Deciding on the Best Time to Sell Your FBA Private Label Brand
March 3, 2021
Chris Shipferling is a Managing Partner at Global Wired Advisors, a digital investment bank focused on optimizing the business sale process. Prior to joining Global Wired Advisors, Chris spent 15 years in senior roles in sales, leadership, and digital marketing at various large consumer brands.
Jason Somerville is also a Managing Partner at Global Wired Advisors. He has almost 20 years of experience in investment banking and has executed capital market trades for Fortune 500 and Fortune 1000 companies. Jason uses these skills to buy and sell both traditional and digitally native businesses.
Here’s a glimpse of what you’ll learn:
- Jason Somerville’s thoughts on the increased demand for FBA private label brands
- Chris Shipferling talks about the future of the e-commerce space as the number of FBA investors continue to grow
- How large private label brand owners can successfully—and efficiently—sell and exit their businesses
- How Global Wired Advisors leverages the enthusiasm of Amazon entrepreneurs to create lucrative business opportunities
- The strategic approach Global Wired Advisors takes to help brand owners prepare their businesses for the market
- The common long-term goals of private label founders who are selling their businesses
- What brand owners should focus on when preparing for a sale
- How to decide between growing your business yourself versus selling it to an investor
- When is the right time to start working with Global Wired Advisors?
- Why Chris and Jason decided to work with brands in the Amazon e-commerce space
In this episode…
Selling a business is not just about gathering papers and going to the market. If you want to achieve a successful and efficient exit, you’ll need to take a strategic approach to prepare your business and attract investors at the right time.
The team at Global Wired Advisors understand that private label founders have many different reasons and long-term goals for selling their businesses. That’s why they work closely with brand owners to create a strategic process that works for them. By helping with market forecasting and product roadmaps, they ensure that you sell your business at the best possible time—so you can achieve maximum results.
In this episode of the Buy Box Experts podcast, James Thomson interviews Chris Shipferling and Jason Somerville, Managing Partners at Global Wired Advisors, about how they help brand owners determine the best time to sell their businesses. Together, they discuss the importance of business forecasting, how to prepare your brand for the market, and when you should start engaging investors. Stay tuned.
Resources Mentioned in this episode
- Buy Box Experts
- Controlling Your Brand in The Age of Amazon: The Brand Executive’s Playbook For Winning Online by James Thomson and Whitney Gibson
- James Thomson on LinkedIn
- Global Wired Advisors
- Chris Shipferling on LinkedIn
- Jason Somerville on LinkedIn
- Disruptive Advertising
Sponsor for this episode…
Buy Box Experts applies decades of e-commerce experience to successfully manage their clients’ marketplace accounts. The Buy Box account managers specialize in combining an understanding of their clients’ business fundamentals and their in-depth expertise in the Amazon Marketplace.
The team works with marketplace technicians using a system of processes, proprietary software, and extensive channel experience to ensure your Amazon presence captures the opportunity in the marketplace–not only producing greater revenue and profits but also reducing or eliminating your business’ workload.
Buy Box Experts prides itself on being one of the few agencies with an SMB (small to medium-sized business) division and an Enterprise division. Buy Box does not commingle clients among divisions as each has unique needs and requirements for proper account management.
Learn more about Buy Box Experts at BuyBoxExperts.com.
Podcast Episode Transcripts:
Disclaimer: Transcripts were generated automatically and may contain inaccuracies and errors.
Welcome to the Buy Box Experts Podcast. We bring to light the unique opportunities brands face in today’s e-commerce world.
James Thomson 0:18
Hi, this is James Thomson from the Buy Box Experts Podcast. Today’s episode is part of a special series of interviews that we’ve done to dive deeper into the recent phenomenon of private equity companies and FBA aggregators investing in private label brands that are leveraging the Amazon sales channel. As part of this series, we interview a wide range of investors, brokers, consultants, and entrepreneurs that have recently sold their private label brands. We peel back the layers on what’s happening in this new investment space and look at how private label brands are finding financial success through the building and eventual sale of their online businesses. For three weeks from mid February through early March, we will release a new episode every weekday on this topic. Sit back and enjoy today’s episode.
