The Quiet Light Podcast

When it comes to buying and selling a business, one of the first questions we typically get is how long it takes to complete the deal. These businesses are complex and looking beyond the multiple to see the potential value and return opportunities for return is key. Today’s guest experienced a longer deal closing than expected but he is being rewarded for his patience. Some mistakes take longer to clean up than others but this is the story of how much the seller wanted to sell to this particular buyer despite the snags in the process. A born entrepreneur right out of high school, Karl spent over 10 years building a handyman business on his own. Right around the time he heard about Amazon and a local kid making a million dollars on the platform, Karl started to dabble and found his way in. After a few false starts, Karl became experienced in the Amazon marketplace. Today he walks us through his business buying process and his plans for doubling discretionary earnings in a very short time. Episode Highlights: The background on the business Karl purchased and how he knew it was the right fit for him. What happened with the SBA loan process and how that affected the deal. How Karl maintained the rapport with the buyer throughout the process. Why a price increase occurred during the process. The importance of keeping on top of the lender throughout. Karl’s plan for doubling his margins and how he’s implementing it. The importance of an in-face meeting with your Chinese manufacturer and how often to have one. Karl’s advice to anyone planning a purchase. Transcription: Mark: Alright guys welcome to another episode of the Quiet Light Podcast. Real quick before I talk to Joe; if anybody out there hasn’t left a rating on the Quiet Light Podcast, do me a favor go to iTunes or Stitcher or wherever you listen to us, leave a rating, we certainly appreciate it. Makes us feel good. Makes us feel like we’re doing a decent job at this whole podcasting thing. So thanks in advance to everybody that has done that. Okay, so Joe, when we’re talking to a potential seller or even talking to a potential buyer one of the topics that come up often, is how long does it take to complete the deal, right? And we have people wondering am I going to get this done in three months and what have you. The fact is these businesses are complex. On the upfront summaries what we see usually is pretty plain and simple. You see revenue, you see earnings, you see a multiple, and you kind of think well this should be nice and capsid and quick. And sometimes it is. But other times you have to look a little bit deeper. And you and I have talked about this before, right? For buyers to make sure you’re looking beyond the multiple and the multiple is one point of data. And for sellers and buyers alike to also have patience with the process and understand that you’re selling a complex asset. I know you had Carl on the podcast who is a recent buyer of one of our properties. And it was one of those situations where the deal took longer than expected and the numbers weren’t as necessarily straightforward as maybe you would think when you just look at this. But the net result for him as a buyer and for a client were phenomenal by being patient and looking a little bit deeper. Joe: Yes, no question. This particular deal took I want to say from letter of intent to closing seven and a half months which is probably the longest I’ve ever had. There’s really specific reasons for it. And Carl is partly to blame for it because he made a mistake on his application to the SBA lender. So we had to do the process essentially twice. The seller Kevin hung in there with Carl because Carl was a nice guy. It made a difference. And at one point when the deal fell apart, we had to go back. Well, my advice was to go back out to market for an awful lot more money because the business has grown a lot; probably worth $400,000 more. Carl and Kevin got along so well that Kevin said no I don’t want to do that to Carl. Let’s just bump the price thousand $160,000; crazy. Most buyers would walk away. They’d be like no. Yesterday it was this price today you want $160,000 more. Carl didn’t do that and he’s being rewarded greatly for it right away instant equity, in my opinion, a quarter of a million dollars in the business. And then some things that he’s doing on his end immediately once that first container load comes in doubling the discretionary earnings because of a focus on reducing COGS. It’s just fantastic what he’s doing. And it’s a great lesson for buyers and sellers to be patient, to be focused on helping each other, and not looking just at that multiple. Mark: You know I love this sort of story because I get it right from a buying standpoint you’re looking at a lot of deal flow you need to evaluate businesses quickly. So the temptation is often to look at just the high-level metrics and to eliminate something based on that. But so many of these businesses and if I could just say you know maybe even a plug for Quiet Light you know when we bring a business to the market we usually believe in that company pretty strongly as being a good value play for buyers. And so taking the time to kind of dissect it and to understand more than the top-level metrics and what’s going on underneath and look for those opportunities for that immediate win and again looking beyond that multiple. So this is a really good story of somebody doing just that and seeing a really quick reward on that. I want to listen to this. I want to hear all the dynamics. This is one of those more complex deals and I think a really good example of what happens when the deal isn’t straightforward but still works out in the end. Joe: Yeah. Hey, one other thing. I had a really strange interruption everybody in the audience I want you to get 10, 15 minutes in. Chris, our producer asked me about a particular person. I’m trying to find out who this is. If you could just get that far listen in and shoot me a note. I want to try to track that person down. Thanks, Ben. I appreciate it. Let’s go to the podcast. Joe: Hey folks Joe Valley here from Quiet Light Brokerage. Today I’ve got Carl Sally on the podcast. Carl recently bought a business from me and it was a long, long process. I think we; I’m going to throw a quick data to Carl, we originally went under LOI in October of 2018 and didn’t close until June of ‘19 and we want to share the story of why with the buyers and sellers and talk about what happened during that period, how the business grew out, how we fell out of LOI, got back under LOI and eventually closed to the point where both you and the seller are thrilled and some of the things that you’re going to do with the business going forward. Before we go over all of that why don’t you give a little bit of background on yourself so the folks listening know who you are Carl? Carl: Sure yeah so right out of high school I basically started out a little handyman company; very artificial, just a smelting yard and painting walls for a long time, offered a few contractors to work for free until I got enough knowledge to do plumbing and electrical and basically do the house from the ground up. I did that for 10 years. So in my late 20’s that’s when I learned about Amazon and I always had podcasts and things trickling in my ears, self-help books and what have you while I was tiling bathrooms or roofing on a house. And I heard the 4-hour workweek and kind of the same time I heard about The 4 Hour Work Week I heard about this kid, he was making a million dollars a year on Amazon. And so I said man if she can do it there’s gotta be a way I can figure this thing out. And I did some free work for him at his warehouse. And he taught me a lot and just basically pointed me in the direction of YouTube. I learned everything I could. I had a few failures in my first project; my first product on Amazon. I think me and my partner lost maybe 10 grand on our first product and that was all credit card money. And then the very next product that we launched we did it the right way and we’re able to actually start a business on that foundation and eventually grew that to five, six million dollars in gross sales. Joe: That’s amazing. Now let’s just come back to this kid that was making a million bucks on Amazon. You didn’t hear it online. It was somebody local in the area that you live in? Carl: Yeah, it was just some random kid from the community. Joe: And you tracked him down and said look man I’m here for free I just want to learn? Carl: I was great at electrical work and I knew he needed some electrical workers for his house so I just thought he could do a little trade with me. Joe: Fantastic. Carl: He was thrilled. It was nothing to him. Joe: That’s beautiful. That’s the way to do it. I remember hearing a story a long time ago doing the same; self-help books and everything like that where somebody was trying to develop a project, a real estate development but he didn’t have enough money. So he brought in people with all of the expertise and gave him a piece of the pie and all that sort of stuff. Where there’s a will there’s a way. I mean that’s exactly what you’ve shown here. And now you’ve bought a business that’s quite sizable and you’re running a business that’s even much larger. So cool, good for you. That’s a great story. Let’s give a little background. Again just a review. We just closed the transaction. Today we’re recording on June 26. I think we closed on the 12th of June but we went under LOI a long time ago. You and I’ve been talking for I guess it would be eight or nine months now. This is the first time we’re on video folks as well. You might want to jump over to the YouTube channel and see what’s going on there. The first time we’ve seen each other. We’d like to do a lot more video in the initial buyer-seller conference calls now. But this is our first shot together. So that’s great. Carl: Yeah. Joe: But it’s been a long time. We initially; a little bit of background on this particular listing folks; it’s a listing that I had listed for sale I think it was in late ‘17. And the growth rate on it had slowed. The owner of the business had some competition and he reduced prices. And his sales went up, his total volume of orders went up I guess I should say. His revenue did as well but the margin shrunk because he cut costs. So growth had slowed to 1 or 2% and it concerned buyers. So for owners out there, sellers think about that aspect of it. It concerned buyers. Growth has slowed. He slashed prices. He had some great growth opportunities in the package but just hadn’t implemented them out of fear. He didn’t want to make a whole lot of changes before listing the business for sale which generally is right. But in this case, the combination of that slowed growth because of cutting prices to fend off competition turned buyers away. And we didn’t sell the business. We had it listed for three or four months. And Kevin decided look I’m going to go ahead and implement these growth opportunities and come back at this in the future. And he did. He came back. He implemented those growth opportunities. He fixed what was broken and came back and the growth was phenomenal. Nine months later, 10 months later we saw a 25% year over year improvement in total revenues and discretionary earnings. We listed the business for sale. And probably within a couple of weeks, I think Carl you got the winning bid. We put that under offer at full price. You knew what you could do with the business which is fascinating because this one is it’s in the home sector, right? You can do installation yourself and things of that nature. I didn’t know there was a connection before with your background, how you grew up in that first 10-year high school. That’s awesome. So it makes more sense now. But why don’t we talk about it? This is we went under LOI and it was going to be an SBA loan and it fell apart. We were almost there and then we lost it because we didn’t get a commitment letter. Can you talk a little bit about your process in terms of first maybe why you liked this one and then what the SBA loan process was like for you and then we’ll get into how it fell apart? Carl: Yeah sure. So the business itself I really liked because well one the numbers were right, it had a very; like you said a strong year over year growth which I found attractive. All the products; it had a small amount of products for the amount of revenue so that that ratio of low amount of SKUs to high revenue was very attractive to me. So it’s less management and I could handle it myself. Also, the review ratings were really high. It had a great historical keyword ranking for most of the SKUs and all of those things kind of checked all the boxes for me. And then next I wanted to talk seller because a lot of it has to do with the seller as well. I knew this would be a long process with an SBA loan and I wanted to work with somebody who was honest. So as soon as I got on the phone with them I realized this guy’s a straight shooter. And I’ve dealt over the last 15 years with a lot of shady characters and I just don’t like doing business with those kind of people anymore. So it checked every box at that point and I said okay I should definitely; I don’t want to screw around. I want to give him a good offer. I felt that it was a good price for the amount of growth that it had left to do. So I made that full offer. And then we started to kind of get into my first SBA loan experience. Joe: I definitely want to talk about that. Let me talk about price. We’re not going to give away the price here folks but we went with an aggressive multiple on the low side. I’d say we were at about 2.8 times even with that growth. But it’s because we have listed it prior and it didn’t sell. So we were able to list it for more than we did the prior time but at a multiple, that was relatively conservative at 2.8 times. And it’s important to note that because of what we’re going to get to at the end. So okay, back to the SBA process. Carl: Sure. So we started the process and of course, I think I approached two different lenders and they had said each one of them had said oh yeah we’ll get this done for you in 30 to 60 days. And I’m like oh man that is faster than I thought. That’s great. Let’s do it. Joe: Yeah. Carl: So we got it going. And I think about three or four months into the process that’s when we realized that I had actually screwed something up in the paperwork. There was a personal financial statement for those who haven’t done SBA loans yet, you have to declare everything that you have as an asset on this paper. And so in good faith, I didn’t want to commit a federal fraud. So I declared everything that I thought was an asset including two properties that I have been receiving rental on for the last three years not thinking anything out. And then they went to go do a title search on them and realized that my name’s not on the deed. It’s not on the loan. And to me, those have always been performing assets. But in reality, since I didn’t technically own them and I just had kind of handshake agreements; paper agreements on the side with the other partners in those properties, they didn’t check out. And it’s almost like I was in danger of performing fraud even though I came from a place of honesty. I put assets there that I technically don’t really own. So anyway the bank at that point couldn’t lend to me. I was untouchable. And we had just wasted four months of time. And of course, the seller was furious. I was furious. And the lender was furious. Everybody is just mad because I screwed up. I still wanted the business. The business was growing hand over fist every month. And I realized there was no way at this point even if the seller decides to keep me on that I’m going to be able to pay the same price for it. So I reapproached Joe and the seller just to see if we can still make a deal happen. There was literally just this one little thing in the paperwork that I screwed up so I knew I had this other stack of 100 documents that I could just drop in the next lender and hopefully accelerate that process. And I think probably Joe knows better. You know better. But I think that the seller saw that I had been moving extremely quickly the entire time even though when the lender had been dragging their heels. It was probably par for the course. I see now. And so he knew that I would perform very quickly for the next lender and that there was no way that he was going to get another SBA buyer that would move faster than me. And we had also established a pretty good rapport over the over those four months. He’s kind of like I am in that he likes to move fast. So I think we just kind of hit it off and he still was able to sell it to me even though we did raise the price which I thought was an extremely fair raise. I thought he really took care of me on that which I’m grateful for. We were able to make the deal. Joe: Yeah let me pipe in there because I have to; people are like what you raised the pricing? You kept going and you bought the business? First I want to touch on a couple of things there. When an SBA lender says yeah we can do this in 30, 45 days; definitely get that done. And you think yeah that’s great, that’s fast. You have to talk about from what starting point. Lenders have a different definition of closing, of starting; they’re really talking about from the commitment letter; 30 to 40 days. And they’re right. Sure. But we always want to talk that one language and that’s from a letter of intent, right? We signed the Letter of Intent I think with the initial one was October 14. It’s going to take anywhere from 60 to 90 days to close that deal. And by closing, we mean what? We clearly define that as money changing hands, asset changing hands, you taking control of the business, Kevin the seller getting funds; all of that is closing. So when anyone is ever talking to an SBA lender talk from the point of the Letter of Intent. Understand that there’s going to be a time when you got to put that whole package together, submit it to them, it’s going to go to underwriting, then you’re going to get a commitment letter. That in itself can take 45 days. And then you’re another 30 to 45 days to closing. So that’s where we get that 90 days from the SBA side. It can happen quickly. We’ve got; I think Chuck did one in 45, 42 days something like that. But if it’s a sizable deal and more towards the end of the year guess what they want to do it faster because they’re trying to hit certain numbers. Yes, they could do it faster all the time right Carl? Carl: Of course. Joe: The other thing I just want to touch on. I’m on a podcast right now with a guy named Carl and I tried to talk my seller out of selling the business to Carl. It is pretty laughable, right? Carl: I don’t blame you. Joe: Because when the deal fell through the first time I’m like look, Kevin, your business has exploded. It’s worth a lot more now. We need to really jack the price. If we go back out based upon what’s happening year to date and this is now, this was March 2019 at this point something. I gave a high number; a much bigger number, that the business is worth probably $350,000 more than we were under LOI with you. And you know what? He’s like you know what Joe I really like Carl. We get along really well. I like him. All the paperwork is done. If we can just get it submitted the right way with another lender we could still fast track it. And you know what let’s see if we can find a fair price that’s going to work for Carl and me. So we did. We went back to you and we did jack the price. You ended up paying, and I’m not telling the list price, but you ended up paying about $160,000 more for the business. Carl: Right. Joe: Oddly enough the multiple still went down. Carl: Yeah, that’s how good it was doing. Joe: Yeah. That’s how good it was doing. You went from a 2.8 multiple to a 2.55 multiple. Yet you were paying $160,000 more. Now I’m talking about multiples here a little bit. Folks, one of the lessons I want you to get from this, Carl is looking at this business with an eye of what he can do with it, what he can accomplish, and how he can grow it. We’re going to talk about that in a few minutes. Not the multiple. The multiple wasn’t his main focus. It was wow it’s doing this in discretionary earnings based upon things within the business I can correct, fix, shift and even with the same revenue, I’m going to jack up the discretionary earnings and have some instant equity. Speaking of instant equity we talked about it, I think that you have probably a quarter of a million dollars in instant equity in the business because I think it’s worth at least that much more right now than what you paid for it based upon the growth. Okay, so there’s my little two cents I wanted to go ahead…hold on a sec, my producer is poking his head in. What’s up, Chris? This is odd. Okay, he gave me a piece of paper. He’s asking me Carl have you ever heard of a guy named Andy Youderian? Carl: I did not. Joe: Okay Chris, no idea. Okay. Hey anybody in the audience listening, if you guys have any idea who Andy Youderian; sounds like somebody from Star Wars, have any idea who the guy is, reach out to me find him, let him know that our producer is looking for him. Alright, I’m sorry for that tangent guys. Back on track. Okay so we went out to another lender and it worked. Just touch on that in terms of how long that process was because you had to resubmit an entire package again. Carl: Right. I mean they want; as soon as they said they wanted to work with me I dropped a document stack on them about 50 pages long; no 50 documents, some of those documents were 20 pages long. Joe: Wow. Carl: I mean it was just a huge stack of paper and in my mind, I’m thinking now we can get this bank down in three weeks. But of course they; when you get legal involved I realize that that’s the real linchpin is the lawyers. It just takes so so long to review and get stuff back to you. They would expect to document for me in a week. I hand it to them in 24 hours. They needed it by close of business. They’d have it in five minutes. So I never ever ever want to be the person who’s holding the ball. I think with SBA loans you got to just keep the ball in the lender’s court over and over and over again. And sometimes it would be even though I’d get it to them so quickly I would be waiting for seven days for a response. Joe: Yeah. Carl: And this just; that time compounds. Joe: You got to keep pushing. Carl: And I would push and I was always squeaky; always squeaky with the lender. Joe: Squeaky but nice folks. You can’t put them off. Carl: Squeaky but nice. Yeah, you don’t want to put them off because I still do want to do repeat business with these people. So it’s a fine line you walk. But I think in the end we really did close that super-fast. It wasn’t like maybe even within that two months that they normally promise. Joe: I think it was. It helped; we fast-tracked the package to underwriting which sometimes again takes 30 to 45 days. But because you had it we were able to get there fairly quickly. The other lender, by the way, helped out with that. He gave a lot of the package right over and helped out as well. Alright, so we did close it. Let’s jump to the fun stuff so people can learn about what you’re doing with this business. We closed June 12th; yeah 11th or 12th, then you and I had a conversation. And you basically told me that you’re going to double the discretionary earnings. Can you talk about that a little bit and how you’re doing it and what other folks should look at when they’re looking at businesses instead of just looking at the top-line number in terms of the meat and bones of the business itself, what you looked at and how you’re approaching it so that you know you can increase the bottom line number and the total margins? Carl: Sure. Well, oddly enough I didn’t even realize this until maybe three days before closing. But I was really excited to close finally and I put the deal in front of my partner for my existing business who does most of the logistics for us. And he said hey this product is really similar to some of the stuff we sell, why don’t we run it past our existing supplier and just get a price out of them before shopping it around to other people in China. And so we did and I think the main item that the seller of the business I was purchasing was paying for; I think he was paying 16.50 for an item that this new manufacturer was willing to make for us equal quality for $8.05. Joe: Wow. Carl: And so I said holy crap this can’t be real. So we just got the samples in yesterday and it’s pretty similar. I mean probably with another dollar tweak to $9.05 it’ll probably be damn near the same product. And at that point—. Joe: How many units is that selling? Carl: I think that’s about like 20 a day, 600 a month; 6 to 900 a month. But what that did to the EBIDTA bottom line is I think it increases it by between 80 and 90%. That’s incredible. Carl: Yeah. Joe: We get a quarter million equity going in by— Carl: It was a huge windfall. I mean completely unexpected honestly. Joe: When it comes to relationships with your Chinese manufacturers, I understand your business partner from your other business spends a lot of time on that aspect of it. Do you find that it’s important to get over there and meet with them face to face and spend a little time with them? Carl: Oh absolutely; 100% yeah. To be able to press the flesh with the Chinese manufacturer is night and day difference. I mean that big of a difference; completely night and day. You’re just a number overseas even if you have big order amounts. They like the green but they also like the in face meeting a lot. It’s part of their culture. They call it Guanxi over there where it’s business relationships; a special word for a business relationship that you develop. And the more Guanxi you can develop with your manufacturer, the more seriously they’ll take you even if you have smaller order sizes, even if you’re ordering less frequently, they give you the benefit of the doubt many times if you screw something up they’ll pick up the slack for you. And some manufacturers will negotiate on their terms as well which is something that for most people who buy from China they know that they’re very inflexible on that. But if you meet them enough and bring gifts and you offer respect and just have a good time; just go out, have some cigars and some drinks with them, the more often you do that the more a friend you are they really blur the line between friend and business over there. And the more that you can step into that gray area the more freely the favors flow and the more freely they’ll give you really good terms which is even better than in my opinion getting a better price. Terms is everything because your cash flow is helped out so so hugely. So I think it’s hugely underrated I think everybody should see their manufacturer. Joe: For those that haven’t traveled to China before, how complicated is it? Is it safe? Should you plan on spending three days there or five days, a couple of weeks and see multiple manufacturers? What would you recommend to people that haven’t done it before? Carl: Personally, I think at least a week is good. And I think starting their relationship with your manufacturer. Don’t just go in blind. Have at least a few months of history with your manufacturer where they see that you do pay and you’re a real buyer, you’re not just a maybe then they’ll already respect you enough to want to extend…roll out the red carpet for you. And just saying that you’re going to be there for seven days. They will take care of you. They’re extremely honored to have an American guest come to their homeland and care enough to see the things that they like and care enough to see their manufacturing facility that they’ve spent so much time developing. So yeah they’ll take you on tours. They’ll pay for your hotels. I mean I’ve never had it where at least it wasn’t at least offered to pay for most of my expenses. They bought my family gifts. I mean I didn’t; these were things I was uncomfortable receiving. But I felt like I needed to receive them in order to develop that relationship and not become one-sided. Joe: I’ve heard that time and time again. I think one of the key things for buyers to take away from that is that if they’ve never been it’s safe to go and people are honored to have you there. Carl: Oh yeah. I felt very safe. Joe: Business relations; Guanxi you call it, is that right? Carl: Yeah, that’s what they call it. Right. Joe: So buyers that are looking at businesses one of the ways that if the seller of the business has never gotten on a plane, spend some time with the manufacturers in China. There’s probably a good growth opportunity in terms of bottom-line maybe terms and do that. How often do you feel it’s necessary to go over? Carl: Maybe once a year if that, if not once every couple of years even. The first meeting is the best. If you can spend a good week there. It makes a huge difference. Joe: You say [inaudible 00:28:42.4] every day or are they taking you beyond the manufacturing facility and recommending other things that you can see in China as a tour? Carl: So we had two manufacturers. Actually the first time we went to we sort of split our time three days with this one three days with that one. And we saw them every day while we were there. We didn’t know anything about anything. And we totally explained to them look if you have a business to take care of we can take care of ourselves we’ll walk around town and just entertain ourselves with the new sights. But they were pretty adamant about wanting to be with us every day. So that’s just how it shook out. Joe: Terrific, that’s fantastic. Okay, so a little bit of a tangent there folks but a great recommendation in terms of being a buyer and how to improve the bottom line numbers. Carl: Sure. Joe: Alright, so you’re going to improve the discretionary earnings on this business that you already have a quarter-million dollars in terms of equity when you bought it by another 80 to 90%. How long is it going to take that to happen in terms of buying the product and getting it in? Carl: Probably two months. So in two months, we’ll start to see those savings in two months. We already have about three or four months of inventory on hand so it’s plenty of pad to get the new inventory up and running. But that’s probably what’s going to happen. And then it’ll take another year to log that. A year afterward to log that in as actual recorded earnings. Joe: Right. You’re thinking in terms of a resale of the business, total discretionary earnings on the trailing twelve. Carl: Days to log in the equity; right. Joe: The equity itself. Yeah, we have in the past when the cost of goods sold has been dramatically reduced then ordered hit FBA and sales occurred. We have been able to do an add back. And for folks that haven’t already heard the podcast on the sale, I did with Mike Jackness on Colorit, Google Quiet Light Podcast Mike Jackness ColorIt or even eComcrew. Mike did a series and honestly, he’s a fantastic podcaster if you haven’t heard it. I think it’s episode 247, 257. Just Google Quiet Light ColorIt eComcrew podcast and learn. Because you actually learn from somebody that’s sold a business. And some of the trials and tribulations we went through when you’ve got four brands in one seller account under one LLC and you’re only actually selling one of them. So sellers out there doing that please listen and learn because it’s a major challenge. But we got through it. What other things Carl would you recommend to people that are buying a business when they’re looking at things like you have and approaching it? You’ve done something I think really really impressive here; hanging in here for seven and a half months to get the deal closed. Building and maintaining a good relationship with the guy selling the business so he trusted you. We talk about the four pillars here at Quiet Light, well that’s the fifth one right there. It’s being a good guy, being likable, building good relationships with either your buyer or your seller. What other things do you think are critical when you’re buying a business? As people are looking all the time they’re looking at lots of things before they find the right fit. What would you recommend they do? Carl: The first thing that comes to mind is anything sold at 5 million we’re really looking at SBA funds. I think what I said earlier about just being forefront on pushing the ball into the lender’s court; that is so important. If you’re lagging on documents then it can damage the entire transaction and the relationship with the buyer. They see that you’re lagging. So I mean that is underrated. I’ve always been a punctual person but I never realized how much that really plays in the business on different levels. I think one of the things that helped me was having built an Amazon business before so I really was comfortable with all of the key metrics and some of the red flags on the account didn’t bother me at all because I knew that those specific things were common given the circumstances. So I think it really helps to either have that background or start small. I would never have jumped into this with both feet at this dollar amount with no prior experience. I think I would have rather pick something maybe 10 times less or maybe five times smaller and just gone in with an attitude of this is my intuition and I’m going to learn here. The mistakes I’m going to make, at least I’ll probably break even. It’s going to be cheaper than college and more lucrative. I think going into a smaller deal is still a good idea even if you can’t put up big numbers to show off to your friends. It’s not what it’s about, right? Get that experience under your belt and then you can make really good decisions down the road. So buying small is good, starting out from scratch I think is a great experience as well. It takes time but you’re better off putting in time than losing tons of money I think. Joe: What about finding a mentor? You clearly did that. That’s one of the things you mentioned. The kid in the neighborhood that was doing a million on Amazon. Carl: Yeah. To be fair he really just pointed me in the direction of YouTube. That was his biggest recommendation. And I mean you can learn a ton just by listening to people. A lot of my mentors don’t know me. I get them in books. I get them in podcasts like this one. I get them in blogs. So there’s a lot of free information out there I never took a course and I feel like I’ve done pretty well. Joe: Well, obviously you’ve done pretty well. I got to tell you just the YouTube thing I’ve got a 17-year-old and anything he needs to learn it’s on YouTube. Carl: Yeah. Joe: I’m 63 so anybody my age, learn from Carl and those younger; anything you want it’s on— Carl: It’s crazy. It’s information at your fingertips. Joe: At your fingertips and it’s free; that’s right. Alright, then this is great. We’re just about out of time. I appreciate the last nine or 10 months. And I’m looking forward to working with you in the future on some other transaction as well. Carl: Oh definitely. That is not the end. Joe: Alright, thanks for all your time. I appreciate it, your patience and congrats on such a great business that you’ve got here. Carl: Thank you, Joe. I appreciate it. Links and Resources: Mike Jackness Episode

A lot of buyers come to us and ask about the risk of buying an Amazon business. Likewise, when setting an Amazon business up to sell, what are some things to consider? Buying up businesses and creating a profitable portfolio is something that some very savvy buyers are going all-in on. Today we are talking about Amazon FBA with someone who has been doing just that. If Amazon is the past, present, and future of e-commerce and all the others are just playing catch where do YOU want to put your money as an online business owner? Carlos Cashman, CEO and entrepreneur, has started over a dozen companies as well purchased, sold, and taken public many others. He is now CEO of Thrasio, an FBA business acquisition company. Thrasio has a wealth of experience purchasing businesses from all over the world. At Thrasio, the team guides the seller to a deal in record time backed by expert law, due diligence, and financial teams. Episode Highlights: Carlos’ take on the Amazon consolidation model. The importance of sku concentration, consolidation, and product stability. How many Amazon deals Carlos has made. Whether he places weight on secondary metrics such as email marketing. Where the efficiencies are in Thrasio’s portfolio. Navigating a bad purchase and when to cut losses. Cross-collateral investing and how Thrasio sets that up. Why Amazon? Some statistics that cannot bely the retail ecosystem that is Amazon. If and how any business can compete, in the long term, with Amazon. Product creation and innovation best practices to follow. The importance of having representation when selling your business. Transcription: Joe: Mark, I have a lot of people that come to me and talk to me as either buyers and they say, Joe, what’s the risk of buying an Amazon business? And I talk—5, 6 years ago everyone thought the risk was really high but today there are people that are a lot smarter than you and me and you and me combined and maybe all of our team that have raised 10, 20, 30 million dollars to buy up Amazon businesses and build a portfolio. And I understand you had Carlos from Thras on the podcast talking about just that. Mark: Thras.io; he’s very careful to approach to actually correct me on that at the beginning of the podcast and he tells me the meaning behind their name which is really cool. I’m going to save it for the podcast so people can listen to that. But yeah what I wanted to know so many buyers look at Amazon only businesses and they discount them for channel risk because they’re like do you really want to be on this one platform or competition and products could be sort of ubiquitous, competition can be really tough and your subject in mercy to the whims of Amazon. And so here we have Carlos putting together a fund and buying up a lot of these Amazon Asense and the question is you’re a smart guy, you’ve done a lot of business in the past and we’ve talked about how he had grown multiple businesses and sold them, so why is he going all-in on this platform and also why are people giving him money to go all-in on this platform; what’s the reasoning here to say this is where the future of e-commerce is. And so we talked a lot of statistics on this. We talked a lot about what is the future of Amazon. And here’s a spoiler alert Amazon’s going all-in on FBA. It’s one of their 3 biggest platforms, it’s one of the 3 legs to their stool that they have with their aid of US being one and their sellers—their 3rd party services being one of the largest profit centers that they have. In addition, when you take a look at where do they stand in the marketplace, it’s staggering. Everybody knows that they’re huge. They’re 49% of online e-commerce sales. When you look at this in terms of total retail sales; total retail sales make up about roughly 10% of all—e-commerce makes up about 10% of all retail sales. Amazon makes up about half of that. So what do we do here? What are we going to do? Okay, online sales is only 10% which means it’s going to grow. Amazon is already half of that online marketplace. What’s the future here? Well, the future is Amazon is trying to become the e-commerce internet. They’re trying to become the de facto way of ordering products online and everybody else is playing catch up right now. And so they are betting and saying we get it. We know that Amazon growth is going to continue. We know it’s going to continue at a rapid pace for a long time; there’s lots of room to grow, and yeah there are competitors and we talked about this. We talked about; Shopify just announced recently that they’re investing one billion dollars in their Shopify fulfillment network which is great news and he was ecstatic to hear that. He’s like competition like this is good. But the fact is Shopify is playing catch up, Target is playing catch up, Walmart is playing catch up, and they’re not there yet at all. They’re more difficult to work with than Amazon. They don’t have the same draw. And so it made me rethink this if we’re looking at where do you want to put your money as a business owner. Joe: That’s it right there the multiples are going up on Amazon businesses tomorrow guys; that’s it. Mark: It’s more sure of investment than maybe we’ve thought about in the past. It was; you know what? We talked to some of these guys that are doing this professionally that are on the Amazon space only; fascinating conversation. I enjoyed it thoroughly to talk to somebody who’s doing this and sees things from maybe a different angle than what most buyers think about. Joe: Well I think it’s great because probably half the audience here is made up of buyers as well and they ask that question all the time; should I buy an Amazon business? And we know that I say we’re going to raise the multiple on Amazon businesses, we actually don’t as we always say determine the multiple. The buyers do because we do our best based upon historic numbers and then we get the feedback from the buyers. If we’re wrong they let us know by driving the multiple down or driving it up in some cases. Year to date; this is end of June that we’re recording this year to date I’ve seen the multiples on Amazon businesses at levels that I had never seen it in the past. So I think that the buyer pool is getting much more confidence in the Amazon channel. I think that that one channel risk is if you’re focused on adding new Asense in growing the business worldwide on other Amazon platforms in countries the risk is diminished a little bit. Historically we’ve seen multichannel businesses sell for 10 to 20% more than single-channel Amazon businesses but I do think that’s creeping up a little bit and catching up a little bit. So it will be really interesting to hear what Carlos has to say. He’s a super nice guy. One quick aside I had Amazon businesses that I had for sale and Carlos had to call them, the guy loved him and they both happened to be traveling to Singapore at separate times. They actually got together and had coffee and dinner with their families just because they had met on a phone call. So Carlos is a super nice guy, very, very good at what he does, and obviously an expert on the Amazon site. So I’m looking forward to listening to this one myself. Carlos: Oh that was all good stuff. Mark: Yeah it was all the good stuff you see that’s the thing, we always record the good stuff before I hit record. And I’m actually going to enter with that. Carlos, thank you for coming on the show. Carlos: Cool. I’m glad to be here man. Mark: Yeah so tell us who you are. I know who you are but tell everybody else who you are. Carlos: Yeah everybody come look at LinkedIn, they usually do. But I’m a serial entrepreneur. I’ve started—it depends on how you count them size or whatever but you know over a dozen companies. I was thinking about this in a way because people are like wow, tell us about that. I started I think it’s about 6 to 8 I got to figure out better multi-million dollar companies. I’ve taken company public, I sold them, I bought them, I’ve sold several for 9 figures, dealt with some amazing people along the way and it’s always been tech-related. So software, advertising, some services related to that stuff and e-commerce stuff. So I’ve got a lot of miles on the road that way. Mark: Yeah no it sounds like the profile for any of our brokers. So if this whole Thras.io thing doesn’t work out for you let me know. So you’re the CEO of Thras.io. Carlos: I know we have the worst name in the world but let’s just make it clear for everybody; Thras.io. Mark: Thras.io, I’m sorry. It’s good that I know that now because I’ve been saying Thras.io; so Thras.io, okay. Carlos: So it’s based on the review of your site, it’s based on the greek word thrasos which means boldness or confidence but it was actually an Amazon warrior queen hence the kind of Amazon connection. Mark: That’s pretty cool. See I learned something. This is awesome. I love this. I love the name now. Carlos: Josh came up with the name in just a second and I’m co-CEO and co-founder with my partner Josh Silberstein. And yeah he just came up with it and yeah I don’t like to spend too much time naming companies even though I’ve done that professionally before so we just went with it. Mark: So it was an Amazon goddess, is that what you said? Carlos: It was an Amazon queen. So we actually had a whole lot of sub-companies for our Amazon warrior queen. I mean like things that do different parts of what we do in the ecosystem. It’s got to stay with that theme or words. Mark: I got to ask now I mean is Josh like some Amazon queen ruler aficionado and connoisseur? Carlos: We’re both aficionados of mythology and things like that but it just made sense getting into Amazon that we would do something like that. Mark: I like it. I mean I like names of businesses that have secondary and deeper meanings and now I’ve got something if I’m really bored I’m going to go out and procrastinate by researching Amazon queens. Carlos: There are a lot of them and their names can be very difficult to spell which is kind of a mess when we’re trying to do with legal documentation and stuff but it’s fun. Mark: That’s really cool. Alright, so I had a few companies that I would say is in a similar vein to what Thras.io does and that is this idea of consolidating multiple Amazon businesses under one roof. That said everybody’s got a little bit of a different twist on it. So I would love to get your twist on this Amazon consolidation that you guys are doing in trying to acquire companies and anything that you’re able to share as well. Like I mean how many acquisitions have you done and how long have you guys been in business so far doing this would be really interesting and if there’s something that—alright I’m not going to tell everybody this then don’t worry we’ll just say it and only the 3 people that listen to the podcast will know. Carlos: Alright so I hope you’re calculating right—I’ve been listening to this for a while now. So I hope you’re keeping track of these questions because I’m not taking notes. You just asked me about four questions right there so let me try to take them in any order that I kind of remember them. In terms of do, we have a particular twist on the market; now I don’t think we do necessarily. I mean I heard Richard when you had him on here with 101 Commerce I mean that’s—the idea is fairly simple. I think people get it. In terms of—I think what they see in this Mark is you know when you mention other people like there’s someone who has built a great home goods business and now they want to expand and so looking for other home goods products to roll into that, right? We are really kind of vertical agnostics. So we’re only looking on that from that point of view. We would just believe in the ecosystem overall, we believe in the fundamental transformation that Amazon has brought on the way we do commerce and particularly e-commerce, and we just see an overall appearance. We’re looking for just great business. I mean look we want great products and now some people have top ranking, great ratings, and good number of reviews; all that stuff. That’s really what we’re looking for but as far as what it is, it could be all over the board really. Again the most important thing is that they’ve built a quality product. And it really comes down to the Asense; the Amazon listing itself; the product, the SKU, whatever you want to call that. So that’s really what we’re most focused on is we look at our business as a portfolio of those. So any business may have a handful of them and I know a lot of people in this marketplace some of the acquires in this place market space or tend to be still I mean you’ve probably seen a lot, you know, people looking for a single business, right? So yeah with the executive leaving some big company taking an SBA loan whatever we could talk through all that stuff later but for that person they’re concerned with customs to concentration and rightfully so. It’s going to be their one business wonders and they take out a big loan for it. It’s actually kind of the opposite for us. So as far as our interest we are interested in the more concentrated your SKU’s are the better because it’s less for us to take on and manage the whole thing. And we’re not concerned about the individual performance of that one because we’ve got hundreds and hundreds and hundreds of others. But I mean we are concerned about in terms of how it does but it’s not going to sink us or make us by the performance of anyone SKU we acquired in one time. So that’s kind of how we—that kind of answers how we look at the business and again we’re not looking for fad products either just something clear to say. So if you got fidget spinners we’re not interested in that. Those are hot for a year. My son has a dozen of them sitting all over his room and he’s never going to spin them again. So we don’t want things like that. And so we want stuff that is really stable in terms of its demand. Mark: Yeah, I’m just going to put a note to everybody that’s given up fidget spinners for swag, thank you for making my room, my kid’s rooms just filled with stuff that’s lying around because you’re absolutely right and you know I will disagree with you on something here. You said that you guys really—you’re not sure if you really having any expend but this idea that you guys have of looking at Amazon businesses not so much in terms of the business side of it but you’re looking more at the Asense and trying to evaluate individual Asense and the strengths of those relative to everything else that’s really what you’re looking at. That is a unique way of approaching the marketplace and it allows you to look at something that has SKU concentration or a unicorn product and we do see that from a lot of buyers with a business that has a unicorn product kind of thinking I don’t know if I want to bet 2 million dollars on this is unicorn product here and you guys are saying well no we’ve got a lot of products like that so that’s a twist. Carlos: Oh that’s good to know. I mean alright so we do have a slight twist on it. Mark: So how many deals if you’re able to share even broadly how many deals do you think you guys have done so far? Carlos: I’m going to be a little cooler here about some of these things. But we’ve done dozens of deals so not high but we’re moving quickly and that number is increasing over time. Mark: Yeah. Carlos: So it’s been exciting for us and then going back to the ego of the SKU concentration question, I just wanted to add something. You guys are talking about like because there’s a lot of interesting; Amazon sellers [inaudible 00:13:56.7] you get this real business straight where they’ve used these products out there, viral launch or fellows got a [inaudible 