Shakil Prasla is the Founder and Managing Partner of SZ Ventures, an investment firm that specializes in acquiring, managing and growing e-commerce companies. He has reviewed more than his fair share of pitches born on Amazon private label brands looking to exit. As an entrepreneur and investor, Shakil has over a dozen acquisitions across multiple e-commerce industries, including prescription eyewear, metal promotional products, fitness gear, fashion accessories, and more.
Shakil was born in Austin, Texas, and holds a BBA from University of Texas in Austin and an MBA from the Acton School of Business.
Here’s a glimpse of what you’ll learn:
- Shakil Prasla’s experience buying his first company through Mark Daoust’s brokerage
- Shakil’s advice to investors who are deciding between holding companies or operating companies
- The lessons Shakil has learned about what it takes to be a successful operator on Amazon
- The biggest red flags Shakil sees in businesses looking to sell
- How Shakil realized he was good at evaluating brands and finding winners to invest in
- Shakil talks about his new training course on buying businesses online
- The escrow company Shakil recently formed and how it works
- Shakil reveals the up and coming trends in the industry
In this episode…
When Shakil Prasla first started buying online businesses, he made a number of mistakes—at times he asked the wrong questions, or failed to do due diligence, or kept the original seller as a partner for only a short period of time. However, while growing his investment firm exponentially over the past seven years, Shakil has successfully learned the tricks of the trade.
According to Shakil, one of the top lessons he has learned is to keep the seller involved in the business for at least 90 days. As he says, the knowledge that the seller acquires over the duration of running a business is invaluable, and it cannot all be shared within a short period of time. With this advice, and so much more, Shakil wants to help other investors successfully buy and operate online businesses.
In this episode of the Buy Box Experts podcast, host James Thomson interviews Shakil Prasla, the Founder and Managing Partner of SZ Ventures, about his experience buying and growing online businesses. Shakil explains how he started his investment firm, what he has learned over the years, and his advice to investors looking to successfully acquire a business on Amazon. Stay tuned.
Resources Mentioned in this episode
- Buy Box Experts
- Controlling Your Brand in the Age of Amazon by James Thomson and Whitney Gibson
- Prosper Show
- Disruptive Media
- SZ Ventures
- Shakil Prasla on LinkedIn
- Mark Daoust on LinkedIn
- Quiet Light Brokerage
- Entrepreneurial Operating System (EOS)
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.
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
I am 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 co-author of the book Controlling Your Brand in the Age of Amazon and the co-founder of Prosper Show, one of the largest continuing education conferences for Amazon sellers in North America.
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. Go to buyboxexperts.com to learn more. Before I introduced today’s guest, I want to give a big shout out to the team at Disruptive Media for its work in off Amazon advertising, focusing on driving traffic, converting traffic and enterprise analytics. Disruptive helps its clients increase their bottom line month after month. Go to disruptiveadvertising.com to learn more.
Today, I’m pleased to introduce Shakil Prasla. For seven years Shakil has been the Founder and Managing Partner of SZ Ventures, an investment firm specializing in acquiring, managing and growing e-commerce companies. Shakil has reviewed more than his fair share of pitches born on Amazon private label brands looking to exit. Shakil, welcome and thank you for joining us today on the Buy Box Experts podcast.
Shakil Prasla 1:45
James, thanks for having me.
James Thomson 1:47
Shakil, soft questions to start us off. Many years ago we were introduced by Mark Daoust of Quiet Light Brokerage. Tell me how you know Mark
Shakil Prasla 1:57
Yeah, Mark, Mark’s a great guy. He’s the one That quiet light brokerage is the company that got me started in buying businesses. This was in 2013 when I bought my first business and it was through quiet light brokerage. And fast forward today, I think I’ve bought about five businesses from them. So Mark is definitely my favorite broker and favorite brokerage company out there.
James Thomson 2:25
Tell me about that experience buying your first company, you must have thought at some point. Are you crazy? Is this gonna work? And what were all those emotions going through you and when you made that first purchase?
