The Ecom Show
The Ecom Show

Episode 101 · 5 months ago

#101 Josh Dittrich from Branded Seller: How To Sell Your Business For Millions Of Dollars


#101 Josh Dittrich from Branded Seller: How To Sell Your Business For Millions Of Dollars

Entrepreneurs put in their blood, sweat, and then some to scale their dream business. But, there comes a time and point in every business owner's life when they decide to take the next big step - cashing in. However, too many online business owners leave the game too soon and miss out on their big payday because they lack a good exit strategy!

Today we've got Josh Dittrich, the Founder and VP of BrandedSeller, here with Daniel Budai, our podcast host, and CEO, to discuss how businesses can maximize their value before exiting.

Branded Seller is full-service management and consulting firm that helps e-commerce businesses grow and plan their exit strategy. Josh Dittrich founded BrandedSeller after successfully selling both his e-commerce ventures for millions of dollars. Josh is also the writer of "Aggregator Navigator: The Ultimate Playbook for Selling Your Amazon Brand Successfully."

In this episode, we will discuss everything from why businesses should sell to planning your successful exit strategy. Tune in to find out:

✔ Josh's multi-million dollar success story.

✔ Why sell your business.

✔ When to sell your business.

✔ How to prepare your business for a sale.

Josh's Multi-Million Dollar Success Story

Josh's story begins in a sales job where he ran into someone that worked at Amway. Fascinated by the prospect of generating recurring revenue without any glass limit, Josh was determined to get a job at Amway.

After two/three failed attempts to get a job working at Amway, Josh decided to try an alternate route that led to him dabbling into eCommerce. He started by reselling products he'd purchased from China on channels like Amazon and eBay.

However, he realized that he wouldn't go too far without a good strategy. Josh then joined forces with a growing startup to get some industry experience before venturing out on his own again. In the short span of three years, he moved his way up the ladder from being a salesperson to managing their business development and advertising. He helped the company grow from a 3 million dollar business to a 50 million dollar business.

He achieved this by focusing on multi-channel growth. As a result, the business started selling everywhere, from Amazon to eBay. He also onboarded the help of experts to nail down their advertising campaigns and SEO.

During his time there, he learned eCommerce; end-to-end technology, supply chain inventory management, tech, digital marketing, eCommerce, and the whole nine yards in private label. After seeing what an enterprise-level eCommerce organization looks like, he was inspired to leave and start his brand.

Josh then started two e-commerce ventures; Essential Values and Sniper's Edge Hockey. The first business provides a versatile range of liquid homecare products and follows a multi-channel strategy. The second caters to the hockey niche and dominates its sales through specialized Amazon marketing. Within six years, Josh has built and exited both brands with a multi-million dollar valuation.

While this may appear like a short time to build and exit a company, it took Josh 15 years to acquire the knowledge and experience that helped him successfully scale both his ventures.

Why You Should Consider Selling Your Business

Before we jump to how you can sell your business, let's cover why an entrepreneur might want to give up their corporate child. Every entrepreneur is aware of the risk and rewards of running a business. Cashing out means you eventually reap the rewards of your hard-earned labor.

Change is the only constant, and every product has its lifecycle. So if you can sense changing regulations or restrictions that will affect your business, it's a smart idea to consider selling out.

Your personal life is another great reason to consider calling it in. Sometimes the reason to sell can be driven by your personal circumstances. For instance, if you're looking to retire, spend more time with the family, or even if you want a new challenge to chase after.

Growth is one of the most common reasons entrepreneurs consider selling their business. There comes a time when you need to stop and ask yourself if you're satisfied with not taking money out of business. If you find yourself in a constant crunch with cash flow each time you try to grow, it's a sign that you should be considering selling your business, especially if it's stopped giving you personal joy and returns.

When To Sell Your Business

You've decided to sell. That's great! But, how do you actually know when's the right time? There's never a clear perfect time to make these decisions. However, there are certain factors that can help business owners make a more calculated decision.

You have to start by evaluating and being truthful about yourself and your business. And it's really important because if you cannot answer why you want to sell, your buyers will get skeptical.

You also need to ask yourself if you have the bandwidth to sell? Once you've got your answer, you work backward and start calculating the value of your business, predict its growth trajectory, and your goals post-exit.

How To Prepare Your Business For Selling

You need to have all your data points in place and books in order before you consider selling your business. Think of selling your business as a marathon; it requires patience, persistence, and perseverance!