00:14:02.6] and they found four different holes in the market so they’re selling pot holders and humidifiers and some sort of potted plant for the fruit product you know great different [inaudible 00:14:13.5] and I got 4 of them. And you know to somebody external coming in looking at that would go sheesh they’re all over the place. They’re not just sporting goods and that’s crazy. But we get it. We get that that’s how Amazon works and what matters is the listing and it’s position relative to its competitors in the keyword space, right? And that’s what we look at and we care about. So it’s usually like in that sense also that business is attractive to us because it’s again concentrated even if it’s in strange different products. We don’t have to have like this suite of products around like I said one vertical where you’re building a brand into it. Again that’s an interesting point to discuss is the position of brand in the Amazon marketplace because let’s face it were all talking about FBA businesses here and frankly most people who buy these things; I see a product in the wild all the time and I love it. You go to a friend’s house and they’ve got one of your products sitting there. Like oh, it’s great but where did you get it? Well, do they say the little brand that we happen to buy? No, they say Amazon, right? They got it on Amazon. They got it from Amazon, if they had a problem they would drive it to Amazon. We’re at a place right now where we’re still; we’re all sitting on the coattails of Amazon; the brand halo that Amazon provides. So we recognize that and we’re going to be very clear about that and how we look at the products and the ecosystem. Mark: So do guys place much weight at all on a business building a brand or even building customers outside of Amazon such as email list and being able to drive that to products and new products or is that kind of a secondary metric that you look at? Carlos: It’s a secondary metric. I won’t say we don’t look at it, we certainly do and there is some value there but it is dwarfed by the value presented by the Amazon ecosystem. And so we care 1st and foremost about how you are positioned on Amazon. But of course it’s nice to have someone that you know the e-mails and people that love your product or you know if you do because what happens now is oftentimes we will have or we’ll acquire a product that is in the same space but we have 5 more. And so that becomes what we start to now as a business uniquely perhaps accrue some value from things like that. Because if you have that email list of 40,000 chefs or something; people who love cooking and I have 4 other cooking products now I can cross-promote our stuff right through there. So it does start to have some value the longer we go out there. I think that value will increase the more we do this but right now we’re still pulling stuff in all sorts of different spaces. They don’t always overlap and it’s something we look at but it certainly is a secondary metric. Mark: When I look at companies like yours not just specifically within the Amazon space and I want to talk about that in little bit here but when I look at companies like yours that are consolidating businesses and millions of them the portfolio the approach is typically to find efficiencies in combining things together. So if you’re looking at a content network of websites so completely divorced from the Amazon world what you have usually is a staple of writers, editors, and an editorial process that can turn out new content to be able to build up a network that way. So bringing a new content site isn’t as labor-intensive you have this natural efficiency. E-commerce stores in the past what I’ve seen have been logistic efficiencies. You’re able to have maybe the same warehouse staff fulfill more products. When you guys are doing what you’re doing and again I think it blends itself maybe to this Asense approach I think from my evaluation; I’d love to get your comments on this, it seems like you’re doing this for 2 reasons. One I would imagine efficiencies which I’d love to know where those are but also a portfolio sort of approach to things and that you’re spreading out over lots of different Asense niche vertical agnostic as you say but it’s more of let’s not bid on one winner let’s bet on a lot of winners potentially. But I’d love to get into 1st of all have you confirm that and then get into are you doing this also for efficiencies within your company that you can run these businesses may be more efficiently and if so where are those? Carlos: So that’s a great point and something worth to think about. So I’ve done your traditional rollups before. We sold the company in the late ‘90s to a company called US Web; a lot of people may—you probably remember a national brand of webshops doing person websites and stuff. But you know the traditional kind of rollup looks more for the—like those efficiencies are more important there because it’s all about pulling costs down, right? If you go acquire a 100 30 person companies and each one of those 30 person companies has inside person finance team or a 3 person finance team whatever and 3 salespeople I am sure you don’t need all those, right? You need 3 finance people for all 100 of them or maybe 6 but still not a linear scale. So that kind of efficiency is certainly more important in a traditional rollup. Like you said rolling up content on websites that would be important there also because you have editors and writers and HTML people and designers and that can be where there can be leverage across more stuff certainly if you template size that. It’s less of a big deal in this Amazon ecosystem. And what some reasoning about what Amazon has down here in creating all these millions of solopreneurs is they’ve taken not just Amazon also it’s all the supply chain companies, it’s the manufacturers. They’ve simplified this interaction so much that you can get a single person running a 5 million dollar business which is unheard of in history. It’s incredible. So it’s taken out a lot of the complexity. Now, most of the time when you get to that scale you’ve got a couple of assistants; part-time assistants, VA’s, someone like that so it could be drive efficiencies there. Yeah, we certainly can if they’re good but it’s more about being able to improve the performance than it is a simple efficiency. So [inaudible 00:19:54.9] a lot of these, we meet a lot of great sellers who I just love them. Like classic entrepreneurs that dropped out of college or I just got out of college and started selling on Amazon and I travel the world and living the life and they built great products and they just hustle. And they’re smart. That’s great but when it comes to global sourcing and your supply chain I mean from all over the world and getting into different places in Amazon you’re not going to be as good at it as the team that I have here. I’ve got a leader here who ran a 2 billion dollar supply chain in 140 countries for one of the largest shipping companies in the world. And we have a whole team of people under this on the side doing this work. And so we can do it better and more efficiently. We can negotiate better. We can do both on the shipping side and the manufacturing side with volume discounts. So we can do that better and we, therefore, carve out more profit from these products. I mean I’d look at it from creative; we’re doing stuff across hundreds of products in all sorts of different areas. We know things that are working that are very likely work what the impact is and what is it and we are—I can afford to have photographers on staff if I want to because I don’t have to try a different outsource for all this stuff all the time. Let’s say advertising and marketing that’s another key place where it’s not necessarily about the efficiency of having less people doing it for more things. It’s really about the knowledge. I’ve come from a performance marketing background. I sold 2 companies with our Google performance marketing company and a Facebook performance marketing company that were top of the line but we did. I’ve got a team here that is 2nd to none in understanding performance marketing and driving traffic from all these various sources. And Amazon is just another PPC marketplace so should we be able to do better than the individual seller who did a good job with their business? Yeah, we should. So I see it as efficiency in deploying new resources for new revenue; resources to improve the performance of the products where they are. It’s not like a cost efficiency, right? Mark: Sure. Now that makes complete sense. I want to ask; you know one of the problems I have seen companies run into when they’re consolidating either businesses or in your case Asense but I would still consider them businesses to some extent but be the consummate of Peter robbing Paul. You buy a dog and it starts draining the resources of the companies. What have you guys done to protect yourself against that? When you do multiple acquisitions you’re going to buy a bad one at some point. It’s just going to happen. So what have you guys done to help protect yourself against draining the resources of the company? When do you pull the plug? Carlos: You know it’s not even so that you buy a bad one in this ecosystem; it’s that you bought one that has bad competitors; but screw with that, right? I mean Amazon sellers know what I’m talking about very well. I mean the wrong complaint even if it’s fake even if it’s not correct put into Amazon can shut you down or slow you down or cause problems. So yeah look I mean we have to know the difference between a problem like that that we’re going to fix versus someone like you said just a bad egg or we’re going to pull the plug. I think we’ve done this a lot. My partner Josh and I both started a bit part of a number of startups, started companies ourselves. He’s one of the most creative and experienced financial dealmakers I’ve ever seen. He’s done more debt deals and equity deals than anybody. I think we look at those dispassionately with—I mean I think that’s the key, think about capital allocation which is really what we’re doing and you can go listen to a podcast about that all day, there’s some great ones. You’ve got to know when to cut your losses and do it fast. That’s the key. And we don’t get emotional about it. That’s hard to the seller who builds their family of 20 products and each one is kind of—this business is their baby and each one of those is another baby of theirs and they may be getting chilled on the [inaudible 00:23:47.8] or something or letter openers but they love it and they think they can get back to it and they’re going to hold on to it longer than they should. We don’t have that. We have no baggage on it. If the letter opener just sucks then we’ll cut it off. So quite often if we buy a business that has a lot of SKU without the SKU concentration we like, we’ll look at it and we’ll cut the losers day one. I mean we’re not even going to pay for them if we’re not making money on it. In some cases we will actually—sometimes it’s underperforming ones and the seller may want to keep them and keep working at them. We have actually—we’ll buy individuals SKUs or separate SKUs from somebody so our Asense—I think everybody knows [inaudible 00:24:21.5] Asense it but more people have SKUs and SKUs are so. I think it’s just a question. You just have to be dispassionate about it and have a financial mindset towards it. And you know look sometimes it’s worth setting because you know you can get back but sometimes you cant. Mark: I mean you may not have emotions related to some of these products but you do have investors within your company, right? I mean how much has that play into it as far as not wanting to pick that losing SKU or an SKU with bad competitors as you put it? Carlos: It doesn’t. I mean we have great investors but they’re not that involved in the business for the looking at individual deals we’re doing. We cross call there early on a decision we made that was really—I think really important. And that was the only way we’re going to do it was we cross collateralize investors across everything we do. So there are some people who look to this market by saying hey I’m going to do an SPV and acquire this— Mark: What is SPV? Carlos: Social Partners Vehicle. So you can raise money in a single; it’s almost like separate companies and then they’re all related in some point in the future [inaudible 00:25:22.7] together and rationalize based on revenue and EBIDTA or whatever it is. But then we have a different set of investors and that ends up; that’s a really bad idea because then you have your intent and what you want to do can be across purposes, right? At this group of investors over here their product is going down and I shouldn’t focus on it anymore but this group over here the product is doing great and if I put more effort there I’m going to make a lot more money. The right thing for me and for the business is the focus where I need to and approve there but if you’ve done your financing that way then you’re kind of shackled. That’s what we did not do. We were not going to do that. It just doesn’t make any sense. So it was important to talk about cross collateralizing across everything and say look everyone we buy that was into this and you all are part of this. So that allows us to have that broader focus. Mark: Why Amazon? I mean there’s a lot of different rollup place within the online space and you’ve got a really remarkable resume with tech companies. You could have gone for ad networks, you could have gone for content sites, you could’ve done any number of things as in the video— Carlos: The advertising space. Mark: Alright so maybe not that; bad example. But why choose Amazon? Carlos: It’s funny. This started actually as an e-commerce rollup. So you go back to it because maybe I [inaudible 00:26:39.0] why Amazon is probably one of the reasons you said why we were kind of coy about talking about what we’re doing for a while and now we are talking about it. We discovered this and it looks super easy. It’s not as easy as we thought but it never is. So we originally were going to do e-commerce like my Facebook Advertising company Orion CKB, we were all performance marketing which is not [inaudible 00:26:59.0] you know change names again but a fantastic group but we were very, very good at performance marketing on Facebook and so all of our customers were either e-commerce or lead gen but people who made money from what we did. And so we started looking at that and saying hey e-commerce companies are getting smaller and smaller and they’re able to produce more value and this whole supply chain kind of thing is figured out maybe there’s an opportunity to go out and rollup the small ones and take what we know how to do which is all the performance marketing which ultimately was adding value to these businesses more so than the other piece of it and we could create additional value by putting them together. So we were doing and looking at e-commerce and when you do that you start to look at Amazon as a channel obviously. So we thought Amazon would be a channel for our e-commerce play. I just started looking into it and started meeting people in the ecosystem and at the same time my e-commerce customers at my Facebook advertising agency were asking us like you guys are good at Facebook can you run our Amazon ads for us because we’re not doing well there. So we started really looking into that. Once we looked into the Amazon ecosystem it was really—it was amazing. I mean to me to see the leverage that you’ve got. We all pay for it certainly to Amazon but like it’s the green traffic; that’s a sure thing. You’re paying for it but anyone who is looking for product that you’ve got to build [inaudible 00:28:13.6] you’ll get it. Or you can have great product and you don’t have the right team driving traffic to you on Facebook and Google and no one is going to know about it. You’re not going to get it. You’re not going to get it to [inaudible 00:28:22.8]. So we just started to see that the Amazon ecosystem was really, really much more powerful and we think the deals were better and the opportunity to move here was quicker and to find these companies and then I think we—I would rather be lucky than good any day Mark but I think we just hit the right time when we sort of started looking at this and there were more and more businesses. We really just kind of went out to sites like yours and looked around to see what was on the internet available and we started to see these Amazon businesses and we said let’s give it a try. Let’s nab a couple of these. Then we really all started to gel from that. Mark: So many Amazon sellers look at Amazon obviously with big eyes of opportunity but also wary eyes of distrust for what Amazon is going to do. And frankly for some people that have been selling on Amazon; let’s talk about Amazon vendor central you know maybe that’s been justified. Amazon as of the time we’re recording this podcast well it was about a month ago they sent basically non-renewal just to so many vendors that saying we’re not going to be buying any more products from you and poof those businesses are basically gone; not entirely but very, very damaged. How do you get over the suspicion of Amazon bad or evil I don’t trust them but I’ll make money from them? Carlos: We get asked this a lot and I’ve dealt with these behemoths. That’s all I’ve done for the last like 10 plus years 12 years. So Google I thought; I have an SEO company I’ve been doing SEO for a long time there we did Google PPC the company we grew here before we sold to the post companies like Facebook and Facebook Advertising company. I’ve dealt with these you know the fangs whatever these giant companies that seem kind of harmless in a move without caring and you can try to read the [inaudible 00:30:07.7] in what they’re doing but I think the most important thing—I have longevity in all those places by doing a couple of simple things. Like by following the rules, being a good actor in the ecosystem, and understanding what they’re looking for. And frankly this vendor central change; it’s tough for a lot of those guys and you can go back to 2002 and start reading Jeff Bezos’ shareholder letters and these telegraph—not telegraph I mean just really writing down in words this is what we’re going to do, this is where we are. People asked if he was a competitor of Barnes and Noble back in ‘99 and 2000 and he said no. He’s always had a vision for building a platform and a marketplace. He said they sell books. We’re a marketplace. They needed to be the 1st party seller to be the whole vendor central platform to get it to the scale and size that they want to be. He’s been writing about the marketplace since then and there are some great quotes about—he talks about the businesses they get married to that are great. They try a lot of stuff. And third party seller marketplace is one of them. It’s that, AWS, and product. Those are the 3 pillars of their business. So think if you think about that, they’re not going to destroy one of the pillars of their business. And then if you get into their numbers outsized portion of their profits is driven by—actually all of their profit is driven by these 3 businesses. And we all know that AWS provides an enormous part of profit for them and the marketplace they don’t want it all breaking out independently. You can kind of read between the lines there and see its producing profit; a lot. And that’s where these decisions are gotten from. And again profit is not always his goal that’s why he’s moved so much inventory and product over the years. But again I think it’s been telegraphed there. So I really think that Amazon’s positioning in this space is to be the marketplace to do what they’ve done. They say they have 500 million things or items for sale on Amazon. They didn’t get there by having a sourcing team like Walmart does you know going out and sourcing individual products. You got to have a 20 million person sourcing team. They have 6 million person—there’s 6 million accounts on seller central. We all know that a lot of people have double ones whatever the Chinese companies do different things but there was probably a couple of million sellers there for real make any kind of money. And they are doing all of that for them. So I just think if you look at the business it’s clear what Amazon is all about and where they’re going and from that standpoint [inaudible 00:32:28.5] after the ecosystem and you’d be in good shape. Mark: Yeah I’ve quoted the actual number here and I don’t do show prep but I actually prepped a little bit for this here and looked at some Amazon statistics 229 billion dollars in 3rd party services and then in 2018, 1 million new sellers joined their reseller services. About 3,000 people per day. Now again probably some duplicate accounts and there’s probably some even 3rd or 4th accounts in there. Carlos: 6 accounts yeah. There’s a lot of real; I mean they’ve released the numbers. There’s 200,000 sellers that make 6 figures and up, 100,000 a year and up US dollars. I mean there’s 2 million who have made any money I think as the states or you know the 50,000 might be a lot of money to somebody I’m just saying in a year, right? So I think there are 50,000 sellers that do half a million a year and up someone like that. So that’s a city man. Mark: Yeah, I know absolutely, in fact, one of these statistics was if Amazon was a country they would be 140th largest country in the world something like that in terms of gross domestic product; absolutely amazing statistics. I tend to agree with you in the past I’ve been pretty publicly bearish on Amazon because I felt like it was a gold rush. However, seeing where they’re going and you are ahead of the curve on this reading what Bezos was saying that they wanted to be a marketplace and they want to be that de facto ecosystem of the internet where people buy stuff. Alright, they want—when you think I’m going to buy something online, they don’t want to think about any other solution other than I’m going to buy it through Alexa or through the Internet or through my app or whatever because that just works and that’s where all the products are. So I agree I think they’re going all-in on that. I don’t think it’s much of a mystery and so because of that, I think 3rd party sellers are actually really well positioned especially right now because it’s still relatively immature but I have to ask you about competitors. Shopify recently announced that they are going to spend over a billion dollars on the Shopify fulfillment network which is going to be able to power all of their sellers with customized packaging and full-on fulfillment services. Obviously, Target and Walmart are offering free today shipping without having the Amazon Prime subscription. You said you don’t want to read the tea leaves but I’m going to ask you to read the tea leaves. Let’s talk a little bit about the future here with some of these competitors. Do they even stand a chance and are we going to see a consolidation of the marketplace or do companies like Thas.io—I’m going to get this right, need to have more of a multi-channel approach? Carlos: I think that Shopify announcement was awesome. I love that. I think it’s a brilliant idea and I hope it works. I mean we would love to have more channels. And we sell in other channels I mean in small amounts. It’s really for us it’s a question of focus; I’ve started a lot of companies and you know the platitudes and stuff about it you’ve got to focus strategy and saying no. If we have lived through that a bunch of times you don’t really get it. It’s like you don’t always have to feel if the oven is hot to understand that we can have someone tell us. But it really is about having that—the focus is about saying hey look this is what we do, we do really well right now, let’s perfect this and then let’s worry about other things. If that thing is big enough and takes enough of your time that’s worth doing so there’s a lot of complexity in the Amazon ecosystem alone with some of it like I expected it’s been more than I thought I expected it’s been crazier and surprising but there’s just some stuff in there that’s even surprised me. The competition is quite [inaudible 00:36:11.1] stuff on there. But we fully intend to look at other channels and well I mean we are exploring. As I said we have some small alternate channel sales already. We’re looking at retail. I mean let’s face it as large as Amazon gets that I think retail is over 10 trillion [inaudible 00:36:26.7] or something like that and 90% of it is still transacted offline. I mean people are still buying a lot of stuff in stores so you’d be crazy not to be looking at that as a channel. So it’s really a question time for us of when. So where we’ve been at this less than a year really, around a year, so that’s a lot to do in a year where we’re both acquiring all these products but then having to operate them and having to worry about improving them at the same time we’re building the company. We’re building the teams and the systems that allow us to do this and the processes and procedures. So it’s really just a question of looking at that way and that’s kind of just traditional kind of start-up thinking and how you go about this stuff. But I do think that whether they succeed enormously or not; Shopify, they have a good chance of succeeding with this. It’s always just a question of what portion of revenue it accounts for. I mean we looked at a lot of these businesses that say they’re going to start to sell on Walmart and stuff. We’ve seen people that are selling on Walmart and have been doing it for a while and it’s 5% of their sales on Amazon, 10% of their sales and I’m like Amazon is so dominant when you talk about sort of pruning like how do we deal—what do we do the bad product. Well to an extent like if I can focus on that 90% of revenue that’s on Amazon and do better with it I’m going to make more than my trying this hack out a little bit more on Walmart which is a more difficult to work with ecosystem right now. So I think those guys are going to have to up their game. I mean for everything I hear they’re not as easy to work with and let’s forget all the other channels beyond that. Shopify I imagine will do a good job of that. I mean they understand user interface. They understand simplicity as well better than anybody. So I’m excited to see what they do. But let’s face it so I’ve been throwing around the statistics, some like 50%, 56% of product searches start on Amazon now. From all the products ranks and more than all the search engines combined including Google. But I just saw a new figure that among millennials and below it’s like 76% chronic searches are starting on Amazon. Come on it is [inaudible 00:38:26.8] great when you’re looking for something and you want to toothbrush you just pull up Amazon now and you go and you get it. It shows up at your door anywhere from 2 hours depending on where you are to 2 days, right? Or even 3 whatever but you don’t have to think about it anymore. So I think that dynamic is just going to continue to play itself out. I don’t think of Amazon as this company so to speak anymore really. It’s a commerce internet. And so you’re telling me you have channel risk, it’s like telling me I have channel risk because I’m on the internet. People told me that and you probably too like 15 years ago [inaudible 00:38:58.1] problem that you’re only selling yourself on the internet. I was like, okay, next [inaudible 00:39:02.6] person, right? And so from that perspective, I hope these other things are successful. I hope Shopify makes a go of it. We will certainly be in all these channels over time but right now Amazon is a great place to focus your efforts to drive value. Mark: Yeah to your point about 90% of all retail sales are still happening offline and validated by the statistical research I was doing before this that Amazon accounts for 5% of all retail sales. So what does that mean? That means that the 5% of this highly fragmented online sales happening and that’s been fragmented by Walmart, Target, and other big box stores that have gone online but then also the millions of onesie twosie sort of sellers online that are playing in 100 to $500,000 of revenue per year and there’s a lot of those little businesses out there doing just that. So I think your point is right. Right now in the marketplace where we’re at Amazon is dominant. Amazon is the new Google as for just e-commerce transactions online. So then that leads us to the question of how do you compete on Amazon? What are the most and this is going to round out our conversation, we’re almost coming to the time here but how do you compete in the long term? The one criticism I hear about Amazon is look it’s a marketplace so products tend to be somewhat ubiquitous and you kind of get into a race on the bottom because the only way to differentiate yourself in many ways is on price. You don’t have better customer service because that’s been equalized by Amazon. So you can differentiate on product or on price and where do you see the best way to set up a defensible long term position? Carlos: So 1st I would say that I slightly disagree in a way customer service is handled by the companies themselves. Like how quickly you respond to queries, what you do if something has a problem, grand Amazon is kind of front line there but there’s a lot you can do in that space. Yeah I mean look overall people don’t always buy the cheapest product. Heck I know I don’t. Maybe it’s dumb but I’m the guy who goes to the page and I’m looking for a 2 grand [inaudible 00:41:15.4]. I don’t just buy the cheapest one on the page. Some people do but I got to look for someone and someone I got to go researching, I look for quality. I mean it really comes back to what I was saying earlier like about playing with these giants these ecosystems is being a good actor in the ecosystem. Now people used to ask me about Google SEO like how do you guys do this? I’ve been running SEO properties for 10 plus years now through every Google change with penguin, panda, whatever animal name you want to bring up. They change multiple times a month and people will say what’s your secret, how do you keep doing that? And my secret was I said those pages on Google, those site where they explain to you what to do for SEO. And that’s what we do. We follow their rules. There’s a lot of rules and we follow them all and we do a good job of that. Amazon says here’s how to play, here’s what to do, have a great product and make sure you’re treating customers well and you’re responding well. If your ratings are going down is it a problem with your product or how you deal with that right. So I mean I may sound silly hear [inaudible 00:42:18.2] but like the reality is make a great product, service the customer—where you can do customer service do a good job of it and be a good actor in this ecosystem. With that being said there is an element of Amazon that is cheap [inaudible 00:42:33.2] race to the bottom and you’ve got to think about how you differentiate yourself. I mean look if your supply chain is more efficient and you’re better off than going to the bottom you’ll win that battle and you’ll sell a lot. I think you’re going to start to see some branding differentiation over time. Right now as I said earlier we kind of discount that because everyone feels like they’re buying from Amazon and this is just the evolution of marketplace as I think a little bit. But if you’re in a category where you know tennis shoes or something someone is going to buy a Nike or Adidas or whatever they like. You got to think about some categories that will matter some it won’t. I mean if you’re buying a letter opener you don’t really care if it’s a Nike letter opener. Not really, right? So you have to be able to play by the other things I’m saying. Just be a good actor, have a great product, and make sure your supply chain is tight. I think for individual sellers looking at this marketplace, certainly new ones, I mean it’s just tough to get into now. I mean that certainly is an issue because it’s really just blown up in the last 5 years; 4, 5 years. And so there’s people in almost every space crowding it out. But I don’t want to—again it’s a price differentiation already. We’ve actually seen products, deals, and you may have heard some of these said once or kind of funny like where they raised the price every week for like 6 months and kept selling more. There’s counterintuitive examples of all these stuff and there’s reasons people do things when they’re buying and shopping and you don’t necessarily know all of them but it’s not necessarily just one [inaudible 00:44:13.2] press. Mark: Yeah, I agree I mean I obviously look at a lot of Amazon businesses and more and more I’m seeing the ones that are consistently growing over the years are the ones that never really actually compete on price, to begin with. They’ve looked at a product or maybe even in a crowded category and said how can we innovate on this and create something just different enough that nobody else is really going to want to compete against us but we’re going to create something that’s super useful and then magically; of course it’s not really magical like you said it’s being a good actor and doing what Amazon wants and creating a good product that people like. It works for the long term and it’s more sustainable. So I’m happy to hear you say that because of the broad experience with different Asense that you guys at your group have just kind of validates that. Now the last question I’m going to ask you it revolves around this idea of product creation. I am going to ask you for more of a general rule maybe it’s not the right way to go because I do think that there are multiple ways to compete on Amazon but I want to see if we can get to a generic sort of here is maybe the best practice and how to be a good actor in the community. Where would you recommend sellers put most of their effort or break up their efforts and I’ll put it into product creation and innovation and quality versus the Amazon-specific metrics of making sure that you have high ratings and maybe even going out and gaining those if you have to or being aggressive of as ways get those versus the PPC side I’m going to try and get as much sales velocity as possible whether that be on Amazon or setting off Amazon traffic as well to Amazon to get that most sales velocity. So kind of 3 groups here, right? You have the sales metrics that kind of influence things, the customer service and ratings, and then the product quality. Where do you think people need to really be giving up their time and again you might come back to say Mark you’re thinking about this completely wrong. That’s cool if that’s what you think. Carlos: No, but I would just say you just kind of summed up how do I be good Amazon business. It’s all of these things. Like I don’t think there’s anyone magic bullet. PPC works for some parts, it works great. It doesn’t work for all of them. I mean it’s like—the thing I love about Amazon, to begin with, it is that there are certain products you can sell stuff on there you could never sell directly in another channel unless you somehow had magical viral take off or something. But like when we were on Facebook for instance; Facebook advertising, it’s going to cost you 30 bucks an hour give or take something to acquire customer leads for a consumer kind of drive by product. Which means [inaudible 00:46:49.8] for 70, 75 bucks at least to make any money back after your COGS and all these kind of stuff in advertising cost. It’s expensive so you can’t sell a $10 item. Can you sell $10 items on Amazon? All-day, right? Because they’re bringing to the people they are taking so much stuff out of the equation. But then you just have to play in the Amazon ecosystem well whether that product may not make sense to advertise to be paying to acquire customers on that one. It’s tricky. I mean I think for individual sellers a product launch and new products are important. That’s not something we sort focus on and particularly care about again because now you’re talking about having more Asense and we’re interested in having less. Lots of sellers that we’ve talked to it’s actually they have—now you’ve learned all this and they know how they can launch something and they know how to do the quality of the stuff and how to get the initial purchases, they need capital. Again we don’t focus on that [inaudible 00:47:48.4] one capital to do and so we will buy in like the top-performing Asense from them and they take that cash and put it back into these things they want to do and test out advertising and purchasing new product and stuff like that. I think the most important thing is just that there’s more stuff now there, it’s the quality question. It’s the number of reviews and quality reviews. I would not—going back to what I said earlier, I would not suggest being aggressive with that or—being aggressive with following Amazon’s rule is great and so whatever they say you could do. You can’t ask for 4-star reviews or good reviews hence I wouldn’t break in [inaudible 00:48:24.8] because my experience going back to 10 years with Google is you get away with it for a while but they catch you. They ultimately catch you and they’ll burn you for it. I mean Amazon is coding reviews every month and their system is going through that probably every day but I mean they’re going through it doing cleanups. And if you’re doing something that’s a bad actor thing in that space you’re going to get busted for it. So I say do that but there are things you can do that are legit. Now if you’ve seen your ratings are going down because you’ve got some product quality issue then go fix that and send out free versions to all those customers whatever it is. Be a good actor in the system, have a voice, respond to queries, the question, and FAQs as quickly as you can and let people know you’re on top of it and if that takes an external site that’s informational where you talk to people about where you are who you are what your product is then do that too. I think that’s an important to focus but it’s hard for people to get a tall hold here now if you’re not already in the ecosystem and with a product. Mark: This has been fantastic. Carlos thank you so much for coming on. Do you have any last thing that you would want to share with the audience here or maybe a question I didn’t ask that you think would be useful? Just something general Amazon or what you guys are doing over at Thras.io. Carlos: No not really. I mean it’s an exciting time to be in the space and it’s a good time too for people to be selling their business and we’re happy to do that help them—I’ll buy them. I think you guys are an excellent brokerage. I’ve really enjoyed working with you guys. And I’d put a little plug there for you would. Getting someone on your side that understands what they’re doing and how to represent your business and how to talk about it and help you understand what you should get and what you shouldn’t; that’s very important. And not all brokers are created equal, not all business people help you sell your business or equal and you guys have all done it and I’ve really appreciated that work with you guys. Mark: Yeah, we’ve always appreciated working with your group as well. You guys have been fantastic to work with. I really appreciate you coming on here and sharing as much as you have. I mean I know what you guys are doing is pretty innovative. Not a lot of people are doing it. There are some doing it but it’s great to get the insights from a company that is working with so many diverse different Asense because it just brings a different perspective to everything. I’ve greatly enjoyed this conversation so thank you so much. I know that the Amazon queens of the past are smiling down on your company and will continue to do so. So thank you for sharing that with me as well. And there you go. One moment do you sell that on Amazon; just curious? Carlos: We don’t sell those. [inaudible 00:51:03.8] I bought them on Amazon. It’s great. Mark: [inaudible 00:51:08.1] on Amazon. Alright, awesome. Carlos thank you so much for joining me. Carlos: Cool. It was great talking to you, Mark.   Links and Resources: Thrasio Company Profile

Ignorance is not bliss when it comes to sales tax. Believe it or not, today’s topic is an exciting one for all buyers and sellers. Our guest is Diane Yetter from the Sales Tax Institute and Yetter Tax. She joins us to talk to us all about sales tax, sales nexus, click through Nexus, and more. Diane is a niche entrepreneur in her own right, uniquely helping other entrepreneurs navigate the tricky waters of sales tax. Diane businesses focus exclusively on sales tax, helping companies learn what sales tax means for them and what they need to do to be in compliance with state tax laws. SalesTax Institute and Yetter Tax are educational consultancies, providing people with all the tools they need to learn the why, when, where and how of remitting sales tax for each state where they do business. Episode Highlights: What click-through nexus is. Where and how affiliate payments are made. The Wayfair decision and the resulting state actions. Physical, Economic, and Marketplace nexus. Where to find the economic guide by state. Educational tools Diane offers on her website. Are there advantages to learning how these nexus’ work versus hiring someone to do it? The penalties for collecting sales tax and not remitting it. Concerns and risks in the acquisitions realm. The process each state goes through to identify sellers out there. We go over the risks to buyers if the seller has not satisfied their state economic nexus. The odds of something coming back to haunt the new owner of a business if there are unpaid nexuses. The resources the Institute provides to help listeners wade through all this. Transcription: Mark: Alright guys welcome to another episode of the Quiet Light Podcast. Real quick before I talk to Joe; if anybody out there hasn’t left a rating on the Quiet Light Podcast, do me a favor go to iTunes or Stitcher or wherever you listen to us, leave a rating, we certainly appreciate it. Makes us feel good. Makes us feel like we’re doing a decent job at this whole podcasting thing. So thanks in advance to everybody that has done that. Okay, so Joe, when we’re talking to a potential seller or even talking to a potential buyer one of the topics that comes up often, is how long does it take to complete the deal, right? And we have people wondering am I going to get this done in three months and what have you. The fact is these businesses are complex. On the upfront summaries what we see usually is pretty plain and simple. You see revenue, you see earnings, you see a multiple, and you kind of think well this should be nice and capsid and quick. And sometimes it is. But other times you have to look a little bit deeper. And you and I have talked about this before, right? For buyers to make sure you’re looking beyond the multiple and the multiple is one point of data. And for sellers and buyers alike to also have patience with the process and understand that you’re selling a complex asset. I know you had Carl on the podcast who is a recent buyer of one of our properties. And it was one of those situations where the deal took longer than expected and the numbers weren’t as necessarily straightforward as maybe you would think when you just look at this. But the net result for him as a buyer and for a client were phenomenal by being patient and looking a little bit deeper. Joe: Yes, no question. This particular deal took I want to say from letter of intent to closing seven and a half months which is probably the longest I’ve ever had. There’s really specific reasons for it. And Carl is partly to blame for it because he made a mistake on his application to the SBA lender. So we had to do the process essentially twice. The seller Kevin hung in there with Carl because Carl was a nice guy. It made a difference. And at one point when the deal fell apart, we had to go back. Well, my advice was to go back out to market for an awful lot more money because the business has grown a lot; probably worth $400,000 more. Carl and Kevin got along so well that Kevin said no I don’t want to do that to Carl. Let’s just bump the price thousand $160,000; crazy. Most buyers would walk away. They’d be like no. Yesterday it was this price today you want $160,000 more. Carl didn’t do that and he’s being rewarded greatly for it right away instant equity, in my opinion, a quarter of a million dollars in the business. And then some things that he’s doing on his end immediately once that first container load comes in doubling the discretionary earnings because of a focus on reducing COGS. It’s just fantastic what he’s doing. And it’s a great lesson for buyers and sellers to be patient, to be focused on helping each other, and not looking just at that multiple. Mark: You know I love this sort of story because I get it right from a buying standpoint you’re looking at a lot of deal flow you need to evaluate businesses quickly. So the temptation is often to look at just the high-level metrics and to eliminate something based on that. But so many of these businesses and if I could just say you know maybe even a plug for Quiet Light you know when we bring a business to the market we usually believe in that company pretty strongly as being a good value play for buyers. And so taking the time to kind of dissect it and to understand more than the top-level metrics and what’s going on underneath and look for those opportunities for that immediate win and again looking beyond that multiple. So this is a really good story of somebody doing just that and seeing a really quick reward on that. I want to listen to this. I want to hear all the dynamics. This is one of those more complex deals and I think a really good example of what happens when the deal isn’t straightforward but still works out in the end. Joe: Yeah. Hey, one other thing. I had a really strange interruption everybody in the audience I want you to get 10, 15 minutes in. Chris, our producer asked me about a particular person. I’m trying to find out who this is. If you could just get that far listen in and shoot me a note. I want to try to track that person down. Thanks, Ben. I appreciate it. Let’s go to the podcast. Joe: Hey folks it’s Joe from Quiet Light Brokerage and believe it or not this is an exciting topic. It is about sales tax, sales tax nexus, click-through nexus; a term I had not heard until today. Our guest is Diane Yetter or she’s from the Sales Tax Institute. So let me try that again. She’s from the Sales Tax Institute, see being a podcaster is not as easy as it sounds. She’s also from Yetter Tax; both all hers. Diane, welcome to the Quiet Light Podcast. Diane: Thanks, Joe. I’m glad to be here with you. Joe: Alright, so that I don’t stutter and stumble my way through trying to tell people what you do, why don’t you help us out with that? Diane: Sure. What we do is we are a business that focuses exclusively on sales tax. And we help companies learn what sales tax means to them. So we are primarily an education business. And then we also help them understand what they need to do to be in compliance with sales tax. So we do that through helping them understand where they have nexus, what’s taxable that they buy and sell, help them get appropriate systems set up so that they can handle that correctly, and then in the hopefully not event that they get audited we can help them with that. So we do that through our consulting side. And then we also provide a variety of educational courses through our Sales Tax Institute. Joe: And it’s good stuff. I just looked at some videos this morning and I’ve learned a bit already just in your free snippets online. And let’s just throw out one of those things because I’m sure the vast majority of listeners have not heard of and I’m going to look at my notes click-through nexus. Let’s just give them something that they don’t know about right away before we reinforce what they should know about which is overall nexus and collecting sales taxes and the risks of not and the rewards of collecting when they go to sell their business someday. So why don’t you just tell us what click-through nexus is, please? Diane: Sure. Click-through nexus is a concept that New York started in 2008. And it’s really just the attempt to move to a digital equivalent of paying salesman commissions which was found to be constitutional back in a case against Crypto Corporation in about 1960. And so what click-through nexus is is when a promoter or a seller and this really was intended to go after Amazon. Back in the day when all Amazon sold was books and people like you, Joe, if you wrote a book and you put a link on your website that referred people to Amazon to go buy your book that you would then get paid a commission; a referral fee or making that referral to Amazon. So Amazon was the seller. You were not. They paid you for sending somebody to them. Really no different than a salesman going around and knocking on a door and when they made a sale they would get a commission. And so what New York started and about 25 other states followed along over the years is that paying that commission to somebody in a state if they generated at least a certain amount of sales. Most states had $10,000 of sales from one or more commissioned agents that that created nexus for the out-of-state seller in this example Amazon. Joe: Yeah. And it’s a term I hadn’t heard of before. I’m impressed if the state of New York actually originally called it click-through nexus back in 2008. Just curious do you know if they call it something else then and have [inaudible 00:09:09.2] click-through nexus? Diane: Well what it was affectionately or unaffectionately referred to by the media was the Amazon Tax. Joe: The Amazon Tax, okay. So most people look at nexus says okay I’m selling a physical product I’ve got a warehouse or Amazon has a warehouse in how many different states that’s where my nexus is. What this is it’s for the content sellers, it’s for the affiliate marketers, it’s for people that are doing product reviews where you don’t actually have a physical presence. You don’t have the—I’m sorry, the physical product. You’re writing content, you’re telling the story, you’re doing reviews, and somebody in Hawaii—no I’m sorry, if you’re in Hawaii and you write the content and somebody buys it in Minneapolis and there’s no call center, there’s no physical—I’m totally screwing this up, and there’s no physical warehouse there, does that mean that you’ve got to collect sales taxes from that person that bought it or on that sale in Minneapolis? Diane: So what it applies to is if the seller; so in this case, if you are not the seller of the content that you’re just the person promoting the content for somebody else that’s selling it. Joe: The person that owns the physical product [crosstalk 00:10:24.5] sales