Hi, I’m James Thomson, one of the hosts of the Buy Box Experts Podcast. I’m a partner with Buy Box Experts and the former business head of the selling on Amazon team at Amazon, as well as the first account manager for the Fulfillment by Amazon program. I’m the co-author of a couple of books on Amazon including the recent book, Controlling Your Brand in the Age of Amazon. Today’s episode is brought to you by Buy Box Experts. Buy Box Experts takes ambitious brands and makes them unbeatable. When you hire Buy Box Experts, you receive the strategy optimization and marketing performance to succeed on Amazon. We also provide investors with due diligence services. Go to buyboxexperts.com to learn more. Before I introduce our guests today, I want to send a big shout out to the team at Disruptive Advertising. For off Amazon advertising, Disruptive Advertising offers the highest level of service in the digital marketing industry, focusing on driving traffic, converting traffic and enterprise analytics. Disruptive helps their clients increase their bottom line month after month. Check out disruptiveadvertising.com to learn more. Today I’m pleased to have two guests on our podcast, Jason Somerville and Chris Shipferling, both Managing Partners at Global Wired Advisors, an investment banking services firm for digitally native enterprises. Prior to Global Wired Advisors, Chris spent 15 years in senior roles in sales, leadership and digital marketing at various large consumer brands. Jason has almost 20 years of experience in investment banking, including executing capital market trades for Fortune 500 and Fortune 1000 companies and honing his skills that would later help them buy and sell both traditional and digitally native businesses. Chris and Jason, welcome. And thank you both for joining me today on the Buy Box Experts Podcast.
Jason Somerville 2:57
Yeah, glad to be here.
James Thomson 2:59
So let’s start by chatting about this big new wave of interest among investors looking to buy FBA private label businesses. The FBA private label business is a hot commodity today. And yet, these businesses have been around for basically 20 years, as long as the Amazon Marketplace. What do you see, having driven all this local interest in the last in the last year or so?
Jason Somerville 3:26
Well, I guess I’ll jump in on that one. First, James, you know, the, we’ve seen this market evolve much like many markets over over the course of the last 100 years in finance, I think what you had for a period of time, was, you know, the the call it pervasive belief that someone’s selling products on Amazon, was everything from a hobby, or something quick, that’s just going to go away tomorrow, or is it really just a digital flea market? You know, you had all of these, I would call it fairly pervasive viewpoints that, you know, it wasn’t necessarily a real channel for real companies and real brands to access, you know, there was, again, the false view and maybe sometimes not so false in the early days that the sellers were all, you know, kind of, again, individuals who are unsophisticated or foreign sellers, you know, just kind of a general viewpoint that you couldn’t really build a sustainable model that was utilizing, you know, Amazon as a as a primary sales model. And what happened over the last really five or six years is that thinking started to change, I think, you know, as Amazon continued to have what we would call object permanence in a number of different, you know, markets as they grew their market share. And what happened is people started to look at Amazon broadly a little more differently. It wasn’t just that weird digital bookseller that Jeff Bezos started in his garage anymore, it was now this behemoth that that was a force to be reckoned with. And then, you know, as that, you know, developed, and these brands started to build, have real success, have multiple years of success, some of that, you know, kind of sustainability and the belief that there was sustainability started to really develop. And so what we saw was, you know, much like many other financial markets over the course of history, it started small, a handful of, you know, people looking to purchase these types of assets, the valuations were very low, the view of risk was very high. And that’s kind of just changed over the last few years. And I think it’s got a long way to go from where it is, it’s come a long way. But now you have, you know, billions of dollars of sophisticated capital, that are looking to invest in good consumer products, assets. And many of those assets utilize Amazon, either, you know, completely or, you know, heavily to reach customers. And so, you’ve now seen, you know, there’s, there’s some real liquidity in the market, there’s a much deeper buyer pool, you’re starting to see valuations increase, all the things that you’ve seen it, you know, if you’re, if you’re a student of financial history, this isn’t the first time this has happened. And you know, this, this is kind of how new markets develop. And we’re seeing this in this case, and I think it’s just kind of the early innings of it, in our view.
James Thomson 6:29
Chris, what do you think happens in the next couple of years, as the number of investors continues to sharply increase?
Chris Shipferling 6:36
Yeah, what happens? Wow, I think you’re gonna see more what we would call sophisticated capital, or into this into this space, I think we’re gonna see, you know, in talking about financial history, and Jason, you can back me up on this. But, you know, typically what happens is you have a lot of pioneers, it’s usually the sea that are the pioneers into a growing market and growing space. And then over time, what you have is private equity. Look at all the mistakes, and then they come in, and they learn from those mistakes, and then they really start to mature the market and continue to mature that market. So over the course of the next few years, I think you’re going to see some failure, I think you’re going to see some failure from these larger funds and consolidation, for sure. And I also do believe that you’re going to see some corporate strategics get more serious about Amazon market share and these private label businesses that have grown into wonderful companies and wonderful brands that have a real chance to go omni channel. I think they’re going to get a real shot. And you know, that’s, that’s obviously it to Jason’s point where valuations go up. He was, by way of proxy, and I’ll say this quickly, but, you know, 10 years ago, when I was sitting around, Evenflo was a company that I worked at who was you know, was to half a billion dollar company, when we would sit around the board, the boardroom, and we would go through all of the accounts, Walmart, Target, Bye bye baby, oh, you know, see, even to the time Sears and Kmart if you can believe it, got a lot of love. And I was the one actually managing Amazon and it didn’t get bought. And so you know, don’t no one really wanted to have a discussion about Amazon because they were so, you know, we were beholden to the Walmarts and Targets of the world. Well, you know, now having still lots of contact in that world and a lot of other CPG companies were folks that I worked with, at the time we’ve gone and branched out, I can tell you, that split, you know, the conversation about Amazon is a more strategic conversation. It’s about Okay, well, we’re on Bender, should we move to seller, right? So we become three P and what does that look like? Right? Because we know that that’s becoming more of the conversation, because, yeah, that direct handshake with the consumer is becoming more and more important, too. So.