Once you have decided to sell your business, step back and focus on your exit strategy. You can't be planning for growth if you're constantly occupied with the day-to-day runnings of an office. Every decision post the decision to sell should be focused on how you can maximize your business's current value.

In order to do this, businesses first need to get their books in order and shift from the cash accounting model to accrual accounting.

Businesses also need to reevaluate their expenses and goals. You need to consider whether an expense will benefit in short-term or long-term growth. If it's a long-term growth benefit, you need to stop and consider how this will affect your profitability at the time of sale. While selling, the focus needs to be on maintaining profitability, not on product development, unless a business owner is planning to retain their role or maintain some involvement in the business post-sale.

The last piece of advice would be to analyze your data and identify trends. As a business owner looking to sell, you need to know what your profit, add-backs, and sellers' discretionary earnings are. You should also be able to identify trends.

For instance, your profits for the last 12 months will affect your business's valuation. So if January of the previous year was your least profitable month, you can take that month off your books by waiting until April of the current year since your trailing 12-month period would be February-April.

There are a lot of resources and help available to business owners looking for assistance with selling their company. If data and negotiating aren't your strong points, you can look into bringing a broker to help you facilitate your deal, do keep in mind that this would be an expensive ordeal. Alternatively, you could also do some more research, network, and consult other business owners that have made a successful exit.

We hope you enjoyed this episode of The Ecom Show. If you're interested in knowing more about selling your e-commerce business successfully, make sure you check out Josh Dittrich's playbook.

You can also check out BrandedSeller for more information on selling your business or reach out to Josh Dittrich.

We come out with episodes that venture into new avenues in eCommerce every Tuesday and Thursday, so stay tuned!

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Hey everyone, here is Daniel, but I with another episode of ECOMM Show, and today I'm here with the Josh Ditrich, who is the see of branded sellercom. Previously he saw two ECOMMERCE businesses and both of these businesses they were partly Amazon and also shopify focus. So he knows both ecosystems and today I want to ask you questions from him about how to sell an ECOMMERCE store with a good multiplier, how to make it a good deal for both parties. This show is sponsored by Buddhi media. Buddhai media is a fully remote ECOMMERCE focused retention marketing agency. In the last three years would they media work with more than one hundred ECOMMERCE clients and generated an eight figure extra revenue for these clients. If you want to check out their website, go to the Buddhai Mediacom and just send an email, or actually, you can just drop a message to me on any of my social media channels if you are interested to work with us. Hey, Josh, how are you today? Daniel? Doing well? How are you? Thanks for having me. Exciting. Yeah, I'm doing great. Thanks and before we jump into you know, the technical things, please tell us about your story. How did you end up in the ECOMMERCE were in the digital marketing work? Yeah, the quick version would be that early on in my career, while I was in sales, I met it guy that was part of Amway. How you familiar with am way? I think that's the biggest time on I'm in Europe. Yeah, so, I mean I attempted to join two times, almost three, and this is at the age of like eighteen, nineteen, and to be honest, it was one of those things that caught me by surprise. But what was fascinating about it was was really about creating unlimited upside with recurring revenue right in way to create passive income and have your time back. And so, while that wasn't my prefer adventure really was the spark in the inspiration to to get into ECOMMERCE. So I kind of dabbled here and there with Ebay...

...and some things on Amazon. I would import, you know, products perhaps from China and sometimes branded stuff, sometimes generic, and tried to do this entrepreneur thing and I gave up after, you know, not really having a really good strategy. But fortunately for me, I was I was lucky enough to land a pretty sweet job where a young company, you know, three years was doing just roughly three million bucks, and so I was able to join in and help them grow from three to fifty million. So that's where I learned all things ECOMMERCE and and technology, supply chain, inventory management, you know, tech, digital marketing, ECOMMERCE, the whole nine yards in private label, and that's where, you know, back in two thousand and ten is like the wild wild west of Amazon and private label really wasn't a thing. You know, we're planning on. We were selling other people's brand. So we were always competing for the buybox. But that's where I learned what an enterprise level ECOMMERCE organization look like and inspired me to eventually leave start my own brand and within five, six years time, built that brand over ten million dollars and sit in sales and sold at last March for roughly ten million bucks. So it was a fairly, I don't know, short time to build, but it took me, you know, fifteen years to acquire the knowledge and experience to really feel like I build something that had value. Yeah, I think many people they think that they just jump into e commerce or any kind of business venture and then the first business feel you will set it for eight or even mind figure quite soon, I think, especially young guys, they thing like that. As you said, you had a job before you work for this ECOMMERCE company and you said You scall the two hundred fifty million. What was your role there? Where your marketer or something else? Yeah, well, at the time I was hired with ten employees and so I was the B Tob Sales Guy. So I came from a sales environment, but I always had like this knack for problem solving. And so as this ECOMMERCE business, they were on a shopping car. Most of the revenue was organic. They had done zero, and paid ads, they're doing zero. Affiliate marketing, comparison shopping and and ebay and Amazon and multi channel, they were doing zero of that right. So at the time I was like, well, I'm hitting my sales goals, but I really see opportunity for the business to focus here, and that's where I started in May of two thousand and ten for that company. And then by June I was heading to the Internet retailer Conference in Chicago, which is the largest ECOMMERCE conference in...