taxes. Diane: The person that owns the physical product is the one that would need to collect the tax if they make payments to you as the promoter of it. Joe: Okay, so if anyone listening sells a brand on Amazon and also chose to do the affiliate program through Amazon and is allowing others to sell that product click-through. You should be collecting nexus wherever those sales. Is it—I’m sorry it’s not where those sales occur or is it where that person that wrote the blog is? Diane: It is supposed to be a combination of those two. However, that’s often difficult to ascertain as to whether or not that affiliate payment generated the sale in that state. And so it really is going after where the affiliate payment is made to. Joe: I got you. Okay, we may need title this to stumble through podcasts because sales taxes are crazy and there’s so much information and misinformation. And is it really gray or is it all black and white conversations going out there that I think just the more we talk about the more we’ll learn about it. So let’s talk about the big Wayfair decision and what has come from that. Can you touch on that; what it was and the end result of for sales tax collection? Diane: Sure. So the confusion that we just talked about with the click-through nexus actually is almost kind of going away because of the Wayfair decision and the resulting state actions. So last June 21st; so close to a year ago, the U.S. Supreme Court issued their long-awaited decision in South Dakota v. Wayfair which was a record-breaking case in terms of how fast it got to the Supreme Court. The original law was only effective in May of 2016. So for a law to be in essence validated and decided by the Supreme Court in just over two years is pretty amazing. But basically what the case was a test and when South Dakota passed their law they wrote it in such a way that they were in violation of the longstanding Supreme Court decisions and Quill Corporation and National Bellas Hess as well as the Commerce Clause. And so what the Commerce Clause said is that a state cannot impose a tax collection responsibility on an out-of-state seller unless they have a substantial presence in the state. Now what the Quill case and the National Bellas Hess case over the last 50 years had interpreted is they added a word into that Commerce Clause test. They said substantial physical presence. What the Wayfair court determined was that physical was never a word in the Commerce Clause and that the state or the prior courts had simply interpreted it to require that physical presence. So by their decision where they actually stated that their decision in Quill was wrong; and they actually said that in the decision, they were overturning that Quill decision. By doing that they said physical presence is no longer a requirement before a state can impose a collection responsibility on an out-of-state business. Rather it needs to have a substantial presence. The company has to have a substantial presence in the state. And the South Dakota law defines substantial presence as having more than $100,000 of sales or more than 200 sale transactions which we define as an invoice into the state. And so that is— Joe: Does this make nexus defined as having a 3PL or Amazon having a warehouse, does this make nexus go away and it flips to what you’re talking about now? Diane: It does not. Physical presence is still the first test that needs to be identified. So if there is an Amazon warehouse and you have inventory if you’re an FBA seller then the economic nexus really doesn’t matter. And the thresholds that are set in the states with the economic nexus are not relevant because of the physical presence of the inventory in the warehouse. Joe: Okay but if there’s no physical nexus it then flips to economic nexus. Diane: Correct. Joe: Okay, and how many states currently have adopted the economic nexus? Diane: So we have almost all; every state has either enacted it and it’s effective, enacted it and it will be effective. The latest one we have going effective I believe is July 1 right now, we’ve got some October ones that are in propose. And we’ve got I think its six states left that are in proposed status right now. The only one that has rescinded and doesn’t look like it will pass this year is the state of Florida. Joe: God I love the state of Florida. Diane: Right. Joe: Where on your site and which sites; Sales Tax Institute or Yetter Tax can someone go right now and figure out which states have economic nexus? Do you have something like that? Diane: We absolutely do. So you can go to SalesTaxInstitute.com and then go to our resources section and on that, you’ll see a link to the remote seller nexus chart. And on that there are; that page will have all of the different types of remote seller nexus. So the click-through we talked about, affiliate, marketplace, economic, and the notice and reporting. There will also be a link on their specific economic nexus state guide which will give you all of the various different nuances of the rules for economic nexus. Joe: Look at that you’ve even got a video in there as well. Fantastic. Okay, part of what you do at the Sales Tax Institute is education. You’re training people to understand and learn about sales taxes. Are these a combination of in-person training or is it online training as well? Diane: So we do a variety of different types of training. We have monthly webinars that are live in-person or live webinars where you can actually interact with me and ask me live questions. So we have a variety of different topics that you can look at. Joe: Is there a cost to the webinars? Diane: There is. Those cost $175 but you can have your entire team gathered around one phone line and it’s a single charge. Joe: And you’ll sleep better that night or maybe not at all depending on really. Diane: Exactly. Joe: When I was looking at your some of the videos I wrote down is ignorance bliss?? And I think it’s not when it comes to sales taxes. And we’ll get into that a little bit more but—alright so there’s a monthly webinar; very, very reasonable price. Diane: A monthly live webinar, we also have some on-demand webinars, and one of the ones that might be very helpful to those of you listening now is we have a sales tax 101 webinar. And so that’s on-demand. The cost of that is also $175 but you can watch it as many times as you want in 30 days. And that will go through and give you all the basic concepts and it was updated after the Wayfair decision so it’s got a lot of the current information about what’s going on today. So we’ve got I think it’s five on-demands and then we also have live in-person classes. So we have a three-day basics of sales tax class if you really need to get in depth. That’s held in June annually and then we have; it is usually in Chicago. Joe: Okay. Diane: And then our advanced workshop is for people with four or more years of experience and that is held annually in the April-May. We just had that this year in Chicago and next year we’ll be out on the West Coast. We also have a; we’ve offered it twice now, a nine-week online class. We call it sales tax jumpstart. So we will offer that again in September. Exact date not yet defined. And that is really meant and who a lot of our attendees have been in our first two cohorts of that are people that are like your listeners Joe that are smaller businesses, can’t get away for three full days of sales tax, and we give them basically all the steps and tools for what they need to do to be compliant. So we break it down into two-hour blocks over nine weeks. And we also share with them a lot of the tools we use in advising our clients. So we try to help them be more self-sufficient. Joe: You know it’s interesting as you’re talking I know that we’re sharing your URL. I mean we’re 15 minutes into the podcast and we normally don’t pitch and promote the people that are on. It’s not about that it’s about education. But I think that this is education that you can’t listen to it; this podcast and understand everything about sales taxes. So I think I’m having Diane’s share this folks early because this information is so complex and so in-depth and changing on a monthly basis because new states are enacting the economic nexus and you need to have some sort of downloadable chart to understand it. Or better yet Diane what we do here often is tell people to outsource. Like you can do the bookkeeping yourself but you’re probably a marketer so focus on marketing and outsource the bookkeeping. Yeah, there’s legal stuff you’ve got to do for your business, don’t hire an attorney and bring them in-house so you’d outsource that. Why in the world does an entrepreneur that’s running a small business with let’s say a staff of six need to go through the Sales Tax Institute and learn all of these things themselves when they can hire a company just to do it all for them. I know you don’t do that; you train, you educate, you consult. Why not just hire a company to do it all? Again is that a little bit of ignorance is bliss you still have to know it or can you just hire one of these firms that we hear about that will help you set it up and collect and pay the states, what to do and you just don’t worry about it. Is that a fantasy? Diane: It’s not exactly. You could certainly hire. There are a couple of different things that you need to do. If you’re selling on a marketplace platform there are less requirements that you need to worry about and that is because the actual tax calculation is going to be handled by the marketplace. Joe: Let’s call the marketplace Amazon. Is that Amazon is going to collect them? Diane: Amazon is the marketplace; correct. If you’re selling on Amazon you don’t need to acquire software to calculate the tax because Amazon is calculating the tax on that order. Now Amazon is going to send you the data and the financial dollars that they collect in the sales tax. In some of the states, you are going to have to prepare the sales tax return and remit that tax directly to the state. Now the trend that we’re seeing in 2019 is states are saying you know what we’re going to remove the burden to the sellers that sell on marketplaces and put that tax collection and remittance responsibility on the marketplaces. And so we’ve got a vast number of states that already have enacted that legislation. And we’ve got a large number of states that have it still proposed this year. We call this our marketplace nexus on our charts. And so what we’re assuming is that—I think there’s only five or six states that don’t have any legislation proposed to this year or passed yet. And the rest of them are really moving towards saying we’re going to remove that burden. Joe: Okay I just want to say. I love that. I love all in capital letters marketplace nexus because that takes the burden out of the hand of the entrepreneur, right? I mean they’re just— Diane: It does as long as they are only selling on a marketplace. Joe: Right. Diane: I think what we find is a lot of the sellers that sell on marketplaces also have their own website. Joe: They should. In my opinion, it’ll bring a higher value. The problem is that Amazon is growing at such a pace. There are more businesses that used to be 75% let’s say Shopify, 25%t Amazon and now it’s flipped. Diane: Right. Joe: That will level out over time I’m sure. But yeah let’s talk about that. So somebody that is selling on third-party marketplaces but they’ve also got an Amazon store—I mean their own website, even if they’re only selling 5% of their total revenues. Diane: Correct. So where it gets challenging is most of the states require you to include the sales on the marketplaces along with your direct sales in determining whether or not you exceed the threshold to determine if you have substantial taxes. With most states its $100,000 of sales or 200 transactions. So if you’re very successful on Amazon and only selling maybe 5 to 20% of your sales are on your own website then you still may exceed those thresholds. And now you do need to have some sort of solution in your direct sales to calculate the tax and then you’ll have the responsibility for remitting it. So yes there are companies that sell software that can integrate with your e-commerce platform. Some of the e-commerce platforms have some of the software baked in so to speak so that you don’t have to separately license it. Joe: Which ones have that baked in? Diane: So Shopify Plus has a baked-in version of Avalara. Magento I think has some baked in of either Avalara or [inaudible 00:23:58.2] depending upon the version that you’re on but others you may have to pay a license fee for that calculation side. The second piece of it is once you calculate and collect the tax you need to remit that tax to the various different tax authorities. Those software companies also could do that for you as an outsource, your bookkeeper may be able to do that for you, and there are also other firms that we work with that are just sales tax outsourcing compliance, providers. My firm doesn’t do that but we do work with other firms that do. Joe: Do you have references for those firms on your website? Diane: We do. Joe: Okay. Diane: We got those on our website. Joe: So what would happen if somebody signs up for Shopify plus they collect all this money and they don’t properly set up the remittance or the payment to the states? How long is it going to take for the states to figure out and what are they going to do? Diane: Well collecting tax and not remitting it is about the worst thing you can do. Joe: Can we call that a crime? Diane: It actually is criminal fraud. It will earn you an orange jumpsuit. Joe: It is the new black so that’s— Diane: It is the new black. You’re right. Joe: Thank you. I have to say it. Sorry, everyone. Diane: You had to. Everybody does. So just as you never want to be withholding income taxes from your employee’s paychecks and not turn those over to the government collecting sales tax and not remitting it is at that same level. Sales taxes when you collected are considered trust taxes. So you need to make sure that you are remitting the tax that you collect. How quickly will the state find you? That really depends. Often it can happen because an auditor bought something from you and then doesn’t see you registered. Or it could be a customer that complains. Joe: That could just be bad luck. Do the right thing folks; do the right thing. Ignorance is definitely not bliss. Let’s talk about this a little bit. We’re 20 minutes in let’s get to the meat of what—say potential buyers and potential sellers are concerned about with both marketplace nexus and economic nexus know, right? Alright, I’m going to just redefine the economic nexus. I get that’s when you hit a certain threshold. What’s the first nexus? Oh, it’s physical nexus. Diane: Physical; correct. Joe: Alright. So yeah this is the stumble through podcast. I’m going to rename it all. Okay, so we’ve got a business for sale. They’ve done four million dollars in revenue in the last 12 months. Let’s just say they’re keeping 20% so the profits are $800,000. The business is for sale for three and a half, four-time multiple and they get three point two million dollars. And let’s say that they’ve been around for five years. They’re selling on third-party marketplaces at this point it’s probably that 75% there and 25% elsewhere on their own Shopify store, Zulily whatever the case might be. If they’re only collecting sales taxes where they have physical nexus and in their own home state and I buy the business; it’s an asset sale, not a stock sale. Diane: Right. Joe: What’s the risk to me if any? Diane: So I think the first thing is if they’re actually collecting in all of the states who have physical presence; so where they’ve got inventory sitting in an Amazon warehouse they’re steps ahead because that’s where we’re finding a lot of the risk is that these Amazon sellers are not collecting in the states where there is inventory in the warehouse. So if the only risk that they have are the states where there was economic nexus past which the earliest the state goes back on any of that for all practical purposes we have a couple of outliers is June 21st which is the date of the decision 2018 with New York. We’ve got Massachusetts and Ohio that go back a little bit further because they have something just to add a little bit more confusion to it Joe that’s referred to as cookie nexus which is a digital present. So if you drop cookies which every Amazon seller is dropping cookies on their visitor’s websites—on their devices so that they can track them. That was deemed to be a physical presence in both Ohio and Massachusetts so they go back a little bit further. Let’s take those guys out. Joe: Okay. Diane: So if we’re saying today we’re selling our business we’ve been registered in all of my Amazon warehouse states and I’ve just got economic nexus going back almost a year. And if I haven’t been registered in those states then there is a risk although we think that it’s probably not a great risk if it is just the economic nexus. Okay? Average sales tax rate across the country is somewhere between 8 ½, 9% is the average rate. Of course, we’ve got some lower and we’ve got some higher. And so your risk is not 8 ½% of your profit but 8% of your gross sales. And so it’s 8 ½% of—let’s say 25% of your 4 million is in economic only nexus, 8 ½% of your million for the last year of sales. Joe: And then you’ve got to further divide it up into—you’ve got to hit that economic nexus in those individual states. And with where you’ve got the physical nexus we’re going to count that money and see if we hit that average $100,000 threshold or 200 transactions. It’s very complex. Almost to the point where it makes me wonder if that state employee in the sales tax division making whatever they make really cares and is going to dig deep to try to find you that sold a widget after you’ve sold all the assets of your business. What is the process the state goes through to identify people that are selling products that didn’t collect sales taxes properly? Diane: So just as probably most of the sellers listening to this podcast are using data analytics to figure out what should they price their products at, what is a hot product to sell, the states are starting to use data analytics and advanced methods to identify sellers. They’ve also used methods including subpoenaing; their subpoena power to go to Amazon and ask for the list of the sellers in their states. So we’ve seen I think about eight or nine states that have done that including New York and Connecticut and North Carolina, Wisconsin, California, Washington. So those are some of the states that have actually gotten that list of those sellers. And we know sellers have gotten those letters from those states saying we think you should be registered. Joe: Okay, they can figure it out is essentially what we’re trying to say here. Let’s talk about the risk to the—you said the risk to the seller it’s still minimum if you’ve been collecting where you have physical nexus. So great that’s the minimum. Well, what about the person that buys the business? And I’m going to try to say this in simple terms and you tell me, correct me, or lead me back on the right path here. Diane: Okay. Joe: Let’s say I bought a business. I buy that business for three million dollars and it turns out that you; the seller didn’t collect and pay on all the economic nexus that you may have had during your ownership and a few states figure this out and they go after you; your corporation. They’re going to go after Diane’s brand LLC. First, they’re going to try to go after the state after you and if it’s an empty—well if the LLC is an empty shell if you ever pierce that LLC by running personal stuff with a business they can then go after you personally for that. And then if you can’t pay it on either of those things you’re going to go okay well the assets are still being sold, the brand is still out there. I wonder who bought it. Let’s go after them. Is that the right path and can they get all the way through to me if they first go after your LLC, can’t get money out of the LLC, it’s an empty shell or you closed it, okay fine they go after you because you pierced that corporate shell at one point, you’re bankrupt, you’ve got nothing. Can they go after me and if so what’s the real risk to me the buyer? Diane: They can and to clarify just a couple of things. Even without doing anything to pierce the LLC all the states have provisions that allow them to go after the officers, the owners, or responsible parties whether the business has been closed down or not. Joe: But everything else was I generally on the right path there in terms of the way it would work? Diane: Correct. They can and there is also provisions that they have that are called successor liabilities. So that means that if they sell the business then they can go after the seller—I’m sorry after the buyer. Joe: Let’s just put a point of clarification on that successor liability, you said sell the business. These are assets sales for the most part. They’re buying the assets of the business, not the entity itself. Does that successor liability carry through in that case? Diane: It does. Joe: Okay, are they going to go to that successor first or is that going to be the last resort? Diane: It depends on the state and it also can depend on whether or not the rules were followed. Most of the states have something called a bulk sale notification requirement that applies on the sale of bulk assets. So this is not typically required on a stock deal but it is required on an asset deal. And so if you sell those assets there is a requirement that the state be put on notice that that is happening so that they can do a couple of different things. One they now know that this transaction is occurring. In some states, there might actually be a tax on the transaction itself. The second thing is that it gives the state the opportunity to give what’s called the tax clearance certificate. So if they’ve recently done an audit let’s say of the seller they can tell the buyer this is all clear. If there hasn’t been a sale made or if God forbid the company has not been registered in the state then they can provide information to the buyer in terms of an amount to put into escrow and withhold from the purchase price. Joe: Again though I’m trying to just visualize how that heck the state is going to do this. I buy the assets of the business. It’s Diane’s brand. I go to the state of North Carolina to get a tax clearance certificate or—no that’s for the past is that right? Diane: Correct. Joe: So I want to start collecting sales taxes on my newly formed corporation for Diane’s brands. Diane: Correct. Joe: And I do that there’s going to—and I actually think I know the answer here. I was going to say how the heck is the state going to know that they were everest passed sales. Diane: Right. Joe: There’s a questionnaire that I have to answer that have there been past sales. A few things, I mean I’ve heard some people just say no or whatever, people in authority, people that are experts like you, I’ve seen attorneys on this bulk sale notification go yeah no we’re not doing that. Are these people just flat out wrong or is it—look the key thing here is risk. I think what I’m trying to help people understand and I need you to throw out numbers for me. I’m trying to understand the odds because that’s what these sellers and buyers are going to look at because you can’t change the past. You can’t change what you did four years ago in terms of sales tax collection. In some case, you don’t have to because economic nexus didn’t exist back then. But what are the odds of this carrying through in this scenario? Again I’m buying your brand. You’ve been around. You sold four million bucks in the last 12 months. And I know you can’t do this everybody calls labor the legend and I remember just after college I was at a temp agency trying to get a job and had to take a typing test. Diane: Yes. Joe: And I did it. And I was terrible. Terrible was like 82% accuracy at the time and the guy tells me it was. But I’m like what are you talking about. Like Larry Bird shot 66% from the free throw line and he was a legend. That actually got me the job nothing else; my expertise and anything else nothing. But Larry the Legend got me the odds, percentages; that’s what people want to know. So I’m buying it. How much—is this going to keep me up at night or is there like a five or 10% risk here that some of this may carry through? Diane: So I think it depends on a couple of factors. So I hate to give you a fudged answer but here’s a couple. Joe: I have to put you on the spot. We are recording. Diane: Yeah. So here’s a couple of things that come into play. If the only nexus is economic I think the risk is fairly low. If you have been an FBA seller you’ve got inventory in the state and you haven’t been collecting. I think that risk is significantly higher because there is now ways that the states are getting that information. Joe: Fairly low is 3% is that what you’re talking? Diane: I would say transactions happening within the first year, we’re saying it’s probably—you know will the state come after somebody for economic less than 20% chance. Joe: Okay but first I bought your brand; first I’m going to go after you. First, they’re going to go after your LLC then they’re going to go after you. If they can’t get money from either of those then they’re going to come after me. So is that 20% on me or is it 20% first to you and then you’re all saying— Diane: I think it’s about 20% that they’re going to go and find that an economic seller did not register when they should have; an economic nexus seller. Joe: And unless you’re bankrupt they’re going to take money from you first. Diane: Correct. Joe: And how do they get that money? Diane: They will do an audit. So they will look at your books for reference and then they will calculate an assessment. Joe: And if you can’t write them a check you’re going to work out a payment program. Diane: Correct. Joe: They are attorneys that can negotiate that down. Diane: Correct. Joe: All that still applies? Diane: Yup that would still apply. Joe: Okay, so economic nexus pretty low. Diane: Correct. Joe: Physical nexus fairly high but again even though their sell-through nexus—is that what you call it? There’s so many different nexus here. The physical first; they’re going to go after you first. The buyers here the concern should be fairly low unless the seller of the business is ultimately going to be filing for bankruptcy and there’s no money there, right? Diane: Correct. And how you would get caught as you said when you’re filling out your registration application for your business because now you’re going to be compliant. One of the questions that is on there is did you buy this business from anybody else. And that’s on I think virtually every state application. And that’s how it would be identified. Now if you choose to leave that blank the applications are signed under penalty of perjury. Although I have never seen a state actually pursue perjury charges on somebody that answered the questionnaire incorrectly; I got to advise you that that’s what it says. Joe: Sure. Okay, and we are 35 minutes in and generally we want to keep this short. Honestly, I feel like I could talk to you about this for another 35 minutes but I don’t dare because the listeners would just drop right off a cliff. So Sales Tax Institute, Yetter Tax, what resources; we talked about them at the beginning and I was writing down—I can’t even read my own notes, what resources are you making available on the length that we’re providing. You’re giving us a link on the QoP podcast so we know it’s there and you’re providing some specific resources for anybody listening. What are those? Diane: Correct. So we’re going to make it easy for your listeners Joe. We’re going to give you a specific link, SalesTaxInstitute.com/quiet-light-podcast and we’re going to load all of these great resources that we talked about right there so it’ll be one place that your listeners can go to. And on there we’re going to give them the ability to download our white paper that talks all about these different kinds of nexuses and what you need to do. We’re going to give them the link to what we call our remote seller nexus chart which will include all the different types of nexus; click-through affiliate which is common ownership and agencies doing things on your behalf, the economic nexus, the marketplace nexus, and the one that we didn’t have time to get into which is the awful notice and reporting which is when you don’t collect tax. So that chart will be on there. We’re going to have a chart for the economic nexus which is all the states and the different thresholds by state, their actual effective dates, what dollars do you include in doing that threshold calculation. We’re going to give you a link to one of our greatest FAQs about what is nexus that has a little video about all of those nexus types explaining what they are. And then we also offer a service called our Wayfair Risk Analysis. We can take your data and go through and do the analysis to figure out what your risk is as well as where should you be right. Joe: I love that. I hate that we’re at the end of the podcast for that part of it because a lot of people just want to have this done for them. So you can do a risk analysis as part of— Diane: Absolutely. Joe: And do they—is that through Yetter Tax or the Sales Tax; since it’d actually to be through the link but look people listen and then they type it in. So if they go to is it Yetter Tax would they be able to figure out that analysis? Diane: The easiest thing to do is go to the SalesTaxInstitute.com and then click on the consultation button. Joe: I got it. Diane: Then you will see a link to our Wayfair Risk Analysis there. Joe: Alright, Diane you know your stuff. You are a sales tax nerd. I see it. I’m not insulting you. I see that on your Twitter handle. Thank you for being such a nerd and understanding this and sharing the knowledge with everyone here. Ignorance is not bliss. Learn about sales taxes because if you don’t it’s going to come up and bite you somewhere unpleasant and that’s in your wallet. Thank you for your time, Diane. I greatly appreciate it. Diane: Thank you, Joe. It’s been a pleasure. Links and Resources: https://www.salestaxinstitute.com/quiet-light-podcast https://www.salestaxinstitute.com http://www.yettertax.com/ https://www.linkedin.com/in/dianeyetter https://twitter.com/yettertax?lang=en Economic Nexus State Guide: https://www.salestaxinstitute.com/resources/economic-nexus-state-guide Remote Seller Chart: https://www.salestaxinstitute.com/resources/remote-seller-nexus-chart Wayfair Risk Analysis: https://www.salestaxinstitute.com/wayfair-risk-analysis Sales Tax Software Vendors: https://www.salestaxinstitute.com/resources/tax-software FAQ: What do I need to know about the Wayfair Case and Economic Nexus?: https://www.salestaxinstitute.com/sales_tax_faqs/wayfair-economic-nexus FAQ: What is nexus? : https://www.salestaxinstitute.com/sales_tax_faqs/what_is_nexus Whitepaper: Nexus after Wayfair – What you need to Know: https://www.salestaxinstitute.com/resources/five-things-to-understand-nexus-whitepaper Sales Tax 101 On-Demand Webinar: https://www.salestaxinstitute.com/sales-tax-education/sales-tax-101-on-demand-webinar Sales Tax Jumpstart Live Online Class: https://www.salestaxinstitute.com/sales-tax-education/sales-tax-jumpstart Consulting Service: http://www.yettertax.com/about-us-services/

I don’t think there is a topic we’re more passionate yet equally in the dark about as CRO. For every dollar a business spends on Conversion Rate Optimization (CRO) they get nine back – which is a staggering statistic. You immediately see ROI if you use a CRO expert who is good at what they do. There is an entire user journey that happens with CRO, and those businesses that embark on the journey can massively grow their business quickly. Jon MacDonald is the CEO and founder of The Good, a Conversion Rate Optimization firm. The Good uses data science to help brands turn their traffic into customers by tracking everything on their site and using the data they collect to come up with solutions for growth. Some of the world’s largest companies convert their website visitors into buyers through their services. Jon is here to talk to about this little known powerhouse toolkit for both buyer and sellers. Episode Highlights: What Jon looks at before starting a CRO project for a client. Where CRO fits in for buyers and sellers in the e-commerce space. The four key areas of data to be looking at to optimize e-commerce conversions. Why CRO gets ignored so often. Helpful dashboard elements for the three types of online businesses: e-commerce, SaaS, content-based sites and how those elements improve business. How microgoals can add incrementally change your flow. What CRO advice Jon has for someone who may be getting ready to sell a business. Where The Good gets their information and what they do with it. AB testing tools Jon recommends for a new business owner getting started. How much time an entrepreneur should spend studying and preparing for a good CRO approach. How CRO practice can increase asset value exponentially for sellers and buyers. The benefit of working with an outsourced CRO team. Transcription: Joe: Mark, one of the things that we see happen often is people—we go to these events that we sponsor, meet some amazing entrepreneurs, and sometimes in little pockets of them you hear people talking about their top line revenue. It’s really not what the focus should be. In many cases, it should be about their gross profit, their processes, and what they do to optimize and maximize their bottom line revenue. Because ultimately that’s what the value of these businesses are based on. And as I understand you had Jon MacDonald on from The Good talking about CRO; Conversion Rate Optimization and how important it is to drive that up and what a great return on investment that can be. Mark: Yeah, that’s right. I don’t think that there’s a topic I’m more passionate about yet equally horrible at than I am CRO; Conversion Rate Optimization. It’s such a phenomenal field and when we look at what you can do using CRO techniques and methodology with a business it’s rather remarkable. In fact, Jon quoted me a statistic in here that for every dollar a business invests in conversion rate optimization on average they get $9 back which is really, really amazing. I know that in the past I’ve hired a conversion rate optimization expert. And they cost a lot of money, right? So I was paying out I think like $2,000 a month. But you know what the first thing they did was? They saved me like $6,000 a month in advertising costs. Joe: That’s incredible. Mark: I mean it’s a net win. You’re immediately seeing an ROI if you have somebody good at what they do. And when we think about CRO oftentimes we think okay we’re going to change the color of this button bar, we’re going to change the title on this, we’re going to increase our sign-ups. What Jon and I talked about quite a bit more is the fact that CRO is much, much bigger than this. There is an entire customer journey, there’s an entire user journey here, and there are all sorts of points along the way where this journey can be optimized and can be made more efficient for our clients. I know I’ve talked to clients in the past who have grown businesses massively by just spending literally years doing this and their traffic doesn’t substantially change. But their revenue changes and their bottom line earnings change as well. It’s a discipline that most of us ignore; low hanging fruit for almost all of our businesses. We should be doing it. Jon and I got to talk about some of the methodologies that you need to implement in order to really get going with some CRO optimization of any business for that matter. Joe: I think it’s going to be a fascinating podcast. I’m going to listen to it myself. Before we jump to that folks be sure to tell us what the movie quote is. Send us a note so we can give you a shout out on the podcast. Alright, let’s jump to it. Mark: Jon thanks so much for joining me. Jon: Thanks for having me. I really appreciate it. Mark: If you could can you provide a quick background on yourself to all the listeners? Jon: Sure. So I am CEO and founder of The Good. We are a conversion rate optimization firm. Now what that means is we help brands to convert more of their existing website traffic into customers. So we do that through data science. Helping brands to track every click and movement that’s happening on their site and using that data to understand where people are dropping off in the process, why they’re not converting, what’s engaging and not being engaged with, and how to solve those problems. Mark: That’s great. CRO is something of a—I wouldn’t say a hobby of mine, I’m not very good at it but it’s something that I’m fascinated by. I love the idea of being able to grow and sometimes pretty significantly grow a business without adding more traffic and scrapping forward for that more traffic but basically by improving that customer experience to the point where everything just kind of smoothens out and it just opens up more traffic internally but with the revenue of course; the conversions and everything else. Now in my understanding with your firm you guys have done some work with private equity firms as well that are coming into an acquisition of a web-based company and want to find some of those opportunities. Can you talk a little bit about that and maybe some of the scenarios that you’ve looked at there? Jon: Yeah. So typically when you’re buying an e-com company the first thing you’re looking to do is optimize the return on the investment you’ve just made. And that’s why a lot of folks end up with us. Typically these brands have a lot of traffic coming in already. They’re spending a bunch of money to drive traffic to the site but perhaps that’s just not converting at the level they’d liked or they’re not seeing as high of a ROAs or return on ad spend as they would like to see and they see that that’s an opportunity for optimization. And that’s typically how we end up starting those conversations. It’s not unfamiliar with us. A few brands we’ve worked with have increased their conversion rates, gotten their ROIs up and then made an exit right after. So it happens on both sides. Brands who are looking to make a purchase and or have made a purchase come into us to help them to kind of optimize a little bit and then also companies who are looking to improve their site and optimize it as they get ready to sell and want to increase the value of their company. Mark: I often think that the CRO portion of a marketing mix is one of the items I think it’s ignored the most often and is often one of the lowest bits of hanging fruit. And one of the things I think people forget about; I forget about it myself but CRO actually has kind of a double whammy effect for you, right? I ran an experiment on another business that I owned outside of Quiet Light Brokerage for getting people to sign up and I know my numbers pretty well. I know that every person that signs up even though they’re signing up for free the value of that client is about $10, right. So I said okay I want to increase these free sign-ups more. But the result was I did increase the sign-ups, I did increase that conversion rate pretty significantly but the other benefit of that is that my cost of acquisition dropped. So not only was I getting more out of what was being sent to me but my advertising dollars dropped at the same time. And so I had this double effect of seeing an increase in my ROIs on both sides just from focusing on one thing. When you’re talking to somebody who is preparing to sell; let’s say it’s an e-commerce business, what are some of the areas that you start to look to see where can you—what are you sort of tracking at a CRO project? Jon: Well, the first thing is are they tracking the right data? True conversion optimization should not be about going down a checklist of best practices. You can find those and Google those online and I can tell you that really the most effective way to optimize a site is to base it on every click and movement of your specific sites visitors and to make data back decisions on those actions that are being taken. So the best way to do that is to make sure you’re tracking the right data. Now, of course, you want to follow GDPR and all of the other privacy regulations that are in place. So all the types of data that you really should be tracking are done in aggregate meaning it’s not personally identifiable information. And really you don’t need personal identifiable information. But there are really four key areas of data that you should be looking at. The first of course is Analytics. If you’re looking to sell you’re likely going to have Analytics and the buyer is likely going to dive into those Analytics. So if you’re looking at something like Google Analytics out of the box let’s be honest here it’s meant to help you buy more Google Ads. So it’s not that helpful in terms of optimizing your site. Now the best way to do that is to build some dashboards in Google Analytics that are more focused on conversions. And also make sure that you’re tracking the right events on your site to get that data in. So that’s one of the first places we look. The second pieces of data are interactions on your site in terms of content. So looking at things like heat maps; where are mouse movements happening around the site, click maps where are people clicking on a page, perhaps they’re often—we almost always find that people are clicking on things that aren’t clickable, and that’s a good indicator that they should be. So it could be as simple as that. You know we also want to look at scroll maps; how far down the page are they going. We do eye tracking as well to understand what people are looking at and how long they’re looking at that content. Lastly—well third I should say you want to do what’s called user testing. So we’ve just talked about all these quantitative pieces of data that really tell you what people are doing. But it’s really hard to get the why behind that from all of that data we just talked about. So user testing comes in and helps us understand why. Now, this is where we send people to the site who match the ideal customer profile and we ask them to complete tasks. And while they’re completing those tasks we are recording their screen and their audio and we also have trained these people ahead of time to talk out loud about the experience that they’re having. So they’re going through a site and they’re saying hey I’m trying to find this page and I can’t find it in the navigation or understand how to get to that content that I’m looking for, I don’t understand what the value proposition is here, or just common struggles that they might be having. And that really kind of coincides with the numerical data to tell us not only what they’ve done but also why they’re doing that and it gives us some context behind that. And we really we do what’s called remote unmoderated user testing. And what that is is a software tool we use usertesting.com most often. And what that means is it’s a piece of software that lives on their home computer that allows us to collect all this data so they can do it in the comfort of their own environment as opposed to somebody standing over their shoulder. Now we’ve done both. We’ve been optimizing sites for over 10 years now and we’ve done both. And what we found is that we get much better data when its remote unmoderated. The people are comfortable and they don’t feel pressure to come up with something on the spot and always be telling us what they’re thinking. We just find it naturally happens when it’s remote and unmoderated. So that works a lot better. The last piece of data is A-B testing or multivariate testing. This is where you say you have 100 people coming to a site, you can segment those visitors and show 50 the current version of a page or even small change on the site, maybe moving content around on a page, or adjusting some headlines things of that sort. And then you would show 50 the alternate page and you test some metrics out of that to understand which one is doing better; the page that exists or the changes that have been made. And we can get really large tests like changing entire pages or we can go really, really small like just changing one headline and seeing what the differences would be and then stacking a lot of those tests and the variations of those tests to truly understand how to optimize each step of that funnel again based on data. So instead of just guessing and launching those changes with this piece of data you’re actually letting the consumer’s actions, your specific sites visitor’s actions and tell you what should be done to permanently change on your site. Mark: Okay. So I think that explanation was just great. I love the framework that you set up here but I think you just explained why CRO gets ignored so often. And that is there is a lot of stuff to set up here and to configure and I just let’s start right at the beginning with Analytics. You’re right right out of the box how useful is Analytics. It’s interesting. You get to see how many people are coming to your site. You can see what pages are popular and some decent information out of the gate. But really Analytics starts to blossom when you start building dashboards and segments and everything else. But getting into that; I mean that’s kind of a discipline in and of itself. Jon: Of course. Mark: I know we could probably talk about this all day and different dashboards for different types of businesses, what are some things that are some useful elements with a dashboard that somebody might want to consider building? And I want to break this up into maybe three different types of sites. And if you don’t work with any of these types of sites that’s fine, just let me know. But e-commerce would be one, SaaS would be another, and then content-based sites that are really looking more for that user engagement and reading and how much are they digesting the information. So what are some dashboards that you would recommend people look into for each of these? Jon: Well, there’s a couple built into Google Analytics that get ignored pretty quickly. On all three of these sites it would be helpful. But the first is page flow. What is the flow that people are taking through the site? And most people ignore this because in Google Analytics the view is one where it shows the funnels but then has lines drawn between them and it looks extremely complicated at first. So most people see that, they get overwhelmed, and they leave and don’t really pay attention to the data. But there’s so much rich data there you can dive into. And you don’t have to do anything other than have the snippet on your site. So it’s not requiring you to set anything else up necessarily. So that’s a great place to start. For e-com businesses we often find one tidbit; a lot of companies no matter what their size is when they first come to us one of the first things we always check is do they have the e-commerce tracking engaged. It’s one button to turn on and off. So many brands don’t have that turned on and they lose so much rich data that Google automatically starts sorting through and looking for. So for e-com just having that turned on could be amazing. And it’s so easy. Now in terms of metrics that we’re looking for on e-commerce conversion rate in terms of to purchase but also what are the other metrics that you’re looking for? We call them micro conversions; things that you know people are doing that influence that purchase. Is it signing up for an email? Is it where they visit certain pages on your site? So we know that if they are visiting or even just like a great instance of this is if they’re visiting a product detail page but then they click to read more of the user reviews. That’s always a great indicator because what we find is consumers who read reviews convert much higher. Because often consumers are going to trust the content that’s in reviews much more than what the brand even says about their products because it’s coming from people like them. They also; for a clothing site for instance or shoe site, it’s really helpful because they will use that to better understand sizing, especially relative sizing. So a medium runs a little larger you’re probably going to want a small things of that sort. That’s really, really helpful for people who are really there to dive deeper and answer specific questions that are all buying questions. Mark: Let me stop you on that real quick because let’s say that you start measuring these micro goals. What does that give you? I mean I would imagine a lot of the people that are taking those actions already have a high user intent. Jon: Right. Mark: In my head I’m thinking okay let’s say sizing options, you said I want to increase the number of micro-goals of people checking out the different sizing options. Does that really increase each individual user’s intent or you’re really just more making the flow easier for those that are already there? Jon: Both. If you’re finding that out of 100 visitors that 50 of them are looking at sizing and of that 50, 25 convert you really want to try to influence that metric. So if you know that people are looking for sizing then make that information surface at higher so it’s easier to find. Now people only visit websites for two reasons. This is outside of Facebook or anywhere that you’re just trying to maybe perhaps spend some time; kill some time. Now they are there because they have a pain or a need and they think that your website can help solve that pain or need. And two once they realize that it can or they believe that it can, they want to do research on how to convert as quickly and easily as possible. And that means that they’ve done that research and now they’re ready to purchase. So you need to make those two things as easy to do as possible. Now it sounds pretty simplistic but understanding as you go deeper on those what people are looking to research and then surfacing that information as high as possible is really important. So making that as easy to find and do that research. So if you know that people who convert always are looking for sizing information but they have to go into the reviews to find it. That’s a problem. So instead make it easier for people to understand what size they should wear. And if that’s the case they’re going to convert much easier. And then when they’re ready to convert it’ll make that checkout flow, that conversion process as easy as possible. And when you look at lead generation sites which is the second one of this one that you’ve mentioned, it’s the same thing with form completions. We often work with companies who have made it very easy for somebody to come to the site and do research about what particular products or offering that