The Quiet Light Podcast

When they’ve gone door to door to sell a product for any amount of time, a salesperson truly learns what they can take. Being a good sales rep can absolutely be nurture over nature and with the right processes in place, any company can turn out a good sales team and garner great results. Today’s guest,  Ali Mirza, comes from a pure sales background. These days, he is mixing his true old-school sales experience with expertise in the online world. He started Rosegarden consulting about 8 years ago and now focuses on helping SaaS businesses build out their sales processes. Rosegarden helps set up a salesforce that does what they need to make the sales while following a set of parameters that can be repeated over and over again. Each of his custom sales processes is tailored for the client to achieve consistent, long-term growth. Episode Highlights: Ali’s sales background and how he got into his current business. His beliefs on natural-born salespeople. How to find and hire rockstar salespeople. Where Ali starts in creating sales processes for the client. How much the process changes from client to client. The amount of flexibility given to sales reps within an organization in order for them to be able to do what they do best. The correct balance of product knowledge for the reps who are selling the SaaS product. How SaaS business owners can achieve continuity between the sales reps and the backend team. When a business should start to think about systematizing their sales processes. How the process is measured by Ali and his team. Some standout successes Ali and his team have achieved Transcription: Joe: Mark I understand that our friend John Corcoran referred someone to Quiet Light to be a guest on the podcast; Ali Mirza. He’s from Rose Garden Consulting. First of all, John thank you very much and if anyone else has suggestions for a great guest like Ali please send us an email. We’d love to have some people on that can help you grow your business or sell your business or even buy your business. Now as I understand it Ali is in the SaaS world helping people optimize that sales process, that onboarding process which is kind of challenging and critically important in the SaaS area right? Mark: Absolutely and John and Jeremy I think they’re just going to become our new podcast guest sourcing agents because they’ve been referring so many awesome people over that have really added to the podcast quite a bit. But Ali comes from this traditional sales background and he and I talked quite a bit about this because that’s my background as well. When I was a teenager my very first job was a telemarketing job. Yes, I was one of those guys. And then I also did B2B door to door sales for long distance optimization. I mean talk about some of the most brutal conditions for learning basic entrepreneurship. Ali comes from that background; he’s really good at it. He’s a killer sales person and so what he does now is he works with SaaS organizations to help optimize their onboarding processes. And how do you set up a sales team that is both free to do what they need to do … is it not this tight like script that a sales person has to have but still have these processes that are repeatable and can be optimized so that you’re not losing money through your onboarding process. It’s the same thing as like CRO; Conversion Rate Optimization.  So many people have these leaky conversion funnels and just by optimizing those they can increase the revenue substantially. This is the same thing with any group and any SaaS business that has an onboarding process for potential clients. So kind of an old school soul … young guy but old school soul when it comes to the sales process and mixed it in with the online world. Joe: I’m looking forward to listening to this one myself, let’s get to it. Mark: Ali, thank you so much for joining me I appreciate … first of all your patience because I cancelled this podcast on you twice both for totally legitimate reasons. My mom’s basement was flooding the first time. I was literally like outside shoveling snow when I was texting you saying I can’t make this one and then the last time was I a little bit lost my voice. And it’s still kind of gone but thank you so much for joining me. I really appreciate it. Ali: No problem. I appreciate you having me. Mark: Do me a favor and let our listeners know basically why I’m having you on the podcast; what’s your story and what do you do. Ali: So what I do I’m still trying to figure that out half the time but my story … so I got in the sales when I was 19 years old. So I was a guy that would go door to door at Sun Life insurance. I did that for four years. I built up a team. I was the number one agent in the country and handled about 50 sales reps under my belt. Things are great and all but as a true entrepreneur, I knew that that wasn’t exactly where I wanted to be for the rest of my life and obviously my [inaudible 00:04:19.6] wasn’t fulfilled. Long story short we have decided to start my own company; Rose Garden. That was almost eight years ago now. Originally we started off as kind of like a hired gun. I didn’t like the bureaucracy and all that stuff that came with selling insurance and so I just hey I’m a salesman just let me sell that’s all I want to do. So we’d go into companies, you put us on retainer and we could sell for you and when we close the deal you pay us bigger. That worked out great for a while; 2 ½ years or so then one of my clients this is great but if you get hit by a bus tomorrow we’re back to square one. And I said yeah you’re right about that and then he said well why don’t you write down what you do for us. I said well that wasn’t our original engagement so why don’t you pay me for it? And so he said yes. And that’s kind of when the light bulb went off and I understood that wait hang on, building people sales processes is infinitely more scalable than me actually selling for people. So that’s about five or six years ago or so we pivoted. And since then we’ve almost exclusively been building out sales processes for our companies. Mark: That’s awesome. So I actually come from that direct sales background as well; like I cut my teeth my very first job. And most people’s first job was like McDonald’s or something like that right, fast food? I think at the age of 12 or 13 I made a promise to myself I would never work in fast food and so my very first job was a telemarketing position. And boy you learn pretty quickly how to deal with that and I think probably … I’ll put this as my worst job because I was kind of burnt out at this point. I was in that for about five years of doing telemarketing in some of the worst stuff out there too. I did door to door business, door to door telephone long distance service sales. They would send us down, it was a team of us, we’d go down in like teams of three and we would really hit like a downtown area and some small town, knock on doors to come see a long distance bill. All these are … oh my gosh man that was brutal but it was an awesome experience as far as learning how to A. be an entrepreneur but also B. how to sell. Ali: Yeah. Mark: A great background for an entrepreneur. Ali: Yeah I know I mean going door to door that will put some hair on your chest. And once you do that I mean you don’t really fear things anymore. I think a lot of what holds people back as entrepreneurs is the fear of what could or what realistically what will happen right? If I take this risk will it pay off with, will it break me? I don’t have that anymore. When you have to knock on someone’s door and try and sell them some life insurance it’s … all inhibitions … when you do that for a few years all inhibitions are gone. You just have enough wee care anymore. Mark: Yeah you learn how to laugh off the nose and actually appreciate the guys that just like in telemarketing the best thing that we could have happen is somebody hangs up on us right? Because that’s a very quick no, I can immediately get on to that next prospect. And you get kind of this cold like I don’t care if you do that. There was one guy at the door to door telephone long distance company where he actually had somebody throw a wrench at him so that’s actually a little bit more aggressive. Hopefully, that doesn’t happen but yeah you’re right that puts hair on your chest. You learn very quickly to lose that fear. So alright today I want to talk … you do a lot of consulting for SaaS companies and helping build their sales processes. And this is obviously really important for just lowering that cost of acquisition. If you have a more efficient sales team you’re going to be signing up more people. So I want to get in that. I’m going to kind of open up with a question here that … I don’t know maybe it’s a softball question but aren’t there natural born salespeople? I mean isn’t it really coming down to … and I know what you’re going to answer on this but doesn’t it come down to … again I did a little show prep; thanks me. Doesn’t it come down to finding just those rock star sales people? Ali: So those are two different questions right? So a natural born sales person in my opinion and my opinion is always right of course. Mark:  [inaudible 00:08:11.9] Ali: Yeah exactly, right? I would do it. I think it was the Charles Barkley book where it was like I may be wrong but I doubt it. But in my opinion, there’s no such thing as a born sales person. The only things that are born are baby boys and baby girls. Sales people are trained. No different than there’s no lawyer gene, there’s no doctor gene, all these other things. There’s no sales gene as much as people would like to believe. A lot of what we attribute that to is people that are just outgoing, charismatic, extroverts. That’s learned. That’s nature not … oh, I’m sorry that’s nurtured not nature. So it depends on external environment built, factors and things of that nature of what your personality ends up to be. That doesn’t necessarily guarantee that you’re going to be at closing and actually bring money in the door. We know lots of extroverts that just talk, talk, talk, talk, talk and burn deals. So there is no such thing as a born sales person. Now, looking for a rock star that’s a different thing; you’re looking for someone that’s … you may not know what you’re asking for but really what you’re asking for is somebody that’s already trained that someone else has put the work into and now you’re going to … you’re fixing to benefit off of their work. That is more reasonable than looking for a natural born salesperson because at that point what you’re really saying is someone that doesn’t have sales training but just going to sell. And so looking for a rock star is someone that has that sales training that you can vet their experience. Now that being said that’s incredibly difficult to find especially in today’s market. I mean if you can sell your … sales is the only money side of the balance sheet. Everyone else is an expense we’re the only income, right? So sales … when someone can sell someone’s picking up your company, you’re not going to let them go. So good salespeople are golden handcuffed in. Of course, there are founders and companies that drop the ball with great sales people but the likelihood that you’re going to find that person on the open market is next to none. They know people that know people that don’t land on their feet pretty quick. Mark: Yeah I think one of the problems I see with a lot of companies especially as they’re scaling is the founder might have that ability to sell the product but they can never really expand beyond that. And I actually have this problem with Quiet Light when I started initially. I went through … I think it was probably within the first year of Quiet Light, I went out and I hired five people that I thought were going to be really good at this but they ended up not really working out. Some of them did a little bit but not really, they all kind of phased out. It wasn’t until Jason joined the team that I stumbled upon I would guess in your world the sales process. And I never really thought about in terms of a process because we don’t think about in the same way here at Quiet Light but I’d like to get into this a little bit as far as finding out what that process is for your company. I would imagine depending on what you’re selling and within the SaaS world specifically as well. The process is going to differ quite a bit from if you’re selling say a $300 a month SaaS product versus … I think I just talked to somebody yesterday where his average price upon is $20,000 per year with three year minimum commitments. So what does that process look like when you’re going into an organization and you want to start to identify A. the characteristics of that sales process and am I even putting this in the right way or do we talk [crosstalk 00:11:35.1] skill process? Ali: That’s exactly what we do. So every sales process we build is custom and unique. Now at the surface level or at the face value after the fact there’s only so many ways to skin a cat and so I could just turn around and be like oh you know what Company A sales process looks quite a bit like Company B but we can’t start there, right? So we have to treat everything unique and custom from the beginning. And then it may end up looking somewhat similar to someone else’s but we arrive at that independent of that. So we’re not trying to predetermine. Yeah, so our process of how we do that is first thing we do is we do an assessment. So we’ll actually go in there and spend a day on site and work with their sales leader, the founders, work with the sales team and really understand everything that they’re doing right that they need to continue doing, everything that they’re doing wrong that they need to stop or change, and everything that they’re not doing that they need to be doing. And so we start at a very high level, they walk us through their process, they walk us through their typical deal flows and cycles and so we start to really pick out things from there. I’ll get them into one of those three categories and then from there we get very granular and look at all the tactics. Then we build a report and say step by step right if I was your VP of sales or if I was the founder of this company or you know I had to build a process this is what I would do. So you get a little diagnostic and I basically can walk you through it step by step. It helps you understand what you need to do in what you do. Because sometimes even if things that we’re doing is right it’s just having that extra validation from someone who sees it from … we’ve seen hundreds of SaaS companies do it the right and the wrong way. I’ve seen crazy growth, I’ve seen two, three, 400% month over month and I’ve seen one or 2% year over year. So you can pick out patterns pretty quick. Mark: Yeah. How much has that sales process changed though from one organization to the next? I mean for example Quiet Light Brokerage, when I hired on those first five people as brokers I took on somebody who was really good at relationship based sales and was fine with taking that sort of long term sort of approach and then I also hired somebody who is the number one salesperson for Quick Books Online but he was much more close. He was a closer and that’s what he wants to do and frankly, he struggled a lot and didn’t really do so well. So at one point and more specifically for the people listening here and they’re thinking about the sales team that they have how much do you look at the company, what do you look at with a company I should ask to start to determine okay this approach is right versus this approach is wrong as far as what they’re doing? Ali: I mean you got to start with who they’re selling to because even within a particular company between the service, offering, product, solution, whatever it is that they’re selling depending on which market and depending on who is buying that sales process very well could change. So I’ll give you a perfect example, one of our clients a SaaS company sells into the education or is an education platform. Let’s call it an online education platform that sells to large organizations. But they also have individuals, freelancers, people like … let’s call them hobbyists coming in there and buying their solution as well. So it’s an online learning platform but their goal is to sell large organizations packages and number of seats but they also have one offs coming in as well. So the sales process is completely unique for the one offs and the people that are buying less than five seats, a small organization that has one, two, three, developers or just someone that wants to up level their own development game. I’m not a developer so I don’t even know if I’m using the right terminology but that’s irrelevant. Mark: It sounds great. Ali: Yeah exactly there isn’t enough coloring right on a black screen with green— Mark: Just like the Matrix. Ali: Exactly, yeah. So the sales people what we have to do with them was we have to get that stuff off the sales people’s plate because we’re paying our sales people too much, in my opinion, to sit there and sell a $49 a month deal. It’s pointless, right? We were losing money at that point on that sale if we had to not only pay the sales person salary because there was some cost to fulfillment even though it was SaaS and then pay him a commission off of that and then it was just annoying the salespeople. Now you got to look at opportunity costs. So what we did was we segmented them completely because the guy that’s buying one or two seats is going to ask maybe not all of the questions but they’re going to ask a fair bit of the same questions that the person that we’re selling one to 200 seats too and I want all my sales people focused on that. So we have to segment that out, we have to change up the sales process, there was a lot of things that we did there. So even within the organization, the sales process changes. Now again we had to build that unique for them and we have to look at their … we started with their who’s buying, what are they buying, why are they buying, how are they buying, etcetera and reverse engineer the sales process that way. And you could look at that sales process and probably compare it to 10 other clients that I have and say well there’s a lot of similarities. Well yeah, there’s only so many ways to skin a cat but at the end of the day, if I had been like wow who does this client remind me of, it reminds me of this person let me bring this in here then you’re … it’s like renovating a house. I mean yeah you can put lipstick on a pig but at the end of the day, it’s still a pig. Mark: So how much of that sales process vary within an organization, the concern I would have would be having a one size fits all sort of a strategy when different clients are going to be coming with different needs. So how much latitude do you give the sales people within an organization to be able to freelance that process or even within that process at certain steps? Ali: A lot, so here’s what we do if you don’t have anything to benchmark off of how will you ever measure success? How will you know that … if you don’t have a control group you will never know whether you’re picking up all the money off the table? With that being said I’m not looking to handcuff and put my extra salespeople in a straightjacket so we give them parameters. We tell them here’s what you need to do. And again what it’s really used for is making sure that at first 18 months of a sales person they have more than paid for themselves. After 18 months, after someone’s been working … selling for a year and a half in a company they’ve pretty much worked most if not all types of deals that walk in and they know what to do. What I don’t want is oh you know this person … we say hey just go sell. What are they going to do? They’re going to burn deals and they’re going to flush out within six months so you have to give them something. But again if it’s too tight they’re not going to close or they’re going to look for ways around it. And your best salespeople, that same part of the brain that it takes to kind of see the seams and run that route and through a sales process, the same part of the brain to get to that and score a touchdown is the same part of the brain that does it internally and tries to figure out okay how can I max out my commission, where do I need to sandbag, what do I need to do, what leverage do I need to pull to maximize it for myself? And sometimes … a lot of times it ends up being very detrimental to the company. So don’t give your sales people enough rope where they’re going to hang themselves with. So give them a process because they’re going to go outside that process so anticipate that and say look here’s what a typical process looks like you go from A, B, C, and D. Understand though if circumstance 1, 2, or 3 arises this is where you can jump to, this is what you can do, this is how you can do it. And now you’re starting to turn their brain and you’re designing where they can cut corners because they’re going to do it anyways. So you at least design and you account for it.  I always do … figuring out when your P&L six months later after John’s left and be like oh shit all of his deals are about to fall through and we just … yeah. And then that happens all the time as much as … no one brags about that right? None of your entrepreneur friends are going to sit around and be like oh yeah I just got shafted for $50,000 of commissions that I paid some guy three months ago and now he’s gone and all his deals are about to fall through, I’m about to lose a lot of money. No one brags about that. Everyone brags about the logo that they closed. But that stuff happens all the time I get to see it from the inside. Mark: Yeah absolutely and keeping that process, you’re absolutely right. I hated it when I was in sales especially in telemarketing. Telemarketing is really churn and burn, get through as many numbers as you can and if I did a telemarketing job and was handed a script I guarantee you I freelanced because you know … you hear it, we all get the call … those annoying calls and the person can’t pronounce your name and they can’t really even … they’re tripping over the script and all that sort of stuff and that’s an extreme example obviously but having that looseness. Now with a SaaS product, obviously there’s a certain amount of expertise that somebody has to have, how important do you see that in the process of developing a sales team to make sure that you’re front end people doing product demos and everything else know that product in and out and how much emphasis should SaaS owners be putting on that part of the sales training process? Ali: It’s a fine balance. So here is the thing, knowledge is ammunition and the more ammunition you have sometimes you might use like a tank to try and kill a mosquito because we see that all the time; it’s the show up and throw up right? But on the flip side if you don’t know what you’re selling how are you going to sell it so it’s a fine balance. Here’s the way that I like to position in and I don’t want anyone to get this confusing but I would like to teach my sales people everything they need to know about the product but also more importantly is teach them how to position it. It’s more important than teaching them what it actually does and when to bring it up and how to bring it up. Because I think that that’s important and once you start explaining that it prevents a little bit of that throw up and show up type of thing but on the flip side and this … everyone’s going to freak out when I say this but you need to know this much more than a prospect in order to sell. I have sold things that I have absolutely no clue what I’m talking about for one reason and one reason only subtext. It’s not what you say, half the time it’s what you don’t say. So if you’re a really good salesperson you don’t need to know anything about anything you just show up I mean not to toot my own horn but I mean like my head is already big enough as it and as you can tell I’m … no one is more impressed by me than me but I’ve closed seven figure deals not knowing what it was that I was selling. Because if you can ask the right questions not only are they going to tell you everything you need to know but they’re going to answer their own questions and all … you just have to know so little and position things. And sometimes it’s just as simple as nodding your head and be like “yup, uh-huh, yup” and it’s just answering their questions. And then they’re like you know what Ali I think I need to move forward with it. People do not understand the importance of subtext. Most sales people will never be able to master that so, as a result, it’s very important that you need to be able to teach them. You need to not only teach them what the product does but then how to position. I think that’s more important than the product knowledge itself but if we’re going to get really philosophical with it in my opinion subtext is far more important than anything else. Mark: The most valuable lesson I ever learned in sales was learning how to shut up. Honestly and I think it was in a Zig Ziglar book that I read way back in the day where he talked about that active listening and just being quiet and more importantly not just being quiet and looking and kind of blankly not listening but listening to what the prospect says and then being able to simply when you’re invited to that point to respond, responding to what they actually say. And we’ve seen this at Quiet Light and this is completely unintentional, we have a pretty soft approach with our sales process. But what I’ve found in the past is that when I tell somebody not to sell their business which we tell people a lot because I honestly think it’s in their best interest; oftentimes when we tell somebody not to do something the opposite starts to happen. They end up becoming more determined to do it and part of that is just dealing with entrepreneurs where all the smartest people are in the room and they wanted to … okay, I have one more question for you. I have two so if we can fit two in we’ll do it but one more big question and this is something that I find to be a problem with a lot of online service based companies and SaaS companies and that is the continuity between the sales person upfront and the back end team; so pretty simple sales person is over delivering, over promising what’s going to happen after. Do you consult in this area at all and how can business owners, SaaS owners look towards that continuity between their upfront sales person because not having to do the account management necessarily after the sale? Ali: See both of that are training, right? A lot of times … let’s call me an optimist in this and I believe that most sales people don’t typically want to lie and so if they know that they’re lying they’ll probably shy away from it. Unless you get a shady sales person then all bets are off type of thing but I’d say the vast majority of sales people don’t want to lie and it’s just because you haven’t taken the time to properly train them on what actually happens after the deal is done. So for us, it’s very important to sit with customers of SaaS and really understand how because that’s really how we create the pitch. So we sit with costumers of SaaS, we see what people are saying, how they’re saying it, we interview customers, and once we understand that we reverse engineer the pitch. Once you give someone the pitch it’s black and white; what we do, what we don’t do, how we do it, and if you’re going off script it’s very easy to call you in and be like hey brother what’s going on here? You’re supposed to say we do X, Y, and Z why are you saying one, two, three, and then it happens a couple of times and you help them transition out. But you’re 100% right it’s all about setting expectations on the front end from a sales person with the prospect so that when they do become a client it’s not a problem but you as the founder, business owner, VP, whatever, the sales leader have to also do that. You have to set expectations with the sales people because a lot of times you’re like oh … and a lot of times this also happens, I’ll be brief with this is the founder is this visionary, delusional, optimist who thinks their product is the best products since sliced bread and is pitching it that way and the salesperson gets all jazzed, full of piss and vinegar, gets excited and says the exact same thing to a prospect then the prospect comes and finds out that half the widgets don’t work. I see that all the time too. So just be reasonable. Mark: Yeah I know. I mean I dealt with that with a service company recently where the sales person showed me graphs and all these beautiful things and I’m like this is so clear like if they can deliver on half this and then I got into the account management stage and there’s a lot of tampering of expectations. Ali: That doesn’t work at all. That’s on our roadmap for Q4. Mark: Yeah I’m like well at this point you need to just kind of sit back and just kind of wait for  … that’s not what I saw, that not what I was told upfront. At what should somebody be thinking about putting in the sales process and I’m thinking again about really early stage people here they’re maybe just coming out of beta, they’re starting to go off for a launch and they might be hiring one maybe two sales people here. When should somebody be saying we need to start getting this process honed in? Ali: I’d say first few sell. As the founder, you need to sell. After you’ve sold a few and you’ve kind of figured out what happens, what’s good, what’s not good I’d recommend hiring two sales people; let them battle it out together. Let them feed off each other, learn from each other. The goal is not the strongest survives the goal is both of them steel … was it steel, sharpen steel or whatever. Get back going and before you go and hire employee number … or salesperson number three, four, five, six, ten, that’s when you need to start the process. So after the first two people have started to prove it out then go from there. That’s when you need to start building it out and systematizing and documenting everything. And now you have become … it makes your life so much easier after that because again sales process is not something that you build once and that’s it. It’s a living breathing document that’s constantly being iterated but you need you to be the foundations start off of. Mark: How do people measure this? I mean do you set up milestones along that sales process that you’re going to be measuring kind of like a funnel or are you just looking at inbound and out as far as inbound calls coming in or prospects and actual conversion rate. Ali: I mean it’s both. I mean you’re doing a qualitative and a quantitative. So overall you … I look at the quantitative just so that I can have … it’s like a measuring stick but I really believe it’s more qualitative. You’ve got to listen to the calls because there is no perfect closing percentage. And I’m always concerned when someone has too high of a close percentage. When they’re like oh I close 80% of my deals I’m like something’s wrong there. So you’re either selling it too short or you’re dequeuing people that you shouldn’t be dequeuing, all of this other stuff. So the quantitative will only tell you what you’re prepared to understand and what you’re prepared to understand is filled in by the qualitative. So you got to listen to calls. You’ve got to figure out did we sell that for as much as we could have, was that too easy, was that too hard, what was going on in there. You got to figure all those things out and data can’t tell you that. Data can only tell you if that improved or didn’t improve and if you’re not doing the qualitative you very likely are leaving a lot of money on the table. Mark: Absolutely 100%. Alright I want to talk about some of the success stories that you guys have had at Rose Garden Consulting because really when you start to look at this again I think two of the lowest hanging fruit areas of any business would be conversion rate optimization and two if you have a sales process where you have this on boarding process and you’re having that customer interaction improving that process as well because you don’t have to do anymore as far as bringing in the inbound traffic, you’re just optimizing what’s coming in. So I’d love to know more about some of the successes that you guys have had. What are some of the things that kind of stand out in your mind as far as kind of eye popping numbers? Ali: One of our clients in three weeks we … their average deal was 35k, within three weeks just changing out their process we closed three deals that I think is just over 70 something and then it just kind of stayed there. And it was just by changing up the way that they spoke to their clients. So right there from the qualitative standpoint, we 2X in less than a month. That was a good one. One of our clients and the cases are online and so one of our clients we took from 5 million ARR to 12 million in one year and rank 500 in the fastest growing company. We’ve got several stories like that but for me the numbers are great and all but for me, it’s really … I just like going in there and proving things wrong because the best are the stories in where hey everything is great, we just need to go from 5 to 50 reps and then you start to find things that hey why are we doing it this way, why are we doing it this way? And all the sudden instead of going from 5 to 50 reps to hit their goal we go from 5 to maybe 15 and we’re hitting their goal because there was so much money on the table. So those are the ones that I really enjoy. Mark: Yeah just making the existing team that much more efficient and being able to find out areas where like you said some of that qualitative stuff, they might have a high closing rate but they’re disqualifying people way too aggressively or they’re just not selling for it as much as they possibly could be. This is fantastic information. Where can people learn more about you or reach out to you if they are interested in getting somebody in to take a look at their existing sales processes? Ali: RoseGardenConsulting.com is our website. You can always email me at Ali@RoseGardenConsulting.com rose like the flower. My podcast is For The Close; that’s ForTheClose.com so anywhere shape or form hit us up I’m always happy to help and talking sales is my jam so I really enjoy it so anytime I can help I am always happy to. Mark: And a huge shout out to Jeremy and John from Rise25, they connected us over at Traffic and Conversion. You’re actually the second guest that I’m having on who they hooked me up with. Ali: Second, how am I not the first? You got me right in my fiddles there. Mark: You know what you’re not the first because I had a delay. I had to cancel on you twice. Ali: Who is number one? Who is first? Mark: I just talked to him yesterday and you put me on the spot man so who was it? Oh the guy from Sourcify. It’s a completely different area and he’s talking about sourcing products from all over the world and manufacturing products and a fascinating, really smart guy. He made me feel like a complete idiot. But— Ali:  [inaudible 00:32:31.5] on me. Mark: You know what I like about having you on is that you’re a sales guy cut from the same cloth that I came from and so that’s just … I don’t know manufacturing like that other guy did. I feel like I could talk more with you although you know infinitely more than I do about scaling up these sales processes and I appreciate you coming on and sharing some of this information. I think you and I are probably going to talk for a full hour just because I could talk about sales forever. I think it’s fascinating but yeah thanks for coming on. Ali: Yeah, no problem. Thank you for having me, brother. I appreciate it. Links and Resources: Rosegarden Consulting Email Ali For the Close Podcast

For our first entrepreneur acquisition update episode, we are speaking to Nathan Singh, a buyer who made a purchase through Quiet Light eighteen months back. Nathan is a great example of how a buyer can get a good deal and beat out other buyers just by being personable and investing in the seller. It turns out that it’s not always the person who has an all-cash offer on the table that wins the deal. Having a Nathan was more appealing and likable to the seller, won out on a deal, and today we are hearing all about how the acquisition transition has gone for him. Episode Highlights: Nathan tells us all about the two WordPress plugins he bought and what each does. Any regrets regarding the multiple and the use of an SBA loan for the transaction. The company growth rate and any challenges Nathan’s faced. Where the growth has come in and what he attributes that growth to. Staff retention and how the transition is going within the staff since the original transition period. Nathan’s tips for an easier transition. The importance of involving the customer in order to create a relevant product road map. The biggest challenges and successes of the businesses. Things Nathan has implemented to ignite that growth. Way’s Nathan keeps his relaxed disposition. Growth Goals for the next 12-24 months. Nathan’s 3P’s advice to entrepreneurs looking to strike out and acquire a business. Transcription: Mark: Joe, about a year ago you had Nathan Singh on the podcast. Nathan was a really good example of how a buyer can get a good deal, beat out buyers that maybe have a little bit of a stronger position with their offer or if they’re a cash buyer just by being kind and generous and investing more importantly in the person that’s selling the business. And I guess it’s time for an update from him. Joe: Yeah, Nathan did a great job. His seller was Syed Balkhi. He owns Opt-In Monster. That’s not the one we sold but we sold two of his WordPress plugin sites which are essentially SaaS businesses and Nathan beat out a full priced all cash buyer with a full price SBA deal where Syed agreed to carry a 10% seller note which was pretty substantial based upon the size of the business. And it’s a story I’ve told often in the different events that we go to and here on the podcast so sorry for folks hearing it. I’m repeating it but yeah the first podcast we did with Nathan was all about that and the transition and training and things of that nature and we’re doing an update. I think this is probably our first entrepreneur acquisition update. And he talks about what it’s been like for the last 12 months; some of the wins, some of the losses, some of the challenges, the team and things of that nature. It’s a great episode to see what people have done. I think really probably more like 18 months later. I think we sold it to Nathan in the fall of ’17. Mark: Yeah, I get asked all the time like do you guys follow up with people that have bought these sites and what does it look like a little bit after. And frankly, we don’t do enough update follow up with people who have bought so this is good. I’m glad that we are doing this with somebody we’re doing on the podcast live so that people can actually hear how the acquisition has gone a year and a half later. Let’s get right into it I want to hear from Nathan. Joe: One more thing I want to just shout out a reminder this new intro that we have, we’ve got some movie quotes in there. If you can figure out what the movie quote is for the intro go back and rewind, listen to it, put it down in the show notes and we’ll give a call out to you in the next episode. Joe: Hey, folks Joe Valley here from Quiet Light Brokerage and today we have our first ever Quiet Light update or acquisition update. We’ve got Nathan Singh on the podcast; Nathan, welcome. Nathan: Hey Joe. Joe: Good to be back, good to have you back man. I tell your story often. I share the story that it’s not always the person who has an all cash full price offer that wins the deal and that being likable is one of those intangible very, very important factors. And for those that didn’t listen to the podcast that we did with Nathan, he … I want to say won a deal where someone was bringing all cash to the table at a full price deal and Nathan came to the table just being more likable. He happened to go to the same school as the seller Syed Balkhi. I know it’s the Gators, is that … wait a second, hold on, I’m going to put on the hat because I have it. I have it. There it is. Nathan: There you go. That’s the right one. Joe: And I didn’t plan this I just happened to have the hat up in the cabin. It’s been there since fall of 2017. So it’s … I’m going to get it wrong and Syed he should … he sighed so loudly when I got it wrong. Is it Florida State? Nathan: No, I would have sighed again, real loudly. Yes, University of Florida. Joe: I’m sorry. Nathan: [inaudible 00:04:41.8] Joe: There it is. There was obviously a quick connection between you and Syed on the conference calls because you both went to Florida State. Nathan: University of Florida, not Florida State. Joe: Okay. Folks, obviously I don’t pay attention to schools in Florida. I’m from the Northeast originally and we don’t follow our college teams at all. Now for those watching the video, my hair looks great. Okay, I just took the hat off. You connected with him on the school but you also connected with him in terms of the way that you wanted to keep the staff in place and take care of them and that it becomes a family or an extended family. And that just really resonated with him and he didn’t want to call the end with you whereas the all cash buyer it was all about the fact that he was all cash he could do a quick close and these types of things but it was a little rough around the edges. Syed believed in you, trusted in you, and actually took an SBA deal where he had to not be all cash, he got 90% and so he carried a pretty substantial seller note that won’t be paid in full for … I don’t remember the exact terms of the deal but probably a balloon payment in year five along those lines. Does that sound about right? Nathan: Yeah. Joe: Alright. So you bought Soliloquy and Envira Gallery. Can you tell the audience a little bit about both of those businesses and what they’re all about and what they do? Nathan: Yeah sure. So both of those businesses are pretty similar in the sense that they are WordPress plugins. Envira Gallery is basically a gallery plugin. That’s a really simplified way to put it but it’s really a photo management system. And if you Google best WordPress gallery plugins you’re probably going to see that in just about every result you see. Soliloquy same deal. It’s a slider plugin. Essentially if you’ve ever seen sliding pictures and things like that in PDFs and videos that’s what Soliloquy does. But essentially it just makes developers and designers lives a lot easier when they’re developing this sort of thing. That’s not something they really want to get into so it just streamlines the whole process. The whole gallery management system is there. And it can display multiple galleries in pictures and sliders in a very professional way. And especially for photographers, that’s a big deal. And that’s what Envira Gallery does. Joe: Did you have a lot of experience, direct experience in WordPress and plugins and things of that nature before buying the business? Nathan: Not at all. At least some people actually have worked in WordPress to some extent whether they’ve blogged or … I’ve had very minimal. I’ve looked at the backend years ago at one point I’m like no way. So WordPress has come a long way since then. A lot of people who have … who used WordPress and have been keeping abreast of that news, Gutenberg came out, what it did is essentially went straight for the head of Wix and Shopify and some of the really easy to use platforms for building websites. So Gutenberg is that which is a WordPress site builder. It’s built in. It’s made by WordPress. So that’s the main thing for all users, now you can get in the backend. It makes it a lot easier. But no previous to that I was pretty new to it. I didn’t really understand the dynamics and the market but the only thing that I had that was slightly close to that is I developed an app before in iOS. And so it was again it was being a part of this community and having some community standards when you have plugins that are uploaded to the depository. Joe: Okay. So you were an entrepreneur. You did sell a business. I sold it for you prior to buying this one but no WordPress experience. You bought it … this business with an SBA loan and it paid a what I would say is a fair multiple. A lot of folks might say I think it’s strong. I won’t say it. You’re welcome to say if you want to. But do you have any regrets in terms of the multiple and the use of an SBA loan in the purchase of this business? Nathan: No I don’t think so. Regarding the multiple, we did pay a strong multiple. I knew that going in but I also knew going in … I’ve gone through hundreds of business over the past few years, I talked to owner things like that. In order to get those businesses kind of like with Envira Gallery and Soliloquy where the churn was pretty good … it’s essentially a SaaS business. It’s been well maintained. It comes from a good pedigree by way of Syed Balkhi. So all those things played a huge part in me wanting to go ahead and stretch what I was looking to do in that multiple. But on the same end when you’re doing an SBA it made that decision a whole lot easier as well. So given the SBA process, I mean I’ve talked about that in the last podcast that we did as well it was … it’s come a long way. And so for me having gone through the trenches and years and years of trying to get SBA loans for businesses with no assets and getting to that point and seeing it streamlined with a guy like Stephen Speer and kind of what Bank United did, it’s just … I mean it was like a dream to go through that really quickly. But yeah I mean we’re here year later and I don’t regret it. The only thing I will say that I kind of … was a thing I didn’t sort of anticipate is how quickly the interest rate did change. And it does change year after year but it wasn’t so drastic that it affected the business in any way. But it did increase just a bit there so. Joe: Your loan had a variable interest rate. Nathan: I think it was more as a result to the Fed increasing. Joe: Okay. Nathan: It was something that I was aware of but it was just political things happened and it increased a little bit there. Joe: Okay. Alright so why don’t you tell us how things are going? Are you seeing the business … what, we closed in the fall of 2017 so it’s been a little over 18 months, have you seen the business grow? Are you challenged by anything or is it growing year over year at this point? Nathan: Yes, so it is growing. It’s a pretty healthy double digit growth. Joe: Double digit growth, okay. Nathan: So no complaints there. Challenges are really again coming and yeah I’ve been pretty much like industry agnostic every business I got into. Like I usually know nothing about it and I prefer it that way in some cases. And so coming in and learning it I’ve been attending the Word Camp. I went to Word Camp in US. I went to Word Camp Miami and really connecting with the people that are shaping where WordPress is going. And just some quick stats for people that like numbers, WordPress was around like 25% or so in all the websites in the world pretty much and now they’re around 33 or 35% and that’s continuing to grow. And just about every major web site that you probably visit is on WordPress. So the fact that that market share is growing there’s … that’s helped a lot with the organic growth as well. Joe: Is that US growth or a combination of US and international? Nathan: I think it’s a combination of both it’s like it’s used in the world but definitely United States I think that WordPress has a pretty solid share there. Joe: You know it’s interesting that’s not something that we zeroed in on in the client interview with Syed in terms of WordPress growth. Is it something you thought about prior to and during due diligence prior to the LOI and due diligence or is it just worked out that way that you bought essentially a SaaS business on a platform that is growing? Nathan: Yeah, I think it was a little bit of both. So I understood that WordPress was … at that time the numbers haven’t been released. The numbers are officially sold on Word Camp US or just before. So the actual numbers I didn’t really know at what rate it was growing but I did know that just the nature of the open source WordPress community, the fact that they’re building a bond and we talked about … a little about Gutenberg during the acquisition as well but just having seeing the route that they were going in relation to all these other paid sites, and what the paid platforms did to me it made sense that WordPress is going to continue to grow. It’s got a foundation to expand on and so it did play a little … not a significant amount in terms of the actual business acquisition. Joe: Excellent. One of the big reasons why you and Syed are working together now was that you were going to bring the staff over, keep everybody involved and you worked remotely from a home office whereas everybody else I think does as well. How has that transition worked out in terms of the staff and you and are you still working together? Nathan: Yeah, great. Yeah, it’s been great so we talked a little bit about this again in that previous interview but there was kind of a bumpy ride with the staff. Again full time they’ve been with the previous company for several years and they were part of a larger outfit. So there were some worry there that it’s just going to be us, essentially four folks transferring over to a completely new owner; my smaller company, how is that all going to work out? I think that just … it was a trust thing and I think after a couple of weeks that they saw that I was in the trenches with them and I was really working to make their lives easier, making sure they’re taken care of. You know we went on a retreat, we stayed in Austin, we stayed in a big house; an Airbnb together, really got a chance to bond and we’re doing it again this year as well. I think those things all sort of helped build that trust. I mean from where we were to point one just like in any transition when you’re taking people’s livelihoods and basically giving it to this owner that’s completely new and they’ve never met there’s always that kind of anxiety and stuff. But we’ve come a long way in that time and I’m happy to say that pretty much the entire team is still in place. One person did move on to another opportunity but outside of that, the core folks are still there. Joe: Oh, that’s great to hear. Syed is probably happy with that as well. As far as the training and transition goes I know that normally it’s up to 40 hours over the first 90 days after closing is the standard in the asset purchase agreement, have you needed to reach out to Syed and other folks that are in the upper level management side or were of this business beyond that transition and training period so that you just reached out if you had a quick question that didn’t come up in the first 90 days? Nathan: Yeah, I think it was that. It was the first maybe really the first month or two is the bulk of the questions and stuff. Syed was really good about it. We went through training together. Thomas the co-founder was there as well or actually the founder. And so we recorded those conversations, went through each one of the processes and so I had all that. That helped tremendously so if you are selling try doing that. Go through recorded conversations and go through the process of what you do day to day and that really helps for them to not have to ask any questions. They can just look at the video again. Joe: Oh, it’s a great idea and we use a Chrome extension called Loom, L-O-O-M on a daily basis when a broker has a question for me or I have a question for someone else they often just record their screen and send that. What software do you use? Nathan: We use Zoom. Joe: Better. Okay. We’re on Zoom now and we’re recording. Fortunately, as you all will hear in an episode or two I just did a podcast this week. I jokingly said it’s the best one I’ve ever done but I forgot to hit record. So we’ll be doing it again next week but I’m sure the guest will bring that up in the podcast for sure. Alright, let’s talk about the biggest challenges that you have had since buying the business back in the fall of 2017. Nathan: Yeah, I would say the biggest challenges for me just like with any other business is kind of getting on that horse and riding it. It was just that the day to day stuff, making sure there was no loose ends that I was missing. I think aside from that it was really that there was not a strong product roadmap going forward. So everything would have gone well until up until that point and I think the team was kind of like well we’re just fixing stuff how long do we want to just continue just fixing stuff day to day? And so that was just like kind of shaving a product roadmap, again I’m coming in super fresh so there’s not a whole lot I can bring to it in terms of this is exactly what we need to do to take us to the next level, right? But the great thing is since I run other businesses and you kind of get a process within yourself that you can apply to these other businesses and for me, it was like let’s ask the customers. And that’s exactly what we did. We went straight to the customers, put out a survey; short, less than 60 seconds to complete. What are the features you like most, what do you want to see, how are we doing, stuff like that and they let us have it in a good way mostly. Joe: In a good way, okay. Nathan: And so the great thing is that they were happy with this feature set and they provided some stuff that would make them much more happier. And so that is what we’re working towards right now. Joe: So they gave you that product roadmap and then your team is working on that. You’re not working on it, you’re just visionary and they’re actually doing the actual work itself, right? Nathan: Yeah, you’re right the developers … you know what I did is basically help create prioritize the roadmap. And so the things we have to do first which is we got to rebuild some of our functions and things like that. That’s the most important part; to keep … to build on that foundation. And then outside of that, it’s going to be basically hitting those priority items and then doing those in truncheons as we move along based on that. Joe: What would you say are your biggest successes or triumphs? Things that maybe they were a challenge but you’ve overcome them and see that it’s maybe something that kept you up at night but it’s changed and it’s a big part of your business now. Anything like that? Nathan: I think for me it’s been a little bit of the marketing, kind of the way to take the market. WordPress is a little bit different in the sense that we have three versions that are on this .org repository. They’ve got somewhere in the range of 150 to 180,000 active users or active installs, probably more than that with Soliloquy. And so there’s not a lot of data we can gather. And up until recently there wasn’t a lot of … there’s not a funnel that you can put them through to bring them over to the paid versions because again it’s actively monitored and it’s a lot different than if you have a trial version and you’re moving them on to a paid version of the funnel. So I think the challenge was trading out ways to get around that and still playing by the rules. So again opt-ins we’ve recently put in opt-ins in the free version that wasn’t something that we could do previously but things in WordPress community has changed. So that’s going to be a huge boom for us. Aside from that kind of marketing directly to the WordPress base, a lot of designer and phyto developers that are used to a certain thing. So one thing they weren’t used to was re-occurring payments, annual subscriptions and things like that but honestly, it’s become something of paramount importance to anyone that’s running plugins that they have to be running a SaaS type program in order to survive or else you won’t be able to make it. Joe: Have you changed the payment system with these two products? Have you changed the way that the customers are paying for it? Nathan: The payments have stayed the same. I think a lot of it was showing them the value of continuing that. Joe: Okay. Nathan: Because again WordPress is a little bit tricky because once you pay for it once you basically own it for life. Joe: I got you. Nathan: So here that is really … is bringing in those value added updates and the value added support; the source support is probably like number two on our most celebrated feature of Envira Gallery and Soliloquy. We get it all and we saw it in the survey as well. So making sure that we’re doing everything we can for that customer experience just from the support standpoint and not only at the stuff that we’re doing as far as updates and things like that. Joe: So you really brought your marketing experience and expertise into the business and that’s how you’re triumphing in a sense. Is that what it is attributable to the growth that you’ve seen, the double digit growth or is it that it was going that way and you’re just on for the ride and making sure you don’t break it. Nathan: Yeah, I think there’s a balance between those. So initially … mostly when I go into these types of acquisitions I’m looking for something that’s like the first year I’m learning. It’s not like I can insert myself and change things at day one like say if you got a content site when essentially you’re dealing with software. So it’s always very different, the base is different, and then the software base is different in terms of developers and things like that. So for me, it’s applying the past knowledge of just making a great intuitive software, changing up the interface to what I believe is just a more … a better user experience, and outside of that applying some of those basic marketing things that just need to be done. In this case a lot of that, the basics have been done, but it’s that out of the box stuffs that really needed to get taken care of. Joe: I love that first year just learning approach. I see lots of these businesses that are listed and sold. There’s a certain amount of year over year growth and the goal is to at least sustain that. And I had a call this week with someone that blew up the SKU count dramatically and it was his kind of biggest failure but at the same time it turned out to be a little bit of a triumph as well because there are some SKUs that are now generating an awful lot of revenue. But there’s also a great deal of loss there as well. So I like that learn in the first year process. And what kind of things are you working on now that were never done before in the business? Nathan: Yeah, so there’s a couple of things that have also attributed to the growth outside of just again being a SaaS business with not a terrible churn. And the churn for WordPress businesses I think is probably a little bit above average of what other people see in WordPress. Again you buy one so you can potentially keep it. So outside of that, it’s been growing. Our affiliate revenue, that’s been increasing pretty tremendously. But we had a lot of articles that had been written that were getting pretty decent on the traffic, didn’t have any ads on there, didn’t have really any affiliate links things like that. So that’s one of the things putting in those affiliate links, building more articles around those really high performing traffic. I think at the time this wasn’t taken to do that and sort of nurturing that so that’s … I’ve seen— Joe: Are these affiliate links for other plugins or SaaS products or physical products or a combination of all three? Nathan: So the shoe in for us really became the funnel editing tools. We did a lot of … there’s been a lot of [inaudible 00:22:24.1] done, tools such as Photoshop and things like that. And so lot of traffic to that kind of stuff. And it just made sense to start saying hey if you don’t have Photoshop and you want to do this stuff that you see in this tutorial here’s where you can go. And that’s pretty much it. And then building off of that and saying what are those Photoshop competitors are out there well there’s Skylum Luminar, there is Capture One, there’s all these different types of photo editing tools that are kind of riding on the coattails and maybe on the heels of Photoshop. So writing tutorials for those and the same type of strategy that was used and say hey if you don’t have it you can go get it over here. Joe: That seems like such a logical thing to do, slow down and read the article, what are people looking for, what can we … Do you know what you’re doing? You’re helping the audience. They’re reading an article about editing and you’re then offering them the best photo editing tools right there within the article and you happen to be making money off of it as well. Nathan: Absolutely. And it wasn’t the intention of just skyrocket the affiliate. It just made sense. I was like a rational person would mainly look at that and be like you know what this is already an article at Photoshop so you probably already have it. That’s not true. There’s a lot of people that wouldn’t make something black and white and something color in the black and white picture but they didn’t know they needed specifically Photoshop to do it. So they end up going … picking up the Creative Cloud plans 9.99 or 19.99 or whatever a month not three or $400 as it used to be. So it’s just a lot more easier and accessible. Joe: How did you find the affiliate platform to use, those affiliate themselves? Nathan: Yeah. So share sell has already been in use in the previous ownerships so that’s just one of those things. But in this case, it wasn’t really even bad. It’s just getting … just registering for the program and dropping them the wings and saying hey I should always focus on this some more too because it looks like to be growing. Joe: Pretty easy stuff then. Nathan: Yeah. Joe: Now you mentioned an e-mail list as well; you’ve historically had lots of free users, a huge e-mail list. Have you ever done anything with that and if not are you planning to do anything? Nathan: Yeah. So the free versions, there was really no list before because there’s no way to collect emails from before. So we’ve started an opt-in for that which again I think is only … it’s been a few couple of short weeks but already we’re seeing the results come through. The only … the list that we do have is just essentially people that have paid the pro. But the great thing is we’re able to cross sell with Soliloquy because generally if you need something like Envira Gallery you probably need something like Soliloquy. Joe: Yeah. Nathan: So that’s continuing churn along as well. Joe: That’s fantastic. Nathan you look so happy and relaxed and just chill, are you always this way or is it you’re just in a good position in right now that you’re running this business and see the trends and whatnot? I mean what’s the deal? Let’s get simple. Nathan: It’s a little bit of both so I would be in positions where things were going absolutely terrible and so the short answer is I meditate every day so that I just accept things as they are so that makes life a lot easier for anyone listening. The second part is I think it is that I paid a higher multiple but I’ve got the security of if all else fails and I can’t figure out what to do it will still follow some level of revenue that was expected. So outside of that, I was just building upon that success that’s already sort of continuing as well. Joe: Excellent. What’s in the works of … goal eyes what are you looking at in the next 12 to 24 months? Anything that if we come back for the second update in another 12 to 24 months what are you hoping to achieve? Nathan: At a minimum, I’d like to achieve that same double digit year over year growth. But I think again entrepreneurs try to go all triple digit all these different revenue channels. Again I opened up the affiliate revenue more and that’s beginning to be more of a significant one. But a couple more like that I think would be interesting and just continued growth man. I mean the main thing is … this is one of the things we discussed earlier. It’s just that focus on the customer; making sure they’re happy, making sure that we’re hitting all those needs and then the business kind of just takes off by itself if you’re hitting all those things. Joe: That’s it. A clear and simple plan; not too complicated. Focus on the customer makes a lot of sense. Any words of advice from one entrepreneur to others in the audience; people that maybe they’re working in the corporate world and want to be the next Nathan Singh. Any advice that you can give in terms of running your own business and overcoming challenges and things of that nature? Nathan: Yeah, I would put it safely into patience, persistence, and presence; those three things. Joe: Alright. Patience I get that. Persistence I get it. Presence … meaning? Nathan: Meaning I think as entrepreneurs what we get into is too much looking around to see what someone else is doing or where they wanted to be in a couple of years and getting super stressed if they don’t hit those goals. Remember that is just your perception of where you wanted to be, reality happens different things. And I think that if you’re approaching everything in a present moment, I’m not trying to sound like a spiritual guru here. Joe: It’s just natural though. I like it. Keep going. Nathan: If you’re approaching everything in a present manner you’re likely to focus on what you’re doing at this point and not be so stressed about all those other stuff. Because essentially that’s going to be what’s going to mess you up; it is worrying about the future, worrying about how things are not going, things like that. Focus on what the problems are at the current moment and do those things at that minute, at that second and just kind of block everything out. I just feel like everybody is uniquely designed to run their own race. So don’t look left and right just do your own thing and you’ll get to where you’re trying to get to. Joe: I like it. I like it very much. Nathan Singh thank you very much for coming back on and giving us the first ever Quiet Light update. I look forward to doing this again. I wish you the best of success. Nathan: Absolutely. Good talking to you Joe. Joe: You too. Links and Resources: Envira Gallery Solliloquy

When sourcing an Amazon business, there are many complex factors that go into finding the right product and getting the right margins. Today’s guest founded Sourcify, a SaaS product that helps people source the product and improve the manufacturing process. Sourcify takes a look at every factor possible when building out margins and lead times to optimize the logistics behind the ordering process. By decreasing costs, revenue increases and therefore the value of your business goes up. Nathan Resnick started this fast-growing b to b software-driven sourcing company in 2002. His fascination with e-commerce and foreign imports goes back to when he was living in China as a high school exchange student and started importing products to the US, making a few thousand dollars a year. He started a Shopify store at age 19 and reached his first six-figure income year. Nathan became fascinated by the process and the capacity of these factories. Sourcify makes it easy for you to bring products to the marketplace, streamline errors, and cut unit costs. Episode Highlights: How Sourcify’s offices are structured for optimal global presence. The current tariff policy issues and how Nathan recently landed in the press. Ways a strong team and strong factory relations benefit both sides of the sourcing process. IP protection and factory relationships. Percentage margins sellers should look for in a factory. Shortcuts to avoid with suppliers. The importance of having quality control parameters in place before shipment. Markets where Nathan sees production increases emerging apart from China. One of the most common problems with Amazon business when it comes to inventory management. Avoiding duties and taxes via Mexico. The domestic and international laws that can allow for this at certain values. Mistakes in creating and retailing that Nathan sees and his tips for going around them on the manufacturing side. How important/beneficial it is to visit the factories for e-commerce entrepreneurs. Scaling up and understanding the factory’s capacity to match that scale. Transcription: Joe: Mark, one of the biggest challenges for startup entrepreneurs much like Amanda talked about on the podcast is sourcing great products. There’s lots of experts out there with podcasts that help and they’re very, very good information but sometimes people need a little bit of a boost; a little hand-holding. And I understand you had Nathan Resnick from Sourcify on the podcast to talk about just that. Mark: Yeah, absolutely. So he founded Sourcify.com which is a SaaS product. They have thousands of pre-vetted factories, hundreds of product categories, and what they do is they help you source that product and also improve that entire sourcing process. Because there’s a lot of complex factors when it comes to A. finding the right products and then B. making sure that you’re getting the right margins out of those products and getting your timing right. I mean Joe how many Amazon businesses have you looked at where the owner says well if you could just figure out the inventory ordering system because I missed out and ran out of inventory business could have done so much more. It’s like every single business, right? Joe: Every single one I asked the question have you ever ran out of inventory? The answer is always yes, the follow up question is how much revenue did you lose during that time period and then how do you overcome that? And yeah it’s often working capital, better planning, software, things of that nature. It’s always a challenge though. Mark: Well, so the software does this. It takes a look at … and he explained this. He says imagine you’re selling watches; you’re not just working with one factory because that factory might be ordering the wristbands from a completely different part of the world and so you need to factor all of this in when you are building out your lead times and also understanding your margins as well. And so we talked a lot about how do you negotiate better rates, when should you negotiate better rates, how do you establish good relationships with your manufacturers and other ways that you can really optimize logistics behind your ordering process. This guy … I’ll just be blunt, he’s way smarter than I am. Joe: Okay, well that’s not very hard though Mark. Come on now. Mark: Well, that’s not. That’s like 95% of the people in the podcast. Joe: I understand he had one really, really cool tip in terms of importing. Mark: I’m not going to try and explain what it is here on the intro. You’re going to have to wait and listen for it but he talks about using Mexico as a place to import products to be able to save a substantial amount of money on that importing process. So I’m going to let you guys listen to that and tell me … send me an e-mail if you found that tip to be absolutely killer because it literally … like you’ll probably hear me in the interview, he threw me off my normal pacing that I don’t have because I didn’t know where to go. I was like wow that was really an incredible tip. So listen for that and … yeah, a really interesting guy who’s done a lot in just a couple of years. Joe: Well, I think any tips and tricks that people can learn to decrease their cost increase their discretionary earnings increases the value of their business if and when they ever decided to sell it so I’m looking forward to listening to this one myself. Just a quick reminder everyone, movie quote, if you heard it, if you want to rewind, if you know what it is, drop it in the notes below and we’ll give you a shout out on the next episode. Mark: Nathan thanks so much for joining me. Nathan: Mark, it’s my pleasure. I’m really excited to be here. Mark: You and I just met. We met at Prosper Show. We talked for I think like two minutes before I was like you got to be on my podcast. I want you to come on board. And you were very gracious to agree. Would you mind giving everybody just a quick background on who you are, the company you’re with, and why I asked you to come on the podcast? Nathan: Totally. Yeah, I mean I run a company called Sourcify. We are the fastest growing B2B manufacturing order management system. What we do is enable companies to source out the best factories in the world as well as bring their supply chain online so they can be data driven and understand how their unit cost, lead times, and quality defect rates have been fluctuating per product and per factory. People always ask okay Nathan how did you get in to all this? And really it actually stems 10 years ago. I was living in China as a foreign exchange student with a host family that didn’t speak English, attending a local Chinese high school, and started importing products from different markets in Beijing where I was living. So we import all sorts of products, sell them on e-Bay and Amazon. In high school, I think senior year where you’re just making a few thousand dollars a month and then by the time I turned 19 I had my first low six figure year through my own Shopify store and really just became so fascinated by e-commerce as well as the power of these factories to produce all sorts of products. So about two years ago I started Sourcify and we’ve been on an awesome journey so far. I’m really excited to continue to help organizations streamline and optimize their production overseas. Mark: Yeah, I just was doing a little bit of show prep here and people that listen to the show are probably going to laugh at that because we don’t do a ton of show prep. That’s why I don’t do the intro. But you’ve gotten some really impressive press with what you’re doing. I saw Forbes publish a piece on you and the growth in Shopify. Share where your offices are right now. You have multiple offices all across the world. Nathan: Yeah, so I mean kind of crazy [inaudible 00:06:05.0] with us and press was last year, especially with this China trade tariffs. Everyone was talking about how these tariffs are affecting companies that are importing products from China. And for us we have offices in China, Vietnam, and India and run production everywhere from the Philippines to Pakistan; basically every country in Asia. And so we became a hot topic. We were on CNN, CNBC, and nearly all over the news and it was an exciting time and still is. I mean I think really if you looked at China as a whole it’s gotten more expensive and so for us, we’ve got three offices overseas and then in America; we’re headquartered in San Diego and have small offices in Las Vegas as well as [inaudible 06:43.7] Utah, right outside Salt Lake City. Mark: Yeah the Las Vegas area, that’s got to be just for all the conferences that are held there right? Nathan: Yeah. Mark: I mean we’re always out there. Nathan: Yeah. Not for all the partying. Mark: Right. I wish I had known this a year ago … or not a year ago but when all the tariffs that was hitting. I had James Thompson who’s the co-founder of Prosper Show. I had him come on the podcast and we were joking that we had to have a Canadian come on the show to explain US policy as it relates to China but cool. How old is Sourcify? Nathan: So we started in March of 2017 so just about two years old and it’s been a pretty amazing journey. We produce in over 300 product categories; everything from hair extensions to bags to bunk beds. I mean you name it. Our abilities are widespread and really that stems from having a strong sourcing team as well as strong factory relationships. So a lot of times organizations when they work with Sourcify they’re able to increase their margin just by buying in volume through our customers that might be producing similar products and so that’s one of the main benefits I think. Mark: Yeah, I want to get into a lot of the kind of details of these … of sourcing products and also some of the differentiation. And you kind of … you touched on something that I was going to ask about so I’m going to jump the gun a bit here with this. Is this an open sort of book where you can see some of the other products that are being manufactured here and if so the question [inaudible 00:08:12.1] Joe’s mind is protection of IP through your platform. What does that look like? How do you protect people’s intellectual property? Nathan: It’s a great question. So first and foremost every customer that uses Sourcify has complete transparency. They can see who the factory is and our goal as a software driven sourcing company is to enable these organizations that work with Sourcify both buyers and factories to have better workflow management and a production process to actually understand what’s going on in the production runs. Right now like pretty much every company we talk to is using e-mail and Excel spread sheets to manage production and that works to an extent but it gets very complex. And so from an IP perspective number one every customer keeps their factories in their own database and number two basically when we talk about IP it’s protected at the borders. So a lot of organizations and a lot of people ask Nathan should we go try to file trademark, should we go try to file patents in China or through Asia and most of the time it’s not going to be worth your money or time to go out and try to file those patents or trademarks in China. But what you should do is file trademarks and patents here in America on your products. So if a company is importing your products under your brand name or trying to sell on Amazon under your brand name a lot of times you can show the Customs and Border Patrol or Amazon themselves and say hey I own this brand, this company is clearly knocking me off. I did not authorize them to import or sell these products on my behalf. And the right thing that these law enforcement agencies or Amazon should do is to give you full control of your products to sell them yourselves. Mark: Okay cool. So let’s talk about you’ve already mentioned that some of these guys are kind of they’re starting out with these in Excel spreadsheets and to control the manufacturing process and it works for an extent. I would love to know because in our world we’re helping people prepare their businesses for sale. We run into this all the time. We have people who come to us with all the metrics that they think they should be presenting and all the metrics that they think are important when it comes to selling and then we have to kind of adjust their mindset as to alright that’s a good start here’s what we should be doing. So let’s start with this, how do you find people mostly attack that product sourcing and product development? Nathan: Yeah I mean I think first and foremost it stems from a vendor analysis. Are you actually working with the right factory that should be producing your product? Hopefully, you’ve done enough due diligence with your supply chain to understand if you’re working with a factory or trading company or wholesaler or agent. Best bet is you’re working with a factory that’s great, that’s fantastic. Hopefully, you haven’t outgrown them. There’s a lot of organizations that we see haven’t renegotiated their terms or prices in two or three years and you’ve 10X the production volume that you’re buying at and you’re still paying a higher rate. I mean the smart thing you do is go renegotiate those existing contracts and prices with that factory. If you do an analysis and you find out you are working with a trading company or agent number one you’ve got to understand okay how much margin do I think this trading company or agent is making. We see a lot of organizations that a rep will say we see the factory numbers they’re only making 1% or 2% on my production run. I mean unless they’re a really large scale facility that’s trying to just take up but like keep their production line going there’s no business that’s going to run off of a 1 or 2% margin. I mean you can’t even put bread on the table with a 1% margin in most organizations. And so when you come with that perspective in mind and you think that you’ve out negotiated everyone and really have a strong factory it’s not to say that they’re not strong factory it’s just to say that I mean I don’t even think you should try to get your factory to run on a 1% margin because it’s just not sustainable. They’ll probably be even making quality cuts or messing up the lead times or working with the wrong vendors because I think what a lot of people and supply chain team members don’t necessarily understand about manufacturing is that most of these facilities that are exporting products to America or Europe or wherever your products are going are dealing with a lot of sub suppliers. So they have suppliers that handle the different components that make up your products. So, for example, let’s say you’re producing watches. Those watch factories are going to have the watch strap, the watch taste, the watch movement, the watch hands; all of these little pieces that make up that watch are assembled and put together by the factory that you’re working with. And until you get to a scale where you’re spending at least a few hundred thousand dollars probably more so a few million dollars on production overseas you aren’t going to dive into those sub-suppliers and really understand okay how much is each little component costing. And even then building relationships with those sub-suppliers to cut costs is not going to be worth your time until you’re spending a significant amount of money on production overseas. Mark: Yeah. So what margin should people be expecting there? You said 1% is probably not realistic. What should they be expecting? Nathan: I mean we’ve had the opportunity actually to invest and buy factories at Sourcify and we haven’t done that and I don’t think we will in the near future. But I mean most factories that are attractive to us are running on at least 15 to 30% gross margins and I think that’s sustainable. I think as a business you want to have some margin to reinvest in new machines. You want to have the margin to invest in your team. You’ve got to have margin there to grow and create a good environment. And I think that’s a key dynamic of any business let alone factories and especially even factories when sometimes especially as your brand might grow you try to sell into larger retailers like Walmart or Disney or whatever it may be. Those larger retailers have their own requirements of your facilities to be able to sell your products in that retailer. So if your factory can’t pass a Walmart cert or a Disney cert you’re not even going to have the opportunity to sell into those larger retailers. Mark: Yeah, so that makes sense to just be investing and making sure that … I think that the mindset that I hear sometimes from both buyers and then also some of the owners of these businesses when they’re renegotiating these contracts over and over with their suppliers is forgetting that on the other side there’s somebody still trying to run a business and it affects that downstream quality. I’m sure it’s downstream, probably upstream quality of the product that you’re getting in return and trying to sell which leads nicely into my next question which would be what are some things that people should be looking out for with their current supply chain and maybe trends over time? Everything starts out good with the first batch of products you receive and everything is going well, what should things that would people be looking for on a regular basis from their suppliers? Nathan: Definitely. I mean I think first and foremost there’s a lot of people that I think try to take short cuts in their supply chain. I think the biggest short cut that I see people taking is not booking quality control inspections before shipment and before you pay that production balance. I mean you can get a quality control inspection done through our partner for QC is Asia Inspection. They just rebranded to Qima. They charge under $300 or around $300 to send a person to the factory to inspect those products before shipment and before you pay that deposit. And if you don’t have a quality control inspection process or program in place you’re going to be getting a container load that might have defective products or might all be wrong and there’s no reason for you not to put those checks and balances in place on every single production run. I mean I don’t care if you’ve been working with the factory for two or three years there’s always going to be some products that might be defective. And I’m not saying these QC teams are going to check every single product. They might check 10, 20, 30% of the products depending on the size of the production run but at least you have images and an analysis of what’s going on with those products. And sometimes these are very simple mistakes or quality defects where like for example on … I know one of the production runs that we had going on this week there was threads that hadn’t been cut on these bags. There were loose threads. We said hey before these are shipped we like all these threads to be cut. We don’t want these bags coming into America with these threads hanging out. So sometimes it’s very simple quality control metrics and other times you find out the code being on certain furniture or certain lamp is wrong whatever it may be. And so having that in place I think is really just a must. I mean there’s no reason not to have quality control in place before shipment because you don’t want your products showing up at an FBA warehouse or your own warehouse and you find out oh wow the 30% of these products are defective. So you’ve got to have checks and balances in place before shipment and then also one of the things that we do at Sourcify that I recommend everyone do if they can depending on their buying power is say to their factories and put in contracts, say we aren’t going to pay for defective products. If the products don’t meet our quality control inspection we aren’t going to pay for them and we’re going to discount them from our purchase order. So let’s say 3% of your products have quality control defects, well now you’re saving 3% of your PO because those products are defective. And so putting that in writing, making sure that’s clear with the factory is really I think the biggest kind of misstep I see companies doing when they’re producing products overseas. And then when we talk about trends it was really the last year it still is right now but transitioning and diversifying supply chains outside of China is huge. I mean so many companies literally every single day are talking to us about producing products in Vietnam, India, Bangladesh, with Philippines. I mean all across Asia. I was on a flight last quarter the Philippines back to Guangzhou from Manila and on my right and on my left were two Chinese factory owners that have just transitioned some of their facility to the outskirts of Manila to start factories in the Philippines. And the reason being is labor rates are more affordable in the Philippines and other parts of Southeast Asia. The biggest challenge stems from the operations of a factory which these Chinese factory owners already know how to operate a factory effectively and you know really just the raw material where do these raw materials come from or produce these products. These factory owners in China have that figured out and there are some free economic zones in certain parts of Southeast Asia where you can actually import products from other countries into this free economic zone, manufacture the product in that economic zone and then export it for free. The benefit of the country is just to really increase labor rates in that area. And so that’s I think really the biggest trend and kind of what’s most overlooked in current companies that are producing products overseas. Mark: Yeah, you anticipated one of my questions which was the different markets where you’re seeing production increase. I know with the tariffs were being threatened and imposed there was a lot of question about well where can we go if these prices rise up? And dump tell that in with some of the reality of the issues that Amazon sellers are dealing with producing China, right? This three month kind of standard lead times if you’re shipping on an ocean it makes it really difficult for people to manage their inventory. So on this side of the ocean what countries are you seeing emerge at this point as potential viable players if any? Nathan: Definitely, I mean I think right off the bat I want to touch on the inventory side in terms of inventory planning. I think we’re both friends with Chad at Skubana. I think they do a great job of inventory management and helping you manage that across different channels. One of the key components that I think a lot of companies fall short on is how do you tie that data into factory lead times. And so when you can take lead time data from Sourcify and tie it into you inventory analytics that you have through a tool like Skubana that’s a lot of powerful insight that you can put together. And when you’re starting to diversify your supply chain outside of China you’ve got to understand that now the raw materials are potentially coming from a different country than your products should be manufactured in. So for example in Vietnam, we work with a pretty high end apparel brand and they get their fabric from Taiwan. It’s about a two week lead time to get the fabric from Taiwan and put it to their facility in Vietnam and all the cut and sew there and so another timeline that they have to put into their analytics and planning. I mean I think forecasting is a huge challenge with any e-commerce business. Ad I think in any … I mean you probably see this all the time in any Amazon business or any e-commerce business a lot of times when you’re going through a high growth period there’s going to be a time where you’re almost running out of inventory or you did run out of inventory either because you misplanned or because you’re going to have to cash to put in the inventory. And so I think it’s a crazy dance that these e-commerce companies play when they’re trying to understand okay how much money should I put in the inventory, how much should I spend on paid acquisition. It’s a balance that’s really hard to figure out on the early days and until you have the data to forecast more effectively you’re going to be playing that dance. And I don’t know if there is like a one size fits all answer. I mean you might know … have a bit more insight in regards to that than I do but I’d be interested to hear your thoughts on that. Mark: No. Honestly again I mean as I know a lot of the people that listen to the podcast here are looking for their own acquisitions and they’re trying … they look to this podcast for some insights and if you can figure this one part out this is the number one problem that we … no maybe not the number one problem but one of the most common problems I see with Amazon businesses is that most have some level of seasonality; typically Q4 unless … but I mean not always but some have some sort of seasonality. And so we see one of two things happen either they run out of inventory at the most crucial time of the year on some of their best sellers or they overbuy or their shipment dates miss the seasonal period. And so let’s say that you overbuy and you have a seasonal product where you’re hitting December … November and December for that Q4 Christmas rush now January hits and you got to sit on a whole bunch of inventory for a year. Or even worse … and again this happens more often than people might want to admit, they get those shipments late. They get them the second week of January. And it could be even more difficult if you have spring seasonality because you have Chinese New Year in there. And if you get caught up in that well you can completely miss all of your windows there. So the idea of combining something like Skubana; yes Chad is a friend. I had him on the podcast. A great guy. Super smart. Combining that with Sourcify, anyone who figures that part out most of the businesses that we list are undervalued in some way given that they’ve missed their hot periods one way or another. Nathan: Yeah I mean I think that ship times there is something that you should be able to control in terms of planning at an early stage. That could be a bit challenging, I could see. But in terms of your ship times I mean that’s something that you should really have under control and under wraps with your freight forwarder and with your factory. What’s crazy to me just talking about ship time briefly is that even a lot of freight forwarders they’re getting looped into factories over e-mail and trying to go back and