- Being Passionate About Your Product
- Fears of Buyers and Sellers
- The Handover Process
- Life After the Sale (Next Big Project)
Mentioned in this episode:
Article:We are live and today we are joined by a former client of ours and good friend of mine Jason. Jason, thanks for jumping on the call.
Awesome. As I mentioned Jason was a former client of ours we helped him sell one of his Brands. What we're going to talk about today is that whole process how Jason built up his brand. We'll talk a little bit about the broad strokes of that business why he wanted to sell, talk about the sale process and more importantly what he's working on now. Jason, could you give us a little bit of background before you started the brand that we sold.
Sure, this was my second e-commerce company and I had sold my first one and it was a very small sale but it was like my first thing that I did. I had enough cash to take off traveling and not have to work for a little while. I needed to do something that I wasn't tied to any specific location and basically got turned on to Private Label style products and started working in that when I was living in Thailand and then Bali. It became like sort of a lifestyle business or it was funding my travels at one point. I kind of kickback and cruise for a little bit enjoyed that life spent many days at the beach learn to surf and then realize okay business is doing all right but I'm going to be wasting a big opportunity if I don't focus on that. Then I decided to focus and grow it and then less than two years later we sold the company for a significant sum.
Nice. Okay. You essentially had the 4-Hour workweek and got bored. That's a pretty common theme amongst our circle of friends at least. The entrepreneurs that just can't really sit still the business was kicking off really good cash flow. We talk a little bit about that business but suffice to say it was a nice lifestyle business still even though you were growing the business. What was the main reason you contemplated selling and then pulled the trigger on on selling the business?
Yeah, I guess one of the main reasons is I wasn't passionate about what I was selling at all and at one point I got really bored. I had hired an employee and I had all this time on my hands and then I felt a little guilty. I'm like making pretty good money living in a really pretty cheap place, very nicely and and I just realized like this wasn't my 10-year business or 15-year business. I was at the point of well I can keep growing it or I could focus on selling it and using the money to do something I really wanted to do. Ultimately I decided to do that.
Okay, excellent. Yeah, we have a lot of clients in the same boat. They build up the cash flowing asset realize that it's got to a point where it's valuable and it's in a point like with you the business was a very sellable condition when we went to market, which was awesome.
Okay. Well, let's fast forward a little bit. We went through the process of taking the business to Market. We had a number of buyer conversations now, it was a little while ago we actually went through this I was I was thinking about this before the call. Do you remember the first buyer, the offer that we got? I thought this was interesting that didn't end up buying the business. Do you remember how that went down?
I believe so, I believe I was in Georgia the country at the time and I think I know what you're talking about. Yeah.
We actually we had a buyer and I'll talk broad strokes. Obviously, we've got NDA's and in place with a lot of buyers and the eventual buyer as well. I just want to highlight one point here. That was a big learning for me. This was a couple years ago. We did this deal. As far as broad strokes goes that the buyer was from the US, I'm Australian if you don't know where already listener and Jason was in Georgia. While Jason is from the US he was overseas as well and everything was fine with the deal up until getting to the LOI point. We had a stipulation in the LOI of a small deposit being held in third-party escrow but both the buyer and the seller agreed to an escrow company. That was very clearly defined and LOI everything was signed.
It was all great until there was some massive resistance from the buyer putting money into a third-party escrow service and that's what eventually killed the deal. He was basically asking for information before that money was deposited. What I've learned on that deal and subsequent deals is even if and this buyer had acquired other businesses as well. One thing I want to highlight the reason I'm mentioning this is selling the business is not only emotional from the sellers side. You're giving up your asset the maybe put a lot of time, energy, tears into building this asset this business. It's also really stressful on the buy side.
You know things come out of out of the blue and sometimes that can actually kill the deal. We ended up killing that deal moving back to market and we found the eventual buyer so that the sale process on this with the final buyer was actually pretty straightforward. But let's talk about the transition and hand over part because the buyer that bought your business was relatively new to selling on Amazon or completely new to selling on Amazon not new to e-commerce. So could you walk us through just the broad strokes of how that worked for you and how that kind of played out?
Yeah. Absolutely. Essentially first thing we did we think we had a company come in and do an audit themselves. I don't know if we can mention the company name.