James Thomson 8:52
So let’s talk about these sellers as a single group, many private label sellers of all different sizes exist out there. Certainly, we’ve seen activity where companies that are doing, you know, one to $3 million a year in sales. A lot of those companies have changed hands recently, when we start looking at much larger brands. And there are a number of these private label brands that do 20, 30 $50 million of sales a year. And those types of acquisitions are much more complicated and not the types of acquisitions that an FBA aggregator is likely to do. And so you’re looking at potentially having to bring in some of that traditional AI banker role or, you know, large private equity. How do you see very large brands, guys that are doing over 50 million a year? How do you see them being able to exit? And I’ll put one qualifier on that. A lot of these guys have seen smaller brands exit where the owners literally walk within 60 days. How does a guy doing 50 million a year walk within 60 days and sell his business? I’m curious bankers, you’re you’re, you’re dealing with big, big, big companies. Tell me a little bit more of your thoughts on that? Sure,
Jason Somerville 10:07
I’ll start with that one. Yeah, the short answer is that the process and the acquirer base are, you know, different, quite frankly, in many respects. For those guys, I think that, you know, what Amazon has, has allowed us to talk about it, you know, it’s kind of its own ecosystem that’s allowed a lot of brands to be born and to grow, where they may not have, you know, in another kind of world. And so now, you know, the brands that are larger, they have a lot of options as this market is developing and becoming more liquid and traditional financial sponsors, and, and, you know, strategic purchasers will now look at these opportunities of 30 40, 50 $60 million brand on Amazon and say, Okay, first of all, you know, that that’s real scale, right? That that’s got some real staying power, it’s got some real heft to it. So, you know, what can we do to acquire that brand and bring it on, usually, to kind of an existing platform or existing strategy, whether it’s a product category strategy, or even just kind of a broader digital consumer products, you know, strategy is that they’re very attractive assets, because they’ve clearly, you know, in a way solved the Amazon puzzle, at least for their products they have, and that that is now seen as a very valuable thing, it’s very valuable IP and very valuable, call it goodwill, you know, that exists in that in that business. So, so these guys are going to look at it, you know, on a much more strategic basis, you know, certainly willing to pay a lot more for that, from a multiple perspective, I think that the, the point you make about exiting and walking is, usually with transactions like that, there’s going to be more structure, there’s going to be a little more interest in keeping that owner founder involved in the business, you know, going forward. And, and there’s really two two things about that: some of its perception, and some of its reality. So these these acquirers, for the most part, you know, they they want to believe that the founder, even though they may be wanting to exit for a variety of potential reasons or exit control, if you will, yeah, that the founders still believes there’s a lot of room to run in the business. And a lot of times they want that founder, if they’re taking a very large financial risk on this company, they want that founder to sort of prove that by having some skin in the game. So they’re going to be more likely to look for, say, an equity role, like retain 20% ownership, or somebody that’s going to be much more common. And also, hey, you know, what, we might want you to have a two year employment contract, you know, to is part of this deal. Now, if if a founder, let’s say they have a large brand like that, but they just really, really value just going off and doing a sabbatical within 60 days of closing, it’s, it’s still potentially an option, but you’re going to usually give something up to get that, you’re probably going to have to give up some enterprise value to get that, and you’re also going to have to have some explaining, you know, really to do and some convincing to do for those acquirers. Say, why should we acquire this brand? Why should we pay, you know, 80-100 million dollars for this company, if you’re just gonna, you know, turn off your phone, and 60 days, and we’re never going to be able to talk to you again, that doesn’t feel very good.
James Thomson 13:43
So let’s talk about potentially smaller, smaller companies here. And you talked about what Amazon has done to enable so many of these companies to be able to build, but it’s not just Amazon, there’s all this excess manufacturing capacity out there. It’s easier for any random person now to get somebody to manufacture a widget for them. And so when you look at Amazon as a marketplace, wanting to add new selection, cheaper, faster, better versions of products, Amazon inherently looks like the place for these entrepreneurs to flock to so i’d love your thoughts around it. As an investment firm, how do you grab that enthusiasm from all these different types of sellers? How do you leverage that enthusiasm, and turn it into a business opportunity for yourselves?
Jason Somerville 14:32
Do you want to take it down?
Chris Shipferling 14:34
Yeah, and I may, I may need a little bit more of an explanation on exactly how to do that. So if you could give me a little bit more commentary on it, specifically the enthusiasm.
