Maximize Amazon Business Valuation: How To Sell A Business For More Money
welcome back to another episode of behind the stone i'm your host robert rung and today that i'm gathered with thomas smell from fe international thomas how you doing today i'm good robert thank you very very much had me on i'm excited to have you on the show and i appreciate you being here so we're going to be talking about some really amazing things and you know you work for fe international tell me a little bit about you your background and effie international you know brag on yourself and your company yeah she'll say uh i founded fe i'm now the ceo founder nephe in um 2010 we've been in the industry for over 11 years now um we work with business owners in the online space that might be e-commerce it could be amazon could be software it could be content-based businesses a real range in the online world who are looking to ultimately sell their business and the service we provide is the whole m a process all the way through from valuation to final sale um just for some perspective over the last 11 years we've closed over 1200 transactions now so 1200 successful exits that's well over a billion dollars in total value um we work on a range of businesses so we have clients who revenue below a million dollars we have clients revenue above 50 million a real a real range generally speaking valuations all the way up to about 100 million so real ranging there we are our head office is in new york uh we have a team in london i'm based in san francisco we have a team in miami we have a few remote people um as well like the team in total at the moment across all of the different things we do about 110 um so quite a big team and about half of those work specifically on the m a side of the business um so i guess we're here today just kind of discussing the kind of things you can do to get your business ready to sale um we spend a lot of time with people often years in advance before selling their business um until either they're they're ready or they decide they want to they want to go ahead so it's always good to kind of talk through the the early stages of the process so people kind of understand when it makes sense to reach out and maybe start a process yep fe international done some amazing things and one of the things that we're going to be talking about today is maximizing the value of your amazon ecommerce business because we're going to show the most effective ways to find the right buyers for your business plus a few extras that's coming up next on behind the stone [Music] welcome back to the sunken stone channel where e-commerce brands agencies and do-it-yourselfers receive tips tricks and tutorials to improve strategy growth and operations every week so be sure to subscribe just click the red subscribe button right below or click on our channel page to see more videos so thomas say you've built a successful ecommerce business maybe you're struggling to decide the best way to sell your business one of the things we're going to talk about is all things you need to consider when thinking about the best practices behind the acquisition process you know thomas can you speak to that you know do you have any examples you can provide yeah so i think the very first thing anyone should do like i said we worked for over 1200 people now so you see this time and time again the most important thing you need to do at the very start of the process if you've been thinking about selling a business is decide what you're actually trying to achieve from that exit so it may well be and that's usually for most people it's either a financial or a time-based goal and what i mean by that is either one a specific number so it might be i want a million dollars 10 million dollars 50 million dollars there's not a right or wrong answer to that there's something you can do i can do to tell them what that number is you need to decide how much you ultimately want to sell your business for or it might be a time based goal it might be hey i want to pay off my mortgage i want to pay off my tuition fees i want to retire it could be anything but usually a specific goal by which you want to achieve your exit um once you have that the best thing to do is then figure out what your business is worth the best way to do that is find other companies in your in your industry usually an m a firm so company like f international most credible companies will put together a free evaluation for you and you want to find a business that's sold company face similar to yours in the past it's usually quite quite easy to figure out who's done that can you talk a little bit about the evaluation you know uh like in terms of why why would a company or why does the company need to increase its valuation or why why is evaluation important like what kind of metric is that yeah so the most important reason to get a valuation is to establish how far away you are from your goal or your expectation so let's say you've decided i'm robert i want to sell my business by the end of next year i want at least a million dollars and i tell you today your business is worth 500 000 then you probably have quite a lot of work to do to get it to be worth a million dollars but if you say to me hey thomas i want to sell my business for 10 million and the valuation we give you today is 9.5 million then you probably don't really need to do anything to get to that 10 million valuation level other than maybe just wait a few more months for a little bit more growth so the reason you get the valuation is not necessarily because you're committing to a sale process you shouldn't have to pay anything for evaluation with any credible firm in the industry but it helps set expectations and help help set your goals and what you need to to do because you could be a very long way away from your target evaluation and your goal might not be realistic to achieve soon you might just need to be patient and wait or you might be much closer or even ahead of your goal and then maybe you decide you want to sell now or maybe you change your goal maybe say okay well my business is worth 9.5 million now maybe i want to get to 20 million and i'm happy to spend another two or three years working to get towards that um so that's why the valuation is most important really just to kind of set expectations and help you determine your plan because the things we can talk about they do somewhat vary like how far away you are from your ultimate