that company has that aligns with their need. But we also see at times the consumers come to the site and they’re looking at the home page and the value proposition is not clearly stated. And so how many times have you been to a B2B service page website and you look at it and you said I have no idea what these people do. So that can be a big challenge; just understanding is the consumer in the right place and allowing them to do that research. But then once they get to the form they’re asking for a ton of information that isn’t really necessary at that first step. So they might be asking how many employees do you have, or what industry are you in; all these things that could have been filtered prior to them filling out a form by just saying this product is best for people who have this many employees, this much revenue, this industry, and things of that sort. So trying to help people understand if they’re in the right place and how to convert as quickly and easily as possible can apply to both e-com and lead gen. Mark: That’s helpful. Let’s go on to one of the other ones here and that’s the scroll maps and click data. A, where do you get this sort of information? Do you have any servers that you recommend? And then B, once you get in what do you do with this information once you start to get it? Jon: Yeah. So Hotjar is likely your best fit. Now there are tons of different heat mapping softwares out there right now. Crazy Egg is another good one. There’s a few of us who—we find Hotjar has the most reliable data and also for the cost has the best benefits. So I believe it’s about $9 a month and it’s totally worth the data you get back for $9; easily a large return on your investment there. Now, what should you do with that data? Well, Hotjar will let you track again all the mass movements that happen on your site and give you a heat map of those. Now for those people who aren’t familiar with the heat map it just shows you from red to—and then cools off from there; so red, yellow, green, blue, and then the lack of colors where people didn’t use their mouse at all on a page. So it allows you to really look at that and say where are people interacting. Now, a quick tidbit on this; on desktop, your eye will follow your cursor. So heat mapping is not so much about the cursor movement as it is about a good indicator of where people are looking and what they’re engaging with on your page. Understanding just where a cursor is going on a page is not as helpful. So that’s a better way we think to look at it is what content are people engaging with. And that’s what’s really helpful there. Now, what can you do with that data? Perhaps you find that there is a piece of data that you had found earlier that people really engage with every single time they purchase. Well it’s really helpful to surface that content up higher on the page and then track whether or not people are engaging with that over time; so testing that by understanding what content to engage and moving that content to a different area of the page and then looking at the heat map to see if it’s being engaged with. Mark: So let’s move on then to A-B testing and this is a personal pet peeve of mine because all the tools out there just feel—at least that I’ve used feel expensive and kind of shoddy and maybe I’m not using them right. Are there tools that you particularly recommend? What do you think about let’s say Google Optimize as a free option there? And we’ll start with that. I would also like to get into setting up experiments that actually make sense. Jon: Right, of course. Mark: Let’s talk first about the tools. Jon: So there are a numerous number of tools for optimization as you mentioned. It’s pretty common now to try to sell a whole optimization platform; so one tool that can do everything. The great thing about Google Optimize is that it doesn’t do that. It focuses just on running those tests. And it also integrates extremely well with Analytics so you can pull segments out of Analytics that you’ve set up and run tests just for those segments. Now it is free and it does have some limitations in the sense that you can run a limited number of tests at the same time. There are some ways to get around that. I would be happy to chat about that with anybody at some point but really the idea here is Google Optimize has come a really long way over the past year. It has in terms of pure testing the same functionality as a platform like VWO or Visual Website Optimizer which is another one that I would tend to recommend if you want to get over the number of tests limit that Optimize has VWO is a great tool. It works extremely well for the testing side. It has a whole bunch of other functionality that at The Good we don’t typically use. But if you’re looking for a full platform it could be okay. And then if you’re in the enterprise space Optimizely is really the gold standard. They were the first really solid tool. They made a shift about two years ago to focus exclusively on the enterprise side. So we still have some clients that are on their legacy plans from five to six years ago that are paying 200 bucks a month. They don’t offer anything like that anymore. It’s now probably closer to 10,000 a month just for their platform. But if you are looking to optimize every experience; your mobile experience, and your app experience, and your desktop or web experience as well Optimizely is really where you’d want to play. But you need to have the budget and the traffic levels especially. This is another thing and I think most companies tend to want to jump into running testing but they don’t have enough traffic to do it. And they sign up for something like VWO and start paying the fees for the platform and they aren’t seeing the results very quickly. That’s where it can get frustrating. You really need to make sure you have enough traffic to be able to see statistically significant results in a meaningful timeframe to get the return on that investment. Mark: What would you recommend for sites that have low traffic amounts? Jon: I would recommend playing around with Google Optimize but running bigger tests. So what do I mean by bigger tests? Try changing an entire page content; don’t just change one piece of content on a page. So the bigger the test the quicker you’re typically going to see some results positive or negative. Now it’s hard to get fine-grained but testing even bigger tests like that you will see increases in the key metrics that you should be tracking like conversion rate, average order value, things of that sort that really are going to drive impactful meaningful improvement for your brand. Mark: Yeah, that’s great. I’ve noticed the same thing in the testing that I’ve done there where—and this leads to the next segment that I wanted to talk about that and that is saying that meaningful tests where the whole sale page changes. I just ran a test on another business I own where we did a whole sale page difference and the lift was significant. It was almost definitely the conversion rate on a completely different page design. When you’re setting up a new test especially if you’re coming in cold and say that you bought a business and you’re now working on different ways to be able to grow that business that you just acquired, where are some places that you would typically start with testing? Let’s assume that there is enough traffic there to be able to run more of this fine-grained sort of tests. Would you recommend some of these bigger tests to begin with or maybe a more nuanced approach? Jon: I would typically recommend a little more nuanced approach that is based on the results from that user testing. So by starting; I mentioned four areas and I mentioned the A-B testing last because the other three are really going to help you determine what you should be testing. And that’s almost as important as running tests at all. So if you are going; there are so many brands that we see that just sign up for these platforms to run tests and start running tests and they just randomly cherry pick ideas to run but they don’t have any hypotheses behind them or data to back those up. So really again understanding the data has to come first so that you can make some data back decisions about what to test. Now, what’s going to be impactful? I’ll tell you that if you start reading general articles online about testing the first thing they’re going to say is things like button colors, or maybe a headline change, or image change. Those very rarely actually move the needle. So you need to find that balance between a whole site or a page change and changing one small element on the page because it’s in the middle where you’re really going to see the results. But also the best way to be thinking about this is the testing needs to be a three or six-month plan. So that doesn’t mean that you should expect one test to run that long but you should be thinking okay I’m running this test to make what learning do I want out of that test; positive or negative change? That’s fine but you should always be learning something. In fact when a test doesn’t have the outcome that we want here at The Good or that we were expecting I should say we don’t call it a failure; we call it a learner. Because we’re always learning something out of that. That will influence what the next test is that we want to run. And then you continue to stair step that. Conversion optimization should really be thought of as an iterative compounding effect over time. There’s nothing that you’re going to change on your site that is going to double your conversion rate overnight short of massive discounting. And I just call that margin drain. That’s not an optimization. So you really want to be thinking about this in small incremental gains. That each test is going to help you get that will have a compounding effect over those three to six months. And so impactful tests are ones that you know are building the foundation for a larger change that you would like to see. Mark: Talking to about this it seems so clear that you’re setting this up into almost two distinct steps, right? The bulk of what you suggest of these four suggestions really relies and rests first on having good data and a good data framework for understanding your site and your business and knowing what sort of metrics you want. And once those metrics are set up then you can take a look and say okay well let’s look at this or what would happen if we were to change this micro goal? Does this micro goal really have a correlation with revenue or is it just something that we’re kind of seeing right now? Maybe there is no correlative effect. Maybe we can increase a micro goal and it doesn’t change anything at all. But I think the challenge then becomes not necessarily how do you run a really great A-B test but how do you set up a really good framework of data and data collection and those dashboards as well. What advice would you give to an entrepreneur who’s thinking about their business and saying okay I know I need to get data on my business, I know I have Analytics set up maybe I turn on the e-commerce tracking but I’ve not ever created segments. I don’t really know how to use segments; 10,000-foot view, what’s a way that we can instruct the entrepreneur here to just start understanding what they need to start setting up for a good data framework? Jon: Well I mentioned the other three areas besides A-B testing and you don’t have to go super deep on those. I know there’s—you could. As you mentioned earlier we could spend a whole hour just talking about each of those individually perhaps. I think you need to start somewhere but just having that data tracking in place and then paying attention to it; look at it once a week spend; set an hour side on your calendar, just spend an hour once a week looking at that data. You will start to see trends. You will start to see things that help you to better understand how people are engaging with your website. And just giving that that hour per week will put you miles ahead of the competition because you’re going to start to see those trends and the actions that people are taking on your site. And you’ll start to have empathy for how they use your site. Now I often like to say that it’s really hard to read the label from inside the jar. So many site owners or brands or e-com managers what they do is they build the site and all the content and the navigation for them because they know the product. But what happens if somebody comes in via Google to search in a topic. Google thought that site might be the best answer they send them there. They’re missing all of that knowledge about the products they sell. So when they go to the navigation and if it’s not set up appropriately the consumer has no idea what they’re looking at or how to figure out what product is the best one for them. So that’s another way that user testing can really kind of help. It’s brief empathy for the end user and helps you see it from that perspective as opposed to somebody who built the site or is on the site every single day. So I think two things; one, just have the data and look at it and you’ll start to build up that empathy. And that’s really going to help you understand what you should test and where you should go from there. Then secondly you can really start to dive deeper. You can then say oh I want to run scroll tracking on these pages because I’m finding that people aren’t reading this type of content that’s further down the page and I want to verify that. So you start to post questions. It’s not about the data; it’s really about asking the right questions once you have that data in place. Mark: You’re echoing exactly what I heard at Traffic & Conversion this past year. I went to a CRO talk and one of the bits of advice that he gave was to start with the questions that you want answered because then the reports will build themselves. If your question is how many people are signing up for this email list and then taking a second action well now you know the report that you need to build there is a report that shows just that information. The other thing that you’re saying that I think is fantastic and this is the trend in marketing in 2019 and frankly it started I think as early as 2017 and has been building steam and that is this personalization; both of the user experience but also in the way that we think as far as marketers and the internet is no longer just a big cold faceless place. Let’s start putting a face to those numbers that we’re seeing in Analytics and understand those are real people, real eyeballs and what is their experience like. And what you said you have some empathy for the user and what they’re going through because then you can start asking those questions and building the reports. And then once you build the reports, you’ve answered the questions, now you can start forming the thesis of okay this is what we’re seeing as far as the answer to this question. Now finally once we get all this in place lets A-B test. Does that summarize it? Jon: Yes; very, very well. Mark: Awesome. Alright, let’s talk about wins. Jon: Yes. Mark: I could do your job. Jon: I’m looking forward to it. Mark: I know that for a fact. Let’s talk about wins. Let’s talk about some of the—without getting and divulging clients or anything like that, let’s talk about this is what you want to put on your site as far as the testimonial because it’s eye-popping and then also the realistic sort of wins that you would see say over six to 12 months from a CRO campaign. Jon: Yeah. You know on average we see about a 9:1 return on investment. So for every dollar that’s put into conversion optimization on average, you’re going to see about a $9 increase in revenue. Now there is not one single metric that you can do that’s going to have a bigger impact on your site than focusing on conversions. But I think the industry of conversion rate optimization gets shoehorned often into that one factor which is conversion. We’ve talked about a lot of different metrics today that really need to be improved and optimized and that all goes back into conversion optimization as a whole. Of course, average order value, cart abandonment rate, we talked a lot about ROAs and return on investment of ad spend. I think in a lot of that is what needs to happen there. Now specific wins, I have a bunch of case studies up on our site. They’re public so I’m happy to talk about some of those. For instance, Easton Baseball; if you don’t know who Easton Baseball is they make aluminum baseball bats mainly and softball bats. About 99% of college swings are done with an Easton baseball bat. They pretty much own baseball bats for Little League. And if you’re a Little League player you’re going to use one of their bats. Now, having empathy for the consumer; what we found when we came into their site was you go to their product page and it would be a wall of bats. Now if you imagine what a bat looks like online and you see a whole bunch of them. You have no idea what the differences are, right? And they’re just maybe different colors but you really don’t know because you can’t feel the weight difference or really see how the size differences of the bats online that well. And especially if you’re a parent with a kid in Little League, you have no idea what bat you should be buying. And we did a bunch of user research and what we found was that consumers were coming to the site to buy a bat for their kid and they would buy the bat take it to practice and had spent a couple of hundred dollars on this bat and then the umpire tells them they’re not allowed to swing with that bat. Now the reason is that all these different Little Leagues have certifications for their bats and if their bat does not have that certification stamp on it you can’t use it. Also, either your kid swings for the fences or he’s just trying to get on base. And there are different types of hitters, and different bats fit with different types of hitters. There are also different price points that parents want to spend. So there’s some that might want to spend $100, some are willing to spend 500. It really varies. Using just those three metrics what we found was that so many parents are buying the wrong bats that they were getting frustrated and there was a high return rate. They were calling customer service quite a bit. Well, what we did after learning all of that is we built up bat finder. So instead of having parents navigate through all these bats and look at all of them and spend time trying to figure that out, they simply just answer three questions and those three questions kicked out three or four bats for them. And so these are the ones you should really look at. Now once you got to those bat pages they often had; Easton had put in a ton of technical terms that were branded around what the bats did. So I can’t remember the names exactly but instead of just saying this bat reduces sting because with an aluminum bat if you hit it really well and you’re hitting for the fences you can sting your hands really bad. And Easton has some wonderful technology that eliminated that bat sting and still let you get the great pop of the bat to hit it over the fence for a home run. Well, what we found was they had branded that term instead of just saying it reduces bat sting they came up with some random term for that. And consumers didn’t know what it meant. So we helped them solve that problem. And that was found through user testing and just having empathy for what the consumer is going through. So we fixed those two things on their site and they saw over 600% increase in revenue year over year and their conversion rates skyrocketed. I think it was 187%. And you know when you think about it just having a little bit of empathy and making those two small changes can have such a big impact. And that’s really what conversion rate is about. It’s understanding what people are doing, what they’re not doing, and how they’re engaging, and using that data to then inform what should be changed and tested on a site. Mark: Yeah. And just to put this in terms of acquisitions; bringing it back to really the subject of this podcast here, I want people to think about this in terms of what I mentioned earlier on the podcast. If you’re seeing a 600% increase in your revenue which is phenomenal you’re also seeing a reduction in your cost of advertising to acquire a client which means your bottom line margin is actually probably improving more than that 600%. And that’s an assumption on my part. But let’s for the sake of argument just say that it also is increasing by 600% at a minimum, it might be even increasing more. And now you’re taking the multiple approach of maybe for an e-commerce business 3, 3.5, maybe 4 and you can start seeing how much you’re growing the asset value of a business that you own; maybe you acquired or you’re preparing to sell. You are seeing significant gains in that asset value of what you’re hanging onto to the point where the numbers really become kind of silly to even say it because it doesn’t sound believable. But that’s the low hanging fruit of CRO is the money that you said 9:1 investment to payback ratio. That’s phenomenal and for preparing to sell or buying and trying to grow a business asset value you’re not only getting that 9:1 you’re getting the multiple on top of that as well. That’s phenomenal. Jon: Yeah. And I’ve specifically mentioned Easton because it’s a public knowledge but after about 18 months to two years after we helped them optimize their site and then moved in and help them optimize their mobile as well for even larger gains there they did sell to another private equity firm and had a very good return on their investment there overall and that was almost entirely fueled by the digital side and the effort they’d all put in there. Mark: That’s awesome. Where can people learn more about you and more about your company? Jon: Sure. Yeah. So The Good you can find us online at TheGood.com. That’s just TheGood.com and you can sign up for our insights there. So if you liked a lot of the tidbits and helpful tactics I talked about today we do produce one great article per week about learning. There are no sales pitches involved it’s truly just educational content about conversion optimization; things that you can take home and do to your site and start thinking in this way. We fully recognize that it is really hard for one person to have all of the skill sets at their company to do conversion optimization. I think you talked about this earlier when you said hey you just mentioned all these things and that’s the challenge most people have around optimization. It’s true. It’s really hard for one person to do all of that. And so we try to help educate as much as we can around all of this type of things. But TheGood.com is the best way to get a hold of us. Feel free to email me directly if you have questions. I’m happy to answer questions that come my way it’s just jon@thegood.com. And I do try to read and respond to every email. So I will do my best. Mark: Yeah. That’s great. And as far as the task list, I mean you’re exactly right. The fact is CRO is a mix of being somewhat of a data scientist and there’s also a technical side to it as well being able to get all the integrations right and then there’s also the creative side as well to understand how to really understand the user testing and how that empathy and then be creative with the tests and ask the right questions. It’s very difficult to find somebody who can master all three of those skills and those abilities. So working with an outsourced team; I think CRO is one of those things where doing it alone is probably not the best approach unless you’re just really, really some sort of a renaissance man who can have these multiple disciplines. Thank you so much for coming on Jon. This has been an awesome discussion I’d begin maybe because I just love CRO but I appreciate you coming on and sharing some of the tips. Jon: Well, thank you so much for having me, Mark. I really do appreciate it. Links and Resources: The Good Jon’s Email Hotjar Optimizely

Getting his start in e-commerce proved to be a series of false starts for today’s guest, Jaryd Krause. While he knew that getting away from a career in plumbing and having the opportunity to travel the world was the ultimate goal, it took him some time to figure out how to get there. After several failed attempts, Jaryd realized he was not approaching his e-commerce career the right way and still had a lot to learn. Armed with the realization that what they say about ninety percent of all startups failing is true, he figured out that he needed to go in and buy an established business that had successfully passed the startup phase. He started to buy businesses and be so successful at it that people began asking him for advice on doing the same. Nowadays, Jaryd is running his businesses and coaching people on how to buy websites and earn passive income while following their dreams. Episode Highlights: How Jaryd got his start and some of his past failures in e-commerce. Where and how he found the first business that he bought. The advantage of looking for listings with professionals brokers. Some mistakes Jaryd has seen with buyers he’s advised. How he guides buyers to align the business they are looking to buy with their personality and past experience. How Jaryd teaches his clientele to become attractive buyers. Advice he would give to someone who is coming into the e-commerce realm for the first time. Trends in e-commerce and where Jaryd sees the opportunity for growth. One last tip Jaryd would give to someone just starting out in e-commerce Transcription: Joe: Hey Mark one of the things we need to do is to plug the movie intro. Folks if you know that what that movie was shoot us a note and we will give you an audio mention. Chris our content director is big on that. It’s awesome and no cheating though. We’ve had a few folks that admitted that they looked it up on Google. Don’t do that just send us a note by listening. Mark: Yeah, I think both folks have actually guessed right. Joe: Yes. Mark: I’m looking at you, Mike Nuñez. Joe: Alright, listen. You had Jaryd Krause on the podcast talking about something that we talk about all the time but it’s good to hear it from someone else. We technically as Jason will always say our client is the seller. We have a contractual obligation to the seller. But as I always say to buyers look I can’t help my client unless I help you as well; the buyer, and constantly having conversations with buyers on the approach to buy a business. It’s great to hear from someone else. That’s what Steven does. You say he’s from Australia. You had a—not Steven; Jaryd, you had a conversation with him about this and his job. His process is actually teaching entrepreneurs or people that might be from the corporate world how to buy an online business is that right? Mark: That’s right. So he does coaching in this and obviously, he has a lot of background experience in this as well. He started out buying smaller sites and kind of building up. And we just talked—had a conversation about his views on buying which is I think fascinating for us to do in our role because you and I have some pretty set ideas as to the best way to go about buying online businesses. We do this from the seat that we sit in which is working on behalf of sellers and representing them. But like you said we can’t do our job well unless buyers are also doing the job well and a good deal; a deal that’s good for a buyer is oftentimes a good deal that’s good for our client as well. Because if everybody wins, everybody’s happy afterwards, everybody’s making money; that’s the goal, right? So Jaryd and I talked a lot about some of the things he looks at. What does he look at and what does he coach when he’s teaching people how to make that first acquisition. So some of the things we talked about are like what are the struggles that people run into? How to get over this imposter syndrome that some buyers might feel when they’re coming into an acquisition like I’m really not the same class of this guy that built this business. And he gives some really nice practical tips on how to overcome some of those problems and address those head-on. So I want to get right into this episode here and just listen to what Jaryd has to say and this conversation. And just by the way a huge asterisk, here I apologize. My microphone wasn’t working properly on this. I thought I was recording through my regular podcast mic and was just going through my laptop mic so it’s going to be awful. But here’s the good news. I’m not really the person that you need to listen to. You need to listen to Jaryd. He’s got the good information in this episode. Joe: Well, let’s get right to it then. Mark: Alright, Jaryd thank you so much for joining me on the podcast. I don’t know if you’ve listened to many of our previous podcasts but we typically have our guests introduce themselves. I figured you know yourself quite better than I know you. So tell us a little bit about yourself. Jaryd: Thanks so much for having me on. I really appreciate it. So with about myself I’m from the Gold Coast, Australia. I love surfing and that was my goal to start making money online so I could travel around the world and surf. I got started in this a few years ago now and I started buying one business and then I bought another one and another one. And the reason I came into this is because I tried to start my own websites Mark and I just sucked. And I failed a fair few times. And I started failing forward and came across that saying 90% of startups fail. Well, it’s actually the studies being done with that one. So I realized if 90% of startups fail why don’t I go and buy a website that’s past that 90% failure rate so I’m not just struggling and struggling and struggling. And I did that. I taught myself how to buy a website and then I got a little bit of help from different mentors along the way. And then I bought one and another one and it kept growing and eventually replaced my income to a point where people started asking me how to do it. And that’s where I am [inaudible 00:05:30.1] in that position of teaching people as well just basically from my learning. Mark: So you said you tried starting some websites and they failed. Can you share any of those with us? Not to make you relive failures of the past but [inaudible 00:05:43.7] so you should know. Jaryd: Yeah. Well, the hardest one was—so I was in Egypt and I realized I didn’t want to go back home broke to my job as a plumber. And I’m like I need to go here. So I thought what I really want to do is travel the world to make money online. So I typed into Google how to travel the world to make money online. I literally typed that in and what popped out was people travel blogging. And I just went yeah that’s me. I’m going to go away and start travel blogging. And I did that for I think bit a bit over two years and I made a little bit of money. But what I realized eventually was just the competition was so fierce. Everybody with an iPhone was my competition pretty much. And it was a good value because I learned a lot on how to grow websites and how to build websites and all that sort of stuff. And that was—they did flop though like I’m just spending so much time on it and it wasn’t really worth what I was getting back like at all. I was spending a lot of time on it. But that time grew into a lot of knowledge and then I thought alright I’m going to start; the second one was I’m going to start a drop shipping business. And I got home and I got my phone and I just spent a month calling people to become suppliers for this store. And it was called AusGlobetrotter—oh no it wasn’t called that, my blog was called AusGlobetrotter and my drop shipping store was Trotter Gear. And I just wanted to put up a whole bunch of travel products like backpacks and heaps of these different types of travel products. And I got a bunch of suppliers and I built this store and I started making a few sales but it took a fair bit of— Mark: What year was this? Jaryd: 2013. And I started making a few sales and I’m like alright cool now I need to double this down and I forgot how long it takes to really build a business and get traction. Especially if I was doing it for free and not using paid advertising. And eventually, I realized that I was just coming up against some pretty fierce competition. You know all these big guys that are selling hundreds of these a week and I’m selling like one every now and then. And it was pretty deflating where I just I bit the bullet and ran around I’m just going to have to turn everything off and start again. And that’s been two businesses that I started and I learned a lot. I didn’t make a lot. Mark: You value was in the education of going through that. Drop shipping is something that is a tough category to compete in especially if you’re doing that around 2013. There’s too much and a lot of people are getting [inaudible 00:08:43.4] drop shipping. So how did you start to realize well why don’t I go ahead and buy businesses and websites that are already been established? When did you buy your first site? Jaryd: So I bought my first one in 2014; at the end of 2014. And I was pretty hair locked; I rushed off into it and it was a good investment and I got all my return back and everything like that and it kept growing but I should have taken a bit more time and a bit more—build a better process on due diligence. So I don’t know if that’s the same for everybody when they’re buying their first website. But it was certainly the case for me. I didn’t really seek out coaches or help or mentors I was just running it on the fly and yeah early 2014 and that—but when I did buy it I realized like wow I’m earning so much more money from the share market when I was investing the share market. Any sort of investment I have ever made I was making more money and I realized that was the norm at that time with the returns or the multiples that were around just in that year. Mark: So how did you start looking for your first business and how has that changed? I think one of the problems that buyers have today is deal flow, right? Every business I just put on the market that is worth looking at has literally dozens if not hundreds of people looking at it at the same time. Where did you find that first one and what are you doing these days to really secure good deal flow? Jaryd: Yeah. So I found out about this marketplace Flippa. I went on there and realized that was a lot of not so great listings and much like—and I’ve spoken to the CEO of Flippa a couple of months ago and they’re making some amazing changes; new CEO, it’s really coming around which is great. But then they just hadn’t had people that like though you were allowed to sign up anonymously and people were listing a lot of junky sites on there and it was—I felt it was a bit of the Wild Wild West. And I was just trying to find this diamond in the rough. And I looked for a long time. And that’s where I bought my first business. And where it’s changed now is I’m not so much on those marketplaces that are out now. It’s because you’ve got to sift through so many listings to find something that’s decent. And a lot of my clients they do that and they say I don’t really spend too much time on there. I say have a look every now and then but where we’re really finding them is the brokers like you guys where the listings; you guys have your brand name. You have a reputation. You don’t want to list something that’s a junky website or not so great. And that’s why you have your process before you list it for sale. You don’t want to sell something to somebody and it just goes down that go blow like that because people are going to complain and bad reviews; all that sort of stuff. And that’s why I like to look to the brokers like you guys because they’re more quality listings and there’s already been a slight bit of vetting done and it makes the process so much easier when you come to do your due diligence. You guys actually help us buyers get more information rather than us to have to rely on sellers as like yeah maybe I’ll sell my site here and I’ll see if I can get some interest and they’re just not like very prompt with their response should I say. Mark: Sure. So are you still active in buying sites? Jaryd: No. Personally I haven’t bought a site in a while. I’m really—I do look at a fair few sites though especially through my clients. I help vendors in due diligence processing and stuff like that. So it’s great to keep me in the game. If I wasn’t doing that I’d be actively just purchasing. But yeah, I learned stuff. It’s great too because I learned so much from that process too with my clients. How I can sort of take a backward step and not be fully in the game but I’m a bit out and just have a better—it’s a really good approach for both clients and myself. We’ve both gained so much from it. Mark: Yeah. So now you’ve transitioned over into this [inaudible 00:12:58.8] because of just how you’re doing and all that so [inaudible 00:13:01.7] learn is that—I’d like to pick your brain a little bit on what you’re telling people in this coaching process and some of the problems that you’re seeing. So let’s start off with this, out of the coaching clients or the clients that you’re coaching, these are all people that are looking to buy websites and they’re going out there and looking to maybe build a portfolio of these sites and getting into the game. What are maybe some of the top mistakes that you see most commonly among people that are looking to buy? Jaryd: Yeah. The most common one is where people just start seeing dollar signs. They start to see—and a lot of my clients haven’t really known that this industry even existed. And they start looking at sites much like a lot of people listening to this already know that your website is much like a property website where they can scroll through and look at listings. It’s the same when people find this out. I noticed when I first come to this like oh my god I can buy this business this much and the multiples this much and I just go and this is in my end and it’s only taking x amount of hours and they just go; they want to rush through it. And that’s probably the biggest mistake is they sell themselves into the business. And what I’ve noticed is that sometimes whether you like this guy or not—what Donald Trump says sometimes the best investments are the ones we never make. And I find—and this is what I tell my clients as well is that if you can’t sell yourself out of the business because the data shows it is so good. I feel that it’s an investment that you need to really pursue. But instead of trying to sell yourself into the business why don’t you try and sell yourself out of it and if you can’t then move forward with it. In saying that cover all your steps during due diligence. And that’s probably the biggest thing that I find when people come and want to buy a website. The second thing is a lot of people don’t know so much about SEO and traffic and websites; how they work and stuff like that. So I have a few—a process and a few lessons teaching people what it actually is first, how it is incorporated in websites, and what it means for a website, and how important it is to gain traffic and to build your business up. And then there are obviously different techniques of marketing. And I think whether it’s paid or SEO and a lot of SEO now is paid SEO. But that totally; they are two very important things. I would say a top thing as a third thing would be people being confident in speaking to the seller and knowing what questions to ask and knowing how to ask those questions in a way that it’s a conversation. I noticed when I first had my first conversation with the seller is I asked a question about SEO and then I started talking about the finances for 10 minutes and then I went back to SEO. And I could tell after I came back off that call and a few months later I could tell the seller was just like these guys need to be game and I made the call really clunky because I was asking questions haphazardly. So that’s a big thing is coaching people to have the confidence to speak to sellers because when they’re first doing it they’re like oh my god I’m speaking to like—I know that when I first did that I was like I’m speaking to a business juggernaut here that’s owned business. They’re a gun, I’m nobody. And just teaching people that like hey you’ve learned so much through this process of working for me, you actually know a lot more than you think you do. It’s just a state; the state of being really. So getting them to state and really understanding like you’ve got this and that’s a huge thing that we have to teach for sure. Mark: I want to go back to your first point here, the first mistake that you put out there, and that’s the people that are seeing just the dollar signs, right? [inaudible 00:16:52.3] into the business and it’s just that I’ve definitely seen that. Personally, I’ve experienced that as well [inaudible 00:16:58.1] a couple of years ago where I talked about in that position that I made that was a mistake and I did just that. I sold myself into the business and I just flew completely past all the red flags and caution signs and everything else and I thought I can take care of this [inaudible 00:17:16.0] I know what I’m doing like I can somehow get around the work which you can’t. But I don’t want to talk about the extremes of that because you talked about being able to sell yourself out of this. So you sell yourself out of this, you [inaudible 00:17:29.8] it doesn’t make sense. In my experience, there are some personalities though out there that A. either will privately still look at the data in a way that they’re selling themselves into the business. So you look at the data and you rather excuse the stuff that doesn’t make sense or you rationalize ways that makes sense for you. Or you just hyper focus on the benefits. And I’ve seen the flipside as well. I’ve talked to buyers that have been looking for businesses now for three or four years and there’s always something wrong with what they’re looking at which I get. How do you coach your client to balance that out and to be able to really take that objective step back to say look this buyer I know that you’re risk-averse and buying any web-based business is risky. There’s going to be risks in there. Or on the flip side hey slow down pump the brakes a little bit we need to take an objective standpoint. Generally just how somebody can do get that on top of text maybe of what type of personality they are? Jaryd: Yeah it is definitely other than just a personality thing I think that’s a huge point and probably is but it’s also where you are at in your journey and whether you’re just on a; at different times on my journey I’m being so gung ho and then a lot of times like just being very stand back-ish. As for tips on how to navigate that is I think people if they ask themselves like alright here’s if I just do a massive pros and cons list. And they go here’s what could happen that I don’t want to happen. And you know here’s the cons and here’s the pros and then not just have yourself look at it but have somebody outside of being invested in this vehicle of investment to look at it as well. And I think that’s very helpful and that works for most of my clients because I get to look at it because I’m not like invested. And I had a call with a kid yesterday and he was like yeah I want to go out and buy this business. I’m like do you think this is—and I didn’t say like don’t buy this business. I’m just asking questions in a way that helped him understand whether it was right for him or not because that’s when we get the most profound learning; it’s when we ask them questions and they come up and they ask these themselves rather than I just blurt the answers onto them. But I feel that that’s a really good technique of getting somebody else to outside of it have a look at the numbers and the pros and cons and then that person asking the person who is looking on the business like are you willing to weigh up these risks, are you willing to take on these risks with the possibility of achieving X result? And I’ve done that with my second business with my dad and my third business with my dad. And my dad I love him so much but with parents what I find is they just want to protect you. And they love you but they just want to protect you. And dad was like saying like no this is a terrible, terrible business. And a lot of the business was—the financials were like; because I was buying in Australian dollars; I wanted to buy in Australian dollars because I was buying it from an Aussie seller. But I converted to US dollars for where the platform they’re selling it on and then also from US dollars into a different currency that they were trading through. And it made the financials very, very messy. And my dad just like flat out refused. Do not buy this business. And I rushed off and I didn’t rush off; sorry it took me like—I went through and I thought about this and our process for over a month. And I asked myself am I willing to take this risk to possibly achieve X? And the answer was yes because I knew the risk. I was willing to take it to achieve that. And it worked out amazingly well for me. But I think that’s a great process that people can do. Mark: Yeah. That’s good. I think a lot of this actually ties into my next question because you have said the third mistake that you see was that confidence speaking to a seller. Now when you were speaking to sellers you had a little bit about imposter syndrome. First of all wondering why am I even on the phone, and you’re kind of all over the place with that and giving the impression of not really being up for the game. I know we talked a lot to buyers and on this podcast, you talked a lot about making a good impression to a seller, right? Sellers in today’s market they have choices in who’s going to buy their business usually. And sometimes the best offer doesn’t win because of their buyer. So there might be another buyer who has a better offer and [inaudible 00:22:15.2] paper. But if a seller might know the buyer better then they’d go with them. So there a process that you really use to ask the right questions and stay on track in making sure that here’s the financial questions and now here’s your product sourcing questions or your content guidelines or whatever type of business. Do you teach a method for this for looking at approaches to buyer and seller conference calls? Jaryd: Yeah. And that’s definitely a good question. Like how do you become an attractive buyer? Because you’re so right; there’s people that know their business and there’s people that want to sell their business to somebody that can take it to the next level and not someone is going to just butcher it since they get it. And that’s hardly—I think that’s really important for everybody who’s a buyer looking to buy a business if you can understand that and really respect that business, not just go—I mean they come in and just be a Wild Wild West cowboy and do this sort of stuff. I think that’s a really good place to come from when you do go to jump on the phone is respect that that person has put a lot into that business. And if you come from a place of respect the rest will fall into place. But as in the techniques I feel on how to be attractive buyer is to ensure that you do as much research and you know as much as you can about online businesses. And you know the lingo. Like when people first thought they may not know what SEO is or SEM or CRO and all these different types of terms. If you can speak the language of the seller that’s going to definitely gain you some points I feel. And if you are respectful and you make sure the conversation flows quite well and you’re not too hard like you don’t make the interview or your sales questions too much like an interrogation; if you can have some enjoyment and make sure it’s a fun and safe conversation then I feel that you come across as a far attractive buyer. And there’s also so many other techniques that you can use through—what’s it called an NLP; neurolinguistic programming in matching the seller’s energy and how you contact and phrase your questions with a middle that sort of stuff. But if you could just forget about that and throw that out the window if you come from a place of respect and you really understand the business and not just the business but the industry as a whole then the buyer is going to see like okay well this person’s really done a lot of due diligence. They’re asking really good questions. And I can see that they care about this business not just in a financial way but that they could be investing in this business to ensure it grows. And I want to be careful with invested in the business with emotions because you do need to be attached to a certain point as well. I feel that I think they vary; all those things help quite largely into being an attractive buyer. Mark: And a lot of that’s very, very good advice there. I want to talk about some of the suggestions you would give to somebody who is getting into this initially. You talked a lot about knowing the language and understanding some basic concepts is SEO and you teach some of these things as well. I know for myself with Quiet Light Brokerage we get people that are coming in from the offline world; brick and mortar world who are coming in first time and many of them will just say I want to buy an online business, others might say I want to buy an e-commerce business then I have a few ideas of what they want and don’t want. But a common question I get is do I need experience before buying an online business? So I’m going to throw that question at you. What do you think? Do you think somebody needs experience to buy an online business? And if so what type of experience? Jaryd: Yeah. I wouldn’t say you need experience to buy one. But I would say you definitely need experience to grow one. And not just experience but education. Because everybody says like I should you have experience and you can’t just—I know this when I first started looking for jobs when I was younger I was like you just you can’t go away and get a job you got to have some sort of experience but you’ve got to start somewhere. And that somewhere is education. So if people do decide that like hey I’m going to go from brick and mortar to online businesses is like invest in your education in that. So then you can become more confident not just when you speak into the seller and become an attractive buyer but like hey I know what I’m going to do when I purchase this business. And I think it’s an unnerving thing for somebody to come to the online world and go I’m going to buy a business but not know what their plan of attack is or what their strategy is once they do end up owning that business. And if you have anybody that’s listening and has that feeling of like I don’t know what I’m going to do I would suggest that you go away and get a bit of education. And there are so many people out there that do teach people how to start online businesses and that could be a place who will teach me where to buy websites as well. But understand and get some education on how the online business realm actually works. And then you put yourself into a better position for sure. Mark: Yeah, that was what I would say as well. I often recommend the people to just understand the language. You don’t have to be an SEO expert but understand the business and what people are talking about. But then understand what you are personally good at; maybe it’s negotiating contracts [inaudible 00:28:01.0] look for a business that you really could get that optimized in that area and accelerate that. What are some of the trends that you’re seeing recently? You’re looking at a lot of deal flow and working with a lot of buyers who are currently in the market. Are you seeing any trends emerge over the past 12 months and maybe even forward-looking as well, are there any trends that you see coming up here? Jaryd: I think hugely obviously Amazon, right? They’re making some massive changes. We’re seeing a lot of Amazon associate and Amazon FBA up until now. It’s been big. Like a lot of Amazon FBA businesses are popping up and they had started quite a few years ago. But it can take time for it to snowball and traction on the shore. And Amazon FBA is a great way to go about it. People I think before these even existed didn’t realize that there was like things like Zappos and different companies and different ways you could do order fulfillment for instead of having to do just drop shipping you could buy bulk from wherever you want in the world and send it to an auto fulfillment agency. But the way Amazon does it is they make things so much easier for you and feasible for everybody. So that’s something that I feel is definitely been trending or whether it’s had its trend or not, I’m not so sure. You can always speculate but you can’t always be certain. And I feel now that with a lot of changes that have been happening with Facebook advertising and different types of advertising where it’s getting more expensive and I’ve talked to a lot of people especially a boss over the world in Australia that they’ve been having troubles with getting results in marketing on that platform. I feel hugely that SEO and great content is going to come back into being a massive way to grow your business; the ones that you do buy. And I feel that’s definitely going to start trending a lot more. That’s what I feel and that’s what I see. Mark: That’s fascinating. I want to pick your brain a little bit on that. Why do you see that coming back and then how do you counter that people that are saying voice aided search; Google Now and obviously Amazon website and Siri are pulling away from SEO? Where are you seeing the growth there, and what leads you to believe that that’s going to be a good opportunity in the future? Jaryd: Sorry, what are you saying they’re pulling away from SEO? Mark: Voice aided search as opposed to just type initiated search where you get results. You know you ask Google for when [inaudible 00:30:38.5] form and you’re going to get an answer right away as opposed to coming to process with content sites. Where do you see the opportunity in SEO? I guess that would be the main question. Jaryd: Yeah. Where I see the opportunity in that is in particular search as opposed to just where people hey Siri or hey whatever it is and give me an answer is that those deeper questions where you can get a profound value not just like a quick little win like you know what’s the temperature today or whatever it is but for like something that’s more in-depth like hey Siri how do I scale my business by using a specific type of conversion rate optimize—sorry my Siri just went off then. Mark: [inaudible 00:31:20.0]. Jaryd: Did you hear that? Mark: Just a little bit. Yes, that was pretty funny. Jaryd: Sorry guys. And so I feel that if you want to go like hey I want to learn how to do this type of conversion rate optimization on my business on my website. I feel that if you got really good content behind that as—I’m not so sure if that’s a blog post but it could be podcasting or definitely some sort of way people can consume content in audio or video. I feel that that’s going to come up the top a lot more. That’s a way people are consuming it a lot easier I feel these days. And I feel that that’s going to win in content in audio and visual. Mark: Yeah. I think watching how content has evolved in the past 20 years is fascinating. Jaryd: Yeah. Mark: But [inaudible 00:32:13.0] not as much content as we can and it’s really matured to the point where if you’re not offering clubby content you’re just not going to compete at all. Jaryd: Yeah, that’s right. Mark: Yeah. It’s gotten way more difficult. Alright we’re pretty much at the end of our allotted time but I do want to ask you what sort of; just as you were [inaudible 00:32:32.7] somebody for. You know a 30-second ride up and down and they said oh man that’s really cool. What would you want to tell me to get me started in this route? What would you give somebody that’s just starting out? Jaryd: Yeah, I would say hey go to website brokers such as you guys and see what is available out there and start learning about the different types of business models. And you can see how much the businesses cost, what their expenses are, what their income is, and then also what the multiple would be. And you can see the sort of returns; start running the figures, running the math. And then dig deeper into those business. And when you start getting prospectuses on different business models then you start to get a bit of an education based on different types of online businesses and then grow from there. And then once you start doing that and you get more experience in looking at that. And it takes time to do so then you can decide if this is a route for you or not. Mark: [inaudible 00:33:28.2] that’s fantastic advice. Where can people learn more about you or reach out to you? Jaryd: Yeah. So www.BuyingOnlineBusinesses.com; businesses plural. And then you can search that in Google or any search engine or go to my Facebook or social handles which is just Jaryd Krause. So Jaryd Krause. Mark: Awesome we’ll link to those in the show notes. Jaryd thank you so much for coming on. Jaryd: Thank you so much for having me. I really appreciate it.   Links and Resources: Jaryd’s Website Jaryd’s Podcast Facebook YouTube Channel

