The Quiet Light Podcast

Merry and Happy Holidays to everyone listening! We thought we would take a chance on this mini-episode to say thanks to everyone who has supported Quiet Light over the past 11 years – especially over the past year with this podcast. We’re also taking this opportunity to go through a year in review and look ahead to 2019. It is truly our pleasure to do what we do and provide you the expertise you need to buy or sell your business. We have plenty more in store in the upcoming year! Episode Highlights: Highlights from the past year. Looking ahead to 2019 with exciting guests queued up. 2018 was a record year for Quiet Light Thanks to all our brokers and veterans at Quiet Light. Quiet Light’s referral program. Hear about surprise guest coming up. Success stories are also coming up on the podcast. Transcription: Mark: Merry Christmas Joe. Joe: Merry Christmas and Happy Holidays to you Mark. Mark: Happy Holidays, thank you for being so politically sensitive. I really appreciate it. To everyone listening, Happy Holidays … Happy New Year. This is Christmas Day when this is being released so if you’re listening to this turn it off, it’s Christmas. Actually, listen for about 10 minutes and then you’re going to turn it off. We’re not going to do a regular podcast episode today because it is Christmas and we want you to be able to spend time with your families and friends. And if you don’t celebrate Christmas be able to take a day off while everybody else does as well. We thought we would take advantage of this episode today just to give a quick thanks to everybody that has supported Quiet Light Brokerage over the past 11 years but especially over the past year that I’ve been supporting this podcast and do a mini year review. So Joe how has your year been? Joe: It’s been fantastic. Yeah, I want to say thank you to everyone as well. Thank you to the folks listening to the podcast. This is our first full year right … 2018 we started late in ’17. The feedback that you’re giving us is fantastic and we feel like the guests that we’ve had on are really helping which is the most important thing. One of the things that I want to do for 2019 and beyond is do some of those sort of under the hood calls like Mike and Dave do and what the Ecom Crew would do for people that are looking for valuations so we can dissect your businesses in recorded calls. Keeping it confidential, not naming the business but having people see what it’s like to go through a valuation because the most important thing I think is to understand what the process is like to someday sell your business. But it’s been a great year. Look we’ve brought Walker Deibel on … Walker and his folks and we like to joke about this recently about Jason’s chops about his Bathroom Millionaire book but Walker is truly a bestselling author. He wrote Buy then Build that launched in the fall; a fantastic guy, honest, hardworking, a great addition to the Quiet Light team and then Brad Wayland as well. Brad is unbelievable in terms of what he’s accomplishing in terms of the volume of transactions and people that he’s helping. These two are going to essentially replace me very quickly in terms of the volume of work that I’ve done over the years. But then the rest of the team is all coming together and we’re just still that. You and I have swapped … talked about boutique brokerage firm. We are in a sense but it’s been a great year where we’ve grown tremendously. Mark: Yeah we don’t publish our numbers. I know this is something that some businesses choose to do to publish their numbers publicly. I’ve always opted not to. No particular reason other than I just haven’t seen the specific advantage compared to some of the drawbacks. But I will say this 2018 was by far a record year for Quiet Light Brokerage. We more than doubled in growth this year in terms of the volume of deals that have been done both in total deal value and also in the revenue that Quiet Light Brokerage has brought on board. A lot of this is due to the new brokers that we brought on board over the past few years. It’s also due to some of the vets that we have on the team now as well such as Amanda and Jason. Joe and I were just talking before this podcast about how nice it is to have those two on board who have been doing such a phenomenal job. For such a long time they seem to understand this industry just instinctively at this point where they know how just to find a good deal. And that’s kind of what being boutique is in a way right? Being able to be selective and knowing what you’re taking on board. And I’d be remiss not to also thank Bryan. Not only is he bringing good deal flow and he does a great job for his clients but he also has been helping Quiet Light here on the backend with some projects to help us get better organized, create better business summaries, in continuous to find ways that we can improve our fishing seas. You know when I started Quiet Light Brokerage … about six months after I started Quiet Light Brokerage I went out and I hired five sales people. And I was just looking for people with sales experience because I thought well we’re selling businesses I need somebody who can sell. And they all flamed out pretty quickly. Some of them had moderate levels of success, some of them flamed out very quickly, and one by one they kind of dropped off. And it wasn’t until Jason came on board and literally bugged me to come on board as a broker that I’d literally stumbled upon this model of having entrepreneurs who have all been there done that and have been successful on their