forth to schedule a freight pickup. I mean all of that should be able to be effectively synced up and e-mail is a fine channel to do that but I mean I think there’s got to be a better method. I mean a lot of companies that use Sourcify they link in their freight forwarders so they communicate directly with their factory online and track what’s going on. But otherwise it’s just a bunch of people CC’ed on different emails and it’s actually kind of entertaining sometimes to see the back and forth between a factory and a freight forwarder got to figure out when they can schedule a pick-up of products. Mark: That’s fascinating. Alright, I’m not going to skip on the other question though about this side of the ocean countries and emerging markets if any and maybe you are going to say this— Nathan: Oh in terms of like North America? Mark: North America or even South America, but [crosstalk 00:23:42.8] three month sort of lead time. Nathan: Yeah. So I’ve actually been doing a lot of research into Mexico. We’re headquartered in San Diego and so there is a huge amount of opportunity in Mexico just south of the border here. And I think it stems from … basically, it’s kind of a similar dance that these companies play that are transitioning production outside of China is where does the raw material come from. There’s a lot of … not a lot of raw material sources in Mexico and so a lot of those facilities that are doing injection molds or cut and sew are importing those products from other countries. But there are a lot of companies that are producing products in Mexico and I think it’s a growing opportunity. The other dynamic that I want to touch on that a lot of e-commerce companies are starting to look into and I think it’s a huge trend is actually handling their warehousing and fulfillment right out of Mexico just across the border from San Diego. And you can actually if you’re doing pick and pack B2C shipments directly to consumers you can actually avoid duties and tariffs no matter where the product was produced. And I’ll walk you through in how this works. So basically you can avoid duties and tariffs by handling your fulfillment and warehousing in Mexico while having the same experience as if these products were fulfilled from California. And the way that that works is there’s two laws you have to know of. Number one is Section 321 which is an American law that says when you’re importing a product that’s valued under $800 you don’t have to pay duties or tariffs and that product. The law number two that you need to know is the IMX program which is part of NAFTA; the North American Free Trade Agreement, and what that enables our organization to do is import a product into Mexico and export a product back into America without having to pay any duties or tariffs between America and Mexico. And so the way that this works is that you import your products from China or Vietnam or any country that are producing these products to import them in bond into the port of Long Beach, have them trucked down in bond across the border, warehouses directly across the border from San Diego, your warehouse and pick and pack your products out of there. Every time you have a customer and buy a product in your website it’s pre-labeled in Mexico and there’s trucks going across the border every single day and under Section 321 because those products are pre-labeled and each under $800 in value you don’t have to pay duties and tariffs on those products. And it’s basically these trucks go across the border every day, drop these products off at USPS, UPS, FedEx, there’s distribution centers literally right across the border from Mexico and San Diego and it’s been incredible doing research and exploring that dynamic down there. And there’s companies that are literally wiping off millions of dollars in duties and tariffs from their balance sheets just by handling fulfillment and logistics out of Mexico. And there’s a lot of big companies that we all know like Taylor Guitars, Bombas Socks, these hundred plus million dollar organizations have been doing fulfillment and warehousing in Mexico for three plus years now. I mean it’s really a robust operation and there is one provider that I know of called Baja Fulfillment that handles mid to smaller sized e-commerce companies. But for the most part, most of these organizations are focused on larger enterprises because that’s where you’re going to get the volume. Mark: That is phenomenal. It’s actually such good information you knocked me completely off my game as to the other questions I wanted to ask. Nathan: Well, I mean we can answer questions in regards to this because a lot of people don’t necessarily understand the dynamics and how it works. It’s nothing necessarily new but here’s the key dynamic. So every drop shipping entrepreneur that’s drop shipping products from China into America they’re using Section 321. That’s how these e-packet shipments work because you don’t pay duties and tariffs on those products because each one is pre-labeled and pre-sold and shipped over via China Postal Service and then USPS into America. And the reason why those products are so cheap is number one those shipments are subsidized by our government. There’s a lot in the air in regards of those if that’s going to change but Section 321 is here to stay. I mean that’s a law that’s been passed through Congress even if something were to happen … would happen with our current Trump administration I mean he wouldn’t be able to change it himself is basically what I’m saying. And so there are millions of packets that come into America every single quarter that are based on Section 321. The key dynamic here is instead of having to warehouse your products in China or wherever you’re producing your products you can actually import the container duty free, truck it down to Mexico in bond, and then you’re basically picking and packing those products out of Mexico with the same fulfillment experience as if it was out of California because these trucks are going across the border every single day. So it’s pretty crazy dynamic and there’s not many providers or even e-commerce companies that are really doing it right now. But being here in San Diego it’s something that I’ve been spending a lot of time on and really just become very interested in. Mark: That’s fantastic; I’m going to completely shift gears mainly because I don’t have any questions on that. That was a phenomenal bit of advice. I want to talk a little bit about that product manufacturing process and developing new products. Obviously most e-commerce businesses you need to be continually releasing new products or at least variations on that. What are some of the mistakes that you see from people creating and retailing some of these proprietary products in that process of looking for the factory, the manufacturer, and maybe shortening up that exchange that happens between the manufacturer and eventually getting it out to retail? Nathan: Yeah definitely. That’s a great question. I would say if it’s a product under IP protection what a lot of companies do is have one piece made at one facility, another piece made at another facility, and then either have one of the facilities assemble it or assemble it here in America. I would not suggest really assembling domestically just the labor cost and headache is going to be too much. But sometimes it doesn’t make sense to diversify your supply chain to have more IP protection under place. I think at the end of the day a lot of this IP protection in China really revolves around your factory relationship and dynamic with them. But then again if it’s a really, really hot selling product like these fidget spinners or the inflatable chairs that came out the other year; those things shot up like a rocket ship and literally everyone was claiming to sell them and invent them and all this is craziness. So I think really when it comes IP protection it still stems from having that dialed in here domestically but overseas it’s a matter sometimes of diversifying your supply chain, building a relationship with your factory, and I would also recommend visit them face to face. I mean I’m in China once a month at our office in Guangzhou and in Vietnam and it’s a lot of travel but it really helps us establish a brand and connection overseas. Mark: How important do you think that is? Because I’ve had clients play on both sides where they are there at least once a year, I’ve had other people say I visited once like five years ago and I just don’t see the need to visit more frequently. Nathan: Yeah I mean I don’t think it’s necessarily a need. I think it depends on your business. For us, we’ve got a subsidiary in China. We have a dozen or so full time employees in China and more in Vietnam and in India. And the dynamic there is mostly just our business puts me in a position where it’s a lot of management and making sure things are operating smoothly there. But if I was an e-commerce entrepreneur I mean as long as I have my checks and balances in place, communication is fluid, and everything is going smoothly, there’s not necessary a reason to go over there. All you’re going to do is see the facility, probably have some tea at the facility, grab dinner, maybe drink some bijou or something and basically break bread with your factory which is awesome. It’s a great experience and really a cool culture dynamic. But I think if you just … if you’re really going over to optimize costs or really negotiate in person I mean that could be beneficial especially if you’re having a challenge with kind of things getting lost in translation between communications with your supplier. So I think it depends on the business. I mean I know eight figure e-commerce companies where the founders have never met their suppliers before and do exceptionally well and I know eight figure founders that don’t go … that go over once a quarter or pretty often. So it depends, I mean I don’t think there’s a one size fits all answer to that. I just think it depends how your supplier has been performing and I think it’s the key question that you have to ask. Mark: I want to talk real quick about scaling and also scaling up with the factory and their ability to match scale. Have you seen clients run into problems with that where they scaled so quickly manufacturers simply can’t keep up and finding quality factories to be able to backfill that demand? Nathan: Definitely. I mean I think there’s two key ways for Amazon businesses to scale up. Number one is just increasing paid acquisition or ranking higher for keywords, the other is to diversify your product offering; start selling products and product categories that you weren’t selling in before. And there’s different strategies, I mean if you’re selling products in new product categories you’re going to have to do a lot of sourcing work to make sure you’re getting those products made effectively and that’s … it takes a lot of work and a lot of time. Whereas if you’re scaling up with the same products every factory that you work with if you say hey I’m going to order 10 times the number of units they’re going to be thrilled. They’re going to be very excited. Does that mean that all those products can be produced at their own facility? Maybe not, there could be a dynamic where they produce products with sub-contracting factories that might not have the cleanest facilities, might have a higher quality defect rate. And so that’s something to be aware of as really understand okay, what is my actual true factory capacity? That’s hard to understand without actually going to visit the facility but there is … I think kind of the key way to understand that is what I call just the kind of white paper trick where you could basically have the rep that you talk with at the factory write your name and date on a piece of paper and have them go around the facility filming a video with that piece of paper in the video or pictures so you can actually see what that facility looks like without going there. And that way you know at least this rep that you’re talking to you has theaccess to that facility. Who knows if it’s the actual factory that is producing your products or not or maybe you’d be able to see your products on the production line but at least you know that that rep has access to that facility. Mark: This has been really useful and we’re unfortunately running out of time. So let’s end it with this and I’m … you’ve offered a ton of useful information so let’s talk real quick about Sourcify and the particular benefit that Amazon sellers are going to see from it. You touched on it at the beginning but this is a kind of chance to be maybe a little more direct with that. Nathan: Yeah totally. I mean our goal is to enable organizations to optimize our supply chain. Typically when a company works with Sourcify, they save anywhere from 10 to 50% of their costs overall in their supply chain. The way we do that is either by enabling them to work more effectively with their existing factories through our software, diversify their supply chain across Asia, or diversify the vendors that they’re working with in China if they’re just producing products in China. So we got boots on the ground here. You’re more than welcome to come visit us and we’d be happy to connect online. You can find me on LinkedIn [inaudible 00:35:18.8] just Nathan Resnick or if you go to Sourcify.com that’s where we’re at. Mark: Very cool. Thanks so much for coming on and a huge shout out to John Corcoran and Jeremy from Rise 25 for connecting us actually at Prosper Show. I think I was talking to Jeremy and he’s like hey you got to meet this guy. He’s great you’re going to love him. And he was right. So thank you guys for the introduction. Thanks for coming on and yeah I’m sure I’ll be talking in the future. Nathan: Awesome. Thank you. Links and Resources: Sourcify Nathan’s LinkedIn Skubana

Can a plush slipper put you in a happier mood? Today’s guest and Shark Tank dealmaker have been banking on that since buying the existing Happy Feet business in 2002. He is with us today talking about the wild ride that his kiosk, retail, and e-commerce business has been on with a single brand that now has licensing agreements with the likes of Disney, Marvel, and the NFL. Pat Yates is another serial entrepreneur and e-commerce success story. Pat has the broadest experience in physical product of almost anyone we’ve talked with here at Quiet Light. From his early start in a retail golf shop, to selling coffee out of a truck in a one-man distribution venture, on to kiosk retail with Happy Feet which now has a booming e-commerce presence, Pat has done it all. He walks us through the Shark Tank process, the deal he struck, the risks he took in his first licensing deal with a celebrity face, and how he managed the rapid growth and cash flow challenges his business faced. Episode Highlights: When the website for Happy Feet went live and Pat’s vision to merge kiosk to e-commerce. The Snooki Story and how he took a chance on licensing for the first time when no one around him thought it was a good idea. His decision to apply to be on Shark Tank, the process he went through, and what his appearance did for the growth of his business. Rapid growth cash-flow challenges and how Pat overcame them. The importance of having good people around when growing. Ways to scale and grow creatively for success. Mistakes Pat made or was perceived as making in scaling the business. How kiosk business works and Pat’s thoughts on the current kiosk climate. Pat’s advice for those beginning as entrepreneurs and his key tips to being prepared to succeed. Transcription Mark: Joe, Pat Yates is somebody that has been a friend of Quiet Light Brokerage for a long time and might have one of the broadest experiences in the world of physical products of people that I know. He sold everything from licensing products on retail, a whole kiosk business, e-commerce, and he was also on Shark Tank and you finally had him on the podcast where he can talk about some of the experiences that he’s had and what it’s like to grow a business that’s as popular as Happy Feet. Joe: Yeah I know. Over the last six or seven years I’ve probably talked to maybe a dozen people that have been on Shark Tank and Pat I think has had probably the most success. He got a deal with Robert. He talks about the process, the presentation, preparing for it, a little bit … he goes back into how he started in Happy Feet in malls, in kiosks; really his father bought the business and he tells some great stories about Jersey Shore and meeting Snooki and how he took a risk and did a licensing deal with her. And then really talks about the success after Shark Tank and how to manage cash flows. And then we dipped a little bit into the back side of it because I was at a Blue Ribbon Mastermind last summer and somebody that has e-commerce product talked to somebody that does retail up on stage and whether they should try mall kiosks and things of that nature. And because Pat has a great deal of experience there we talked about that a little bit at the end in terms of how to go from e-commerce to retail and whether he thought the kiosk business was a good option. Mark: I know every time I walked through a mall … a few years ago when I was walking through a mall I’d always come across one of his kiosks and his giant stuffed slippers which is what Happy Feet is right? Joe: Yeah. Mark: They’re these ridiculously oversized slippers and they’re super fun and I know people bought them for Christmas presents and everything else. So I’ve always been fascinated with what he’s doing. I do have to ask you real quick just changing topics, do you have any idea what the movie quote was on today’s intro? Joe: Not at all. No idea whatsoever so if anybody knows what it is rewind, listen to it again, put it down in the show notes, we’ll give you a shout out and a thanks in the next episode. Mark: All right why don’t we get to Pat and listen to what he has to say about growing an e-commerce business and also the chaos side of things too. Joe: Hey folks it’s Joe from Quiet Light Brokerage and today I’ve got a Shark Tank alumni and we’ve had some on the past before but this one actually got a deal and has a great deal of entrepreneurial experience; Pat Yates from Happy Feet. Pat welcome to the podcast. Pat: I appreciate you having me on and I’m looking forward to it. Joe: Good man, all right so we don’t do big introductions here. We want to hear a little bit of background on your story. Tell us about your entrepreneurial life, how you got started, and where you are today. Pat: Well it’s kind of funny. I started my first business pretty much directly out of college. I was actually working for a gentleman in a … when I got to college I started working in a retail golf shop. It’s where I’ve worked in summers and they put me on as the manager in that location which sounded like a really important job at the time. When I got at a college I thought I was going to change the retail golf industry. But in an event when I was working there I had an opportunity through one of the customers I had to get involved in a business in Columbus, Ohio and I lived in Louisville, Kentucky at the time and he basically told me about it and I decided right on the spot to buy into this franchise deal that he had for a coffee company in Columbus. I went home and my wife of three or four months I told her we were moving to Columbus and she’d never been there. So it was kind of an interesting conversation. My first ever business was basically a one man, one truck. I would get up in the morning and I would sell coffee accounts to restaurants and offices and put in vending and just go out and hump it and it was me and that was it. I did everything. Joe: Let me interrupt for just a sec for just a sec for those husbands out there that are newlyweds and still within that first year of that honeymoon, are you still married to the same woman and do you have children now? She actually wanted to go on it? Pat: Amazingly it’d be 29 years this June and yeah [inaudible 00:04:57.3]. So yeah I was pretty lucky and she just had an interesting ride. You should have her on the podcast to talk about me. That would be probably better. But yeah we started … I started that business and 2 ½ years later I sold it back to the company that was a long … it was a long story about a father and son in federal court over their ownership and it was out in the press and we sold ours back. We had a contract. It was exciting. I moved out to Tennessee and started my own company. I basically have a 200 mile non-compete and I looked at the map 200 miles away and my mom lived in Nashville; I’ve lived in Nashville. We moved over there and started the same kind of company right after I sold it. So at that point, I started working a little bit also in the winner’s pawn specialty retail so I would use carts and kiosks for a couple of months and make extra income whilst I was building that company and that’s what led me to e-commerce which led me to Happy Feet. So the short synopsis is my father and his wife are trying to work and sell on kiosk too and they were trying to find products. So when they went to a trade show in Atlanta, the Atlanta Gift Mart one time and ran across a guy who had these slippers and he had a patent on them and designed them and he really wasn’t selling any so they agreed to buy a container of them. A small container of 4,000 units and put them in a mall here in Louisville. They sold out that season really quickly. It was a great beginning and then we went out and started sending … giving off 24 people to get kiosks across the country. And in 2002 I bought it out from my family and started going in a little different direction, a trajectory on retail that aren’t kiosks that turned out to be really big but then really catastrophic with relation to the growth pattern and then started to concentrate more on e-commerce. And that’s obviously led me to a Snooki deal which I’m sure you’re probably going to end up asking about which is the funny part of the conversation typically. And then it led me to Shark Tank and it has led us to every late night show, morning show, TV show you can imagine. So the press around the company was incredible and obviously, I’m still here doing it basically 20 years later. Joe: That’s an incredible story. So if you’re focusing specifically on the e-commerce side of it when did you first open up the first web site for Happy Feet? Pat: Well the first one was actually opened up by my dad when they had the business in 1988. They were … they started in doing very little stuff. I mean I’m talking like we packed two orders in the basement one day. Joe: How much [crosstalk 00:07:08.6] 1998 is a lot of having, I think my first site was 50 bucks probably 1998. Pat: I could guarantee that my dad would not have spent $50 on a website. So I don’t know how much he spent but it probably was somewhere south of $50. They really weren’t doing anything. I think when I bought the company they were doing $22,000 in web sales. They just … it hadn’t translated but what happened was I had a little different vision. And my vision was that if I can get it out to people in kiosks and grow that funnel sale it would get the brand recognized by people and then they would continue to buy it online. And since our business was seasonal, two months a year they were coming to me. Two months a year they were going to the kiosks. So if the kiosks can say osh kosh wherever or from like Milwaukee, Wisconsin closed down and someone went back to buy and they didn’t have them they see the name on the back of the slipper and all it did was that distribution funnel continued to grow. So my thing was to try to get it to a lot of places for me to market very quickly and try to build the e-com via that. And we went from 22,000 to about 100,000 to about 400 and we capped a million and now we’re well over three million and it just shows no signs of slowing down. It’s a fun product. Joe: You know the way that you went about it is actually hard work and hustle. And that hard work and hustle got you in the right place at the right time which is not necessarily luck. It’s because of the hard work and hustle but being at that trade show in Georgia where your dad was and meeting these folks and taking the risk in buying that half container load so good for you. But then there’s a lot of work to do since then. And as we’ve talked and I’ve had a lot of people on the podcast and what I’ve experienced over the last seven years in the brokering side of it is that everybody has problems with cash flows. So I want to talk about that with you. I want to … first I want to hear the Snooki story and I want to hear a little bit of the Shark Tank experience but then I want to talk about how you’ve solved the problem of cash flow with a company that is growing so rapidly because everybody that’s in the first 12 to 36 months of a business that’s growing rapidly faces that challenge especially with the Amazon growth these days. But talk to us about the Snooki story did she just happened to have— Pat: Well it’s kind of interesting. It’s actually my most fun story of all these and actually from many standpoints; number one from a standpoint of growth, second of all from a standpoint of trusting my judgment. I’ve had done many podcasts before and I’ve talked to a lot of people about the biggest thing with me is if I always trusted my judgment on what I first had an inclination on I typically had success. Now it’s not always that way. Not everybody gets it right the first time but the 80-20 every time I trusted myself it was good. Every time I didn’t trust myself it was the same 80-20 but the 80-20 was the other direction. Well, I’m sitting in my house one night and this is 2009 maybe. I’m guessing. I have to go back and look. But my son comes into my bedroom and I’ve said this many times so I’m sure people have heard it and he said dad your slippers are on Jersey Shore. Snooki is wearing your slippers on Jersey Shore. I said I only have two questions: who’s Snooki and what the hell is Jersey Shore? I really had no idea. I had no idea what it was. I’ve heard of the show but I didn’t pay any attention to it and this was the second season on Miami so [inaudible 00:10:13.8] rewind it and I look and she’s bent down cleaning something up with our pink slippers on. It turns out she was just a fan of the product. She bought them and took them down there and thought it’d be cool to wear in the house. So we get all these emails and orders immediately as soon as it starts hitting the air. And we sold out of those pink slippers in like three days. So at that point, I knew I had something. So I being a ford motion guy; that’s one of the words I use a lot being a ford motion guy, I picked up the phone and I called her agent and it turns out one of the guys is selling license agreements for her because they figured they could capitalize on her fame at the time. It was in Chicago so I got my car and I drove to Chicago four hours the very next day and I sat down and had dinner with her agent and we offered her a license agreement to design her own slippers. I can tell you that there was not one person including my current partner at that time that wanted me to do it. Every person said this will be a complete travesty. Why in the world would you put her in front of your product? I said well there are several reasons: number one, I saw what it did when we got the press and second of all you can always deal with those things. I mean there’s no bad press. What you want to do is get it out there. So to make the long story short we sound this license agreement, we launched our product. Her leopard slippers is still probably all-time the greatest selling product we’ve ever had. The first time she tweeted out about it with only a million followers she crashed our site. So we got to learn really quickly how we needed to scale. Joe: Wow. Pat: Then she took us to trade shows. We went … she was on Jimmy Fallon playing slipper golf which is one of the coolest. If you ever get the chance you can Google it. It was really fun. I was there for it in New York. We were on Good Morning America, on the Today show, so all that stuff came from it and it turned out it was one of the best decisions I’ve ever made because of the way that it helped to get the notoriety around the product. And I just trusted my judgment because not one person really believed it was ever going to be something good for us. And it was exciting and since then I’m still in touch with her regularly and her management. We still do a lot of things together. So it’s been a great relationship for eight or nine years now. Joe: Wow that’s fantastic. A fun story too. Is there any chance of Jersey Shore coming back on the air? Have you got any inside information? Pat: They did a rewind this year but I don’t know how it did. I know that she has got some other things she’s working on so she’s always … I mean the thing is people just … really it’s amazing in our society how people sort of make quick determinations on small snippets of someone. She’s actually a really sweet girl. Some people look at her and think she’s this hard core partier; she really isn’t. When we were in Vegas is a great example, we went out … everything she gets she gets for free. We went to a restaurant, she took a picture for Instagram, probably a $7,000 bill and with all these people. We went up to this nightclub and it was roped off area, bottles, service, everything she wanted for free. Her life at that time was just immeasurable with relation to the benefits and things she got. But what we ended up finding out was is that she was just this really calm, young girl. We went out to dinner and out to a club and she never had a drink. It wasn’t the Snooki they sell on Jersey Shore; it was Nicole Polizzi which is her name. She’s an adopted girl from Colombia and she has a great family and she does … she has great young kids now. She’s actually a tremendous person. That’s the one thing people would really be surprised at next door. Joe: I believe it. Well, I know that you got connected with Quiet Light back in 2010, 2011 or ’12. I know you had some conversations with Mark about doing a valuation for Happy Feet. And as Mark often did he probably gave you some good information and suggested you go and fix that or if you want X amount of money you got to build the business more. Not high pressure at all he did the same for me in 2000. I forgot, no it was 2010, maybe we called him about the same time. But at some point, you said okay this Shark Tank thing looks interesting I’m going to give it a go. Can you talk about your decision to apply to Shark Tank, what it was like being on the show, and what it’s done for Happy Feet since? Pat: Well I applied on season two originally and it was … I mean if people hadn’t done the Shark Tank applications, it’s like 50 or 60 pages of disclosures. It’s all handwritten. You can’t type it. It’s so non-technical, you can imagine. And I got turned down that first year. I went to the interview process. We submitted videos and got turned down and I hadn’t really thought much of it after that. I watched the show and I was a fan but I remember it they were getting ready to finish casting for season five and I get a phone call. And believe it or not I was actually on a golf course and I picked up the phone and they said look we’d like to revisit your application. We’re scaling so fast. We’re doing so many new things. We’d like to revisit it would you want to resubmit this application? I said well it took me days to be able to do the application and videos and stuff and I said like okay if you feel like there might be some fruit from it let me know. So I resubmitted the application, did the videos, it comes right down to the end. This is like in September of 2013 they called and said Pat look we have four or five slots left and about 18 or 20 companies where we got it narrowed down to. We want to tape so what we’re going to do is we’re going to bring you out to LA and we’re going to let you tape in front of the producers. If they like you they’ll keep you if they don’t they’ll send you home. And I’m like alright. So I flew out to LA and actually it’s interesting because Snooki was sort of involved in this in a pseudo way. I went out and I taped my test and I went that night to Dancing with the Stars and I sat with her family and her agent at Dancing with the Stars live which was really cool by the way and [inaudible 00:15:25.0] I was done I got a call and they said look we’re going to tape you tomorrow so be ready. We’re keeping you, we are going to go ahead and tape it. So we taped in September of 2013. It aired in April of 2014. And I was also told that probably 30% of people they tape don’t get on air. I’ve heard the number is less than that but there was no guarantee I was even going to get on TV. And then in April of 2014 obviously it aired and it was an exciting episode. It did not go well for a long time in there. And the way that the production was set up and the way they showed it, it turned out to be what I think is one of the better endings and exciting. So it was a lot of fun and obviously, it was a real whirlwind and since then there’s just been nothing but great things that have come from it. Joe: Well you got a deal from it. You’re one of the first guys I’ve ever talked to that’s gotten a deal from it. I’ve probably had conversations with five or six people over the last three years that had been on Shark Tank but you got a deal. Actually, I’ve got somebody else that got an offer but he didn’t accept it which in hindsight he should have. But what was the whirlwind part? You were there for a long time it didn’t go the way that you wanted it to but you did end up with a deal, how did it go? Pat: Well you’re in there … I’m just going to estimate, I’m going to say I was in there probably an hour and ten to an hour and 20 roughly. You get no break rights. There is no break. If you have to go to the bathroom or you have to get a drink forget about it. You’re standing on your spot and you’re answering questions and they’re grilling you. And probably for the first 15 minutes to an hour, it just wasn’t going well. Barbara didn’t like me which most women don’t like me when they meet me the first time. Then I don’t know how it went, then Robert— Joe: We’ll do another podcast on that and again we’ll have your wife on in that podcast. Pat: Anyway it just … everything seemed to be going negatively and then I got an offer from Kevin which was one of his royalty deals which wasn’t going to help me. And then Lori I really thought was going to do something then she hitched her wagon to Kevin which was really tough for me because I did not want to deal with that royalty agreement and that was really all I had on the table. And then about an hour and five minutes in I decided because Mark had made comments I asked him if I could tell him a story versus you know asking him. And I talk about my mom who had passed away and I talked about my passion as an entrepreneur and how this is a single product and some people don’t do that as a company but I was going to get up every day to make sure it grew. And he made a quick comment which I’m glad they didn’t cut out and he said you’re the real deal and you have a great business but it isn’t a fit for me. At the time I wasn’t sure why I mean obviously he has an NBA franchise, we had NBA licensing, I don’t know if that got anything to do with it or he just didn’t want that kind of product. But either way what happened was it changed more of them because at the end of the day Mark controls more money than most of those people put together. And you’re in a situation where if he is saying something like that it makes people view it different. And I think my plea is exactly who I was as an entrepreneur; passion, excitement, and getting people engaged where they feel excited about what they’re going to do. Then all of a sudden Robert came back in and made an offer and then Lori and those guys wanted to counter. I gave him a maximum we wanted and understand we only took at our web addition we weren’t a consolidated company with relation to wholesale and then all of a sudden Robert said I’ll take that deal and I wasn’t going to hesitate. I didn’t even allow Lori and Kevin to react to it. I just said done and it was over. And the deal changed after the fact. It wasn’t exactly the same on the show. It really wasn’t anything near that. Joe: There’s lots of due diligence after you shake the hand I assume. A lot of verification and it takes process. Pat: For us, it wasn’t even that. Robert and I talked and he said you told me you didn’t necessarily need the money and he says why do you want to do this? Well I said, first of all, I could use some money but it isn’t that important now but I really need the connections and I’d like you to help me grow this company. That’s really what I wanted. He said look let’s just do a small deal without the money. If you need something in the future I’ll try to help you but I want you to work with my Shark Tank group. We signed a deal and we’ve been working with him ever since. And they’re fantastic. They have a Shark Tank division that’s run by a really dynamic young lady and she’s really good and anytime I need him I can get him. I talk to Robert occasionally. I was in his office four to six months ago before the launch of the Disney line and we went over some stuff but he’s just a great guy and it’s a great group of people. And honestly, I’m happy it didn’t close at what it was before because it would have changed for both of us. There had been a lot more expectations on both sides and other than that Robert has helped me with anything I need from soup to nuts with business including we have so much press. Obviously, it led us to DreamWorks it led us to basically every license we want in the United States and the world for that matter. So it’s really a blessing for me and it was exciting, it was stressful, it was fun, it was really scary to watch because I couldn’t see the episode. I wasn’t allowed to see it. I had to watch it like everyone else. And I swear to goodness I had no idea how it was going to look. And I honestly [inaudible 00:20:12.4] and I don’t really get nervous. I’ve played basketball in a small college, in high school and I’ve been an athlete. I’m a very competent high playing individual but that one I was sitting there to win. I just don’t know how this is going to look. But it was great. And then the one interesting thing that most people don’t realize they will usher you off to an airport immediately. As soon as you get off sound stage they take you out of the sound stage into another stage. You do your post interview. They have to sit with a counselor which is required for an hour because they’re afraid that some people would be suicidal. So you’ll sit with a counsel when they feel like you’re in good shape to leave they walk you out the door. This is not a joke. They put you in a van. They drive you to a hotel. You should have your bags packed and they will not put anyone that takes in the same hotel. They don’t want you talking. We were originally in the same hotel before we pitched and afterwards they spread you out and then you fly back the very next day. So it was a real whirlwind and it was exciting but it was stressful. But everything that’s come out of it has just been fantastic and it made for good television. Joe: Okay I just have to comment on the counselor part and then we’ll move on to your growth and then the cash flow challenges that everybody in the audience that’s an entrepreneur faces, but does Mr. Wonderful have to pay for the majority of the counselor because he says you’re dead to me more than anyone else? Pat: Probably Barbara would be. She has I don’t know … it was … again that part was a little odd for me. I didn’t know they were going to do that but then they just bring it on me. So I’m like no, I’m in a great mood what do we need to do to get out of here now? They make you stay for an hour. Joe: That’s fascinating. Alright so how did it turn out and what kind of growth have you seen since 2014? And then we’ll talk about how you dealt with that in terms of financial cash flow challenges. Pat: Yeah I mean we jumped up 40 to 50% over the period of time from where we were in the baseline during at the time. It led us to get passed by DreamWorks to do a license which at the time was a very good thing but it was my first foray into a big license and it was a little challenging. You couple the fact that they were sold in the middle of it in DC universal which became very difficult because they were moving those assets in and they get people assigned, people to work with me. So the DreamWorks thing was an interesting lesson in licensing and how implemented and I didn’t do a great job at it but it was a good license and now obviously we’re working with Disney and Marvel and all those things came from Shark Tank so it’s a great thing for us. Joe: So when it comes to a business that’s growing rapidly as many of the folks that I talked to on a regular basis are dealing with a lot of the physical product e-commerce businesses that we’re selling, actually I’d say the majority of them are probably less than three years old. And the reason that I see that people exit, you know buyers always say well it’s so great why are you selling? It’s because for that three year period they’re hardly taking any money out of the business. They bootstrapped it, they put it together, and then every penny that comes from the revenue of the business goes back into buying more inventory and trying to stay ahead of it and not have stock outs. What have you done in your business to overcome some of those challenges and what advice can you give to entrepreneurs that are eventually going to be in your position? Pat: Some of it is … there’s an easy answer and there’s difficult answers. So the easy answer is I think anytime that you’re facing cash challenges you should address that either one of two ways. Obviously, they jump off the paper to anyone. Obviously, there’s banking that you get involved in but I believe that is really important to find someone who can add value to your company if you decide to do a strategic partner. Some people believe don’t believe in partners but if you can find the right strategic partner that not only gives you a leg up in some of the systems and other things that you’re going to encounter as you grow but also can help in the financial thing that’s premium. What I did as we started to try to grow it is I partnered with someone that could afford to help scale that growth and make sure that we had a position to where we would have the product. But I also started to get creative with vendor relationships. For instance, there’s a manufacturer that I work with on licenses that is one of the biggest manufacturers of plush in the country if not the biggest. And I went to them because their margins were really low when we talked about and I said what if we could raise your margins by you going ahead and using your scale and your manufacturing abilities. You send the product in, we have the ability to pay for it as we sell it almost like a consignment deal but we can help you develop a division where your margins grow if it’s not capitally intense then it would make sense for both parties. So what I tried to do is be very passionate with people I could put around me in vendor partnerships to try to get them to help me with the initial product I needed to do anything. We developed a brand new credit slipper called zlipperz; Z-L-I-P-P-E-R-Z. That was a collaboration with a company on being able to develop the actual design and to make the product and then we didn’t have to put a lot of money on the pocket because we’re putting a lot into the system side. I think you just have to talk to everyone you can possibly think of. It doesn’t have to be an investor, it doesn’t have to be a bank, it could sometimes be your vendors, it could sometimes be family, it could sometimes be a warehousing and distribution company. I mean I almost … I talked to a warehouse and distribution company one time and said look if you could bring your distribution to us we’ll help invest in some of the product and we’ll mark that back up to be able to help get the distribution business. So there’s a lot of ways that people can scale businesses if you put the right people around you. And I think you just have to be willing to have those conversations and think creatively on how to grow your business. Joe: I think you’re absolutely right. The more I’ve talked to different entrepreneurs in this situation it’s being likable and it’s working hard and it’s getting lucky back to the reason you are in the business here and now. And again I don’t mean to make light of being lucky because it only came from your hard work and dedication and being willing to take some risks by hopping in a car and drive four hours to Chicago just to meet with the agent of Snooki when you didn’t really know. You didn’t know what she was all about. So you got to do those things. Well, we had people on the podcast that sort of break the mold in terms of being able to buy internet based businesses because they use local banks because they’ve built relationships with them. They go and they talk to them, they shake their hands, they see them face to face, and they instill confidence in the bankers, other types of lenders, investors, family funds, family members, warehouse owners, shippers, whatever it might be their goal is to stay in business and to grow. And if you can do what you’re talking about and make it mutually beneficial then they’re going to help your business grow as well. We do that every day. It’s not just brokering and trying to sell a business for the absolute maximum price, it’s trying to achieve the goal of the seller. Sometimes they’re trying to get it sold very quickly with a better set up and transaction. Maybe all cash close in 30 days other times they want to max it out. They’re willing to take a small note on something and hold the business and deal with that emotional stuff you go through for a little longer in order to reach the goal. So I like the fact that you’re talking about bringing in other people and talking to as many people as possible to make something mutually beneficial. Well, what would you say has been the biggest challenge and maybe the biggest mistake you’ve had to have made in terms of finances in cash flow and things of