It’s a jungle out there. Today we invite you to reflect on the state of the internet world we live in as entrepreneurs and the impact e-commerce can have on hundreds of thousands of people. One of the most interesting trends we are seeing in the arena is the service companies popping up to support the thousands of Amazon merchants out there. Today’s guest, who quickly turned his back on a career in engineering in his twenties, started dabbling in Amazon sales until he came up with the idea for Jungle Scout just before taking off on a three-year world tour. He talks to us about how he spent those years living the true entrepreneur experience while actually building his now 100 person company. Jungle Scout searches, captures, analyzes and refines billions of data points from Amazon to deliver the most accurate data in the industry. His 200,000 plus customers were all clearly in need of his merchant scaling tools. Jungle Scout also offers numerous free educational resources to give young entrepreneurs everything they need to succeed. Episode Highlights: How Greg convinced his wife to give everything up to travel the world. The hesitation, the results, and the payoff of that path. The employee structure of Jungle Scout. The company’s original design and what it has evolved to today. Stories that stand out as models of success for Jungle Scout. The Five Minute Pitch – what it is and how it’s helping entrepreneurs succeed. How the Jungle Scout scholarship program is motivating young entrepreneurs. What’s coming up for Jungle Scout. The company’s new initiatives for bringing ease into scouting suppliers and merchandise. How his products have created friction with people in the business but also brought them in as clients. Transcription: Mark: Alright allow me to relax philosophically here for just a minute and I invite you to reflect on just how impactful our current era is with the Internet. Back at Traffic & Conversion in February, I actually hear Richard Branson talk about what they would do to get attention and PR; crazy stunts, parachuting into places and doing these incredible things just to be able to impact large volumes of people. Well as online entrepreneurs we have that at our fingertips and can do that often from our bedrooms just by putting up a good marketing campaign online. But we have the ability to impact thousands of lives and have this network effect as well of these thousands of lives impacting other people’s lives. And I looked at where we’re at with the Internet today and I think one of the most influential areas are all the service companies that are popping up and SaaS companies popping up to service the Amazon merchants that are out there. And I’d say by far one of the leaders of the pack is Jungle Scout. They—most of everybody that is in the Amazon world, you know who Jungle Scout is. They’re kind of ubiquitous with this idea of product research. Joe, you got to talk to Jungle Scout in this week’s podcast. Joe: Yeah. Greg Mercer founded Jungle Scout just a few years ago; 4 ½, 5 years ago, an interesting story. Look we talked all about how he came up with a concept, even where he met his wife Lisa, how we started the business, travelled with his wife Lisa for 3 years overseas while growing Jungle Scout. He has only settled back in Austin for the last year and a half, and the size of the company. And then really it was about his entrepreneurial journey. And then we touched on some of the key features in Jungle Scout and some of the other things that Greg has done with his good fortune like scholarships that you can find on the Jungle Scout website and in the show notes here. You know being entrepreneurs and having an easier time impacting people one on one or directly is something that we know here at Quiet Light because we’re fortunate enough to be in a situation where we do work one on one with most people. And we know what it means when they sell their business or buy a business and get to stay home and see their kids more. We talked about that a little bit with Greg and like most entrepreneurs he started Jungle Scout to make money. But now that he makes great money that relieves the stress, right? We all want to have money in our bank account to relieve the financial stress but the big thing that fills his cup is the impact that he’s having on individual lives. And he gets to hear about that impact when he goes out to conferences and they have a booth like out at Prosper and people come up to him and say listen this is my story, this is how Jungle Scout changed my life. And Greg says quite honestly look it wasn’t Jungle Scout; it was you, it was your effort, it was your risk, your reward. Jungle Scout was just a tool that you used. So he’s very humble about that but a great guy. Just a good human and I think that there are 2 or 3 things that come out of this podcast. First and foremost you get to hear a great entrepreneur story. He didn’t go to school for business yet here he is running a business with 100 the least. What it’s like to travel all over the world with your wife? It’s right for some people, it’s wrong for others. And then just the good things that he’s doing with Jungle Scout Scholars and then all the features that Jungle Scout has, and the scariest one. And folks you’ve got to listen all the way through because we talk more about it at the very end. This is not a pitch for Jungle Scout. It’s more of a story of entrepreneurial success. But you can literally find—can I give this away Mark? Can we give it out, too much information; what do you think? Mark: Oh no it’s a great tease so get to the end. Joe: You can find your favorite product on Amazon and then use the Jungle Scout tool to find out who the manufacturer is in China. It is scary. But like Greg said it doesn’t mean you’re going to be successful. We know that all great ideas don’t achieve success. There’s lots of motes around these great listings on Amazon so it’s no guarantee of success even though you find them in [inaudible 00:05:10.9]. But, great podcast, great guy, looking for to get to know him over the years as well. Mark: So he’s down in Austin, right? Joe: Yes he is. Mark: Is he going to come to our meet-up coming up at the end of May? Joe: Yes he is. Mark: And when and where is that meet-up? For anyone in the Austin area or who has always wanted to go to Austin area, this might be an awesome opportunity to meet Joe. I probably won’t be there. Amanda will be there as well and some really, really good people are showing up to this as well. Joe: Yeah everybody that we’ve worked with over the years that’s down in Austin are getting an invite and hopefully [inaudible 00:05:44.1] groups is going to go. Actually, one person replied today and said thanks for inviting all my friends. It’s like you’re throwing a party for my friends. I appreciate it. It was pretty funny. And that was RJ at 101. It’s going to be May 29th at Oasis at Lake Travis from 6 to 9 pm and it’s just drinks nor dares and coming out with friends. Mark: Awesome, and we’re going to have a page up on the Quiet Light Brokerage website. We’re going to make sure it’s included in the e-mails that get sent out. And also on the show notes for this podcast so that you can RSVP if you do want to attend. We would love to see, we’d love to host it for the night; bring a friend, bring lots of friends. It should be a few hours of just really good networking and getting to know some really key players in the space. So please do show up. But now let’s get to the good stuff [inaudible 00:06:27.7] Joe: Let’s do it. Joe: Hey folks it’s Joe here at Quiet Light Brokerage and today we’ve got another great guest on the Quiet Light Podcast. His name is Greg Mercer. Greg, how are you doing today? Greg: Joe I’m doing fantastic. Thank you very much for having me on and it’s going to be fun to talk to you. Joe: Founder of Jungle Scout and many other things; a very impressive guy at a very young age. I just looked at your LinkedIn profile, listened to a couple of things on YouTube, and I saw your wife talking about you as well which was all positive by the way. Greg: Oh, that’s good to hear. Joe: Well you know the drill, we don’t have a whole lot of fancy introductions. So for those that don’t know you and don’t know the Jungle Scouts can you give a little bit of background on yourself and the business itself? Greg: I’d be happy to. So it’s probably most relevant to rewind back to my college days real quick. I went to school to be a civil engineer and graduated. I got a job working as a civil engineer and I just didn’t like it at all. I want to become an entrepreneur so I tried a number of different things. But the 1st thing I had a little bit of success with was selling physical products on Amazon. And that’s ultimately what led me to quit my job. I was able to kind of replace my income by doing that. My wife and I actually at that point sold all our belongings and started traveling around the world and living out at Air B&B’s and running our business from there. And one thing led to another and I—the biggest problem that I had with scaling my Amazon business was finding new products to sell. So I had a number of products up, some of them are doing really well, some weren’t doing really well. I didn’t really know why some were doing well and some weren’t. And what it came down to was the amount of demand there was on Amazon for these products. So being kind of an engineer by background and a very data driven person, I was able to create some algorithms to estimate how well all products on Amazon sell. And that was ultimately how Jungle Scout got started. So I’d never started a software company before but I 1st built a simple extension. I was like no one will probably ever buy this thing but if nothing else I can just use it for myself. And it turns out we were able to get people to buy it because if you fast forward all the way today there’s about roughly 100 people that work in Jungle Scout. We have over 200,000 customers so it’s grown quite a bit since the 1st day when I didn’t think anyone would buy it. Joe: That is absolutely crazy; 100 employees and did you say, 200,000 customers? Greg: Yup over 200,000. Joe: That’s amazing. So I want to talk about a few things, I want to talk about you travelled the world with your wife while starting Jungle Scout so that’s probably the most important thing. I love the fact that you went to school for civil engineering and then took a completely different path in the sense as an entrepreneur. But then you were able to start it as an entrepreneur while traveling the world and with your wife of all things. And then I want to talk a little bit about what Jungle Scout does and a couple of the other things that you’re doing because of the good fortune you’ve had in the business through Jungle Scout. But let’s get personal for a minute. I mean you are what 30, 31 years old I’m guessing? It looks like— Greg: 31. Joe: Right. So you’ve been at this for a long time. Did you meet your wife in college? Greg: I did actually so yeah we both went to school at Auburn and that’s how we met. Joe: Amazing. And she actually was willing to sell everything and travel the world with you or was it her idea to do that? Greg: I think it was my idea. I had read Tim Ferris’ book 4-Hour Workweek and I was like well this is pretty cool. Instead of living here we could go live in all these cool exotic places in much less money. And so I was like Elizabeth we should go and try this. And she was like yeah you’re an idiot. We’re not doing that. But I kept on bringing it up over the months and she’s always really enjoyed travel. I think her biggest hesitation at the time was she was working for Target and was on a pretty fast crew path. And I think that’s where she envisioned her career moving forward. So I think that was her biggest hesitation. It was like man I’m kind of going to give up my career a little bit, or at least put it on hold if we’re going to do this for a year or 2 or 3 years or whatever. So I think that was her biggest hesitation but she’s like you only live once let’s go for it. And yeah we both ended up loving it. We did it for 3 whole years so we both ended up loving it a lot. Joe: And you launched Scott but just before you took off for a while you were over in Southeast Asia? Greg: Yeah it was actually just before I took off. I like the week before we took off. Joe: And how many years ago was that? Greg: That was is January of 2015, so 4 ½ years ago. Joe: So really you’ve run the business for the 1st 3 years of its existence by traveling. Greg: Yeah. Joe: That’s incredible. Now the 100 employees that you have are they mostly remote, mostly they’re in Austin, whereabouts in the world are they? Greg: When we started the company it was fully remote. I was traveling around so I didn’t have an office to hire this people in. So we are fully remote. In January of 2018 is when I moved to Austin. That’s where I live now. Since then we’ve been doing a lot of our hiring in Austin. So I think about maybe 40 of the people are in Austin now and the rest of the team is either remote. And then we also have an office in Vancouver. And then we opened up an office in Shenzhen in China about 6 months ago. So some of the team is there now. Joe: Amazing. So we’ll talk about what some of those offices do for Jungle Scout and the subscribers in a bit. Now that you’ve gone through college, marriage, travelled the world, entrepreneur, you worked with directly and indirectly and inspire a lot of young entrepreneurs all over the world. Is selling everything, packing up, and traveling the world something you would say you got to do to that young man or woman that has the opportunity and is not tied down to things of this nature? Greg: You know I’d say it’s not for everyone. And for me, it’ll probably be like one of the most fond memories of my whole life. I kind of go in through a period. I think I learned a ton about myself. I met a lot of really interesting people. I learned a lot about different cultures. I think we visited roughly 30 different countries. We would spend about a month sometimes 2 months in each country. So when you spend like a month or 2 somewhere sometimes a little longer but you get like a pretty good sense of just kind of like what day to day life is and what the culture is really about much more than like on a weeklong vacation. So during that, I got to just learn a ton about all these different countries, fascinating things that a lot of countries do like very well. I was able to bring back individual things. I think certain countries do very well so that was really cool. So I’d say it’s definitely not for everyone. I think to a lot of people it’s very stressful. You’re moving all around the world and you don’t have any kind of—or we didn’t have any kind of a home base. So with all that being said it’s definitely for everyone. But if you’re interested in it and that seems like something that you’d enjoy I would definitely recommend for you to try. Joe: Is there a particular book that you would have and go to? Is it Tim Ferris’ 4-Hour Workweek or is there a great travel one? Greg: Probably. Joe: Probably; okay. Greg: Yeah I’ll probably just do the Tim Ferris’ 4-Hour Workweek. It’s a little bit outdated now. I think it was written over a decade ago now but the spirit is still the same. Joe: I’m reading one of his books now and I’m looking around like my office here. I don’t see it but it’s the tools to tighten switches. It is one giant book. The great stuff all from the podcast off from those he’s taken over the years and a lot of the 4-Hour Workweek stuff as well. It’s funny we’ve had Bill D’Alessandro on the podcast. Do you know who Bill is? Greg: The name rings a bell. Joe: He’s from South Charlotte and he runs a consumer products group down at Charlotte. He does a lot of speaking, very close friends with Andrew Youderian from eCommerceFuel and Bill had that same 4-Hour Workweek life at one point and do the same thing working from a beach in Southeast Asia or somewhere. And we talked about this on the podcast now he has staff, an office, a warehouse; in many ways just like you. And he finds that he actually has more freedom now than before because he’s got people that can actually do everything for him instead of having virtual assistants that he has to check in with every day. Greg: Right. Joe: So it is not for everyone like you say but certainly something to explore. It’s not for me and my wife. I was in your shoes once upon a time when I was living in the frigid cold of Portland Maine for those folks that are listening out from Portland Maine. And this is back in the day when I heard a commercial for GoToMeeting.com I’m like what? What is that? And I went across the hall—I signed up for a free trial. I went across the hall to my other office and log in get the free thing and then go to my PC is what it was. It was a derivative of that. And I log into my PC from across the hall, this is 2nd nature now but I was amazed. I was like this is incredible. I went home and I told Christiana and said hey we’re going to Florida for the winter. And she said we are not, you’re an idiot. [inaudible 00:15:35.1] we did it for 5 years and then we got the hell out of Maine because it was too cold. Sorry for those folks that are still there. Were in North Carolina now and do love it. But this isn’t about me it’s about Greg Mercer and Jungle Scout. So let’s talk about Jungle Scout and what it does. I know what it does. I’ve used it a little bit in the past. I know a lot of clients that bought and sold business with Quiet Light have used it. So can you just touch on what it does—let’s talk about the progression of it; what it originally did and what it’s evolved to today. Greg: Yeah. That’s a good way to frame it. So it started out as just a Chrome extension. So most of the listeners are probably familiar with Chrome extensions which is a little add on that you install into your Chrome browser. And what it did is when you were visiting Amazon and you were on the listing or on a search page, you’d click this little Chrome extension and you’d see a little pop up. And on that pop up there was a number of different pieces of data. But the one that people care about the most is the estimated sales data. So that’s what I was talking earlier; developing these algorithms that can estimate how well any product on Amazon is selling. Back then it was pretty poor accuracy, today a pretty high degree of accuracy. So that’s how it started. Shortly thereafter we launched a web application and the primary functionality in there was again to find good opportunities on Amazon or find out how well things were selling. And that’s kind of been transitioning over the years. We now have keyword research functionality. We now have functionality to help you find high quality suppliers or factories. Actually launching in 2 weeks is functionality to help you launch your product on Amazon. And then by the end of the year, it’s going to be everything to help you kind of like manage and optimize your Amazon business as well. So the way we like or our mission here at Jungle Scout is to really empower and inspire Amazon entrepreneurs with the tools and resources they need to be successful. So we’re building all that into our software but then we also have just tons of free resources in education and a whole bunch of other stuff just to help people be more successful on Amazon. Joe: Yeah I’ve looked at some of that both on your website on LinkedIn on YouTube. You are all over the place. It’s pretty impressive the reach that you’ve got and the folks that saying you are praising Scott Voelker is somebody we know in common does that well and does it all the time. I love the empower people approach and to fulfill their dreams not only the staff that you have but the people that used to program, the 200,000 or so subscribers that you have. A lot of people in your—let’s call your world, I want to call you an influencer because I think that’s what you are Greg. So in your world, a lot of folks say I’ve made X many millionaires. You’ve heard a lot of stories over the years of the way that the tools that Jungle Scout has and provides to people how it’s changed their lives, can you think of anything or anyone that stands out and what an impact it had in terms of with their Amazon business and how it changed their lives? Greg: I can think of a whole bunch of stories. And actually, I was—I think the last time we saw each other was at Prosper Show. And going to conferences and stuff like that it’s always a great chance that I talk to all these customers in real life. So like probably a dozen times throughout that 2 or 3 day conference whatever it is like someone came up to me very emotional a few different times in tears but like just telling me this life story about how they found Jungle Scout and how it helped them create this business. And that’s like a really, really special thing to be a part of. I never would’ve thought that in a million years like starting this business that people would come up to me in tears being like—just telling a story about how they were at a really low spot or they hated their job or whatever else and especially starting the business is what changed their life. A lot of them kind of attribute or say like Jungle Scout is kind of what caused that or encouraged them to do so or empowered them with the tools to have the confidence to do so. So yeah I mean there are tons of stories but I think most of them have like a ton of things in common, at least the ones that are most memorable are impactful to me. Joe: And it’s the impactfulness I think that is most interesting. I think that with success and some of the things that we do, and you do, and Scott does and Mike Jackness another friend in common it’s A. being a good human and helping people. There’s peace of mind that you get with money in your bank account but there’s pure joy, satisfaction, and other things that are so intangible by helping others and having people come up to you like that and say what you’ve created has changed my life, what you did changed my life, what you said, the way you helped me change my life and very impactful stuff. Greg: Yeah very much so and if you would have kind of—if I would really listen to this podcast not that long ago, just like 4 or 5 years ago, I would’ve been able to really like understand that at all. I don’t think—at the time this seems like super shallow. But if I’m just being honest with myself, my only goal was just to make money. And the reason that was my goal at the time is like that’s how I kind of like saw freedom. It’s like okay I can quit my job or I have the security so I don’t have to worry about it or I was always like—my 1st few years being an entrepreneur I was always so scared. [inaudible 00:20:59.8] like go back and get a job. Now it’s like the most terrifying thing to me. So honestly—when I’m being honest with myself all I cared about was like the money at the time. And then kind of like as I felt like I was financially secure and kind of like no longer have those worries. That’s when you’re going to start asking yourself those questions like man what really does bring me the most happiness or like the most joy? And for me helping entrepreneurs is like very, very high on the list if not the top thing. So I would do these different case studies or free educational piece of content or whatever else. And people often say to me why are you giving all this away for free or why are you doing this it’s only creating more competition for you or whatever else. And when I hear that it would just remind me of like yeah okay 5 years ago I would have said the same thing. I wouldn’t have understood it but then I talk to these other people who are like successful entrepreneurs or whoever else and they’re the ones who kind of like can understand that a lot better. It’s like okay once you get to a certain point it’s about okay what really brings you a lot of joy in your life, a lot of happiness and you want to optimize for doing those things. Joe: Yeah and that free content and everything you’re giving it away for free but you’re helping people and if you’re in this for the long term it’s going to come back around. And I think you’re in this for a long term. Absolutely, yeah. Some of the things that you’ve done over the past are overflowing into other things that you have ventured into. And I want to talk about a couple of them. You and a group of friends have started something called the 5 Minute Pitch. I took a look at an episode or 2 of that. I’ve talked to Mike about it. I saw the one with Andrew from ECF on it. Do you want to talk about what 5 Minute Pitch is and how you’re helping entrepreneurs? Greg: Yeah. So this kind of goes back to what brings me joy. And helping entrepreneurs is definitely one of them. It’s also fun to hang out with other people I enjoy being around. So this was like a nice mixture of the 2. 5 Minute Pitch is shark tank style pitch competition where anyone with a small internet business who hasn’t raised institutional money is eligible to pitch; so different people with all different types of businesses. Everything from a small software business to an e-commerce store to just developing a product and selling it through Instagram ads or whatever else. They pitch their business to myself and 4 other judges. And at the end of the season, the season actually ends in just a few weeks; we’re giving the winner a $50,000 prize. They don’t have to give up any equity in their business or anything. It’s just prize money to help grow. So yeah it was a—we’ve only done one season of it. It was really fun and we’ll probably do a few more seasons in the future. Joe: That’s great now everybody that listens to the podcast knows that we don’t pitch products and services. But I think that they all should look closely at Jungle Scout and 5 Minute Pitch. Take a look at it if you’ve got a product that’s just taking off and you want to get more into the e-commerce world. Take a look maybe you could be on season 2. Who is Kevin O’Leary in the 5 Minute Pitch? Who’s—and have you said you’re dead to me to anybody? Greg: You know I’ve been watching some Shark Tank before thinking about these different lines and me and most of the other judges I think most of us are all just a little too nice to be Kevin O’Leary; which in results probably makes it a bit worse for television. But we’re kind of just ourselves on the show. Joe: We had the founder of Happy Feet on the podcast a few weeks ago and he said that—and he did a deal with Robert on Shark Tank. Greg: Okay. Joe: He said that when you’re on shark—and I’ve talked to 5 or 6 people over the years that have been on, when you’re on Shark Tank when you finish up they make you go sit with a psychiatrist for an hour. You can’t leave 10 minutes n. It’s at least for an hour because they want to make sure that you’re not going to kill yourself because of some of the things that some people have said about your business; so pretty rough. Alright so let’s talk about something else I looked at before we jumped on the podcast here and that is the Jungle Scout scholar; JS scholar. What are you doing there man? Greg: Yeah. So it’s just a scholarship program that we started just over the years I’m thinking of different ways and kind of like give back to the communities especially things I’m kind of passionate about. So that’s one that we’re doing. Each semester we’re giving a scholarship to someone who’s kind of like in business school or maybe computer sciences or something in that area who also has kind of like an entrepreneurial spirit. So it’s pretty easy. Just create a little short video and submit it. Each semester we choose someone to give the scholarship to. And then with that also comes some mentorship for me to help them get their business off the ground. Joe: That’s awesome. I mean it really is. A lot of people talk about giving back and helping others, young entrepreneurs, entrepreneurs themselves but you’re actually doing it. How long have you been doing that program? Greg: I think we’ve given away 5 scholarships now so that would be about 2 ½ years I’ve been doing it. So it’s cool. Joe: That’s impressive. Now I’m going to talk to my 17 year old when we’re off. He’s applying to college next year and— Greg: Tell him to apply. Joe: He is not going to business school. He’ll probably be an engineer or maybe an art student, who knows we’re still working that stuff out. They change their minds a lot. They really do. Greg: Yeah I do too. Joe: I did as well. And we’ve actually had people that have put their kids through college and then bought them a business when they graduated which is very interesting. It’s almost like they shouldn’t have spent that’s $200,000 on college [inaudible 00:26:30.4] part of the business but kids get to grow up a little bit. What’s down the road, what’s in the future for Jungle Scout? What things are you going to add that are going to help those 200,000 plus subscribers and fend off some of the competition down the road? Greg: Yeah we have quite a few product initiatives going on right now. We’ve really grown our product team a lot over the past 6, 12 months. We’re going to really build out a lot of this stuff but most of it is around kind of what I spoke about earlier about right now the Jungle has got a tool at least that gets you up to until you launched your product on Amazon. We have a few other businesses that we have acquired or built over the years but we’re kind of combining those into a singular tool. So by the end of the year, the additional functionality you can expect is like the stuff from those other tools. So helping you manage your business in our PPC and optimize it; all these different areas is kind of like what we’re building in this year in 2019. Joe: That’s great I know that finding a great PPC company is often hard for folks, managing products we’ve got folks that buy businesses and just—I am looking for a great company that managed the entire thing for me so that’s fantastic. One of the biggest issues people have Greg as you probably know is sourcing great products. Is that down the road or is that part of Jungle Scout at all now? Greg: Yeah so we actually just released—so our newest feature is actually probably the one I’m most proud of called supplier database. And we actually just released this like a month ago. So it’s pretty cool Joe. So we—I guess you’ve seen this too that a lot of people have a lot of problems finding high quality suppliers. And I did too. And I also found like this was one of the biggest pain points of our audience. And when I really started to get into this, it’s like okay what’s the problem here because there are tons of factories on Alibaba. That’s how I used to find all my factories, just on Alibaba. There’s tons of them and what it really comes down to is it wasn’t like a shortage of factories or finding the factories or being able to communicate with them what it really came down to was finding a quality factory and vetting the factory before you did a production run. So like most of the horror stories that you hear are that the quality didn’t come out as expected or every once in a while you hear a horror story about someone who a factory just ran off with someone’s money or whatever else. And so there’s a few ways I used to try to combat this; one was ordering a sample at a time. However, the problem is that when you’re only ordering one unit, of course, they’re going to give you the nicest one. They’re going to like polish that one up extra but it’s like oh can I do that on a production run of a 1,000 or 2,000 units and that’s oftentimes not the case. So that was one way I tried to combat it. The other way was to get an inspection once the production run was finished. The problem there is when it didn’t meet the quality sometimes you weren’t able to get them to really fix what you wanted or is like sometimes a little bit too late at that point. So anyway the ways to try to combat it, the list was long but [inaudible 00:29:30.6] that effective. So what we did is we collected all of the US import trade data. So when you import something in the US you file some paperwork, yo give it to the government, and through this law called the Freedom of Information Act in the US, we’re able to get access to that data. We put it into a database. We made it easy to filter and search through. And the way that it’s able to solve this quality problem is you’re able to find factories on there, you’re able to see who their customers are, how often they import into the US, and how long they’ve been importing to US, the quantities; a number of different factors like that. So that’s really cool but we kind of took it one step further by being able to essentially search for any Amazon product or any brand on Amazon in here and you could find out who are their factories. Joe: Holy cow, that’s amazing and almost offensive in some ways. I would think if you’re an Amazon seller and you’re able to scrape through their manufacturers. That’s pretty incredible. Greg: Yeah it’s really incredible. It’s like the old way for me of finding factories was when I found product idea I went to Alibaba, order a bunch of samples, whatever else. My new way of finding factories is like when I find something that I want to sell, and like sitting next to me right here is a little espresso. So if I want to sell espresso cups, I would just go to Amazon, I would search for espresso cups, I would see who gets the highest ratings. So who has like 5 out of 5 stars with a whole bunch of reviews and I just find their factory. Because then like right away then you know that there’s a high quality factory. Joe: And you did that through sheer tenacity and hard work. What you’re doing at the Jungle Scout is you’re giving a tool to do it for them. Greg: Yeah. That what— Greg: And that’s what I do now; I just who the factory is of the highest quality product on Amazon and I just contact them and I buy from them. So it’s a much easier way to do it. Joe: Wow that’s amazing; that’s scary and amazing. Still, though I think for those that are going oh my God I’m never going to sell on Amazon because of that; it’s that moat that you build around with thousands of reviews. I did a valuation today for something that is a fairly competitive it’s in a very competitive niche but they’ve guy 17,000 reviews and the closest one has maybe like 1,100. That’s an enormous gap in reviews. So there’s a pretty big moat there. Greg: Right, and you know this Joe it’s—when we launched this there was definitely—we probably got a dozen emails of like really pissed off people because now everyone can find out who their factory is. But you realize this because you deal with people who are buying business all the time but it takes a lot more than just knowing a factory to create a successful business, right? [inaudible 00:32:09.4] like a lot of other steps. Joe: A ton of a lot. Greg: So just because people can find out who your factory is that doesn’t mean that they can just copy your whole business. There’s a lot more steps to it than that so I wouldn’t be too worried about it. We actually saw this exact same thing when I originally launched Jungle Scout because prior to Jungle Scout no one knew how well products on Amazon were selling. And now all of a sudden you could see how well every product on Amazon sold. So same thing I got like dozens of people emailing me pissed off because I was telling the whole world about how well their products were selling on Amazon. Joe: That was—they were pissed off shortly before they subscribed probably though, right? Greg: Right. So we’ve kind of seen a little bit of a similar thing with the supplier database. And then to your exact most people are like wow, well I’d rather have all this data and the whole world be able to know who my factory was than this type of thing not exist out there. Joe: Yeah I hate you but I’m going to give you my money every month because you created a great product. That’s awesome; fantastic. I didn’t know that it went to that depth and level where you can find the products manufacturer. That’s incredible. Alright, Greg, we’re running out of time, obviously, Jungle Scout is how do they find it? JungleScout.com? Greg: Yeah JungleScout.com if you’re not familiar with it you can read up all about it on the website. If you’re interested in just selling on Amazon too, I might be a little bit biased but I think we have like the best educational content out there and it’s all for free. You can find all of it under the free resources section of the website. So any format you like learning in whether that’s on audio or video or written it’s all on there. There’s a lot of—a bunch of end up guides. We do this thing called the Million Dollar Case Study where we launched 4 products from start to finish. You get to see the products and everything along the journey. So yeah that’s tons of stuff on there if you just [inaudible 00:33:52.5] on Amazon too. Joe: Fantastic; a great educational tool and a great product. And for those out there with kids that are going to college in the next couple of years how do they get to the JS Scholarship or scholar site? Greg: JungleScout.com/jungle-scholar and you can find in the footer of the website too. Joe: I got it. I found it on LinkedIn. And then there’s the 5 Minute Pitches well we’ll put all this in the show notes as well. Greg Mercer, thank you very much for spending time with us. I know you’re a very busy guy. I appreciate it. Greg: Thanks again. I’m glad I’m here. Take care. Links and Resources: Jungle Scout Jungle Scholar The 5 Minute Pitch

