’s amazing for someone who’s never thought they could eventually sell and now they’re seeing their colleagues around them, selling businesses and being able to put a lot of money in the bank so they can start the next business or go live on the islands. It’s it’s very confusing at some level, because you’re not quite sure. I didn’t expect that I would ever be in this position to participate. And yet here it is. Right. I want to finish our discussion today by asking you somewhat of a loaded question here. How do you see all of these investors getting their value out of these brands? They’re paying these multiples that require these investors to know what they’re doing for the next X number of years? How do you see them actually taking over a brand and running with it fast enough and building it up enough that they can actually make money out of it?
Melissa Simonson 29:45
Yeah, so I mean, I think there’s, there’s some that are gonna do really well with that and some that are not, um, you know, they might have different strategies for that they might again, they might sell off, you know, a brand that they’ve taken on, they might have different ways of approaching that. But I know you know from some experience with our strategic partners that are aggregators, they have more of a budget to work with oftentimes than typical seller so they can throw money at advertising and marketing, and repackaging and stuff like that, that really, you have to think long and hard about if it’s worth the cost when you’re a seller who’s just coming at this from a regular read my second income ration You know, I’ve seen some crazy transformations from a brand that was purchased by through Thrasio, and they repackaged, you know, I think they actually use it in a few of their, their presentations, as one of the things to show what they can do to a brand. One thing I think it’s, it’s important for settlers to know they’re going to take care of their baby that they’re selling or selling their baby and they want to know that it’s in good hands and that it’s not just going to die off, that it’s gonna grow and it’s gonna flourish. And it’s gonna be you know, something that they can still be proud of in a year or two. You know, this, this one product, I can’t remember what it’s called, it’s orange or something. But they took this product, they repackaged it they changed the way that it looked. And also the the information that was on the packaging. Okay, it just took off like crazy and it is selling like hotcakes right now. It just means you know, they’re more able to make some of the changes then then sellers are and I think that that’s, you know, there’s it’s a double edged sword, some people are going to worry that if that’s coming into the space, are regular sellers going to be able to make it and some people are gonna say, you know, if they’re not doing this, are we would we be able to sell this to a regular broker. So it’s a mixed bag.
James Thomson 31:52
Melissa I want to thank you for joining us today on the Buy Box Experts podcast. For those of you interested in learning more about the Empowery eCommerce Cooperative, please visit www.empowery.com. Join us again next time on the Buy Box Experts podcast. Today’s episode is brought to you by GETIDA. GETIDA is a global leader in Amazon FBA auditing and reimbursements. GETIDA analyzes your Amazon data, reconciles your FBA inventory and files claims reimbursements on your behalf. No obligations no hidden fees just GETIDA recovering your money. GETIDA helps you get your money back into your pockets so you can focus on investing in more inventory and growing your business. To learn more, check out getida.com, that’s getida.com.
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