that nature? Just pull on out of your hat to— Pat: Well it’s interesting because I can tell you I’ve made hundreds of mistakes but as I’ve talked about before there’s … let’s just say there’s a hundred there’s less than three that I would regret because the other 97 led me to something that is always better for business. So I’ll give you a great example when I was growing the kiosk business my father and his wife Sharon who started it basically had … I don’t think they had more than 25 kiosks at one point in any seasons which is still a lot if you’re talking season November, December. When I bought it and started doing distribution I changed it up. I brought them into the warehouse because they use to sell only containers. They bring them in to container loads, they bring them in to Seattle or LA Portland and they’d send it to customers. They never touched a product. They didn’t have a warehouse; didn’t touch it. It was basically just an order company. It’s like an FOB order. What I decided to do was get a warehouse and bring the product in, get the warehouse to scale, put people in there, break the containers and ship whatever they needed. So if they didn’t get in the 4,000 or 8,000 pair of containers I could still sell. So we went from 30 to about 300 kiosks in about four or five years. So we were one of the bigger kiosk programs seasonally in the United States. We had them from every state. You know I had one guy that ran 20 of them. So what I couldn’t see at that time were two things: one, how good that would be and two, how catastrophic it would be. And it’s interesting that they’re both. And the reason they were both is I started to get so much product and we were so seasonal that I was taking chances on buying product in case we added a few kiosks late or someone needed more or whatever and that was just that all that was doing was rolling the dice and eventually figuring out what year it was going to come up craps. That you ended up a year where you had a million dollars in products sitting on the floor for nine months to a year that you didn’t have money to pay for. So I was sort of in a position to where I was betting on to come a little bit more than I needed to be with the kiosk business so it became catastrophic with relation to cash flow. And I ended up having to partner with someone to be able to make sure that I could hedge it and grow. But at the same time, it was the biggest blessing I did because as we put the slippers out there and our name and buy HappyFeet.com was on the back people learned about our brand and we started to build that same funnel I talked about. It’s funny how my hands are always down here than they appear but— Joe: And if you had the video I can see that funnel, that visual that you’re doing. Pat: I just let everybody know I move my hands we’re not even on video. Anyway, my point in this is that it helped grow what we … the scope of the business. It looked bigger. It looked like a company. It looked like something you’d want to be involved with. So all these people started taking notice and we did NBA license, we did NCAA, we did NFL, we did all these different things and we really expanded the base of the product. And it’s something that … you know the first container they bought was four styles in three sizes or four sizes, there were 16 SKUs and now we have over 5,000. Joe: Wow, incredible. Pat: So it was catastrophic to our cash flow because it nearly broke me and it should have and still trail the business for years after that because I made the decision. But it’s hard to be upset about it because we were in a position to where we decided that we couldn’t continue on that trajectory. So we cut the kiosk business back, we concentrated on the .com and what we found out was people were conditioned to buying a product and if the kiosk wasn’t there that year they bought it from us for Christmas. So those leap years and those difficult things it’s almost hard to be upset about it because it was almost like the lost that you would have taken or the aggravation tax. It was something that you really needed to be able to grow the company overall. So it’s really hard to regret that. Every decision that I made that’s been bad I always look at something and that thing could be better. The DreamWorks thing, I was terrible at it. I didn’t understand any licenses but now I have learned some things about it that going into the Disney/Marvel deal that helps me really understand it better. So I don’t regret a lot of those things. I just try to learn from them to get better and back to the point you talked about with relationship on scaling the cash, be passionate like I was. When I talked to people they get excited about building products, they’re excited about doing businesses and doing all these things. If you go in and find people that have capital that don’t operate businesses and you’re passionate they’ll put you in place to make you successful because at the end of the day that’s what you’re going to do for them. It’s all going to come around and that’s why I have to maneuver so I have to jump up every day and say I want to be passionate. Sometimes it’s been hard for me to do that because it’s tough but that’s what I’m always trying to do. Joe: Yeah it can be exhausting for sure. Let me just pivot here, you’ve talked about kiosks a lot, it’s what you know. You know very well. You’re in the ecommerce world now and licensing and so on and so forth. I’ve been in a few events, Mastermind events where people have stood up and said hey what are your thoughts about me taking my brand and starting in the kiosk business and expanding in retail that way instead of a retail store? What are your quick thoughts on that for folks that are out there thinking of that now? Is it a pain in the ass? Is it worth it? Is it challenging? Is it too much, too late? What are your thoughts? Pat: Let’s say … let me answer two ways: number one, for our product as big as it is and needing storage for a couple of months a year it’s a very difficult sale. Because I think it’s challenging, it’s tough, it’s a big investment, they want too much per square foot. I personally think that the kiosk and especially retail business is terrible. That’s just my opinion. I just think retail, in general, is bad so when it falls down to that and what you see malls do is go away from branded products and good looking kiosks in the past to getting anything they can get in there. It’s now like a flea market. So I really don’t think it’s a very good business unless malls turn around and change it. As far as retail goes you’re making a huge commitment to what you’re getting in front of customers. Right now I think it’s very difficult to get in to retail and be able to scale. But if your product is small enough and you have the ability that you can get people to run them independently then yes I would not sign a lease all over the country as an independent company and then try to make it work for one hug and then have 25 or 30 locations. It’s not a good business plan. I think some people have to go to retail. Luckily I’m right now knock on wood I’m not in that position to have to do that. It’s not a tremendous business but it’s not a bad place to start if you have to. Joe: Okay I got you. Alright Pat you’ve been an entrepreneur for 30 years, there a lot of folks out there that are just starting off on their entrepreneurial journey some of them are 20 years old, some of them are 50 years old and are quitting the corporate world any last minute advice for those that are just beginning that you can share? Pat: Yeah don’t quit your job until you have a built business. I mean I talk to my sons, my sons don’t work in my business because we know that I can … first of all, I need them to go and find their own way. And I want them to be able to go out and understand what it takes day to day to be able to work at this job and bride. If they were working for me then I know that they would get a little bit of a sense of complacency. But I tell them if you want to start a business start it while you have a job. Something that is not taking you away from a job, not like you’re living and working for someone all day and then taking some of those money. See if you can make a run in whatever product or business you want to do, keep your income so you don’t add that stress. There’s a stress to starting a business you need to make sure you have an income. If you can figure out how to make that and navigate that as a new entrepreneur, then I think that you have an ability to have a good balance. Either way, you have to be ultra-excited about it and willing to do anything. I’ll give you a great story and I know that some people may have heard some of the podcasts, I had a guy that was an entrepreneur here in Louisville that I work for at that golf shop and I told him I said I’m going to go start a business I think I’m going to leave this job is there any advice you can give me? And he said well you’re moving from a meal ticket to a suit lot and understand that’s not going to be easy. There’re going to be days when you’re going to worry if you can even have food on the table or whatever it’s going to be and you’re not going to have a fall back. You’re not going to have that check coming on Friday and you better hope it shows up in the mail paying some of your receivables so you’re not going to have anything. And it’s stressful and some people look at the excitement of taking a product and taking it to market and say hey I can do this so I could really make this work but they don’t understand the other intricacies to running a business and stress that comes with that. It’s not easy so the biggest thing is just to make sure you’re prepared for that. Number two, I’d like you to keep the job and then I would find some mentors to put around you. A board that is a pseudo-board; it may not have to be a board of directors, it’s not that sophisticated but people that can help you understand and navigate the problems that you’re going to go through. You’re going to find them. Joe: Awesome, that’s great advice. Pat Yates, HappyFeet.com thanks for coming on the show we’ll talk to you soon. Pat: BuyHappyFeet, B-U-Y HappyFeet. Joe: There you go BuyHappyFeet.com I’m going to go buy some. Thanks, man. Pat: Thank you Joe. Links and Resources: Happy Feet Pat’s LinkedIn Profile  

One of the misconceptions people have about Quiet Light is that we do more e-commerce than content transactions. Fun fact, our top two transactions ever have been content and SaaS deals. Our guest today, Bruno Bornsztein, is a web entrepreneur who has conquered the content domain via his two websites, Curbly, and Mandmade DIY. Bruno is what we like to call an “old school” entrepreneur, someone who successfully combines his own web development expertise with entrepreneurship. Equal parts content creator, developer, businessman, and design aficionado, Bruno got his start during the wild west days of the influencer platform. Nowadays, he’s in the process of launching a new SaaS product to make success more fluid for influencers. Episode Highlights: The starting up of Curbly, the monetization, and the changes the site took on over the years. At what point the site started publishing sponsored posts for large companies and how these companies found him. We delve into the world of influencer marketing and how Bruno built a brand, rather than an individual, that then became the influencer. We discuss how influencers should pull back from the spotlight rather than build that personal brand that cannot operate without their personal daily input. The metrics that exist to measure the influencer impact. Bruno talks about his transition from a content site to building his Influencer Kit Saas tool and the phase the product is in now. The potential challenges in scaling The Influencer Kit quickly to meet market need. The target clients for The Influencer Kit tool. Transcription: Joe: Mark, one of the things that I think is a bit of a misnomer here about Quiet Light is people think that we do much more e-commerce physical product business brokering than we do content. And in fact the largest transaction I’ve ever done, the top two have been content and SaaS. And I understand you had a friend of yours, Bruno from one of your Mastermind groups on to talk about both that … just both content and a new SaaS business that he’s got from his own content site. Can you chat about that? Mark: Yeah of course. Yeah, Bruno … the guy is an old school entrepreneur and I’m doing air quotes right now for old school because in the world of the Internet is there an old school yeah? But in my opinion, he’s old school because the guy started out developing his own stuff. When he started his first business Curbly.com which is a home improvement blog. He developed the code himself, designed everything, and then he was writing the blog post as well. And now that he’s transitioning into a new SaaS product called InfluenceKit he’s once again developing the code on the backend and doing pretty much everything on his own and lives in that world of web development plus entrepreneurialism. A super, super smart guy when it comes to that side of it. So he and I actually … this podcast is really just he and I catching up online and walking down memory lane. But there were a couple of things that came out of this that I thought were fascinating. And one thing that I love about his business Curbly, and there’s a couple of other guys that I talked to here local to me in the content world, is they’re treating their businesses like influencers and they actually talk about it as influencer marketing. And I don’t know about you Joe but I … when I think of an influencer I think of that 21 year old model wearing sneakers and putting them on Instagram and getting paid just to post wearing those sneakers or is just like that right? The personality based influencers. But what these guys are doing is they have their blogs which are completely irrelevant to their personality and I’m not … calling it a blog might be a little bit meaning because it has so much more content than that but these sites are influential. They have lots of followers for what they’re doing and large companies are coming to them and paying them to use their products and write about those products through to their sites. So when you look at a content site we often think well how do you monetize that? Well there is AdThrive, there’s Google AdSense, and maybe you charge for advertising but these guys are generating quite a bit more money by getting these sponsored posts. So Bruno and I talked a lot about that. We talked about how did he get into this in the first place with these sponsored posts, how did he attract some of these larger advertisers which are obviously paying quite a bit to have these sponsored posts. But then we talked about his next venture which is getting into that SaaS base. He realized that these companies that were paying him to do these sponsored posts, they wanted good metrics. They wanted to know how many people were clicking on the post and viewing them, how many people were sharing these posts. And so he develops offer internally for that reporting, now he’s developing a full on SaaS product and we talked about how do you grow a new SaaS business the right way because everyone thinks … and I’m sure you’ve seen this Joe in the SaaS community, you kind of have this idea of all right you create your product, get the right fit, and then just scale, scale, scale, scale, scale, right? Well, not always right? And he wants to make sure that he scales the right way and has a really good product market fit. Joe: Yeah I think doing it slow and doing it right is much more important than trying to get big … too big too fast because you make mistakes and lose good customers along the way because they’ll go somewhere else. I love the sounds of this because as you said most of the content sites that we’ve brokered are using AdSense and AdThrive and things of that nature. Even the largest one that I did was and there’s not a whole lot of sponsored posts that are driving revenue. So I think that’s fantastic and I love the off shoot of an entrepreneur telling his story or her story about how they had another business, in this case, the SaaS product to serve those customers that were doing sponsored posts. So I think it’s great. Let’s go to it. Mark: Hey Bruno thanks for joining me. I really appreciate you taking the time here for a quick conversation. You and I are local to each other. We meet up once every few months with a couple of other guys and just talk shop so it’s kind of weird to be talking to you. Bruno: I know we should almost just get together in the same spot, right? Mark: That would have been good planning on my part and you know I don’t do necessarily great planning all the time. So we have a little tradition here at the Quiet Light podcast where we have our guest introduce themselves. We like to say it’s because you know yourself better than I do but really it’s just because I don’t do show prep so— Bruno: Sure. Guess what I didn’t do any show prep either so I think I could probably introduce you better than me. So my name is … as you know my entrepreneurial, Bornsztein. I’m a local St. Paul guy like you are. And my background is in publishing online and web development. So I’m really a web developer who got into running digital content sites for a long time. So what that looks like is I launched a blog called Curbly.com in 2006 and another blog called ManMade DIY in 2010. I ran those for 10 years or more and in the last couple years I’ve been focusing on a new project called InfluenceKit which is a Software as a Service product that’s targeted at digital influencers, content creators, basically people like who I used to be. Mark: Right now you come from this kind of old school or what I consider to be old school Internet entrepreneur. And I used to fall in this category. The first business that I built online, I built the code and I built it in Pearl if you can believe that and I didn’t know a lick of code but I figured it out. You’re still doing that to this day though, right? I mean like InfluenceKit it’s a SaaS product you’re building; we’ll talk about that in a minute. You’re doing most of the development on that. Bruno: Yeah I’m the lead developer for InfluenceKit. I was also lead technical person for my content sites which was good and bad. There’s upsides and downsides to being technical like that. I like you, learned to do a lot of this stuff a long time ago when the way that you were to do web development was usually do source. So a lot of things I learned was just by looking at another site, looking at the source, trying to pick apart how it worked. Fortunately, that process has gotten a lot more easier now so there’s a lot more resources out there for people to learn how to become web developers. But yeah I definitely like being involved in the technical side. I think the challenge for me is figuring out when to disengage from that and how much I should be involved and how much I need to try to delegate. So that’s definitely something that I’m working on. Mark: Yeah. Alright so I want to start out and I want to break this conversation into two parts, I want to talk about InfluenceKit and what you’re building there in the SaaS realm but I want to talk also about Curbly and ManMade DIY is that right? Okay. You and also I know some of the other guys that we know have a model with their content sites. I think a lot of people when they hear content sites are just thinking okay I’m going to put something up. I’m going to put on pass a bad network and just kind of run from there but you guys do quite a bit more. Tell me a little bit about starting up Curbly and maybe the beginning story of that and then what its primary means of monetization has been over the years. Bruno: Yeah it’s actually kind of an interesting story because it wasn’t really intended to be a blog. The way Curbly came about was this: I was doing freelance web development; I took a contract building a social network, this was in 2005. This was before Facebook was publicly available to everybody.  You still had to have an EDU address to get in. And this network that we built was intended to kind of like compete with that in some sense. After that project was done I had some time on my hands, a little bit of money saved up, so a friend of mine and I decided to build something and being the sort of non-strategic person that I am we just kind of … it was a little bit random; I had bought a house, I was working in my house that was kind of an area that interested me so somehow without a whole lot of forethought we came on this idea of a social network for home improvement. The idea that Curbly was meant to be was a social network UGC site … User Generated Content site that all was focused around the home, design … I’m remodeling my kitchen here’s pictures of what I want to do, I’m looking for ideas for my bathroom does anybody have some? It sounds a lot like a site you’ve probably heard of which is House. House is that. I think we wanted Curbly to be House, we just didn’t really know it at that time. So what ended up happening was Curbly sort of organically transitioned into something else. When we started the site we built it really quickly in about six weeks, the MBP of it. And the first thing was well we don’t have any content on here how are people going to want to like join this social network when there’s nothing there. So we just posted for it; freelance writers on Craigslist and had people start kind of seeing content. And that was not because we wanted to be a publisher or a media company but because we just wanted something on the site. But over the first three or four years it just kind of … I realized that there was a business model there and that was easier actually than trying to become House. And for a variety of reasons turning into House just like didn’t happen. But I learned that actually there was a way of generating high quality content for a reasonable price using freelancers and in monetizing that. So yeah over the course we were really lucky with Curbly. I think in our first month we went from zero to 250,000 patrons a month. Mark: Wait, wait halt. What? How did you do that? Was it all organic SEO or were you keying in on other—? Bruno: No it was luck. We got to be lucky, we got on Dig, we got on … remember Dig? Mark: I remember Dig. I got Dig to the front page maybe twice in my life. Bruno: We got on Dig, we got on a few other things; Life Hacker it was a big blog back then and they posted a link to one of our project that somebody posted. Yeah, it was just lucky. I talk about this a lot … like sometimes if you would ask me at the time in November or December 2006 after Curbly had been live for two months like how things were going I would’ve been … I would think I would have said uhh I don’t know, it’s okay not great. And I just think I talk to a lot of like younger entrepreneurs about this a lot which is that at the beginning it’s really hard to know whether you’re succeeding or failing especially if you don’t have any experience. So the way I’d phrase that is success or failure look the same a lot of times when you’re just starting out. And it’s really about experience and context. So at the time, our goal was to build House, right? And so we wanted 250,000 users to sign up to Curbly because that’s … active users was the metric we were looking at. And because we didn’t have that, because we weren’t seeing that it was kind of like what are we doing wrong? It’s not working. Not really appreciating that we had actually been really successful in another way that we didn’t understand.  So I think for anybody who’s … is entrepreneurial but maybe hasn’t done a lot of things before just remember that you maybe … it may be very difficult to disentangle whether you’re succeeding or failing you just don’t … you might not have enough experience to really know the difference. Mark: Yeah I know with Quiet Light it was the same thing. For the first five, six, seven years of Quiet Light I did the same thing and people would ask me like well what are your plans and I’m like I don’t know I might just make a boutique and not really do much more with it or I might just kind of wind it down over the next few years. But I just kept kind of going and going and going and it wasn’t until I really went to hire Jason on initially, Jason Yellowitz, that I was kind of like there might actually be something here that I wasn’t expecting. But you’re right, success and failure do look the same. At the beginning at least they can look the same. When did you start taking on these sponsored posts and just to be clear for everyone listening you do have like AdThrive and stuff like that that you monetize through but a big bulk of your revenue is coming from getting sponsored posts from major companies like Home Depot and other large companies that are looking at your traffic, at your audience and saying we want that audience so we’re going to pay you to test this product or to be able to feature this product in one of your DIY stuff. When did you start making that transition? Bruno: Yeah 2009 was the very first sponsored thing that we ever did. So that was very early on. It was with a fabric company who I won’t name but it was kind of a failure for a variety of different reasons. But it was the first time we got paid just to create content on behalf of a brand. And then it ramped up. So I would say in 2009, 0% of our revenue was sponsored content or influencer marketing [is what it’s called now and 100% was … you know the rest about probably 95% was programmatic display ads and the rest was affiliate links. And then back then it was even okay to do text links. That quickly went sour but there was a period where it was okay to have text links on your site. And then probably by 2016, 50% of our revenue became sponsored content. So it did sort of take a little while to ramp up. And it took a while before we started seeing interest from established brands and agencies. But definitely by 2012, 2013 you are starting to get pitches from PR agencies, brands, ad agencies that were interested in partnering with you to talk about their products. Mark: So what changed for those agencies to start recognizing you? Did you have to do outreach for that or was it really just them picking up on the metrics that you guys were supporting at the time? Bruno: You know I think a little of both. I definitely started doing … being proactive once I saw that there was an opportunity to make real money there. And so definitely being proactive, reaching out to people even just replying, you know we always got … as any kind of publisher, you’re always going to get a lot of press releases and inquiries and people that want you to talk about their thing. So by proactive, I even mean just replying to those and saying like hey you know we’re not necessarily going to cover this product this month but if you’re interested in sponsored content we have these opportunities. So just being like a lot more responsive and offering that. I think on their side they didn’t really start seeing metrics until much later. Even today a lot of influencer marketing happens with very little metric reporting which is something that InfluenceKit is trying to change. But I don’t know that it was that they started seeing big metrics I think it was that the people that were working in those organizations were more digitally native. Like they understood that landscape more. In 2009 I mean I … in 2009 I had people who didn’t know what a blog was. There were still people who are like what’s a blog, why would I … how do you make money on it, how would you … why would a company pay to have their content on it or whatever? By 2016 that wasn’t happening anymore. Everybody knew what a blog was. Everybody knew what social media was. And so the idea that a brand would want to communicate with your audience just made more sense. They understood that like okay blogs are a real thing. They have a real audience. They’re communicating … they’re able to communicate your message and help you get your branding out there. And so I think it just became a little bit easier to convince them of that. Mark: Yeah it reminds me of … do you remember Darren Rowse from ProBlogger? Bruno: Yeah. Mark: He was kind of the big guy who was making all the push of saying you know what these blogs you can actually make a lot of money with them. Bruno: Yeah. Mark: A bit at the forefront of this movement. We’re getting in this weird, wild world of influencer marketing something which I know very, very little about personally. And I think one of the interesting observations here … and I’m sure a lot of people listening are kind of like well yeah, of course, Mark just kind of get with the program but it’s the idea that I think influencers I think that Instagram person, right? Up on Instagram on and it’s the person themselves and they’re making sure that all the pictures have the same colors in them and fit the 3 by 3 matrix that they want to have so it looks all nice. But Curbly itself was the influencer in this in this situation. Bruno: Right. Mark: So you built a brand that was an influencer. Bruno: Yeah. Yes. So Curbly always was … Curbly never had a … it was never a personality driven site and that helped us in some ways and hurt us in some ways. But yes in our case it was much more about the site than any individual person contributing to the site. Because our site was driven by people like freelancers and a few staff people that were creating the content. But in general yeah there is much … you do seem more of like the individual sort of pseudo celebrity influencer although there is a lot more out there than just that. There are a lot of sites out there that aren’t so tied to the individual that’s running them that’s really more about the content that they create and the audience that they are able to pull together. Mark: Yeah [inaudible 00:18:39.7] anything about like the other guys who are now over [inaudible 00:18:42.4], right? Totally the same sort of thing where they can do that and be a full blogger pro as well right and all the brands that he and Lindsey have as well which is so influential for what they do. Bruno: I think a lot of bloggers and digital content creators that I talk to this is a topic that comes up because in terms of selling sponsored content it can be easier if you are sort of a known personality. But in terms of actually having that be your business not … first, not everybody wants to do that because it is difficult to have … to be that kind of an influencer you really have to expose so much of your personal life and really be vulnerable and that’s not for everybody. Not everybody wants to do that. And then just from a … strictly from a sort of business strategy point of view, it’s not always smart to make the business so reliant on you. You may be a huge Instagram influencer bringing down a lot of money through your influencer contracts but what do you do when you want to sell that business? That’s a really hard business to get out of. It’s a really hard business to cut back because if you want to say like scale back your work or you have a family or a kid who’s going to take over that role? So I have talked to a lot of those types of influencers about like how can you sort of start to pull yourself back. How can you supplement your business and make it a little bit more sustainable and not so reliant on you as a person? Mark: Yeah absolutely. That’s the same advice that we would give anybody out there is that I totally get the appeal of a building a personal brand. And I think a lot of people start with that in mind. Like I’m going to build a brand around myself, I’m going to be the celebrity. But then you get to the point where like this is a lot of work and I’ve been growing it for five years and I’m tired of posting my life for the public to see every single day and so how do you convert that over to an actual business? It can be done and I’ve seen a few cases where people have done it but it’s a process. Bruno: It is and I just think it’s something that … you know because so many of these businesses do start off as hobbies or side projects it’s not something that people think about right away but I think it is important to think about. You need to start thinking about it as a business, building a team that can support you. If you need to be the face of the brand okay that might be fine as long as you are thinking about it and I’m also thinking about how that might affect your ability like you said to sell a business or change your involvement in the business. Mark: Yeah. Alright, let’s talk a little bit about the influencer marketing side of it and the metrics and just kind of moves into what you’re doing now with InfluenceKit. You said it yourself there’s not a lot of metrics that were necessarily expected from the people or even deliverable for the people that were paying for these sponsored posts. What have you done there and maybe through Curbly or that you just kind of learned over the years that’s really helpful for somebody paying for a sponsored post to start to key in on in terms of those metrics. Bruno: Yeah I mean really where this came out of was like I said around 2016 we started doing a lot of sponsored content. And the first problem we had was just producing it efficiently. Not even reporting on it but just like honestly making sure that we did everything we promised we would do. I mean I know it sounds kind of silly but when you’re doing … I think that we were probably doing three blog posts a day on Curbly, we’re doing something like four or five sponsored projects or campaigns a month on Curbly. That’s just a lot of moving parts. Like did we … are we supposed to do Instagram for Home Depot and how many pins were we supposed to do and what was the blog post supposed to include and is it cap is it the Home Depot or just Home Depot? I mean these are all little details but it makes of a difference when you start working with those brands because they expect a level of professionalism and you want to deliver that. So that was the first problem it was like okay we just don’t have a good system for this. And that’s kind of where the precursor to InfluenceKit came. It was just an internal tool that I built to help our team. Just to help everybody keep on the same page, what we have to do, when is it due, did we do it; simple right? And we used that. We used that tool for a long time. We used it both for our sponsor content but also for our editorial planning. It was great. It was really helpful. Then at 2017, 2018 I started thinking like man, we’re just not doing a very good job of showing these sponsors their ROI of what we did for them. Like they’re paying us money, we’re getting good deals, we’re getting as much money as we think we should be getting, we’re creating this really good content but that’s kind of where it stops. And I realized that that was a weakness. And so then I started looking at well how can we report, how can we go back and report on this? Doing it manually sucks and I’m somebody like if I do something twice I never want to have to do it again. Like once I’ve done something twice I’m like okay I should build something. So that’s where InfluenceKit came out of. And it really just lets you automate the reporting piece of that process. So that for us, when we’re doing, say four sponsored campaigns a month each of those campaigns might have four or five separate deliverables; things that we have to deliver back to the brand and report on. That’s 20 different things. We can just dump those on to InfluenceKit and send the brand a report. So yeah I mean that’s kind of where we’re at now. The industry as a whole is really kind of still up in the air, people are starting to ask for a lot more metrics but not all. And that’s kind of part of my mission with InfluenceKit is. I want to see every blogger doing this. I think it’s to their benefit and I think that the biggest benefit is going to be when the industry realizes that there is reporting on this stuff they’re going to start opening the floodgates. And by that I mean there’s going to be a lot more money coming in and available to do this kind of stuff because they can actually measure the results. Mark: Let’s talk about InfluenceKit … and I love the transition here. You’ve been doing content, sponsored posts, all these and then internally like you said if you do something twice you want to build a tool for it and you started building the tool and it starts evolving and the next thing you know you have on your hands what could easily become a SaaS application which is what you are really focusing on right now. So you just finished an [inaudible 00:25:03.5] you just finished a kind of an introductory like get in the door sort of program with InfluenceKit for a limited number of people and you’re in the testing stage with them right now is that right? Bruno: Yeah so we’re essentially in a sort of like a pre-launch phase right now we’re letting in a very limited number of people. And that’s really … that’s not because you know we’re snooty or anything it’s just there’s we’re a very small team. It’s myself and two other co-founders. And I think that we want to get it right. We’re trying to figure out and I think all SaaS apps probably deal with this but what’s the growth rate that we actually think we can achieve and we actually can support. I think that there might be a little bit of a misconception that you just like want to grow as fast as you can as soon as you can like just grow, grow, grow, grow. I don’t know but I don’t want to do that you know. I want to grow this business at a rate that is sustainable that we can actually keep up with. I don’t want to be working nights and weekends right now. So yeah we are … where we are is we’re letting people in. We’re kind of testing out the product with them making improvements and changes based on early customer feedback and then figuring out okay now what? Like we think we have product market fit, we spent about six months kind of convincing ourselves that that’s the case and now it’s like okay well how do we figure out how to grow and like I said at what rate we want to try to grow at. Mark: So a couple of questions that can come to mind here, I’ll ask the easier one first and that is you talked about not wanting to necessarily just grow as fast you can, scale as fast as you can. What are some of the restraints that you’re seeing that if you were to open it back up and … our of millions of listeners are listening to this podcast and they start knocking on your door and they’re like hey we want in Bruno, we want in. What are some of the challenges that you guys would have in scaling quickly? Bruno: Oh man I would say first of all let’s just back up and obviously it would be a great problem to have that million and millions of people— Mark: It’s a good problem to have millions of listeners as well. Bruno: You know I’m not like that and so I don’t want to just make that assumption. Obviously, we need to work really hard still to even have that problem. But what are the scaling problems? I think the first scaling problem would be people. SaaS apps at least ours, I suppose I should speak for everyone but ours are still pretty heavily dependent on people. You really need to support people, you need customer support, you need onboarding. There’s still a lot of time that goes into it and so that would be the first problem. Then with that comes a bunch of other problems like scaling an organization so that you’re building … yes, you’re building a product but you’re also building a company. And in some sense, the company is like the more important product because if you can build a good solid organization then you’ll do other good things and good products will come out of that. So we’re really trying to be conscious of that like okay if we suddenly had to hire three customer support people how would we do that? How would we train them? How would we all stay on task? So I think scaling up people would be a big constraint. From a tech point of view for sure, there are some things we’d run into as well. InfluenceKit, in particular, relies on a lot of API’s so … and for the non-technical people that just means we have to go out and grab stats from a bunch of different sources; Facebook, Instagram, Google Analytics. All of that takes server time. All of those API’s have rate limits. Whenever you’re building software you know doing something at a small scale and then just like growing it to a bigger scale is not as easy as just … it’s not like we multiply things linearly. Things get way more complicated, way more difficult to debug. And that’s not to say that I’m not excited about solving those problems; I am. But yeah I want to do it in a sane way. I think if we were to suddenly add … if we were suddenly to triple our user base like in a month I would be spending a lot of late nights doing things that I don’t want to be doing. Mark: I totally understand that. Building the organization side I think is really important. Whenever you’re scaling anything at all having that foundation to be able to scale on is crucial because you will just completely buckle under the weight of growing rapidly. Who’s the client for InfluenceKit? Who are you trying to target? Obviously, digital creators would make sense but it’s not just mom bloggers. Bruno: So we think of our customer as professional bloggers. I know that when we started out you kind of mentioned when you think of influencers you think Instagram and for sure you know that’s legit but as we talked about and we talked about this a lot who we can picture as our customer it’s somebody whose primary platform is content creation on a website that they own and their social platforms are supplementary to that. And when I say professional I mean like if they’re making their living off of this, like they’re supporting their family. They might even have an employee or two. We look at it anywhere from there up to what you might consider more like a small media organization; a site that has five or 10 or 20 employees. Beyond that, you don’t think about that really as our market so much because at that scale there are other tools for those people and you don’t really want to swim in those waters. So that’s really who we think about and the interesting thing is that we’ve started hearing from a lot of agencies and brands about this. Really not our plan but what’s happening is influencers are sending reports to their sponsors; the people that are paying them and then we’re hearing from them saying we could use this. A great problem to have, it’s a little bit like of an existential mini crisis for us because we’re all in front … we come from this background, we’re bloggers, we set out really with a mission to build a tool to help empower people like us and we don’t want to just like pivot and start serving a completely different market at the same time. I mean when you have people asking to use your thing and who wanted to pay you, you need to listen. So we’re trying to navigate that and see how we can do it. Mark: Alright that sounds like a really good problem to have and sounds as well like we maybe pivoting down the road into matching influencers as well. Not to plan your path for you but it just seems like a natural extension that might be happening as well. Cool. Well, I really appreciate you coming on the podcast here talking about some of these things and I think we probably could have broken this up into two because just thinking about all the questions to deal with on the sell side. If I ask another question now we’d go on for 15 more minutes. Bruno: Okay. Mark: So I’m going to stop it now and I’m going to say I want to have you back to check in as you get past that kind of first initial enrollment and talk about how things have all been in this influencer space. I love the idea and just thinking about influencers outside of the Instagram model, thinking about it more in terms of a brand and just kind of this story is … well, it’s fantastic so thanks so much for coming on. Bruno: Alright. Yeah thanks for having me. I’d be glad to come back and chat with you here on that episode. Mark: Alright. Looking forward to meet up with you. See you again soon. Bruno: Alright sounds good. Thanks, Mark. Links and Resources: Curbly Mandmade DIY

