In this episode, Geoff Matthews shares a wealth of strategic knowledge and insights gained from his years deep in the Amazon FBA market. Optimized for aspiring entrepreneurs looking to get into selling on Amazon or who want to improve their current strategies, come join us as we explore buying and selling trends; multiples, definitions, ups & downs. Tune in now for an information-packed show full of tips ‘n tricks that’ll take your business up a notch.
Topics Covered in this Episode
Intro Geoff Matthews
Geoff is an experienced business broker and partner in the FBA Broker
Riding the FBA Acquisition Wave
You saw the trend early for FBA rollups – when did you first get started focusing on Amazon sellers specifically?
Covid Strikes, March 2020
Stories of where people were getting stuck between borders
How about AGGREGATOR craze?
We’d love to hear it and that structure – so seems mid to late 2020? The phone is ringing off the hook?
Some Basics: Defining a Multiple, Earn Out, and SDE
Mapping Out the Roller Coaster - by Data
You are my data go to guy! So if possible, I’d love to hear some KPI indicators of the ups and downs in the space. Probably a key metric is the average multiple on SDE (seller discretionary earnings) over the years.
The Peak of the Acquisition Crazy, the year 2021?
The acquisition craze was full force in summer 2021 with money flying everywhere.
How has 2022 been for Amazon acquisitions?
What is this year like? Earlier in the year seems many I talked to were focusing more on D2C.
What is the future for Selling your Amazon business - 2023 and beyond?
What is in the magic crystal ball Geoff?
How can people reach out to you?
What are some ways to get in touch?
People / Companies / Resources Mentioned in this Episode
Episode Length 1:22:50
Thank you Geoff for being on the show, and thank you everybody for listening in.
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[00:00:00] Episode 388. I’m sitting right next to Faith. We’re doing this in person today. Welcome to the Global from Asia podcast, where the daunting process of running an international business is broken down into straight up actionable advice. And now your host, Michael Michelini. This is honestly the most exciting part for me.
Of course, we ha, I have been hosting your show GFA for quite some time now, [00:00:30] and this is the first time I was able to speak. Yeah. And personally meet Mike. Yeah. And I’m super happy. It’s really cool. I got a chance to meet you and of course be able to host well 1 0 1 with him in front of you guys. It’s a special episode.
totally special because also we are here in Tagaytay, which is the volcano. In a volcano. Exactly. It’s pretty cold out here. That’s why I have my jacket on here. You might wanna grab your Or a jacket. I should wear the the [00:01:00] jacket. But I’m wearing your Christmas gift. You got me. It’s really cool. Exactly. I just bought it.
Black polo. Do you like it? Yeah, it’s super. For those watching on video, you can see it. But it’s super, it’s my style. Like she was checking my style, so. Exactly. I haven’t been seeing Mike wearing whites or any collars for for, I don’t know, for how long, for, I don’t know. So it’s always, honestly, I’m very grateful.
Thank you. I got this chance to be able to house with you. Being here also here with our team, not only with us, we have [00:01:30] our whole team here. We’re going, going to show you Yeah. What’s happening in the back end here a bit later, right? Yeah. Af after the episode. Exactly. All right. So we just wanna get it on.
This is an episode with Geoff. Geoff , Geoff Matthews. He’s a friend I’ve met in the, you know, in over the years, and he’s, He’s deep in the Amazon fba. Buying and selling rode that rollercoaster of the ups and downs. So it’s a longer show. He really gives lots of definitions and trends and multiples and, uh, you know, [00:02:00] That was a deep one, and it’s a good one for the year.
It’s the end of the year, so 2023 is coming. I think there’s still one more show before the new year, but you know, it’s a good one for the end of the year. Exactly. There’s a lot coming in, especially with Chef of course, that he has been in the industry for ha, I mean, a lot of years now. And of course being him, being able to show or even share the knowledge to our view viewers and also our podcast listeners, it’s very, very valuable for you.
You wanna take down your notes here? Yeah, lots of notes because this is not only a [00:02:30] 1.2, but there’s a lot of bullet points that you wanna share and get and also share with your friends if, if you’re like an aspiring Amazon seller or at least wanna learn more before you start being an Amazon celeber, this is the episode for you.
Let’s do, let’s, let’s go right in. Let’s go right in and it will get back in the actual. Let’s see us. Are you looking for a cross-border logistics company from Asia to the east and the West? Then look. No further. Cross Better [00:03:00] logistics is a solution for you. From ocean shipping to air freight from factory to three PL warehouse, Amazon, F B A and Walmart Cross Better Logistics is an experienced service provider for e-commerce sellers and B2B traders on TPS trade.
As a GFA partner level sponsor. Let them know we sent you and they’ll take care of you. Check them out @www.crossbetter.com [00:03:30] today. Welcome back everyone. We are now back in another podcast here at the GFA Podcast and we are very happy today since our episode today is very much interesting. And for me, we are so excited to have this guest in our podcast today.
And of course, um, if we go into ask, mainly this is mainly about the ups and downs of the Amazon F B A acquisitions industry. Well, [00:04:00] I don’t wanna keep you waiting too long. I wanna let you know that we have a special guest here. This is Geoff , an experienced business broker and a partner in the F B A broker.
Welcome. Welcome here, Jeff. How are you? Thank you very well. Thanks. Thanks for having me. Yeah, you’re so happy to have you. And, and I mean, Mike is so happy to have you here as well. Yeah. You know, we were preparing for the show just now and I was like, man, let’s hit the right button. Hit the record button cuz you’re seeing some [00:04:30] cool stuff and, uh,
So, uh, I’m excited. I mean, there’s like, like you said, maybe we start with the last time we left off. Uh, maybe, you know, a lot’s changed in all of our lives. Everybody, especially Covid, but just life in general, life changes, but, uh, a lot is, seems to have changed in, in your world, looks like for the better, but, uh, how are you doing?
Yeah, yeah, good. I mean, obviously, you know, um, the last couple years have been pretty crazy for everyone and, uh, you know, some [00:05:00] people, it was really nice to see a lot of people took advantage of it, you know, I remember, uh, listening to, uh, I think it was like a Dean Jackson podcast or whatever where, and he said it really early on and he said, don’t let the pandemic be a missed opportunity.
and I was like, yes, yes. I need to hang onto that man. Like, I need to hang onto that. Like anytime, anytime like things are down or like sales are down, but this isn’t going right. It’s like, man, what can I do to like turn this into an opportunity? Um, so yeah, that, that was really cool. But yeah, I, I don’t actually remember the last [00:05:30] time that we spoke, but, um, I wasn’t doing this then because I had a business with my wife and we had been running this business for, uh, a number of years and, um, this was in the travel space and I mean, timing being what it is, this was before the pandemic, so this was a good, you know, and things were going well, right?
I mean, we, we had traveled the world. We, we were doing this, you know, everything was going great. Um, and we thought that maybe now, you know, at that time or whatever was a good time [00:06:00] to, to think about selling and we’d heard rumblings of this buyer and the space. So we got in touch with ’em and we’re like, you know, here’s our stuff.
Like, what do you think? when, you know, and he ended up making an offer that surprised us. Like we were like, wow, okay. You know, and a lot of sellers go through that too, right? They don’t really know, you know, they’re like, wow, until a buyer says I’ll pay you this much. You’re like, oof, okay. This is for reals.
Now there’s commas and zeros involved here, man. Different, remember, man, I remember you’re just, you were going through this with [00:06:30] Yeah. And so this was, uh, something that we had decided to do ourselves, right? So we decided to keep going down the road with this buyer. Um, I mean, hindsight being what it is, this was really stupid of us to do.
But we kept going down cuz I mean, hey, it was an offer that we liked and you know, this guy, um, you know, said all the right things. But then we started to get into to the diligence phase. And of course, trying to do [00:07:00] this all of yourself while also still trying to run your business is awful. Like the amount of.
Data and like the requests and questions and stuff that they had all just fell on us cuz we didn’t have an intermediary to, to help us with this. So, um, but this got like right into like, I think it was actually New Year’s Eve and he called us, uh, the money was in escrow, like we were closing that day. Money was an escrow.
Mentally, we had already spent it. We were [00:07:30] already moved on, right? Like we, we were already out the door and he called us up and it was in the evening and we had friends over already and he had some questions about a certain metric and we did the best we could to try to explain it. But he got cold feet, um, and ended up pulling the whole deal.
He actually paid a penalty to take his money out of escrow, but something about it didn’t sit right with him. We weren’t able to ex, we knew what it was, but we weren’t able to communicate it to him. And of course at that time, there’s nobody to get on [00:08:00] the phone to like help you. And he ripped the whole deal apart right in front of us, man.
And we were absolutely shattered. Oh,man. Like, diligence, like months long. Diligence is really, really hard. And it was having your life’s work basically ripped apart, like, you know, thread by thread and, uh, and yeah, like right in front of you basically, right? And, uh, and then to come away with that, from that with nothing like left us pretty broken.
We were really upset about that. But, [00:08:30] um, we picked up the pieces and went back to work. And a few months later we started to talk to, uh, a friend of ours who’s, who was the managing partner of, of, uh, the fba broker here. And, um, d it was a different business, so it’s not like that was gonna be the right fit or anything, but we’re like, what should we do?