Yeah. So since you're a cut there are a lot of buyers will use Centrica. They're cool firm. There are third-party verification service.
Which I thought was actually very smart at the buyer and they were very clear and straightforward. They found a couple things I expected them find. Clear in the deal but their research was thorough and they even checked to make sure my deposits are what I said they were so that was very smart the buyer and I recommend that to anyone buying a business for sure.
Then the handover was basically, you know, since he was already an e-commerce, he understood supply chain and ordering he just needed to be walked through that. We spent quite a bit on on Amazon PPC and even though those campaigns were set up they still need to be monitored. We spent some time there spend some time on how I found products to launch what I did and kind of my strategy. I also had an employee which I believe he took on I'm not sure if she still works for him. I think we had allotted like 30-40 hours of training and we probably only use 15 I would say and he was a smart guy. He picked up on things really quick. So he made it really really simple
Awesome. And you know, that's that's a good tip if you've got someone that is a private buyer on a deal often times, they'll ask for more. They're basically not sure what it's going to take to hand over the business. In your case, you had a lot of SOP's you had the staff member that the contractor that could go with the business. A lot of it was already hands off and that made it a lot easier and faster when it comes to the transfer if you're getting to that transfer stage and you're just figuring out how to do what you do and it's only you that's going to take a lot more time. It was a great thing that you'd actually put that all in place prior to going for sale. That was awesome.
Yeah and to preface that I mean I was only working about two to four hours a week on the business at that time. But in order to do that, he needed SOPs and at least one employee who had everything together and that made the business way more sellable in marketable in my opinion.
Yeah, absolutely and you know something that's a very common theme with an Amazon based business. So much of the operations is hands off right Amazon take care of a lot of stuff as well. They charge you for it, but they take care of a lot of that stuff. A buyer that isn't used to that ecosystem will dig into those numbers and and think that there's something missing you can't be only working these few hours. So yeah, that's quite a shock to buyers that are new to this space which is why so many buyers are interested in this space, which is awesome. Okay, cool. So let's let's move forward a little bit. You've closed the deal you've done the hand over your sailing off into the sunset. What did you do next?
Well before that actually wanted to mention something. I might help people. The buyer was pretty concerned about Amazon in the risk associated with my business was 99% primarily an Amazon as this is a lot of people and he was a bit concern because I had a couple products that were taken down from Amazon and I got them back up or somebody complained and I had to get them back up. I actually had SOP's for those problems and I was pretty good at getting a product back on if they took it down within 24 hours and I think that did a lot to calm his nerves about that. I wouldn't hide the fact if that's happened to you and just document what you've done to reinstate those products and I think you'd be ahead of the curve there.
Yeah, absolutely. That's a great point actually and you know, that's that's becoming more and more than norm that there are always issues with Amazon from time to time. So yeah having that documented and and the timeline as well of what happened each time something happens put it in a folder and just write some notes especially a timeline and if you can cut that time line down next time and and know exactly what to do that puts the buyer at ease for sure. That's a great point. You brought up there. Excellent. What did I do after the exit?
It's kind of interesting. Right after we had a deal signed deposit. I mean that literally the last thing to do is was for him to transfer money to pay for the inventory and the final payment. I had a diving trip plan in the Philippines and I rented the nicest hotel on that little island, which is definitely not a five-star Resort. Let's put it that way a little island of Carone and I didn't realize they only had like internet access for maybe an hour a day and it was spotty there. We were actually closing the deal with the money situation during that time and I look back now and I kind of laugh but had I known that I would have postponed that trip. At the same time we close the deal money was in there it was done and then I went diving for three days and it was it was just an amazing time.
That's awesome. Sometimes you can forget to actually celebrate the win and that was awesome that you had that trip already planned. I'm curious so I know that you've we'll get into what you're doing next. But how long did it take you before you got that itch again to work on the next project which you're working on now or had you already started working on the next thing?