own right. And the result has been pretty amazing because Quiet Light Brokerage is this group of entrepreneurs where I get feedback all the time. Sometimes I really want to tell everyone to shut up but at the end of the day, I get really awesome feedback about what we can do better at Quiet Light. Joe: That feedback is from the brokers, not the buyers and sellers just for clarification purposes. Mark: Yeah, thank you. Buyers and sellers you can tell me anything and please do tell me whatever you want. It’s from the different brokers you know because as entrepreneurs what we do? We always find problems with other people’s businesses or we think how we could run it better. But it’s pretty phenomenal, it’s like a built in board of advisors. Joe: Absolutely. Mark: So yeah and guys like Chuck, he gives us great feedback. And Chuck has been with us for a year and a half then. He’s one of the best connected brokers that we’ve brought on in terms of the industry and the relationships that he has. So you’re absolutely right it’s an incredible team, a board of advisors. Maybe this podcast is turning into a thank you to our team more than anything else. Well, I was actually going to move on from the team because I do want to say thank you to the team. But I just want to say thank you to our past clients and also our buyers and those out there who have been referring business to us. Honestly the referrals, when somebody comes to me and says “Hey I was talking to so and so and they said I should talk to you” it doesn’t even have to be about selling their business, it can just be I have a question about my business. Look that’s completely something where it’s flattering to hear that we’re a referred source. So thank you for thinking of us as a resource. For those of you that are referring potential sellers over to us keep in mind, we actually do have a referral program where you can get paid on that referral. I know most of you … the vast majority of you, you don’t do it because of that because most of you don’t know it exists because we do a terrible job of actually advertising this. But we’ve received lots of referrals from people where we’ve done sent them a referral payment and like woah I didn’t know this was coming. Joe: But you do that intentionally. You don’t advertise it. We don’t put it out there. We don’t have it on the website because it’s kind of fun to have someone refer a client to us, we close that transaction and then we send them a wire form saying “Can you give us your wire details we’re going to send you $23,000?” that’s kind of fun. Maybe it’s selfish on our part and we should talk more about it on the podcast. Hey, we do referrals folks, we pay referral fees. Mark: We do referrals. Just let us know if you give it. Again we know that’s not why you’re doing it. We don’t want you to refer us just for the referral fee we want you to refer us because you think that we’re high quality. So thank you and then also to people that took the survey a few weeks ago, thank you for that as well. That’s the thank you’s unless you have anybody else, Joe. Joe: You know I just looked at Facebook last night and one of our clients posted something of a photo of about five years ago when he was in an airport and he was stuck in the airport with his four year old son and they couldn’t afford the taxi fare to get to where they needed to go. Their flight was canceled and they couldn’t afford to go back somewhere so they stayed in the airport for the night to catch the flight the next morning because they couldn’t afford it. We sold his business for almost 9 million dollars last summer. And for those folks that are in situations like he was 5 years ago stick with it. I had a conversation with somebody this morning that’s throwing their hands up in the air and is about to give up. Stick with it. Have faith. Listen to this podcast and the experts that we bring on, the people that are here to help, our entire team. Have a conversation. Pick up the phone and say I’m not ready to sell but I want to get better where should I go? Who should I talk to? What should I listen to? That’s … strangely enough yes we get paid to do what we do but for me to read that story this summer and know that I had an impact on that person’s life means more to me almost than the job itself. So thank you for allowing us to help you guys make differences in your life and grow and change and impact whether you’re a buyer or a seller because that’s what we’re doing. I think more than anything else Mark is we are having an impact on people’s lives and I get a lot from this. So thank you, everyone. Mark: Absolutely. All right let’s look ahead real quick to 2019 first in terms of the podcast, the podcast we have some good episodes cued up. I know I have a few really exciting guests queued up ready to go including our number one ever listened episode … downloaded episode. I have that guest coming back on for a reappearance just like to try and take the top two episodes. We’ll also be doing an updated SBA in 2019 episodes soon. But I need to get on the calendar still with whoever we’re going to bring on for that episode. And then I have a surprise guest from a pretty big company, founder of a pretty big company and we’re going to get him on board here for an episode which I think will be pretty exciting for everybody listening. Good stuff coming up Joe. I know you probably have a stable of episodes coming up as well. Joe: Yeah I’ve got a few coming on with their success stories either as buyers of businesses that they’ve bought through us and just to look back