Are we seeing a plateauing of Amazon? Those who think that any type of e-commerce conducted outside of Amazon is a dead-end are dead wrong. Today we welcome back Andrew Youderain to discuss his third annual State of the Merchant Report for 2019. If you’ve never read or heard us talk about the report, it’s a comprehensive report of all things e-commerce that comes from Andy’s exclusive database of real entrepreneurs, all running physical product e-commerce businesses. With more than 400 qualifying merchants completing the questionnaire, the report covers an array of important topics including growth and conversion rates, profitability stats, advertising ROI, and even one surprise question about ways our members would fulfill their biggest indulgences. We’ll go over all the questions, responses, and the surprising trends in e-commerce for 2019. Episode Highlights: What is providing the best return on investment in terms of advertising? The facebook marketing factor, why it’s so different, and how can be tricky. A shout out to email marketing as a very valuable and viable advertising tool. The reality of advertising fatigue and the big three – Google, Amazon, and Facebook. The typical store owner makeup and whether dropshipping is coming to an end. Surprising gains in manufacturing of original merchandise. The impact of the new tariffs on the surveyed businesses. Does everything seem to be growing? We discuss general growth rates in the e-commerce industry. The surprising thing we learned from the survey this year regarding Amazon. The place for premium and niche products. Andrew’s top three takeaways from the survey. A rise in Chinese sellers on Amazon and what that means for e-commerce merchants and counterfeiting. Andrew’s view on the FBA nexus and the state to state tax impact for his community of clients. The fun and surprising final question in the survey. Transcription: Joe: Mark back in Savannah I think it was 2016 was the 2nd time I ever went to eCommerceFuel. In a great location because I could drive there and it was a beautiful, beautiful location. And I was so proud because I brought copies of my e-book some would call it a book called 10 Steps to Selling your Amazon Business and this is back in ’16. We’re talking years ago. And so I thought I was at the forefront of things. And then Andrew does his presentation at the beginning of eCommerceFuel events which was really the state of commerce back then and what we’ve had him on the podcast about what this podcast today is about. The 1st thing he talks about is how few of the eCommerceFuel attendees are using Amazon; like less than 10%. And it was a very small part of their business and that Shopify and other channels were much, much bigger. And I was slightly mortified. But then the next year, the biggest growth I think in 2018 that we saw—actually it was at ’17 because we stated e-commerce from Andrew in 2018 and the biggest growth factor was Amazon. And now that you’ve had him on again I think that that’s changed a little bit, right? Mark: That’s right. In this year’s State of the Merchant Report from eCommerceFuel, they’ve found that this is the 1st year that non Amazon e-commerce stores outpaced Amazon as far as new sales channels which is pretty amazing when you think about the impact. The quote directly is this was the 1st year non Amazon sellers grew faster than those on the platform. So there’s more growth happening off of Amazon among their members than on the Amazon platform. That’s pretty remarkable to hear that because it feels like feels like everybody’s on Amazon. And we’ve often preached this idea of having diverse revenue streams and making sure that you’re being multichannel with your revenue streams and platforms but you and I know a lot of Amazon sellers that have gone all in on Amazon so that they could just focus on the growth there to get as much sales blossomed there as they can because it’s easier to do than trying to manage multiple channels. Those who think that outside of Amazon e-commerce is dead; it’s not at all, not even close. There is a couple of other interesting things that came out of this report and I’m going to let Andrew really get into some of the things that he found impressive. But one of the things that that stood out to me was the effectiveness of Facebook as a marketing channel. It seems like everyone we talked to always says Facebook is such a great marketing channel and if we could just figure it out and what my experience has been is that everybody’s trying to figure it out. Which means it’s really difficult to actually do. I think those that have “figured it out” are doing well. But among the people that responded to this really lengthy survey that Andrew puts them through Facebook ads came in as the 5th most effective sales channel or advertising channel that people were reporting. And the ROIS, the media in ROIS was a full point lower than the next highest. And again we’ll let Andrew talk about some of these things because I’m sure he has more insights than I do into the report itself. From just a general like where are you in the market as an e-commerce business or when you’re looking to buy and identifying the right trends and the types of businesses that are going to be around for the next several years a report like this is just invaluable, right? You get to see where a business is going, where the industry is going, and maybe where the next opportunities lie. Joe: Yeah and it comes directly from the eCommerceFuel membership database. As far as I understand it Andrew sends a survey out and collects all of this data and all of this information so it’s from real entrepreneurs down in the trenches running their businesses; physical product e-commerce businesses. So if anybody is out there that is looking to grow their business outside of Amazon this report can help. If anybody’s buying a business and wants to take it beyond Amazon this report can help. If you’re on Shopify and you want to learn the other channels, what number 2, 3, and 4 are before that 5th one that’s most effective being Facebook this report can help. And it comes from Andrew. There are very few people in the industry that are as good character as Andrew and the folks at eCommerceFuel. Mark: Oh I was just about to say that now. A shout out for the good guys Andrew is certainly one of those. So let’s get into this discussion between Andrew and I on this report and find out what some of the insights he [inaudible 00:05:59.2]. Joe: Let’s go to it. Mark: Andrew, thank you so much for coming back on to the podcast. You were on last year and we talked about the awesome report that you guys do over at eCommerceFuel; the State of the Merchant Report. And this is where you survey a lot of the members of your community which we’ve talked about here on the Quiet Light Podcast, Joe and I talked about it quite a bit. One of our favorite conferences, one of our favorite communities out there for high revenue e-commerce store owners; it’s a fantastic community that you built there. And you do this report every year. It’s a really good pulse of what’s going on in the world of e-commerce. So thank you again for joining us. Andrew: Yeah thanks for having me. I appreciate it. And good work with the podcast. I’m enjoying the Quiet Light Podcast. I kind of love your episodes and yes you’re putting up good stuff; you and Joe. But your episodes seem to have just a tiny edge on Joe’s. I don’t know maybe it’s just in my mind but regardless you guys are doing awesome, awesome stuff. Mark: Yeah I’m just going to record that. I’m going to put it on a loop and I’m just going to send it to Joe a few times so he can hear that over and over again. You need to submit at some point we’ve been adding these movie quotes to our intros at random so you need to listen to those and tell us what you think it is and we’ll give you a shout out. I don’t know what they are myself so I’m excited about this. I’m excited to talk about this year’s report because you always come out with just some really fascinating bits of data. And I’m going to start with one that I’ve run across a decent amount because I think it really speaks to a lot of buyers are thinking about when they’re evaluating an online purchase and also sellers who are looking to scale their business and this is what is providing the best return on investment at this point in terms of advertising? Facebook is often quoted you know if we could just unlock Facebook and this is something that I want to get into a little bit here but your report showed some surprising numbers with where the most value is and where some of the lowest hanging fruit is for advertising. Andrew: Yeah so there are a couple of things that are new this year. I wanted to take a look at what merchants are using the most in terms of promoting their business; so what’s most popular and then also what’s the most effective because often those are not the same thing. And so you look at the most popular marketing channels and we just ask people what are you using and in the number of popularity 1st was email marketing, 2nd Facebook ads, 3rd was Google AdWords, 4th was SEO, and 5th was Instagram. And so then we—of course, it was a popularity—to get a sense of what was most effective we looked at okay, of the people that are using every single one of these things we asked about which, how many, what percentage of them ranked that specific one as the most effective? And the one that came to the surface wasn’t even the top 5 that we talked about. The number one most effective marketing channel reported by merchants was Amazon Ads. Over half of people running Amazon Ads said it was the best highest ROI marketing channel to use, number two is e-mail marketing, three was SEO, 4th was Google AdWords, and like a distant 5th not even like a close 5th, but a distant 5th was Facebook Ads. And another thing that we explored was the average return on Ad Spend for Facebook Ads versus Amazon and Google and they had the lowest return on Ad Spend at 3.4 compared to Amazon at 4.6 and Google at over 5. And they’re increasing of the costs on the Facebook platform were growing up the fastest as well; almost 20% versus 16 for Amazon and 10 for Google. So that was kind of the Facebook—I think a lot of people, so many people are doing it and it’s easy to have like almost some fear of missing out if you’re not doing it or if you’re doing it like you’re not getting the secret when everyone else is. But I think it’s a harder nut to crack than people like to admit. And those were some of the numbers based on the advertising. Mark: Yeah there’s a lot that I want to get into on this here and let’s see if I can remember all of it but I want to 1st talk about the Facebook ads because you put it in that way; it’s a tough nut to crack. And I wonder if that’s really maybe some of the secrets that’s going on behind these numbers with the EBIDTA ROIS and also the effective marketing channel. We’ve had Ezra Firestone on the podcast here before. He’s a friend of Quiet Light Brokerage. He obviously is a big advocate of Facebook advertising. I’ve seen some other people who have been doing Facebook Ads with a lot of effectiveness but and this is the big caviar, it takes a while to figure that part out. And a lot of these guys have gotten there where they’re seeing these ROIS of five plus, they’ve taken months—literally months and lots of dollars down the drain to really get to that point. I’m wondering and maybe you looked into this a little bit with the survey; did you look into people that have tried Facebook marketing and maybe gave up after two or three months because they couldn’t get it to work or did you not look that deep or ask that deep of a question? Andrew: Yeah I didn’t go quite that deep. And it’s always tough designing the survey because it’s already like 50 plus questions and I’m trying to balance—making sure we get people who get all the way through it with you know what are the critical things we get. So sadly I didn’t get that kind of data. A lot of the kind of the fox and the stories behind people getting into Facebook and having a hard time with it are more anecdotal that I hear from people. And so sadly yeah I wish I had some good numbers and data behind it but it’s more anecdotal than anything else. Mark: I mean look there’s a couple of things on here on your top; 5 Amazon Ads, e-mail marketing, SEO, and Google AdWords. So let’s go through here with Amazon Ads, SEO, Google AdWords; those are all high intent advertising channels, right? So if somebody goes online and says buy shoes or buy cheap shoes or best running shoes; that’s a really high intent search, Facebook Ads not so much of a high intense search, e-mail marketing side if they’re on your list that already a warm contact. So it shouldn’t be too surprising that we’re seeing that but the other side of this too that I would say is like if you’re looking to create a market and let’s say you have kind of an odd channel, maybe you take a spin on a new type of ice cream scooper that doesn’t get stuck ever. So the ice cream never gets stuck in that ice cream scooper and you’ve invented this and you’re going to sell it; well nobody knows that it exists. So it might take a while to build that market and so Facebook Ads might be a good source for that because you can have that proof of concept and really kind of educate the marketplace. But it’s also going to take a little bit more work to get people to really peak their attention. Andrew: Yeah Facebook is just a totally different mindset for advertising. It’s really great if you’re good at targeting if you’re good at—the way you build a funnel is just totally different. It’s more so about you get to be able to catch people when they’re doing something else, get their attention, pull them off the platform or engage them for a while and then pull them off versus being able to drive a sale short term. I think it’s a longer term game and just a different mentality you need to have if you’re going to do it well. And targeting too with Facebook I think is getting trickier [inaudible 00:12:57.7] that some of the targeting the traffic that Facebook had been sending hasn’t been converting as well for some members and some people I know. So that’s a big part of Facebook performing well as them sending you people that are based on their intelligence they know are going to work well. So yes it’s interesting. Mark: Yeah talking to crack I think is the best way to describe it. So I do think it’s a viable source but you’ve got to have the right type of product and you really have to know what you’re doing with it and be patient. I mean that’s just a lot with these; Amazon I’m not surprised at all, still a very young marketplace so I think we’re still seeing kind of those numbers equalize out. Talk about a high intent marketplace and high intent searches so I think that makes complete sense they’re number one on the list. And let’s give a shout out to email marketing probably the old man in the room there, right? Andrew: Yeah although it’s funny I think about if you look at email and even email it’s still of course you know the number two most effective marketing channel and it’s still highly—super valuable but I feel like even probably it’s getting harder. I think advertising, in general, is getting so much more difficult because we’ve had so much of it—a part of it is fatigue; just advertising fatigue. And you’ve got three main giants who control so much of it and they’re kind of squeezing all of the juice out of it they can with rising ad prices but even my email inbox I don’t know about you Mark but I’m way more ruthless now with my email. I’ve got a ton of filters set up. I have used like unroll.me to unsubscribe from a lot of stuff because you have to. Because I’m looking to change my email address in the next couple of months to just have a team address to really focus on because it’s—the levels most of the messages coming at us are increasingly just –they just keep going up and up and up. And so I don’t know, it would be interesting to see if anything comes up in the next two, three, four years where—that it makes it able to get through all of that noise. Because it’s getting—just any advertising, in general, is just getting a lot harder because there’s just so much out there. Mark: You know I really think it comes down to the personalization. Email marketing, you’re right I mean email it’s a complete mess and now I use Gmail, we use Gmail, Google Apps throughout Quiet Light Brokerage and they tab everything down in that promotions or updates or forums tab. And I’ll tell you what I don’t look at promotions ever. Basically, its spam light is what it is and so you just throw all that stuff away. I go through it every few days and select all and hit the archive. Coming through that though like having personalized messages, very, very hyper focused hyper personalized messages I think that’s really the only way that people are going to be able to survive with that email marketing. That’s tough, that’s not easy to do. Andrew: You know I agree and I think—you know I did a podcast with somebody earlier this year and they have an antiques business and every week they send out an email on Saturday and at the click through rates are like 25%. I talked to him about how he was doing this, I mean trying to get some secret out of it and there wasn’t any secret. It was that he spent hours and hours and hours on an email that was totally unique and it was amazing deep interest level to the customers and people open it. And like I look at the email that we have that goes out to our private communities [inaudible 00:16:34.2] it’s not nearly as good as his is but just that so much smaller group only about a thousand people but we’re able to get it. It takes a lot of time to put together but it gets generally open rates of close to 50%. Mark: Let’s move on here to another thing. I want to talk about the anatomy of a store owner. You put together a really nice simple graphic on the link to the report and I will link to this report here in the show notes and we’ll also throw it into an email as well. So people listening to this take a look at the email coming through from Quiet Light Brokerage but I want to talk about the makeup of the store owner. Drop shipping seems to be kind of on the losing end of things these days. Andrew: Yeah I feel like it’s had some pretty strong headwinds for the last couple of years. And this year the number—every year we ask and we look at what percentage of store owners is a certain type of business model; drop shipping, manufacturing, private label, hybrid, or reselling products. And this year the number of drop shippers that reported got cut in half. So only 8% of people this year down from 16% last year were drop shippers which is a pretty huge—just a massive cut. And if you look at the number of manufacturers that we’re reporting that reports for the survey that was up by almost a 3rd by 32%. So it seems like a lot of those—this has been a couple of narratives that have been talked about for a couple of years now but it’s really playing out in the numbers. Mark: Yeah I think so as well. What’s funny though is we had somebody on recently to talk about drop shipping and they were killing it. They were doing a great job with drop shipping. So I feel like it’s one of these areas where for a while there were Ad Sense sites, a pretty number of Ad Sense sites all over the place, a bunch of those got wiped out and the general thought was this is kind of a dead business model. Well, I’ve seen some of them come by and those people that actually survived through that and how they got some strong, strong businesses. I feel that way with drop shipping a little bit. Like if you can survive these head winds you’ve got something good. Andrew: It’s funny you say that Mark because when I looked at the revenue growth by business model and the income growth by a business model guess who was leading the pack on both of those metrics? It was drop shippers. And I think what happened is exactly like you said there’s a little bit of a Darwinism at play here where a lot of the herd got thinned out and the people that were left were able to make it work well. And I think you’re actually right it definitely can work in some models. I think it’s much harder to get the things to all align and get a model where it works well for reasons that—I guess I don’t want to get into on the show right now but if you can get it right I mean it’s a great business model because no inventory, no upfront cash, no cash flow issues, location independent. If you get it to work right it’s a pretty good gig. Mark: It really is but it seems to be so dependent on the product and also your relationships as well because obviously, the problem with drop shipping is competition. It’s so easy just to spin up something and compete directly with you and you get the sort of you bicker with a sort of marketplace of every product that is exactly the same, same images and everything else. It’s tough to work in that area. On the flip side—so like I like to think about this on a spectrum. On one side we have drop shipping where you can see the products sometimes you get into reselling which might be a little bit of a step away from that drop shipping where you’re still doing with some physical product but it’s not yours. And then you go all the way over to the other side of the spectrum and you get these unique manufactured products, some of them private labeled but the most extreme would be hey I invented something or I’ve created a product and you’re seeing some pretty big gains in that area. Andrew: Yeah I mean the number of manufacturers like I mentioned was up a 3rd this year. If you look at also not just the number of people that are doing it but the benefits that they’re seeing and the pay off, so we tracked gross margin, net margin for those—for all these different types of sellers and manufacturers and by far the largest gross margin at 53%, the highest net margin at 21% and those were up year over year too for each category. I think the gross margin for manufacturers was up from 45% percent up to 53 and the net was up as well. So yeah I think manufacturers are—it’s a harder business, there’s less of a roadmap, it’s more capital intensive, it’s more stressful but if you’re able to crack it more and more people are going that way. It’s really the only way I feel like you can play on Amazon these days because if you’re going to try to go resell someone else’s product on Amazon you’re going to get destroyed. And it’s where a lot of people seem to be going and getting paid for. Mark: Yeah I think all those things that you talked about; the stress, no roadmap, everything else there’s a flip side of that. It’s defensible, right? Because there’s no roadmap you’re not going to have everybody saying oh I know exactly how to do this. It is difficult to do and figuring out how to get that manufacturing [inaudible 00:21:21.3] done is tough. Did you ask people and if you only have just kind of from what you’ve heard in the community obviously China I would guess would be the number one sourcing location for most people manufacturing, what other countries are you hearing from some of the members on the community that—where people are sourcing products? Especially when we’re recording this—I don’t know when we’re going to air this episode but when we’re recording this we’re staring down potentially more tariffs going on with China. Obviously, this is going to impact everybody selling from China so finding other sources would be great. Have you heard of any other countries that seem to be emergent? Andrew: That’s a great question and the honest answer is no. I mean there are people in Asia—I hear occasionally about people sourcing in Taiwan which depending on who you ask is China or isn’t. Vietnam is another one that comes up but apart—and you know some people I know occasionally hear their source from India or make their things in Canada or someone I met with recently is building some footwear in Mexico. So there definitely are some other places people get certain things but in terms of a potential runner up to China that could even remotely start to be an alternative to where people are manufacturing 90% of things I don’t think of someone who’s pulling away or even you know accelerating at all. It’s kind of just a whole bunch of a lot of different options all over. So not really an emerging source for manufacturing that I’m seeing. Mark: That’s a little disappointing but not surprising. I mean wouldn’t it be great to have something on this side of the ocean where we could maybe just pull up from Central America instead of having to—I talked to some of these store owners and they’re talking about three months plus lead times where you’re committing capital and then that goes on the ocean and it takes—I can’t imagine how difficult that would be. Andrew: Oh yeah it would be really hard and you know it’s one thing we did ask this year was did tariffs impact your business and granted I know we’re talking you and I are both in the States, I know a lot of people listening aren’t in the States but probably the vast majority of 85% or so of respondents for the survey are US based or 75% rather but we asked did tariffs impact your business this year? And over a 3rd of people, the 36% said the tariffs meaningfully hurt their business this year. And like you just alluded to they are only getting more from slapped on. So it’s a big deal and it’d be nice to have a silver lining; maybe be that sourcing out of some of the countries closer to us maybe, maybe get a boost. Mark: Yeah that’d be interesting. Hey if anybody has an idea on where we can craft and not let me know. That’d be great to get that part out. Let’s go to like some of the Sunday news here and that is everything seems to be growing. You know I started Quiet Light Brokerage right before we hit that great recession so a lot of my entrepreneurial journey has been slogging through a difficult economy. It seems like from what we’re seeing we’re in a bull market right now. Andrew: It seems really strong. So we—looking at growth rates over time, and again these are the average merchant—the average e-commerce store owner reporting for the survey was right around 3 million. So that’s relatively small when you look at the macro economy, if you look at e-commerce trends, in general, they’re probably could be growing closer to 20% plus or minus but for this segment of store owners if you look at the growth trend over 3 years, 2017 it was about 25%, last year it jumped way up to almost 37%, and this year it’s down a touch to 36% but still meaningfully about the same. So revenue growth is good, income growth has also remained real strong and if you look at the conversion rates too and it’s just continued to go up the last two years. I mean the conversion rate we’re looking at this year was over 3% up from 2.60% last year. And in terms of like our earlier margins are up so all in all for store owners things are good, growth is good, margins are good, the conversion is great and it’s kind of a boom time is the right word. But it’s definitely—things are robust and healthy out there for stores in this segment. Mark: Yeah that’s fantastic. One of the surprising things that I’ve seen from the report and we talked about this last year and I know Joe tells me and we mentioned this in the introduction to this episode here that the very 1st eCommerceFuel Live that he attended he brought a book on 10 Steps to Selling Amazon Business. You asked at one point to raise your hand if you’re selling on Amazon and it was only a small portion of the room that did so. And he was thinking oh man I completely missed the mark bringing this book. Well, we’ve seen this number increase over the years although this year from—unless I’ve got [inaudible 00:26:19.5] I’m not reading this backwards, it looks like you have a decline in people that are selling on Amazon and an increase in people that are not selling on Amazon. Is that really what you’re seeing? Andrew: Yeah I wouldn’t say a decline but I would say a plateauing of something in the report that I wrote I call it like a plateauing Amazon—I hesitate to use the word peak Amazon because every time that I think that they’ve peaked anything they blow up and accelerate to the moon. But looking at like three examples here, or three data points; if you look at the number of merchants who just sell on Amazon or they don’t. A couple of years ago 49% last year, it was 55% so a fairly meaningful jump. This year that number barely budged; it went from 55.2% to 55.8%. So up a little bit but wildly decelerating. Along the same lines if you look at group sales from Amazon last year, two years ago they were up really sharply and this year they barely budged; 27.6 to 28.2% of the total sales that all of the merchants generate coming from Amazon. And this is maybe the most surprising number. If you look at just the revenue growth of stores that sell on Amazon versus don’t last year stores that sold on Amazon grew faster than stores that didn’t. And this year stores that don’t sell on Amazon actually grew faster than stores that do by a small margin which is just really, really surprising. So I think that there’s so much here. We could do a whole episode on I don’t think Amazon is going anywhere, I think they’re going to be shaping the e-commerce landscape for the next 5 to 10 years. But I do think a lot of merchants are starting to really struggle with counterfeit issues, with increasing fees, with loss of control, with feeling like they’re totally beholden to Amazon, and a lot of host of other issues. And they’re not getting off the platform but the number of merchants that are saying hey yeah let’s go hitch our wagon, go to Amazon and sell there—and some people are just deciding to leave the platform altogether. So one of my predictions and here I’m almost certain that it could be wrong because I’m going out on a limb is that next year is the 1st year we see the percentage of stores selling on Amazon actually decrease year over year. So we’ll see when that happens. Mark: Yeah that’s interesting. I wonder if shopper’s behavior is changing at all and just again you just can’t draw any conclusions from this here but I know for myself I’ve become more of a diversified shopper than I have in the past. I still use Amazon probably like 4 or 5 times a week, I’m still a really heavy Amazon shopper but I’ll actually look around a little bit off of Amazon as well. And if I get the chance to order directly from a store I do so. Now that’s probably just because I worked with so many entrepreneurs that have these stores and I know the benefits for them. But there’s something nice about that specialization, right? If you think about the big box stores and how they couldn’t specialize in any sort of gear but if you want something high end and specialized, it makes sense that there is somebody that actually does specialize in that. It’s pure speculation on my part of course. Andrew: No. I think you’re absolutely right. I think we’re going to see in the next 5 years a real hollowing out of e-commerce where you have Amazon; if there’s something you’d know you want to buy it’s more of a commodity or a fairly inexpensive product that I think Amazon is going to be the place you go to get it quickly and cheaply and efficiently. But I think for anything else, for merchants I think the place to really thrive and survive over the next 5 years is to have a premium product or a very niched product; ideally, one that you manufacture. Like just for example yesterday I called up and I was in the market for a nice bike rack for my vehicle. And I went into a lot of research and the company I ended up buying it from I ended up talking to him on the phone for 35, 40 minutes. They custom manufacture in the United States, they ship that to me and it’s that kind of thing. They have an incredible product and they don’t sell on Amazon surprisingly because they don’t need to. Because everyone that wants the site or this product they go right to them and they don’t want to give up the marginalized control and guessing. And I think those are the kind of merchants that are going to do really well in the next 5 plus years. And I think that’s kind of the best place to be going forward if you’re not going to be on Amazon. Mark: Yeah. I would agree 100%. I think just from a long term sort of defensibility mindset and that’s what I’ve seen and I actually see it on Amazon as well, the companies that are doing really, really well long term Amazon really care about their products. And they’re spending a lot of time on that product development cycle and doing their research and trying to make sure that they have something that’s a high quality product. But then they’re also looking outside of that as well and becoming specialists in that space which makes a big difference. With everything that you surveyed here was there any one or two things that really stood out to you as being surprising this year or would inform you if you were an owner of an e-commerce business yourself that you would definitely want to take action on? Andrew: I think the big things were the massive shift and we kind of touched on this but the massive shift of people going away from drop shipping and into manufacturing. And the benefits financially that those manufacturers we’re seeing. That would be a big one. The other one was the Facebook ones we talked about where Facebook Ads really are definitely at the back of the pack especially relative to their popularity in terms of effectiveness. So those would be probably two of the big things and then in terms of Amazon just I think it still makes—it can make sense if you have a great product that’s proprietary. It doesn’t—if you do it carefully I don’t think you shouldn’t go on Amazon but just the fact that so many people are kind of hitting the brakes on that or at least new entrance in saying aren’t rushing in as head long as they were before I think is pretty telling. So nothing new there Mark that we haven’t talked about but three things if I was in the middle of kind of defining strategy or starting it from scratch I think would be things I would think really carefully about. Mark: You said earlier in the episode here with advertising how much more difficult it’s become. And I generally think that what we’re seeing with the Internet and Internet based businesses and we’ve been seeing this pretty much since the time I started as an entrepreneur 20 years ago now is this maturation of the businesses where I think they’re all getting more difficult to do. And you look at this and you think oh man that’s such a bummer. I know I talked to some friends who are entrepreneurs back in the early 2000s and we kind of reminisce about the quarry days of Amazon was a thing of the website waiting for the movie dance to happen and now all of a sudden they’re making gobs of money. But what do we learn from all that? We learned that dries up and disappears pretty quickly. The people that are surviving are the ones that are embracing some of these challenges and looking at them saying I’m going to build something really sustainable, a real product and they’re doing great. They’re doing really good. And that bears out in some of your numbers. Andrew: Yeah and one thing—it absolutely, absolutely does and I think one thing for you to touch on in terms of Amazon and in terms of sourcing in more of a macro level, if you look at one of the things we asked it was what are your most common struggles, what macro changes are you seeing, and what are your future plans? And one of the macro changes that came up the 1st time this year on the top top list was the number of Chinese sellers that were coming into Amazon. And I think I saw a stat today that 40% of the top Amazon sellers in 2019 are Chinese sellers versus 26% two years ago. And so A. on one level you have just a lot more competition directly from factories who are the low cost provider. Which isn’t a bad thing for consumers in and of itself but it’s harder for merchants. And if those sellers don’t have the same kind of quality standards; some of them do, some of them don’t, and you also run into problems. But you also have a lot of—one thing I’ve noticed is a lot of counterfeit issues. This has been in the news. We’ve had a number of members in our community who have had problems with this when they had a product it got knocked off and then these people—you know a lot of overseas sellers started selling this product directly in competition with the original manufacturer which was really problematic because the quality wasn’t as good. And so consumers got it and it really hurt the brand because they assumed it came from the original source when it didn’t. And so you see I think this also ties back into Amazon and why people are getting a little bit more careful about that platform is because there are some meaningful counterfeit issues out there that again going back to the difficulties of manufacturing that merchants are having to face that weren’t really as much of an issue two, three years ago. Mark: That would be interesting to see what happens with that platform. And also I’m going to touch on one last bit of the report here that you spent some time on and that is the impact of politicians and judges and we’ve covered two areas; we were already talked about tariffs briefly and how many were impacted by that. I think the other big elephant in the room and it’s been there for several years and we’ve talked about it a ton here at Quiet Light Brokerage and that is the FBA Nexus. Do you have Nexus, are you filing those sales taxes in different states, and you still have a very small percentage [inaudible 00:35:49.6] to the speaking of your community that was paying those sales taxes. I think 21% is what I’m seeing is that right? Andrew: Yup that’s correct. So the percentage of sellers who have Amazon inventory that is filing for sales tax, [inaudible 00:36:04.0] sales tax in any state that they have “FBA Nexus” whether or not you agree that [inaudible 00:36:10.1] Nexus. Yeah only about a quarter of merchants are submitting sales tax to those states. Mark: And do you have any idea why such a small percentage? I mean obviously nobody wants to pay taxes and that it’s a pain to most people. I’ve run into sellers who make the argument that it’s really not—oh there’s no legal basis for it. Andrew: I think it’s a couple of things. I think one it’s it is potentially disputable whether or not and again this is something I need to personally do a deep dive on but from the very—this is where things get dangerous when I talk but from the very little I know I don’t know if it’s—I don’t believe it’s that very crystal clear, there’s a whole lot of present presidents that said yes this does definitively give you Nexus. And it could be a state by state issue as well. So I think that’s part of it. I think the 2nd part of it is thinking about—so because it’s a gray area you can have more people who start thinking on a risk basis. What are my risks I submit? What are my risks if I don’t? Also relative to the workload because it’s not just about the tax; I mean if it was mostly about the tax and the administering this and the managing of it was really easy and you didn’t have any you know long term liability or exposure to being audited I think most merchants would say hey it’s a little inconvenience but let’s go ahead and let’s set this up. You can snap your fingers I’ll collect the sales tax; it’s not a big deal. If it is a federal level it’s much easier to do. I think you’d see that number jumped to 25 to 50% plus but that’s not the case. Like you’ve got—it’s hard to administer. You potentially open yourself up to dozens, hundreds, maybe even theoretically thousands of different municipalities who can audit you. You run the risk of getting on a sales tax agency’s radar to come after you and maybe it wasn’t before. So I think those are some of the reasons why people are not exactly thrilled at the thought of jumping in and waving their hand at taxation seasons saying hey here I am I’m not sure if I’m actually legally obligated to do this but come check me out. Mark: I completely get it. I get the risk versus reward analysis and frankly if I were a seller I would probably be among that 75% that’s not collecting. Not that that’s what I would advise here in my role because I know that if you do want to sell you got to be doing that right. And most buyers are looking at that and saying we want you to be paying those taxes. We don’t want that to come back after us [inaudible 00:38:31.9] later on. But I mean from my opinion I think it’s pretty legally shaky ground to say that people do have that Nexus. But the best practice from a selling standpoint would be to be filing so we do—I mean that’s our default position here at Quiet Light is that you should be filing for sure without a doubt. But I would love to see this resolved within the next few years because it as if Amazon sellers don’t have enough things hanging over their head. There’s this potential like you said of being audited by the state of California or all of a sudden getting a bill for seven, eight, nine years of tax—what a mess. They need to get it together and figure this part out. Andrew: There’s a little bit of encouraging news [inaudible 00:39:16.5] different sales tax issue we’re talking about the FBA Nexus tax issue but the wayfarer versus South Dakota Supreme Court case that opened up the doors for states to tax inbound orders to their residents even if you don’t have Nexus in the state as a whole opened up a whole other can of worms. And California I believe just passed some legislation that increases the threshold for—I think that the term for that is economic Nexus. They bumped that up meaningfully to half a million when before it was really low at like 100,000 and 200 transactions. So there’s a little bit of encouraging news on some of that fronts and I believe there’s been maybe half a dozen other states that either followed suit or are in process of doing that but its sales tax right now in the United States is just an absolute disaster. And I agree with you, I think we really need something at the federal level to clean it up because it’s just a nightmare. I know people and I know you have to Mark that have sold their business not entirely based on but this definitely was a large part of the calculation thinking through I don’t want to deal with this. I don’t want to deal with the stress. I don’t know with the liability and this is making business harder than it needs to be and I’m ready to be done. Mark: Yeah absolutely. Alright, we got to get to the most important metric that you’ve got and then wrap this up because we’re actually long already with the episode. And you know what it is, it’s your KPI the thing that you’re focusing on the most. And in the past, you’ve learned stuff about your community rather be attacked by a swarm of angry bees and a bear and you say that they’re crazy. I don’t know the bear sounds pretty scary. But this year you asked what luxury gift would you pick; unlimited use of a private jet, $300,000 in annual income, a monthly lunch with anyone, or a tropical island and a house. So that 300k of annual income is that like forever? Andrew: That’s forever. Yeah and I think overly weighted this one. I should have been all stench here with the annual annuity that you got because 2/3 of people picked the 300k income which yeah it’s hard to argue against that. That’s a pretty sweet little set up for life but like 10% picked the jet, about 13% picked the monthly lunch with anyone. That was my pick. I think like you can—I mean to be able to sit down once a month with the likes of U.S. presidents, heads of state, Nobel Prize winners. I mean you can’t buy that. I think that’d be cool. Mark: Do you have to buy lunch? Andrew: You do. I should have included that. That was probably what the deal breaker was. Mark: Right. Because it’s got to be a pretty nice lunch if you’re going to have lunch with these guys. You’re not just going down on like [inaudible 00:41:45.4]. Andrew: That’s a good point. And then the last one was a tropical house, about 30% of people picked that. But yeah I mean to me this is I feel like it’s going to a cornerstone—I suppose we can lead with this one actually Mark. I think next time maybe we mix things around and lead off of the Kardashian performance. Mark: You like to always put the best content at the end so that people will listen all the way to the end. Because where would your day be today if you hadn’t learned that most people would take 300k annual income over a monthly lunch with anyone. I actually think you make a pretty valid point there. That would be pretty valuable. You can’t buy a monthly lunch with anyone. That’d be tough. Andrew: Buffet—I think you could buy lunch with Buffett for—I don’t know it’s in the millions I think to have lunch with him. And he’s just—I can imagine he’s a pretty cool cat but yeah to build it up monthly with anyone; that’s pretty cool. Mark: Yeah that is pretty cool. Alive and dead? Andrew: No, I don’t think—I think it has to be alive. I didn’t put that in there. If we had some inane abilities to be able to resurrect people, that would be pretty sweet. I’d put that in there too. I probably would have bumped it up a touch but I don’t know, that 300k was pretty [inaudible 00:42:53.4] people. People like their cash. Mark: I think I could probably make 300k a year with some inane abilities. I’d be like one of those fortune tellers but I’m pretty sure I could spin that off into a pretty desk. Andrew: I know you could too. Mark: Hey thanks so much for coming on; tons of really good information. Go check out eCommerceFuel.com and the State of the Merchant Report. We will link to it in the show notes. We will be sending out an email to every one of our subscribers here on this. If you’re not a member of the community are you taking applications right now Andrew? Andrew: We are. Yes, we are. Mark: Okay. If you’re not a member of the eCommerceFuel community and you are an e-commerce seller you definitely need to check them out. I don’t recommend a lot of groups. I don’t recommend a lot of people or sites. We do so very stingily here at Quiet Light Brokerage but eCommerceFuel is one of our favorite groups out there. So please do check them out. Anything you’d like to end with Andrew? Andrew: No. I think that maybe two quick things; one if you want to check out the report directly its eCommerceFuel.com/2019-report that’ll link you right to it. And then if you happen to be a podcast listener which I’m guessing you are, we also do a weekly podcast, sometimes twice a week on e-commerce, e-commerce news, store owners, kind of cutting edge just whatever is happening in the e-commerce world and strategy. That comes out weekly as well so if you’re interested in that you can check that out [inaudible 00:44:15.2]. Mark: Yeah and you guys also sent out really good emails. I know we talked about email marketing and there’s not a lot of people I feel add value to my inbox. I think you guys do a great job of adding value to my inbox. So definitely check out the community, check out the podcast and the report. And once again Andrew thanks for coming on. I look forward to having you on next year for the 2020 State of the Merchant Report. Andrew: Yeah. Thank you, Mark. I appreciate it. It’s always fun to come on and great work with what you guys are doing in the online space with businesses. It’s always fun to talk and I appreciate the invite. Links and Resources: Andrew’s website State of the Merchant 2019 Andrew’s Podcast

In part two of the incredible exit of Mike Jackness’s Colorit, we are hearing his first-hand perspective on what the process is like from the side of the seller. Mike honestly and openly goes through the process, from the letter of intent through due diligence, all the way to the handoff and transition. He reveals the humbling moments, the surprises, and things he would do differently. This episode is for anyone thinking about being on the seller or the buyer side of the acquisition process. Ending your involvement in a business can happen more easily and smoothly if you are in a good position and absolutely prepared no matter what. The takeaway to all business owners is put your business in that position from inception in case of an eventual sale. Episode Highlights: Mike’s background and how he found himself in the coloríng business. How the due diligence process went and how in many ways it was harder work than running the actual business. The things that came up during the process that were surprising and how to approach number discrepancies in due diligence. The value of using a professional firm for due diligence. Why early preparation is critical. The creation and review of the asset purchase agreement and how it went for Mike. The small things he relayed to the buyer in order to make the transition smoother. Why in-person meetings are very important during the hand-off. The importance of doing everything you can to facilitate while still creating limits to your involvement in the process. What’s next for Mike. Transcription:   Mark: Mike Nuñez. Yes, Mike if you’re listening to this podcast congratulations for sending in the right answer to the movie quote. And which one was it; that was the Boiler Room, right? Joe: I think so. You expect me to remember. I don’t know. We need Chris Moore our content director on here. Come on Chris. Mark: Hey Chris, we need your show notes for before we actually record these. But I do know that Mike you sent in a correct answer. Thank you for doing that. I don’t know the prizes although the next time I see you I’ll buy you a drink for sending that in and getting the right answer. Joe: For people that don’t know, why don’t we tell who Mike Nuñez is? Mark: Yeah, Mike Nuñez is an old friend of Quiet Light Brokerage. He is also a buyer with Quiet Light Brokerage and what are we getting out Joe what am I missing? Joe: Doesn’t he run AffiliateManager.com? Mark: He does run AffiliateManager.com. Joe: He’s huge in the affiliate space so if there’s anybody out there with products that are looking for a great affiliate company to connect with look up Mike Nuñez on Linked In and connect with him. He’s one of the nicest guys in the country and you’ll love working with him and his company. Mark: You know what this movie quote is going to become, right? All of the show vendors, all of the other vendors out there that want us to make a pitch on the podcast are going to start sending in the right answers to us here on out. So those of you listening whatever the movie quote was send us an email and let us know what that’s from. We’ll give you a shout out on the podcast. But now let’s talk a little bit about today’s podcast episode. I’m excited about this. I love the actual stories of selling some of his business. Joe, you’ve been working with Mike Jackness is on ColorIt.com getting his business sold and today we’re continuing the story. We already have one podcast on this where we talked about getting the offer, preparing the business for sale, going through all that, and now we’re looking at the other side of it. And that is preparing for the close and doing that due diligence and some of that stuff that gets pretty difficult towards the end of a sale. Joe: Yeah the 1st podcast was right up until the letter of intent and now we’re talking honestly and openly about the process that we had to go through; that Mike really had to go through with his team from the moment you’re under a letter of intent all the way through the due diligence, that financial trusted exam if you will, negotiating the asset purchase agreement, meeting the buyers face to face, working with transitioning your virtual assistants over to them, closing, and training and transition after. We go through all of it. Nothing is left out. Mike is honest and humbled and surprised in some cases. I don’t mean to plug people but Centurica did the due diligence and Mike—we’ll let people listen to it but Mike made a promise to Bryan at Centurica and he said something about this process and his accounting and how it’s going to work out and Bryan said yeah okay we’ll see and Mike was a little humbled and surprised in the process. Mark: Well, that’s great. Mike is a good guy. We plugged him before. He’s been on the podcast now a few times. Let’s get over to this because I think anyone that is thinking about selling or even if you’re a buyer and you’re going through this process, it’s so useful to get that perspective of what it’s like to go through this process as a seller. Because boy it can be frustrating sometimes, it can be stressful and just getting to the psyche of what’s going on there I think is invaluable. Joe: And not to go on too long but one of the most important things you’re going to hear is what Mark and I say all the time but you’re not going to hear it from us, you’re going to hear it from Mike. He’s built, he’s bought, he sold, and he’s gone through this process most recently as a seller. And there are some things if he could turn back time that he would absolutely do and he would have made more money. But he was at a certain emotional state and life state where he wanted to sell and we made that happen. And we achieved his financial goals but if he could turn back time that would have changed things a little bit. So we’re hoping that the lesson that you’ll get out of this is planning; planning your exit eventually. If you may wake up one day and decide okay today’s the day I need to reach out to Joe or Mark or anybody at Quiet Light and begin that process what will you plan well in advance for that? That’s part of the mistake that we talked about with Mike. So that’s it, let’s go to the podcast. Joe: Hey folks it’s Joe Valley with Quiet Light Brokerage and we have another great episode of the Quiet Light Podcast here with our good friend Michael Jackness. How are you today Mike? Mike: I’m doing good man. Joe: It’s good to have you back. I know that we’ve been chatting a lot lately because we just closed a transaction together. Mike: We did. It’s good to be on the other end of it now. Joe: It is and it’s been a process. We’re recording this folks on April 18th and we started in mid-December. And we ended up closing the transaction on April 5th. So giving you a little bit of a recap; this is Part 2 of the process of selling Mike’s business Color It. Mike those that are just tuning in and didn’t hear it the 1st time why don’t you give a 60 second background on yourself so they know who you are. Mike: Yeah. So I always joke that this background story gets longer and longer as I get older but the short version is that I have a background in IT. I’m an entrepreneur by heart and was doing affiliate marketing. I quit my day job in 2004 and I’ve been out on my own doing various things since then. I got into e-commerce in 2012 when we bought Travelo.com and sold that—had an exit to that in 2015 in January. Four e-commerce brands one of which we just sold through you. And we’ve been blogging and podcasting about that journey since 2015 at EcomCrew. Joe: And you’re being a little humble there because you really travel all over the world and speak now. Not just with EcomCrew but also on your email marketing campaigns that you do with Klaviyo. So I’m going to boost you up a little bit. Mike: Thank you. Joe: You’re famous man, I’m humbled just having you on the podcast and to call you my friend I think. Mike: Inaudible[00:07:06.7] has this show notes that say famous on Amazon I had one that says famous in my own head. Joe: I’m famous in my house but the least famous according to my family. There you go. Alright, so just a quick recap; again we launched Color It for sale in mid-December against my better judgment but you’re influential and you pushed me and we did it anyway. But we try normally to have three to five conference calls in the 1st 30 to 45 days and at least one acceptable offer. We had three or four. We can’t remember. We talked about this the other day and I didn’t bother looking it up. But we had enough so that we got two offers. We ended up under LOI on Feb 5th, intentionally chose not to close for 60 days so you could move three of the brands out of the seller account into other seller accounts and that was a fun process, right? Mike: Oh yeah. Lovely. Joe: And then we ended up closing on April 5th, roughly 60 days later after going under the LOI. So we talked about the process, getting to LOI in the previous recording. Let’s talk about what happened afterwards and talk about due diligence. How was your experience in due diligence; how painful was it, how good was it, how easy, all that good stuff? Mike: It was a lot less enjoyable than receiving the wire. Joe: Is this a yes or a no that you really worked harder getting the business sold than you did actually operating the business? Mike: I’d say absolutely. It was a lot of work. It was stressful just because—I kind of strive for perfection and I wanted everything to be exactly what we had communicated in the preliminary process. But Centurica is really good and they found stuff that I didn’t even know about my own business which was really frustrating for me. It was a little bit unnerving. I was worried about how that would be perceived if it would—how it would affect the deal. What I realized I guess eventually was that every one of these deals I think that goes through due diligence stuff comes off and we were kind of within that normal boundaries of acceptable tolerances I guess or whatever they would call it and I probably was making [inaudible 00:09:12.1] but for me at the moment that it was happening I was pretty upset. Joe: Yeah so we had two or three things that came up where the P&L wasn’t exactly right; the discretionary earnings wasn’t exactly right for the trailing 12 months. And it’s funny I had a call this morning, I’m working on launching a listing tomorrow and the owner of that business said well what happens in