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Acquiring and Accelerating Growth of eCommerce businesses - Amazon Business Tips with Adam Epstein - Part 2
Manage episode 299058804 series 2492296
A. Part 1 with Adam Epstein
Transcription in this Episode:
[00:00:01] spk_1: Welcome to the seller roundtable e commerce coaching and business strategies with [00:00:06] spk_0: and er not and amy Wiis mm makes sense. I would love to get your experience and opinion on some of the barriers that you've seen that businesses have had to selling. So they go to sell. What are some of the barriers that are in place um that prevent them maybe from getting the money that they wanted to or from selling at [00:00:33] spk_1: all? Yeah, I know we talked a little bit about it earlier. Um there's a bunch of different types of sellers. Right? Most of the buyers are looking for private label businesses rather than resellers. That's not to mean that if your reseller you can't sell your business. But uh we're going back to your question on brand and we are looking for businesses that have some type of brand even if it's not a very well recognised brand, at least having their own products that they're selling rather than reselling other people's products. It gives a little bit of remote you have, we typically won't buy businesses that don't have a trademark associated with the brand as well, because that gives you that iP intellectual property associated with it. Um so that's one thing that does pop up, you know, I just mentioned a second which is not having the trademark. Even if you are branded, if you don't have that trademark, somebody can either copy your business pretty easily or they might already have a trademark. It, you might be infringing on somebody else's intellectual property. Brand registry also is a huge part of selling on amazon. You can't get on the brand registry without a trademark. So that is another kind of thing that prevents people from being able to sell. Um as you think about the rest of it, right? There's different issues we've run into across the board inventory is always a big one, right? And it goes back to stock out. What is your supply chain looks like? How quickly can you get goods in? And when we buy a business we're hoping to grow it from day one, right? So if your inventory is not in a great perspective, It might at the very least delay the transaction. So you can get your inventory into state into place. Um we've seen businesses where you know, we're going through the numbers that they have provided to us and they say it's $500,000 of even thought for for example, and we dig into the numbers and it's actually 300,000 people to and that's a very difficult thing for us to digest and understand a because it kind of throws away from the trust of of what you know what we're buying, what else don't we know and be um tells us you don't really have a good grip on your business. So, as I talked about earlier, if you don't know your numbers, that's fine, we'll help you dig into them. But if you tell you your numbers are X, and they're actually a lot less the next um it becomes a little bit harder. From that perspective. We'll still try to find ways to close those deals, but ultimately right. We're relying because of such a fast process on what the seller is telling us and having that kind of relationship that trusts in particular as sellers will be continuing to earn money with us through that are now period, we really care about kind of having that that strong relationship and trust across um both between buyer and seller [00:03:17] spk_0: got it. And then as far as um you mentioned some of the types of products. So this is always a big debate of that. You should have a trademark, but you should also have, um kind of recognized products that are a little bit different. Um So if, if I, let's say I'm a really good marketer And I've built, I've paid for a bunch of reviews and I've built a brand and I'm at the top of page one. But my margins maybe aren't so good and my products are really easy to copy. Is that going to be a barrier to me being able to sell or Because Hey, I'm selling a lot of volume and I've done a good job of getting to page one. Um, you know, is it going to be okay? [00:04:05] spk_1: Yeah, I don't think it's a barrier to sell. I think it all comes down to evaluation. Right? So it depends on where you are. If you're at the top of page one in doing 20% margins and in a category where you are dominating, you'll probably get a higher evaluation and somebody's with top of page one who has lower margins who by what we call muddled or then somebody can come in and take market share by lowering the price etcetera. That being said as I talked about earlier, right, there's a lot of recognition and clouds and value given to being at the top of page one on on any given keyword. So just to say, for example, if you're I don't know the number one, what's a good kind of generic product? Right? If your [00:04:55] spk_0: water bottle, that's my favorite, you know the number one water bottle, can you sell your [00:05:02] spk_1: water bottle? There's not gonna be that much innovation and water bottles. Right? So how can you maintain your number one spot? And how do you kind of think about that? As long as you've got the marketing down, you know, I think a bit of a higher margin is probably going to be helpful. Um, And sometimes you are in a race to the bottom, right? Sometimes we are looking and saying, Okay, if you're the lowest price already and you're 25% margins, that's great. Alternatively, if you're number