James Thomson 14:44
So you have all levels of skill out there? Yes, operating as third party sellers. Even if we just look at the private label sellers. There are very sophisticated businessmen and women and there are folks that basically got on a plane went to China at some conference, they met some people, they now make widgets and they private, label them and sell them on Amazon. And you’ve got everything in between. Yes. And so as professionals that are involved in helping brands, get more investment dollars and potentially exit, you have quite a range of options available there. When you look at the types of companies you’re dealing with, how do you segment the opportunity? How do you go after the parts that are interesting to you? How do you find the parts that are interesting to you? And tell me a little bit more about that aspect?
Chris Shipferling 15:37
I mean, when we’re assessing a company, like when we’re looking at all the different businesses that we talked to, and kind of how do we leverage and pull out the enthusiasm and the opportunity of where this business might be going? You know, if I would say, it’s, it’s not simple, but at the same time, it’s fairly simple, you know, all that enthusiasm, all that sophistication should have resulted in a product that, frankly, speaking is unique or more unique, right. And so you do have a lot of sellers, you have a lot of folks that are going to Alibaba and you have a lot of folks that are just putting widgets on Amazon, and frankly speaking, you know, the result of that is commodity, that’s what they built. And that’s because they built cash flow. You know, I think that it’s it’s getting increasingly hard to do that, you know, the Gold Rush, the Gold Rush days of FBA, back in 2014, 15, you know, I think is is, is it’s not the same, it’s a lot more expensive, in my opinion, from a capital outlay to really grow and scale a business through Amazon than it was five or six years ago. Yep. You know, this isn’t a shameless plug on you guys. But your role became much more important in my opinion than it was, say, six or seven years ago, right? You know, being able to find a true college Sherpa, someone who can really take you through the advertising and, and take you through all the optimization process on Amazon, you know, doing that in 2014, 15 is wildly different now than doing it in 2021. And going forward, some of that is just pure and pure and simple. TLS changes, right? And so, you know, for us, yeah, I mean, when we’re assessing, and we’re looking, and we’re vetting a company that that is wanting to go to market, and is looking to take their business to market, we spend a lot of time on opportunity, because that’s really important. We spent a lot of time on what the runway really looked like? And being able to leverage Yes, you know, even on the smaller businesses, you know, what, where is this business going to be in three years, right? You know, in corporate America, this is done on on enterprise level businesses all the time, in an even flow, when I was preparing my last enterprise business, we spent a lot of money on lots of very smart consultants to come into the business and work hand in hand with us to determine what a three year business plan looks like that we spent a lot of time there trying to identify what is this business really have in terms of true opportunity? And yes, the ones that have strong positioning, when it comes to opportunity, they’re going to gain a much better trade, they’re going to get a much better valuation or enterprise value when it comes to a transaction. I hope I answered your question.
James Thomson 18:15
Yeah, so let’s, let’s talk then, when brands come to you, that they’re not all equally ready to go to market. And that journey of deciding, yes, I think I’m interested in selling to, okay, I’m actually ready now to start the paperwork and start the whole bureaucracy of having to deal with people and show them what it is that I sell, and so on. And I’d love to get your thoughts around, you know, what are the series of discussions that your firm typically has with brands that might be interested in eventually selling?
Chris Shipferling 18:50
Yeah, great question. And I’m always the first conversation they have running, you know, business development and marketing for our firm as a partner. But yeah, it’s, it’s really, you know, in our firm, we play a lot of roles, and we play more than just, hey, let’s sell your business today. Here’s the paperwork, and let’s take it to market, you know, volume, volume, volume, that’s not our game, our game is much more strategic. So, you know, kind of as at an 80,000 foot level, there are several, you know, clients of ours that we’ve taken to market that we’re currently taking to market and that we will take to market in time that we’ve spent two years with, you know, so that’s kind of at a 30,000 foot level, you know, we like spending time, well, what does that mean? They don’t just want to call us to have casual conversations over coffee, you know, they need resources, and they want to understand, you know, from our perspective, what resources are potentially needed that layer into an eventual exit, right, and you know, what might provide some more value? So, we spend a lot of time getting to know the company, we spend a lot of time getting to know the long term goals because that’s also part of that intersection of going to market. You know, what are the long term goals of the founder and the owner of the business. And so, and part of getting to know the company, we’re starting to really dive in from a consultant from a consultancy perspective on functionality of the business, right. And really kind of walking through the different functions and really seeing where they may have some missing pieces. You know, we get a lot of, you know, smaller businesses, for sure, larger businesses too, but not as much as we get disorganized financials. Well, you know, clearly, they just need a not just kind of a mom and pop bookkeeper bookkeeper down the street, they need a real CPA to comb through a real accounting firm. So we have a lot of vetted resources to get very specific, a lot of folks that we’ve spoken to folks like yourselves, who we trust that when we and we also understand with our resources, the type of clients they’re looking for, right. And so, you know, we input their information, and we output and send them to the right resources. And then along the way, you know, we’re calling it check-ins, but they’re there more than just again, kind of a casual cup of coffee, and how you doing, it’s, hey, let’s actually see where you stand. You know, we have a client right now that we’ve been talking to for the past year and a half. And we’re at a place now where we’re about to do what we call a high fidelity valuation, we are going and you know, three to four weeks diving into their business, and truly understanding the company, from soup to nuts, really understanding the companies from supply chain to logistics, all their operational leverage, and how that’s going to affect the pro forma going forward into the future. And we’re going to provide what we call a time series analysis for these guys. Because they really want to understand when is potentially the best time for our high growth trajectory, very large direct to consumer business to go to market, we need to get a lot of detail in order to come to that conclusion. So I hope that gives you a little bit of a buffet of how we like to interact with our clients. It’s a much more strategic approach.