in the first six months on under ownership, what it’s been like and people that have sold. I want some real actionable items and experiences that they could take away from the podcast. And a little bit more of what you’re talking about, big guests that have big names but I really should inform or impact. You and I on a whim we didn’t have a guest one week and we decided let’s just talk and we ended up talking about the things that can improve or plummet the value of your business and now it’s in the top 10 podcasts. We need to do more things like that that are actionable and that’s one of the goals for 2019. Mark: All right so moving forward we’re getting long on this and I want people to get back to their holidays or if you’re listening to this the day after be able to get back to families affairs. Families are still in town. So I’m going to wrap it up and just say once again thank you for everything. We’re looking forward to 2019 very very much. Our pipelines are very very full so I expect a good amount of deal flow coming out early 2019. Everything continues to seem to be pretty strong right now. Yeah definitely looking for 2019, thank you for 2018 and always feel free to reach out to Joe or myself or any of the members of the team with any sort of feedback; good; bad; otherwise. Direct all bad feedback to Joe all great feedback to me and I think we will be good to go. Joe: All good feedback about me to me that’s fine. Mark: All right very good. Merry Christmas. Happy Holidays. Happy New Year. We will see you guys in the next year.   Links and Resources: https://www.quietlightbrokerage.com/ Listen and suscribe on Itunes  

One of the mistakes people often make when starting their own e-commerce business is they try to make the business an extension of themselves. They don’t build out enough within that extension and therefore don’t build a real business. A real business that is going to be attractive to buyers. Some also make attempts to reject Amazon, feeling they can achieve success with Shopify, Walmart, and other E-commerce channels. Today we are talking with a true Amazon veteran and success story, getting to the truth behind building real e-commerce success, working to build a real and viable business, and why it pays to go to China. Kevin King is an e-commerce entrepreneur’s advisement expert. He teaches to and works with seven to eight-figure companies and speaks at e-conferences all over the world – attending nearly twenty-six events in at least 10 countries in 2018 alone! He runs his own e-commerce site selling his Amazon products, and has developed and guided hundreds of products from inception to market. He’s been in the Amazon Private Label space since 2015. He’s here talking about the Amazon opportunity bubble and how he doesn’t see it popping anytime soon. Episode Highlights: The skyrocket of the Amazon business model and how that model has changed. Kevin shares his tips for doing business right from the start and increasing chances for success. The different ways to approach the Amazon model. Kevin gives us a definition of Amazon Private Label. The number one crucial skill you need to succeed on Amazon. What you really need financially to start a real business. How to find out where the demand is on Amazon. Why being on top of your inventory is vital to your success and how often you should turn your inventory each year. What it really means to build a brand and if brands mean anything to potential buyers. Why Amazon is a great place to launch a product but not to build a brand. Why product choice is the backbone to business success. What to look at when choosing a product to sell. Selling cheap easy turnover items versus high ticket items. The most important thing to do to improve traffic on Amazon. Unless it garners at least 20% of your revenue, multichannel sales don’t increase your chances of finding a buyer. The international factor and branching out to other marketplaces. Kevin’s golden rules for moving a product. How many products are the right amount to have in your portfolio? Where the money is really made in the Amazon space and the importance of how and where to source products. Transcription: Mark: Okay Joe I want to start this off with a question for you. Back when you owned Puristat how long did it take before you realized this is going to be able to grow into something and how long did it take before you turn it into kind of like a real business that could be scaled? Joe: That’s a great question. I wish I had a really good prepared answer for it. Mark: I got you completely unguarded with that. Joe: Yeah. I’m one of those guys that built a business without knowing I could actually sell it. And as you and a lot of folks that know my history I started out on doing radio and direct response and did a TV infomercial and then eventually took it 100% online. But early on in my entrepreneurial career, I did have a sit down with a good friend … a family friend that slapped me upside the head in terms of accounting and I did have my ducks in a row in that sense. And I always built what was a real business so that if I got hit by a bus one of my head people could take over, my wife could take over things of that nature. But it never actually occurred to me until I was emotionally tired that I could sell the business. And then I reached out to a guy named Mark Daoust back in … gosh, 2010 right? Mark: Way too long ago. I think one of the things … one of the problems I see and I’ve seen over the past 11 years with entrepreneurs is we make the business an extension of ourselves; an