one and you're priced above people and been able to maintain that, that that also looks good, right? Some people don't want to be the highest price, but sometimes the price is an indicator of value. So you can you can be priced above your competitors and be in good shape as long as they like them coming down further and price hasn't devalued your business, right? You're still number one at 40 and your competitors at 20 that china shows some of that even the water bottle, it shows you have a moat around your product, [00:05:57] spk_0: got it. And then I guess my big thing that I'd like to know is what can sellers do now. So now they kind of know how their businesses valued. They know that there's many different ways they can sell. There's many different types of buyers. Um they know what's important as far as their net margin where that needs to be 20%. They know what kind of products they should have. They should focus on a smaller number of products instead of having a lot of products across multiple categories. Um And so they know all those things, but that being said, what would you say are the top maybe three most important things we can focus on if we're wanting to sell our brand. Like let's say I want to sell next year, what should I be focused on this year to make it really, really an awesome deal. [00:06:51] spk_1: Yeah, I, you know, we actually often appreciate a brand that isn't fully efficient and by that, I mean there's some low hanging fruit opportunities for us to take and think they need to grow the brand, right? So it's not necessarily you need to have everything buttoned up. Nobody ever has. There's, there's hair on every business, right? And there's hair on boosted commerce. Every every business has something that is, is not perfect. Um so understanding that story and kind of what's going on there I think is number one and number two is knowing where that growth opportunity is right. If your if your business is down 20%, it's obviously a little bit harder to sell. So you can't not think about top line, But if your business is growing by 10, and there's an ability to grow by 30%, you started to prove that That's not a bad time to sell because you can, you can say, Okay, here's how I would do this over the next year and then boosted Congressman can come in and say, great. Not only can we grow that extra 20%, but with our expertise and with our team and our knowledge and our time commitment, we can take that 20% to 40%. Um, so, so that's one thing I do want to stress, like if you're waiting for that perfect time, so your business where everything but end up, it's never going to be right and you're never going to sell. Um, and it's not a bad time at all right now to be looking to sell your business because there's a decent amount of people attracted to the space, and the multiples are pretty nice for somebody who's got a nice business ready to go. Um So, you know, as you think about getting it ready, I would focus on where are the opportunities, what are, what is the hair on your business? And how can you mitigate that hair? Right? It doesn't have to be fully figured out. But what are the reasons it's there and what's the story you can tell around it? Um [00:08:40] spk_0: and then [00:08:42] spk_1: it's not going to make a break it, but again, having your financials in understanding what they are. I can't stress, like it is, we can do it, but it's helpful for you as a seller to be able to understand what you're selling also and how much money you're making, right? It's amazing. Um you know, people get a check in there in there in their bank account every week and then or every two weeks from amazon and I say okay great. But but don't really fully appreciate right, how much is going out to marketing or how much of that and your profitability can vary pretty widely from that perspective, awesome. Excuse me. We all got the coffees today. Um um Adam I'm interested in uh are there any categories that you guys won't invest in? Right. So say I I live in southern California kind of near you. You know, I'm really big into the adult industry have got my line of adults toys that I sell on amazon, It's going gangbusters. I have this thing that I came up with that is just the most innovative of adult toy ever. It's flying off the shelves. Um You know, if we come to you guys, are are you gonna be interested in that or do you guys steer away from any categories? Uh, we, we do stare away from categories. [00:09:54] spk_0: I apologize, my [00:09:55] spk_1: Slacks going crazy so I shouldn't try to turn off the last 20 minutes. I finally figured it out, but that, that wouldn't scare us away. Right. We actually, and it to your point, we have a, a thesis around what we call embarrassing product, inc so we we're okay with some products, you know. Now sexual wellness wellness does become a bit difficult on amazon because some of them you can't actually show up in the keywords and there's restrictions. Um, but the ones that we, I wouldn't say there's any category. That's an absolute no, we'll never look at it. The ones that are a bit more difficult for us, our fashion electronics. Um, and probably for a few of the reasons we've already talked about right on the fashion side, if you have one pair of women's leggings at one pair between small, medium large extra large and five colors and all of a sudden you're at 20 aces very fast. Right? So that, that kind of adds up on the asian side of things. Um, and then the other side of things is innovation, right? We talked about water bottles aren't going to be innovated on very