goal and and with that valuation right like uh say it is at 500 000 or and you want to get to a million or say it's at a million and you want to get to 10 million you know what are some of the things that people can do to increase their valuation is this uh investments that they need to make such as you know we funder crowdfunding campaigns things like that or is it you know higher internal staff what what what exactly would you recommend for for people listing or watching right now yeah so firstly it depends law on the business so one of the advantages of getting evaluation is as part of that process at least if it's our if you're talking about fe international's process we will then identify things that you do particularly well particularly badly so we might say oh compared to similar businesses we've sold uh your team is smaller than average or your average order value on amazon is smaller than average or your return on ad spend is lower than average if you're buying ads so it could be all sorts of different things it would be but we can help you identify that in a like a customized way but in general the things buyers are looking for are growing revenue so people want to buy businesses which are growing it doesn't mean you can't sell a business which is flat or not growing but it's easier and you're gonna get more money for a business it's growing um the business needs to be particularly if it's a e-commerce business or amazon business whatever you want to call it has to be profitable so there's no point on amazon you could effectively build a 10 million business that makes no money 10 million revenue business it makes no money because you spend it all on unprofitable ads so the business does at least need to be um profitable to be sellable and to be worth more in general it needs to be more profitable so there are lots of different ways you can go about that it could be increasing your revenue so to your point it could be hire more people uh maybe you need to improve your logistics so you get product from supplier to customer faster maybe you need there to be less returns so maybe that needs a better like qa process um lots of different maybe your return on ad spend isn't very good so you need to hire an agency or you need to hire a person to take over that um maybe you have your own store as well as uh your amazon storefront and maybe your own website needs to be improved maybe you need a better way to capture orders or bigger orders different orders customize orders or whatever that might be so there are all sorts of different things you can do to increase that value but it really depends on the business there's no there's no simple formula for example to double the value of your business you do not necessarily need to double the amount you're spending on ads double the size of your team double the amount of skus you sell or anything like that it could just be one or two small things you need to change so that's why it's important to get that valuation earlier because you'll also get an idea of what other companies that have been sold do well and what they don't do so well so let's say that we've nailed the acquisition process and you know we've hit that that valuation we're preparing to sell our business you know what are things that people should know before that exit you know about preparation for a successful exit so firstly and particularly for amazon sellers i'd say the very most important thing you can do is get your financials or your books in good order so many e-commerce businesses we work with have really messy financials so they might keep at least some numbers but they're not very accurate so depending on the size of your business um you could just hire a part-time bookkeeper you could hire a contract bookkeeper you might need a full-time in-house bookkeeper and then exactly the same for an accountant as well so i'd recommend at the very least the most important thing to do if you are going to sell your business successfully your numbers have to be in good order so if you work with a company like us we'll run a due diligence process before we list the business to audit your financials and make sure they're accurate um but the mistake we see people do a lot of the time is they'll try to sell the business themselves before they come to us they'll send a buyer financials a buyer might make an offer and then the offer will fall through because they'll realize there's discrepancies and it's not usually because the seller is intentionally misrepresenting their numbers it's just because they got it wrong maybe they overstated cogs or understated cogs didn't understand return on advent forgot that they were employing people whatever it might be we've seen all sorts so the most important thing you can do is get your financials in in good order and how long does your process take so depends on the size of the business but generally our audit process so from valuation through to getting the business listed so then out there where our m a team take over and reaching out to acquirers usually two to four weeks depending on the size and the complexity of business so for example a million dollar business will probably take two weeks a 50 million dollar business uh with a like two warehouses three offices will probably take more like a month um and then from there the actual sale process again can vary depending on the time and complexity of the business but generally somewhere between 30 and 60 days to finalize bids on offers we usually run like uh we do a lot of outreach so it's not just a lot of people think you can only sell your business to an aggregator for example they might be part of our outreach but also private equity firms who no one has ever heard of but they've raised a billion dollars and they're looking to work with businesses might be reaching out to individuals strategic buyers so that's why the process takes a bit of time it's not that you could get an offer on day one if you just go to an aggregator but generally they're not going to be giving you the best offer so we'll run a 30 to 60 day process get as many buyers into the process as possible and then closing from there once and off has been agreed again it depends on the size of business i'd say generally a smaller business say a million dollar business might be two weeks and then a 50 million dollar business usually 60 to 90 days one average to close so the process can take start to finish anywhere from say 45 days for