And basically the overwhelming advice here was like, you need someone to help you with this. Selling a business is really, really hard. We found that out, [00:09:00] you know, the hard way. But yes, it is very, very hard. And, um, he suggested to, to make some calls, do the rounds, interview some brokers, and find someone you trust, find someone you like, find a process that you can buy into and be confident in.
And that’s what we did and we ended up having a successful exit out of that and further conversations, um, I said, I want, I want to do this. Like how, like I want to be able to help people get a premium for their business and not make the same [00:09:30] mistakes that, that we did and not go down that same path. So fast forward to today, a few years later, um, you know, we’ve helped a, a number of, of, uh, of business owners capture, you know, seven, eight figure exits and, um, nice.
And it’s been a really fun ride to, really Uh, like I said, help people and steer them in the right direction and be completely on the side of the seller. Right? Like, the buyer’s not in our back pocket. Like we are working for the seller. We’re on the same team. You know, [00:10:00] a good exit for them is a good exit for us.
It’s like, let’s, let’s capture a premium here. So that’s, yeah, it’s kind of like that about, sorry, it’s kind of a, a, um, a long walk for a short drink of water there, but that’s, no, I like it. That’s kinda the, the, the nuts and bolts of, of how that, that, uh, a failed exit turned into a successful exit. I wanna help people do this because I remember we were on, we did mastermind together for a while, and I remember you were, yeah, actually when we were kind of wrapping up that, that mastermind sessions, uh, you were going through this process.
So I I, I, I, [00:10:30] sorry to hear the bad. It got ugly man. Little part, but uh, cause I remember you were going through talking to them. I remember, I remember you were maybe an early stage. Process with the buyer or maybe you were looking to sell. I can’t remember exactly at that stage, but you were definitely like in that mindset, so, well, you know, glad it worked.
Ended up working in the end, but geez, that does sound, uh, freaking nightmare. Hahaha, yeah, it was tough, man, but it was, it’s not an uncommon story either. I mean, if you look at [00:11:00] the whole world of, of, even in the e-commerce, we’ll talk about e-commerce, it’s that that’s kind of what we’re into today. But, you know, this 75% fail rate, you know, just cause a business is listed for sale does not mean it’s gonna transact on the other end.
Diligence is really tough and a 75% fail rate, meaning there’s only 25% of the businesses that get listed are actually gonna sell. So, you know, there, there’s a big, big chance. So [00:11:30] that’s, yeah, that’s something to be aware of for sure. Got it. All right. And absolutely us having to hear that there’s a lot coming in.
Again, it’s always the bad experiences that helps us just progress, do better in the future endeavors that we do have. And of course, we wanna tap into F B A. Of course. Everyone’s, uh, been waiting for this and getting started writing the fba acquisition wave. And yeah. You saw the, uh, trend early for the [00:12:00] F B A Rollups.
Uh, when did you first get started focusing on Amazon sellers specifically? Well, the F B A broker started I think around 2016, and it was really the first, uh, brokerage to focus exclusively on, u, e-commerce businesses with an Amazon sales channel, right. With that F b A sales channel. Um, I mean, of course there were other brokerages, um, selling all types of businesses.
Some online, some not, but no one was really [00:12:30] focusing on, you know, the, this kind of like emerging appetite at that time for online, uh, product based businesses. So, um, we were there well before the aggregator craze started, so, um, but yeah, the writing on the wall, I guess I, I think there was probably rumblings of it back 2018 or so, if I’m remembering correctly.
I mean, yeah, I think at that time it was like, wouldn’t it be nice if someone could like buy a bunch of Amazon businesses? Yeah. They [00:13:00] seemed so easy to run, you know? Yep. Yeah, I think And true keep. Yeah. Sorry. Keep, I think at least the first rumblings, right? Like it didn’t really start to take off because I mean, nobody had funding for it, right?
That was the hardest part. But yeah, I mean, there were certainly talks because they, you know, like Amazon businesses were so easy to run, you know? Um, what if one person could run 2, 3, 4, 5 brands, um, that were, uh, already established, right? Like, it’s hard to start a business, [00:13:30] but, you know, the maintenance, uh, thing, you know, that was the thing.
But Amazon was growing. It was kind of like that, the tide that floats all boats, right? Yeah. Um, but yeah, I mean, certainly Covid hit and e-commerce went into hyperdrive and money poured into the space. Right. And investors were they, everybody was shocked. Everybody was caught off guard by the, the global scale of it.
Yeah. But investors needed to find ways to get returns. On their money. [00:14:00] And, you know, e-commerce with CLO stores closed, E-commerce took off. And that was a smart, uh, smart, you know, area to put their money in to, to get a, a quick return. Um, agreed. Yeah. But it was pretty crazy ride over the last couple of years.
I mean, I remember the first ones that kind of really came into the space. Um, obviously the, the big names. And I remember having a lot of conversations with [00:14:30] people because there was no, um, it was just an idea, right? There was no. Uh, proof of concept that this was actually gonna work. Um, I mean, the idea to buy up a bunch of growing profitable Amazon e-commerce businesses, and at that time it was like two and a half to three and a half times multiples centralized operations.
Ride the Amazon wave it, you know, with a massive consumer behavior shift and, you know, there weren’t many other options [00:15:00] for consumers for a while. But then stack all of those revenues and float their overall enterprise value and get like 10 to 15 times on exit. Get rich along the way. I mean, all of this, this was the whole point of us.
Maybe they go public or whatever, but it was absolutely insane when the amount of copycats and money that started to, to flow into this space, and all of a sudden aggregators popped up from everywhere and they had to compete with each other to buy [00:15:30] businesses. And this is where we saw multiples go fine six, seven times.
Like this was, I mean, if you think about that for a second, like in terms of a multiple and what it really is, like their future paying say 5, 6, 7 years of your income at today’s value nuts. But some of these companies were only two and three years old. So how do you future pay seven years for a three [00:16:00] when there’s business doesn’t even have that much history.
It was absolutely insane, but it was, it was happening. I mean, it wasn’t without structure and some people got, um, you know, we could talk about that in a minute, but structure really screwed a lot of people. Um, but uh, yeah, I mean, nobody knew this was gonna work or not. It was never a guarantee. It was high risk, potentially high reward, um, and a crumble.
Yeah. You know, couldn’t withstand. Stress test of [00:16:30] global forces . Yeah. Add a little color to in my, in our community, in my space, in my life. Like you said, like, um, it, it actually was almost like a, like a, everything dropped in March, 2020, right? Like March, 2020 was like the, uh, apocalypse of the world, right?
Even fba market, I don’t know. Um, if it just collapsed because they, um, I was actually doing, so I was a, I’m still a shareholder, small shareholder and [00:17:00] ag aggregator that I sold my brand to. Um, this is Satana one we did on a show, uh, wri wrote a book about it, e-commerce, gladiator, I think you might know, but.
I was also joining as like BD partner or you know, uh, ex associate, whatever my title was. And we, they caught every, everything just got frozen because of the March, 2020, cuz Amazon stopped accepting new inbound shipments. , I was like, we were chatting before recording [00:17:30] about our struggles and, and borders closing.
I was in the Philippines bouncing between a whole island, taking a ferry to Cebu, trying to stay in hotels, stand in front of place, getting kicked out here, kicked out here back of taxis. At the same time, Amazon is not accepting new ship inbound shipments. People are like flooding to try to book the shipments cuz we heard on a war on street it was gonna cut off the next day and people were booking in right at 3:00 PM uh, manila time, which is like midnight Pacific time in the US right?
As soon as you flip midnight, [00:18:00] boom off, people were like in the middle of their shipping plans trying to put it through and it got like locked out. Couldn’t put new shipping plans to Amazon. We felt like the world was ending. We had mm-hmm. There was, the aggregator had containers still in China, not shipped, had to just leave it in China, find three PLs, huge nightmare.
So everything like froze. Actually, sellers were frantically trying to sell like, I think multiples maybe at that like two or three week time period. But then it went the complete opposite way cuz everybody could only buy on [00:18:30] e-commerce. Mm-hmm. . So then Amazon stuff started shooting up in like April, 2020 or so.
May, May, 2020 went nuts. But, but that March, 2020 was like, people are like frozen, we’re thinking we’re screwed. Like, yeah. Scary times. Yeah. That was nuts. But then, yeah, I remember that. So I think deals in, deals in progress at that time just got cut off at the knees, man. It was that was, uh, . Yeah. A lot of sleep was, I felt like the world was ending seriously.
It felt like the world was ending in that march, [00:19:00] mid-March, Friday 13th, Friday 13th March, 2020. Um, . Yeah. Yeah. That day just burned into your mind, right? That was, I remember everybody was like, where are we gonna get toilet paper from Right people? Yeah. Stock up toilet paper masks. Yeah. Stock up on canned food.
Man. I had a duffle bag of canned food. I was carrying around with me and, uh, and my backpack. I was in carryon luggage mode only. Man, I felt like I was in, I was getting kicked outta Airbnbs. Like, [00:19:30] I, I was like, I don’t know what I’m gonna do. Like, I, I felt like I was gonna like sleep on the streets, but can’t.