often. But electronics, you know, the iphone charger is a great example where from 7-8-9-10, you need four different chargers and they're moving pretty fast and You know, that makes it a lot harder to stay at that 5th Avenue real estate on Amazon. And if your product is going to become obsolete fairly quickly. So those are two things that we kind of look at as we think about categories. But I don't think there's anything where we would say, not even willing to kind of at least digging on level one. Right. Um, I'm curious, are you guys only doing amazon businesses or do you also look at, you know, standalone aecom businesses that maybe they built a, you know, a business on their own? Or what about print on demand? Are you doing any, you know, KDP stuff? Do you do any of the um, I forget what it's called, but where you print your own t shirts on amazon, You know, some people have built some pretty massive businesses in both of those marketplaces. Are those something that you guys dig into? Is it strictly amazon? Third party seller? Uh, set up at the moment, we are predominantly focused on third parties. Right, As I talked about a little bit earlier, when we think about where we're going, we want to be where the consumer is. So what does that mean? Most of our businesses are 80 to 90% amazon right now. But that is declining as we think about DTC, as we think about other marketplaces as we think about even potentially brick and mortar. One of our two co founders with the founder of charming charlie. So he, you know, he has those brick and mortar relationships and knows all the malls and we're in discussions constantly in terms of, you know, what does it look like and when is the right time? Obviously brick and mortar is is a almost a full pot at the moment given covid. But I think there is opportunity if you have the right um, right deals in place. So we will look at him, I would say, you know, the middle of the fairway right now is 70% plus on amazon. We'll look at D. C. T. T. T. C. Shape of five businesses. Um We also look at kind of affiliate marketing businesses right? So as we think about where amazon is going um Amazon does give a lot of credit in their algorithms to driving traffic to amazon. So how how can you do that? And how do you bring more attention to the amazon space? Um You know, we have beauty brands where we'll look at a beauty affiliate marketing website that has back links etcetera. Um So as we kind of build out our categories, certainly thinking about how we how we drive traffic to amazon into our brands from the outside world. That that that brings up a really good point. And a lot of amazon sellers don't do this in terms of value add right? Like if you maybe came up with some kind of proprietary software that you use in your own business that you know is a huge value add when you guys, when they can hand it off to you guys and say, hey, we've automated X, y and z. You know, we've got this Facebook group of 100,000 people in the brands, you know, we've got, You know, all these influencers that we have relationships. So I assume that you guys take all these kind of extra things that the brand has done, um, and take that into consideration in terms of having some kind of like back end machine to really push the awareness and the sales of the products 100%. And that's part of uh, what all those slacks I was just getting more about was how we do that better. So it's funny, funny you mentioned that right now, but um, that's that's something we're always thinking about, right. It's amazing to me. There's a bunch of sellers we talked to who are like, oh yeah, we have a 10,000 person data database that we have not emailed once or that we haven't been able to really monetize. Um, it's a huge opportunity when I talk about low hanging fruit. That that's one thing we're always looking at is how do we, you know, how do we engage with the consumer now? It's obviously a lot harder on amazon because amazon customers are their customers. But as you think about DTC and think about other other channels, you know, how can we use that information and get to again, what we're trying to do is b where the consumer is. So if you have that consumer data and you know, they're a fan of your brand, how can you get back to them? Right? And retention repeat rates is something we look at all the time depends on the product in the category. But we spent a lot of time thinking about repeat customers. So another thing that a lot of people um you know, just got approached by a fairly big, big brand that wants us to take a look at their account. And one of the things that you know, he had mentioned, which you know, I knew this, but I didn't realize how much more in terms of valuation that you can get is subscribe and save, right? Like if you have a massive amount of people on subscribe and save if you have some type of uh you know, like I always say that consumables are the Holy Grail, especially on amazon, right? If you sell a consumable product as terrible as some of it is for the earth, unfortunately, But a consumable product is the Holy Grail, right? Because that's like, you know, it's like a product subscription, right? Like it runs out. People need to order more. I assume that you guys also really love those types of businesses and also bump value if they have a lot of subscribe and safe in place for sure. You know, it does depend on, there's more than just subscribe and save. Right? So it's from a consumable respective. Absolutely. We have, again, we have beauty businesses that, that some other people don't really, um, look