Well, I knew I was going to sell for quite a while and actually Coran and I worked together and sorting out my bookkeeping. I had to fire my bookkeeper. We are probably working on it for six months. At that time I was using a lot of my spare time to research products. I had gone to Canton fair and just kind of keep my eye out for anything that caught my eye. I hadn't pulled the trigger on anything by the time I sold and then when I sold I decided to take just two months completely off, you know any sort of work email anything because I knew when I started the next business, I'd never have this time to just disconnect again.
Did you make the full two months?
I did actually oh well I had a let's see I went diving in the Philippines. I spent a few weeks there and then I met a buddy out in Colombia and spent two months in Colombia and Medellín which was incredible and even though It was in a new place, I got bored at times.
I'm like, I can't go travel out of the city all day every day and then I had a another buddy of mine who's a real respected entrepreneur right? I respect the hell out of him, a bit older than I and wiser and we were talking I was like well now I have a pile of cash and honestly the business had been throwing off cash for a while. I had most of that as well and you know, I didn't live lavishly but nicely but not really expensively. We were chatting and there's a lot of people on Amazon doing Private Label stuff and stuff that doesn't have very high barriers to entry and the stuff I was doing what wasn't at the time either so you certainly can find success there but I wanted to do something harder and I also wanted to challenge myself put in perspective the business that I sold and again, I can't reveal the products but I was doing private label and sourcing in the US and my supply chain was fairly quick. I was able to run relatively low inventory levels and turn it over quickly. My cash flow was was awesome. I mean I never had an issue with cash flow. Then I went to Canton fair and I found a product I just loved and that was amazing and never seen before. I had started doing research on that product before I sold the company.
I took my two months off and started doing some more product research and this product I wanted to launch and test was going to cost me probably 70- 80 thousand dollars just to launch and I'm used to my product launches costing you about $5,000 in cash flowing in month 2 or 3. I ran the numbers and I would basically make my money back in three or four months, three months or when I sold the product. I thought about that for a while that was a tough decision and it became that I wanted to challenge myself and take myself to the next level. I'm an entrepreneur level and I knew I had enough faith in myself that I wouldn't lose the money if things didn't work out I could still make it back. So I decided to pull the trigger on that and that product took longer than I thought I visited many factories in China and spend some time there and which is a story in itself. I had to design the product you know it just it took some time it took me to get it to market probably took me including shipping and the order and everything probably took me nine months.
It's been challenging and now it's a very seasonal business and the cash flow is completely the opposite. I need to make all my orders one time during the year and putting out hundreds of thousands of dollars because if I don't do that and I miss the season that's a huge opportunity cost there. That's the challenge of this business and I also am testing the products myself and using them, constantly improving them and it's much more hands-on and challenging so it's fun. It's challenging and that's sort of how I got into it. Since then I've been pretty busy.
Wow, that sounds like quite the journey made and you've kind of jumped out of a nice cash flowing business into something that's quite a bit harder. So that's that's interesting. So are you mostly focusing on Amazon for the second brand or are you focusing outside of Amazon as well?
Well, yes and no. It's an interesting question. I still believe in Amazon's probably the best place to start an e-commerce business. It's the easiest place to get some sales and some data but I'm actually working with a handful of influencers who have other website properties and you have some influence in the market because my product so expensive people will potentially find this on Amazon.
They'll Google it as well and they'll do research before they buy so that's been huge for us. Right now we're pushing a lot of stuff to our Amazon listing but in the future we want to push it to our actual e-commerce store because as you can imagine our margins are much better there, so that's kind of the overall goal. My focus is to be yeah, we sell a lot on Amazon. We also sell a decent amount of our website even without much outside marketing at the moment but our goal at some point is to be you know, Amazon will still probably be 60% of the business over the next few years. But you know if I can get like 30 percent anywhere from 25 to 40 percent my website that will be huge for us.
Absolutely and that also nicely will make the business more valuable if and when you do plan to sell in the future. As with the second business because this is a niche that you're more interested in and like you say, it's really one time of the year where you make your money back is this one built to sell or are you keeping it? Or somewhat sale ready or is this something you just want to keep doing because this is what you love love doing?
Well, that's a great question. I think we should always have in mind that we're going to sell the business one day either you pass it down to your children or we're no longer here and you have a succession plan or you go through an exit. I think that's always important to keep in your mind right now that's in the back of my mind.