James Thomson 22:01
I remember when I sold my first company, one of the challenges I had, as an owner was figuring out, what are the options on the other side for me? Yes, I want to sell my company and make a bunch of money. But there’s a lot more to existing than just getting a bunch of money. And so I’d love for you to talk a little bit more about when you said, what are the goals of the owner. I imagine there are a lot of situations where you talk to owners who have never sold a business before where they don’t have particularly sophisticated goals, because they don’t know what goals are available for them to have beyond I want to get paid. Can you take me through a little bit more? What are some of the types of goals that our private label sellers, like the ones we’re talking about today? What are some of the goals or the choices of goals they should be starting to think about?
Chris Shipferling 22:50
Yeah, you know, I’ll give an answer. And Jason by all means, you know, feel free to give an addendum here as well. But yeah, yeah. When we were asking about long term goals, you know, number one, it’s very specific to the actual exit, right? So there are a myriad of different responses that we get one of which is, I’m what I want out, I don’t want to work in the business anymore. I’m done. You know, I burnt out the day it sells, I’ll give a little transition. But I’m done. Right. I’m on an island, right. 60 days from now my phone’s getting cut off? Oh, yeah, you know, we’ve gotten that response. And of course, we, we, we, as professionals, we walk them through that, you know, hey, that may not be the best option. And here’s why. But, you know, let’s kind of formulate what that might look like. We have others, you know, I just, I just got off the phone with a potential client, a sizable business, b2b. Very diverse, in terms of his in terms of his revenue concentration. You know, we’re kind of walking through a little bit of what deal structure looks like and what it could look like. And he said to me, point blank, I’m willing to go low on the cash at close, if that means I have a lot of upside, opportunity. Well, what he was, what that what he was saying, and how it was interpreted was, I’m willing to go along for the ride to go have a bite of that proverbial, you know, next bite of the apple, right? Yep. And so, and yeah, so kind of after the exit, and kind of talking through those things, of course, you know, we play therapist and walk, walk the client through, you know, here’s, here’s what you could potentially do, once things are done, you know, once the transaction has gone through, part of it is to it’s, it’s, you know, it comes down to non competes, we have a lot of questions and conversations around non competes, and, you know, what are what are they handcuffed to and what are they not handcuffed to in terms of growing and building? I mean, James, you work with a lot of folks that are a lot like the clients we work with, these guys are really, really good at building something to a certain point, and then they’re done. They want to build something again, to that certain point, right. That kind of first generation founder So Jason, do you have any addendum to that anything to add?
Jason Somerville 24:55
Yeah, I was just gonna add one of the one of the really actually quite honestly, fun things. About working with clients in this space is that usually we’re working with founders, usually, those founders have a lot of entrepreneurial DNA. And you’re right. Usually, it’s their first deal when we’re working with them. And so, you know, we do end up talking a lot about, Hey, you know, here’s kind of a path to how you do this, again, and again, and again, over the next 20 years, let’s say of your life, if you really enjoy building businesses, and starting businesses in particular, you know, there’s usually two types of people, there’s people that like to start businesses and people that like to buy businesses, you know, that someone else already started, usually you don’t find a lot of people that are both. And so, you know, we ended up discussing that. And interestingly, as well, you know, a lot of our clients, and there were a lot of years there, where they, you know, they didn’t have a ton of capital to really devote in their business, you know, and every dollar they were earning for the most part was getting reinvested. So they were always starved for capital, well, they have one exit, and they kind of fill the fill the coffers, and we kind of we have those conversations about, well, the next one is going to be a little easier, because now you have a lot of capital you can devote to it. And so you can get that snowball effect over time. And do it again, three, four, or five times until you’re tired of it, and then and then go to the island.
James Thomson 26:29
So Chris, you talked about going to the islands, but also you talked about, you know, getting your books in order, I’d love to have a conversation now around, what are the sorts of things you wish more companies that came to you were already starting to think about or had already undertaken? And tell me a little bit more about that.