...the world. And you know, it's like dive right in, let's let's figure this thing out. And you know, I left that show hiring a PPC agency software solution for creating data feeds that were for comparison shopping engines and was a desktop tool even back then, not even a cloudbased software. So, yeah, I feel like I date myself sometimes, but ECOMMERCE move so down fast. Yeah, good times. What's then? You show the store us you sold later. So the brand we started and built from scratch was called these central values. In the idea of that brand was pretty much any product category that was prime for disruption. Right. So a lot of times our criteria would be national brands that would be dominating and there'd be no solid private label aftermarket comparable and you know, so going in with the best product. We developed roughly over a hundred products in about two hundred and fifty, three hundred acins. So we carried multipacks, but that would be like a home and kitchen boarding goods, personal care sometimes, but primarily, if you really distill it down, was in liquids. So solutions, liquid solutions that we could alter the formulation and create our own version of it, and so we parked with partner, with contract manufacturers to help us, you know, reformulate the the appropriate mixture to be able to add value and you hit the price points. But we wanted, I think many business owners who sell a business, they don't do what to do next. Was it the case for you as well, or you already knew what to do? Danny, I'm one of those guys in life where it seems like there's a lot of doors that always open and I'm and I'm ready to run through the next one, and so we weren't really sure that we were going to sell our business. We listed a different business and was primarily a shopify business and we had a record year coming out of Covid in only about thirty percent of the sales of that brand we're on Amazon, and so we did hire a broker for that, because to find the right buyer in this hockey niche that we were in was definitely harder than just talking to a bunch of the Amazon buyers, the aggregators that you would call them, and so we hired a broker because we needed a deep database to be able to find the right buyer. Because, you know, if fifty percent of your sales are e commerce, shopify, twenty percent were be to be you know, selling to stores and then, you know, thirty eight sent whatever, whatever the math is, to be...

...a full hundred percent. It was roughly thirty five on Amazon. So through that process I realized, all right, we're going to sell this business, but I have this other business that's very, very interesting to other buyers and that was our Amazon brand. And so we decide to sell both brands at that same time. So they answer your question. We weren't really looking to sell both brands and get out of ECOMMERCE, but we were willing to look at, you know, what options we had to sell and we started soliciting deals and the valuations were ridiculous and we said Hey, maybe it's time to leave. So we didn't have a lot of time to prepare for what was next. I will say this, though. When we sold our businesses, both brands that we sold, we were able to retain a twelvemonth, you know, services management contract to be able to handle, as a threepl continuing to do the order management Fba reor plenishment, pickpack, ship for shop of fine, Walmart and other websites. So both brands we sold, we were able to retain that for twelve months. While we were able to kind of figure out what was next, and so we decided to really pivot now and and help other brands maximize the value. And for a long time, for the first three, four, five six months, my wife is like, what are you doing? You need to go do something, like too much sitting on the couch and hanging out, like this is my office, I don't come around and hanging out your office. You should go do something, and so I had to kind of think through what it was. And when you don't have to work anymore, you're like, well, if I'm going to work, because I believe as an entrepreneur there's there's a lot of things I can offer the world and you know, I wanted to continue to do that, but I didn't know what it was quite yet. So, full circle, I had an opportunity to be interviewed by business insider and they did a full on article featuring me in the process that I ran to sell my business. It inspired me to write a bull book. So I spent, you know, those first several months writing a book and thinking about what would be the benefit of this book if I sold it but also used it as a tool to help other sellers maximize the value of their Amazon and e commerce brands, whatever platform it's on, to be able to grow it, optimize it and then potentially help another you know, help other sellers exit it. So it wasn't right away, but we pivoted. Is something that became really a sweet spot for us, which is maximizing the value of a brand, and that comes through, you know, doing the initial optimization, all the...