Today the newest member of the Quiet Light team, David Newell, joins us to discuss the four pillars for buyers and sellers, particularly when they apply to SaaS businesses. David knows SaaS super well and covers all the metrics that buyers and sellers need to pay attention to on both sides of the acquisition process. We discuss everything he looks for when listing a SaaS business, the challenges in measuring some of those metrics, and some common SaaS buyer pitfalls. David started his career in investment banking and worked in that environment for four years. Looking for a taste of life on the outside, he started brokering online, eventually working his way through the ropes to a head broker role. David is now a successful entrepreneur in his own right, with a brand in self-discovery and personal development which has grown from a podcast to a full online brand. Inner Truth offers a wealth of courses, community, and content for anyone embarking on a journey of self-truth. We’re very pleased to welcome David to the Quiet Light team. Episode Highlights: David takes us through his background and the SaaS business floodgate that opened for him as he learned about this niche and began brokering SaaS deals. The top three things David feels are important to hone in on to add value to a business. What churn is, how it’s calculated, and why it’s a cornerstone to a SaaS business. The difference between MRR and ARR and how each can affect the revenue profile of your business. David’s software recommendations for measuring the metrics he looks at in a SaaS business. We get into what micro SaaS is and how it differs from the traditional SaaS model. Potential pitfalls of owning a SaaS business and the challenges to consider when getting into the SaaS acquisition arena. Tips and advice for folks preparing to sell their SaaS business. Compelling acquisition tips on how to do the good work before getting ready to sell. Transcription Mark:    Joe we are quickly being outnumbered here at Quiet Light Brokerage. We just hired on somebody else who hails from the UK. Joe:        Yes; David Newall, a fantastic guy, and another Brit. I guess Brian’s not a Brit he’s a— Mark:    What is he? Joe:        He’s Estonian, that’s what he is. Mark:    Yeah but he’s kind of an international mutt when we would think about it. He’s Estonian but he lives in the UK sometimes but now he’s looking at living who knows where. Joe:        Well, he’s a true entrepreneur. He’s been living all over the world with his wife for the last 12 months. And we just got together at the Prosper Show last week with both David and Brian and Brian’s wife; a first time we’ve met a Quiet Light spouse right? First time you’ve met … you’ve owned this company for almost 11 years and you’ve never met a spouse until last week. Mark:    Over 12 years. I mean talk about the age of the modern company right? We are a distributed company. Everybody lives in different states and when we see each other it’s at conferences. So it’s pretty rare for me … very rare being that this is the first time ever that I met a Quiet Light spouse. And I think the only reason that I did is because Brian and his wife don’t actually have a home that they go to. Joe:        That’s right. Mark:    I mean obviously they have places where they live but they’re constantly on the move which is fun but I’d like to meet more of the spouses. Joe:        I’m with you. Yeah, they were in Vegas and then they were heading down to … I think it was Panama for two months and eventually they’re going to make their way back to the UK and settle down I believe but we’ll see. Time will tell. But yes we have a new member of the Quiet Light Brokerage team. His name is David Newall; a former investment banker, a former head of brokerage services for a competing firm, a fantastic guy. I gotten to him a lot on the podcast but even more last week and I knew we were going to hit it off well when I started calling him Harry Styles because of his British accent and his affinity towards Taylor Swift. Everybody call him Harry if you want and I think he called me grandpa at one point. So I think we’re going to get along well. Mark:    Didn’t sort of from Australia though, is he? I mean— Joe:        Not at all, that’s what I kept saying just to bust his chops a little bit. Mark:    Well, let’s get to the meat of it though because David really knows SaaS super well. The guy is a genius when it comes to SaaS businesses and you guys talked about some of the metrics that both buyers and sellers need to pay attention to in a SaaS acquisition. Joe:        Yeah, we did. We went through everything that he looks for when he’s listing a SaaS business for sale and he’s done dozens and dozens of them personally. So all of the different metrics and what some of the challenges are in measuring those metrics from a selling standpoint and then we focused and flipped it over to what buyers should look for and what some of the pitfalls are. Very, very knowledgeable; a very smart guy and it’s going to be a great podcast for those SaaS business owners out there. Mark:    Well, I love having these British guys on staff because they make us sound so much more intelligent. Joe:        He does. Come on now there’s nothing like a good southern drawl though. I don’t have it but there’s plenty of folks that have. Mark:    Well, it helps that David is actually a really really smart guy so it’s not just the way he says words, it’s what he’s saying. He’s always extremely insightful. And he puts things in a very simple way as well that makes it pretty easy to understand and adjust. Joe:        Yeah so let’s get to the accent. Let’s focus on SaaS and what David has done in his history and how he’s going to help the Quiet Light team build a much, much bigger brand and a great, great addition to the team for all the buyers and sellers out there as well. Joe:        Hey folks it’s Joe Valley with Quiet Light Brokerage and today I’ve got one of our newest brokers with us. He has a ton of experience. It’s David Newall. David welcome to the team and Quiet Light’s podcast. David:   Thank you, Joe, it’s a pleasure to be here. Joe:        That’s a funny accent. Is that Australian? David:   It’s British and I saw you write it as Australian in an email the other day. I was absolutely savaged by that. I was going to reprimand you. Joe:        I was only kidding. I was on the phone with Ben. We won’t say his last name but he’s like yeah tell him he’s a great guy but I really don’t like that Australian accent. He was kidding at the same time as well. Anyway, I’m going to kick this off just the way we do with every guest David and that is can you give us some background on yourself? Tell us about who you are, where you’ve been, that kind of stuff. David:   Yeah well, I started life out in in investment banking actually. I’ve been a business degree undergraduate and then I launched myself into the windy world of investment banking. And I worked in merger and acquisitions for Citi Group in London for four years which as you can imagine is a very intense environment but also an incredible learning environment. And there I got to work on some of the biggest tech media and telecoms, M&A, Capital Races, for the first four years of my life. And you learn a lot, you earn a lot, you don’t sleep very much and so at a certain level you start to think I wonder what life looks like on the outside of this office. And so I left that and took some time to travel and then shortly thereafter I decided it would be really good to get involved in something smaller where I could have more a managerial position and bring a lot of the experience that we had into a more exciting and a hotter area. And so that’s when my online business brokerage life actually began. And I started life out at one of your competitors. Joe:        Our competitors; you’re on the team now. David:   And yeah so I started like everyone does with this so that’s the bottom realm with always the view to building up and becoming the [inaudible 00:07:48.7] which is just the head of brokerage and operations there. And so with the three attendant that I have, we obviously expanded very well out of London and moved overseas to Boston. Built a team up and so in that time yeah I must have done about 75 deals and sort of oversaw the rest of the team doing about 200. So a lot of deals across a lot of business models and a lot of niches. And yeah it was a very exciting endeavor. Joe:        You know I was out for a walk this morning and yes folks I’m in North Carolina and it’s sunny here and I was thinking about having this conversation with you this morning and the fact that you mentioned the last time we chatted that you’ve done 75 deals. And I’m thinking wow David might have more experience than I do. And I’m adding mine often. I think I’ve done more but I’m doing it longer, that’s the key. David:   Yeah for sure. Joe:        But you have me by doing a larger deal than I’ve done as well which is it’s great to have that experience that you bring to the team just because that’s everybody here at Quiet Light, a very successful entrepreneur business person and a great deal of skill and talent in the internet space as well. You are also an entrepreneur as well can you touch on that just for a moment? David:   Yeah, that’s right I mean I think one of the things that was just becoming kind of a burning seed for me in 2016 which is the year that I sort of decided to leave was to strike out and become sort of my master and flex my entrepreneurial feathers a little bit. And so I spend the best part of sort of nine months, ten months as really resting and thinking in to what I wanted to get involved in. And my personal interest is massively in self-discovery and personal development. So I got really deep into yoga and meditation and shamanism and breathe work and all of these wonderful tributaries that are now becoming really big parts actually of modern culture. And so around this time last year, I actually launched my own online brand of self-discovery called Inner Truth and it started as a podcast and then we since added on audio courses with various famous speakers from around the world. And yeah the podcast is growing exponentially now and I’d had some really amazing people and I’ve got to interview some of my favorite authors, singers, writers, speakers, yeah it’s mostly really famous people so it’s kind of an interesting life now hopping on the podcast every week we have a celebrity and— Joe:        It’s pretty neat. David:   Yeah yeah [inaudible 00:10:18.8] Joe:        Yeah, it’s … Mark and I did a podcast on the benefit of podcasting for your business and for us at Quiet Light it’s just opened up doors to very successful authors, professors at Harvard, whatever it might be and then there are these celebrities inside the world we live in which is e-commerce and SaaS and so on and so forth. But it really is a great tool for anybody that’s running their own business. Start with a podcast, it doesn’t cost that much. You can always edit out stuff that you’re not good. I think actually when we did that podcast I must have stuttered and stumbled in the first three minutes and we decided not to edit any of it because we said look if we can do it anybody can. David:   Yeah, 100%. I mean on the first episode I recorded it was an hour long and I spent four hours editing it. Joe:        Yeah. David:   Well, I’ve got the last move and now and there’s a lot less going on. You sort of have to force necessity when you’re doing some of the bigger guns now. Joe:        You certainly do. Speaking of big guns let’s talk about some of your experience in the e-commerce brokering world or internet business brokering world. A lot of folks think that Quiet Light is really specialized in physical products or e-commerce as they label that whereas the largest deal I’ve ever done was a content business. The next largest after that was a SaaS business. Sure I do lots of Shopify stores with an Amazon component or more these days an Amazon business with a Shopify component but you have a tremendous amount of experience in the SaaS base right? David:   Yeah exactly I think you know around 2014, 2015 we really started to spot this emerging trend of micro SaaS businesses coming up and sort of not really being thought about perhaps and valued in a very sophisticated way given the strength of these businesses, the IP mode that they’ve got and the recurring revenue. And so we really started to pour a lot of attention into what makes SaaS special. And yeah we’re very happy to start working with some great names like Patrick McKenzie and Rob Walling and as they bought their businesses to us and we did successful exits for them; the floodgates opened really. And so for me yeah I think … you know I sold several dozen SaaS businesses over my time and culminating over course the successful sale of Rob’s business direct in Leadpages in 2016 which was an incredible transaction an awful massively personally gratifying because Rob is such a good friend and great to get a life changing exit for him but also to sell into a company as big as that with Claire as a CEO; a super dynamic deal environment and yeah definitely a lot of learning. Joe:        Yeah, Mark had Rob on the podcast talking about his story of building Drip and exiting from it and it was a great, great podcast. If anybody hasn’t listened to that please do. But it’s kind of funny I remember when you were doing that deal and we were getting wind of it and it’s funny we just thought oh yeah no we don’t want to do 10 million dollar deals or whatever the number was. You have to fly all over the country, you got to put a tie on then you … and I don’t think you probably did any of that. And now we’re doing deals that are that size and a little bit bigger so we all grow up in this business and have to evolve so to speak. So let’s talk specifically about SaaS David. For the audience that’s out there, if they’re running a SaaS business, if you’re working with them through Quiet Light, you get a referral and boom you’ve got a SaaS business that you’re going to value what are the top three or four things that you’re going to sort of hone in on that is going to bring more value? Maybe even speak to the buyers here what should they be looking at and what would you look at as the seller’s broker? David:   Well, I think that one of the most important probably least looked at and least understood metrics of any SaaS business is churn. Churn really is the cornerstone of successful SaaS business because it is completely cancerous to revenue growth if you don’t get that right. Joe:        Can you define that for folks that are just beginning to look at SaaS; what churn rate is and maybe how it’s calculated? David:   Yeah, churn rate I mean you can look at it from a revenue perspective or you can look at it from a customer account perspective. Revenue is probably more helpful and that’s simply telling you how much revenue, how many customers you’re losing per month through cancellations, expiries or sort of billings that aren’t going through. Joe:        That’s measured against total revenue and what’s a good churn rate in the SaaS world? David:   Well, that’s a great and a pretty seminal question that comes up a lot when you’re evaluating SaaS businesses that specifically are targeting different end users. So if you’re thinking like the B2B space the monthly customer churn rate actually varies quite a lot depending on which business segment you’re looking at. So if you have a SaaS business facing an enterprise segment it’s going to have a materially different monthly customer churn rate than one interacting or facing against an SMB segment because those end customers have different purchasing behaviors. So in enterprise, for example, you know very, very, very low monthly churns expected and we’re talking like 1.5 to 1% a month which annualized is 6 to 10%. When you’re looking at SMB something doing 3 to 7% is— Joe:        What does SMB stand for David? David:   Small to medium sized businesses. Joe:        Thank you. David:   And so annualize that’s more like 30 to 60%. And so now you can start to see that the difference between a 6% percent monthly churn rate and a 4% monthly churn rate is going to have a mega, mega, mega difference to the revenue profile of the business 12 months out from now. Joe:        Yeah, let’s just … I want to talk about the other two aspects in terms of things that you look at in terms of the metrics but the churn rate measured against the revenue; obviously, the revenue has to continue to climb and new customers need to come in at a higher phase than the churn rate in order for the business to be growing. Or even actually just staying steady right? They can be losing 5% a month and be gaining 5% a month in revenue just that. And the beautiful thing that buyers love about this is that … or SaaS business is that it’s the recurring revenue. And they generally trade at a higher multiple. If you’ve got a straight up e-commerce business selling physical products with its own brand even with a patent I think that a SaaS business that’s growing and has lots of growth opportunities and a reasonable low churn and workload is going to trade at a higher multiple. Is that your experience as well? David:   Yeah well, I think that the recurring revenue piece is one explanatory factor for that premium in multiples. I think the other is simply the moat that exists around the average SaaS business; having that intellectual property. We work in a space where if you can find product market fit for a very quick rate with an Amazon business and very quickly start to scale it but with the SaaS business you might have to pile in anywhere between 10,000 and 100,000 into development and may not even make a penny. And so one of the things that actually make these micro SaaS businesses very valuable when they come to market is that actually, they’ve simply found product market fit after having put down a lot of Cap Ex. And so it’s interesting that that’s actually a large amount of the value proposition for people that are looking to acquire these and scale them because that in itself is finding a diamond in the rough. Joe:        Right, so that risk is one of the four pillars for those that listen often. It’s one of the four pillars and it’s the lower the risk as David’s talking about the defensibility of the business, that moat around it, it lowers the risk so therefore the value of the business goes up. All right throw in another couple of metrics that you generally look at and it’s important for buyers to think about as well when they’re looking at SaaS businesses. David:   Yeah well, I think acquisition channel for the customers is really important and I think the really premium SaaS business at the higher end of the multiple range are just like every other type of business managing to acquire customers across a multitude of channels so the concentration risk is low. And that within those channels the competition is relatively low. You can look at say a SaaS business in the project management space which is absolutely saturated with VC vat competitors and that’s a pretty frightening spot to be in. You’d much prefer to be somewhere in a quieter segment just like we’d look at in e-commerce. The same rules apply. I think it’s quite nuanced in SaaS though because you have put down a lot of Cap Ex upfront to develop product and so you have to be pretty savvy when it comes to acquiring customers at a reasonable rate. Joe:        Okay. So we’ve got the cost to acquire a new customer, the channel that you’re getting them from, the churn rate, anything else that really jumps out that you’re looking at? David:   Yeah, I think the profile in terms of the revenue of the business is really important. So obviously we’ve been talking about MRR but there’s ARR as well right? Joe:        So that’s Monthly Recurring Revenue and Annual Recurring Revenue. David:   Yeah, exactly and it’s very tempting when you’re a business owner and this is kind of an important thing that I think a lot of business owners can trip up on to want to sell lifetime and annual plans at a gracefully discounted rate in order to book that revenue. But when it comes to sell it presents a pretty lumpy revenue profile at a major risk for the acquirer. And so actually the multiple that can be applied to MRR should be higher than ARR because it’s more predictable. And this is, even more, the case when you know you’re using debt financing to buy a business. And so something that I would always do when I’m evaluating a SaaS business is actually use something of a blended multiple where I value MRR higher than ARR. Joe:        Right so to further detail that and explain a little bit that annual recurring revenue if you have one or two months a year where let’s say the subscriptions are opened up and there’s a flood of customers with a special promotion and a steeply discounted price for an annual subscription but you’re selling the business a few years later and you are nine months away from or actually just say two months after that annual subscription, the person that’s buying the business they’re going to go 10 months without having that big bump in revenue. They’re not doing any daily or weekly or monthly work for that revenue. It’s going to occur so there’s no discount necessarily but it can become a challenge like you say when they’re getting debt financing. They’ve got a monthly payment to make every single month and if that big bump is not going to come for 10 months it can be a bit of a challenge. That’s great. David:   Yeah, and it’s not entirely guaranteed that those annual subscribers will renew a great wish that came in there and I think people expect a certain level of annual around Black Friday but if the business is struggling to show MRR growth in off months then that’s a bit of a red flag potential. Joe:        Right, so from the buyer standpoint you think really the focusing on the monthly recurring revenue … you got to look at the annual recurring revenue but the more attractive business would be one that’s got more monthly recurring revenue because it’s spinning out that risk a little bit more. David:   100%. Joe:        100%. Okay, software that’s out there to help SaaS owners measure these metrics. It’s a challenge like I’ve looked at trying to calculate at lifetime value. It’s very, very difficult. Everybody does it a different way. Is there a particular software that you’ve seen more SaaS owners use than not? David:   Yeah I mean I really like the Profitwell analysis actually. I think whatever you use standardize. I think it’s not helpful to swap between Chartmogul, Baremetrics, Profitwell, and just keep skipping around because then you’re looking at very inconsistent numbers and methodology as in if trying to evaluate a number of SaaS business that’s just not an additional complexity that you want to commit into your analysis. So I think stick with one and the one … the dashboard I’ve seen as the friendliest and the most well explained and the easiest to use is Profitwell. And in particular, looking at their cohort analysis the churn is this incredible way of seeing whether the business underlying is improving or getting worst as new customers are coming on board. Joe:        Okay, Profitwell or wells? David:   Well. Joe:        Well, Profitwell. Yeah, I’ve seen Baremetrics used quite a bit on the SaaS businesses that I’ve sold. It’s a great tool for buyers and sellers just to go look at it and study what these metrics are that people are analyzing these businesses on. David:   Yeah, 100% and there’s a bunch of open source businesses upon the Baremetrics platform where you can just go and look right now. I mean you can look at Baremetrics and their own metrics I believe on their own platform and I [inaudible 00:23:14.4] I think convert kit was on there for a while. They may still be. So it’s fascinating to have a poke around and once you’ve looked at a handful of SaaS deals you can really start to get a feel for what makes sense for and what doesn’t around from all of these metrics. Joe:        I got you. David, you’ve mentioned the term micro SaaS more than once can you define that for us? Is there a certain size? Is that what you’re referring to? David:   Yeah I mean I think of micro SaaS as sub a million dollars in value but really when I think about it more deeply it’s characterizing the business that has not gone down the sort of venture capital deep investment. You know fast growth, pushing for a revenue multiple exits and instead gone for the bootstrapped— Joe:        I got you. David:   Slower grave way of doing it. And that is absolutely not to say that you can’t take a micro SaaS and push it into that revenue growth multiple VC back territory. It’s just that I think a lot of the businesses that we look at in our world tend to fall into the micro SaaS class version. Joe:        Yeah, I sold one last year that literally was started by someone that had a problem and he solved it himself. It was sort of a self-calendar tool and he had it for 14 years but he was an engineer by trade and you could tell by the interview that I did with him that he was not comfortable selling or talking; very, very much an engineer. The person that bought it very much the opposite of that and is already talking to private equity folks to invest or get it to a certain point and take it beyond this sort of micro SaaS market that you’re talking about. David:   Yeah this is a really important point actually that I want to extend because what I’ve observed in my experience is that a lot of the businesses that come off exit were designed by the engineer, by developer types that find a problem that solved that and pushed it out to friends and family and other developers, acquire a customer base. It starts to grow organically but they simply either don’t have the appetite, the interest, or the skill set to market it. Nor do they want to. And so these businesses become right for marketers to take them over and actually work on building them out from a marketing standpoint because a lot of them are in very good shape on a technical side. They just need more sales effort poured into them. Joe:        Yeah, the one I sold it was doing … I forgot exactly, let’s call it a quarter million dollars in discretionary earnings. His advertising budget on a monthly basis was $325. David:   Yeah. Joe:        Yeah, I get emails every week now from them. I’m on their list; the guy that bought it and they’re doing a much more aggressive email campaign, retention campaign, and adding new tools and features for the existing customers. Let’s talk about the pitfalls of owning a SaaS business for those that are potentially buying one for instance. What do you see as major pitfalls and I had a gentleman named Ezra Firestone, you probably know Ezra. David:   Yeah. Joe:        I had Ezra on the podcast and we talked about a number of things. He’s very much into yoga and meditation too by the way but we talked and he’s got e-commerce businesses and he got SaaS businesses and he talked about the differences and what he likes about each and what he prefers. But I’d love to hear you talk about pitfalls and I’ll tell you Ezra’s feel. David:   Yeah, I think that the IP roadmap for any SaaS business is always something that you have to be very clear on. I think you can easily fall into a trap where you start the design … excessively design the product either on specific customers and then it becomes this very odd sort of pool of mud. They like to use that phrase in SaaS world where you’re designing around specific customers or you’re just adding features to it that perhaps aren’t really needed. And actually, I think a lot of SaaS business actually benefit more from dialoguing with customers about how to use their products more effectively. Because oftentimes they’re only using about 20 to 30% of the functionality and then often churning away because they’re not aware of the other 70% than just by adding feature sets for the point. And of course, this really does stack up because as you add more features that’s going to add more complexity. You create more of a UX headache for your customer base. You create more of an operating manual to train your sales team with and everything starts to become … to slip out of control of. And I think that having a very clear crystal clear vision about the road map is actually like something that yeah probably keeps a number of SaaS owners up at night contemplating that. I think churn is a real challenge for micro SaaS businesses specifically because a lot of the time there ain’t SNBs so they’re naturally facing against a client base that’s got higher churn. And the best way really to reduce churn is to really improve your onboarding experience and your customer success. And something we’re all absolutely crushed during one of the best in class onboarding processes I’ve ever seen but it is expensive to do that unless you go down a very intelligent sort of IT lead onboarding route. And that’s a challenge that I think a number of business owners struggle with because once you get up into massive scale on your VC back so you can have a whole sales team that come on and really help train every single house member when you’re in this micro space you don’t have the capital to do that. So you got to think very creatively about really educating customers, really onboarding them very well so that you can solve the churn issue and scale the business well. And the churn is also important because it really starts to impact your ability to run paid for example [inaudible 00:29:03.4] acquire customers that way and so there’s a lot … you have to be just very, very thoughtful such I’d say churn is quite a headache as a SaaS business owner. Joe:        Yeah, it sounds like any business with customers. Take care of the customers first. Make sure they’re using the tools to the greatest extent possible and that will reduce the churn. Which will, in turn, give you more money to do paid advertising than more than $325 a month. Yeah, I was going to go to the same place not that there’s a right business or a wrong business to buy, they’re just physical products businesses are just different than content versus affiliate versus a SaaS business. So anyway I was talking with Ezra about it. He owns both. He owns Zipify and he owns BOOM by Cindy Joseph or a portion of that one. In the physical products world, you create an ad and it hits and you scale. You spend more money on the ad. With a SaaS business it may be the same but then you’ve also got more support, more customer onboarding, and focusing on that churn rate and the metrics and you’ve got the cost of those developers which are also a lot more expensive than the cost of really good customer service people or graphic designers in the physical products world. A big, big difference though and again it all balances out. With the physical products business you have to have working capital for inventory. Your business is growing like crazy … sometimes I’ve sold businesses that have been 24 or 36 months old and had in-depth conversations with the owners of those businesses David. They bootstrapped it. They don’t ever take any money out of the business. It’s just growing and all they do is take every ounce of profit just trying to keep up with the inventory demand; that working capital demand. And sometimes they still run out of inventory. So there are two different ways to look at it; two different worlds. Those people that exit on the e-commerce world they don’t take a whole lot out the first couple of years if they hung on that accelerated growth always slows down a little bit and they can then start taking salary and pull some more money out of the business. But you don’t have that physical product or working capital requirements inventory in SaaS but you’ve got more expensive staff and developers that gosh if you’ve got a key developer and they go away it’s a key employee and you’ve got to replace them. It can be very challenging and very expensive. So I’m not sure which is right. I always … I think people that are new in the in the internet space that are coming from the corporate world and want to live … work at home and see their family more and travel less and I’ve talked to a lot of people like that they say what … where should I go? What space should I look at? And I kind of think that they understand more easily physical products and can easily say I sell a widget versus I sell software to that people subscribe to to help them manage their calendar better. It’s very different; very challenging I think. What are your thoughts on that? David:   Yeah, I agree entirely. I think there’s a lot of things to think about with SaaS. It comes down to … as in life right? You always have to choose what problems you want to solve for and some people like solving for very intellectual problems. It’s very interesting looking at the buyer base for SaaS companies that often people that enjoy the intellectual challenge of having a lot of the moving parts to think about. And there are people that enjoy the challenge of just scaling e-commerce. So it’s … yeah, a totally personal preference. I don’t think that one is better than the other. I think it’s entirely a form or like disposition of character. Joe:        Yeah. Well, listen, David, we’ve had you on talking about SaaS. You had more than SaaS experience right? You sold lots of content, lots of physical product sites in the past as well. David:   Yeah, more than I can remember. I mean when I really started my brokerage career I spent almost exclusively doing content sites so we have all of the … it comes in affiliate stuff, Ad Sense sites and I love them because again you know we talk about these beautiful nuances between different business models. For me, it was just so interesting looking up the SBA strategies of these businesses, looking at the approaches that these owners are taking to rank specific pages. And I got super into ad optimization group and it just fascinates me with this psychology of ad revenues and clicks and so forth. So yeah I actually have a lot of reference for Ad Sense likes and I think I often look at them from my own personal acquisition perspective because I just love the pessimity of those business models. Joe:        Yeah, yes, absolutely for those that don’t understand it’s good quality content developed over time that’s driving organic traffic and you’re getting paid for clicks either through Ad Sense or a lot of folks doing affiliate stuff as well when they’re doing product reviews and things of that nature. But that was the larger one that I sold last year which is under 9 million and it was a content site; just crazy, crazy growth. A great story too and we’ve had Ramon on the podcast. And this goes to the relationships with the people that we work with. The first one that we sold for Ramon a few years ago, let’s call it five years ago it was maybe $125,000 business and a few years later he comes back as a client again. He says okay I’ve got another one like this out. It’s 425,000. And then he comes back in December of I guess it was ’17 and you know he’s got one where we think it’s valued around 5 and then we get it under a  Letter of Intent and it’s just exploding growth. And so he says Joe I just don’t think I can do this. It was a hard, hard call for him to make on a Saturday afternoon in April of 2018. And he had to walk away from a 5 million dollar deal because revenue was growing at 300% every month which really just drove the multiple down and the total value up. We pulled the listing and the same person it was under LOI for 5 million, he didn’t go away. He wanted to stick in and he knew that the value was there so he bid it up and two others bid it up and it sold for just under 9 million; a great story for that guy. David:   The high quality strategic exit there to come back at that level. Joe:        It was a risky move to walk away from 5 million but it worked out for sure. And the buyer was fantastic too. You’ve got to have a good buyer and good seller on both sides of the table. Structurally business on the side I know but it was a combination of private equity money, a little bit of SBA money, some family fund money came into it, and then the owners… the buyer’s personal money as well and as strange as it is that particular by David also bought the largest SaaS business that I ever sold. So relationships with buyers are critical as you know. Any quick tips or advice for people that are thinking about selling their SaaS business, what should they do? Should they just focus in on churn or maybe have a conversation with you with an eye to exit even in 12 to 24 months, what are your thoughts there? David:   Yeah well, I think definitely I’d advice there as based on how far you are out. If you’re quite far out I do think it’s worth split testing price increases. Over the years we’ve seen a surprising number of wins from people making micro price improvements. I’m obviously not grandfathering existing customers by trying that out. I think if you are closer into the potential exit talking six months like the really important stuff is actually things that seem to become incredibly easy to miss. But I’ve seen over the years things like just securing IP properly and then that’s much more than just getting trademarks sorted out. But actually, if you’ve had a lot of third party developers working on the code getting proper IP assignments. Because the number of transactions I’ve been involved where they’ve got to be done retroactively is a little bit uncomfortable. I think another piece is around security. Again if you’re not patching passworkds properly or if you’re storing credit card data or any of this kind of things, like if there’s any aspect at leaking they really need to be on top of that. I think absolutely avoid any kind of large discounting, annual plan discounting. Don’t sell any life time plan type things. I mean that attempt to sort of artificially increase revenue earnings three to six months out is really, really, really visible unless of course, it’s around something obvious like Black Friday. And I think that don’t be too heavy with sort of trying to cost cut because again that’s really obvious when you come into a sale that if in the last six months you suddenly just gone extreme and leave in order to get an attempt at inflated SKU it becomes very obvious to any experienced buyer. Joe:        Yeah very obvious. David:   I think one of the things that really does have a pretty big impact in terms of leveraging the multiple up is as much as possible obviously document source code and annotate that well. But as you can try and bring in … if you’re the owner/operator and you’ve done a lot of the IP yourself and built a codebase really start to consider six months out bringing on a developer in time to hand that off. Because if you can show you by the time you come to exit that the third party developer has been in the business for six months, understands the codebase intimately, and has made … pushed out various updates; that is going to be a very compelling acquisition proposition for a buyer versus … you know that all of the knowledge is inside the owner’s head and then we’ve got to do like fulfill the email gates at transition and our third party developer is part of this. So do that work before and you will get paid multiples upwards on the backend. Joe:        David, unknowingly you’ve talked about the four pillars; the risk, the transferability, the growth, and the documentation. It’s not just financial documentation but it’s SOP’s and all the other stuff as well. All of the things that you’re speaking to sellers about buyers can focus in on the same thing when they’re analyzing a purchase of the SaaS business. Everybody, David is reachable david@quietlightbrokerage.com. Reach out to him there. He’s up on the website now. A phone number extension is there as well. We’ll put it on the show notes too. David welcome to the team. I’m thrilled that you’re a member of the Quiet Light team now. Thank you for being here. David:   Thank you, Joe catch you. Joe:        Alright, talk to you soon. Links and Resources: David’s Quiet Light Profile David’s LinkedIn David’s Podcast

Is direct response marketing an “old school” trend? People in the e-commerce world have historically looked at direct response as outdated. Direct response has been around for so long because it has a track record for success and e-commerce marketers can actually learn a lot from the direct response marketing approach. Some marketing experts are now fusing the two into a cross-channel style of marketing. Today’s guest, John Santilli, comes from more than twenty years in the direct response television world and is here to share his experiences in identifying a product’s potential to sell across multiple distribution channels. John’s new marketing company, Star Logic, works with e-commerce firms to help them determine whether infomercials or other forms of direct marketing can create a lift in their online sales. Episode Highlights: Insight into John’s background in sales and omnichannel marketing. How the previous norms of the non-online marketing ecosystem can work in conjunction with online. Ways John’s background helped him learn to fuse these systems of marketing and boost client’s online sales. We touch on the evolution of Amazon in the way products are marketed. The algorithm John uses to calculate the correlation between direct response marketing and the online environment. How his marketing company is able to run this algorithm in order to predict ways a product’s success could be boosted. Examples of success John has seen when applying multichannel marketing. The time it takes to see a sales boost with the direct tv model and the science behind pushing that “nag factor” to increase sales velocity. Benefits of omnichannel marketing as a selling point for businesses in the acquisition arena. Transcription: Joe:        So Mark a couple of podcasts ago you used the term old school in terms of one of the … your podcast and what he does and you know when we started talking about this particular episode I am all in old school apparently because the old school direct response marketing is what I did. I came from the radio direct response marketing world and Walker is not the only producer here. I’ve produced two TV infomercials. They had many many spot ads and even hosted one. I just have to throw that in there because Walker is such a celebrity here at Quiet Light with a bestselling book and all that good stuff, Netflix, documentary and all that stuff. I didn’t make any money but … maybe a little bit but we’re starting to see a trend of a little bit that old school direct response TV production and advertising combined with the e-commerce world where somebody has got an e-commerce product and they’re driving traffic both to a call center which is what I did but now online to a website or to Amazon for the products as well. And you had somebody on the site … I’m sorry on the podcast that focuses specifically on that. Mark:    Yeah I know he comes from that direct response TV market world. That’s his background and we were just talking about this Joe but it’s kind of like these two types of business models in direct response grew up a little separately and kind of despised each other initially or looked at each other with skepticism. A lot of the guys in the direct response internet world looked at direct mail and infomercials as this outdated dinosaur sort of way of marketing. And the direct to TV market and direct mail market advertisers look at these new kids with their internet like it will never last and these are real businesses. Now what we’re seeing is these guys are looking at each other and seeing maybe if we work together in this cross channel … now there’s a buzz word for you, cross channel sort of marketing both in the offline and online world there is a lift that can happen in the online world. And so I talked to John Santilli really his whole specially is direct response TV infomercials. That’s what he does. And now he’s working with online firms to help them determine if we were to do a commercial … an infomercial and run this for three months, six months or what have you what’s the lift going to be in the online world and does it make sense to do this. I love this idea here because when we look at an online business for sale one of the things I want to see, I want to see do they have this stability? This kind of multi-channel approach for attracting customers and if they do that’s a good thing. And we often think multichannel … okay, I’ll get my Facebook, I’ll get my PPC, I’ll setup a Shopify store but there’s more than just the online channel. And when we start going into the offline channel there’s a certain amount of brand that comes up with it that they can’t build entirely online right? Like when you see something on TV it’ll hold a little bit more weight than just something that you see online. So this whole conversation with John was how does he make these assessments? What’s been the history of this direct response TV market and how can it help online sellers. Joe:        Yeah, it doesn’t just build value in terms of more online revenue but its offline revenue as well with people ordering directly from TV. You can also look at products and putting them on HSN or QVC and things of that nature and what it does is you’ve got multiple channels of revenue. It’s going to boost the value of your company not just because discretionary earnings are higher but if it’s large enough a private equity firm is going to pay a much higher multiple for a multiple channel product line coming from different avenues. That was one of the presentations at the Prosper Show that mimics or mimicked almost everything we’ve been saying for the last six or seven years. So I think it’s a great idea for those that currently own internet based businesses selling a physical product or those folks that are considering buying one and thinking okay this person bootstrapped it they’ve gotten to a certain point and they want to move on to their next adventure how can I take this to the next level and look at this TV advertising as well. And it’s a great option. Let’s go to it. Mark:    John thanks so much for joining me on the podcast. I appreciate you taking the time here. I know you and I have talked over the past few months about various Amazon opportunities and I asked you to come on the podcast mainly because your background in this direct response TV advertising and really omni-channel marketing, going outside of the Amazon and internet ecosystems into these more traditional mediums to really boost brands is pretty extensive. I would love for you to just give a quick background on yourself for our audience and your experience and what … kind of catch people up in our conversations for the past few months. John:     Sure. No problem. Thank you very much, Mark, again for having me on the podcast. Hopefully, your listeners will find some value in what we’re talking about today certainly as we’ve been having our conversations and give them a little bit about my background first and then we could get more into that but my background basically I’ve been in sales and marketing for the last 20 years. I spent the majority of my career with two companies. Primarily those companies have all been marketing … both of these companies are marketing dependent companies offering budgets of I’m going to say 3.5 million up to 55 million dollars at some point in time and margins ranging from 20% all the way to 100% at some times. I touched almost every marketing means that there is whether that be from direct mail … direct response TV which we’ll talk a lot about today and also within the digital side of things, generation side of things. As I’ve said direct mail I sent out about five a week this is a direct mail on a monthly basis at one point in time. I spent about 25 million dollars a year on TV. My last company I was the executive producer … in-house executive producer for the company. I produced over 120 TV commercials that 30 of them actually went to a retail rollout generating over 250 million dollars in business. With that company, I co-created an algorithm which really gave us the ability to identify under marketed products and new inventions that had the most unique attributes, had the most mass market appeal, and were suited really to go to retail. Our job was to really find, filter, quip products and what that really means is that be again we took products that were under marketed, new inventions, filter them through a