But my this goal for this business is I want to hit an eight-figure sale and I won't sell it before then and if I could have this business for 10 or 15 years or longer, I'm happy with that so that's awesome. Yeah using what you know Coran did help me in as my first my first large sale that Coran and I worked on and he had so much help. I can't say, you know anything but good things about him. I was a bit naive and and he told me exactly what needs to be done. When when he had to deliver bad news, you know, he did it and I learned a lot from that process. So applying what I've learned through here into the next business and laying the foundation for a future sale. It's up is huge and I'm sure will be very beneficial if and when I do so.
That's awesome mate. I love to hear that progression and thanks for the kind words to that's that's awesome. I enjoyed even the tough times on the deal on every deal.
I love all of it. It's crazy. I can relate to what you're working on now is being more of a passion project and you've built the skill set on the first business release some cash from that now you can do something where you can really focus on it for a decent amount of time. I don't really see there being a downside in that you've got something that you enjoy doing and you've got one eye on value at all times. Which is great because sometimes you do need to sell right and having having the business 80-90 percent ready to sell it. Any given time is a great. It's a smart move. If you can keep doing that along the way while still enjoying what you're doing and working in the niche that you love then there's no downside there. That's that's awesome. I'm so happy to have been a very small part in that process. That's awesome mate.
Absolutely Coran made a good point to me one time where you just don't know like maybe at this offer comes your way. Maybe you need to sell maybe something comes up and being prepared for that never hurts you and absolutely you can always walk away from any deal but not being ready for a potential deal it can suck.
Yeah. We have a number of clients that reach out to us and they say, oh look. I've got a strategic of my space that wants to buy me. What do I do now? They don't have there books ready. Don't have the systems, don't have anything. At least moving towards what would be needed for a sale is that like I said there's no downside there absolutely. That's so cool. So you're about to do some speaking I hear so what are you what else are you working on and how could people reach out to you and connect with you?
I'll be at the business conference in Phoenix came from the FastLane Forum MJ DeMarco, if you know him and we've been doing that for four or five years. I've been asked to speak about my business exit there and for like 45 minutes. If you're in that area, I'd love to meet up they'll be 50 of us entrepreneurs hanging out for a week in February 7th.
We do it every year and then what I'm working on now is obviously my my current business. I'm it's in the Sporting Goods category and I'm funding it myself but I'm also looking for any potential strategic partners if there's any Synergy there as well. So feel free to contact me. If you have any questions I'm happy to help, you know, if you don't know Coran and you want to ask me about him, I'm happy to tell you they're too
Appreciate that Jason and the how can people get in touch with you. Do you have a website or an email will or?
Email is the best bet it's just [email protected] just my name. I'm sure Coran can put that up.
Awesome. Yeah, we'll put that in the show notes as well. Yeah, that's amazing. The last question I would like to ask you is now you've been through the whole sale process and you've come out the other side with the perfect 20/20 vision that hindsight is is there anything that you would do differently?
I think so, I definitely I'm happy with the sale and I don't contact the buyer very regularly but we're on good terms and he bought one of my new products and I think he's pretty happy with this purchase. I'm happy that I sold but I'm also happy that the business is alive and well and that he's happy that makes that just makes me feel good. I will say something interesting changed where you know, I didn't have any money.
I don't know seven years ago or six years ago. I mean nothing like I was in debt, you know and going from you know, making a little bit of money to making a lot of money into having a really nice cash flowing business where I mean, I just couldn't spend what I was making and it was nice to you know, you know went to Hong Kong and bought this Rolex that I had wanted for a while and okay, no big deal and money is replenished next month great. Going from that to selling and having you know a nice bank account balance, but at the moment I wasn't making any money off that kind of change my mindset now. I'm like wow every dollar I spend you know my net worth goes down a little bit and that was frustrating and I was like, well, it kind of motivated me motivated me to do to get working on the next business. If I were to do it again, I would probably have launched my other company already since I was only working four hours a week. Not not that it's a big regret and I'm happy that I took time off but your mindset definitely shifts and at that point I was so focused on e-commerce. I didn't have any other Investments cash flowing or passive income at the time.