...operational components around inventory, planning, advertising, but then also setting it up for scale so we could go out and find a buyer and and eventually see that brand have a larger exit than they would have before. So our business model has pivoted, but it wasn't because we didn't know what we were doing. It was more like, let's give it time, let's figure out what the market needs and, you know, we wanted to stay in the space because when you build out a skill, it's not something you want to walk away from and just lose all that knowledge that you've had for for fifteen years, right. So yeah, it was a tough transition, but I feel like there's a number of things I wrote in the book actually that helps with that. And you're right, like what should I do? And it's really a process of understanding what you're great at, what you're really passionate about, and what does the world or the market willing to pay you for that? Right? As a Japanese saying for this is called ekey Guy, it's Ikigai, and I know that's Onnya. Maybe that it's a don't. So they don't right. So so google it. Ekey Guy, Ikigai, and it's seriously important because, whether it's the work you're doing right now or it's your future, if you're not doing what you're great at and absolutely love, life is tough. And if you start thinking about what you're building and what you're doing that makes money for you, when you love it and it's fun and you're good, it's not work. You know, it's the old saying it's not working a day in your life when it's fun. So yeah, hopefully that answers the question. Yeah, what's the title of here? It's called aggregator, Naggett navigator, the ultimate playbook to maximizing the sale of your Amazon brand. So and again, you know, there's this massive, massive interest and Amazon brands right now. But many, many listeners probably also our shopify or you know, traditional shopping cart sellers and maybe considering bringing their products onto Amazon or, if they're an Amazon brand, bringing their products on to shopify. And for us we were multichannel. It was one of our things that really stood out for us is that, even though ninety percent of our sales were Amazon, ninety plus percent, because we were on US Canada, the UK and all of Europe. We even dabbled with Australia for a little bit too. But you know, we were set up to handle orders from any channels. So the goal was to maximize wherever there was real estate for us to have our listing show up, and so we were on shopify doing product...

...listing ads. We were on Walmart, leveraging, you know, Amazon's and Walmart's ability to bid on keywords and see traffic coming through Google as well without having to pay, you know, cost per click. So it was a strategy that made a lot of sense for us because there's a lot of products that had a lot of demand and having companies like Walmart start ranking for keywords that, you know, we normally couldn't it was a good strategy for us and just really starting to cover page one of Google right. So now you have an Amazon shopping platform where fifty percent of Sur which is start, but then you have this other world of Google where people start to shop, and obviously any player group on Ebay, Walmart and can show adds. So if we felt it was a good strategy, and you know, it certainly added incremental profit to the bottom line by doing that. We also add the the link of the book to the description so everyone can find it. And you mentioned shopify, Amazon, Walmart. You know, different channels, different platforms, and probably you are the first one who could sell a business, the first one in my podcast who could sell a business or two businesses, and you were strong on shopify and Amazon as well. That was a guy a few episodes ago with the key too brand. Amazing Guy, but he's not. He's shopifive stories just to get to accepted on pinterest. You know it's not the real store. And on the flip side, I could see many businesses who are strong on shopify, they have a solid brand, but they just cannot tackle with Amazon. And is there any secret here or any mindset that would hell ECOMMERCE business owners? Yeah, a hundred percent. I think the mindset first is where are customers that you're trying to find shopping. Where are they shopping? Where is the pock moving? Where are people at? And and the simple fact of fifty percent of searches or more now start on Amazon for product searches. Right, the conversion rates on Amazon are significantly higher because there's a very high intent to purchase. Right, and so, believe this or not? Right. So if you look at a shopify page, you know an average ECOMMERCE shopping a conversion rate might be two to three percent. Right, three percent would be decent, five percent would be amazing. If I have anything converting at five percent on Amazon, that's a crappy product.