proprietary algorithm that we designed and tested those products through that algorithm and then joint ventured with a partner and pushed that into retail. And that was really a direct response TV model. Much of you will actually recognize that as “As Seen On TV” products, those late night infomercials, those daytime commercials. Mark:    So you’re the ones that if I’m at the gym in the middle of the day and I see something come up and it’s that sort of infomercial type of commercial, you’re the one that was putting those on? John:     Yes. Exactly. We’re … I mean it’s actually a very small market. You’d see a lot of commercials on TV but it is a very small market. Initially, it must be a profit channel in at itself. The direct response was the first news … it was the first area to market goods and services direct to the consumer bypassing retail. The goal of direct response really is to take a … to break even or take a small loss. It really has been to entice consumers to go to retail and to purchase at retail. It effectively became the focus of all DRTV campaigns was to air a lot of media, get people to walk inside the store and buy it. Mark:    Right. Now in our current economy especially the internet based economy we’ve completely bypassed a lot of these channels that were built up frankly over decades and we’ve had this whole ecosystem system kind of buildup of internet and we’re seeing that direct to a direct response TV market as well as retail market. I’ll try to scramble and catch up and see if they could also tap into the Internet market area as well. One thing I find fascinating, I went to Traffic and Conversion a few months ago or about a month ago … actually not even that long ago. It doesn’t matter. Richard Branson was one of the keynote speakers and one of the things that struck me from that conversation that he had with all of us was the idea that … the idea of all marketing that used to be the norm, right? He did crazy stunts just to be able to get on the front page of the newspaper. And today I think a lot of us we look at our businesses and we think about it in terms of how can I manage my Amazon PPC account or how can … for a SaaS company how can I get the right onboarding process and find the right customer acquisition channels online and what you’re talking about is let’s look a little bit beyond that. There’s this whole developed ecosystem of marketing that exists which can really work in conjunction with the online environment. With your previous experience did either of your companies get into that where you are using this omni-channel marketing outside of the internet to boost the online sales? John:     Absolutely. So that really is the evolution of the business at this point in time. I mean it’s revolutionary where of course just like you mentioned and it’s really … you know I have since left the last organization that I was with. I’ve founded a new company its Star Logic Marketing and the reason why I’ve called it what I call it because first of all everything out there right now is based off of reviews and star ratings that are out there. If you see something on TV today, okay the first thing you do is you pick up your phone and you take a look on Amazon. You see if it’s on Amazon, you see the star ratings and reviews that are on it, you take a look at the price and then you act to buy. So it changed … definitely, the game has changed completely. Through our proprietary algorithm that I kind of mentioned to you the way that we filter products has been based through a survey process. We do a web test which really put the customer … put our product in front of the customer and position them to act on it here. Here’s an offer out there we like to buy it. And the direct response model in the past when you had 10% of your orders going through direct marketing today that’s up to 50, 60, 70% of your orders are going to order through the web. And whether that’d be through Amazon, whether that’d be through traditional e-com that’s the way that people acted on it. So over time, you saw this evolution happening. It started impacting the way that we marketed products, the way that we looked at our marketing in general. We had to consider the fact that 20% of the people were actually going to go buy from Amazon versus going to your e-com site or picking up the phone and calling you. And again there is a higher number of people that were actually ordering off with their phones so you had to make sure that your mobile marketing was done properly. So this omni-channel marketing as you indicated is just so important today for every company whether you are holistically selling on FBA at this point in time and that’s when you and I started having these conversations and really what got me excited about this whole thing which is that whether you’re selling wholly on FBA and not taking advantage of the digital ecosystem out there, the direct response pieces that are out there, the Home Shopping Networks that are out there, international Amazon, and making sure that you also take a look at traditional retail as well as international retail, is really what I think is a great opportunity for our product and product businesses that— Mark:    Alright so what you’re talking about here is you have basic infomercial or commercial and somebody is at home and they’re up at one o’clock in the morning and watching reruns of I Love Lucy and something comes on they’ll potentially see and so they end up typing it into their phone because everyone now watches TV with their phones as well right? And the product pops up and we can see this direct correlation now between direct response on TV leading and bleeding directly into the online environment. You’ve mentioned a couple of times that you guys have an algorithm that you run these opportunities through, can you talk a little bit more about that? John:     Sure absolutely. So it really is you have so many things at your fingertips these days. I mean first of all, you used to take catalogs from your house. You go into stores and you see products and stuff like that. There’s products everywhere; all over the place. In the past you’d search for products through Google and we would just take a look at products in Google or a catalog and find some unique things and we said well how do we find out what works, what doesn’t work, what’s the best opportunity for retail whether it’s traditional retail or online retail. They’re two different things but they still have some unique drivers behind and that get people to buy it right? So they got to be unique. Alright, they have to be they feel like they haven’t seen it somewhere before. They now have to be of great quality and they have to have the right price point to get people to impulsively buy it. So what we would do is we would go through a survey process first. My background and my disciplines in the direct mail business is in creative makes people buy but also there are consumer behaviors that made people buy it. So what we did is we asked a series of questions in a survey basis state consistent with those questions and over time became … it had benchmarks that said this product is unique, this product is an everyday product, this product appeals to a large percentage of the marketplace. And those were some of the main drivers that made us … that help us go to stage two which was web testing. So now in web testing, we would do a couple of different things. We would do a very small teaser video or a vlog tech video that demonstrated the product in a way that you quickly understood okay I need this. And we put a very quick order page together where it wasn’t an elaborate brand type of web store or web page; it was an order taking page. It was built to just take orders. And we would have people go into these. We’d do an e-mail blast of let’s say 300,000 people, 150,000 people, and sometimes even a million people and get benchmarks based off of conversions, click rates, click views, orders, average order amount, how many products did they actually order through that, and those benchmarks were also tied to our algorithm and they remain consistent and we try to make sure that we form long term benchmarks. Those filtering process is whether it was the way that the product has originally come to us and looked at by our view meeting which had people on there from a lot of Home Shopping Networks and people that have been in my industry for years but also the survey process, the web testing process, those benchmarks once they’ve qualified we would actually put a TV commercial together. And just put a little science next to the art of just putting something on TV. Instead of doing just a … what we refer to is or what I refer to as a spray and pray approach where you just spray your product everywhere and see if it works it add a little more science to it. Mark:    Sure. So now with the current marketing firm that you just recently founded that’s doing this what your basic appeal for somebody that might be listening here is that you’d be able to take a look at that product if somebody has a private brand that they built and maybe are doing well with on Amazon, you’d be able to take that and run through this testing process to be able to see what the possible or potential impact on revenues and growth would be if they were to go to the direct response TV market. Am I understanding that right? John:     Absolutely. I mean you nailed it. I mean really what it comes down to is this is that through this process we feel like we can go into any retail store for example and if you have a product line and you say this is my entire product line we feel like we can go from A through Z process and say A has the best opportunity to succeed; Z, put it on the shelf. It’ll still sell but put it on the shelf it’s not going to be your most appealing product that’s out there in your marketplace. And really that’s what the system does, but in addition to that, it helps identify your best opportunity to go through TV and other channels because I think that all products have a home, right? It’s just a matter of how big is that home. And then I think that’s what the process is designed to do. Mark:    How long does it take you guys to figure out what that impact would be from a direct response campaign? John:     Great question. So the initial process that we’re talking about from a survey, web testing type of a platform I mean that really could take one to two months depending upon what kind of assets that we have. Or it could take a little bit longer depending upon if we want to … if we get any data that says we need to tweak the product a little bit. So if we find out that people like your product through this process and they have an attraction to your product but there’s a couple of different variables that they may want to see more, a couple of different features that they want more on a product a light for an example or something better of quality. This doesn’t look as quality … the quality that I want. We may take a step back [inaudible 00:09:04.2] but if you have the completed product that’s ready to go if you wanted two months to do that initial survey web testing platform then you go into developing your TV commercial and maybe you’re talking about another two to three months before you actually get on the air and test everything and really are good to go. One thing I just want to make sure that I’m clear with is I’ve said to you that every product has a home that [inaudible 00:19:30.1] that they should be in. Through this evolution and this process, we found that some products just belong on the digital atmosphere versus TV. So an example of that would be is that we actually have a product and tested at $10 price point on TV a few years ago and it did not meet the metrics to push that product into retail and do a large spend on TV. What we wound up doing with that product and we tested it on digital because the metrics weren’t making sense. We were getting false positives on our web platform seeing that people who are ordering this product through web but they weren’t ordering it through TV. So we started testing inside the digital ecosystem and the next thing you know a year and a half later that we’ve been marketing this product digitally at a $29 price point at a 19.99 price point and had major success just by utilizing the digital atmosphere. Mark:    Interesting. So you talked about gathering some data to be able understand do people want to buy this product, do they like the product, and maybe is there a product adjustment that needs to happen, can’t we just look at how the product is succeeding on Amazon and look at the reviews to be able to gather most of that information? And could we maybe accelerate that two to three month process if we were to just look and say hey I have a product that’s been on Amazon for three years saying I’ve got 2,000 reviews of it with all sorts of feedback on this? Is there other data outside of that that you need or is that a good starting point that would get you most of the way there to be able to identify a product that would succeed in that direct response TV market. John:     Yeah, that’s a great question and it’s a little bit of a complex answer. I’ll try to simplify by basically saying to this I mean I think there’s a lot of smart people listening so I won’t insult your intelligence by basically saying that either people got their products on Amazon as an early adopter of Amazon or people put their products on Amazon and they wound up first in your category. So some of that behavior helped them get those reviews, helped them get that success early on. And that’s my belief. Anyway that product is not necessarily unique and if you marketed that product on TV it would not have the same success as it would have on Amazon or digitally because for example marshmallow sticks, you hear all of the success of marshmallow sticks and the examples of marshmallow sticks and the success on Amazon I don’t think you could put marshmallow sticks on a digital campaign or a TV campaign. Does that make sense? Mark:    Yeah, that makes sense. I wasn’t aware that marshmallow sticks were a big thing. Are they a big thing in Amazon? John:     I actually was just reading an article about how someone made a half million dollars in a short period of time by being one of the pioneers of marshmallow sticks on Amazon so it was a very interesting [inaudible 00:22:27.9] for me. Mark:    Now all of our listeners are going to go out and buy a few crates of marshmallow sticks and throw them up on Amazon and that entire market is going to be ruined. John:     Exactly. No I mean I think that in general, I would say to you this, what fascinated me Mark in our conversations and when we were going from in you know we sold in writing on a wall two years ago in the direct response business. And what I mean by that is that like I said we saw this quick evolution of all of a sudden 10% of the people that saw your commercial on TV bought from the web. All of a sudden it’s a 50%, 60%. In addition to that, we saw 20% of your orders actually going to Amazon. So we saw it being very difficult, you go into a TV advertising campaign with the goal of breaking even but if you lost 20 cents on a dollar, 30 cents on a dollar you would know in the old world that you’d get that money back because you air a lot of TV and you actually would see a lot of people go to the retail store and you get an 8:1 ratio. So for every one person that brought on your TV ad and called in through the phone or jumped on the web, you would see eight people buy at retail. So those numbers started changing rapidly. And when you and I started talking it was when it clicked to me and said [inaudible 00:23:54.9] couple of things. One is that we had a couple of trial campaigns that we spent, we developed a lot of money … we’d spend a lot of money on Facebook trying to develop a campaign. We’d sold a hundred thousand units of one product on Facebook alone, okay? A lot of these people guide brand awareness very quickly of our product just on an online basis that does not necessarily translate to retail at all. What had happened was is that we saw that Amazon boarded it’s like unwanted competition, you heard all about that, unwanted competition, you … traditional direct response TV and we spend a couple of million dollars in a very short period of time advertising for our product and then we’d be shipping in half a million units overseas. So now everybody overseas is getting alerts and anybody that tracks imports is getting alerts on what had … what products are being most successful? We’re airing this stuff on TV, you have an international competition coming in and putting your product, your brand up on Amazon right away with lower prices. Maybe not the same quality and we saw a major impact happening to you know we weren’t able to market the same way. So that 20% or that 10 cents lost, that 20 cents lost on the dollar started becoming 50 cent losses on a dollar and we had to figure out different ways to market our product. And you had to look at it more holistically. You had to look at Amazon, digital and really start playing a different game. And I think that when you and I started talking and I started seeing these [inaudible 00:25:37.5] Amazon centric companies when they were only living inside the Amazon atmosphere they’re saying some of these products are awesome, some of these product lines are great why haven’t they tested some of these other channels. I can see that maybe they tested a little bit of digital because once I’ve clicked on their web site they started following me around [inaudible 00:25:58.9] Facebook, Instagram, everywhere. They didn’t really have any type of marketing dollars or marketing spent outside of the Amazon atmosphere. So the reality is that I just see this as a huge opportunity for any of the FBA type companies that are sitting out there to say hey what other channels can I market to really explode this business and really put my business on steroids. I think you know and I know and you know better than me for sure that those multiples that are being paid on these businesses when you put them up for sale I think that if they have more of an omni-channel approach towards things, if they have a good Facebook presence, if they have a lot of Facebook followers that are around there I think it just makes their platform that much stronger and that business much more saleable. Mark:    So anyways there hasn’t been a whole lot of crossover between these silos in the past, right? We’ve really kind of stayed true to the one areas and part of this is just because of the opportunity that exists. And in talking to sellers and business owners who are working in the Amazon space their businesses are growing rapidly without having to go outside. But I do think that looking outside of Amazon whether it’d be through digital marketing and I know a lot of our clients are starting to do that but also into these more traditional areas is the way that we need to stay ahead of that curve right? We all know we have to say ahead of the competitive curve. What are some examples of lift that you’ve seen from applying this omni-channel focus and I apologize, I didn’t prep you for this question so if you don’t have numbers off the top of your head that’s fine but I just want to get a sense for what are we looking at here by exploring this option of omni-channel marketing and especially when we’re looking at going outside of Amazon but even outside of the internet as well into more traditional forms of marketing. John:     It’s an excellent question and although you did not prep me for it, it is something that we live in every single day. So I’m going to try to answer in a couple of different ways. First of all I would say to that if you are an Amazon centric company, we’ll focus on that first, and you are not taking advantage of some of the digital or traditional DRTV, direct response TV channels I would say to you this; so the curve in the direct response TV industry is about 18 months. So in 18 months, that’s kind of your life cycle. And traditionally it’s been [inaudible 00:28:34.9] of a life cycle because get this grand awareness of this product, you’re ahead of the competition and you try to outrun the competition by just flooding the market with a bunch of products. So some of our products in that 18 month life cycle yielded 6, 10, 15, 20 million dollars’ worth of revenue during that short window of time. So if you have access to inventory, if you have access to the product if it is a DRTV type of a product I think an 18 month window and developing several million dollars’ worths of revenue is very obtainable. The other piece of that is this for those products that did not work on direct response TV and really you test into the digital ecosystem, there’s a lot of companies and I think everyone will agree that Facebook is your work force in that spectrum. However if you go about it in some of the more scientific ways and try to figure out where your audience is, whether you’re doing some display banner type ads to learn where your audience is and where to target better, we’ve seen some of those companies that they may have been exploring to try and get into retail. They weren’t there yet but they decided let me try to play holistically on the digital side first. We’ve seen some of those companies in a matter of three to six months generate quick huge revenues and be what we call a double return on your investment. I mean a double return on your investment on the marketing side of things; maybe a triple return on your investment and its either three to six months with a nice digital plan. The amount of traction that you wind up getting at retail if you’re able to get into traditional retail we know how hard it is to get in traditional retail but the amount of lift that you get could be easily 50% lift at traditional retail when you’re running some type of direct response maybe in combination with a little bit of digital TV figure campaign. Pretty good deal target right? We could figure out exactly where your products are being sold and deal target that as well. So does that answer your question? Mark:    Yeah, that definitely helps. I have one more question for you and I’ve played around with radio advertising for one of my other companies and the general rule that I keep hearing over and over with the radio ads was look you need to run it for three months. You need to have the right saturation and frequency in order for it to really take effect. Do you have that same effect with television ads? Does it take time before you start seeing that lift? John:     Absolutely. It’s impressions. Everything’s based off of impressions and you need a certain amount impressions across a broad audience and to a specific audience in order for you to get them to buy. So there is a science to that that our media buyers actually play with on a regular basis and they … you’ll see … I mean a great example of that is kids items; children’s items. We always call it the nag factor. So you really want to put those impressions inside of a child’s head so they go to mom and dad and they basically say Mom I want that. Mom, I want that. A lot of our media for kid’s items is 60 seconds spots, 30 seconds spots so you’re just really driving everybody to impressions and driving them to retail. They’re also direct response type of ads but you’re really trying to get the impressions in their head. Get the nag factor to go and really get them to buy. Mark:    That’s fantastic. Alright if somebody wants to learn more about this where can they reach? John:     Star Logic Marketing is the name of my company. As I said I just started the company a couple of months ago. My phone number is 215-694-3118. You can look me up on LinkedIn. I have all of my LinkedIn information. The website is still being and would be finalized the next … hopefully, a couple of weeks here but Star Logic Marketing is the name of the company. We do think that this omni-channel type of approach is a way for you to really put your products and your product lines on steroids when you jump outside of just the Amazon ecosystem and really you take up the edge of the more omni-channel marketing opportunities. Mark:    I think there’s all sorts of benefits for Amazon sellers and I think those that have been in the game for a while might be thinking in their heads of some of these things and think sales velocity for one. Being able to really power up the number of sales of launching new products as well would be another benefit that I definitely see with this and a really fascinating concept. And I think probably the way that we’re going to see things go. I have a couple of additional questions for you but I think we’re running out of time at this point so thank you so much for coming on the podcast. I do appreciate it and I hope to have you on again in the future. John:     Thanks, Mark I really hope it was of value to your audience. I do think that there is a great opportunity for the people that you’re speaking with in a regular basis to really help improve the opportunity to sell their businesses by leveraging all of these [inaudible 00:33:41.9]. So thank you for having me on and I look forward to the next time we talk. Mark:    Thanks, John. John:     Take care. Links and Resources: https://www.linkedin.com/in/johnvsantilli https://starlogicmarketing.com/ coming soon Reach John @ 215-694-3118

These days Amazon businesses are getting more complex, and one way to add margin to your business is to extend to other countries. Today we are talking about the importance of understanding foreign exchange when buying and selling overseas. Since your business can potentially save a few thousand dollars, euros, or rupees, it is a good idea to use a broker for fx, where every little bit counts. Today we have an expert on to talk about the benefits of getting the best foreign exchange rates for your growing business and how having that broker can make a big difference. Jared Van Orden is a financial expert with GPS Capital Markets based in Utah. Since 2002, GPS has been the leading corporate foreign exchange brokerage firm dedicated to handling foreign exchange for companies, large and small. Jared’s firm helps its clients exchange funds back into their working currency when selling overseas. Additionally, they exchange the currency of the country where clients are doing business and making foreign purchases. GPS Capital Markets deals in any type of transaction that has a foreign currency element to it and helps companies implement best practices. Episode Highlights: Jared explains the impact of WorldFirst Brokerage’s US operations closing. The cost difference between using an exchange broker and being directly exchanged via Amazon. How getting the best exchange rates can affect an exit. Savings opportunities when purchasing goods from overseas, particularly China. Opportunities in other countries such as Thailand and India, a broker can offer. How the cost of a product going up or down can affect the exchange rate. Can sellers set up an EU bank account if they’re a US company and what are the tax ramifications? The advantages of multi-currency accounts set up in the country where you do business. Understanding VAT and using an experienced accounting firm for taxation. Transcription Mark: Everybody for those of you that have been long time listeners of the Quiet Light podcast you’ve probably noticed that we have a brand new shiny introduction to the podcast. Let me know what you think. I like it quite a bit and there’s a point in that introduction where there’s a movie quote. We thought we would just throw this in there really for no reason other than it’s somewhat fun. So here’s what we’re going to do, if you know what movie that quote was from send me an e-mail at mark@quietlightbrokerage or e-mail Joe at joe@quietlightbrokerage. For those of you that think that this podcast is actually Joe’s podcast, you can do that. Let us know what movie it is from and we’ll give you a shout out on one of the future podcast episodes. So what movie was that from? And Joe I got something just really funny. Just to tell you briefly I was just at Traffic and Conversion out in San Diego and we were talking about the different people at Quiet Light Brokerage and somebody actually told me that they thought that what you did at Quiet Light Brokerage was the podcast. So that’s all that you did. Joe: That’s all that I did? That’s all I do? Mark: That’s all you do. Joe: Oh. Well you know I wish it was all I did and my life would be a lot easier and I’d sleep better because the podcasting is the easiest part. All I do is talk and you and the content team, Chris, everybody else they do the rest. Podcast Motor; they make my life easy. So cool I wish … maybe that will come true someday. The other alternative versus mark@quietlight or joe@quietlight … you don’t have to play favorites you can just send it to inquiries@quietlight and put movie quote in the subject line. And that way both Mark and I will see it and we can call you out and tell you we love you and that you picked the name of the movie. But listen we should talk about— Mark: Well on that be honest if you use Google like I do with every single one of these tell us that you used Google just to find it. Joe: Well when you were showing me this sample and you gave a movie quote I did, in fact, Google it. So don’t cheat like I did folks. I knew what it was. I was pretty sure I knew what it was. And it was maybe people we can … I know I won’t want to confuse them with the intro that is not pride to this. Anyway, we have a new guest; a person that specializes in foreign exchange. And it’s something that you and I don’t have a whole lot of expertise or experience in. His name is Jared Van Orden. He’s from GPS FX. I met him at the Prosper Show last year and we talked a little bit about what they do. And finally because of some things that have happened with a company called World First we decided to get him on the podcast and talk about saving some money for the folks that do sell overseas and also buy from overseas manufacturers. Mark: Yeah. I’m sorry I thought you were going to continue talking. I didn’t know you were done. I usually when you talk I just kind of tune you out so I— Joe: I know. I know. Mark: Well look the Amazon businesses are getting more complex and one of the best ways to expand and grow your business … any e-commerce business but Amazon specifically is to go into different countries. And when you do that there’s going to be added complexity but also added areas for margin. And one of the very simple ways … and I talked to Jared before at Prosper Show is just that right? Looking at the foreign exchange this is an area where you can definitely add margin to your business. And it’s an area that frankly I don’t know much about so I’m glad that we have somebody who does know a lot about this to come on and talk about it. Joe: Yeah and let me just say real quick before we go to the podcast Mark is mentioning margin and it’s important if you’re going to save a thousand dollars a month on foreign exchange by doing it right. Or another thousand a month by using a foreign exchange company when you’re placing orders overseas. That’s $2,000 a month; $24,000 a year. That could result in an additional 75 … a hundred thousand dollars onto the value of your business so every little bit counts. Please listen to the entire podcast because Jared does a really good job of explaining the entire process. Mark: Awesome let’s get to it. Joe: Hey folks Joe here at Quiet Light Brokerage and today I’ve got Jared Van Orden with me on the phone. Hey Jared, how are you? Jared: I’m doing great Joe. Joe: Awesome. Well as I said in our little chat before, today I’ve got a guest on talking about a subject that I know very little about which is great because I’m going to ask a lot of dumb questions. But before we go into those dumb questions that I’m going to ask and questions that I think will help the buyers of internet based businesses selling physical products and selling overseas; sellers of those save some money in the future why don’t you give a little bit of background on yourself so folks understand who you are and what your company is and what you do. Jared: Sure. Thanks, Joe. So I’m with GPS Capital Markets. We’re a foreign currency exchange brokerage that headquartered out at the United States; Utah actually to be exact. And we do all things foreign currency exchange. So we help companies specifically if they have revenues that are being collected in a currency outside of their functional currency, outside of the currency they use on a day to day basis. A US seller that’s selling in to the UK; we help them to exchange those funds back into US dollars. Or a company that’s paying for products in a foreign currency; we help to exchange funds from US dollars into those foreign currencies. And you know that it can be on a revenue cost basis. We help companies to acquire other entities overseas or to sell other entities; any type of transaction that has a foreign currency element to it. We really go out and try and help those companies number one to find the best practice solution to what they’re doing. Sometimes that may mean not doing business with us but to help them find really what’s going to fit best for their unique situation in dealing with foreign currencies. And then help them to implement that strategy if at all possible. It could be anything from just converting funds to locking the exchange rates for them. Joe: Excellent. I’ve dealt with this a few times over the years when we’ve got people that are not US citizens. They’re … I just did one in Germany last year and the exchange rate was a major factor in terms of the timing of when we’re going to close a transaction for him because it was being sold … purchased in US dollars. And I’ve had a lot of Canadian folks as well and folks from different parts of the world. But the big savings here and the way that people ultimately and this is what we look at can boost their bottom line discretionary earnings. There’s many, many different ways to do it but the key here is a one or two or three percent savings in that foreign exchange. We’re on this podcast because your team had sent me an e-mail. We met at the Prosper Show last year. I think you’ll be there this year. We will as well. But you had sent me an email in regards to World First which is a very well-known foreign exchange firm that they’re closing their doors. Can you touch on that a little bit for those folks that are currently using World First and may not know about this and what’s … how it’s going to impact their bottom line? Jared: Sure World First is actually a very good exchange brokerage. It has been around for quite a while and they had been helping a lot of Amazon sellers in the seller space to convert their funds from the foreign marketplaces back into US dollars. Basically, this is another option rather than using Amazon … to let Amazon convert those revenues for you into US dollars. And what happened is that World First is in an acquisition type situation where a foreign buyer out of China was looking to acquire the company. But because of some of the blocking that the US has done for Chinese financial companies purchasing US corporations that transaction didn’t look like it was going to go through with World First US operations. And so World First sent out an email here back in January to all its clients saying that their US operations are going to be closing immediately. And that leaves a lot of our Amazon sellers in a situation where they’re no longer going to be able to use that service with anywhere less than about a 30 day notice that after February 20th which is today you cannot use World First services if you are a US Canadian corporation. So those services out in US and Canada are no longer available to you. Now that doesn’t mean that World First just quit doing business if you’re a UK seller that’s doing a business in the EU that services still can keep working for you. It’s really only affecting the US companies that are based out in the United States and Canada. Joe: Okay so if we’ve got a US company or a Canadian company doing a $100,000 a year in revenue in the EU and they were using World First and they just default back to using Amazon what’s the cost difference in terms of the exchange rate, what they’re going to be left with? Jared: It’s going to be pretty substantial. I mean if you’re using Amazon, every two weeks Amazon sends your revenues back to you and if you have not entered an EU or UK based bank account those funds get exchanged by Amazon and sent to you every two weeks. And by default, the exchange rate that they’re giving you is not what the market exchange rate is. It’s actually the Amazon exchange rate they provide to you and it’s over 3% off market. So if you’re doing $100,000 in sales over there you can expect to only get $97,000 back or a little bit less than that because of the exchange rates that come that with your Amazon’s platform. Joe: And if that same seller was using say you guys or World First what kind of rate would they have been getting? Jared: It would have been at least 3% better than what they were currently receiving at the time if they’re through Amazon. Joe: I’m confused. Do the math for me. Jared: Amazon is around 3.75%. It’s kind of where they come in at on their mark up on the exchange rate. Joe: Okay. Jared: Whereas if it’s coming through GPS you’re going to see significant or any other broker that is helping the Amazon sellers you’re going to see significant reduction that oftentimes two to three or more percent back to you for those conversions. Joe: So you go from you’re at 3.75% which is the default Amazon number … and these are just numbers that float and change I would assume. Are we looking at a full percentage point, two percentage points … are you talking 2% versus 3.75%? Jared: I would say for most of the brokers including GPS you’re looking at two to three percent back in your pocket on the exchange. Joe: Yeah that seems really high just given that … I mean two to three percent. So you go from 100,000 if it’s 3.75 with Amazon that’s $3,750 you’re going to save 3% by using GPS or if they were with World First is that only costing them 750? Jared: Yeah. Joe: Really? That’s a huge difference. Jared: It’s a huge difference. And that seems really high but in all reality that’s actually pretty on par with a lot of other methods that are employed right now. If you’re in e-teller and you have your own website. So you’re selling on Amazon but you’re also selling on your own website or in the UK your credit card processor is collecting those funds and oftentimes they’re converting the foreign revenues into US dollars and placing them into your account. You’re often losing 2.25% on that conversion and often a 1% to 1.25% cross border fee that’s charged to you. And so that’s 3.25 to 3.5% that you often lose on that conversion even if it’s coming through a credit card processor that may be integrated to your Shopify account or some other online platform. So it seems really high but you’d be surprised that currency conversion buffer is in there for most conversions. Joe: Okay so a simple math again though if someone’s doing $100,000 in foreign currency, a foreign land they’re going to save 3% by using … if they were using World First or using a firm like yours. That’s $3,000 for every 100,000. So if they’re doing a million it’s an awful lot larger. Just to break it down further for those that are listening if you’ve got a business and you’re planning to exit in the next 12 to 24 months and you’re paying these high numbers that Jared’s talking about not only is it hurting your bottom line, taking money out of your pocket but you’re also devaluating your business. If your business is worth a three time multiple of discretionary earnings, if you’re losing 3,000 in currency exchange you’re taking $9,000 off the value of your business. If you’re doing a million overseas and that’s going to be $90,000 off the value of your business in terms of these additional expenses. I had Mike Jackness on the podcast and hopefully, you guys listened to it a couple of weeks ago where we talked about his exit and one of his businesses. And he and Dave on eCom Crew always talk about that revenue is sanity… revenue is ego … I’m getting this wrong I know but profits are sanity. Too many folks focus just on the top line and don’t focus on that bottom line profit; renegotiating cost of goods sold, looking at foreign exchange rates and making every dollar count will help you build a more valuable business. And it actually instills confidence in your buyers as well because they see that you’re running a real business and you’re doing what you can to make it as profitable as possible. All right so I ranted there for a moment Jared, sorry about that. You mentioned …at one point you said you can … if people are buying products in a foreign land are we talking about currency savings, cost savings if someone is buying product from China because a lot of folks have got e-commerce businesses are importing from China and spending tens of thousands if not hundreds of thousands a year. Is there an exchange rate opportunity … savings opportunity there when they’re buying from a foreign manufacturer or did I misunderstand that? Jared: There is and you know there are two parts to that answer so maybe I’ll dig in a little bit. China is unique. A lot of these products are coming out of China and a lot of these companies in China they want US dollars when they’re selling to you. That has a lot to do with in the past you know China has controlled the exchange rate between the US dollar and the Chinese or in the CNY CNH [inaudible 00:15:59.3] names for the currency; Yuan. When you are sending money over there in the past they have often wanted to receive US dollars. And in a time period where the Chinese currency is weakening, that’s just an added bonus to these Chinese suppliers when they receive US dollars and getting it converted to their currency. They receive more for it. So in China most of the time you’ll see that it’s really hard to get any pricing outside of the US dollar and if you’re being priced in US dollars because the supplier knows that they’re not going to get your payment for 30, 60, 90 days they don’t know what the exchange rate is going to be in 90 days. And so the Chinese suppliers will actually increase the price of your product to add a little bit of a buffer in there just because if the exchange rate fluctuates they don’t want to be out one or two percent or more because the rates have changed between then and when they actually receive the funds. Now China aside looking at all other countries where companies may be purchasing your product, if you’re having to pay a euro invoice to buy your product you probably hop on a banking platform to purchase those euro and you’ll notice that the exchange rate that you receive on that transfer is not what you can see online on Google or any of these other sites that are recording grain rate. And that’s because the rates that you’re seeing online through Google and these other locations like Bloomberg or Reuters those rates are averaged rates of transactions of 5 million dollars or more. Some of these are 10 million dollars or more and those are referred to as market trades. And so if you’re trading blocks of 5 million or 10 million at a time into these other currencies those are the exchange rates that banks are trading with each other at. Now we little guys who are not purchasing blocks of currency that big, when we go and buy foreign currency and go to send it to that supplier the reason we don’t get that rate the banks are getting is because there is risk associated with us buying those funds. And so the banks mark up the exchange rate and it really have a lot to do with volume. Somebody who’s buying a million dollars at a time, a million dollars’ worth of euro at a time is going to get much more favorable exchange rate than somebody who’s buying a thousand dollars’ worth of euro at a time. Joe: What about some of the other countries that are more likely to be countries that folks would manufacture in like India, Thailand, maybe even Mexico? I’ve seen a few of those. Is there a … for folks that are buying in those countries, manufacturing in those countries, is there a currency exchange savings opportunity for them and if so how do they go about doing it? Jared: There is on those and again if you’re just using a typical bank to do those transactions that may not be the best opportunity for you. Reaching out to a broker or one of these other companies, World First, GPS, and looking into what type of exchange rate that they give you on sending those wires, that could be really substantial savings. And there’s a bank here locally near me that charges $50 per outgoing wire transfer and that is not the cost of sending a wire. That’s part of the cost. So it might cost you anywhere from $20 to $50 to send an international wire to pay a vendor but then there’s also that foreign currency element. Maybe your bank just doesn’t have a great relationship when sending money to Korea and so the exchange rate they provide to you might be 3½ % off of market plus the $50 wire fee or $20 wire fee to send the funds to that country. And so the savings can be quite significant but it’s going to be on a bank by bank, provider by provider basis and also looking at what currency that you’re purchasing. Joe: So how does it work? If I’m manufacturing in India and I’m placing an order for $40,000 worth of goods, would I work with a GPS to lock in that exchange rate and you wire the funds over in whatever the Indian currency is? What is the Indian currency? I want to put you in the spot. Jared: Indian Rupees. Joe: Okay. Jared: So if you’re sending … and you picked a good one, India has some very interesting tax laws over there and so if you’re buying from an Indian provider and they’re pricing you in US dollars you’ll often see an INR price … Indian Rupee price printed on the invoice. And if you take that Indian Rupee amount and you just look on Google to see what the exchange rate is and you convert it back into US dollars well now you’ve got a US dollar cost on the invoice and then the US dollar cost that you back in to from the rupees. If you compare those two, you’ll often see a very significant difference. I’ve seen up to 5% built in to the pricing for you to pay them in