Two things one would be if your business is throwing off a lot of cash obviously save it save it for taxes whatever else you need. I would definitely suggest investing either in real estate or something where your money is a lot more secure than in e-commerce and then so if you do sell and I didn't sell for like eight figures. Not retirement money but a good money. In my opinion I needed eight figures to retire. If you don't sell for that much I would just say invest wisely and that's the only mindset shift that happened for me and and to note I guess a bigger one for me is now that my this business is so cash flow intensive. That was a big hurdle for me to get through. I'm placing $100,000 orders now. Whereas, in the previous business my orders were five to ten thousand at a time. That was a big mental hurdle to get through and having the right mentors and people you really look up to really help and guide you through this decisions. And that was that's been huge for me. I don't think I would have probably gotten into this business if it wasn't for the trust of some really close successful friends. That's really important.
Yeah. That's that's a really good point actually and that's something we want to focus on here at the podcast Truth About Exits because I've come across this myself in my own history and also with a lot of clients you you're so focused building the business and optimizing the business that you don't necessarily take the time to take cash off the table and invest in something else and start start figuring that whole game out. That can take some time. Some of our mutual friends that have sold and it's taken them a year or two to really get the investing side nailed and why not do that while you're while you still have the cash flowing business because a pile of cash in the bank is very different to cash coming in every every week every month. It's the change that happens is visceral you actually you feel it in your physiology.
I was actually listening to a podcast with John Paul dejoria who launched Patron Tequila and a bunch of other businesses. He hit the tagline of this was homeless to billionaire. He was actually homeless twice on his way to becoming a billionaire which was pretty pretty amazing. It was on the ultimate entrepreneur podcast. I just pulled up my Instagram because I posted about this just a little bit ago but one of the tips that he he mentioned in this episode, which I thought was genius. He said despite having these multi billion dollar brands that he's a part of he never put all of his money back into any one of those ventures. He always paid himself first and put that money that he drew other than salary he put into really secure safe Investments for him and his family. So regardless of what happened with the business. He would always be building this wealth in the background. That's the first person I've actually heard talk about wealth that way most people say put everything into the business or do go all into Real estate. I haven't heard someone talk about diversification like that. When you think about it that makes a lot of sense to start making those moves and building that skillset putting in the reps of how to how to invest your money in a more secure fashion than a business a business. Even if it's diversified is somewhat high risk right can be great returns, but high risk, so yeah, that's a really good point that you that you bring up and something will be interviewing a lot of people that are on the investor side that have after the exit just invest or we're investing along the way or are actual full time investors.I think that's going to be a good A good point to jump off out there. That was that was an awesome tip that you that you left at the end there.
Yeah, and I just want to say from my mindset. I have a friend who's he's not a billionaire but he has cited. The same mindset he had a successful business and he put things into low-risk real estate and they don't make amazing returns. But over time that's retirement and he could retire on that cash flow if he needed to and I think that's huge and then I want to leave you guys with one thing. I know this is a new podcast but I met Coran at a business conference in Bangkok and had no clue. I'd be end up working with him. And I'm so glad I did so I did speak with a few Brokers before Coran and there's a lot of good Brokers out there for sure. But one thing that stood out to me about Coran above the others is he never once bullshitted me? Everything was straightforward and clear. I got the sense that he was extremely honest and he would deliver bad news if there was some and good news and that's been very true. I think that made our relationship working together work extremely well. I just wanted to say that about him and I really really appreciate you know you and people like you
Awesome. Well, thanks so much for that Jason. Yeah, it's nice to hear that feedback. I appreciate it. That's that's what we try to do here is just yeah, just tell it like it is and I know that in the long run that's that's all that I would want. That's what we strive to do. I appreciate that came through in the whole entire transaction and and we're still mates. We still catch up when we're in the right in the same place, which is rare these days, but hopefully we'll be catching up again soon and we can we can talk about the next phase. Well, thanks so much for jumping on the show Jason. I really appreciate it. Like I mentioned will put your contact details in the show notes. It's [email protected] if you want to reach out to Jason and talk to him about anything partnering up or His experience or even have him talk as an event at that his exit.
I appreciate you Jason as a person as a friend and also as a former client, so thanks so much and have a great day.
Thanks Coran you too.