So here's the philosophy. If you have a great product, why would you not put that product in the place where most shoppers are looking right and with the high intent to purchase, which means when they go to Amazon and they site, type in the keywords for that product category and you show up, they're looking to buy. They're not just browsing, right. And so a lot of shopify sites, any site that's that's you can find through Google or any any search engine. That's what you're trying to do anyway. So it seems like a natural fit to bring your product onto a platform where customers are a lot of folks generally or that haven't made that leap are either one don't understand Amazon, you know, and it's a lot of work to to really invest in that platform. But at the end of the day it's one of the platforms where, if you can build great product on that platform and get it to rank, it provides serious long term recurring revenue. Right and and yes, it is harder to drive sales and position long term growth there, but I would even argue it's more profitable because I ran many a shopping carts and you know, at one point in time I was managing a million dollars a month and ad spend for a brand that used to manage at that previous company. And it's a tough world and you need serious tools to it's a really growing scale in any commerce in general. But to do it using Google ads and organic and Seo and affiliates, without even considering Amazon, it's like half of your sales potential are pretty much cut in half, if not more. Right. So it seems like an easy fit and it especially for those that have a great product. It's a no brainer to really size up your products competition on Amzon and if you're already doing fulfillment, what's another order? What's another ten orders? What's another hundred orders to start filling? And it's just opportunity cost to invest your time and effort to get the store to work. Once upon a time, you know, Amazon allowed you to show ads and drive you to your own site, but they shut all that off five or seven years ago. had a comparison shopping data feed. So you would plugget data feed, you would send your data feed to a certain FTP site or URL and they would show your product ads, you know, the way they do today, but instead of driving traffic to Amazon listings, they would drive it to your shopify or a gym to side or you know whatever part from your on. Let me ask you a big question. So, ran, should somebody sound that e commerce business que? Minutes earlier you mentioned... had a ridiculous multiplier, so I guess that was one incentive. But you know, when is the right moment to do that? Yeah, there's not a perfect moment, but I think you have to evaluate and be truthful about yourself and your business, and I do. I do spend some time in the book talking about this and it's really important because if you cannot answer why you want to sell, many, many buyers are skeptical. And it's true. I bought three. We've done three transactions and we've looked at a whole lot more. And oftentimes when a brand cannot tell me or business cannot tell me why they want to sell, it's a red flag. But when it comes down to it, you have to understand and take audit of your personal life but also your business, right, and so one person has to consider, do I have the bandwidth to sell? You know, and before they even consider that, if the work backwards and say, all right, hypothetically my brand is doing this much in sales and it's doing this much in profit. If I were to sell it today, what is its value? Right? So an easy way to do that would be tracking multiples online, and so there are a number of resources out there. At the FBA broker is a great site. They track ECOMM and Amazon multiples. You can see number of different sites with listings what values they're putting on even Amazon businesses and ECOM businesses. So start tracking that in as a right now you're seeing multiples be higher and so you have to think about is my brand in a position to continue to grow, or is it hit a point that I can't continue to push it forward to grow? And many folks run into a situation. They either don't know what to do, they hit the ceiling or they're out of capital. Right. So it's either a strategy thing or it's a cash thing. If your business can continue to grow, the most valuable thing you can do is continue to fuel that with getting cash and access to capital to grow it. Because if you have any partners at all and you sell a business for a million dollars, you have a partner that you pay fifty percent of that, you know you end up leaving yourself with only three hundred fiftyzero dollars on a million dollar exit, right. So what are you going to do with that three hundred Fiftyzero? You want to completely exit the space and do something completely different. Well, that's your motivation and that's your reason to...