US dollars and that has to do with the way the funds get converted in the country and whether they receive a certain type of tax credit. But there are opportunities where if you pay them an INR … Indian Rupees you might get four to 5% right off the top in savings just simply because they’re not dealing with the riskiness of achieving a currency anymore. Joe: So if I was manufacturing and buying $40,000 worth of goods from India for instance and I work through GPS I could save that 5% because you’d be able to wire over and do it in that. Is that $2,000? Am I doing the math right? Jared: There is very much that chance. And not just GPS I mean almost any institution in the United States that is doing it for you rather than sending over dollars. I mean in this case you’re just sending dollars over there and it’s being exchanged in country. Joe: Right. Jared: By simply paying the invoice in Indian rupees you might be saving 4% right across; four to 5%. Joe: Wow. So … and this can be done in multiple countries. China … maybe the opportunity is not as big in China because they want US dollars. Is that right? Jared: Exactly right. Joe: Okay. Jared: They typically want US dollars but some that’s changing. China would like to become more of a global player and their currency is becoming one of the reserve currencies in the World Bank. You’re going to see that change over the next few years. And there’s real opportunity there but there’s also a risk that comes in to it as well. If you decide to start purchasing Indian rupees to pay that supplier there is a chance that the Indian currency would strengthen 5% over the next year. Joe: Can you lock it in in terms of … because when people are manufacturing products they’re putting 30% down and the other 70% when it’s inspected and going on the boat. And that usually all happens within a 12 week period. Jared: I know. You’re exactly right. And so the timing may not be really wide on those payments and so maybe the market isn’t real significant but if you start paying a foreign supplier in their local currency and that may give you back some … a little bit of a discount on purchasing your product, but you also have to then take into consideration that you’re now at risk that the Indian currency could weaken 10% in your favor over the next 12 months so going in 12 week increments but a year from now if the currency has weakened 10% then it’s 10% in your favor but if the currency has strengthened over the next year, a year from now it’s now 10% against you. And so you may have to make decisions on how to lock exchange rate ahead of time on those purchases you’re going to make. Or you may have to go back to the negotiating table in order to get your pricing down a little bit with the supplier. Joe: And just to include it, the owners of these businesses their eyes are probably on the back of their heads right now because they’ve got so many things that they’re supposed to be experts on but they don’t have to be here. They can hire a firm like yours to do these things for them right? Jared: Absolutely. Joe: Okay. Jared: I would always look at what your costs are doing. Sometimes these companies and this … I’m glad you’ve mentioned that because there’s a big misnomer here where a lot of companies think I’m buying my product in US dollars so it doesn’t matter where the exchange rate go. That’s not actually true because if I’m in China and I’m receiving your US dollars and it’s a hundred thousand dollars today, if the Chinese Currency strengthens 10% at the end of next year I’m only getting $90,000 worth of [inaudible 00:24:11.1] when I receive it. And so I have production costs in country and if I’m no longer able to be profitable I have to raise your price. And so some of your clients here they may see that they’ve been buying the same SKU for the last 10 years and then we see that the price of that SKU has gone up and down over the years even though they’re only buying it in US dollars. And that has a lot to do with the exchange rate. If the costs go up and down to the supplier they have to adjust the pricing even if it’s in US dollars. Joe: Okay. You had mentioned something earlier about I think I heard you say EU bank account if you don’t have one the funds are going back to your US account and charged in exchange rate. For those that are selling in the EU let’s say via Amazon are you … or should they have an EU bank account and can you do that if it’s a US institution or US corporation? Jared: Okay so that’s a really good question. Let’s look at that in a couple of parts. So one is if I’m selling into Europe, I’m selling into the EU, let’s use Germany as example. If I’m selling my products into Germany on Amazon if I don’t log on to my seller central account over there and punch in a Euro bank account Amazon automatically converts the funds to dollars every two weeks. So you have an option if you could go over and get an account in the EU set up. So you go to Germany and set up an account in country. You could have those funds go to that Euro account and pool into that account and if that account has online access you could manage it from here in the United States and send the funds back to you however often you want. Joe: Just to be clear you’re saying … you mean a bank account not a Seller? Jared: A bank account, yes. Joe: Okay. Jared: So you can open an in-country bank account. Joe: Can you set up an in-country bank account in all of the EU countries if you’re a US corporation or LLC? Jared: You’re likely going to have to go over and register in country. Joe: Okay. Jared: So there is going to be some tax Nexus situations that are created by that. So another option you have is you can go to your bank here in the United States. You can go to a GPS and you can say I would like to get an account in-country over in EU. And so in the case of GPS, we would open an EU account for you in euros and this is referred to as a multi-currency account. And this multi-currency account is an account that is assigned to you. You’re likely not going to have to register any country that you use this account. And then you can now take your euros and login to your Seller Central account and plug in that euro account into Seller Central and now those euros are going to pool into your own multi-currency account. One of the big advantages of that account is if you have cost in Europe so you have to pay VAT back. You can simply take those funds and pay those taxes out of your own account … this account, this multi-currency account. Or you can take all the funds and convert it back to US dollars. Joe: I got you. You know I … we had Avask Accounting on the podcast in 2018 talking about that. And I do know that they actually help people set up EU bank accounts as well as part of it. And folks can find them at AvaskAccounting.co.uk. And then use a company like Jared’s for the foreign exchange as well. Just quick math if based upon what we’ve talked about is somebody doing $100,000 in revenue they’re going to save a couple of percentage points; $2,000 by making sure they’re using good foreign exchange. And then if they’re not; if they’re manufacturing overseas, if they can save another 5% on that $40,000 inventory purchase that’s in India for instance that’s another $4,000. Folks that $6,000in savings, money in your pocket and if you’re selling your business for a three time multiple that’s $18,000 added on to the value of your business. And you can adjust that number in any way that you want. But these are the things that matter when you are growing your business with an eventual exit in mind or if you’re buying an interest … buying a business and you want to increase the discretionary earnings and build equity right away. These are some of the things you can look at. Jared, I appreciate your time here. It’s a complicated subject. How do they find you? What is your web address and how can they reach out to you either via e-mail or finding your website? Jared: Okay so our web address is www.gpsfx.com and to get in touch with us it’s just usually a phone call at 801-984-1080 and then I can send you my e-mail but I’ll state it here as well. My email is jvanorden@gpsfx.com. Joe: Awesome. That’s great. Jared: And if people just have questions I’m happy even just to answer questions that point you in the right direction. If someone has listened to this and they’re like I think I have this but I just need some help on it I’m happy just to point you in the right direction as well. Joe: I appreciate that. That’s why we have you on because you’re here to help first and build value so I appreciate that. Folks I would encourage you to reach out to Jared and his team over there and see if you’re overspending and if you’ve got some savings there. Jared, I appreciate your time. I look forward to seeing you at the Prosper Show. Jared: Thanks, Joe. You too. Links and Resources: GPS Capital Markets Contact Jared

Selling a company is the entrepreneurs’ dream goal, but what to do after the exit is daunting. Some sides say to stay away from building another business right away while others say it’s important to keep a toe in the pool at all times. Today’s episode is about what to do (or not do) after you sell your business. We discuss drive, purpose, and the type of work business owners want to do once they achieve financial freedom. Today’s guest, Nate Ginsburg, dabbled in a variety of entrepreneurial ventures before he got into Amazon and FBA about 4 years ago. About a year into his business, he took in a partner and sold off about half of the company to him. In 2018, they sold the US side of the business to a Chinese investor. When he sold the business and made a hefty profit, Nate found himself questioning what he wanted to do next. Today we get into the many ways he is fulfilling his need to always be doing something, both personally and professionally. Episode Highlights: The history of Nate’s entrepreneurial journey. The trajectory of his Amazon FBA business and how the sale came about. How Nate and his partner structured the relatively atypical sale. Nate’s motivation for selling. The importance of free cash flow in a business. How Nate moved on from the sale to pursue new things. What brought about the new deals he’s involved in and what’s next for Nate. The importance of assembling the right team in moving your business forward. How the helping and connecting pieces of what Nate is doing these days can play into future deals. Focusing on the big picture in your business role – the recurring notion of working on your business rather than in your business. Transcription Joe: So you and I had a chance a few weeks ago to hang with Ryan Daniel Moran and talk to him a little bit. We had him on this podcast and one of the things that he talked about was what to do after you sell your business. He talked a little bit about planning in advance but his advice was take some time off; don’t do anything business wise and that was his mistake looking back. You just had Nate Ginsburg on the podcast to talk about that very same thing if I am right … correct? Mark: Yeah that’s right. So Nate has an interesting story. He sold his business last year; not through us. It wasn’t through a broker. It was a deal that just kind of worked out on its own. But he found himself after that sale questioning what he wanted to do next. It was a lot of this … you’re so used to all this hustle, hustle, hustle, and the next thing you know you’re just kind of left there wondering what is my purpose? What do I enjoy? What I want to be doing next? And so he really went on kind of an almost spiritual journey here of really evaluating how does he want to spend his days, how does he want to spend his time. And he came to the conclusion that he really wants to be someone who shares in helping other entrepreneurs and then also doing some investing as well. So this episode has a lot of layers to it definitely talking a little bit about general entrepreneurship and that drive that we all have to do things and that hustle. But also what do you do when that drive kind of dries up or when you aren’t having that in front of you or maybe you’re hustling for all the wrong reasons. So that’s definitely the topic in this but we also have this interesting wrinkle in here that he’s bought two businesses since then. One of the businesses he didn’t buy entirely. He bought just a portion of it and is more of an investor. And I know a lot of our buyers they ask us about that. Do you have deals where an owner wants to stay the yacht and he’s successfully done this before on deals. We’ve talked a little bit about that as well. So a lot of different layers to this, if you like just general entrepreneurship discussion that’s really where this kind of falls into of entrepreneurship drive, finding your true purpose in life and your work, and purposeful work, and then finally getting into some more creative deals when it comes to acquisitions. Joe: I think it’s always great to hear people’s stories and how they did it. It may not always directly relate to your life and what you’re doing and what your goals are but you can always take bits and pieces of it and leave the rest behind. So let’s go to it. Mark: Yeah absolutely. Let’s go. Mark: Nate thank you so much for joining me. Nate: Thank you for having me. Hello from sunny Los Angeles. Mark: And now you’re actually just up in my neck of the woods up here in Minnesota and normally I would tell anyone hey if you’re up here in Minnesota up in the Twin Cities reach out. You did and I happen to not be here this past week so we missed each other. Nate: Yeah we missed each other but I’m glad to connect now. And yeah Minneapolis is my hometown. I was back … I was in New York for the summer and then attended Burning Man and then after Burning Man I went to Minneapolis to hang with the family and kind of decompress and now I’m on the road again in California and then making my way back towards Asia where I spend a good chunk of the winter. Mark: All right pretty cool. I’ve been following you on Facebook for a little bit now and I’m just kind of looking at some of your Facebook posts especially from your … I think you call it the summer of hustle 2018 New York City. And you talked in a few of your posts about your eagerness just to share some of this stuff that you’re doing as an entrepreneur. And so I thought hey if you want to share we have an audience. Let’s talk, let’s start sharing. Nate: Yeah. Mark: I saw one of the images of you doing a photo shoot, a yoga photo shoot in the middle of the street. Nate: Yeah. I mean … so after I sold the business last year and you know after that I had a lot of these questions around like what to do next and what’s important and what direction do I really want to be going in? And that’s where some of this … it’s got all these questions of what am I good at, what’s my unique ability, all these kind of things and really trying to uncover and understand what I’m best at. How I can add value, what I enjoy, and yes some of the things that I’ve … I mean not that this is totally new or not like new information but just useful to kind of like specify or articulate is that I do … I really enjoy sharing, I enjoy teaching, I enjoy helping others. And so that’s in part of the Facebook stuff of trying to share more and post more and connect and help and inspire. The yoga stuff I’m also really into yoga. I’ve been practicing pretty regularly for the last five or so years. And I was hanging out with a friend of mine in New York who … I mean she has an amazing personal brand and Instagram following of 400,000 people. And she was just kind of encouraging again like you should do this and in the trying to stay with pushing yourself to do things even if they’re a little bit scary. Yeah, I ended up doing this photo shoot in New York. I got some cool pictures in front of the middle of the street doing head stands. It was a little bit scary but also fun and people seem to like it. Mark: It’s pretty fun. It’s fun to kind of troll around and take a look at what you’ve been doing in the past there and like you said pushing yourself which is always fun to talk to people that have been doing that. Let’s back up a little bit, let’s talk about selling your business last year. Was that the first business that you owned or how many businesses have your owned before you sold that business? Nate: Yeah so that’s the first somewhat significant one I’ve … over the last six or whatever years I kind of dabbled in a variety of things. I have actually sold a few small content websites. This was years ago but nothing that significant. And then I got into that business which was e-commerce, Amazon FBA. I guess I got into it three years ago now or four years ago or something and yeah that was the biggest, I made the most money, built into the biggest operation. So then that was the I guess most notable sale but I guess actually though just kind of back up I’ve kind of sold that business twice. And what I mean is I started the business myself three or four years ago and then about a year in I took on an investor partner. My friend and now business partner Travis. So then I sold him 49% of that business which was I guess kind of that type of a sale and then a year later is when we had the opportunity to … again we didn’t sell kind of the whole thing. We sold the USA distribution side which is actually the one that was making basically all the money. And so we sold that which was for just under a million which is kind of what I was kind of posting more or sharing about but then are actually still operating the EU side of that business which at the time that we sold wasn’t at a place or wouldn’t make sense to kind of include in the sale but now hopefully going into next year or maybe Q1 or Q2 next year hopefully we’ll be looking to sell that remaining side. Mark: So how did that work as far as selling just a portion of that? I mean usually, you have these non-compete agreements in place. People typically want you out of the industry that you’re in. So as the owner you know that business … that product really well. Usually, a buyer wants to take over the business and have room to expand and especially with Amazon, it seems like international expansion makes the most sense. So how did you guys … without getting into details you can’t get into how did you structure that? And what was sort of the appeal of that? Nate: Sure. So it’s a good question and yeah I guess I’d say our sale was somewhat not so typical and I guess there’s a lot of different ways that sales wouldn’t be typical but yeah ours was not … this wasn’t like oh we want to … like oh, let’s sell this business and let’s put together a prospectus and let’s contact brokers and contact the buyer. Ours was like … I mean I was catching up with my business partner Travis. I was in Vietnam. It was in the spring of last year. I’m catching up with Travis and so Travis had sold a couple of businesses himself to this big Chinese Amazon selling company and they have software and a big operation. And so Travis had sold some of his businesses to them before. And we were talking and catching up and he just kind of casually mentioned they might be interested in buying more businesses would you want to sell? And long story short I was interested. Three days later I was on a plane to China to meet with them to try to make out this … work out this deal. And yeah we ended up coming to an agreement for the USA side. And it’s kind of interesting and I mean some of this is speculative. I mean I don’t know some of these things for sure as to like what their motivations were but that business was rolled up or had some sort of a merger acquisition with a big publicly traded company shortly following their acquisition of my business or the USA side of my business. And so I think that they were just trying to acquire businesses to build up and show more revenue and sales for their … looking forward to their acquisition merger roll up whatever kind of thing. And so yeah that’s … I mean again I don’t know this for sure but that is kind of my theory or my why I think they were kind of interested which kind of explained the atypical nature and kind of structure of how it played out. Mark: That’s fascinating; right place, right time, and right connections as well. What was your motivation? I mean when Travis came to you and said would you be interested in selling. Did you always plan to sell or was it kind of like he has you know like … it actually doesn’t sound that bad or— Nate: Yeah. Mark: How… why the yes? Nate: So in my experience with e-commerce and especially with a lot of these Amazon FBA businesses … and this is also a motivation for why I sold half of the business to Travis previously and then selling this is like you can do some really impressive revenue numbers and profit numbers. And I say profit in quotes because your profit is generated or on the books it looks like revenue minus cost of goods minus expenses. And let’s say we were selling a lot; 100,000 a month $150,000 a month and then our profit would just say 30% of that or something which is sizable but at the end of every month it’s not like the bank account was going up by X thousand dollars each month. The money comes in it needs to go back out for more inventory or you’re launching a new product and that comes out of pocket. And so when the business really started to take off our sales was growing but my bank account was still not growing like I wanted to. And I was … the reason I guess for those businesses was very financially motivated. Like I’m trying to run this business to fund my life and build some security into my finances. We were selling a lot of stuff and that’s great and we had a lot of profit but it wasn’t like the bank accounts were just kind of stacking. And so with a business like that my kind of thought is that where you really stack your bank account is from some sort of sale opportunity. And that’s what happened when I sold the half of the business to Travis previously that brought in a bunch of money into my bank account and then again selling the half to the Chinese company got money into my bank account. And so yes so that was some of the motivation and yeah I think we just had a good opportunity. I mean there’s a lot of opportunities certainly still there was and is selling on Amazon but there’s also different risks and challenges and I thought that this was a good opportunity to take some more chips off the table and then parlay that as like another step up and step forward for my life career allow me to pursue newer and different and better opportunities. Mark: Yeah and I want to move on to some of that and sort of what happened after but I want to stop real quick and make a point because I think you make a really good point here. You said something that I think people need to keep in mind when you’re looking at a P&L for any business for sale specifically an e-commerce business that’s growing. The profit does not equal capital. It is not the same thing. So if you’re looking at a business that is growing and has $150,000 of profit that’s not necessarily the cash flow; it’s not necessarily 150,000 in positive cash flow. That’s a problem that we see a lot with people growing and when they get to a certain point the same reasons as what you faced you know you’ve been putting in the hustle, hustle, hustle, the business is growing, in some ways it would almost be nice if it leveled off because then you’re not … you just aren’t actually seeing or realize some of that profit as opposed to consistently reinvesting into the company. Nate: And just to kind of add on that I learned … so I had an opportunity to attend this really awesome entrepreneurship summer camp program put on by Simon Black and the guys at Sovereign Man and one of the … I mean I’ve learned a ton from them but one of the points that they hammered home which has really stuck with me is when you’re looking at a business the importance of free cash flow and like free cash flow being really the only thing that is important; it’s not revenue, it’s not profit, it’s free cash flow that’s what’s going to pay back to investors. That’s what’s going to actually go into your pocket. And yeah my Amazon businesses had horrible free cash flow and so having an opportunity to sell that and get the cash part of that motivation. And then also the focus on free cash flow has really been a big driver for the investments that I had ended up making since then. Mark: Alright we’re going to get to those but I want to talk a little bit about the post-sale situation that you find yourself in. Because I tell people this all the time when they’re selling especially their first business; the first thing that’s really taken off and that’s have a plan for after the sale. I know when I sold my first business my plan was look I did it once. I was young. I was like 25, 26, maybe a little bit older than that but it doesn’t matter how old I was, I was pretty stupid because I looked at it and I’m like oh my gosh this is so easy. I tell people how to start businesses. I tell people how to make money and everyone goes off and does it. I was able to do it with this company and then at that first year I struggled. I couldn’t find anything that was actually going to really take hold. I didn’t know what I wanted to do. You had sort of the same situation, not necessarily struggling in finding a new business but kind of understanding purpose. Is that fair? Nate: Yeah I know definitely. I mean it’s crazy the last year or so after selling that business. A lot of new opportunities and also challenges come up and you’ve had … it’s like for a short while after the sale at least for me it’s like ah like everything’s great and you’re just happy this happened. But then I guess pretty quickly after at least for me I can only … I mean I love yoga, I love being healthy and having a healthy lifestyle and that’s great but you can only at least for me that’s only a part of life. And after a period I just get really antsy if I’m not being productive working towards something and figuring out what that is, what’s the next direction? In a lot of ways, it’s like starting over. And so yeah, that was a lot of what kind of followed the sale and what I … so like I’m a people person. I love people. All the best things in my life and opportunities and friends and … it has all happened because of people that I know or had the opportunity to meet and connect with. And so what I tried to do or did is just meet and talk to as many people as possible. And that’s been a big and still is like a driver of … I knew like okay well like I’ve got more time and I’ve got more money and I’ve got more kind of options and so I’m just going to try to meet and connect and talk with as many people as I can. So I went to a bunch of events. I was literally flying around the world meeting up with friends in different places and meeting new people and getting different perspectives. And yeah that was actually something that towards the end … so I sold the business in it was like May. Early May was when it was finalized. I got the money and then a lot of that summer I was flying around. I attended a couple of different events. And by the end of the summer, one of the things I kind of concluded was … it kind of like was a confidence in pursuing more investments. So I want to and can get involved as an investor and that’s what kind of started this deep dive into just what does that even mean, what are the different structures, how can things be structured, where do you find deals, how do you make deals happen. And so that was … yeah, I guess from talking to and meeting a lot of these different people I was kind of able to realize that yes this is a direction that I want to go down. And also it’s just like part of it is confidence of just okay yeah I can do this. I can add value. And yeah, I guess as a first time, investing in a business I don’t know that was definitely something for me. I’m just kind of … you know the confidence of it no like you can do this. Mark: All right let’s jump into that because I think that’s going to be the heart of what we really want to talk about here as well and that is investing in companies. I mean so much of what we do at Quiet Light Brokerage is all about these asset deals. Or if somebody’s selling they’re selling 100% of the company, the business transaction closes, you got one buyer, you have one seller; nice, clean, simple. It sounds to me like you’re doing something a little bit different than that though. You’re investing in companies as opposed to buying a whole or maybe I shouldn’t assume and let you explain a little bit of what you’re doing. Nate: Yeah so it’s … I guess it’s ended up being kind of a combination of both. And I’m not … I think it has benefits of both and I kind of I guess in the two deals that I’ve done the last year have … one of them has been invested in and the other one has been bought outright. But in all of them I have partners. And so I invested with Travis who invested in me. We’ve invested in a business last winter and then also again with another partner we bought outright a business. I mean for me getting involved in a new business it’s a lot of … a lot of this kind of came down to again what am I good at, what do I like, why am I doing this. And with the first business, I guess it’s like a similar kind of a checklist of things of I want to get into a business where I can personally have an impact. I’m not looking to be a passive investor. I’m also definitely not looking to micromanage but I want to be able to help push the business forward and give my capital the biggest chance and boost of having a good return. And so by investing in a business which was like the first one my kind of role is I mean I have somewhat regular communication with the founder and we hop on calls whether it’s every week or every other week and kind of help identify the priorities and make connections and make intros. And so that’s something that I thought that I’d be able to have an impact while not … I didn’t want to buy myself a job. And with any of these things that’s not what I’m looking for. I’m happy to be involved and I want to be involved but I’m also not trying to buy myself a job. And then kind of with the more recent business that we bought outright really like part of the motivation and thinking behind getting involved with that business was that being really intentional about the role that I was going to play. And with that business, I knew I had people on my team from some of the other businesses in the e-com stuff that I knew that I could bring over to kind of plug in to handle some of these different parts of the business that I didn’t want to or wouldn’t be very suited to handle. And so even though we bought outright the business it wasn’t like I was just stepping in myself to kind of operate it. And [inaudible 00:22:17.2] any of the businesses like what I … one of the ways I think that I can add the most value is by kind of assembling the team that is able to run it. And that’s something even with the business that I invested in I’ve been pretty active or my team has been pretty active in hiring new people for the different roles as well as for the business that we actually bought that was really what my role has been is like getting the right people in place to manage their different … the things that they’re better at than I am which then allows me to … I mean I’m more involved with that business than the one that we invested in because Brent is the operator of that and I’m still … I guess let’s say like CEO but I’m not … my role is still more like finding the right people to do their job and helping them as opposed to me more like in the weeds in the operations. Mark: So it’s with the business that you invested in. I have this question from buyers all the time you know do you have people who want to sell just a portion of their company? They’re looking for sort of that role. Do you mind if I ask how you came across this deal? Was this through a broker or a—? Nate: Yeah so that one was through a broker. We bought it on Empire Flippers and was totally … it came out of nowhere honestly. So another rule that I’ve learned from investing or it’s maybe the cardinal rule is like you make your money when you buy not when you sell. And one thing when I was kind of decided that I wanted to invest or buy a business and one of the first things that we started to do was look at all the brokerages. I was looking at yours as well as … just like trying to see what the deals look like. And one thing that we found is that the deals that are … generally, if you find them on a brokerage they’re fairly valued and as would make sense. And not that I’m … I’m not trying to rip anybody off at all but as a buyer I’m looking for the opportunity to buy a good discount or get involved at a discount. Again you make your money when you buy not when you sell. And so that had kind of turned me to look elsewhere for investment opportunities which led to the first investment. And then my business partner Travis, this was a couple of months ago sent this listing. It’s a cryptocurrency publishing website and it was selling at … I mean it was a relatively young site. It was only making money for six months or so which had the multiple low. It was selling at a 22X monthly … last six months monthly profit which I know for an average website business a 3X multiple is somewhat standard. So we were getting it at less than 2X multiple and so that got our attention. And this was listed and then I hopped on a call with the seller two days later and then there were other interested buyers so we just had to move fast and pull the trigger and bought it. So yeah that’s what kind of happened with that one. It just kind of fell into our lap and we thought it was a good opportunity and had to act fast. Mark: Yeah I like the saying that you make money when you buy when you’re investing, you don’t make when you sell. That’s absolutely right. For the seller that was looking to … that you just invested in was he actively looking for that or was it something that you suggested? Nate: Yeah so that one, so kind of back to what I was saying when I first got started interested in buying or investing in businesses the first place that we were looking was the easiest place to look; all these brokerages. And again there’s a lot of great businesses and they’re generally pretty fairly priced and then one of the things I realize is that if I wanted to get the best deals or getting things where I would have opportunities that were not to get into a bidding war with other people I had to find those deals myself. And so that’s kind of what started then. I started like … and part of that all leading into sharing more and sharing my story and going on podcasts and just kind of being intentional to try to develop and build a personal brand so that … so I was doing some of these things last fall and that’s what kind of got the conversation started with Brent and the Amazon advertising business that eventually led to us investing in it. So it wasn’t … he wasn’t looking for … looking to sell, looking for partners. It was like I was kind of starting to share this and we previously had a relationship. I don’t remember exactly how it was brought up. Maybe it was just like hey, by the way, I/we might be interested in investing and partnering up and he was like yeah I would be interested in continuing that discussion with you and Travis to get involved and so that’s what led to that. It wasn’t … they certainly weren’t actively seeking investment. It was more like we … yes, somehow the dots were able to connect with us kind of putting it out there and kind of starting that conversation. Mark: Yeah that’s pretty cool. I know there are probably a lot of buyers out there listening and being slightly jealous that you were able to pull a deal like that off. What does the future hold for you are you going to continue to buy or are you looking for more opportunities to invest? Nate: Yeah definitely. I mean it’s kind of … so it’s come together a little bit in the last couple of months or so but I will say that I … well as a kind of a side tangent personally I got very sidetracked by crypto last winter as many people did and— Mark: Back when it was trading at high levels right? Nate: Right. I mean it was exciting and so when I sold the business last spring I dumped a pretty good chunk of that into bitcoin, ethereum. I was starting and that kind of got me into ICO’s over the last summer which was early enough before the big run up in November-December that come December-January I was way up. Unfortunately, of course, I didn’t cash out at the top but from that then I kind of like … I mean I was kind of going in this direction and I had made this investment in Brent’s business and was generally enjoying that. I’m trying to put myself out there more and find more opportunities. And then this crypto stuff spiked and I kind of put everything on hold. I’m like alright I’m diving in here. I started going to events and flying all around trying to see what’s going on. Then fast forward a couple of months and the market was not where it was in January and some of those same kind of questions came back up of like is this what I want to be doing? What do I want to be doing? What’s important? And it was kind of again like revisiting a lot of these things in direction and what do I want to do. And then this new site became available so we kind of jumped on that. And then the last couple of months have been … I’m kind of happily busy working on that and it gives me stuff to do. And some of the stuff that I’ve learned is that I’m certainly happiest when I have a project. And it’s not … I mean money is important obviously but it’s not just about having as much money. And time is important but you don’t want to have all the time. It’s important. You want to have enough free time. I think balance is really important but also having the balance towards productive work and having a project that you can work on and make progress and connect with people and be excited about is a really … like I’ve realized is maybe the most important factor for just my personal happiness. Anyway so that site came around and I had the opportunity to get involved and I have been working on that and getting the people and pieces in place to keep that moving forward. And that’s kind of solidified what I see as my direction of continuing to find … putting myself out there, sharing more, hopefully attracting new and better opportunities. And when the right opportunities come along and when I have the time and the interest and the right opportunity kind of all lines up get involved with a new business. So that’s sort of where I mean I’m not sure if I’m quite there yet because there’s still quite a bit working out with the crypto site but fast forward a couple of months the idea is to continue to share more, put myself out there, connect more, just really finding opportunities to connect with and help other entrepreneurs as priority. And then also if down the road whether that’s in three months or six months or whatever when I’m looking to make the next investment to bring into the portfolio that also can put me in a position to be able to get access to good deal flow. And then I think the idea is getting involved with more and better businesses and bigger businesses going down the line while also kind of trimming or unloading different ones in the portfolio moving forward to just kind of have a better and especially now focusing on cash flow generating portfolio and moving forward. Mark: Cool. Yeah, the point of while connecting with other people I think people asked me a lot about the team that we built at Quiet Light Brokerage, where did I find some of these people that are working as brokers because as most of the listeners know everyone that works here at Quiet Light were all entrepreneurs. We’ve all started, we’ve all bought, and we’ve all sold our own internet based businesses. And frankly, the resume of my team completely drove some of the things I’ve ever done in my life. And I try to explain I’ve never actually actively recruited any of our guys or Amanda for that matter I’m sorry if I said just guys but the entire team. I haven’t actively recruited anybody. And so the question comes to why, why do they do it? So much of it is exactly what you’re talking about there; being able to connect. Finding that business where you’re passionate about the business itself but also having the ability to connect with other intelligent entrepreneurs who share that same drive, that same desire for life and working in a project working towards and a goal; really, really cool. I think that’s an interesting self-reflection that you’ve kind of come across over the past few years since you sold your last business that that’s what you want to be doing. Have you thought about with the current businesses what you’re going to do if they get to that point where now it’s just another job? Nate: I mean … so I’ve kind of had … so something that I guess I gotten a lot of experience with and that I enjoy has always kind of been hiring in my businesses. And so I know many people kind of struggle with delegating and I think if anything I kind of error too much on the other side where if I ever catch myself doing something or I’m just like why am I doing this, it’s just like as quickly as possible like who can I give this to? How can I find someone else to do this? And so because I’m very mindful and aware of … and increasingly so of what I spend my time on; is this my unique ability? Is this my superpower? Should I be doing this? Again also mindful of balance, like I’m not … there’s a lot of things that I enjoy in my life and there’s a lot of different pieces that I think contribute to having a good life. It’s not just business and so if things are kind of starting to get too time consuming or heavily on the business side or if I find myself kind of doing some things that I don’t think I like I think that even maybe a step before that kind of happening I would kind of be aware and look to delegate that to someone else on my team or find a way to change that situation. Because at this point in my life and career I want to work and I want to be productive but I want to do it in ways where I can have the biggest impact. And I know that there are certain activities where I can have a really big impact and it’s just not like … and I also know that on the other side there are activities that don’t have a big impact and so I’m just trying to focus on the big impact activities and the least amount on the lower ones. And so yeah I would I think maybe a step before it gets to the point where I’m doing all these things I don’t want because I am quite mindful and intentionally thinking about these things I’d kind of like made a strategy or a plan to offload or get some of those things off my responsibility. Mark: Really cool. I love the whole purpose driven entrepreneurship that sort of outlook of things. Nate thanks so much for joining me. I really appreciate it. Nate: Yeah thanks for having. This is a lot of fun and yeah if anybody has questions, comments, ideas, wants to connect like I said I love people, I love connecting with people. Anything I can help with feel free to reach out. My website is nateginsburg.com or nate@nateginsburg.com. If you like inspiration and also yoga balance stuff feel free to check out my Instagram Nate Ginsburg. Yeah, I’m happy to connect and chat. Mark: And you also know quite a bit about Amazon marketing which is actually what we originally were going to talk about but I got sidetracked here but you know this amount about that. Nate: Yeah if anyone is looking or interested in the Amazon space I have a lot of experience there as well as a team with a lot of experience in those things. And yeah I’m broadly open to opportunities and chat. I’m always looking for win-wins and yeah I would love to connect and help if I can. Mark: Alright very good. Hey, thanks, Nate. Nate: Yeah thanks for having me. Links and Resources: Nate’s Website Nate’s Instagram SellerPlex.com