Chris Shipferling 26:50
Yeah, you know, I, you know, in all four partners training, you know, in our, in our business careers, we’ve always been taught, know, your numbers, right. And it’s ingrained, at least in our heads. And I think, you know, companies coming to us, as far as what I wish, we had a little bit more of a better view, or a better picture, when they come to us is really, truly knowing, knowing the numbers, right. And what I mean by that is not just not just your financials and your historical numbers, but really also understanding your data around all of your different metrics. Now, I know Amazon tends to gatekeeper some stuff, and it can be difficult to plug in. And that’s, that’s actually getting more sophisticated, as you well know. And more and more data is starting to leak out, or sellers are getting a better understanding of their other three p business, but, you know, knowing their data, and then also really understanding where the business truly is headed in the future. You know, that takes strategic thinking, and so I can’t fault anybody because, you know, strategic thinking takes, you have to take your head out of the weeds, and you have to kind of rise above the clouds for a moment, right. And the only way to do that is to create more bandwidth. And I know a lot of these sellers just don’t have that. So you know, while it’s a wish list, I also know that it’s a very difficult thing to demand from any of these private label sellers. But those are those are very helpful in formulating really strong and we help and part of our vetting process here at Global you know, we we help formulate all three of those things, you know, kind of understanding a better picture of your financials, and understanding a better picture of your current metrics, your digital metrics, and then really also understanding a clearer picture of where the business is going.
James Thomson 28:38
So let’s talk about where it’s going. Because if I’m a private label seller, I’ve got 10 products, 20 products in my catalog, and most of those are evergreen selection, I might add a couple products a year, and I have manufacturers who make certain types of widgets. For me, I’ve got two or three of those guys that make those products. And I can take my business in a lot of different directions. But, you know, maybe this is a, I’ll just make up an example. I sell pet supplies. And I know a lot about pet supplies in these particular sub sub sub categories. So when you come along and say, Well tell me what the future looks like. What are the things that I realistically realistically can look at, without having to look into, you know, look into the future with crazy numbers. And what can I do?
Chris Shipferling 29:29
Yeah, I can give some simple, just very kind of simple, you know, guidance on that, you know, again, I kind of go back to my own corporate history where, you know, that was the question every year we did budget planning. Well, that was one aspect and we did you know, budget planning for the next year typically that started in August of the prior year. It was an exercise of about two or three months where we walk through every single key channel and we walk through all of the different trade marketing that we would do and all the different sales forecasting but it’s about proper planning. So that’s, that’s, that’s really kind of the theme. What does that look like? Well, number one, you know, product roadmap is a real thing, right? It’s a real exercise in many, many, many consumer product companies, where they actually take a look and go, Well, where do I want the business to go? What am I really realistically going to launch? And where am I headed? Right? You know, we just talked to a potential client, that’s now a client just yesterday, and we were really walking through that piece of in function of his business was the product roadmap, he had a very clear idea of where he’s going now. He’s a bit more omni channel. So you have, you’re forced to be more driven towards a product roadmap, when you’re selling into Target and Walmart and byebye, baby and menards and etc, you got to really think through Okay, well, who am I selling here? And who am I selling here? And what you know, kind of what that strategy looks like, but, you know, a product roadmap helps with planning. That’s number one, you know, I’d say, forecasting is another big piece, just really understanding where your business is going. But we know that forecasts can get blown up very quickly when you have a growth trajectory, but at the same time, you know, painting a clear picture by SKU of where this business is going, you have a better understanding of where to allocate your resources. Right. So, Jason, I don’t know if you have anything to add to that.
Jason Somerville 31:19
Yeah, you know, I think it is, I think one of the things we we spend a lot of time with our clients, you know, on is is that forecasting piece, it’s most of them have never done it, most of them have never actually done a 12 month, much less a two year forecast, at the SKU level of understanding, you know, where new product launches are going to come in, and kind of being pretty sophisticated and detailed about it. You know, and I think the other thing is, you know, one of the important parts as it relates to potentially exiting the business is the acquirers want, they want you to have a view. And they because they’re looking at your view as the most educated, most credible view. So if you come to the market, and say, I’m not really sure where this thing is gonna go, I’m pretty much fresh out of ideas, then that’s not the message that you really want to send, cuz they’re like, well, you’re the guy who knows the business the best. So if you’re fresh out of ideas, I don’t know how we’re gonna do this. So I think having a view and the view doesn’t have to be perfect. And you don’t have to, it doesn’t have to be a crystal ball. But it has to be and you know, have some real intention in defensibility, one of the things we spend a lot of time on in marketing deals is defending the forecast. Right? And that’s what you know, we we walk potential acquirers through the two year forecasts that we’ve put together, and when they find out that these are forecasts that are built hand in hand, with management down to the SKU level, they’re like, Okay, and then you explain how you got these numbers and their defensible assumptions that they respond very favorably. So you know, doing things like that is important. So, do you have a roadmap and an answer to, you know, hey, if I gave you X amount of dollars tomorrow for growth capital, what would you do with it? You know, where would you go, how would you spend it in order to build this business and double and triple what it is today? You know, having an understanding to that level. And having a view is, is important as it relates to exiting and what what a lot of clients find is, after we kind of go through that exercise, they usually say, I wish I would have done that two years ago, because it’s also another great way to, you know, manage the company with the right kind of viewpoint.