at the same way as we do, but we think about, you know, again, being where the consumer is, a lot of using businesses have an opportunity to grow beyond amazon. Um, but retention repeat that, that all kind of goes into subscribe and save also. Right? So what does that recurring revenue base if you have a consumer that you don't need to market to that, you know, it's coming back on a monthly basis that consumer is worth a lot more than somebody who's coming, you know, And you can also, you know, you're a cost, can go up your cost of advertising and go up on all of that because you know, they're coming back and that, that second by is pure profit. Right? So, uh, that's one thing I think a lot of people particularly for repeat business is don't spend enough time on is they say, Oh my a cough is high when it's 50, But okay if that consumers coming back twice or even three times, you know, that a cost goes down to 20%. So that's, that's another thing kind of to take into account as, as you think about your business. Yeah, a cost is a is a funny number because there's so many people who don't realize, you know, they look at a high like a 60% a cost, especially in the beginning when you're first launching things like that. It's absolutely horrible. And they don't realize that that's a long game, right? In terms of like brand awareness and exactly like you said, you know, if if you have a product that people are going to order more than once, then you know, you can take that across and and and start subtracting, you know, because uh that that long game is, is um you know, where it's at. Um I'm curious to know, you know, you said like length of the time the business uh you know, has been running. So I assume that you really, I mean what's like a minimum amount of time that you would want a business to be up and operating and you know, see month over month growth before you would consider if somebody like, you know, launches something and it just goes hockey stick on the first month, you know, is that something that you guys are going to be interested in? Or um, you know, is it something that you would kind of hang back and watch for a few months to make sure that, you know, it's not just some like fat or, or you know, leader, like the solar glasses, you know, something like that? No, we talked about it all the time. Um, and typically we're looking for at least two years of history, right? I think the minimum will go to, it's like 18 months. Um, and that's exactly what you're talking about. Anti right? Is any business can have a great month or two, but we're trying to build a long term sustainable business. And what does that look like? It's hard to see that over two months trend, even three month trend, um, even a year, right? Because its seasonality had a lot of these businesses on amazon. So we typically look at both month over month and year over year, trying to figure out what's going on there. Understanding not only industry trends, but competitors trends also, right? It is your business going up because one of your business is one of your competitors was delisted or out of stock. Right? And that that could show a nice pickup, which you may not see if you're kind of looking across the industry and not understanding what's going on outside of your individual business. Um, so that that is, you know, a very important part of our intelligence processes. Not only what is the business doing now, but what has it done historically? Um And and how do those trends look awesome? Um I assume that, you know, you're, how many to phrase this question? You probably see a lot of businesses with a lot of different processes in place, Right? Um you know, I would love to know what you've seen in terms of processes, what people are using to build those processes. Are they all in like Excel spreadsheets, are they an air table? Um I'm sure there in all different kinds, but I'm wondering if there's some kind of basis that people can use besides, you know, the standard screen grab and maybe the google sheets, you know, any um any advice you can give in building out these these processes. So when people come to you, you go, oh wow, you guys got some great stuff in place. Yeah, I would say whatever works for you and helps you manage your business is more important than having that set up for a seller or for a buyer. Excuse me. Right. Because most buyers will have their own processes in place, right? We have our own inventory management system, we have our own financial system, we have our own way, we forecast supply chain. So seeing how you do it or seller does is super helpful. But at the end of the day, you know, we learned a ton from our sellers and it's very important. But what we care more about understanding your business and being able to kind of understand trends and how it's managed, right? So, um most important is figuring out what works for you and following it, right? We know people who have 12 ace and businesses who are using amazon's inventory replenishment and that works perfectly for them. And then we know other people are using complex models where the forecasting is something that I don't even understand until I talk to them and you know that works for them. It all its business dependent and it's it's really ultimately what's going to help you grow right now? No, if there's processes that we can learn from, we might add some additional value, but that more comes to what you were saying earlier, right? Which is um more around mailing lists or kind of some hippie or something that's been built out rather than just