due diligence if that happens? And he was worried that the whole deal would just fall apart and you start from scratch. That’s not normally the case. Normally you just use logic and math and say okay if you’re off by $1,000 and your multiple is a 3 time you take $3,000 off the contract price of the business. That’s really important when you build that trust that you’ve built over the last two or three months with the buyers of your business Mike. But in your case we didn’t make any adjustment at all even though your numbers were not exactly the same as in discretionary earnings, right? Mike: Yeah and I think a few things kind of happened and number one as we were going to do diligence and working towards closing our January numbers came out and our February numbers came out and eventually we kind of knew what March was looking like and we were up significantly year over year. So I mean it was getting to be to a point where in some respects I was kind of hoping the deal will fall apart just like be realistic for money. Joe: Yeah. Mike: Obviously, that wasn’t what I wanted to happen because I didn’t want it to go through [inaudible 00:10:37.3] but that certainly probably helps. And I think a little of the trust kind of was established like you said that they knew that there was nothing the fairest going on there or at least they hope that that’s what they were thinking. I’m sure that’s what they were thinking obviously. And I also think that just based on talking to Bryan over at Centurica like after the whole thing was done it was basically like when a report comes out it’s always going to be—there’s always something that’s kind of found and I just—it’s kind of like a home inspection. When you go buy a home there’s going to be a home inspection and there’s always going to be stuff that that guy finds. Some of the stuff you can try and negotiate for to lower the price of the home but a lot of it you just accept. It’s just like there are things that you’re going to just go okay well I didn’t know that when I signed the agreement to buy this house and put it in Escrow but I want to buy the house nonetheless and here I am and I’m going to just go ahead and still do it. So I think all of those things combined and I just I mean legitimately was willing to walk away. I wasn’t willing to sell it for less. Because I feel like the number that we picked in my mind was the least I was willing to sell the business for. I was willing—we had talked about willing to—because we had already started separating our companies and making things better that if we waited another year we would have gotten more money for it. But at the same time, I also had set my mind to sell it. So I mean there was a bunch of things going on there but luckily all kind of worked out in the end. Joe: Yeah, you were emotionally ready to sell. There’s no question about it. I talked to you three times about waiting; separate them all out, wait another year or so, and you definitely were ready. Mike: It wasn’t about the money. I mean it was just a lifestyle adjustment and realizing we had too much going on and leaving some money on the table for this transaction to almost certainly put us in a better situation moving forward. So all and I think we’re going to do much better by selling one of these businesses. Joe: Yeah, and you’re going to be able to narrow your focus with the sale. So with regards to Centurica; for those that are considering using them or are fearful that you’re under LOI and your buyer is hiring Centurica. I’ve never had a deal go sideways with Centurica. What they do is they find out like Mike said what the issues are with the business and really what it is, it’s a little scary but for the buyer of the business it’s really things that can be fixed and it’s a path towards future growth and making the business stronger. So I like it when somebody else steps in on a buyer’s behalf and really digs into those numbers. It helps the process and instills confidence in everybody that it is a good investment and that nothing’s going to come back to you Mike in this situation after the sale if you closed and the buyer found something after the fact. It’s better that they find it during due diligence like we did here. Mike: I think the only reason you really need to be fearful is if you are hiding something and you know it. And these guys will find it. I promise you—I mean they’re incredible. And if I ever go buy a business I will absolutely hire them. They are incredible. I almost want to hire them just to tell them to come do an audit on our existing businesses to make sure we’d get things fixed before we go sell it—another piece of it a year or two from now. They’re really good. Joe: It’s not a crazy idea preparing in advance for the sale of a business 12 to 18 months out. You know now that that is critical. We’ve talked about it recently. You got a good value for Color It but I think realistically if the brands had all been separated out and you had clean tax returns, a staff that was delegated just towards Color It, it’s possible you would have gotten a higher multiple. And with your January, February growth numbers and December was just killer, there’s no doubt that the buyer of your business is really excited and didn’t even think about making an adjustment because some of the numbers were off by a little bit. Because the numbers were so high for January and February he knew that he was getting a great business. And he told me personally that he thought that this one is probably the best of the three Amazon FBA businesses that he’s bought for me in the last eight months. So we got through due diligence, it was a little painful, a little tough. Centurica helped. We had some trust built early on so we didn’t make any adjustments and mostly because of that trust and because of you keeping your foot on the gas in terms of the numbers and the growth of the business. The worst thing you can do folks is once you’re under LOI have a bad month or two during due diligence. It scares the buyer. They’re making a lifetime investment putting their life savings on the line and they want to see positive numbers, not negative numbers. So we got through it and the next phase sort of when we got most of the way through it was to end up drafting, editing, and signing a 30 to 45 page asset purchase agreement. And that can be kind of scary and overwhelming in itself but the situation was pretty smooth, don’t you think Mike? Mike: Yeah. I mean it was incredible. I expected it to go one way. This is actually funny, I expected due diligence to go one way and it kind of went a different way because I was building to Centurica when I had did the kickoff call that this will be the most accurate—I forgot exactly how I said but I really hear myself on that [inaudible 00:15:57.3] accurate company that have ever gone through diligence with you, you’re not going to find anything off here by a penny. He was like yeah we’ll see about that. That went one way and then the legal actions in my career and the ones where the other party drops the agreements are usually just an awful experience of their lawyer is dropping the agreement on behalf of their clients and all the things that they would want in a perfect world for their client with complete disregard to what the other party would want to see in that agreement knowing exactly what they want. They already know what the 3rd party is going to want but they don’t care about that. They hope that of a hundred things that are in there you only asked to change 50 or something and the other 50 stays in the other party’s best interest. So what I got was an agreement and—so I’m not a lawyer and I’ve been through these a million times and I don’t really get emotional about this. I just send it immediately off to my attorney I was like let me know and I was expecting pages of stuff that were going to be really difficult to go back and forth on. And I really hate this part of the negotiation process because you’ve already signed a deal and now you’re negotiating over a bunch of other points that you weren’t expecting to have to fight over and there was none of that. Like she just like make sure you fill in the blank for this number and they haven’t created this LLC that they’re talking about in the agreement and make sure that that’s done so it’s actually a legal entity before you sign. I mean there was little pebbly stuff like that, there was a couple of small things that had some substance but it made me so happy not to have to go through a tough process. It kept our legal fees down only spending 2,500 bucks reviewing and editing the APA which I was expecting 10 or 20k just from previous experience of having to go back and forth. And it was such a great experience. I actually emailed the buyer afterwards and I was like dude I just want to let you know that I really appreciate this because somebody along the way from your team said do not send an agreement off to Jackness and Terran that’s just lopsided. Like, make this a middle of the road agreement from day one. Like that was clearly someone communicated that because otherwise, I think it would have been the other way. Joe: Yeah. This is the 4th transaction I’ve done with Matt and his attorneys; the 1st one years ago and the last three within the last eight months. And every one of those contracts had been fair and balanced and turned around very quickly. And we actually have an attorney referral list now where we just want people to have good attorneys because we’ve had situations where people have awful attorneys. So we started gathering a list and we put this firm Jones and [inaudible 00:18:35.7]. if anybody is working on an asset purchase agreement and doing it directly with another buyer or seller and you want a referral to an attorney, shoot me an email at joe@quietlightbrokerage and I’ll be happy to send it off to you; I’m happy to do that. So that’s good, we got through that APA and we actually signed it. It’s interesting because we signed it on the 14th of March and normally when we sign it money goes into Escrow and then we’re right off to closing. But in this case, we waited almost another three weeks. So it could have been even longer. Mike: It did [inaudible 00:19:16.7] Escrow. You might not recall but there was like a $25,000 deposit. Joe: Yeah because of the request—actually it was necessary because you moving things out of the seller account. It was a nonrefundable $25,000 earnest money that was put in Escrow after signing the asset purchase agreement. I think it was nonrefundable. But that went to the attorney Escrow agreement and then the balance was sent in just prior to closing. It all worked out very well. We ended up closing on March 5th. But prior to that, we had to have some calls and some meetings and doing some planning but there were times when you were a little nervous because there wasn’t a whole lot of planning and a whole lot of conversations going on. Mike: Yeah, and it was from my point of view like I wasn’t worried about me because like I knew the money was going to be there. But I’m the kind of guy as you know that I’m looking out for the other guy. They just spent a lot of money, I want to make sure it’s a good experience for them. And I was just like guys you’re buying this business in a couple of days and we haven’t talked about changing passwords and billing and things are going to just start breaking if you aren’t paying attention to them and the team needs kind of a handoff to know exactly where to look for things etcetera. So it was a little bit weird to me that it didn’t seem to be—like they were the kind of guys like everything was like T’s crossed I’s dotted, really highly motivated and passionate about everything that they’re doing but that didn’t seem to be as big of a concern. And I think we were talking a little bit—I think it was a combination of they just purchased another business like right before that. Joe: Yeah. Mike: I was also coming to visit them for two days like a couple of days after closing to be with them two, four days in person which I think probably they were just mostly waiting for that to happen. And I think the last part is that they just basically trusted me by that point that I was a good guy and wasn’t going to rake them over the coals. But there were definitely some moments where I just like I—if I wanted to like really screw these guys [inaudible 00:21:09.4] kind of I was like thinking that and more just from the perspective of I think they probably should just be more careful because not everyone is a good person and I’ve seen scribbly stuff happen. Joe: And remember you didn’t read every line of the purchase agreement. I’m sure whatever the potential screwing was or could have been was covered there. Mike: There’s probably, I did not read the agreement. My lawyer read it but yeah I’m sure there was some legal stuff on there that had I screwed them—I mean again that wasn’t even like—I was [inaudible 00:21:39.9] that I was just more—I’m worried for them. Joe: Yeah. Mike: The biggest was that if a wire did come in and we still had that lump in the Amazon accounts and—who knows someone could just like catch a fly out of the country and really see it later and it was a little bit scary for me on their behalf. I just worry about stuff like that. Joe: Yeah. Well, I think that the last minute stuff was due to they had just closed one so they were busy with that and they also knew what was coming. And they are so busy they have so little capacity for anything about what’s in front of them that they were like we’ll get to that when it’s necessary and it’s necessary just after closing; after the money is wired. The other thing you mention was that you went to meet with them in person. You happened to be going on a road trip and going to be in their neighborhood just after closing. So that worked out perfectly. Mike: Yeah. Joe: I always recommend to people, to buyers in particular regardless of the size of the transaction that if you can; if there’s any possible way, you get in a car, you get on a plane and you go visit your seller during due diligence. Once you’re under a letter of intent get in front of them; have lunch with them, have dinner, get a tour. You don’t want to let the staff know that the business is forsold, the large part until the APA is signed. But you could go in as a consultant or at the very least meet them so that you can gain that level of trust because it makes a huge difference. The worst situation I’ve ever had—I actually had a guy from San Diego where you’re from. Early on when I 1st started back in 2012, he bought a business from me that was $35,000 and there was about $40,000 worth of inventory. He flew from San Diego in January to Minnesota and he didn’t have a winter coat and I was trying to talk to him because I grew up in Min and I’m like you really—you don’t know what 10 degrees is and with the wind chill factor of 20 below but it worked out. And he said to me later, he said look if I hadn’t met them in person and learned everything I learned in due diligence I would have walked away because due diligence was tough when you’ve got a business that’s $35,000 and there’s $40,000 worth of inventory. But he met them in person and that made a difference. He still owns it today. I saw him at the Prosper Show a few years ago. So definitely in person meetings are really, really important. So let’s talk now about those two days; in most transactions, there’s a transition period, a training period that is part of the purchase price. The standard asset purchase agreement says up to 40 hours over the 1st 90 days after closing. I don’t think you’re going to use 40 hours or they’re going to use 40 hours from you but you put in a couple of very long days right after closing, right? Mike: Yeah. I mean I don’t know that it was required and I committed to be there whatever but I’m again that type of guy and I want to see them have success with this business; bottom line. And part of it is just treating others like I like to be treated. And I have been in transactions before when I bought Ice Wraps on the wire hit the guy ghosted me. It was like I literally never heard from him again. Joe: That’s why we do hold backs people. Mike: Yeah but I mean it was a $50,000 purchase. It was actually the exact same situation as going—I went to Michigan, it was also in January. I also didn’t have a winter coat. And I was also [inaudible 00:25:13.8] I thought you’re talking about me for a second. But the employees did help me with the transition. The owner just was gone. And there were a couple of things that I could have used his help on that would have just taken him 30 seconds to answer. So again I just would never want to be that guy. And there is a lot—I mean a lot of things are going on in our business that I probably needed to hand off you realize it is all complicated; they are but it seems so easy to you because you learned them one day at a time. And when you’re trying to take five years of something that you learned one day at a time that for me they’re like sending orders into Amazon or you have something come from our 3PL or coming from China go to a 3PL and go to Amazon or deal with the customer service issue or do Facebook Ads, I mean all the different pieces of the business it all just seems so 2nd nature to me. It’s no different than breathing. But when you try to start explaining to somebody you realize like just how much there is. And so I actually made a list of like 40 items as I just started thinking of them over and above what they were asking for or things that I thought that I needed to explain to them. And I just I wanted to feel like when I left there that I felt good about myself that they had everything from me to make sure that they were going to be successful. Now what they do with things from here on out isn’t really—I look at that and that’s not my problem. I mean I’ve done everything I can it’s up to them now if they want to end to the ground there’s nothing I can really do about that. I’d rather that they’ll make a billion dollars with it. I’d be much happier with that result but I want to tell they felt good about me. Like I gave them every tool possible to be successful and I’m still there for them. They still have been in contact with me but they’ve been really good about it and respectful. And I’ve been spending 10 to 15 minutes a day maybe since I left there helping them which I think is completely reasonable. And I see the light at the end of the tunnel in that within two to three weeks I’ll probably never hear from them again other than to say hi and maybe have a drink some day because they’re really awesome guys. I really like them and I’d love to hang out with them just on a personal level next time we’re in the same city. But they’re obviously not going to take advantage. That’s when I would get upset is like if the other parties are taking advantage and like asking you to continue to do stuff and spend eight hours a day helping them and just taking advantage. And they’re not doing that and again I just want to make sure that I do the best that I could and I can feel good about myself with the hand off. And that’s kind of how things transpired. Joe: Yeah. And that’s why as far as the taking advantage that’s why it’s called transition and training. It’s not operating the business. Mike: Yeah. Joe: So we’ve always got a certain period up to and over, the reality is that even after three months they may send you a note, a Skype message, a text, an email with a quick question that you’re going to respond to. It happens. There’s just no way that you can pack everything that’s in your head inside of a two day training period. Because they’re going to come up against something that may not happen for four months and it’s new to them and it wasn’t covered in training. It’s just the nature of all of the pieces and parts. But at the same time, it’s not overly complicated. These businesses are fairly easy to transfer and the training is fairly easy. It’s just running on its own now and it’s the key thing that I always tell people is especially people that are leaving the corporate world and are used to working 60 hours a week and they take over a business like yours that might take 15 hours a week on a high side that just put in 30 but 15 working in 15 observing and training and don’t fix anything that’s not broken. I see that happen too often. People come from the corporate world and they’re just fixers; they want to fix things even if it’s not broken so they do break it. So that’s the big piece that I try to have them not do which is really important. Okay, so we’re doing a video here. Most people listen to audio but you’ve got the EcomCrew shirt on so I want to talk about that a little bit. I want to know; we’ve closed, the money is in the bank, you’ve dropped one of four brands so you’ve got a little bit more free time. Not a lot, I know you’re crazy busy but what’s next for Mike Jackness? Mike: Well immediately following as just I have the EcomCrew shirt on is because we’re doing an EcomCrew webinar right after this. That’s what’s immediately next but I think you’re talking bigger picture. I’m trying to get—I have some life goals, I do a podcast every year about yearly goals and a couple of big themes are less is more. I think that would be just trying to do too much. We’ve been successful in spite of ourselves, in spite of running at full scene. I’m concerned about burning out because I’ve been there before and I can kind of feel that coming to [inaudible 00:30:01.6]. So before running off the rails and feeling like I’m completely burned out, I wanted to make some changes. And one of those things was selling one of those businesses to make sure that the burnout thing doesn’t happen. And overall like the thing that I really enjoy doing is the teaching and education part with EcomCrew. It’s just been awesome. I talk about how I feel like I have enough in life. I mean it’s always nice to make more money. I’m not going to be one of those guys that’s like I’m not going to take any money when I have enough to make money but there’s different ways to make money. And one of the things that have been really cool is just to help others while doing that. It might be a situation where I might make 10,000 instead of $20,000 but somebody else might make $100,000 so it’s like a net win for the role and it’s still good for me and it’s still in an environment where I get way more enjoyment out of it and it’s a lot better than coming to the office every day and just kind of grinding which is not really for me. That was the reason why I left my day job in 2004. So those are kind of some big picture things that we’re working on. I also want to get into an e-commerce business I have just a personal interest in. I think that that’s really important after just being in e-commerce and business stuff over a long period of time. The things that you are personally interested and passionate about are just way easier. And Color It was an amazing business, amazing brand for a whole bunch of reasons that we don’t time to get into here but it’s just not something that I’m personally into. And the same thing with Ice Wraps and Tech Miner and Water Baby, those are just things that they make money. I’m an entrepreneur at heart, I think a really good business person at heart like I am very strappy. I will figure out a way to make money doing just about anything but it’s not just about that. It’s doing something that I actually have an interest in and enjoy which I think will be a lot better. So those are some big picture things for me. Joe: But I think a lot of that estranged and left comes with age and experience; hustled in the past and you did what you had to do and you got ahead and you’re giving back. For those that have not listened to EcomCrew, the podcast, I highly advise it. We talk about it often here on the podcast for people that have just purchased businesses or even those that have them and are trying to expand their channels either to Amazon or email marketing or anything like that. You got to tune in and listen to Mike and Dave on EcomCrew. They’ve got a great series, Under the Hood, we’re going to try to do something like that on valuations here at Quiet Light someday but Mike is one of those guys that has been there, done it, and now he’s helping. He’s not teaching because he had nothing else to do. He’s teaching because he’s been very, very successful in sharing his experience with others. So I appreciate that. Mike, any last thoughts, any last words in terms of what you’d say to people that are thinking about selling in the future and how to prepare? Mike: Specifically, on thinking about selling and how to prepare, the 1st thing I would say is that everything comes to an end at some point. So even if you’re like I’m never going to sell my business that’s complete B.S. because everything comes to an end. And what I’ve learned in life, entrepreneurial life is a lot of times it sneaks up on you. You think you’re in a good spotting and you’re happy with what you’re doing but there’s a lot of things that happen in business that are irritating and wear on you. And eventually one day you might just throw your hands up and you’ll be like I’ve had enough of this. And if you’re in a better spot to sell and you’re prepared to sell all along the way that can happen a lot easier and smoother than if you haven’t prepared. And you’ll also get way more money for your business if you have prepared. So it’s something that you should be thinking about at all times. It will probably make you a better business person and make your existing business better anyway because if you’re always thinking about it from the perception of I might need to sell this business any time it will force you to have better procedures in place. It will force you to be looking at your accounting every month and scrutinizing all your expenses. Making sure that your net profit is always as high as possible. There’s a lot of [inaudible 00:34:09.9] benefits having that thought process. And even if you “never do sell” it will probably put you in a better position no matter what. So if there are things that I wish I’d—if I could go—if you try and go back and change things and I was thinking a lot about this; our plan was to sell the whole thing as like a big conglomerate originally. But things changed and so I wasn’t—I had been marching towards to sell everything as a conglomerate goal, everything was together and I thought one day e when I was done with e-commerce I would just be done with e-commerce. But that’s not how it worked out. What ended up happening was we got too big for what I was comfortable with in terms of risk to reward and I want to take some money off the table and I still immensely love e-commerce and I want to be involved in e-commerce. So I could have better prepared ourselves for that by having multiple LLC’s for each brand that maybe one LLC owned each one of those and it still would have been that conglomerate thing and structured in a better way. You can’t foresee the future all the time but you can definitely plan—put yourself in a better position when the unexpected comes. Joe: I don’t know if I could have said it any better than that so we’re just going to wrap this up, Mike. Mike: [inaudible 00:35:20.4] Joe: It’s about a complete pleasure working with you. I’m glad to have been your broker in helping you achieve these goals and maybe another year or two we’ll do it with the next one. Mike: I’m looking forward to it. Joe: Alright, thanks, Mike.   Links and Resources: ColorIt.com MIke’s Podcast Email Mike Centurica

A great deal of the businesses we sell at Quiet Light are founded by entrepreneurs looking for the rush of finding the next thing. Sometimes they look to sell because of burnout and sometimes it’s just boredom. Today’s guest’s business is designed to help entrepreneurs really question the goal of the businesses they run. Jason Zook earned social media fame and experienced that burnout while on his first entrepreneurial ride after walking away from his day job. For five years Jason ran IWearYourShirt, creating thousands of videos, photos, posts on social media, and had countless media outlets talking about IWYS during the early days of social media marketing. At some point, Jason realized he had almost created a self-made work prison for himself. He and his creative wife started their company to guide owners towards financial freedom and a business they actually want to work on. Jason’s focus is now on working to live rather than living to work. He strives for entrepreneurship with a healthy balance. Episode Highlights: The backstory on Jason’s current company, Wandering Aimfully. Why the t-shirt business had to end. The things Jason learned from that business and his subsequent years of starting and growing companies. How Jason and his wife formulated the idea for the business. The importance of setting a mark and working towards it. What the “enough” number means to Jason and his wife. How to create the balance between getting ahead and falling behind. How that balance applies to the business creep that can often take over work-life balance. Ways Wandering Aimfully helps people build their business impactfully based on what they need, How Jason uses challenges to create habits. Transcription: Joe: Most of the businesses that we sell Mark … well maybe not most but a great deal of them are businesses where someone bootstrapped it, put all their energies into it, got it up to a certain level, and then looked around and thought “man, this is kind of work now I’m not loving this day to day anymore; I’m not happy with this challenge and I’m getting burnt out”. It happened to me. I had a cushy gig, I was working 20 hours a week, easy business, recurring revenue, and I looked around and said this isn’t fulfilling me, I’m burnt out I need to move on. A lot of buyers that are from the corporate world don’t understand that. Those people that are in the entrepreneurial world know that they need that new challenge, that exciting challenge. And as I understand it you had Jason Zook on the podcast; a husband and wife team actually and they talked about working to live not living to work and trying to overcome that burnout challenge. Mark: Yeah, Jason got completely burnt out with one of his 1st businesses and one of his 1st businesses; really simple concept, he would wear a t- shirt that was a sponsor. It would be their company on the t-shirt and he would wear a t- shirt every single day and put up a YouTube video of that and the prices increased every single day for that sponsorship. And so as he put it he said I was doing daily videos before Casey Neistat made that cool to publish daily videos on YouTube. He said it was great initially and he was making money by just wearing t-shirts and having people follow him around with cameras. But then this organization grew and it grew more and more and his whole life every single day was being documented and he built this prison. And I think as entrepreneurs a lot of us can relate with this idea that you build prisons sometimes for yourselves with the businesses that we’ve built. And so he naturally got completely burned out on that and now his whole focus and life as entrepreneurship but with a healthy balance in that life and understanding what are the real goals of your life. What do you really need and why are you doing what you’re doing? And I think these are really important lessons for all of us just to keep in mind and have as a focus when we’re pushing that entrepreneurialism envelope like why are we pushing growth, why are we adding this new feature to our business, and really understand what is our goal as an entrepreneur? Maybe you want to be a billionaire and if that’s your goal all right then go for it but I think most of us get into this entrepreneurship game for the lifestyle. We get into it for the freedom. We get into it to be able to do what we want to do by our own rules. So are we actually doing that? Are you doing that? And is what you’re doing fulfilling you today? So this whole podcast … Jason is somebody that I did not know before this podcast. He and I had never talked before and … just a fascinating guy, an absolutely magnetic personality so I’m excited to share this interview with everyone today. Joe: I don’t think we can have enough people on the podcast talking about work life balance. We had Ezra Firestone; Ezra’s got a staff of 25 or 30 VA’s working all over the world and his work life balance is his primary focus. He and his wife they’ve got a certain lifestyle that they want to live and he is growing the business but at the same time making sure everybody within the business understands that work life balance. So I’m excited to hear what Jason has to say, it’s always interesting to hear somebodies approach in what they do on a day to day basis. Let’s go right to it. Mark: Jason, I’m super excited to have you on the podcast. Thank you for agreeing to come on here based off a completely cold and random e-mail that I sent to you. Jason: It was a good cold and random e-mail. As someone who has sent thousands of cold and random e-mails in my time as an entrepreneur, it was a good one. You didn’t just kind of like lay out exactly what you wanted, you were kind, you were nice, you really presented yourself well and I was like yeah I’ll say yes to this interview. I have no idea who you are, we’re meeting for the 1st time in this conversation which I think is fun. Mark: Yeah absolutely and I’ll tell you why I wanted to have you on the podcast. I think I said it in an intro e-mail that I sent to you. But on your website, you and your wife have a phrase on there and it’s actually one of the core values that I consider my company Quiet Light Brokerage to have and that is that we work so that we can live we don’t live so that we can work. This idea that hey we’re entrepreneurs, we get obsessed, we love the grind, we like that sort of thing but at a certain point it’s got to have something else beyond just the work itself; right? Jason: Yeah. Mark: I would love to get your story, have you share your story real quick with the listeners as to how you kind of came about this with Wandering Aimfully and this new mission that you and your wife have. Jason: Yeah sure. My entrepreneurial journey actually started kind of way late in life for a lot of people who are entrepreneurs like had lemonade stands and they like went door to door and did all those things and started businesses super early; I didn’t. I started my 1st business when I was 27 on a whim after leaving a full time job that I in all essence liked it just was a very boring job and I didn’t see a lot of potential for myself there. And I really felt this drive and this pull to do something better and something else. I started my own design company. It was just two people and from there I had this kind of crazy idea to get paid to wear t-shirts for a living for no reason whatsoever other than I just thought social media is kind of growing. This was 2008, 2009 I just … I don’t know there was just something about it that seemed interesting to me and it struck me one day when I was literally standing in my closet looking at all these clothes that I had paid brands to own and then walk around and kind of schlep and promote. I was like wait why am I doing this? This is so weird. Could someone just pay me to wear their shirt? So that idea did not take off. I launched a website called iwearyourshirt.com five people showed up on the 1st day. I think three of them were my grandmother like refreshing the page, no joke. And then I really had to start doing the entrepreneurial kind of hustle and sprint that we all do to get things started. I was e-mailing friends and family and I was getting on Twitter and jumping in conversations back when Twitter wasn’t just a barrage of political nightmare that it is now and that’s not to say there’s not some still good stuff on Twitter but this was 2008 so it’s very different; a very small community. And yeah that idea just kind of took off on its own after a lot of hard work putting in a daily YouTube video. So I recorded 889 videos straight every single day before vlogging was a thing before Casey Neistat was recording videos and we were all watching them and loving them all I was making really terrible videos every day. But yeah that led into a couple of different ventures along the way. I created a software company to help people build and sell online courses because I wanted to build and sell online courses I just wasn’t a good one at the time, a couple of other little random things and then yeah just a couple of weird different changes and ebbs and flows. My wife actually worked for my I Wear Your Shirt business and when that had to shut down in 2013 after 5 years she was kind of left with like I don’t wanna go back to the nine to five world, I’m going to start my own business as well and so she started a business. So we kind of worked like 12 feet from each other but we always chatted and then we kind of came back together this past year on this Wandering Aimfully project. Mark: So why did the t-shirt business has to end? Jason: So many factors that we can dive into, I’ll lay down on the couch and we can talk about them all. Truthfully it was my 1st business and I think so many people can resonate when you start your 1st business you don’t know what you don’t know. And I didn’t know about managing people, I didn’t know about managing money, the pricing scheme of I Wear Your Shirt was very poorly designed for paying people at a consistent salary. So the 1st year it was just myself and it was a dollar on the 1st day, $2 in the 2nd day, $3 in the 3rd day and so that pricing scheme is cool because it’s so low barrier entry in the beginning and towards the end of the year once you build momentum it makes sense and it adds up. It made $66,795 in the 1st year which is really cool. But when you have five employees as I grew the company too because I thought I had to scale up, I thought I had to grow, I’m reading and watching all of the things that we’re all reading and watching and I’m thinking that’s what I have to do. I ended up having $30,000 in salary in January when my business only made $800. That doesn’t work out well and so it was just a lot of those things where I just was so new to things; we had billables, we were printing all of the t-shirts through an outsourced printing service. I didn’t know about just like paying invoices and all those things and so I got very back on bills and I actually built up a $100,000 in debt not overnight but in about a year and a half and it just it was so crazy to me because Mark it went from I was making almost $100,000 with literally no expenses, literally getting e-mails from PayPal like “hey there’s a $100,000 in your PayPal account what’s going on” to people e-mailing me and going “hey what’s going on you can’t pay your bills or you’re 30 days late in your bills”. And so eventually I just saw the writing on the wall and I was just like this isn’t sustainable. I tried this thing, it kind of grabbed its moment in time in social media and the landscape of it and I just wanted to move on to other things plus I really overworked myself every single day running the business, wearing a shirt, managing people, doing all of the marketing and sales and interviews and things. It was just time at the end of five years to move on. Mark: Five years is a long time to be wearing other people’s shirts. Jason: And I’m still wearing other people’s shirts if you think about it I’m just not talking about them at all. And almost none of them have a brand name on them because I’m just so burnt out from that. But yeah I actually don’t regret any of it. I think I learned so many unbelievably important valuable lessons that I continue to use to this day in everything that I do. So while it ended not on a wonderful note and I don’t feel like I have like this crazy awesome success story I also have a really relatable story that so many business owners can kind of stand behind me or stand with me and go “yeah my 1st business didn’t do well either or my 2nd, or 3rd, or 4th it fizzled out or I didn’t manage it properly” and you just learn from those experiences and you kind of take those with you and you kind of take your lumps and move forward. Mark: Yeah you know I would disagree I actually think the idea that you were able to take something as simple as wearing a t-shirt and having somebody paying for that and turning that into something that actually generated revenue is pretty remarkable. Now obviously is it sustainable, eventually, you’re going to run into the problem that you ran into which is I don’t want to wear your shirt anymore and I don’t want to be on TV … have a video done every day and everything else that you ran into. You said something in there in that story that you were reading and listening to what everybody else was reading and listening to, there’s a sort of like momentum that’s out there in the business community where there is this almost like a psych guy stuff here’s what you should be doing and it’s all towards drive, drive, drive, grind, grow, expand, and all this sort of stuff. What are some of the things you’ve learned over the years with all the different ventures that you’ve been in about listening to that or not listening to it? Jason: The 1st one is more money more problems and as silly and as dumb as that sounds it’s true. I mean it’s just I don’t know any business owners that have taken their business from one level to another level whatever that means and not encountered so much more work, so much more stress, so much more all of the things. And I saw that with myself like in that 1st year of I Wear Your Shirt I was making almost $100,000 because I had some other sponsorship stuff in there. There was literally almost no stress. I mean the daily creativity and all the things I had to do was a lot of work but in the 3rd year of I Wear Your Shirt when I had five employees, we had five sponsors per day, we made almost $600,000 that year; I was so much stressed. It was a nightmare almost. And I’ll tell you I made $30,000 that year. I got paid the least as the person who was doing the most. And I think so many people can relate to that and so I just saw all of these things that I was latching onto of like I wanted a million dollar business what does that mean? I wanted this big house, why? I don’t need a big house, I actually like having a small place where I know where everything is and I don’t have a lot of stuff. And so I really just started to look at a lot of these different values that I was buying into or believing into especially the ones that society puts pressure on you and when you read Entrepreneur.com, or Business Insider, or Forbes, or whatever you’re reading we all read these stories of millions and billions and all this stuff. It’s like where are the people who are just making $100,000 or a couple $100,000 or $50,000 that are super happy? And it’s because those stories don’t sell. Those headlines don’t get clicked and I really just started to reevaluate all these decisions and it was through a lot of conversations with my wife and we just kept saying this phrase what is it all for? Like what is all of the work for, what is all of the time for, what is all the energy being put into this for if at the end of a day or the end of a week or a month or a year you’re so tired and you don’t enjoy the life you’ve created? Why are we doing that? I should just go get a nine to five job at Target and clock in and clock out and leave and that’s it like I don’t even think about it. And so I do think there’s just a lot of misnomers that go on with this like buying into up into the right mentality and you should always be growing and social media landscape can change so you got to grab all the Facebook advertising stuff you can do. It’s like no you don’t have to do that. You build the business around the life that you want and you really figure out what that means to you and I think that’s so personal and subjective to everybody that’s starting a business. Mark: At what moment of your life did you really start to formulate that when you and your wife were thinking what are the values that we actually want to have? Because look I agree with you 100%, this idea of I want a million dollar business and once I get a million dollar business I want a 10 million dollar business. When I talk to some of our clients, some of the people that are preparing to sell and I ask them what are your goals, why are you thinking about selling? Because one of the things that I try and impress especially on sellers … I’ll tell you a quick story here; the 1st client that I worked with, a good friend of mine he had a company and he came in and said “Hey would you help me sell my business?” Well this is how Quiet Light Brokerage started and I went through the process, we got it sold. I won’t say exactly for how much but you know what he was in financial trouble just a couple of years later. He gave up a lifestyle business for a big pile of cash today thinking this is going to set me free only to find out that he was back in the grind that he was in before. And so I’m curious from your standpoint what was it where you started to question that up until right mentality and same maybe it’s on up into the right maybe it’s whatever is right in front of me today? Jason: Yeah it’s funny I get chills because I think back to the exact moment. I was in Fargo, North Dakota speaking at a very small conference called Misfit Con; they don’t even do it anymore. And this is like literally 120 people and I was a speaker. No one knew who the speakers were so it’s just a group of us sitting in this really cool yoga studio actually kind of converted into this space. A guy stepped on stage and he had well-coiffed hair and he had skinny jeans and he had really nice boots and I’m like this guy’s going to tell me all the secrets that I need to know to succeed. And he started telling the story and it was eerily similar to mine of trying to grow, being focused on the money, the big house, the things, the stuff and I come to find out that was Joshua Fields Millburn of The Minimalists and his story was so akin to mine. And then when he started talking about these specific values and these specific things and really questioning all of the stuff that we buy into both societal and personal and these things it really hit me. It hit me hard sitting there and I remember sitting with my wife at the time just looking at her and going like uh-oh we got to rethink everything. And I think I spoke like two or three spaces after him and I just remember spilling my guts about how everything wasn’t perfect at the time for my I Wear Your Shirt business and yet I was there to talk about this is a business that was supposedly doing so well. And that flight home after that conference we basically sat down and were just like what do we actually need to live? What do we want our lives to look like? Then those questions are so big and they’re so heavy and they’re scary because you tend to find yourself thinking well if I’m going to make a decision that’s the decision forever. That’s just not true. It can be a decision for the next three months, six months, a year, two years, five years, whatever it is and we’ve changed so much in that time since that conversation; that was 2012, 2013 and it’s just been really big for us too at every turn and every opportunity where we can do more or we can sell more or make more is to ask ourselves hold on what is this going to add to our plate. And just like your story with the client that you worked with I find that question to be so interesting to me, I was like if I sell a business or anything I’m a part of, like I have a software company, the online course business, like if I sold that business and I made X amount of money from it what would I do with that time? I like working on that business. I actually enjoy it and I want to invest in it and so if I just sold it for a small chunk of cash which is a sizable chunk of cash, in a long term it’s not really that big of a chunk of cash I’m going to have to start over. And I think we see that with so many people and you suppose this way more than I do but so many people sell a business that they actually enjoyed working on only to then find themselves a couple of months or years later bored out of their minds wishing they had something that fulfilled them to work on every day. And that for me is kind of where this comes from too of like I want to make enough money that we don’t have to think about money and truthfully we’re not there yet. We don’t make enough money every month. We were just like we don’t care about money but we’ve set what mark looks like and we’re working toward that mark. We call that our enough number and once we hit that number we’re just going to stop trying to make money. And you are going to have to fill in gaps [inaudible 00:08:45.1] we have a lot of monthly recurring business stuff. And so it’s always going to be a game to just kind of stay around that enough number but I love the work that I’m doing so I’m happy to do that. Mark: How would you balance out the difference between … I think there’s two motivations for working hard, right? One is to get ahead the other one is to not fall behind. Jason: Yeah. Mark: Because oftentimes in business I’ve seen it some of our clients that come to us with distressed businesses where they got to that enough number or probably more than enough and then they’re like I made it and then they relaxed and then a year later they’re thinking oh my gosh my business just completely fell apart underneath me. How would you approach that in your own life when you get to that stage of having enough to make sure that you’re also not necessarily falling behind? Jason: Yeah I think it really depends on your lifestyle and I think lifestyle creep is such an interesting idea that we all run into and just like you started saying earlier it’s like well you create a million dollar business and then you want to make a 10 million dollar business or even just a two million dollar business and the reason that that tends to happen is not because you need that money, you don’t need the money, it’s that you go oh well now I can afford this and so now I’m going to … I need more money to kind of balance that out. And so I think for Caroline and myself, my wife, we really just started to try and define what are the things that we love and want in life and if we don’t have those now what does it actually take to get those things? And to really put a price tag on those and then to question those things and to go … for one thing for us has been looking at buying or building a dream home and for most people, that’s in like the millions of dollars. For us, I think we could actually do it for a couple hundred thousand dollars. Like we just want a 1200 square foot cool modern pretty fab place and we keep going through the effort of that and just going you know what