extension of our personality. And because of that sometimes we don’t really build the business in a way that can be sold and we don’t have intentionality of building something outside of ourselves. And I know you talked to Kevin King who had a lot of suggestions and tips as to how somebody should be building their business for that expansion and again for lack of a better term a real business. Joe: Kevin used the term real business probably 10 times in the first five minutes and he is such an honest straightforward tell it like it is kind of guy that he says you got to build a real business. Grow up build a real business. Don’t be a … build a real business. And he just says it in a way that you just have to go okay he’s right, I need to stop messing around, grow up, and build a real business that is going to be really attractive to buyers when I’m ready to sell. Kevin is one of the few guys that is out there teaching, helping, coaching entrepreneurs build ecommerce businesses with a focus on an eventual exit. He’s got a four year plan in terms of … you know step 1, 2, 3, 4 in terms of year 1, 2, 3, 4 with an exit in mind not that you’re going to exit but that you’re in a position to exit in 48 months. Part of that is giving it enough time to mature and grow and gain value. And he’s a believer as many folks in his position are that a majority of the revenue that an entrepreneur gets to put in their bank account comes upon an exit and that’s a simple matter of math. We hear Scott Deetz talk about that a lot and he’s an advocate of that as well. But I tell you there are … the gurus are a dime a dozen and Kevin has been around a long time. He walks the walk, he talks the talk, he’s a guest podcast on lots of podcasts, AM PM Podcast co-host, and helps out a lot with Helium10. And now he is so sought after. He’s being asked to go and present and speak around the country … around the world and he’s being paid to do it. You and I have to … we have to say can we sponsor and by the way can we speak and we pay them to let us up on stage these people are actually paying Kevin to get up there and talk because the wisdom that he shares is so valuable. Mark: That’s fantastic. I want to get to this, hear what he has to say. I was at a conference a few months ago and there’s a speaker who said … and I’m going to keep this PG even though he wasn’t PG but he said if you want to have a real business you have to do real business stuff. And it’s one of those truisms that is just kind of basic but good to hear once in a while. So I’m interested to hear what Kevin has to say about it and for those listening, I think it would be a good idea to listen to some of the specifics that he gives here and just measure up against what you’re doing right now. Are you doing these things? Have you been doing real business stuff within your business to actually build something that’s real and external? Joe: Perfect let’s go to it. Joe: Hey folks it’s Joe Valley with the Quiet Light Podcast and I have an amazing guest today. His name is Kevin King. Kevin, how are you today? Kevin: I’m doing good Joe. How are you doing? Joe: I’m good man. You’re kind of a legend in this industry now. You’re traveling all over the world speaking at events, getting paid to speak at events, helping 6, 7, 8 figure entrepreneurs build their Amazon businesses. That’s kind of the intro, why don’t you tell us who you are and what you’re all about so the people will understand it directly from you? Kevin: Sure no problem. Yeah, I’ve been doing ecommerce since the 1990. So I go back about 20, 25 years or so since the days before there was even a Google. I’ve been selling ecommerce to my own websites. I started selling on Amazon on around the year 2000 or so and then I’ve been doing the FBA model which most people are familiar with now since 2015. I originally started out doing wholesaling, some arbitrage, and some other stuff on Amazon and still do that through another business. And then I’m also involved in a couple of different training things. So I teach advanced level sellers, 6, 7, 8 figure sellers in the Illuminati Mastermind which I’m mostly training. Like a 3 hour training [inaudible 00:05:54.2] these tactics and techniques for sellers and then we do a live event once a year. It’s a pretty high level live event and then also I have a course called the Freedom Ticket which trains new people on how to sell on Amazon as well as how to have a 7 figure Amazon Business that I do myself and then I’m partners with a couple of other people and a couple of other Amazon businesses. And then I … like you said I speak at a lot of events all over the world for Amazon sellers and ecommerce. Joe: And why don’t you tell us how many you went to so far this year? This is being recorded in late 2018. Kevin: Yeah in 2018 I’m at 26 events so far this year. Joe: And say how many different countries. Kevin: Oh man I haven’t added that up. The number of countries would probably be at least 10. Joe: At least 10. Kevin: So I would actually … it’s a … China, Hong Kong, let’s see … several United States including Hawaii and it’s not another country but Hawaii and then several and Germany, so Germany, London, Greece, Romania, Ukraine, man all over … all over the place. Joe: That’s incredible. And you’re attending and speaking at these as well right? Kevin: That’s correct yeah. Some of them I’m just an attendee but over half of them, I’m actually speaking at. Joe: All right well let’s help the people that are listening, those that have Amazon businesses and those that don’t, those that want to