I like the Hormel chicky, uh, chili Hormel chicky. I, I was just like, I even recorded a podcast on somebody’s show while I was in a hotel. Like, and then they’re trying to kick me out at hotel during the recording. , like, , like, insane man, like security. I hope. I hope you left that in. I hope you left that in.
Yeah. The guy was saying like, yeah. Um, I, I, man, I’m forgetting. [00:20:00] The person, Dan, Danny, and, uh, in, uh, Indonesia, Bali. But, um, anyway, but yeah, so, but, but then it went the other way. Then everybody was going nuts for Amazon. Everybody’s going nuts. I just remember that then. Then it was like summer 2020 maybe, or everybody’s going into Amazon hardcore.
Yeah. All these aggregators. Yeah. Yeah. It was strange, man, strange times. Like we, we were in, uh, we were actually in Mexico when that, I mean, we were living in [00:20:30] Budapest, right? and, you know, a strong expat community, strong like digital nomad community. And it was an awesome place to, to live. Our daughter was actually born there and um, and it, it was great.
We met so many cool people with cool businesses and this right around the time that got involved in, in, uh, in doing this. And we just decided as a team we’re like, let’s go somewhere cool and work in the same office [00:21:00] together for like, cuz you know, working on home like this is, we’ve been doing this for 10 years.
It was nothing new to us. Right. So like the idea of like going to Mexico. Getting a cool office, getting a baller apartment with like a pool and like, just everything. Like let’s do that for a few months. Work in the same space, like workout together. Just everything. Like hit the beach bars after work, whatever.
Like this is gonna be fun. North American time zone never hurts either cuz it’s, it’s tough when you’re halfway around the world, as you know. But, [00:21:30] um, but that, that was it, man. And then, and then the headlines just kept going and going and going and going and, and you know, at, at the time it, you know, I, yeah, like March, 2020, right?
It was like, well, is this gonna be a global catastrophe or is it not gonna be a global catastrophe? Like, don’t, you know, we just don’t know. So we’re like, well, maybe we should go back, back to Hungary. And boom, Hungary shuts the borders. They shut the borders. Specifically for anyone who is not a Hungarian citizen.[00:22:00]
Well, we’re not Hungarian citizens, but we had a resident permit and anybody we called emailed or, or however we tried to get ahold of them, nobody could tell us if you travel all the way back to Hungary from Mexico, if you will be allowed in or not, with a year and a half year old daughter at that time, we’re like, well, okay, so o o option B is, if this does turn into a massive global catastrophe, do we want to, to stress test the Mexican healthcare system?
Or [00:22:30] what should we do ? Right. So like, because at that time I say March, 2020, right? I mean this is like, that was nuts. It didn’t feel like unreal. Like it was, it, it was, it was scary, but the thought was this was just gonna put our heads down for a few months and I’ll be over. Or like, you know, nobody knew. So, uh, yeah, everybody kind of split.
That’s too bad. It gave up on our little Mexican, uh, um, you know, not vacation, but, you know, that was really fun. I, I feel like we got short change. I feel like we need to go back and like fulfill that. [00:23:00] But, uh, never too, but yeah. Yeah, yeah. But yeah, that’s, that’s the story, man. Kicked outta Hungary, and then these enterprising young fellows decided to start a business.
This like saved us, don’t know who these guys were. found them online, and these guys basically knew that people were locked out of the country. Expats, digital nomads were locked out of the country, and they caught wind into this early man, and they started a business to [00:23:30] go into people’s places, basically box up all their stuff and sell it for them and split the profit, 70 30.
And they could, you know, they, they were all like trilingual, college age kids. Like, I like it this. And we were like, this is exactly the service we needed. Like all of a sudden a problem came up. It’s only three weeks old, this problem, or four weeks old, and these guys have already got this. They already knew what to do.
Um, and I, I just like, again, [00:24:00] I dunno who these guys were. I never met ’em, but man, that was just the perfect solution for us. And we actually had someone go in and box up our stuff and send, send it back to us or, or sell what they could. And they sent back to us like anything that we wanted to keep, but they photographed it all and sent that.
It was great. I liked that man. Uh, I wish I had that I had to beg a friend in P G C to, uh, I couldn’t even mail the key cuz I had to leave the key in Cebu cuz there was no mail. Lb, L G C, is it Faith? They were not shipping. I, I had [00:24:30] to just drop my key off when I took the emergency flight back to China, like some kind of evacuation flight.
I just like, I don’t know what to do, just hold my key in Cebu and once they could ship and just send this key to Manila. And then, uh, I had to, like, I wrote up, you know, I write a lot, so I wrote a long Google doc and uh, I said, okay, in, in the bathroom is this and that. I wrote out, I walked through my room, my apartment virtually in BGC and I just outlined all my stuff from my memory and, uh, And then the landlord wanted [00:25:00] me to pay the electric fee.
I lost the deposits, you know, whatever. I, he, I’m like, he’s like, no, I only accept Peso. I’m like, dude, I’m in China. I got PayPal or nothing. You know, I’m not gonna send you a Peso. You get PayPal for your electric fee that I was locked out for two months. Or you can keep my like underwear and my like, backup clothes and my like, broken laptop, you know, if you want, you know, like, yeah.
Yeah. . So he accepted PayPal? Yeah, it was like a freaking nightmare. And [00:25:30] then my stuff is moved from three people’s houses or apartments. It’s at Ricoh in BGC right now. But yeah, I, I, I don’t know if there was selling it. Yeah. It’s gonna be funny. One day when you get that back, it’s gonna be like, okay, going through like, like got dirty laundry in you buried in the backyard, right?
I got dirty laundry in there. I think that might have walked away by now. Yeah, I, uh, I don’t know. I don’t care. But I, I, I remember leaving dirty laundry when I left, [00:26:00] you know? And, uh, obviously didn’t know the world was gonna lock down. I was like, I’ll be back in a few days and I’ll through my laundry. But, uh, I think that’s still, no, that’s crazy, man.
I, I like people’s stories, man. Everybody’s got one, right? Everybody’s got like, where they were, what ha like what they did some kind of crazy thing happened, but I mean, it all kind of had a funny way of, of, of working out and like, and like in your situation, it’s still kind of incomplete. This gonna be a nice little time capsule when you finally able to open that box and like, my, whatever my [00:26:30] style, my story is, uh, I’m gonna just leave it in Philippines.
Now it’s, I, I’ve forgot what I have. So, uh, it’s just gonna be like my Philippines belongings. I’m not, I’m gonna just, right. I’m gonna just leave stuff there so I can just fly there with like, carry on and just have like things there. That’s kind of my plan now. Right? Understand. There you go. Uh, unless you, you sort of roll the dice because, uh, maybe there’s some, you, you’re overthinking it cuz you might have, you might think you have stuff there and you don’t actually have it anymore.
[00:27:00] Yeah. That’s happened in Thailand. There’s stuff that my kids were like, kind of sad because they had toys. They were hoping they would get back at all. The toys are gone. I don’t know where they went. Somebody kept them somewhere in Thailand. So, yeah. Anyways. . Somebody needed them more than they did, I guess.
Yeah. , you’re enjoying them. . Absolutely. There’s a lot going on, especially when it comes to Covid. Also us here, we were so stranded. There’s a lot of things. Again, we were able to talk about this with uh, Koran as well. [00:27:30] Like, uh, we needed community pass, travel pass. There’s a lot of paths. just to make sure that we can go out.
Everyone’s hoarding the toiletries, food and canned foods. Yeah, there’s, so, you know, you’re here in Manila before there’s a lot happening. It was just too much. I really didn’t know what’s going to happen in the future, you know, it was just too much. And of course I wanna tap into Dad, especially, we’re talking about it already.
And how about the Covid Triking in March, 2020? Any [00:28:00] stories that you have where people were getting stucked between Borders? Any more stories about that? Um, I think, I don’t think so. I think we kind covered that just now. Yeah, I feel okay. It’s mainly it. Right? And then of course, uh, the one that we were able to talk about the, uh, aggregator craze, and I would love to hear it and also the structure that you were talking about earlier.
And so it seems that mid to late 2020, uh, the phone is ringing off the hook. [00:28:30] Yeah, yeah, pretty much. Um, it, it’s, it’s funny though because aggregators, um, were definitely stealing all the headlines and had all the PR and they had the neon signs outside their office, like, we wanna buy your business and we’ll pay you stupid money to, to go get it.
But aggregators represent a pretty small portion of the buyer pool. Like they’re, they’re, they’re, they’re banging the drum, the loudest, but they, they [00:29:00] actually make up a very, very, small portion. So the whole private equity space and strategic financial bias, like everyone else just kind of took a, you know, just kind of let these guys fight with them themselves and wait it out.
And I’m sure they’re glad, they’re glad that they did. Um, because yeah, like it’s, the phone was ringing off the hook. It was sellers and buyers. I mean, buyers were [00:29:30] honest, like always trying to get the jump on, on the next deal that was coming out. Right. Um, and, and it got pretty sloppy where they were just buy anything and make these stupid offers so that nobody could say no, just so they could get exclusive access to deals.