James Thomson 33:43
So, I’m a brand I’m looking to sell my business, I know, I need to give the investor, a roadmap of where growth comes from, helped me figure out when when do I, as an owner, decide, I’m going to do the growing myself versus I’m going to sell and let the next guy do the growth?
Jason Somerville 34:05
Chris Shipferling 34:08
You can go ahead. Sorry, man, a lot of you. Yeah,
Jason Somerville 34:10
I’ll, um, I’ll start there. And then Chris, you can jump in. So, you know, I think it all comes back to the goals and calling them goals and resources is really where it starts. Right. And so, you know, we get a large number of clients that come to us and they’re pretty hump, they’re, they’re pretty humble about, you know, what they’ve done, even though they’re very proud. So we get a lot of clients that say, you know, what, I’ve grown this business to this point, and quite frankly, I just don’t think I’m the guy for the next you know, 10 20 million, right? Um, I doubt I don’t have the skills. I don’t necessarily have the desire, and I don’t maybe have the capital in order to get there. So now’s a good time for me to exit and let the next guy do the growing right. However, if a client says, you know, to us when we first start speaking to them, yeah, you know, I think I can double this business in the next six months. Myself, right with what I got. And usually we’re gonna say, you should do that, you should go ahead and do that. And then we’ll wait and take you to market when you’ve done that. And, and so I think it’s that intersection between goals, you know, desires and capabilities that oftentimes drives that and also usually feedback from us, you know, if we’re describing the market and saying, Well, you know, what multiples really expand when your eba starts getting north of 3 million, and you’re at 1.9. And you can get to 3.5, you know, in the next 12 months, that might be well worth it for you to hang on for a while. And so, you know, feedback related to those kinds of things also drives that I don’t know, Chris, if you would add,
Chris Shipferling 36:03
I would just by way, of example, I mean, we, you know, we have a current client now that we’re about to start prepping for the market. I spoke to them mid last year. And I had that same conversation with them, you know, they had a nice growing business, obviously, they saw the COVID lift, but you know, it was, it was not, it was sustainable, and it was defendable. And you know, they were approaching about this close to about, I think 1.8 million they saw as their run rate. And I said, Look, man, you guys are, you know, very diversified, like 90% Shopify at the time, 10%, Amazon. And I had that conversation with them, hey, look, multiples expand when you hit a certain level. And let me kind of walk you through where the acquirer base starts to also grow. And just, you know, on an educational level, I’d call it, you know, from an intelligent, intelligent view of their business, and when the right timing is to go to market. And for them, it was a little bit of a breath of fresh air, they spoke to some other folks who just wanted them to sign like today. And so you know, actually hearing some good advice, well, they just came back, you know, to us about a month ago and said, Yeah, you know, what, we’re done. And we’re ready to go to market, you know, so that does happen a lot where, you know, we kind of walk them through all of their options and let them know what, you know, what, where, where can you realistically take this business from an exit planning perspective? And on a time series analysis I think that’s really important.
James Thomson 37:29
gentlemen, when would I come to Global Wired Advisors to do business with you? When am I big enough? When am I too small? You know, what’s the sweet spot for your business? Yeah, I
Chris Shipferling 37:44
think when you are when you’re about a year and a half to two years, and maybe a little bit less, but when you’re really feeling that growth, trajectory, driving towards a million dollars in EBITDA, and you feel that it’s, it’s a good time to start having conversations with us. It’s not a good time to necessarily go to market, of course, but it’s a good time to start talking. Because, you know, you said earlier as the business as the business is creating more revenue as the business is creating more sustainable EBIT down profitability, lots of complexity starts to get introduced to the business, I spoke to somebody just yesterday, they saw a huge lift last year, you know, they’re in home decor. And so it’s all really nice lift. And last year, I think they did close to about, it was a stump year, so only nine months, like 200,000, but they believe they’re going to hit a million dollars in EBITda this year. And I said to them, I said, Look, because they specifically asked, you know, we had a great conversation, I think they really respected our view. And then, you know, specifically said, What can I do right now to help? You know, what, what advice would you give me right now? And I just, you know, I kind of gave him a couple pieces. But I said, Look, realistically, whatever I’m going to tell you today, it’s it’s, it’s moot. It’s meaningless, because once you start hitting that true trajectory towards that million dollar, EBITDA, the conversation starts to change a bit. So we’re happy to talk to people. I mean, it kind of as a rule of thumb, we’re happy to start having conversations with folks when they believe they’re about, you know, at the most 24 months out from going to market. And it’s not just like, oh, you can’t talk to us because of resource and bandwidth. It’s more like, we’ll have a lot more things to discuss. You know, once once you’re feeling that growth trajectory, Yep.