Shakil Prasla 2:36
Yeah, I made that first purchase because I failed at my e-commerce business. I was trying to start up, right it took me a year to just make it barely profitable. But to get to that year of existence, I learned so much from manufacturing’s infringement issues. To blackhat SEO strategies, just that whole process, and it was a pain for me to just do that process. And so I figured, you know, what else can I do? So I went on Google, and I started Googling, you know, what should I do next? Should I become a consultant, and I came across the quiet lights add on to buying a business. So I subscribed to them and waited a couple months and came across some business that I really liked. And they were just selling on their website, not a thing on Amazon, no paid ads. And so I just took the plunge. And it was a small acquisition, a mid five figure acquisition, and I bought the business, listed those products on Amazon, turned on some Google ads, and I made my money back in three months. Wow. And so yeah, I knew right there that I was onto something.
James Thomson 3:53
And it turns out, there’s millions of these brands out there if you can go and find them. So let me ask you this: A lot of attention to the type of business you’re in today a lot of new attention started to surface. In the past three years thras.io has made big splashes in growing up to be a big roll up firm with valuation nearly a billion dollars. Lots of enthusiasm recently by family offices, VC and private equity firms looking to recreate their own version of thras.io. What do you make of thras.io, his business model and all of this enthusiasm from various investors?
Shakil Prasla 4:32
I think it’s great for the market. When I joined seven years ago, there was nothing like this. I had to pay out of pocket for everything’s right so if I’m buying something for $100,000 it was hundred thousand dollars up front fully cash. Yes. Now the great thing is VCs and PE firms are recognizing this online selling and honestly, it’s a very cheap aquas If you’re buying things from anywhere from three to four times net profit, that can scale very quickly, right? If you compare this to a brick and mortar store, you can only get customers coming through your door. You know, based off the intersection, Your Honor, or some maybe local Facebook ads with Amazon business or e-commerce, you could target anyone in the world. And so I think people are recognizing that and I think more money is being thrown there. And it’s great for acquisitions, banks are willing to finance now. So you know, it’s good that all these players have came into the market. Me personally, I don’t think it’s affected me I think it’s helped my my business valuation even more when I was buying a two x multiple, seven years ago, and now, like I said, it’s about four x multiple now. So, you know, my portfolio is definitely doubled because of all this that’s going on.
James Thomson 5:58
Some of the conversations I’ve had with Some of these potential investors, some of them want to be operating companies, some of them want to be holding companies. When you look at what it’s taken for you to grow your business. What advice would you give to a prospective investor around looking at that holding versus operating model?
Shakil Prasla 6:17
Initially, definitely be an active operator. If you are buying an Amazon business with no Amazon, prior experience, you’re going to struggle. Amazon is its own beast. You know, and I have experienced both on Amazon and off Amazon, right. So getting things ranked on Amazon. It’s not sticky, so you could fluctuate quite quickly versus off Amazon and so you need to be very active. Know your customer. Know your competitors, understand the product for improvements, understand those reviews. misunderstand what competitors are really doing to get, you know, you definitely up there. But yeah, I would definitely advise to be an active operator, learn the model, learn the business, learn Amazon. And then eventually you could hire, what I do is CEOs to run the companies and act like a board member.
James Thomson 7:22
One of the interesting aspects of large money coming into this industry is that often they’re used to keeping the leadership teams in place. And yet, you know, you take your own example, the first company you bought, you had to immerse yourself completely in that business. For companies that are rolling up these businesses or buying them and then taking over and running those companies. There’s a lot of knowledge that has to be gained to be competent at understanding something like the Amazon channel. If you had to do it all over again, what would you do to accelerate Your learning and accelerate your depth of understanding of what it takes to be successful as an operator on Amazon.