And, um, they, a lot of them had a pretty dirty playbook. Um, for the most part, the sellers, you know, did, did pretty well. But when I mentioned [00:30:00] structure, Because you know, a lot of sellers really focus in on this multiple, the whole idea of a multiple. Yeah, exactly. And it’s, it’s, it’s multiple is a vanity metric, man.
And, and, well, not vanity, but what, what I mean by that is like a multiple should never be the target, right? We need to talk in real numbers because a multiple does not tell the whole story. A multiple is a result of a deal, right? [00:30:30] So like somebody says, I can offer you five x for your business, that’s great, but really how does that, how is that five x being achieved?
And that’s gonna be made up of some cash at close. Yes. And some of it’s going to be made up from, from structure, either, it could be an earnout, could be a holdback, could be stability payment, could be seller financing, could be an equity play, could be all sorts of things. But all that means at the end of the day is that the buyer puts less cash into the deal upfront.
And anything that comes after that is at [00:31:00] risk on some level. Some less risky, some more risky, but at risk on some level, cuz it’s not in your pocket today. So if you got offered a five x deal, but you got three x exit close and then the economy collapses and the aggregators tank your business and the extra two x is never paid, then the result of your deal is a three x.
Did you still get a good deal or didn’t you? Right? Mm-hmm. . So, I mean, that’s the o the valuation upfront matters [00:31:30] less than the, than the, you know, the structure of, of a deal and negotiating that to be in your favor and more secure than what’s initially offered by pulling, you know, certain levers to, to try and secure it a bit better.
But that’s what I mean by that. You know, like, cuz right now there’s not a lot of earnouts being paid. Mm. Which is really, really unfortunate because you know, they’re missing their target and you sold your business, you’ve handed it off [00:32:00] to a buyer who you know has complete control and a hundred percent say over what happens next, and you’re in the dust.
So whatever you got on the day of close is what you got for your business. So that’s, you know, a lot of sellers right now are, could be having remorse that they didn’t sell last year, but I mean, realistically, You know, some of those buyers are in a, in a fairly tough spot now. I mean, thinking of all of the, the, the global stressors [00:32:30] that have been put on businesses on a singular level, like you as a business owner, oh, the shipping crisis.
Oh, the shipping prices are too high. Oh, my containers stuck at port, whatever. Well, what if you had a hundred brands? Like, imagine that idea at 120 brands or whatever and all it’s all happening. So your entire portfolio at once and your lenders are like, we need our money back, man. , it’s, you know, that’s, yeah.
So it’s really painful. Yeah. Container. Even right now, we, we have a couple brands we’re doing internally and one [00:33:00] is spend this huge nightmare of, in LA it was really a nightmare. Yeah. Long beats got, uh, oh, pain. The pains . I see you, I see you twitching right now. I, I struck a nerve. Yeah. You know, like I. I go back and forth, you know, over the years I said I wasn’t gonna be a seller, but then my friends get me back in for various, defining the reasons.
You know, I just have no patience for logistics. You know, I shouldn’t be involved in logistics, [00:33:30] but I’m somehow involved in this logistics situation right now of a container in LA It clear Customs is at the warehouse, but the warehouse has got like a, I don’t know, I don’t wanna. It’s, I’m just gonna say some kind of labor, labor issue.
Mm-hmm. . And so we have another warehouse going to that warehouse at different companies and contacts and groups and emails and phone calls. And I turn off my phone at night now cuz they just call me thinking I’m in the US and it wakes me up at like three o’clock in the morning. So it’s just like a, a nightmare
Yeah. [00:34:00] Yeah. So, uh, yeah. Anyway, that’s another, hopefully I’ll wait till there’s a more positive story still in ending. Yeah. I’m waiting for you to start dropping names though, man. I don’t wanna hear some, I don’t wanna go there yet. I’m trying, I’m hoping everybody cooperates and we just get through this right now.
Yeah, yeah. It’ll happen. I, yeah, long Beach was, uh, was really stacked for a while. They wore the brunt of it for sure. Um, but you know, the, the thing is, The sad thing is, is logistics companies use it sometimes to their advantage, to [00:34:30] jack you up on rates cuz they, yeah. You don’t really know exactly what’s going on.
So then they’ll just start throwing in extra fees and extra charges and extra this and extra debt and then your bill just goes up. Thousands of dollars, thousands of dollars. It’s like, you know mm-hmm. anyways. Oh, save there. I’ll wait for the happy ending. Or at least an ending is still kind of in process.
Right? Right. A content ending, maybe that’s not a, might not be happy, we might not be terrible either. Yeah. [00:35:00] Make break some or something. . Yeah. And of course, I, we, we were talking about just earlier, um, some, the basics, mainly this is for, uh, people that don’t know much about this, like defining a multiple earnout and s d e again, uh, like the five times, three times.
Can we briefly explain it in what Earnout is? Uh, just some basic people that might not know. I mean, I maybe listeners know. Yeah. But I don’t wanna, you know, it’s kind of a more advanced [00:35:30] show and, but I maybe just give some brief definitions of those, those kind of terms. Yeah, for sure. I mean, the, the, there’s a fairly common deal structure was, um, from an aggregator specifically, is that you would get some cash at close, maybe 70% of the deal, maybe 80% of the deal, but like a significant portion of cash.
Right. And then the, the remaining deal value was usually in two tranches. Right? So you’d have 12 months post-close anniversary. If the business hit a certain [00:36:00] performance metric, whether that’s s d e or a revenue target or whatever it was, then it would unlock like another turn or another multiple or whatever.
And then on year two, same thing, 24 months later did it, you know, achieve another threshold. So, but again, you hit it or you don’t, right. There was no safety net there. And some of those targets were fairly aggressive with, if, you know, if people tried to, to [00:36:30] negotiate with buyers, I mean, buyers are sharks, right?
I mean, they’re, they are. And you know, they were offering like a, you know, crazy multiples, but did those actually come to fruition? It really depended. Like earn outs was risky. You’re, they’re basically asking the seller, To hold on to some of that risk and roll the dice on the buyer that they’re able to, to grow the brand.
And, um, in a, and in a lot of cases they weren’t. And it could be some global, you know, stressors that were on, like we just talked about with like shipping and, and [00:37:00] market headwinds and that kind of stuff. But these guys were so wrapped up in acquiring businesses that, I don’t know if it was pure ignorance or what, but they kind of forgot that they also needed to operate the businesses at the same time.
Man. And this is a huge criticism of the aggregators that became acquisition machines. I can’t say shit, unfortunately. I can’t say shit. I have contracts. I can’t say shit, but yeah. No, you can’t, but you can nod your head, I, I can, I can hear a agree. Yeah. I can’t say shit. I can’t say shit, but I don’t [00:37:30] know.
Like these aggregators think they were superstars, but they don’t even know how to operate an Amazon seller central account. And, and then they were like just getting huge money and then they were just buying companies not even knowing how to like Yeah, I mean there was so many blundered like, It kind yeah of makes me you know what upset a little bit, actually.
We’re prac, you know, like, you know, you and me, we were on masterminds. I know you weren’t in the fba space, but you’re, you know, we’re, we’re, we’re, we’re, you know, operators we’re executors, we know what we’re doing, but then all these guys would just money. Mm-hmm. Yeah. And finance started coming into this space, not knowing [00:38:00] anything, just throwing money around and, you know, hiring my friends, hiring, trying to hire me, trying to buy like my podcast.
It was like outta control, you know? It’s like totally outta Yeah. It was, it was ridiculous. But I have to say that I don’t wanna throw all aggregators under the bus . Um, because the, the, the, the arc that we saw, or the phases I guess that we saw is that the aggregators that came in at the beginning who had this idea, and it got gazillions of dollars, you know, from, from, from multiple lending [00:38:30] sources, just thrown at them for the express purpose of acquisition, right?
They buy up as much Amazon real estate as possible. And then, but I feel like what happened was like some of the aggregators that came in later, Saw the writing on the wall here, right? They could see the C-suite, they could see who made up the core of these companies, and there was a real key component missing.
So some of the newer aggregators, [00:39:00] like newer, I mean, this is like, you know, the, the ones that came in eight, 10 months later, um, saw that and they started to make up their executive team from X, Amazon, you know, X eight figure operators, current eight figure operators, whatever. But like, they started to, to build the core, uh, exec team that had operational knowledge.
And guess what? Those guys are still acquiring right now. Mm-hmm. because they knew that, right? [00:39:30] They, the pressure is off the multiples for sure these days, but some yeah of these guys are still acquiring, and some of them were actually very, very good to deal with. So I don’t wanna throw them all under the bus. Some of them actually were, were our, our sound, um, equity firms is what they really turned into.
Yeah. But, uh, but yeah, man, I mean, not all of them were, were awful. There were some at the beginning that played dirty. They were sharks. They were just trying to get, you know, snap out deals and go direct. There was millions of emails a month [00:40:00] trying to go direct for the sole purpose of trying to take away competition and just go in and scoop it up and, you know, hiring $1,200 an hour lawyers to like, have these contracts that basically steamroll these guys.
And they had no idea. All they saw was commas and zeros, and they were like, yep, I’m gonna. Yeah. sign my business away. Yeah. Um, but the, I, the ones that came in after like the phase two aggregators are really enjoy dealing with and they’re still acquiring nice, they’re still good deals to be done. So, yeah, it’s not all doom and gloom for sure.