...sell. If three hundred fiftyzero dollars is very exciting to you, you know, most people that would be pretty good game changing money, but it's not going to allow you to retire, right. And so I'm in the situation now where it's weird like I've had to work for money, right, and now I have to have my money work for me. And what that means is if I only had three and Fiftyzeros, I would have to start a business or find a way to invest that money to create enough income to be able to pay myself, you know, enough to live off of right. And so it's a mindset thinking about what am I building and what are my goals? If my goals are to build a great brand and retire, then you know you probably need to target a three or four million dollar valuation right and and then work backwards with your taxes and paying off your partner to say, all right, this is actually going to move the needle. So there's a lot of things to check. And then, if you decide to sell based on the value because your business has been growing, first step is, if I'm going to sell my business, when is the right time? While the valuations are up, my business is growing, I have two years of history. People want my brand and I'm stuck. I don't know how to grow it. That might be a good time to sell. Let's do it. Then you have to decide yourself to yourself if you want to list it with a broker or take on the opportunity cost and try to market yourself for us. You know, we built a brand that was worth ten million dollars, and so paying someone an eight percent commission on ten million dollars is eight hundredzero dollars. So I knew our brand was growing. I knew we were getting a lot of interest. It drove the multipliers up. We said, let's see what's out there, and so we had six offers after talking to twenty three people, and we were able to leverage our offers to increase the value of the deal to a point where we said let's absolutely it's time to sell. But I chose to list a business ourselves because I knew I could run a process myself, I could find the buyers and I could negotiate a higher value. That's typically why you would hire a broker. So my book helps brands, whether you're on ECOMMERCE in general, shopping platform or Amazon, things that you can do to increase your value but then also navigate is at the right time to sell. So it's supposed to be coming out the end of the month. I just had a snap food with my editor, but there's a lot of good insights in there. It's only an hour read in anyone looking to sell their business it's definitely a read worth while. I guess...'s really hard to decide when you are stock and when you know, because business owners they are really optimistic. Could buy the growth myself as foul like we will grow forever, we'll be a huge whatever about reality is not like that. Many Times. Can you say anything that would help business owners to decide it when, when it's not really stick to grow anymore? Yeah, I think the first question is, are you able to buy the inventory you need to fuel the products growth? And if every single week or every two weeks you're in a cash flow crunch and you've done everything you can to find access to cash, that might be a time to exit, because when you hit the ceiling and you're limiting yourself, you're actually hurting the brand. Right. So, for example, if you launch a product and you're selling on Amazon, if you're running out of stock every single month, that's going to hurt your rank. The ranking algorithm right, it's it takes a hit. Every time you sell something, it raises in rank and then it drops down when you run out of stock because you can no longer sell it. Those are those are good signals right there. If if the brand is not giving you the personal benefit and enjoy that you think it should. Right. That's another good reason. Like if you're in a situation where you're always overwhelmed and don't know how to fix it and you're tired of dealing with the problems in the customer service issues, you need to first consider how to get your time back, which is obviously from a scalability point of view. You need to increase the value of your time and efforts and delegate the things that are low value activity. Right. So for me, I'm always trying to consider how do I create five hundred dollar an hour value? If I'm not creating that kind of value, you know, and everything that I do, I need to outsource steff. And so for me, I was able to be in a position where every single whole thing daytoday was taken care of. I had the opportunity to be able to spend time to sell my brand and and many business owners, if they're running the daytoday working in their business as opposed to on their business, they're not going to be able to step back out and say, all right, what do I need to do here to create the value, and that's super important, because it's easy to list a brand and sell it, but it's not easy to face two facts decide to grow it and put the systems in place to scale it before you sell. So most folks, most brands, see challenge and decide that that challenge cannot be overcom...

...and therefore maybe I should sell. I spoke to a brand last week. They're interested in selling. Their a little smaller and they had opportunities to grow, but the reason they were planning to sell is because they felt like with their one product, three asins, three skews, this year where there was the first time they were seeing year over year growth decline about by eight percent and they didn't think there's any more upside. And as I took a look at the brand, I said you guys are is about four things we can do here right. We can better position the brand. We can go after competing related products and try to create package discounts and bundles to create right along. So frequently bought together would be a way to do that. There's so many different things, Daniel. So I think ultimately it's really good to network and get connected with groups and and listen in here and listen to podcast to discover ways to get yourself out of those points where you hit the ceiling, where you get stuck, because a lot of times most brands are willing to sell because you either cash or they're physically exhausted and stuck. Yeah, and cannot break through the ceiling. What that those things that business owners can do to increase the evaluation. Somebody has a solid brands. Now want wants to get the better evaluation, higher multiplier. What they can do? So we launched a brand that was a hundred percent about new product development. Right. So, day one are brand started, we didn't have any products, you know. Day Two we had one product, day ninety we had two products, that type of thing, right. So we our entire business was built on developing new products. Well, if your products don't have any reviews, if your products are just starting out, it's more expensive to get those products to start selling. And so my recommendation is for us, we had to really think about slowing down our new product development as we were moving into a season of selling the business, and the reason for that is because it was bringing our margins down. So, for example, if we launched a product three years ago, that product was achieving roughly twenty two, twenty five percent net profit right, but any product that we launched in six months was a loss. Any product that was launched within a year was barely breaking even. And this is the standards as of today, meaning five years ago. You can launch a product and be profitable right away. But we had to stop and say we should stop launching new products because it's lowering our average margin.