management, right? If there is a proprietary system that can be helpful that that certainly adds value, awesome. Um the other thing I'm really curious about is like, you know, um one of my coaches always asked like, you know, what would somebody change about your business if they were to buy it today? Right? It's a good self reflection in terms of taking a step back and looking at, okay, you know, if I were to come into this business, what would I like hit the ground running on immediately to improve? Uh you know, profits and things like that. What are some of like maybe the two or three most common things like right, when you get a hold of an amazon business, what are you guys getting to work on? Right away? Yeah, it depends on the business, right. We kind of break it down into six letters without going into too much detail. Marketing is one. Some people are very efficient, others are very inefficient supply chains and other not only the inventory we talked about, but cost of supply chain are, you know and how much are you shifting when you shipping? How are you shifting? What are the storage costs are using A three pl are you having too much inventory in an amazon etcetera? So just increasing margin through supply chain. Um New product development, right As I mentioned, we do like skewed concentration, but we are always thinking about how can we use the brand and the Fifth avenue real estate that we've already built or the seller is built to continue to build on amazon or even off amazon marketplace expansion, you know, as we talked about being where the consumer is, so not only, you know, getting to walmart or iron for supplements or lows for construction, but to international amazon as well. It is another one that we think about, right, Some products don't lend themselves as well as there's different regulatory environments, but you know, there's there's so much low hanging fruit in the U. S. But in europe there's not as many competitors, it's just it's a different ball game. So if you know how to operate there and can kind of figure out the regulatory environment, there's actually a barrier to entry for U. S. Companies. Um, and the last one is just scalability, right? That's what goes back to what we talked about before. We have a team behind us. It's not one or two person shop, we'll have a brand manager take over and run the day to day. But they're supported by the boosted brain. Everything we've learned from our portfolio, having experts and supply chain marketing, inventory management and everything to kind of, you know, give give that an additional boost that that we're looking to give. So one last thing which um, you know, which may be a little controversial but we keep seeing these models pump pop up. There's some competitors of yours that I won't mention that, you know, they're, they're doing like billions of dollars in business now, but you know, one of the things I loved about amazon, especially starting out early is that, and especially like you said, they're enabling, you know, the small mom and pop type operations to kind of kick the 9 to 5 to the curb, but um, you know, in essence, you know, this is kind of a, you know, getting these brands that are successful and then combining them into a kind of a big conglomerate, right? So by the time it's done, you know, you're, you know, Nike, but you're selling 100 different products, right? But you're this big conglomerate. So, um, you know, is there, is there any a chance for these small, you know, if somebody comes to you and you're like, no, we're not gonna buy you, but they now have to compete with you. Um, you know, what do you think that, that's going to look like in the next 2-5 years? Do you think only big brands who continue to grow are gonna survive, or do you think that they're still going to be room for these small mom and pop shops, saving the hard hitting questions for last? I like it. So I think there will always be space, right? I think amazon is changing at a tremendous pace. Um and I kind of say in this industry, a week, as a month, in a month, as a year. Um, and you're seeing that happened on a pretty incredible, incredible journey and it's, it's a very fun place to be, um, and certainly it's becoming a bit more professionalized, um, but ultimately, at the end of day, product speaks, right? So if you have a strong product and your, you know, how to operate, um there's gonna be room for you, right? So what's going to happen and amazon is doing this some themselves already, right? What they're trying to do is give the consumer the best experience they can have. So what does that kind of mean? They've spent billions of dollars, billions of dollars in the last couple of years trying to take out black had activity, trying to move towards getting products right there, there's now on the supplements side, they're doing I. S. O. Type certifications to make sure that your products are actually what you say they are. So there's gonna be room And it's a focus on product, and its focus on driving what the consumer wants is the easiest way to say it. In summary, we could spend two hours on that conversation, but that that's that's the 32nd answer. [00:25:48] spk_0: I don't have that answer. I think it's so important. I mean, you know, there's because it's so much easier and there's so much more of a focus on e commerce now than ever before. And many traditionally brick and mortar brands are now, which don't have as strong a brand that don't have necessarily quality of product. Um many of them are moving into e commerce and it's just getting bigger and