a small deal that's going fast to maybe up to six months for a much bigger more complex deal where there's lots of moving parts often there'll be uh in-person meetings as part of the due diligence process have to meet the team have to understand suppliers all that stuff hence why it takes a little bit of time so we're talking about some big numbers here you know large and small from 1 million to 50 million uh let's talk about fees you know what kind of fees are you know sellers and buyers both looking at you know they're nothing good in life ever comes without fees that you definitely get what you pay for in this industry i'll say you get like a real range of fee quotes so out there so i'd say the things you need to think about firstly as a buyer you generally shouldn't be paying a fee there might be like an administrative fee or an escrow fee or something like that so we have a very small fee for buyers to cover some administration related to escrow and some general paperwork but generally you shouldn't be paying 10 of the deal value or anything because the m a firm is generally getting paid by the seller um we have a sliding commission scale um which starts at 15 for small deals and then scales down um i guess depending on the deal size that can get significantly lower than than that number but we tell you that at the start of the process once you've got a valuation you don't have to pay anything to be transparent very it's also entirely uh contingent so we only get paid if we successfully sell the business you're not paying a snarly rate you're generally not paying a retainer um or anything like that so i'd recommend if you are looking to sell your business unless it's much larger so let's say as deals get more complex maybe above 20 million it's not uncommon for firms to ask for a retainer but usually you want to find a firm which is aligned with your best interests so they're taking a percentage and then similar to what you said like nothing in life is free same in this industry when it comes to finding good advisors the one that charges the lowest percentage is not necessarily the best option because the better firms have like a real team with real head count most of our team are ex big four accountants or they've come from uh big investment banks and they're used to doing billion dollar deals and we now have them working on 50 million deals so we have see as a seller you do not care about overhead but you should care about the talent we have behind the deal so we put significant like real money into actually selling your business and i guess we charge accordingly so you can definitely find cheaper companies it will do it for less but i mean that's the same with anything you can find a ad agency that will work for basically nothing kind of web design firm that will work for basically nothing you can find the cheapest possible supplier for anything but generally not the best um so that's the way we approach it but it's very transparent up front of valuation and the initial advice is always free so it's always worth having a conversation and then if you decide it's not a good fit then you can obviously walk away early in the process i appreciate you clarifying on that so we've talked about the acquisition process we've talked about preparing for successful exit so let's say that we're considering selling our business and we want to know the best way to do it you know what are the things that people should look for when trying to manage a large acquisition yeah so i think the first first thing to do is establish whether or not you want to try to do it yourself or if you want to hire a firm to represent you and do it there are your two main options um i'd say the only situation where it really makes any sense to do it yourself is if you have a relationship with a buyer who's approached you and already made an offer which you then believe is way above market value which is very uncommon but it can happen so that's why it's useful to get a valuation because we might value your business at 20 million dollars but then if someone comes along and offers you 100 million then obviously you should take the 100 billion deal but generally speaking similar to i guess almost anything in business it doesn't make sense to do it yourself and even if the fee sounds high you're going to save money ultimately hiring someone to represent you similar to hiring a a good accountant like who or a good lawyer yeah i was gonna say order an attorney yeah an attorney you know that hiring a good attorney should ultimately save you money versus the cheaper attorney or trying to do it yourself where you can just cause issues so firstly you do not know what you don't know you can reach out to except the aggregators there are probably 20 aggregators out there who have raised money and they will all love to tell you why they're the best or only buyer for your business and make an offer but the reality is a lot of deals happening on selling to aggregators um they're selling to private equity firms strategic buyers we'll we have an entire team that will spend weeks or months reaching out to potential buyers there's no way you can run that process yourself because you just don't have access to the buyers and they often won't take it credibly if they're being approached by a seller directly whereas if you're getting reached out to buy an m a firm similar if you think about any sort of like professional referral if you get reached out to you by a firm that you know does work in that industry you're likely to take the approach a little bit more seriously and like bigger buyers like working through m a firms because they know that we've run a process to get the business ready for sale so they know that the accounts will be in good order they know we have reasonable expectations around valuation we wouldn't have just made up we know that the seller is motivated to sell we know that everything else is prepared we know the process will go smoothly so often they're willing to pay a premium because of the fact it's gone through a process so while it might seem that you are let's say you're paying us 10 on a 10 million deal which is not necessarily exactly what we would quote as a fee but hypothetically it's a million dollars that's a lot of money but if we can get you 12 million dollars for the business that you would have sold yourself for nine then yes you sold a business for 9 million you haven't paid any fees so you've actually lost