Shakil Prasla 8:06
Yeah, I’ve made a lot of mistakes along the way, not asking the right questions, not doing enough due diligence, keeping on the original seller as a partner and then breaking that off, you know, what I would definitely advise is, if you know you’re going to buy business during due diligence process, keep the seller on at least for 90 days, 60 to 90 days on a consulting agreement. Typically when you buy business, you get 30 days free 40 hours a week, keep them on for an extended period of time. What this seller has learned for the five years, whatever they’ve been running the business, it’s incredibly hard to transfer the knowledge in 30 days. A seller may be telling you that they’re working 20 hours a week. They may be but that’s because over the last five years they’ve gained all this knowledge, you know, automated for them. If I were to come in, it wouldn’t take me 20 hours a week, it would take me way longer. Yeah. And so you need to recognize that and keep the seller on for as long as possible. One thing I like to do is, you know, either a seller financing or some type of earnout. And it forces the seller to help you out. And I’ll give you an example, James, if, let’s say I’m buying a business for $100,000. And I see the revenues going up and down the last 12 months, I may want to run out and tell the seller Hey, look, I want you to stay on and help me grow this business. Okay, I’ll give you $50,000 up front, and I’ll give you the other $50,000 as long as the previous 12 months revenue matches the next 12 months revenue. And what that makes the seller do is okay, well, I want my rest of my earnout I will help you maintain and grow The business and so it keeps those sellers foot in the game as well. You know, and that’s a great strategy I like to use but utilize the seller’s knowledge, there’s a lot that could fall through the cracks. And I’ve seen people you know, utilize SBA loans and not be able to make payments, because they just weren’t able to transfer all the knowledge and didn’t know how to keep growing the business is
James Thomson 10:25
one of the most challenging parts of taking a digitally native brand. And now transferring ownership, one of the biggest challenges I’ve seen is how do you take on and quickly develop an understanding of the supply chain that the brand has if they’re sourcing products out of one particular facility and one overseas plant, making sure that that relationship continues to be in place, making sure the terms are in place, making sure you learn what it takes to be good at doing overseas sourcing, that there’s a lot of stuff there that has nothing to do with being a An operator on Amazon, how did you get yourself up to speed to be comfortable with the whole sourcing component of managing these businesses?
Shakil Prasla 11:10
Originally, I failed a lot and I think I made expensive mistakes. But, you know, to bypass all of that, and not make those expensive mistakes like I did a good way is, you know, keep the seller on, Shadow them as if you’re an intern or even have the supplier. You know, you could create a contract with the supplier and say, Hey, I’m going to be the new owner. Can we sign an exclusive contract that you’re only going to distribute my products to me, if that was already happening in the past, just get a contract going? If it’s overseas, you know, maybe it’s gonna be hard enforcing something like this, but at least you have something on paper, but really just keep the seller on and ask those questions. You know, whenever a business I bought recently, it was Amazon focused. The seller was airing everything in and, and he was making these small batch purchases and I understand like people have cash flow issues, whatever cash you make from Amazon, you wrote you’ll reinvest that. In fact, I think that the stat was that 80% of your Amazon value, you’re going to get at the exit, right? So 20% you get from your net income. And so I understand cash flows are low, even though net income may be high. And so the seller was just airing everything and making small purchases. And I just told the supplier look, hey, I’m the new buyer. And, you know, let’s keep building on this trust. Let’s keep these same terms going whatever was next 30 or paid deposits right now, but I’m going to do a secret Right, and I’m going to make larger purchases, can I get a discount? No. And I was able to and so that’s another great way to really add value to your business is if you’re buying something, you know, let’s say your gross margins are 50%. And you could get that gross margin to 55%. Because you’re saving on the fright and you’re making bold purchases, that’s 5% on a million dollars, that’s $50,000 on a four times multiple you just made 200 grand valuation increase on your business, you know,
James Thomson 13:30
you look at a lot of prospective purchases, a lot of companies that are looking to sell their business, take me through, you know, what do you normally run into that is a big red flag. What are the biggest areas where brands wanting to sell don’t do their proper homework and prepare to sell.
Shakil Prasla 13:51
The biggest thing is financials and you’re weighing things on financials. I’ve seen a lot of mistakes. In financials, where you run multiple businesses through the same financials, or you expense a lot of personal items, and then it gets hard to see what’s business and what’s personal. So I would say definitely keep financials clean, your business is still sellable, but that multiple starts decreasing, you know, the more risky it looks. The second thing I would say is businesses Usually, I see a lot of businesses sell on the decline, and people may just, you know, throw in the towel and just say, you know, I don’t. I don’t want to grow this, when you sell on a decline. Your business may be worth now 2.5 X or three X, but when you’re selling it at kind of the peak point, at least when it’s going up, you’re gonna get at least a 3.5 multiple I’m just throwing kind of averages out there. But though that multiple can vary based on how the business is doing, so if it has a decline, yes, you could sell it, but you’re not going to get that much refocus and grow that business again, you know, go, you know, go 200% in. And so that’s what I would tell sellers if you’ve cleaned financials and sell when it’s trending upwards.
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