Since 2013 Quiet Light’s average transaction size has grown up to ten times. Back in those days, there were no private equity firms poking around the e-commerce space for these listings. Today it is a completely different story and more often than not we’re seeing private equity firms come into the buyer spectrum. In fact, once a business reaches a certain size, it is more likely than not that a seller’s potential buyer is going to be in the private equity space of the buyer pool. Today we are going to dissect the PE process a bit further. We’ll delve into the process, the advantages and disadvantages, and give a general education on the subject for those who are curious about it how it works. Today’s guest, Brian Rassel, is Vice President of Private Equity with Huron Capital. He’s responsible for sourcing, evaluating, and analyzing investments made by his firm. Brian delves into ways he finds that e-commerce has entered into almost sector of investment that his group is involved in these days. Prior to joining Huron Capital, Brian was an Associate at Prophet, a global growth strategy consulting firm. Prior to Prophet, Brian was a consultant with New England Consulting Group where he led project management in their private equity practice for buy-side clients. Brian is sharing his wealth of private equity experience and how PE is entering more and more into the e-commerce space. Episode Highlights: How Brian defines private equity. How PE funds traditionally start up and get solidified. The difference between small, medium and large equity funds. The holding periods that private equity funds usually need to secure capital. Is PE all about acquiring to grow and sell or is there a category for buy and hold? Do evergreen funds exist? The difference between platform and bolt-on investments. Three things funds do to generate deal flow and types of business spaces they favor. The behind-the-scenes processes of putting a deal together. How many people are involved in the deal on the PE side. The backend investors committee and if that hinders the deal for the seller. Why time commitment is actually a good thing. How many deals Brian’s PE firm evaluates per year. The defined process that gets them through the numbers. The growth potential for e-commerce – multiple appreciations and the role of private equity. Brian frames an ideal acquisition structure based on the general private equity model. Why the buyer/seller fit really matters. How private equity can work for sellers who want to get their business to the next stage. Transcription: Joe: Back in 2013 Mark I closed 23 transactions. It was a busy year for me. Do you have any idea what the average transaction size was? Mark: I … what do I guess? Well, it’s you so I’m going to say like seven million dollars. Joe: I love putting you on the spot because you do it to me all the time. The average transaction size— Mark: You got to be like 250. Joe: It was 125. Mark: Holy cow. Joe: 125; very small. Mark: Okay. Joe: And at that time there were no Private Equity Firms poking around the e-commerce space for these smaller listings. Today it’s a completely different story and my average transaction size was 10 times that last year. And a lot of buyers or a lot of sellers, the question I get asked all the time are who are your buyers? And it’s a mix of everyone but more often than not now we’re seeing Private Equity Firms come into this space. And I understand you had an expert in that area on the podcast. Mark: Yeah private equity is a topic that’s coming up more and more frequently with sellers especially on the higher end of that revenue spectrum that we really work with. And it makes sense because once you get to a certain size of business your buyer is more likely than not going to be at least somewhat in the private equity place … area of the buyer pool. In addition, we’ve talked before … I had Ryan Tansom on and we talked about selling to a strategic buyer versus a marketplace buyer. And obviously, people always look at this especially at the higher ends and say I kind of want to have a strategic buyer. Well, one thing to keep in mind here is that this is kind of a spectrum right? It’s not binary; you’re either strategic or marketplace. But when you get into that private equity world, private equity is almost always going to be something of a strategic play. So I thought … look this private equity world is something that people keep asking about let’s actually start to dissect it a little bit. So Brian and I talked and we spent probably about half of this interview just kind of going over what is private equity. How does that work? What is the definition of this? What are the sizes of it? And really just trying to ask some of those silly questions that maybe you kind of wonder about but don’t want to ask because you don’t want to sound like you don’t know what you’re talking about. And so we went over a bunch of those questions but then we also went over what does the process looked like. What does it look like to sell to a private equity firm? What are the drawbacks to it and what are the benefits of it as well? And really it’s kind of a general education podcast but I think also … and maybe more importantly for those of you out there who are thinking about selling down the road and you’re looking and trying to peg the different values that you want to get from an exit and maybe you think well I want a 10 million dollar exit or a 15 million dollar exit, if you get to that point what’s it going to look like to sell to a private equity and what do you need to do to really make yourself appealing for a Private Equity Firm? And how does the deal change when you’re signed to private equity as well. So we really covered a lot of ground in about 30 minutes. Brian is super knowledgeable obviously. He works in this space. And I really appreciated him coming on the podcast because … again I just downloaded a ton of information. Joe: Well let’s get right to it. Mark: All right Brian thanks for joining me on the podcast. I really appreciate you coming on. Brian: Yeah I know. It’s great to be here. Thanks for hosting. Mark: All right so I don’t expect people to listen … my guests to have listened to the podcast in advance and I know … I don’t know if Joe’s been doing this, he records like 9 out of 10 episodes and I don’t know if he’s continued on the tradition but we like to have our guests introduce themselves mainly because you know your story better than I know your story and I figure it’s a little bit easier. So why don’t you give just kind of a quick 30 second to one minute rundown on who you are? Brian: Yeah I’m Brian Rassel. I’m a vice president with Huron Capital Partners which is a middle market private equity firm based at Detroit Michigan. The firm is 20 years old and has invested in … we’re typically enthralled buyout investors where we’ll buy a majority of a business and have done that through five successive fawns starting back in 1999. And the industries that we play in are business services, consumer, and specialty manufacturing. You know it’d kind of be interesting how I got to know you Mark for those listening is that believe it or not all of those basins are being affected by e-commerce or different kind of SaaS business models that are internet based. And I’m taking it upon myself to maybe be the person of the firm who is trying to understand those influences on all of our companies and make sure that we’re in a position to incorporate those changes that are going on out and new coming at large number and being done by a lot of people who probably listen to your podcast and make sure that we’re bringing more of the [inaudible 00:05:51.4] in the businesses we own so that they can be successful today and be well into the 21st century. Mark: All right, well I got a lot of questions for you because this world of private equity is encroaching or coming into the internet business acquisition world more and more. And whether it’s because at Quiet Light our deal value is moving up or private equity is starting to look at different price ranges and maybe this convergence of these worlds and also private equity looking more in the online space is just becoming an increasing topic that we’re seeing more and more of. We’re also seeing individuals that have started up on their own raising funds to do large acquisitions or to string acquisitions together. Brian: Yeah. Mark: So what I’d like to do and I already kind of told you this in our conversation before I hit record, I’d like to go over some of the basics here of the private equity world and how it looks in the Internet space as well. And then know a little bit more about your fund and some of the things that you guys are doing over there and all that. So a quick shout out to Chris from Centurica and Rhodium I know that we’ve talked about him so much that it’s almost as if he’s a sponsor. He’s not. But this is again how we got introduced. You spoke at the Rhodium and then you and I had a chance to speak after that and a good conversation. So thanks Chris for the introduction again. So let’s start out really really basic here. How do you define private equity? Brian: Private equity is capital … private capital being put to work in private businesses. And so I like to name [inaudible 00:07:22.6] for folks who really don’t know much about it a little quick stat just kind of on the US economy. There are half as many publicly listed companies as there were in 1996 or 1994 something like that. So even if the value of the public markets is larger the amount of places you can park that capital in the public markets is small in the total number of listed names. Private equity is a big part of either big institutionally managed money. Whether that’s from insurance companies, [inaudible 00:07:52.4], pension funds, universities, those kinds of things. This is their way to go participate in the forces of economy that are still private companies that they can’t get access to otherwise unless folks like me help them get access to it. It also includes folks that can kind of go into different flavors of private equity but depending on the size from the bing capitals of the world down to very very small funds that are more entrepreneurial. There’s sort of every flavor under design in certain family offices and other things like that. That would be private equity, pooled private capital going into private businesses. Mark: Well how did these funds start-up traditionally? And I imagine that there’s a lot of ways that they can start up. You’ve listed a number of sources of money and I think sometimes we forget just how much money there is in some of these places. So yeah [crosstalk 00:08:46.6]. Brian: For sure I mean there’s just [crosstalk 00:08:49.4] I’m going to get this off, I’ll be wrong by a hundred billion dollars. But I think something like 600 billion dollars flowed into private equity firms last year. So these … and the source of a fund or the way a fund works is that a fund manager like the folks I work for here where I’m a part of, they go out and they make their pitch about how talented their professionals are and what their track record is and the fact that they can get access to great deal flow and great opportunities, places to put private capital where it will go earn a reasonable return. And they raise this money from these other institutional or independent investors. It could be high in net worth individuals or anybody like that but … so they get started that way. They’ll hold this farm estate back to the 1960s and there are new ones being created all the time. And frankly, as hedge funds have declined I believe in a large way in popularity just because of the efficiency of public markets there’s been more and more money directed towards these private pools of capital and the private equity market. And when I say private equity I mean both kind of traditional buy-out funds for more mature businesses that have healthy positive cash flows on the one hand and on the other hand I mean venture capital is the son segment of private equity. And that might be for really really high growth businesses like the next dewberry of the world or whatever it might be. Mark: Right, absolutely. Okay, that makes a lot of sense. And as far as the breakdown as to sizes what would you consider to be a small private equity firm and what are we talking about in terms of their capitalization rates when they start up? What would be the difference between the small, medium, large type of firms? We can get an idea for how much money we’re actually dealing with? Brian: So I would say just kind of from my understanding again all this caviada being dead this is sort of Brian Rassell’s take on private equity and my interpretation and may not really be the opinions of United Capital, I can only speak for myself as an individual but they have a dedicated fund. And when I say dedicated fund these are groups of people that other folks, other investors have made a promise and a pledge that is legally binding and written their name at the bottom that that dedicated fund, the small one might be 50 million dollars. That’d be very small. Folks who are trying to invest less than that, generally speaking, have something more akin to a pledge fund. They have a number of people that they can pass the hat with to raise money in a deal by deal basis versus having committed capital to go invest in five, six, 10, 12 companies in that particular fawn. So just kind of … back at the envelope type map that you can think of is every firm should have plus or minus roughly 10 investments that have enough diversification in it. So a 50 million dollar fund is looking to put five million dollars to work in the 10 different companies. And that would be the equity capital going to those companies. There’s oftentimes a mix of equity and debt coming into those companies and we could talk about that later. And then a midsize fund might be three or four hundred million up and pawn up to the 2KR’s of the world or Apollo or the very big managers who are doing 15 billion dollar funds and so all different world. Mark: Very. Brian: They’re taking hotels private or something like that. Mark: I was going to say they’re buying something completely different than your Amazon business. Brian: Yeah that’s right. It’s a whole different world. Mark: All right you talked about you have successive funds. In my understanding again is that we go through these rounds of investment that coming up. We had Andy Jones from PrivateEquityInfo.com on and he talked a lot about the holding periods that private equity looks for. Can you just again quickly touch on that? We’re kind of doing private equity 101 here. Brian: Yeah. I didn’t hear Andy’s remarks but just as it relates to a whole period I would think of it just to be linear about it that a private equity firm once our capital is raised [inaudible 00:13:01.9] the time that it takes to raise that money they committed capital or even the past they had capital they’re going to take that money and let’s just use this fictional 50 million dollar fund. And they’ll take something like four years to deploy the first 80% of it. And the goal would be you take 20% of that money and get it into a new platform company. Companies they had no money in before. In the first year or the next year next 20%, next year next 20%, next year next 20% thus 80%. The point at that point you can’t do necessarily new investments you’re reserving that last 20% for either a company that’s struggling that you need to give more money to to keep it going or to do an add on investment to buy something else and add it on to something that’s in the portfolio. That might take four or five years to really deploy the majority of it and then another four to five … you know an investment from year one that you only … you’re exiting that investment three to seven years later and let’s just use five as kind of a round middle of the road number there. So an investment from year one is maybe gone in year six so it’s being harvested. It could be sooner, it could be later. And the investment that was your last platform investment from year four might be heading out the door in year eight or nine. So fund life is something like eight to ten years. It can be longer. And a traditional as you kind of draw it up on the whiteboard like I have behind me here is sort of a five year hold. Now there’s … I’ve seen many that are much much shorter and many that are much much longer but those are the fat parts of the [inaudible 00:14:36.2] if you want. Mark: Sure. So is private equity … is the goal of all private equity companies to grow and sell? So acquire, grow, sell, or are there other strategies? Buy it and hold for long periods of time? Brian: There are certainly evergreen funds out there. They’re much more … when I say evergreen they have the ability to hold and recycle the capital. They may be designed to have heard of a number that has committed capital from particularly family offices that never want to do the tax consequences of becoming liquid in an investment and actually realizing the gains so they’re structured to reinvest the money that they make. Or if they sell something to quickly find someone else new for it to go into. Now that would be a more unique situation. And then certainly family offices there’s a number out there that looks for longer hold periods and there are certain funds that are designed for a longer hold period. Mark: All right so this is going to be again another basic question but I want to make sure our terms are all well-defined here. We hear these terms of platform versus bolt on or add on investments. Just real quick the difference between a platform investment versus a bolt on. Brian: Yeah I’ll just keep it simple. I’ll say anything that is a brand new business, new industry for that firm to go into. They don’t currently own something in that space. Whether that’s a tiny initial acquisition or a big one that would be the platform investment. So let’s just say with a … I don’t know Internet broker pencils, I’m just making this up, all right? And they don’t have any other investments in the internet broker pencils space and they invest in a company in that space that would be the platform [inaudible 00:16:17.1] that. And maybe there are 10 companies that make … that do internet broker pencils and they buy two other ones of their competitors and they make it bigger or somebody [inaudible 00:16:25.3] and now they’re putting it all together those might be add-ons to that original entity that they purchased or recapitalized. That’s what we mean. It doesn’t necessarily have anything to do with size which can be confusing. Sometimes you start with something small and you get the opportunity and do an add-on that’s much bigger than the original investment. So it’s more just where is the starting point in you can do a space or an industry. Mark: And if we think about the terms it makes sense right? Brian: Yeah. Mark: You build on top of the platform and you add-on top of the platform. So it makes … that makes complete sense. Brian: Or bolt-on, yup that’s where the nomenclature comes from. Mark: Or bolt-on, absolutely. It’s amazing when you dig in to definitions it’s like the terms actually have a meaning and it makes sense. Brian: They do. Generally, they come from somewhere. Mark: They come from somewhere. There’s logic to this stuff. I love it. All right so now I’ll get into questions that I’m starting to be genuinely interested in and that is how does a fund develop a thesis or an entire direction to go after a particular platform investment? I mean if you’re selling blue widgets and also if somebody comes and says no you don’t need widgets what you really need are sprockets, if you don’t do anything with sprockets at all how does that enter into a fund’s psyche at all? Brian: There’s really three things that we’re doing here to generate the sort of deal flow and the ideas and spaces we want to go into. So here I’ll speak more from Huron Capital. There are other firms who follow a similar philosophy potentially. So the first is businesses we didn’t know about but are being represented by a broker or an investment banker like yourself Mark who … those are opportunities that are coming to us. They are being listed. They’re being actively shopped around. We may have never thought of the sprocket industry before or we didn’t know too much about it or we read materials on it and we say it has a lot of characteristics and things we like; great cash flow, seems very resilient, seems countercyclical, if the economy goes down it’ll still do well, it’s a leader on its space, any of those kinds of things. Those are opportunities that come to us and that is more of a passive thing. And then we get active once we realize that it fits a lot of criteria and we believe we could be successful with it. And that sets into motion a whole chain of things where we kind of prove out of the pieces that we might like this business and we try to get educated. The second that we spend a lot of time on is networking with executives from a broad, broad variety of industries. Those people know where there are spaces that are changing. And generally speaking, change creates opportunities. Change creates winners on one side and losers on the other side. And less be to the losers but you need that kind of disruption to create any sort of sort interesting investment outcome. The study ID is probably the market’s sufficient enough that the study ID is not going to return the greatest returns. So we’ve spent a lot of time with executives unless I knew them about spaces that could be interesting and trying to listen to areas they know about and start to build some [inaudible 00:19:37.4]. And then even more proactively than that there’s a lot of opportunities where we meet the executive who has a view of one particular thing they want to do here at Huron it’s got a registered trademark or the like of the firm. We call that an exact factor investment where we will actually flip the process and say we really believe in the sprocket industry. We met Phil who is going to be our perspective CEO in the space and he has this vision that is going to totally turn the industry [inaudible 00:20:11.5]. To do that we need to go find the platform, we call that like getting fuel behind the wheel. We need to find a car to fulfill the drive. We believe he’s the best driver in that industry. And we will do all the work, we’ll go write a hundred page white paper on it to prove to our investment committee why it’s such a fabulous opportunity and Phil is the greatest operator in this space. And then we will commit dollars into going and finding businesses in that space and find Phil the car he can drive and we’ll get off to the races that way. So it starts with a commitment from our farms for a certain amount of money behind Phil to go do an acquisition more and more in this space. So it … I guess ranges from that passive we find things and then we get educated too. We educate ourselves as much as possible and align ourselves with an executive who can execute and work the process the other way. Mark: Cool. All right that [inaudible 00:21:04.07]. So let’s talk a little bit about the process that goes on behind the scenes when you are evaluating an opportunity. And I think for a lot of potential sellers this sort of conversation is going to be really insightful. So let’s say we have somebody that they have an e-com business, 30 million in revenue, eight, nine million in earnings on an annual basis and they’ve got a couple of private equity firms looking at their business. Where does that start and what is the process going through? And you can talk about maybe Huron’s process and then if there are variations that you know as well. The number of people that are going to look and touch that deal as it goes through the steps. Brian: Yeah. Mark: What are some of those behind the scenes looks? Brian: Yeah so once you’ve got that moment where there’s a couple of firms interested there’s going to be an incredible amount of information about the business across insurance, benefits, compliance with laws and regulatory statutes, information about the market; anything the business can possibly produce about itself, fairly every file that’s off the shelf that they have, every non-disclosure agreement they have with somebody that they on boarded or employment agreement, every contract they have with a customer, or maybe it’s an industry where you don’t have a lot of contracts with customers but you have a lot of contracts with suppliers. All that information needs to be made available for these perspective buyers to digest. And the more they can be made available, the more that that’s organized into different pockets of legal, employee, insurance, benefits, all of that, the better. It’s going to save the company a lot of time from serving requests versus being proactive by getting that stuff out there. And you know well everything here all the buyers be under a non-disclosure agreement and that’s just a very kind of well-oiled machine around making that information available to give your last few buyers down to the one you would like to choose and have them under a Letter of Intent. And that starts to be an exclusive relationship where the buyer is going to spend a lot of money in due diligence and in exchange for spending that money, they would like the exclusive right to [inaudible 00:23:19.3] business for a period of time. 60 days … 90 days where they engage and here is where it starts to get to be a lot more kind of in your trousers and really analyzing your business but they’re going to engage in quality of earnings earned to go and understand did you actually produce the amount of revenue, if you put it in the right time periods, if you really counted for every cost etcetera. They’re going to engage legal professionals who are going first to sort of just again a full work up of registration, compliance, [inaudible 00:23:51.9] and then those folks are going to work on the actual transaction documents as well as a host of other advisors. And that would be like again a 60 to 90 day process. It could be 30 days on the short end. There are firms who can do it in that time particularly if you’re a smaller business and an add-on to a much larger or a very simple business. Mark: So how many people are we talking about there that are going to be involved in the process? Outside of the consultants like a Q of E … a quality of earnings report that’s going to be an outside accounting firm right? Brian: Yeah. Mark: So we’re not going to— Brian: Okay so from the acquiring firm? Mark: Mm-hmm. And we can start at the beginning. We can start at your interns that are digesting deals. That’s going to be part one. Brian: Sure call it four and they’re going to be answering to the remainder of their firm particularly their investment committee. Ideally, it’s a tighter team and there’s four and if it’s an add-on expect more. So you’ll have the management team of that kind of platform investment as well. So four to eight and then when you get to the advisor well now you’re talking 20 something more. Mark: Right, getting all those outside advisers. Now one of the things I know people get worried about during this process is you start out again with that guy who’s that in deals up front and he sees some he passes it on to the team and they end up liking it so now you’re dealing with a handful of people that are asking the questions digging deep in that due diligence right? Pages and pages of collecting information possibly even submitting an offer because on the surface things look okay. Brian: Yup. Mark: There seems to be these back end investors committee as well which can also kind of wash the deal far in the process. What would you say to people that get kind of frustrated when they hear that and they think do I really want to work with private equity because there are so many people that could potentially disrupt this deal? Brian: So I would think about the time investment to it. So the private equity firm is in no way interested in wasting any of their time. Huron looks at something like little over a thousand deals a year. That takes a lot of time and we’re very thoughtful about moving things to the funnel and connecting our firm’s resources to evaluating an opportunity. So if somebody is spending the time I would tell the listeners that they are encouraged. If everything checks out the way I told to them so far or they’ve written so far about that business then there are absolutely no issues. The firm, an organized and real firm is going to be thoughtful and time is kind of their most valuable resource and they’re set up to be able to make a number of staged gates kind of we’re interested and we’re not interested. We’re interested subject to confirm affirmation I want two and three. And you can have a very quick conversation like you and I are having now to say is this the case is this not the case? Here’s a big concern we have, should we be worried? And they will both take your answer and that gives them that kind of gumption to proceed. And they’ll probably have to go validate that as well later. And that validation just has to support what’s been told to them. But they are also making a big commitment with their time in the same way that the seller is and I would take it as genuine on their part that they’re not looking for it to fall apart. It’s just things do. Certain deals fall apart because new information becomes available. I’ve seen that happen a number of times where the seller learns things about their business or thinks about their business in a way they hadn’t before and can agree that that’s a genuine risk and may be something they want to work out within a course of another year and then they might be back to market. Mark: Yeah, that happens often. We see that all the time even in the amount of work that we put a seller through upfront it pales in comparison to what you guys are going to be doing in your actual dig deep due diligence. And the number of times that we have people come back and tell us that was a lot of work but that was really useful. Brian: Yeah. Mark: I have learned a lot about my own business, right? Brian: Yeah a great advisor like somebody like you and using a broker who’s been through and understands the questions that are going to be asked is going to save a tremendous amount of time. And we call folks like you Mark a river guide we’re using on our side and we love them. Sellers use them too because they’re that much more prepared for the process. Mark: Yeah. And I can tell you like the one thing that … I’m going to play both sides here, I would say the one thing that can be difficult with working with private equity is because there are so many people that can come in with a dissenting viewpoint. You’re not trying to … convince is a bad word but show the opportunity to one person and have them agree to it; you’re having to show a number of people. But the great thing and I love working with private equity on is that it’s completely unemotional throughout the process. Brian: Yeah. Mark: I mean it really is does this check the boxes we needed to check and if it doesn’t we’re going to find out as quick as we can. You said something, I was going to ask this question, you guys evaluate you said about a thousand deals per year? Brian: Yeah the pipeline you think about now it’s working its way down at the top of the funnel and so we’re a thousand and then that’s working its way down to 250 that real solid time is being spent on and then 75 that we’re spending real tons of resources and traveling around to visit them … maybe 80. Now I’ll get these numbers wrong this is kind of directional and then down to the 30 or so that are getting a Letter Of Intention and we’ll close 22 transactions a year. Mark: Yeah so that’s an amazing amount of data to be pulling in. And you guys have criteria at every stage I assume that you’re looking for up front? Brian: That’s right. Mark: Okay. All right that makes sense. Do you publish those criteria? I know we get a lot of just the very broad stuff sent to us. Brian: We don’t only because it’s just so bespoke for every company. There are so many things that really are as you just said that are check the box and we’re highly confident that we will go confirm later. We’re highly confident that’s not an issue and we are trying to get to it very, very quickly. The three or four things we want to make sure are the reasons we’re most excited and confirm that that is factual and that was going to continue. Whatever that might be; on the customer relationship or the recurring purchasing or … whatever it might be. And then at the same time the three or four things that are kind of we’re concerned that could be deal killers. We believe we’re spending the time because we think that’s going to turn out to be true or we need to get to a yes no about is this a real problem very, very quickly. And so you know it’s just they’re different for every business. Mark: Yeah I know a lot of people listening right now you guys are buyers that are out there looking to acquire. So technically Brian you guys are somewhat of competitors although I think that you operate at a range that a lot of our buyers wouldn’t. But I think one thing interesting that they should hear is this idea of having this defined process number one and then number two the amount of deal flow that you have to look at. I’ve talked to buyers that been out there looking for a year, year and a half but then you find out the number of deals that they’re actually looking at doesn’t really … this is a numbers game. I mean it’s purely a numbers game. Brian: It is and one thing I want to say on that numbers game for us and it may be different for some of your buyers or not is that we’re looking for situations that are great for us and we’re also looking for situations where the seller in some ways choosing us. Now I don’t want to overstate that but I do want to say that there has to be a great fit in every piece and why we’re a better owner than someone else for that business. Some angle that we have, some affinity we have for what they do, or some prior experience or something. Otherwise and it could be a little different for particularly small businesses. Maybe it’s a little bit less like that and it doesn’t need as much of the chemistry but that’s a big part of what we’re looking for, for sure. Mark: And we talk about that a lot on these pockets. I know you guys are probably tired of hearing Joe and I talk about the need for a buyer being a good fit. And we talked a lot about this general concept of being likable because sellers do eventually choose and for most of these sellers they do have a choice. I mean right now it’s a seller’s market. They do have a choice of who they’re going to work with. I want to talk about the exciting stuff. Let’s talk about the actual deals; the money. Brian: Sure. Mark: Why is selling to a private equity something that people should be excited about? Brian: I think I spoke a little bit about this at Rhodium but I just … I see then the difference in multiples that are paid for businesses that are exclusively e-commerce or SaaS based businesses. Those multiples are so much lower than what private equity firms are paying for more traditional businesses out in the economy. And I believe that those worlds will come together. And I believe that businesses that are a hybrid of both or have excellence in both and are flipping both worlds are going to be extremely, extremely valuable. Because on the one hand, they have the relevance for the future, it’s coming from kind of the types of businesses that you represent. And also they have that anchor of the traditional business that makes them more under writable and it makes them more predictable because it’s a less dynamic place that they’re out in. And so that’s where I think private equity firms in the coming two, three, four, five years are number one going to become much more comfortable with standalone e-commerce business models that are exclusive that and there are going to be people participating from the much more kind of like formal private equity world participating in your markets. And then I think there’s going to be a convergence where a lot of more traditional business models are going to look for the influence and the DNA as well as the revenue and the profits but the influence and the DNA and the growth that comes from the types of businesses you work with Joe. And I think that means that the market that you’re playing in, the multiples will rise there. For every dollar of earnings they’ll be more valuable in the future and I believe that’s for now in a very significant way in 2018. Mark: Yeah and we talked about this this idea of multiple appreciation that we see. And a lot of it reaches over to the fact that this is where private equity starts to play right? So we often talk if your EBIDTA is less than a million dollars per year the … just again for the sake of a multiple, it’s going to vary for each business but maybe 3 … maybe 3.5 would be the multiple on that EBIDTA depending on the type of business that you have. But once you start getting up into two, three, four million dollars of EBIDTA now we start seeing the multiples jump up in the different ranges. And the reason for this again is that we’re no longer playing as much with an individual investor who really has a much higher risk profile because they don’t necessarily have the entire team behind them or a portfolio behind them to be able to take some of that risk but also get the staff in the background and all the resources in private equity. Brian: Yeah. Mark: So let’s talk … I am not going to pin you down because it would be a really bad idea for you to say hey we generally paid 25x on earnings which I know you don’t. What does a deal structure often look like? Because I know these deals structures do change as well when we’re talking about a private equity acquiring a small company. What does an ideal acquisition look like for you in terms of its structure of cash that the owner is going to be getting, maybe equity or debt that you would hope that they stay around and I’d also like to address the idea that a lot of private equity likes to have or prefers to have an owner stay on board with the new company and why that’s a good thing also for that owner to think about that. So that’s a lot; the general structure, the ideals for a structure. Brian: Okay so let’s keep this out of your space and let’s just talk about the general PE model. When deals were cheaper a couple of years ago you might get a higher ratio of debt than equity in a deal but for this sake, I’m just going to make it 50-50. I think that more reflects the market today in terms of underwriting. But let’s take a deal where a private equity firm is paying at least eight times. That’s still a relatively rich multiple. I could have said six but let’s use eight times. So we’re paying four times the earnings in their own cash that they’re talking and they are going and putting the company on the hook or raising four times and they do it. Private equity firm does it but on behalf of the company of debt for the business to take on. So let’s say it’s a business with 10 million dollars of EBIDTA. So it’s an 80 million dollar transaction and a firm like Huron is putting 40 million of equity and raising 40 million of debt in that transaction. And that 40 million of equity can come either from Huron or some portion of it could be rolled over from the seller. If that seller has no debt on the business today, no capital leases or anything else that could be thought of as indebtedness over the normal trade payables. And in your day to day you’ve got cash coming in and cash going out; that thing that keeps the shop running. And they have no debt on the business theoretically on the day of closing they’re getting a check for 80 million dollars. If they choose to roll over some of that … let’s just say 10% of the purchase price, eight million of it I would argue that a private equity firm or somebody like me would take that as them stating a high degree of confidence in the future of the business that they want to continue participating and have a relatively [inaudible 00:37:34.7] portion of their net worth tied up in that outcome. Or that they see the opportunity to turn that eight million into 16 or whatever it might be that there is a great opportunity to continue driving growth and equity value in that business. They’ll … I start there that the rollover investments are very useful because if you’re saying you want to do no roll over whatsoever and you just want to walk away from the business it’s not conveying a lot of confidence in the future of the business. There are certainly reasons to do that but it’s not conveying a lot of confidence in the future of the business. And where somebody might have been agreeing to pay you eight if you were rolling over and giving that kind of tacit support for the business going over, they might kind of say this is we’re not so sure. It makes them a little more nervous and it might be a seven times deal. So you may actually be shooting yourself in the foot in terms of the total proceeds you perceive. Again so it’s an 80 million dollar deal, 40 million of debt, the seller is choosing to roll over. They got their 80 million dollar check, it doesn’t work like this you’re actually [inaudible 00:28:28.9] but they got their 80 million dollar check and maybe we wrote one back for eight and so Huron holds 32 million of the equity and that seller holds eight million of it. So Huron owns 80% of the business and they own 20% and we’ve got some obligations to pay. That would be kind of the middle of the road structure. There’s certainly a lot more that happens as it relates to creating incentives for management teams and that’s a very, very big part of what we do to make sure that if we do well they do well and vice versa so that we’re all talking in terms of growing the underlying equity value of the business. And that can often be very different for a business that didn’t have that before. And it was just solely kind of the founder driving it or minding the growth of equity value. We believe in creating a broad base of ownership so that we’re all on the same page. Mark: Yeah. Brian: Our management team is on incentives exclusively through their salary or bonus or both. Mark: Right so one of the things that I’ve talked a lot in the past especially on like the main street sort of deals is this almost dichotomy and it really shouldn’t be set up as a dichotomy of a marketplace based sale where you only have an investor looking to acquire business in a strategic sale where you have a company that it would effectively be like an add-on acquisition in your world right? They already have the sort of strategic advantage to acquiring that company. Within your world, it seems like so much of what you do is going to be the strategy based type of acquisition anyways. Brian: Right. Mark: So it’s like you’re not going to do an acquisition unless you think that you have a strategic advantage. And when we … you and I talked out in Las Vegas back last October one thing that you talked about quite a bit was we want to pour gasoline on the fire that’s already existing. So whatever that might be and so as a seller who’s out there thinking about this and saying man I’ve been growing my business like crazy but I’m investing all this cash back into acquiring more inventory and expanding the product line and I’d like to take money off the table and then keep growing it. This is that perfect sort of handoff to a private equity because you can say you know what you [inaudible 00:40:54.0] your income statement rich in cash flow pour. Brian: Yup. Mark: We got cash. We’ll help you out there. You’re going to get some cash on the table and then let’s grow this from a 30 million dollar business to a hundred million dollar business. Brian: Right. Mark: And so there’s an incentive there for that owner to double dip that [inaudible 00:41:11.7]. Brian: Absolutely. Particularly in situations … we see this all the time where additional capital is going to be an accelerant to growth. So capital is what we have and we’re trying to find a smart place to put it work and if that means we can buy a business and continue and support that business with more dollars and we believe in the strategy and what’s going on in the way it’s being operated there’s nothing … that’s the easiest dollar for us to put out versus the whole re-under writing process of a new investment. And then for that seller to have all their eggs in one basket … I don’t care what their life situation is they could be in their 30’s and just want to diversify or they could be somebody who’s looking at kids who are about to go to college and it just doesn’t make sense to have 100% of their net worth or close to it tied up in their business. And if they could diversify a little bit or generate a little bit of cash but their vision hasn’t changed at all that’s a great situation to bring on a strategic partner like a private equity firm. And that’s where that [inaudible 00:42:11.9] fit it really matters and the chemistry between the seller. For the most part, you’re not going to sell it to a private equity firm, they don’t want to be in the business or definitely not in the business of operating these companies. So round the business and investing in them helping to bring the right resources to it and bring the right capital solutions or capital availability all that. Helping them set strategy and all the other things but the actual day to day operations. So it’s not going to be for your sellers or for buyers [inaudible 00:42:45.1] sellers who are looking to exit the business and hand it off somebody else private equity is not going to be the right solution. But for those companies that they either want to go to be a division of something larger and they think they can be a great cross selling opportunity or the way they’ve built their mousetrap if just they had more to sell in the same way, and I’ll say like let’s say you’re the number one muffler seller online and you also want to do transmissions and drive cams and stuff but you don’t have the capital and you don’t have the ability to go source and expand that way, going and selling to a larger entity and being that e-commerce division is a very powerful idea. Or just continue and do your own business and double down … accelerate the organic growth, private equity firm could be a great partner. Mark: Yeah, we’re just about out of time in fact we’ve gone a bit long but one thing I wanted to emphasize here, you said that capital obviously is the resource you guys have and are able to invest and I know a lot of people that I talk to say look I don’t really need money from this, the business is making money and I feel good about this. But what I find when I actually start to dig in with these guys is I say well what would it take to move to that next level. Oh well, I would have to hire out this other division or create this other division and you know okay but what’s the obstacle to that? I don’t want to invest in it. It often comes up. Okay, that’s the area where a firm like yours can also come in and say well look we have the capital to be able to invest in this. You know what you need; do you want to invest in it to get to that next stage? And even if that means bringing in someone and you can help with that let’s do it. Exactly we can do that and we could— Brian: Not to mention that I think we find that often business owners are willing to do one out of their five ideas that are like that and were willing to do all five knowing that three won’t work but two should work out beautifully and we’re willing to go [inaudible 00:44:39.4] the bodies of the business and the capital and have the appetite to take two steps backward to take four forward and understand that they’re not going to all work. And where maybe an independent owner would do those sequentially, try idea one it wasn’t really working, didn’t feel pleased with making that investment and losing that cash flow, fired that new sales person who was supposed to do something else. We’re willing to go do things faster and make sure that that doesn’t hover around in the business and the core of what we’re interested in the first place. And so we’ll work through that with the business owner by giving them that support and the dollars needed to make that happen. Mark: Brian, I really appreciate you taking the time here [inaudible 00:45:19.8] some of the small questions I had but really good to get those things— Brian: No it’s my pleasure. It’s fine. Mark: So thanks again and maybe we’ll have you back again in the future at some point. Brian: That sounds great. Yeah, I enjoyed it. Thanks, Mark.   Links and Resources: https://www.huroncapital.com/member/brian-rassel/ https://www.linkedin.com/in/brianrassel