though the cash that it would take up from for it, the time and stress to deal with everybody building all the things right now in our lives it just doesn’t fit. And it may be something we do down the road but it just is not … I don’t want to creep into that and have that completely change our life. So to answer your question I really think it’s about checking in constantly with the things that matter to you and then really questioning every single one of those things and just going like do I need more money to do this or do I just need to change something in my life or change something in the way that I operate because I kind of … I tend to find for myself at least like flexibility and control of my time is the number one thing I want. Of course, I want more money in the bank but if I can make a little bit less money and have a little bit more time because I’m not working to make more money I’m happier because I can then choose my schedule every single day of my life. I don’t have to give up and sacrifice things at the whim of making money and that to me becomes a really important discussion to constantly be having with yourself and thinking about. Because just like you said with that client you can reach your enough number and then just fall back and go okay I’m good like I don’t have to do anything anymore and it’s like yeah but that’s not how business works. You just don’t get to a finish line and then you’re done and you won the race. You kind of have to stay in the race at a certain point and you find that pace that you can kind of go at that makes sense with you. Mark: Yeah I think something that’s interesting with business as well because you talk about lifestyle creep and that’s obviously a problem. I think anybody can relate with that but there’s also business lifestyle creep that I’ve found where when you start up a new business some of it … a lot of it is bootstrapping, you’re going out there and you’re figuring out how am I going to make this business work with whatever little money I have and then you get that client they pay you less money and like awesome I can now pay for ads. It how you start paying for ads, you have an ad budget and then you hire a few employees and now have those employee … the next thing you know your monthly budget is ramping up and you have the added stress of I got to keep layering on more and more revenue to be able to cover this monthly budget as well. I think it’s an interesting concept to say core value is both for the business core value is also for yourself and keep reminding yourself of those core values in order to stay true to that and have a balanced life. That’s what you question, just kind of riffing on what you’re saying there. Jason: No and I do think it’s a really valid one because we’ve thought about that. My wife and I, we live and work at home so where we would have a dining room table we have our desks and it’s been that way for the past six years, five years something like that. And for a lot of people that would probably be the worst thing ever. They’d be like oh I don’t want to look at my work I want to be completely separate so I need an office or I need a studio or whatever. And so I do think there are some decisions you could make for your business being separate from your life if that really matters to you. For us we run very creative businesses, we love the community that we built so I don’t hate my e-mail inbox. I don’t loathe looking at these things so for us it is such a blend and lifestyle career business creep for us would potentially be like oh we want like a really cool office base like we’ve talked about this before. And it’s like yeah but we have that in our home it’s just not a full dedicated space and we don’t actually need that. So it’s continuing to come back to that and then honestly I think a big part of it too is not watching all of the videos and reading all the stories of the cool office spaces. Because then you just get stuck in that mode of like oh yeah but I really want a ping pong table and the full living wall and it’s like I don’t need that. That’s just a cool thing and I can appreciate someone else having that. Mark: I do want to nap pad. I’m just going to say it like I want a nap pad in my office because that would be awesome. I’ve got a glass door you can actually see it. If you’re listening in your car you can’t see it of course but I have a glass door behind me so I can’t really take naps in my office. Let’s talk a little bit about your community. I love what you guys are doing with the community over at WanderingAimfully.com. Tell me a little bit about it and who it’s targeted towards and what the whole purpose of this is. Jason: Yeah I think it’s a really good question of who it’s targeted toward because when we started to blend Caroline and mines two businesses together in March of 2018 … and actually the conversation started many months before that. We weren’t sure who to target because her business was targeted to soulful creatives which is kind of general in a way and my business was targeted to business owners who just want to get better at taking action. Again very general audience it’s not like stay home moms who love to cook vegan meals. It’s like it’s not as focused as it could be. And so when we started Wandering Aimfully it was very generic of like independent creative business owners and that’s designers, musicians, artists, [inaudible 00:24:57.5] and we really found that it was tough to get people to identify of like hey I’m raising my hand I fit within Wandering Aimfully. They kind of felt like they did but it just wasn’t kind of niche enough if you will. And so in the past couple of months we really decided to hone in further on okay who have we attracted over the years that we’ve made the most impact for? And what we found is that that’s service based business owners or like client based business owners; so that is your designers, that’s your developers, that’s your coaches, that’s people who have clients and that they want to move away from selling their time one on one to building digital product businesses. So it’s having online courses, books, workshops, membership communities of their own whatever that is. And we went back to the root of what did we do when we were getting started and that’s exactly what we did. We were service based business owners and we wanted to stop trading our time for money and we want to try and reach more people and make more of an impact based on what we had learned and experienced. And so now that’s essentially who Wandering Aimfully is for and there are some fringe benefits to people who are not those people but if you run a service business and you want to transition into selling digital products we’re the perfect community for you because we ourselves have had that exact experience. We know exactly how to help you. We built now a six months program that helps people really do that without burning out because we just decided the people need to slow the hell down and not try and transition their entire business in 24 to 48 hours or a couple of weeks. And it’s been really interesting to shift the focus on this is exactly who we are for and it’s a smaller audience and you have people who self-identify much faster than we did before where people are like I don’t know if it’s right for me it’s like now they know that it’s right for them and then for everybody else they can still kind of try and figure out if it’s right for them but we can now more clearly identify. Mark: That’s pretty cool. I’ve kind of poked around through your website and you guys have all sorts of prepackaged courses and checklists and everything else. One thing I love about this and I can relate with buyers who are acquiring a new business or anyone growing a business as well you get into something and there’s a sense of I’ve got to be doing all the things all right now. I got to have my Facebook marketing strategy, do some CRO, get an Instagram account going because it doesn’t have that and it’s this long list of things and you’re going to just kill yourself in trying to do that. What you guys have through this community, I saw you have a bunch of checklists and action plans for some pretty normal things that a lot of different companies are going to have to deal with as well. And it seems like the entire goal and correct me if I’m wrong but the entire goal is just that breaking up these projects into bite sized pieces. Jason: Yeah absolutely and we just want to help people navigate. Like you said when someone is running a business or starting a business or making that transition from clients to products there’s a lot that can be done and really what we try and do because it’s what we’ve done for ourselves is to identify what do you need to do. Like what is actually going to make an impact? Because for so many people a Facebook ad campaign or an Instagram account is not at all what they should be focusing on. What they should be focusing on is creating some type of really valuable content that can be searched for on the internet because Google is still the number one place that people go on the internet and that is not going to change for quite a while. And so we’ve just seen through a lot of experience that people want the shiny new and fancy and we’ve been there as well, we’ve been one of those things too but you find that they actually don’t make that big of an impact on your business and it’s a lot of time spent without a lot of return. And listen I'm all for branding, I’m all for hitting the word out about your business and going where people’s attention is but I think that there’s a lot to be said for having a good foundation for your business, making sure that your ducks are in a row and so much and you probably see this so often is as business owners a lot of times we don’t even know the basics of expenses and cash flow and I know that stuff can sound really silly to people like oh how do you not know that? It’s because it’s different for every business. So what we’re taught about how to run a business may not be applicable to the business we actually create and start. And so I think that so much of that we’ve seen is just trying to help people navigate their own journey based on our experiences, experiences of community members, identifying bigger tasks like you said that people want to do like if you want to start a podcast that’s a pretty big task. There’s a lot of things that go into that that you don’t see and so we’ve broken it down. I think it’s in like I don’t know … I want to say less than 100 steps and that sounds like a ton but some of the steps are like name your podcast step cool, check it off the list. But it gives you this incredible bite sized thing and people find it so helpful to just have this list to be able to like yes I did that, yes I did that, and go through and knock it all out as opposed to having to think of everything themselves. Mark: Yeah it reminds me of a couple of other episodes that we did here at the Quiet Light Podcast. One was with Bjork Ostrom who owns Food Blogger Pro and a few other pretty big food blogs and he talked a lot about … he’s grown that company from nothing into a significant enterprise and he talked a lot about this idea of I’m not going to try and double my business tomorrow. I’m going to try and have this single daily marginal improvement and the compound in effect of this on a day to day basis. The other person … you talked about going back to the basics and focusing on those things that really work well the person you’re agreeing with right now Babak Azad who grew Beach Body into a billion dollar business that was on the podcast and he told me … he said people are focusing on way too many advertising channels. He said that you should really be focusing on just a few; probably one, maybe two because if you’re focusing on six that means you’re not doing any of them well. You’ve got to focus on those basics so I think that’s fantastic advice. Okay, I’m going to round this out with a final question here for you and this is really the content on your site. I absolutely love … I’ve always liked this kind of I’m doing this productivity experiment or just whatever sort of experiment. Jason: Yeah. Mark: You recently rode a stationary bike at your standing desk for 30 days and I haven’t read how it finishes out but how did that go? Jason: Cliff hanger, okay, so the reason why I did this experiment … why I love doing 30 day challenges specifically is because it’s just like you said with like you do these little daily things that can add up and incrementally make a big change or make a big impact. And it’s hard to change, it’s hard to build habits, it’s hard to do those things and I highly recommend a book Atomic Habits by James Clear; a friend of mine and just a super smart guy when it comes out. So if anybody is like I’m bad at habits James will help you, that book is really great. But for me, I just always like breaking these things down into 30 day challenges. So to round this out I rode a stationary bike at my standing desk every single day for 30 days. I just wanted to know could I get a little bit of exercise every day because I’m just at my desk. I didn’t want to sit at my desk and do those things and I ended up burning 18,339 calories in 30 days. It’s insane. And I wrote this at the end of the thing and I talked about this in the video that I kind of recapped and put it all together it did not feel like I was working out. It felt like I was sitting at my desk very slowly methodically riding this bike while doing e-mails and bunch of other admin tasks and the average amount of time that I rode the bike a day was one hour. It didn’t feel like I was riding an hour because I would break it up into different chunks throughout the day. I rode an average of 25 miles a day and at the end of it my pants fit better, I had more energy every day, and it really became a good solid habit for me. So it was super … just a weird random thing I wanted to do but now like I still have the bike we’re now a couple of weeks after that I’ve finished up I’m still riding it. It’s great. My wife is starting to ride it and it’s just one of those things that’s like challenge yourself to do something for 30 days that you might think is weird or out there are different and see what kind of tangible result you get cumulatively over the time and you might realize like wow yeah in a couple of days of course I didn’t get like six pack abs from riding this bike but I think if I do this for six months I’m probably going to be in a better shape than I would have been than just if I’d continue doing at the gym and eating better and all those things. Mark: That’s fantastic. I absolutely love everything that you guys stand for. I think it’s so easy for all of us entrepreneurs to build businesses but at the same time build little prisons for ourselves as well because we get so driven by productivity when we worship at that altar and then also by just having more and more and more instead of thinking about like you said at the beginning that focus on the goals and ask yourself a question and I’m encouraging everyone listening that’s thinking about buying a business or maybe you want to sell the business or you’re building something right now to ask those questions; why, for what, what are your goals, what are your values, what do you value in life, a really good advice. Jason: Yeah, absolutely. Great chatting with you. Mark: Thanks for having … thanks for coming on I should say. Way to end that professionally. Alright, thanks for having … for coming on Jason. Jason: Yeah no problem.   Links and Resources: https://wanderingaimfully.com/ Atomic Habit

The purchase process for first-time e-commerce buyers is rarely stress-free. Today’s guest is here to take us through his acquisition from inception to completion. He openly talks about the vetting, the financing, the due diligence process, and the seller/buyer relationship. We also discuss the wins and losses, and how they played off on each other in the six to eight months after the purchase. Finding himself near the end of his career, Rocky Cleborne was looking for something else. As an almost-retiree from the automobile industry, he decided to purchase his first business. Rocky reviewed numerous businesses and performed extensive vettings of fourteen of them before finally deciding on an e-commerce jewelry business. As we’ve mentioned before, surrounding yourself with smart, experienced people and being the right type of person yourself are often the keys to successful acquisitions. The highest offer is not always necessarily the one that wins the bid for the business. Episode Highlights: The vetting process Rocky went through before deciding on Novadab. How many offers he made out of the 14 businesses he considered buying. How using Centurica services helped Rocky through the process. The SBA lending process and how much Rocky had to come up with in his deal. Rocky’s business model and where his e-commerce products are being sold (hint, it’s not all Amazon). Mistakes he made in the early days of the transition to e-commerce and sourcing. The customer experience Novadab provides for their 12,000 orders each month. Rocky’s email marketing strategy. The business’s growth percentage since the purchase. How he’s formed a partnership with a surprising partner and how that partnership is fueling growth both in Novadab and beyond. The losses and wins Rocky experienced during the transition process. Transcription: Mark: Joe over the past several years I have sat down and had coffee with people who are looking to buy their 1st online business and we talk a lot about what does that process like. How do you go about finding that right opportunity? How do you vet that opportunity? And then even afterwards what does it look like after you do the acquisition and are spending the 1st several months in there what you would be expecting as far as wins and losses. I love it when we have the opportunity to bring somebody on who has gone through this process and they’re totally an open book willing to share what they did. You had Rocky on who you sold a business to to talk just about that. Joe: Yeah and actually I wasn’t the broker. I had Rocky make offers on several of my listings and he wasn’t the winning bid or the chosen one and eventually he bought one from Amanda and he openly talks about that process of buying the business, the successes that he’s had, the financing that he did, some of his big wins and some of his big losses, and how they sort of played off on each other in the six to eight months after he bought the business. Mark: Well, it’s great. Now we also have a really exciting announcement here. We had somebody guess one of the movie quotes from the intro Mike K. right? It was Mike K. Joe: Come on now. Mark: I can’t pronounce his last name. I’m sorry Mike. Chris, our producer is in here with me; what’s his name, Chris? Chris: Koregnept. Mark: Koregnept. Alright, so Mike Koregnept Big Short from the very first intro that we ran. Thank you, Mike, for doing that and hey guys if you’re listening and you know the quote send us an e-mail. C’mon send it over. Let us know where it’s from and if you use Google tell us; be honest because that’s the only way I can ever guess any of these movie intros. I’m not going to at game at all. Joe: Let’s do one more thing though Mike I want you to call me, leave me a voicemail message with the proper pronunciation of your last name and we’ll air in on one of the upcoming episodes. Mark: That’s a really good idea. So let’s get back over to the actual topic let’s talk about Rocky and the process that he used to acquire his business. Joe: I’m recording; you can see that in the corner. Hey folks, it’s Joe from Quiet Light Brokerage and this is another episode of the Quiet Light Podcast and yes you heard me say I’m recording right at the beginning because I have Rocky on the line with me. Rocky pronounce your last name for me; go ahead. Rocky: It’s Cleborne. Joe: Cleborne; so easy, spelled funny but so easy. Rocky and I have talked twice in the last week because yes I recorded the best podcast ever last Tuesday with Rocky but I didn’t actually do what Rocky? Rocky: Hit the record button. Joe: Exactly! So we’re back at it. In the podcast world, everybody has a story of at least one time forgetting to hit record and it happened to us last week. So I’m glad you’re back; glad you had time but I think it’s appropriate that we didn’t do it two minutes after I realized when we were wrapping up that I forgot to hit record. Okay, enough babbling. Rocky Cleborne tell us about yourself; who are you what’s your background? Rocky: Well, my name is Rocky Cleborne and after I graduated from college I ended up starting some businesses that I turned around and then sold. I got into the automobile business in the late ’90s and became a general manager of a number of large automobile dealerships; some of which were selling over 600 cars a month. I’ve been doing that for over 20 years and then decided that I wanted to retire but knew that I didn’t want to just sit around and do nothing because that’s not who I am and so I decided that I would buy a business. At first, I looked at brick and mortar businesses and then I said I wanted to be more cutting edge than that and decided that I would look at e-commerce businesses. I did some vetting and some research. I came across Quiet Light Brokerage and the rest is history as they say. Joe: So you are an almost retiree that is in the automobile industry which is about as old school as it gets and you do what? You buy an e-commerce business and it’s not only that but it’s a jewelry e-commerce business. Rocky: Yes indeed and the company is called Novadab and I wanted to end up getting a business that had higher margins and that the jewelry business definitely has and I wanted to be able to end up operating the business with my daughter and so she has joined me in this venture and we really, really enjoy it very, very much. Joe: Well, good. So I want to take your life experience in terms of being in business and talk a little bit about the search process that you went through, the vetting process because I know you looked at a lot of deals; we looked at a few together, and then your financing; how you decided to pay for this business and talk a little bit about some of the wins and losses you’ve had along the way. But before I do that folks I want to say that you’ve heard me say it, you’ve heard Mark say it in the past that who you are as a buyer and how you behave as a buyer makes a huge difference in terms of getting the deal done not just with the broker. Well we’re here to help both sides of the transaction no matter what and sometimes it does matter in terms of the likability of you the buyer because if we’re in a multiple offer situation our client; the seller is going to say who do you like, what do you think, who are we going to get through due diligence with and all the way to closing, and they’re going to say who do you think would be better to work with after closing in transition and training? And Rocky is that type of guy. You struck me … well, what you bought this last fall, in fall of 2018 and we’ve talked a few times before that and then lo and behold I hear you’re under LOI and under contract with a deal that Amanda had and excited about it. I even got an e-mail from her and from the lender Stephen Speer about what a great guy you were; so good for you and folks this is what it takes some time. So again, alright Rocky tell us about your vetting process. How long did it take you to find Novadab and how many deals did you look at, and how many deals did you make an offer on? And I know you’re going to come up with ballpark numbers because you probably looked at more than you can remember. Rocky: Well, that’s true I did look at quite a number of them actually. I started the process February of last year and I looked at quite a few businesses. As a matter of fact, I did do some research and found out that I had actually in-depth researched over 14 businesses that I was trying to end up purchasing. I utilized a company called Centurica with Chris Yates. I actually did quite a bit of study for me because I learned early in life that you want to surround yourself with people that are knowledgeable of the businesses that you’re looking to try to purchase and also know what you don’t know and I certainly … and I was very, very glad to end up having Chris being part of this search process as well as helping me do the analysis because two heads are better than one and he provided me some great insight and as a matter of fact prevented me from … or didn’t prevent me but certainly lend some insight as to why I wouldn’t want to purchase certain businesses out there. So we did some due diligence together. I ultimately landed on Novadab and then through that same process and through a podcast I was introduced to Stephen Speer and Stephen really again if you want to surround yourself with really, really smart people that are hardworking and I give it back to you all at Quiet Light and also Stephen Speer and Chris Yates in guiding me to a purchase that ultimately I’ve been very, very happy with and have enjoyed as I say operating with my daughter. Joe: So you started in February 2018, when did you close on Novadab? Rocky: August 23rd. Joe: August 23rd, so just about eight months … no six months. Rocky: Six months. Joe: I always … I actually did this today, I talked to a buyer today and I said look man trying to find that perfect business is like looking for a needle in a haystack inside of a giant big ass haystack and he said absolutely. He’s looked over 53 cases; he looked at 53 of our listings in the last I think probably 12 months, so a lot more than you’ve probably looked at. How many of the businesses that you looked at did you … you said you looked at 14 in depth; how many of those did you make offers on? Rocky: I actually only made offers on five of them and one of them actually was one of your offers where I was reaching for that brass rain if you will but because I hadn’t been in the e-commerce business previously we felt that it wasn’t something that we could end up doing and securing the financing ultimately with Stephen. So while I reached for it and wanted to try to do it I’m certainly glad that we ended up where we did in purchasing Novadab. Joe: Good. Alright so quickly and I don’t mean to plug Centurica, we don’t get any referral fees. They’re not an advertiser but what I’ve talked about historically with Centurica is that once you’re under a Letter Of Intent they will help you with due diligence. We give a great deal of information on our listings but no matter what you’re going to want to dig deep. You’re going to want to look at bank statements, vendor invoices, Amazon statements, credit card statements, all of that in due diligence and when you do an SBA deal like you did Rocky with Stephen at First Home Bank and they’ve got a 3rd party valuation team, they’ve got an underwriting team, and they’re going to dig in and vet the business as well. So you’ve got lots of people that are helping but one of the things that Centurica did for you just to make sure if I understand it is that they didn’t just help you with due diligence once under LOI, they helped you with the search process as well and it made sense in advance of making the offer and going under a Letter Of Intent; correct? Rocky: Yes, indeed they did. In fact, Chris and I took a look at a number of different businesses together and looked at the attributes, the positive things about the different businesses and how they might indeed tie into my skill set or not necessarily tie into my skill set. And by doing that he really helped guide me to purchasing a business that fit my skill set that I could then expand upon and ultimately grow the way that we actually have grown the business over the last six months. So he was involved from day one with the search for a business and really provided me that hand holding that when you’re investing the kind of money that you invest in these businesses really gives you somebody to lean on and obtain incurred information. Joe: Cool. I want to get into the growth but let’s hold off on that just for a moment because I do want to learn there. Stephen Speer of Bank United another great one that they’re working with is Bruce Marks at Radius Bank for those listening. And if anyone listening has an amazing SBA lender please shoot me an e-mail at Joe@QuietLightBrokerage and make an introduction; the more the merrier. Bruce and Stephen though are top notch. I don’t think you’d go wrong with them at all. Okay in regards to the SBA lending process we’re not going to talk about the purchase price of the business here but generally, depending on the deal size the lenders are looking for something from 10 to 25% equity infusion and that can come from the buyer and the seller or from just the buyer. Rocky in purchasing this business how much percentage of the overall deal did you have to come up with? Rocky: I ended up coming out with approximately 20% of the overall deal including the inventory and there were some reasons behind that that I did not want to end up pledging my home is a security with the SBA which they looked to try to do and so in exchange for that I put up some additional equity in order to not have my home secure. And it was really quite interesting, the sellers also took back a note for 15% of the total deal and it was interesting in that when we did the interview as you mentioned previously on this podcast how important it really is to end up building a relationship with the seller. Everybody thinks that when they’re a buyer that they’re in the driver’s seat and when you have as much demand for e-commerce businesses particularly the good e-commerce businesses that you really want to buy; you’re the one that’s being interviewed as a buyer to end up buying that business and you really should treat it as an interview because you are being interviewed by the seller. They’ve taken a lot of their hard work and really it’s their baby if you will and they’ve owned it and brought it to where it is and now they’re turning around and trusting you with it so you want to end up making a good impression and certainly during that interview process you want to make sure that you put your best foot forward. What ultimately happened for me is that I … like many others faced a situation where there were multiple offers on the business; mine was not the highest of offers, in fact, mine was about $50,000 less than the next offer. Joe: Wow. Rocky: He took my offer and it’s great because the two of us are still talking with each other on a regular basis and in fact, we’ve formed another business that we could talk about later. Joe: Good for you, you found another business together in your retirement years. Rocky: Yes indeed. Joe: Crazy Rocky that’s what I’m going to call you from now on. It’s interesting being likable on those calls gets you … obviously, you got the deal $50,000 less than the highest bidder but also a 15% seller note. That’s not standard. I think the highest I’ve seen and I’ve done a fair amount of SBA deals is 10% so good for you. This total 35% equity infusion is interesting; 20% from you, 15% seller note for the seller and it’s news to me that the equity infusion that you brought to the table scratched the requirement by the lender to have your house as collateral on the business so that’s fantastic, good news there. Let’s talk about— Rocky: That was thanks to Stephen as well. He did the negotiation for me with that as well. Joe: That’s terrific. Let’s talk about the transition and training period here. You’ve got a physical product business, the business model itself is not your standard typical e-commerce business where you’re selling on let’s say a Shopify store and Amazon you’re also selling on I don’t want to call them daily deal sites, how would you classify Zoot Wulily; hold on let’s just talk about my mispronunciation. I said Zoot and Wulily, I meant Woot and Zulily and Groupon, things of that nature. Okay enough, we can make fun of me all day long; it’ll be a long podcast. Tell us about the model where your products are being sold so that everybody understands the business model itself. Rocky: Sure our biggest partner happens to be Groupon, and Zulily is our 2nd biggest partner. We only do at this point about 10% of our business on Amazon, the rest are on deal sites as you mentioned. We have a company called MobStub that we do business with, OpenSky and some of Walmart of course and some of the other platforms that really are great opportunities for growth for us but our … what’s called a preferred vendor on both Zulily and on Groupon and it works out very, very well for all of us. Joe: We don’t have enough conversation about deal sites like Groupon, Zulily, Woot; all of them and I think the key … tell me if I’m wrong and expand on if I’m right but the key to success on deal sites like that is SKU counts and new SKUs and being able to present new products on a regular basis. Is that right; is that what sets you apart and allows you to do business with them on a regular basis? Rocky: Very much so; they are looking for new products to list on their sites and what we do is we try to do three new products a week on each on the Groupon site as an example. And by doing that we can end up growing along with them and they can present fresh products to their customers on a regular basis. So we vet the products out, we put them on their site, and ultimately we get orders from their customers of course and it helps us grow our business on our home site because they’ll order their initial product from say Groupon or Zulily but because we send our product out branded with branded boxes or bags they then could come to our website and we really have done quite a bit of growth through our website and our e-mails because of those different vending platforms. Joe: That’s fantastic. So in this situation are you using a 3PL or are you fulfilling orders yourself? Rocky: We fulfill our orders ourselves. I’ve got a wonderful team of people here in New Hampshire. In fact, we moved the business from Texas to New Hampshire over the Labor Day weekend and did not miss any orders that were placed with those portals that were wired to ship within a certain period of time. And the women that fulfill our orders here do an awesome, awesome job and we’re very, very glad to end up being able to provide not only jobs for them but also we take real care in presenting our product to our customers. And because we have control of it we really feel as though it gets into the hands of our customers in a timely fashion and also with it having looking its best. Joe: Did the company come with any outsourced VA’s that transferred with the business or did you take it over with your daughter? Rocky: Well, my daughter and I took it over and she does the day to day operations but we ended up having a wonderful team in India. As a matter of fact, we’re going through some of the mistakes that I made in why that team ended up being so very important to our ultimate success. When I bought the business we had just about 510 SKUs, during the last quarter of the year I increased those number of SKUs from 510 to over 800. Joe: Wow. Rocky: And it was … I thought pretty easy; you just go out, you source the product, you bring it in, you just get some pictures, put it online, put some marketing behind it and you’re all good to go. Joe: Simple; I mean its e-commerce, that’s all it takes right? Rocky: That’s all it takes. Joe: So I’m sensing we’re going to have a valuable lesson come out of this. Rocky: Yes very much a valuable lesson but out of a few mistakes comes your biggest opportunities as well and what happened was I would go out and I would source all of this product and be bringing it in and bringing in and it was a little bit overwhelming to our people at the warehouse as far as stocking it in; having the SKUs. You have to create those SKUs, you have to end up picturing them, get them on the website, and so our team in India provided us with all of that necessary grunt work I’ll call it to be able to assign SKUs, to be able to get our pictures taken, to be able to help us with the marketing of the product, and ultimately our customer satisfaction as well because with this size of business that we have we ship about 12,000 orders on average a month. Joe: 12,000 orders a month; that’s amazing. Rocky: Yeah and in doing that we certainly have customers that we want to make sure that are taken care of and so we have four customer service people in India, we have a graphics designer, we have a website developer, and a number of other people that help us really execute the plan. We couldn’t be where we are today and have experienced the growth we’ve experienced without their help. Joe: Rocky, you’re in 12,000 I mean that’s 400 orders a day are you capturing e-mail addresses for every single one of those customers? Rocky: Almost all of them. Joe: Are you’re doing any e-mail marketing? Rocky: Absolutely we have about 125,000 e-mail addresses at this time and we e-mail market every single day; Monday thru Sunday. Joe: What software are you using? Rocky: We’re using Mailchimp. Joe: Mailchimp; you need to go to EcomCrew.com and listen to Mike Jackness talk about his e-mail campaigns that he does on one of his businesses. I actually just sold up listings of business of Mike’s and it’s that business that he talks about. He goes all around the world speaking about it. He doesn’t use Mailchimp, he uses Klaviyo and the getting 400 new email addresses a day 12,000 a month is gold to somebody with the skill set to be able to send additional e-mails. And with the volume of SKUs you have I would think that that’s a growth opportunity; a huge one for you. Not that I know anything about it, Mike knows everything about it. So EcomCrew.com for anybody listening that wants to do e-mail marketing and Klaviyo as well I think you should check it out. So I know you love listening to the Quiet Light Podcast but I’m going to point you over to EcomCrew too. Let’s talk briefly about your growth, I mean 12,000 orders a month is great; how many orders a month was it doing when you bought the business eight months ago? Rocky: We’ve actually experienced about 60% growth overall. Joe: 60% growth and you used to run automobile dealerships; you had no … other than e-commerce websites for the auto dealerships, did you have any e-commerce business experience? Rocky: No, actually I do not. Joe: What is fueling that growth other than your wisdom and your brilliance Rocky? What is happening here; how are you doing this? Let’s just say it’s your daughter man because she’s going to listen to this. Rocky: Yes; absolutely. It goes back to realistically I was able to purchase a business where the gentleman who sold me the business is still actively helping me run the business. And so that really helps quite a bit. It goes back to the relationship that he and I built when he was selling the business to me. Joe: Is he being paid for that beyond the sale of the business and the transition and training period? Is it a consulting deal or he’s just a really nice guy? Rocky: No, he is a nice guy; I will say that he’s not being paid to end up doing the consulting work. What happened was we ended up forming because of my mistakes of adding these 300 SKUs at the end of the year we formed some businesses; two businesses together and so he wants to end up helping me continue to run Novadab and the growth of Novadab and in turn the two of us are helping each other grow these two new businesses. Joe: I think this is a 1st where we sold a business and then the buyer of the business starts another business with the guy who sold it. I think that’s fantastic. And it goes to the relationships and being likable and connecting. I guess it’s not always going to happen for sure and sometimes people just want an exit. They want an exit; they want to be done. They go through that initial transition and training period which the standard folks is up to 40 hours over the 1st 90 days. And if you don’t have a seller note like Rocky did there’s something called a hold back; a certain percentage of the funds just reside in Escrow and then are released in 90 days after that transition and training period is over. Alright well, let’s … you’ve grown it 60% is that what you said? Rocky: In the last quarter of the year, we grew at 60%; the 1st quarter of this year, year over year growth was 40%. Joe: Wow, unbelievable. Alright so … but those 300 and something SKUs that you added; the big win big loss, what was the loss and what was the win? Rocky: The loss was definitely that I overwhelmed the team. Again it’s just to add that many SKUs in such a short period of time during the peak quarter if you will; a mistake on my part and it definitely was too much too fast. And while they were very, very helpful in trying to get them launched we actually didn’t get them up quickly as what we would want to. At the same time three of the SKUs that we didn’t end up launching I know it’s not a great percentage but three of the SKUs ended up selling over 20,000 pieces during the month of December. So it really provided some real good growth to us and the other SKUs some of them are working some of them are not but you have to try. And ultimately we’re going to end up having most of those SKUs work and retire some of the older SKUs. You have to refresh your product up on a regular basis. I just try to do it all too quickly that’s all. Joe: Oh that’s alright, that’s just part of the learning process at least you know it’s a product line that doesn’t go bad and you can sell through them, discount them, and maybe retire a few but that’s pretty awesome. The big win; let’s talk about what you’re doing with the guy who sold you the business. You have started two new businesses together, what are they? Rocky: We started two new businesses; the 1st one is called Profinac and it stands for Professional Financial Accountants. Joe: Okay, I just have to say that sounds like prophylactic; how did you pick that name? Rocky: You and my wife said the same thing actually. Joe: She’s a brilliant woman let me tell you that right now. Rocky: I will have to say that’s part of why we’re partners. I did not pick that name, Ashish picked that name for me or for us but the reason it stands for as I say Professional Financial Accountants and so we ran with that and see we’re having an impression on everybody just as this [inaudible 00:30:44.2]. Joe: It’s now unforgettable to the thousands that are listening. So Professional Financial Accountants, you are doing online bookkeeping for e-commerce businesses? Rocky: Yes, we do online bookkeeping for e-commerce businesses. We also do sales tax management. We end up doing payroll services for people as well, income statements. We’ll do anything that they need to in order to offload what I feel that many e-commerce and really small businesses don’t want to end up doing. They get so bogged down in being a business operator they don’t end up being a business owner and so by taking off the real necessary, you have to keep score somehow and if this way somebody else can do it it ends up being or allowing you to end up focusing on the growth of the business. Joe: And there’s … in my experience I mean growth is important if and when … you know what it’s really when; when you decide to sell the business and it may be 15 years from now, it may be passing it on to a family member but they’re still going to want financials when you decide the business you’ve got to have good clean financials. You can’t co-mingle it with other brands and things that you want to keep. You’re just going to get less value for the business and the time to start planning that exit even if it’s in 10 years is now by getting good clean financials. So I think the prophylactic company, the Profinac is a great business. I’m sorry I won’t do that again. What’s the other … is it Profinac.com I assume? Rocky: Yes, it is. Joe: Alright. We’ll put that in the show notes. Rocky: Okay. I appreciate that. The other thing is that’s what you and Stephen taught me as far as the businesses were concerned in the sense of being able to provide a clean settled financial so that when you end up wanting to sell your business you have those financials that can end up getting that SBA approval ultimately. Joe: Let me ask the question because I think it’s probably on some folks mind in the event they need these types of services and are doing it a little bit themselves right now are you using Xero or QuickBooks? Rocky: We will use both. Joe: Really? Rocky: Yes. We’ll do either one for them. The team is well versed in both. We feel though that Xero will end up providing them with much more in depth information. Joe: I agree; I hear that a lot. The one thing that I wish the developers of Xero would do is allow a Profit & Loss statement to be run with a longer date range than just 12 months. When someone sends us the Xero reports we have to merge all of the years together in order to get to a running P&L which we always want to present with Quick Books; it’s easy. And also the Xero folks they’re not US based, I don’t think because all of the dates are reversed of what we do here in the States which is the reverse of everybody else in the world I’m sure. Rocky: Yeah very, very true. They’re an e-commerce based platform and they were founded on the e-commerce platform or in the cloud if you will, that’s one reason why we feel that it provides us with a lot of [inaudible 00:34:10.3] that way. Joe: Good, what’s the 2nd business that you’re starting with your new business partner? Rocky: It’s called Supportab and that is S-U-P-P-O-R-T-A-B.com. Joe: Only one T? Rocky: Only one T. We don’t know how to spell either. Joe: It’s giving you support to your abs; that’s what this one does. Okay, what does Supportab do? Rocky: Supportab basically provides again a lot of the necessary support that an e-commerce business needs. This is going back to my big mistake of introducing those 300 SKUs. I needed to end up having a team; a website developer, for example, customer satisfaction people, graphics designer, marketing person. That’s what we provide to people that are in the e-commerce world. And what we do that’s a little bit different than some of the other businesses out there is that we have it all and we call it omni channel instead of multichannel. And omni channel basically is the integration of all of those different facets under one roof where your customer satisfaction team or your customer service team, your website developing team, your graphics team are all working together and that way they communicate with each other and interact with each other as far as what the overall goal of the company is. Whereas if you do it multi-channel you might go out and hire a bookkeeper, you might go out and hire customer service people but they never talk to each other so they don’t get that common feel of the business going forward. We have it all under one roof and we also provide the supervision and management of that team. So we interview the companies and we ask them what their goals are and then we then convey that and manage the team towards those goals, talk with the owner of the company on a regular basis, and then we make sure that we’re doing what it is they want to end up doing and more to achieve their goals. Joe: Based upon my experience in doing thousands of valuations I would say it’s a very needed service because a lot of people that sell their business sell because they’re just pulled in too many different directions, feel like they’re going nowhere, and just need to cash out and get some emotional satisfaction because they’re not getting any. Because they’re working in the business instead of on the business, so Supportab; support one T ab.com sounds great. But Rocky you don’t have any e-commerce experience, you’re an experienced business person who’s been managing a very difficult niche in the automotive world for 20 plus years now you’ve got Novadab so I guess that brings that life experience to starting these two new companies which are essentially service agencies which are definitely needed. What about your business partner before Novadab, what kind of e-commerce world experience does he have? Rocky: Well, he founded Novadab and certainly brought it to fruition and then before that he works for AT&T for a period of time in website development and was doing a lot of computer work himself. So that’s one of my partner’s— Joe: So he’s mature, he’s not in his early 20’s that started his 1st business sold and is doing more business with you? He’s got some real world experience behind him as well. Rocky: Very much so and the other partner that we have is actually his brother who is located in India and is heads of the operation over in India for us so that we have someone who has experienced … he worked for Pfizer for a period of time and did marketing for them and spends the time building our team in India and sourcing all of our employees that we end up hiring in that area. Joe: Wow. Is he and his brother originally from the States or born in India and relocated to the States? Rocky: They were born in India and Ashish came over here. He came over here to go to college, graduated from college and wanted to stay for a period of time and has now located in Austin is where he is. Joe: Oh, that’s great. That’s great to have a direct contact there that is an owner of the business, a relative of one of the owners of the business as well so it’s fantastic. Well, Rocky, this is a great story; we’re running out of time here. I appreciate you coming back on and actually allowing the team to record this one. Thank you very much for your humor in that regard and your time. I’m very impressed that you’ve taken this and grown it to the level you have in such a short period of time just for your daughter’s sake. He’s given you all of the credit in case you’re listening; Rocky is just showing up every day. I’m kidding of course. The next time we have you on I want another update maybe in another 12 months we can get you back on, maybe have a daughter on as well what do you think? Rocky: That would be awesome. I couldn’t do it without her that’s for sure. She takes care of the day to day operations and allows me to end up working these other businesses and really without the team that I have I wouldn’t be where I am so I really appreciate all of their hard work without a doubt. Joe: And we appreciate the type of person you are, the type of buyer you are, and the fact that everything has gone so smoothly. I’m so glad to hear for your success. Thank you for coming on the podcast and I look forward to doing an update with you sometime in the future. Rocky: Thanks very much for having me, Joe. It’s been a real, real lot of fun. Joe: Take care, you too. Links and Resources: Novadab Profinac SupporTab Centurica StephenSpears BruceMarks Austin Meetup