So what we started thinking about was every single thing that we do in our business that was an expense. Reevaluate it and have to ask yourself, is this a short term strategy or a long term and if you're doing things with a long term strategy that are losing new money, need to stop doing those things, because every dollar is worth around five. Where's my hand? There's my hand right here. If you spend Tenzeros, that potentially impacts tenzero on wasted advertising, that potentially impacts your profit. I fiftyzero dollars right. So you have to start putting in the mindset to say, am I growing my profit through rationalization of my skews and optimizing the advertising, because every new product that's not ranking yet is a drag on my average margin. And so when you decide to sell it, someone's going to get the benefit of next year's growth, not you, unless you unless you negotiate a long term two, three, four, five year earn out right. And so I think most brands want to sell with as much cash up front and then at least one to two years of an earn out, which for us made sense because we were able to a get the most we could today and be with that strategy, see the benefits of the growth over time over the next two years to be able to still get checks for the brands we sold through the form of an earn out. So I think that's a huge one. And and the other couple big ones, I would say the simple one is if you're doing at least five hundredzero on your way to a million, you need to start thinking about moving your books from cash to a cruel based accounty. And the reason for that is if you're doing cash based accounting, your profits are going to peer much lower than they actually are. So, for example, if I spend a hundred thousand dollars in invatory in China and I don't get it for ninety days, if I record that transaction in a cash based accounting I'm going to be expensing that as cogs. Well, that's not cost a good sould yet because I haven't sold it. Normally you would bring that inventory in and it doesn't hit your your profit last statement until you sell the products. So a cruel base is a huge transition. You should be doing to work on your profitability. That reflects accuracy of what the true profit is, and many brands fail to do that because then then when they go to cell they're...

...taking a multiple off of a number that's incorrect as opposed to the true multiple of the true profitability. So I've actually seen a number of brands like this and I'm like, we have to stop, we have the regroup, we have to get our books in order right. So every brand should be doing that today and there's a number of great resources. You can find people on upwork. You can find services for Amazon or ECOMMERCE sellers that do all this stuff for nine hundred to a thousand dollars a month. Might Be Spendy, but it might be worth it if you are planning to sell and frankly, if you consider it a project, you could get it added back to your profit as an add back as opposed to a service that's required to run your business. So there's a number of things you can do when you do spend money that you can add back, like your salary, like your benefits, like your credit card rewards. These are all things that would increase your value that you can do. Now, as long as you know about the data, you can take action. So I guess this is the moment when solely the content is really appreciated. Dry I heard about companies that a multiplier wasn't amazing, and partly because of the accountants and how they managed the numbers. So here's a different one for you. Let's say your brand did a hundred thousand in profit and someone says I'm going to give you an eight multiplier. And someone says eight multiplier, that's great, let's do it. Well, if you look under the hood, you might actually have two hundred thousand dollars in profit realistically, because you didn't account for the AD backs correctly. And let's say the buyer knows that you're actually only getting a four times multiple. Yeah, four times multiple. If you're doing two hundred thousand in profit as opposed to a hundred thousand profit times eight. So some people like to jump on the multiple as the end. I'll be all but you need to understand each of those pieces, each of those data points. What's your profit? Is it realistic? What's your ad backs? What is your Sde Seller's discretionary earnings? And then you can really gage whether that multiple is legit or not. And so I even recommend this in the book. Build out your last twelve months in profit, revenue, expenses, profit, add backs and do a monthly month, month over month over month, trailing twelve months. And you're looking for trends right. Is your profit going in the right direction? And you're also looking for the months twelve months ago to start falling off. So let's just say last January my sales, my profits were low for whatever...