Jason Somerville 39:31
James Thomson 39:32
Anything else you want to add on that? Jason?
Jason Somerville 39:35
No, I mean, I think, you know, I don’t want to just turn into an infomercial for us. You know, I think in general, we just try to take a consultative approach with people we want to be seen as a resource for this market. You know, we want people that have questions and are considering you know, potentially selling their business to see us as someone they can go to for Good advice and good information. And so we don’t shy away from it, you know, we love doing things like this and just getting information out to the market. So we’re not, you know, we’re more than happy to have certainly many more conversations, not not less conversations, it’s always more conversation. So, you know, I’ll just kind of leave it there. So we, we really, really like this sector, this the Amazon ecosystem, in particular, we love the people that we come in contact with. These founders are great, there is a lot of fun, such an interesting, diverse group of people. So we just enjoy what we do. So you know, having these discussions, whether it’s maybe a little premature or not, you know, we’re not going to shy away from it. Right,
James Thomson 40:46
of all the different types of companies you could be working with, you decided to be in this e-commerce space. I’m curious to hear from both of you, when did you realize you were good at doing what you’re doing, helping brands position themselves for sale? Yeah, I’ll
Chris Shipferling 41:01
take I’ll take it on more of the operating side, you know, my, my career pivoted about six years ago, and I knew it needed to, you know, I was at the time I was working for a company that was based in Barcelona, you know, the business model was the traditional business model that I, I applied to, to every business that I worked in, I go to the retailers, I sell the product, you know, I run trade marketing, I talked to them about their catalogs, and etc, etc. And I just I, at the time, when I was at this business, I was in between collections, and I had about a half a million dollars worth of inventory sitting in my warehouse. And, you know, I’ve been familiar with the Amazon platform, I’ve been working with vendor central since about 2004. And, you know, they really put a strong emphasis on baby products and parents, they wanted that they wanted that consumer, because that consumer buys a lot and stays with them for a very long time through their whole journey of life. And so I was familiar with the vendor and my brother in law, actually, he soon as Seller Central opened up and I can’t remember the year, exactly, you know, he started selling on Seller Central. So I was kind of just, you know, by osmosis, understanding a bit more about that side of the platform, but it was so young, I knew that I needed to get rid of this inventory. And so I really, really buckled down. And I became kind of one of those first, not first, but you know, younger generations of guys who learned the amazon seller central platform back in 2000, late 14, 15. And learned all about the you know, how to take all the keyword research that you do, and apply it to the optimization on your listing, and then, you know, fumbling around with the advertising to get to a place where I actually truly understood it, and it was making a real impact. I think, you know, my claim to fame is I got a booster seat, I think down to a BSR of oh my gosh, it was like, I want to say like 12 in the baby category. And that was that we sold out like that. Tremendous. So, yeah, I knew then I just knew that, you know, from an operating perspective, I had to pivot. I had to pivot my own career and really start honing my skills in on that first handshake with the consumer. So that was amazon seller, Central and digital marketing as well. So,
James Thomson 43:13
Jason, what attracted you to this Amazon e-commerce space?
Jason Somerville 43:18
Well, it actually started, you know, I spent a lot of years doing large deals for large companies, you know, multibillion dollar transactions and kind of that world of large, you know, boards and, and a lot of, you know, super super Sharky people and all that. And I decided a number of years ago that I kind of wanted to get away from that, and I really wanted to help, you know, founders, you know, figure out a way to exit their business. So it actually started more just broadly, where, you know, I decided that I wanted to shift my focus and help smaller companies in general. And then, you know, seeing what was happening in, in e-commerce with the consumer and, you know, the kind of growth that it was having, and where I kind of thought things were headed, you know, started to think about focusing more, you know, in that in that arena, consumer digital in particular. And Chris will tell you, you know, I actually met Chris through another client that we had sold their company, and I sat down with them and I said, you know, what, I think we can do a lot of good in this space. And, you know, I know a lot about doing deals and a lot about breaking down companies and Chris knows a lot about you know, e-commerce and Amazon and so you know, what, why don’t we Why don’t we start something that focuses on this and you know, there’s so many entrepreneurs out there in this space that I think need our help and get used to it and we can do some good and and that’s kind of how it all got born. You know, the Wall Street guy and the Amazon guy kind of got together and, and and made an investment bank, with Greylock partners.
James Thomson 45:00
Jason and Chris, I want to thank you both for joining me today on the Buy Box Experts Podcast. For those of you interested in learning more about Chris and Jason’s investment bank firm, please visit globalwiredadvisors.com
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