money versus selling it for more money and that's probably a realistic kind of delta in expectations yes you can definitely sell yourself where you are on average not going to get as much as what you pay us minus our also what you get paid through us minus our fee plus the fact we do a lot of the work for you um so that's our usual sales pitches it's not necessarily that you should use us because you're paying us for the value of the work this is that we will get you a higher valuation than you'll be able to get yourself it's not that you can't do a deal yourself because you can and it also goes back to what you said earlier too that 20 million dollar you know your valuation somebody offers you 100 million well just flip those somebody offers you 20 million then you find out the valuation is 100 million right so it's important to do your due diligence your research get your free business valuation um and work with the right people in order to sell your business because you want to leave it in the right hands um so just in closing thomas do you have any final tips thoughts closing remarks for our listeners or viewers yes i think my tips like first thing to do is figure out what you're actually trying to achieve if you're trying to build a billion dollar business what you should be doing in your business is probably different from the person trying to build a million dollar business and there's no there's not there's nothing right or wrong with either of those building a million dollar business is a fantastic achievement so is building a billion dollar business but you need to figure out what you want to do and that will help professionals like you and i advise people what their their best plan is um so figure out early on what your own personal goal is it's not saying anyone else can tell you it's personal discuss it with your spouse other family members stakeholders in your life business partner or business partners if you have partners get on the same page early on well the same if you have a time based goal if you know you want to go travel the world in 12 months time then that's your time you have to work towards if you're going to sell um if you're really early on your business and i'd say generally below a million dollars in revenue it's early you should really not be worrying about selling you should be focusing your time on growing your business you can you can listen to this podcast and hopefully it'll give you some good information but ultimately your business is going to be worth more if it's bigger so there's no point sitting there putting all these things in place to make your business more sellable versus just focusing on the growth because if you double revenue that probably offsets a lot of other things you could or should otherwise be doing um and then finally again this is kind of more of a sales pitch but it's never too early to reach out and have a free no obligation conversation about valuation because you may well approach us get a valuation you could be a very long way away from what you want to achieve or you could be much closer to your goal or even beyond your goal than you that you realize so there's never any harm in reaching out it doesn't cost you anything um and there are lots of kind of companies in the industry you can speak to to figure out what's a good fit because you may decide you want to try to sell your business yourself it's just in general we've seen a lot of horror stories um people who work with us will make more even if they have to pay us a fee it's all really ultimately offset so let me ask you just in closing uh so say somebody does reach out to you early in the process uh would you be able to work with them kind of like give them tips tricks um tutorials and more to be able to increase their business valuation like kind of like a mentoring process so for sure that's absolutely what we do so we have clients that we've worked we had a client earlier this year can't tell you the exact number he sold his business for but between 10 and 20 million we first met him in 2012 and we spent nine years not necessarily giving advice for that business but teaching him a little about the process sold a couple of much smaller businesses for him and when it came to his bigger business which he's now ultimately sold and never has to work again if he doesn't want to i think he is has actually started a new business already but that was not necessarily saying he has to do because he owns all of the business um we started having that conversation eight years ago so as long as our not our condition but if you want to reach out to us we just want you to be like honest and clear of what you're trying to achieve so don't say oh i really want to sell like soon so give me a valuation because if you take advantage of the free advice then we're less likely to reciprocate but if you're like quite open and honest and say hey look i'm not ready to sell now i just want to get an idea of what my business is worth more than happy to help you i guess just with any like professional relationship be respectful be honest of uh like what you want more than happy to help and that process could take years and that that's fine we've been here 11 years in 11 years time i might have moved my desk but we'll probably still be doing exactly the same thing and that's one of the biggest takeaways too if you're going to sell your business it's really about relationship building because you want to pass off your business to the hands of someone that you know is going to take the best care of your business possible so for more great tips on selling a business fe international offers free evaluations to figure out what your business is worth you can get that free evaluation by clicking the link in the description box below this video contact thomas and his friends fe international they will take care of you so what's your next step reach out to the team fe international for tips tricks best practices on growing or selling your business they're experts and they're there to help you grow thomas's team will take great care of you just like hundreds and thousands of customers they've helped in the past and if you really want to level up your ecommerce strategy then watch this video next it's called five proven e-commerce marketing strategies to 10x your business and you'll learn insider secrets from tanner tozen and ceo adam weiler on how scale seven and eight figure e-commerce businesses
2022-01-20 16:58