...reason. At the end of this month I get to take January off the books because I'm going to be running into March and now my trailing twelve months are going to run from March to February, and so that January month potentially could fall off or whatever whatever the last month was previously. If I saying that right, March through February would still include January. But that's what we did. We're able to delay our closing to see that, month over month, our profits were going up, to increase our total dollars. Same multiple, but we added a hundred thousand dollars more just by waiting a month to sell, because our profit grew that much more year over year. And Yeah, and what was the buyer revrow it or or they were not aided to throw them. Yeah. So it was important for us when we started talking about the value that we would use the baseline seller's discretionary earnings and then a multiple, right, and so if next month the earnings went up, the multiple would stay the same. And so it was very clear upfront that we expected that are multiple was what we were locking in in. The profit would be changing each month we waited till close. And so not every brand does that, actually every buyer. Many buyers actually give you a fixed amount and they don't tell you how they arrive to it because they know next month, if they're seen that that growth is happening, some of them will push back. So they try to lock it in at a rate based on window of months that you're looking at. So that's an important thing and I would be upfront saying hey, you know, this brand is going to continue to grow. The longer I wait to sell, the more valuable it is, right, and that's a reason for the buyer to say we better get this deal done right, because each month we're going to be writing a bigger check. It worked out for us that way, because that the subsequent two months and even actually it's grown every month since we've sold it and it's we're coming up now on month eleven. Yeah, that's that's a smart move. Actually, last question to so you mentioned brokers and running. Is it worth to have them and use their knowledge, or who shouldn't really work with brokers? I think brokers are amazing for for many people because they do two things. Brokers are able to navigate their relationships, deep relationships most of the time, with...

...buyers, buyers that are actively looking for brands to acquire. So that's usually one benefit. The second benefit is navigating the deals, and so a broker is an expert at helping translate the deal terms to reality in a way that you can understand. Now I'll back up and say we chose to do one method with a broker in the other method ourselves, and the reason we did one with a broker. It was because the business we had was so diverse and it was not going to fit into the mold of an aggregator. On the flip side, the other brand, I did not use a broker because I wouldn't. I could go out and find fifty buyers myself. I reached out to over thirty buyers myself that were you typing Amazon, Fba aggregator and you're going to find, you know, twenty, fifty, a hundred of them. And so the broker in that example didn't make sense for the Amazon business, but he did for the multichannel e commerce business because we didn't really know who the right buyer would be. Number two, I've been business in a long time and I've done a number of transactions and so my accounting knowledge and my business document was at a point where I felt confident that I could negotiate and navigate a transaction. I've bought three businesses before. But my goal with the book is helping every brand realize whether they're in a position to sell and market the brand themselves or if they should use a broker. And so one thing that I do. I'm not a broker, but I do help other brands, find the value and get connected to buyers and then I become the guy in your court without having to pay broker. So it's a free service. But I also in some cases like to recommend very specific brokers because of the complexity of the brand. So I guess, to answer your question, brokers are very valuable, but they can also be very expensive and you just need to decide whether you have the skills and you can find the right buyer or not. But I definitely encourage you to reach out, because happy to speak with anyone that's considering selling. There's a number of strategies and ways that we can help, mostly for free, and in some cases, you know, there's ways that we can also help you grow, and that's one of the services that we offer. It's worth while, and that's the thing. Have you heard of this kind of model before? It's like you should have friends. If you don't have friends, then you should have a network, right, and if you don't have a network, you need someone in...

...your corner that can help you navigate right this very big, life changing, potential event rather than doing it alone. Network is your net worth. That is a frame. Yeah, and I fully agree. Be just be part of muster minds. Have good friends, you know, business minded friends, and not just in your country or stay, but all over the word, and you can see many different things. Actually, for me, one thing was that I started investing into stokes last year when everyone went crazy about creep too, I just completely went to stocks and I learned a lot about the annual statements or reports, quarterly reports, those calls, and it's very different than my agency or an ECOMMERCE business, because those are much bigger businesses. But still you can learn a lot about accounting, financials, business strategies. It's really interesting, absolutely right, and that's that's ultimately what you're building, right, like on a much smaller scale like. So, to your point, if you're listening to publicly traded companies and quarterly results, they're talking about things that are really relevant. There's lots of podcasts on this topic right. And it comes down to what is your opportunity cost? For me, I don't think there was a better way to save eight hundred thousand dollars than spending two or three months selling my own business. Right, like selling it and saving it on the broker fee was a good Roy. But I own real estate as well, and so for me, like five or tenzero bucks makes a lot of sense to pay a real estate broker because there can be a lot of work that has to happen. So it just comes down to your competency, your knowledge and your time to be able to do it yourself versus hiring an expert. Right. Isn't that everything in life? Thank you, Josh, thanks for coming here today. Thanks everyone who listened to us today or later listening to the PODCAST. And if you like this podcast, then give us a review on apple, podcaster, spotify, be honest, video rating. And every week we come with the new episode about ECOMMERCE and ECOMMERCE marketing. Stay tuned, everyone,.

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