Okay. [00:40:30] Yeah. So, but, but I better get that out there before I get myself into trouble too. Yeah. I mean, I’m, I, I was the same, you know? And honestly, even those ones that maybe didn’t know what they were doing, I had to write some, mostly had, some had to write intentions. But all I know is in my, uh, I’ve learned about myself.
I’m like an operator, you know, uh, personally. But, uh, it kind of annoyed a lot of my friends and I, cuz we’re like sellers or e-commerce business owners since like 10, 15 years, you know? Mm-hmm. and then [00:41:00] all of a sudden this thing flashes and people that don’t know what they’re doing are just kind of almost messing up the whole industry in yeah, in some ways.
But, um, yeah. Just before yeah we go to the next point, I just want to kind of just do a little bit of the basics. Ste means seller discretionary earnings, I think. And it’s yeah kind of a, it’s almost like. It’s basically, I don’t know what the other, it’s, it’s more for smaller businesses and it basically just means like, how much profit did a business make after the sellers?
Uh, maybe salaries [00:41:30] or dividends, I think. Right? Basically it’s, so basically you would run the Amazon numbers, right? And then you say, okay, it made a hundred or thousand dollars a month, you know, times 12. That’s the yearly average profits. or ste and then the multiple is like times three. If it’s three years.
So three x, we’re talking about three year times yearly earnings ste. Mm-hmm. or five. And then like, just to recap, just to kind of what Geoff’s saying is there was earnouts, so they wouldn’t pay all of that [00:42:00] out front. They’d say it has to hit a certain target usually after a year. And then they get paid out like me monthly over a certain timeframe.
Some are even, like, I hear some crazy ones, but some are like four or five years or something. Or maybe one year, two years. So I have friends that didn’t get those earn outs too because um, they blame the brand. They blame the aggregator because they’re like, man, if I was running this, I would’ve hit that.
You know, I believe, you know, but yeah that’s why seeing these multiples come in, that’s not the number to focus on that. [00:42:30] Like who the buyer is, matters. It always has mattered. It matters a great deal, especially if you’re really, really care. Your brand and you know, if these guys would come in and say all sorts of stuff, if they were going to, but the, you know, do to the brand.
But I mean, realistically they didn’t have the history. There’s no proof that they were ever gonna be able to, or had success with any other other brand, um, growing it, you know what I mean? So, yeah, I, I always really try to, [00:43:00] you know, instill in any client that we work with that to remember that who the buyer is matters.
Get them to pitch to you because you don’t get a say after you sign that document. And if there is any money at risk, I wanna make sure that it’s mailbox money, it’s bonus money what you get on day one, bill box money is, you know, if, if nothing ever else happens, then you still got a good deal, you know, and you’re not gonna walk away being like, ah, this stupid guy tanked [00:43:30] my business and now I can’t get my money and I want to take him to court and sue him and all this kind of stuff, man, I hear it all.
Yeah, I’m hearing that too. . Yeah. I mean, but what are you gonna do? You, you, you sign, you sign your business way, you know, like if you, if you sell your car to a guy and he crashes it into a pole, well that’s, you know, what are you gonna do? Like there’s nothing you can do. You sell Well, bill of sales sign, well that’s, I mean, that’s a good analogy.
But if you got, if you got paid up front for him to crash the car, you don’t really care. Of course, maybe you [00:44:00] care cuz you like the car, you know that analogy. But if you got paid with the car had to win the next three races in every year. Mm-hmm. or had to finish 10th outta like a hundred for you get extra, extra more money and they like crashed the car in the first year so you don’t get any of that extra money or like, I like the idea of mailbox money, but Yeah, I mean it’s true.
I think a lot of sellers almost just like assumed that earn out would come, you know, they just assumed or were convinced that this guy, this new company is an expert [00:44:30] and they’re gonna like grow this brand and I’m gonna get even more money than I could have gotten. Yeah. But now you’re saying even now, Now aggregators, I mean, not aggregate.
Now the space doesn’t even have earn outs, you’re saying? I maybe we can talk about that later, but, uh, that’s amazing. No, it was just like, some earn outs we’re not getting paid now because the, you know, oh, things tanked and metrics weren’t hit. And, and now, you know, people are left with not getting that mailbox money and if they didn’t negotiate a strong enough upfront payment, then they’re gonna be really, really mad about what’s happening [00:45:00] right now.
True. Um, and there’s not a whole lot they can do about it, unfortunately. Um, so yeah, I mean, it was at risk and it was assumed that both parties accepted that risk when they signed the, the document. And if you weren’t comfortable with that, then you know, you need to keep negotiating. And that’s, and that’s part of the lesson that, that we learned early on too in our, uh, trying to deal with a buyer direct is that we didn’t, it wasn’t [00:45:30] automatically clear that everything was negotiable.
And when I say everything, I mean everything. Everything is negotiable. Every tiny thing about that, whatever their initial offer is, and nobody comes with their best offer right up front, right? I mean, everybody knows that. That’s, that’s, that’s the 1 0 1 in the playbook, right? Or whatever. But that’s, you know, you think that, you know, you see it is components to the deal pay.
That’s much money to close. We’re gonna hold back 20% and, you know, [00:46:00] once the, the inventory final adjustment’s done, you get that 20% and then 12 months post close, we’re gonna give you, you know, another one X. And then if it hits this number in 24 months, it’s gonna hit that one x. And like, but then they look at overall deal value five x and you’re like, that’s an awesome deal.
Yeah. Where do I sign? Where do I sign? You know, and it’s like, okay, but the, you know, you need to read that fine print. And if you know, you need to know that every little component of that was negotiable. Yeah. They probably would’ve paid [00:46:30] you more money up upfront had you said that that was a deal breaker for you or whatever, you know, so that’s, that’s part of our daily life.
Yeah. Just that’s, that’s the value Look under the hood there. Sure. But that’s, yeah. Yeah, yeah. Absolutely. That’s since we are also take, I mean, talking more about the ups and downs of the business lately, of course we are mapping out the rollercoaster by data. Well, of course, Geoff, uh, you are the data guy here.
So if possible would love to [00:47:00] hear some kpi indicators of the ups and downs in this pace. And of course, probably a key metric is the average multiple on STE over the years. We’d love to hear your thoughts on this. . Yeah. I mean, you know, my thoughts on multiple Yeah. We were talking about, it’s kinda, I guess, you know, it’s, but I mean, mean just trends, evaluations, maybe, you know, like deal sizes or, or, uh, premiums or, you know, I mean, right now it’s, it’s less about, [00:47:30] it’s less about metrics and more about trends, I guess.
Like, like not less about hard metrics, more about the trends and what’s happening. Because looking at the metrics over the last few years tells us what things were like in that, you know, in that time, in that window of time, that’s what things were like, that’s what deals were worth. But that’s not what’s happening today.
So like, looking back at, at comp data is, is nice and, and you know, but it doesn’t really tell us what a [00:48:00] business will be worth to a buyer today, um, by, by looking at what was happening six months ago. You know what I mean? That doesn’t really help us much. Um, but. I mean, yeah, I mean, absolutely. To get into some of the stats, um, if you want,
like, if we take like the median multiple over the last five years, it really doesn’t change much. You know, like in the two to [00:48:30] 5 million space, for example, you know, we’re looking at like a four, 4.2 multiple as a median. If you don’t think the average, it’s gonna skew ridiculous over the last couple of years.
But the median is still fairly, you know, in that 4.2, which is, which is high for an e-commerce business. I mean, like two years ago, two and a half years ago, that was a great, great deal and it’s, I think it’s, it’s going to come back that way. But the funny thing is, like with all the deals that were getting [00:49:00] done over the last, you know, 18, 20 months that.
Metric or that stat of that 75% fail rate never changed. It never changed. It’s been the same since 2017 or 16 or whenever we first started tracking it. It hasn’t changed. Interesting. It changes a little bit depending on, like if you’re looking at like under 500,000 in deal value, 500,000 to 2 million in deal value, two to five, [00:49:30] whatever, whatever, um, category you’re looking at, you know, it might go from 21% to 23%, you know, success rate or whatever.
But around that 75 is just never, is never wavered interest. The more deals came to market, but that just means more didn’t transact. Hmm. So interesting. Yeah. I mean, one little point, maybe you can clarify, but I. Think I’ve heard in the space there’s something called like a cornerstone [00:50:00] business versus like a, a non cornerstone.
I don’t wanna get so technical maybe, or keystone maybe where it comes with a team or the operations or the, the first one aggregator or the investor buys to operate the future businesses. Like if I swear I heard this somewhere outta either podcast or speaking or, or Yeah. It depends on the size. Like I think you’re talking about a plat, a platform investment, um, happiness, I forget the nerd, but they say they buy it cuz they want to use that to [00:50:30] buy other ones.
And that’s the operating. Yeah. Yes. Yeah, exactly. So Mo mostly in, in the private equity world, they’re gonna call that like a, a, a platform place. So like, if this is their first acquisition in a particular category, like let’s say this private equity firm wants to go into pets and they’re going to make their first acquisition in pets, uh, in the pet space, um, usually it’s going to be a significant one, right?