bigger and bigger, the more and more people that enter this space, so that's when it becomes more important that your products are awesome and that you know how to connect with the consumer and that you care about those things, You care about brand, you care about your products, you care about what the consumer wants. So I love that, I feel like there will always be space for people to build new brands that do those three things. So that's awesome. Great advice. [00:26:50] spk_1: I think it's a little bit more than that, right? You also need to uh, to be able to operate within the amazon ecosystem and understand, right? If you don't understand how it works, a brand by itself is not enough if you have that brand and you have that understanding and you know, shows like this that there's, they're all over the internet, there's a bunch of people you don't even have to pay anything right, You can just watch videos. And I've heard from amazing sellers who are doing not only seven figures, but a figure businesses who literally learn how to sell on amazon through Youtube and it's incredible, right? And that goes back to the proliferation of what amazon is done for Mom and Pops. I don't think that is going to go away. And interestingly, a lot of kind of more traditional brands hate amazon, right? So they see amazon as a competitor rather than seeing them as an ally um, that I think will continue to change, but that also gives the Mom and Pops a little bit more of an opportunity to kind of to be the man on amazon. [00:27:54] spk_0: Yeah, I love that. So we always ask this question. We ask what it is that is motivating you. So are you listening to podcasts? Are you reading books, um, what are you into right now and anything that you want to share with our audience in terms of things that are motivating you as an entrepreneur and business owner? [00:28:18] spk_1: Yeah. So I head up our m and a team and my job is to go find new businesses that that fit into the boosted platform right? Um and not every business is a great fit for us and we're not a great good for every business, but what's incredibly motivating is I spend a majority of my time talking to sellers, hearing stories, understanding how entrepreneurs have got into where they are and there's no one way, there's no perfect way, there's really only the way that works for you and there's so many different ways to get there and that to me is super exciting and the best part about my job, I get to learn as much from the sellers as I get to share with them and bring their business in and we have S. O. Ps and our network that are started and found from our conversations with sellers and they've taught us right? So it's super fun, I'm learning something new every day um and I get to kind of just talk with amazing group of people who are incredible, successful entrepreneurs and their stories are inspired, [00:29:19] spk_0: awesome. That's what we love about doing the podcast so that we get to meet other people and learn. I'm forced to stop and learn and grow every week. And that's been an amazing blessing. So adam, I mean you've given us so much information in this hour and we so appreciate you for being here please before we go, just let everybody know if they want to get in contact with you. If you're thinking about selling their business, how do they do that? [00:29:46] spk_1: Yeah, look, we we are always looking to grow, right? We are trying to get pretty aggressive. 200, uh amazon businesses plus in the next couple of years. So even if you're not ready to sell your business, we would love to talk. We would love to have a conversation and understand where you are and reservations, what you're thinking about and maybe you get to get the relationship started for when you are. We're trying to be the acquirer of choice. We wanted, we look at this as a partnership and we want to be, you know, the buyer that you go to first because not only are we going to give you good value and we are fair with our value, but also we're gonna help with a with the relationship and help you continue on with your career. And we have a cool announcement coming in the next week that you'll see on the press with with regards to that. Um, so as you think about, you know, differentiators in space has a lot of us, but please do reach out. Gusti commerce dot com is our website. There's a form that you can fill out, you can reach out to me directly at adam at commerce dot com or my m and A team is altogether at acquisitions at boosted commerce dot com. Again, even if you're not looking to sell, we would love to hear from you and get the conversation started. [00:30:54] spk_0: Awesome. Well thank you so much and thank you everyone for being here with us and thanks for everyone who joined us live, you can join us every Tuesday at three p.m. Central one PM pacific here at cellar round table dot com slash live, make sure to rate, review and subscribe. We appreciate all of you and, and I hear from you all the time and we just absolutely love providing that value for you and thank you to our guest adam today and we'll see you next week on the seller roundtable. [00:31:28] spk_1: Everyone thanks for tuning in, join [00:31:34] spk_0: Us every Tuesday at one PM, Pacific [00:31:36] spk_1: standard time for live Q and A. And bonus content after the recording at [00:31:40] spk_0: cellar round table [00:31:41] spk_1: dot com, sponsored by [00:31:43] spk_0: the ultimate software [00:31:44] spk_1: tool for amazon sales and growth seller s c o dot com and [00:31:48] spk_0: amazing at [00:31:49] spk_1: home dot com.