It’s gonna have a large footprint, it’s [00:51:00] gonna be more of a robust brand. They’re probably going to acquihire, uh, and bring in the experts that come, come with that. And that’s going to be like the jewel in the crown like you’re talking about. That’s gonna be their, their, their platform investment in the pet space.
And then they’ll have all these add-on or both on smaller businesses that will support that. Um, but that’s kind of how that, that that’s more how the traditional roll up should work.right Where they bought, they, they make a large [00:51:30] investment into one category. They centralize operations and then they add on and buy up market share within that space.
But what the aggregators did was they, they sort of ignored categories and just went, you know, they were category agnostic. They bought everything. They just wanted to buy up as much real estate. So they had, they had pets and automotive and baby and, you know, home and garden and kitchen utensils and just anything that they could get that, that, that had a certain, whatever [00:52:00] metric they wanted to hit.
If it was, you know, 20% profit margin or 25 or whatever, then they bought it and now they’re, I thought, I think, just to put the thought process on that, I remember, again, I’m not trying to call out anybody, I can’t even recall who I heard it from, but I heard some of these aggregators saying they were doing that because it’s Amazon, the category doesn’t matter in Amazon.
which I don’t fully agree with, but they would say, you know, the operations is the same, the technology’s the same, the supply chain is the same. Maybe they just [00:52:30] looking at, it’s coming from China or in, in, you know, uh, India, or they look at a supply chain more than the category. Cuz they’re saying like, it’s more about filling containers or, or volume than it is a category.
I remember yeah somebody saying, sounded smart, saying that, you know, during this, so someone who sounded smart, but you know, , I don’t know if you could, I don’t know if you could tell me that the automotive space is the same as the supplement space when you’ve got regulations and suspensions Exactly. Again and things like that happening at [00:53:00] one and not the other.
So that’s the operator versus the investor or the visionary? I guess the operators. Cuz I, I was more surrounded by operators in our community and we’re all just like, what are these people, investments, aggregators doing? They’re just buying anything like, yeah, yeah, yeah, yeah, yeah. So I mean, that, that’s, yeah, like the.
The traditional roll up is, it’s a pretty sound method, you know what I mean? To, to really buy up market share in a particular category, [00:53:30] um, where you have an ability to buy the expertise, right. Buy the teams that come with it. Yeah. And that’s your first cost savings is, is to bring it into that ecosystem where you already have people operating that that’s how it should work.
But you’re right, they thought of Amazon as kind of this, this catchall, this, everything it doesn’t matter as long as , all I need is somebody doing logistics and somebody doing CU customer service, and we got this handled. But you know, like complaints and compliance and regulations and all these kind of things differ from [00:54:00] category to category.
Um, so yeah, I think that, that you, you might have hit one of the reasons why it didn’t work, , because the aggregators, like I mentioned, that have been successful and did come in a little bit late. You know, aggregators 2.0 who saw the bugs in 1.0. You know, they do have a fairly, a, not totally tight, but a fairly dialed in investment [00:54:30] criteria where they will look at specific categories and ignore others because they know that they can be successful in some because of they already have investments in that space or, or a team, right.
So they, they are looking to sort of narrow their focus a little bit and bring it into that sort of traditional roll up model. Okay, okay. Interesting stuff for sure. Um, there’s a lot going on. A lot going on. I, I, I really agree. Again, it’s al already quarter four [00:55:00] here and, uh, 2023 is coming in, and I think there’s a lot, um, to wait.
Uh, uh, there’s a lot to happen as well when it comes to the progress. It’s a very progressive, it’s not slowing down. I, I really agree. Really agree. And of course, speaking of peak, the peak of acquisi of the acquisition cra craze, the year of 2021, um, from Mike’s side, I believe, so the, the acquisition craze was full force in summer 2021 with [00:55:30] money flying everywhere.
All right. Left and right. Everyone was an investor looking for deal flow. What can you say about that, Mike? Yeah, I mean, I, I love to hear Geoff’s input. You know, we didnt. Prep too much, but it had a basic outline. But I would say the summer 2021, maybe fall of 2021. Was the height of this, of this aggregator of avalanche.
Is, is that what you would say? I mean, Yeah. I, I, I would second that. Yeah. That the summer fall [00:56:00] was, uh, was pretty crazy. Um, you know, I even had people introducing myself if we want to be the new Thrasio or we wanna be the new whatever. And it’s like, that’s how you’re introducing yourself, really. Like, not trying to be different at all.
We’re just like, you’re basically broadcasting to the world that you wanna be a copycat. Like they were just literally leading with that and yeah it’s like, all right, good luck with that. Yeah. But, uh, yeah. Uh, but yeah, that’s, that’s probably when we saw the, [00:56:30] the, the largest deal valuations were probably in that summer and fall of 21.
Yeah. Exactly. Crazy times. That’s a lot. Yeah. And of course I’m speaking of that. Um, how has 2022 been for Amazon acquisitions also, what is the year like for you? Earlier in the year, since many, uh, since we were talking about focusing more on D two c i, I [00:57:00] always think it’s a good idea to focus on D two C, but, um, and, and it’s funny because the aggregators sort of made it seem like that wasn’t something that was valued.
And again, going back to the idea that aggregators were loud, but they made up a very small portion of the fire pool. Dude, they didn’t even care about websites and shit. Sorry. Yeah. Go keep going. Sorry. Yeah, no they didn’t. You’re absolutely, it’s really frustrating. MAs so frustrating. But the but so, so before that [00:57:30] aggregator craze, right?
Private equity firms who wanted to buy, um, an e-commerce product-based business felt like a hundred percent or 90% above Amazon business was risky. Single sales challenge. You could have been in all the different geos on Amazon, but it was a single sales channel risk. And to them, there’s a barrier between you, the seller and the customer.
Somebody comes on Amazon’s marketplace and buys your product, but they’re not your customer. They’re [00:58:00] Amazon’s customer. Yeah. And you had no control where they went next. So where they, there was a limit, there was an upper limit on where somebody would pay for that. Right. Because it was, it was risky. So, you know, and everybody knows that Amazon is in complete control there.
They mess with one thing and, and your, your empire can crumble. But, you know, so to spread that risk out and to develop a D two C channel, that was a goldmine for [00:58:30] investors who wanted a more robust brand presence because that’s where they felt more comfortable. You’ve got a direct line of communication to the customer.
You can collect their data, you can offer them exclusive deals. Amazon’s always gonna be there. That sales, you can’t ignore that, that sales channel for sure. But they really wanted like a significant amount of revenue coming off, off of Amazon. and, and then you would see the valuations just like the sky [00:59:00] was the limit.
Cuz that’s what they really wanted. That’s where they really saw that value. If you’re growing on that off of Amazon, then aggregators came along, said, Nope, we just want hundred percent Amazon cuz that’s what we know. And then it made it okay that people didn’t do that. And now I feel like the trend is going back the other way.
And I, I like it. I love it because that’s really where the customers are going to win in the end by getting good deals, exclusive deals, exclusive access, all this kind of stuff, [00:59:30] these offers that you can do that Amazon kind of takes away from you. So I see a real trend to that. Um, you know, mining for that data, I think investors are really gonna pay because it’s perceived that that’s, that’s a real brand, right?
If you’ve got real off Amazon presence. Yeah. And. You know, because I mean, two years ago you talked to somebody who’s like, oh, my, my brand is growing 20% year over year. I’m like, no, Amazon’s growing 20% year over year. You’re just kinda along for the ride. You know what I mean? [01:00:00] So like, what are you doing specifically to grow your brand and getting off of Amazon?
I always think that that’s a good, that’s an excellent thing to do. Like for any brand, you have to, you have to get away from the dependency of, of Amazon and that’s gonna show investors that, that, um, you’re a big grownup brand. I agree. Agreed. I mean, man, it’s kinda what we preach, you know, in this community, you know, but there was, we’ve done conferences, you [01:00:30] know, and, uh, in China and you know, Asia and there’s sell huge sellers.
I would just say you don’t need a website. And there’s a big argument in our, in our space, because you know, of course, usually it’s foreigners, Westerners, I say foreigners, but Westerners. But in Asia, especially China, a lot of ’em just say websites, waste of time. Just do like ppc, blah, blah, blah. And then, yeah, you know, I get frustrated with that.
Some people. [01:01:00] I know, but you know, the, the, the, the, again, I don’t, I don’t, I don’t wanna, how do I say, but people, people are like, shut down on Amazon, doubling down. They lost their Amazon accounts and they’re gone. They’re just boom. And they’re gone. Gone. Yeah. Nothing. Yeah. Gone. So, exactly. If you, but if, if that happened and you still had 40% of your income coming in, you were, you were able to like work to repair that.
Right. But if your entire business collapses, cuz Amazon changed one thing or decided to, [01:01:30] uh, you know, call a specific word on, on, uh, on listings and, and you have to prove to them that, you know, whatever. If it’s down for like two, three days, three weeks, whatever, you’re out, that’s it. Yeah. No more money coming in.
But I, I, I often banging my head against the wall and trying to convince it. But people don’t think that way. Right. They’re experts on Amazon. That’s what they know and they’ve tripled down on it. And that’s, and that’s what works for them. and to learn Google SEO and Yeah. Yeah. You know, those like, like that [01:02:00] is like a completely different game.
And it, and it’s, and it’s hard’s a real, it’s hard. Yeah, it is. Totally. That’s why people will pay, but that’s why people pay more for it because it is hard. Yeah. Right. That this, when you think about like why an investor would wanna buy a business versus starting a business because they have more money than they have time, they know it’s hard.
That’s why businesses get valued at 2, 3, 4, 5, whatever times their earnings because it is hard work. And they’re gonna pay you for that because they don’t have to do it themselves. [01:02:30] And they take more resources and more time for them to actually do all of that themselves. So it’s way easier for them to acquire.
And if you give them something that’s really hard to. To start, then it’s gonna be worth more to them if you’re good at it. But that’s, that’s the thing, it’s hard to like switch cuz like Amazon’s SEO doesn’t work on Google and Google’s SEO doesn’t work on Amazon. So you have to, it is a, it is a commitment.
I get it. And if you’re already like a [01:03:00] seven figure seller on Amazon and somebody tells you you need a website, you’re like, whatever, . You know what I mean? Like, I, I get it. I, I totally, I see it all the time. Like that’s, and I, and, and I, and I get where they’re coming from and that’s enough for some people, but True.
You know. Thanks Geoff. Absolutely. Yeah. And of course, um, um, speaking of, um, what is the future, uh, for you selling your Amazon business on 2023? All [01:03:30] right. And beyond, and also what is in the magic crystal ball for Geoff
The ball. Huh? I wish I had one. You know, we’re all thinking of next year. It’s, I know. And, and you know what, the thing to remember though is that good profitable businesses will sell in any market condition they have for, since people started selling businesses all the way up to now and beyond, if there’s a good [01:04:00] profitable business, there will be a buyer for it.
Um, and, but it’s been really, really easy basically to make money online in the last five years. Right. And I think the, the, the lucky will, will fall away. Uh, they probably won’t survive. And the stronger brands will, and I think so there’s gonna be a bit of a, a, a leveling out period. Um, the expectation is that valuations are coming down.
They already are. They already have come down, but I, I don’t think they’re gonna keep going [01:04:30] down. Like, it’s not, I feel like they’ve come down in line to where they were in 2019. Mm. Like that, that risk that we were talking, that upper limit to what somebody would pay for an Amazon only brand exists. And it didn’t for a short period of time.
But I think it’s, it’s kind of like it’s leveling out and I think that that’s what we’re gonna see because private equity people, like they were already rich, right? They could afford to let the aggregators play their game, beat themselves up, and, [01:05:00] but they still have capital to deploy and they’re still looking in E-commerce.
E-commerce hasn’t gone anywhere. It’s still growing. But private equity looks for, you know, they look for products that solve problems, right? They look for brand presence, they look for defensibility, and that’s what’s really gonna move that needle. They want to deploy that capital. Profitably, but they wanna limit their risk.
So that’s why like getting onto that D two [01:05:30] C platforms, I, this is all we need to go back there cuz private equity world, they want a real brand, not just the Amazon, a guy who sells stuff on Amazon. Right. , I totally agree. What’s your thoughts on that? Uh, Mike? Yeah, I mean, yeah, yeah. I said of course, I, I, I, you know, Geoff, Geoff and I are on similar wavelengths.
You know, we’ve been into trenches, I think as opera, you know, we’ve operated businesses from scratch. So we have a different mindset than I think a lot of times maybe [01:06:00] these, I think a lot of investors, I, Geoff talks to more than I do, but they don’t wanna go through that hardship. They just wanna cut, you know, like, save time.
So as long as you can prove to them that it’s a valuable. What’s that called? I think Warren Buffet calls it emote, or it’s just called moats, right? But mm-hmm. defensibility, like you said, like how easy is it for somebody else to come in and do what you’ve done, right? Mm-hmm. . And that’s really, I think, what a premium or a multiple [01:06:30] is representing.
How hard is it for somebody to recreate what you’ve built? You know, if I can just recreate your exact business, uh, why would I pay a multiple? I would just do it myself, right? But if you can prove to this buyer that it’s really, really hard to do what you’ve built, and they should pay 3, 4, 5, 6 years upfront of the future earnings of what you’ve built, then that, you know, you have to prove that, right?
You build a case. And yeah, I mean, there’ll always be a market for people [01:07:00] to buy and invest and, you know, roll up businesses. So, um, you know, I think there’s reports on the internet about multiples, standard multiples, but it seems like, from what I’ve learned from Geoff today, is maybe people aren’t paying as close attention just to that metric of multiple.
And, uh, you know, uh, looking at the whole package and, uh, people getting smarter to mature market’s maturing. Of course, there’s more yeah and more of these, these sellers complaining. They’re like, I sold my stupid brand to [01:07:30] aggregator X, Y, Z, and they destroyed it, and I didn’t get my earn out. So now we all are learning, right?
But that didn’t, we didn’t hear those stories. Before, right? Yeah. But now it’s in Facebook groups, it’s on podcasts and, you know, different forums. So, you know, I think the whole market’s just matured and, and, uh, I think that’s, it has, sellers are smarter, buyers are smarter. Um, you know, and, and I think, uh, you know, there, there’s a fair amount of caution [01:08:00] right now.
Um, there’s still activity in the market. We’re taking a deal to, to market tomorrow. Um, so, you know, like there, there are still good brands that are coming to market. I feel like there’s a lot of people that are like, oh, I, I don’t wanna sell right now. I’m gonna wait. And, you know, sure. I mean, you can I guess if you want to, but I mean, again, you know, nobody has a crystal ball here as much as we’d like to, to have one.
I mean, we can see where things are trending [01:08:30] and um, but if it feels right, then explore it. You might be surprised because. Strategic investors typically see value on their own terms anyway, as looking at a deal to see what it means to them. And you know, when we’re talking about like that roll up model, right?
Where somebody has a brand and this could be a nice add-on, it could be a good fit. Well, how much is it worth to them to like, buy that market share, buy that audience, or buy your product [01:09:00] that’s unique, cross-selling. The opportunities are endless. So that’s why they, they kind of look at it a little bit differently.
So standard multiples typically don’t apply in that situation. So good deals are still being had true. Um, and you know, I wouldn’t just, you know, kick stones being like all the aggregator crazies over, that was a, that was a, you know, a blip. It was a glitch in the matrix. It happened. Get over it. [01:09:30] Yeah, people got good multiples, but I, I would venture to say that there weren’t that many people that got good deals, if that makes sense.
Mm-hmm. . And so I, I wouldn’t necessarily beat yourself up over it. And I would say that who the buyer is matters. And you should explore opportunities with multiple buyers and, and see what happens if you’re, if you feel like an exit is the right option. If you wanna wait a year, fine wait a year. But if you’re waiting a year thinking of the aggregator craze, or like, things are gonna, [01:10:00] I, I wouldn’t
Okay. You know what I mean? Like, if you’ve mentally checked outta your business, then then explore the opportunity cuz. , the minute you take your foot off the gas pedal and your trends start to go like that. Yeah. The less attractive your business become. That’s a good point. It’s always better to sell when it’s come.
Going up, not going down. Right. ? Mm-hmm. . It’s a harder conversation to have to the buyer when the sales are going down. It’s a lot of explanation. . . Yeah. That’s a good, yeah. That’s awesome. Right? It is a funny, like, visual, right? If your, if your business is [01:10:30] going up and to the right, then it’s easy for investors to model what’s gonna continue after that.
Mm-hmm. . But if your business is going down into the right, well, if they just continue that pencil line down to zero , where, where, you know what I mean? Like, if they just keep drawing that line all the way down. Well, how much, how much time you got? Eight months, 12 months, 16 months, like before that hits Zero is, well, that’s not gonna happen.
Well, Maybe points. Yeah, this is really valuable. Thanks Geoff . Absolutely. I [01:11:00] totally agree, Mike. Everything is quite good. Uh, we, we really, uh, love all the inputs from Geoff today. I think, I hope our listeners and our viewers and all the taking notes of what we are talking about here and will really help you move forward in this kind of industry and businesses as well.
Well, I think my takeaway here is that when the brand is strong, of course it would just be progressive. It wouldn’t really slow down. And again, we really enjoyed this episode. There’s a lot to, [01:11:30] um, think about. There’s a lot of realization, there’s a lot of inputs and we just wanna make sure that we will be learning more of this in quite some time as well.
And of course, since you are you here, um, in our podcast, how can people reach you and what are some ways to get in touch with you, especially to our listeners and viewers here? Yeah, always happy to, uh, to chat to people. Uh, uh, I think the easiest way would be to, to, to email, uh, [01:12:00] email@example.com. , um, the whole team has access to it.
I check it every day. Um, so yeah, I mean, I I, it sounds like a generic info at whatever email, but okay. Trust me, it does go to real human beings. I look at it, I always have it on the corner. So firstname.lastname@example.org will ensure that, you know, somebody will get back to you, uh, , uh, quickly and, and. And we can get a call on the box.
So yeah. Sweet. Thanks Geoff. Really appreciate it. Gotcha, gotcha. [01:12:30] We’re so happy, uh, to have you again here. It’s a privilege to have you in our show and of course in our future episode, especially on 2023, if we, if you’ve given a chance, we’ll love to have you as our guest. Again. Again, guys, this is a Faith with you, your co-host here in the, uh, g f A podcast.
And we are so happy to have another episode with you again, and we look forward to seeing you and for everyone to listen again in our future [01:13:00] podcast. And Mike, any, any anymore, anything you wanna add? I mean, this is a deep one. I mean, I think it’s one of our longer shows, honestly. Um, but yeah, I mean it’s, uh, it’s definitely gonna be one for the books and, uh, and really appreciate your time, Geoff.
I know it’s even late, late for you, so I appreciate it. All good. Really appreciate, we really enjoyed this month. Thank you so much, she, we look forward to having you in our next podcast very, very soon. Thanks guys and thank you to our sponsor, our returning sponsor mercury.com [01:13:30] online bank while it’s a real bank but to a totally online for US.
Our Blimp program participants are going through this as well. Thank you Mercury. Travis is great there. It’s been on our show, it’s been in our events. We’re gonna have another event where we will have them attending as well. And if you wanna get a little bonus for you and us, if you sign up and do some special circumstances, you can go to global information.com/mercury.
I also have a video tutorial that we use, even for the Blimp people, use the same exact video to learn how to use it. Oh, I hope [01:14:00] you can check it out totally free. Why not See you there. That was a great interview. Thanks Geoff. Absolutely Geoff, and we’ve learned a lot. I believe. So also you, and there’s a lot of things that you can just digest in on how to sell.
Being an Amazon seller, mostly the experiences of Geoff could surely help you start on this kind of industry. What can you say, anything that you wanna share? Any thoughts about the inter interview that we have with Geoff? [01:14:30] Sure. I think. You know, one point is beginning with the end of mind. A lot of people maybe don’t start thinking they’re gonna sell their business.
More and more are doing that. Mm-hmm. . But I think a lot of people just start and just don’t think about that. Mm-hmm. . So just by under, even if you’re not ready to sell, understanding this kind of process. Mm-hmm. what investors are thinking and looking for as well as knowing the trends right now, cuz I’m talking to people that wanna sell right now, , and it’s not a good time really to sell.
I mean, you can sell like Geoff says, but it’s just maybe wait or know the [01:15:00] market and know when maybe a better time to sell is. I truly agree because it’s not all all about just selling. That’s it. It’s like just 1, 2, 3. It’s not like that. It’s always you wanna dive in, not only dive in, like dig deeper research, do a lot of AB testing, do a lot of things mainly in the backend, not of course front end.
You will earn, there’s a lot of income. It’s of course that it’s very usual, but inside of it, It, it, that’s the [01:15:30] most technical part. And of course you need to learn that before stepping in in this kind event. You can say about that. Yeah. I mean, just knowing the industry, knowing, like knowing what multiples are mm-hmm.
and knowing these terms, especially if in and being ready in advance rather than just kind of getting, jumping over these investors, a lot of ’em don’t even really know Amazon. We talked about it, right. But they know financials, they know how to like bargain negotiate and we, we try to you know. . A lot of these brokers too, they try to help the seller [01:16:00] because they don’t know this is their first time.
But if you’re educated, you’re usually going to make a lot more money. So it’s worth it to learn. I agree. I agree. And of course, of course learning with Geoff, as you can see, it’s, it is pretty long interview. Yeah, I believe so. But it’s very valuable for all of us, all of the ones that just want to start on it.
Of course. That, you know, if you’re an aspiring on it or you just wanna learn more about it, well this is the best episode for you. And there’s a lot to learn as we can see. Even me, of course. And [01:16:30] there’s a lot of terminologies. Yeah. On the interview. Definitely. And well, we should learn that step by step.
Of course. Not like an overnight thing. But if you wanna get to learn more about the industry, it’s all about researching on it. Just wanna make sure that you really absorb what you are going in for. Right? Yeah. So I think going to the battle with the right guns, right, with the right equipment. Your tools and And your knowledge.
Exactly. Exactly. On that. Well, [01:17:00] let’s take a walk today. Yeah. We want this again. This is a special episode. We wanna take a walk. So our team here doesn’t even know we’re going to interview them. All right? So we wanna make sure that we’ll just surprise them, get insights. I don’t know. You won’t wanna, yeah, let’s try asking any kind of thing.
Let’s go. Let’s go for it. Let’s go for it. Let’s go over. Let’s go. I think we see our amazing video editor, Alvin. Yeah. Alvin’s pretty. Oh, Alvin is with [01:17:30] his partner. Partner. Partner. Yep. And hi Jay . And we are going towards you guys. So this is something new. Again, a special episode for everyone. We are here in Hanging.
Hanging garden here in Tagaytay. All right, let’s take Alvin. Hi Mike. What’s up? Good, good, good. We’re making the episode. Ah, okay. You’re making the intro. What part is this? This is outro. We’re just kind of walking around. Okay. This is the last part. Yeah. [01:18:00] Alvin is awesome. But thanks Alvin. You enjoy how many years you been edit editing with this?
I’ve been editing this podcast since. 2017, I guess. Five years. Yeah, I think so. It’s gonna be, that’s crazy. Six years this May. Wow. Very loyal to you. Yeah, it’s the best. I really love, we really love Alvin. Thanks. Loyalty award goes too.yeah What goes to, thank you. My thanks, honey. Thank you. All right. Okay, so that’s our first to interviewing and who’s [01:18:30] your next target now?
I think it might get random now cause I think. We’re preparing to go to KTV and dinner. Exactly. What are your plans about it? Of course. Are you excited about it or do you love singing? I’m just gonna, maybe you stick to Hotel California . Okay. So that’s, how about you? You’re the singer. You’re great. Okay, let’s, let’s see, let’s see.
I’m not quite sure yet though. Oh, okay. So we wanna jump in with our team here. So a lot of our teams here are just chit chatting and such, and let’s get their insights about [01:19:00] our retreat here in Tagaytay. Yeah, I think LJ first. LJ LJ is our general manager. She’s the big boss. . And then order here is the big Manly is the big boss.
The boss man. Boss man. It’s our first ever ninja gathering, ninja gather that we call. And it’s nice to see everyone in the flesh. Yes. Get to know more of each one. And the people that we once thought were very quiet. Yeah. Pammy has, you know, [01:19:30] or have stories to share as well. So it’s a great experience for really, so thanks.
Great. Sally? Yeah. Chat. Hi. Great team. Sally. Sally, she’s does, she’s does everything. Mm-hmm. She’s like Superwoman. Yeah. She’s like client services, community sourcing. Yeah. Trying community. I think the best question, how is, how is, how’s it feeling working with Shadstone? Just, just for a while now? What do you feel about working with everyone here, especially Mike?
[01:20:00] Beep, beep beep,
To be honest, it’s really great. It’s, it’s amazing. It’s, this is an amazing team, so I’m just happy to be, you know, having this opportunity to work with them. Cool. Of course, Mike. Trying, trying our, my best stressful times. Yeah, you’re, thank you. Thank you. Thank you all. All right. This is Andrea. Andrea for those who [01:20:30] dont know..
Hello. So welcome to our retreat, . Yeah, we actually, Akatai is on the podcast. We’re doing the outro for the podcast right now for Global from Asia. Yes. So we are just sorting the items and yes, thank you Akatai. . Yeah, these are really beautiful products and yeah, we are checking them out and some of them were giving away to the great numbers.
Nice. Nice. Thank you. Thank you. Thank you too. [01:21:00] Christian. Christian. He’s too busy to to talk. Hi guys, how are you? Ah, so getting the Amazon stuff going. Yeah, a lot of things to do, guys. Nice, nice. This we globalasia show. So yeah, Christian helps keep up the Amazon operations moving along. It’s a lot happening. So yeah thanks guys.
If you guys want to focus on Amazon, just contact us. You can contact Mike or our team Shadstone, and we will help you out for us to increase your sales. [01:21:30] Thanks. Great. Thanks, Freddy. All right. Yeah, I think that’s pretty much it. And we have all also, well last, but at least Arian. Yeah. Oh my God. Six months pregnant. Oh, she gave us, it’s like crinkles, mainly.
Crinkles are chocolates. Yeah. She also, now she’s a baker too, right? Yeah. She gave us that. Nice Arian. Wow. Thank you. No worries. Congrats on the new baby too. Yeah. Thank you, Mike. All right, thank you. Sorry, I think that’s a wrap. [01:22:00] Absolutely. There’s a lot going on here. We are really enjoying and we’re about to go out.
Yeah. Ktv dinner. So exactly everyone’s ready and everyone’s, I think LJ is ready. Yeah. What can you say? Woo. Super happy for this special episode, and of course I look forward to meeting the team in, in the next part as well. Many, many, more Please. Absolutely. Thanks Pete. Absolutely got me here. You got me here. All right.
All right. We’ll see you guys very very soon. Cheers again this [01:22:30] spade, this Mike, and we’ll see you in the next episode. Bye-bye. Bye-bye. To get more info about running an international business, please visit our website @www.globalfromasia.com. That’s www..globalfromasia.com. Also, be sure to subscribe to our iTunes feed.
Thanks for tuning in.