get started. A lot of folks like you and me started off with our own websites and Google AdWords and content development and eventually morphed over to Amazon. I didn’t, I sold my business before you were selling in Amazon but before I realized that Amazon was a tool I could sell on. I sold in 2010. I look back and think man I wish I knew a Kevin King back then. Kevin: Yeah the Amazon space is one of those that … it had a hot wave around 2012 or so. The guys over at Amazing.com kind of set this off where they turned it into a business model and started instead of getting rich in real estate let’s get rich in selling on Amazon. And so they started doing courses and it took off and since then there’s probably about 4 or 500 other people that came out with different courses. And to be frank, most of them suck. The guys at Amazing do a pretty good job and there’s three or four others. I’d like to think that mine is one of the better ones but most of them are people that either isn’t selling on Amazon or tried it and failed or they’re just not very good. So you have to be very very careful out there. It’s become a big industry that is … a lot of people realize they can make more money selling the show than they can selling the gold or whatever or that saying is you know. It’s teaching people how to do it rather than doing it. But the opportunity … so as a result of that a lot of people say hey is this selling on Amazon saturated? Is it too late? Did I miss the boat? I say absolutely not. I think it’s better than ever right now. The difference is it’s no longer an easy game where when 2, 3, 4 years ago it’s pretty easy to just go to Alibaba.com find a product slap your name and logo on it and sell it on Amazon and those days are pretty much gone. It’s a real business now. So if you approach this as a real business and not a get rich quick scheme and not listen to a lot of these course guys that are saying you can quit your job tomorrow and sit on the beach drink margaritas and just check the app and watch the sales come in. But treat it like a real business and keep your job. Don’t quit your job maybe for a year as long as you got money … unless you have a lot of money in the bank saved up that you can live on. But if you treat this like a real business that you can reinvest it there’s no better business out there that has a better return right now. And Joe you know this, you guys broker a bunch of businesses so you see these numbers and you see the guys that do it wrong and the guys that do it right. And like I always say if you take $5,000 and you put that into the best mutual fund on Wall Street in about 3 years you’ll have about 7500 bucks or so roughly on average. If you put $5,000 on an Amazon business and do it right that $5,000 in 3 years can pretty easily turn into about $52,000. So the ROI is tremendous but you got to do it right, you got to treat it like a business. And I always tell people if you’re going to start in this business the thing that you need to do is … I say it’s like a 4 year plan. Year one you’re basically learning and you’re earning. Year two … whether that’s you taking a course from someone that you paid, you’re watching some YouTube videos or whatever you may be doing, you have to be careful though if you’re watching YouTube videos because some of that stuff is out of date or incorrect. So you’re learning and you’re earning. In the 2nd year, you’re optimizing. So maybe you’re adding additional products and additional variations. The 3rd year you’re preparing to sell. You’re getting all your ducks in a row. You’re getting all your financials correct. Hopefully, you’ve been doing this all along but you’re really optimizing your financials and in the 4th year you sell. The best opportunity in this business is not running the business; it’s in selling the business. Because when you sell an Amazon business typically that’s where you’re going to take in over half of your profits. Sometimes as much as 70 or 80% of what you’re going to walk away with from running the business. People would say why the heck would you sell a business if this is such a great opportunity Kevin why the heck would you even sell it? And I say well it’s leverage. I mean there’s no better … that’s how you get ahead. You know in real estate that’s how you get ahead and wherever it is leveraged. Even if you’re making $200,000 a year off this business if you can walk away in one year with a million bucks let’s say in your pocket, you can just turn around, pay off some bills, take a nice vacation, buy the wife a new car, whatever you want to do and then start over again. And I know a lot of people that are on their 3rd Amazon based business right now. I know a guy that sold his first one in a year for half a million. He sold his 2nd one for 7.5 million. Now it’s the third one. I know another couple, a really nice husband and wife team that just recently sold one for 4 million, got a multiple of almost 4.2 and their next goal is 2021 to sell it for 10 … the next one for 10 million. So it’s a great way to do that. Joe: [inaudible 00:11:38.6] them the skill set. You know the folks that I talk to they build these and then we sell them for them. Once they’ve got that skill set they can go back to the well. They can go back to the Amazon well and build another brand because they understand it. But let’s throw some chips out there. You said you could turn 5,000 into 50 in 4 years. We’ve seen 5,000 turned into several million in 4 years. How much would you recommend to the newbies that are out there and what I want to do here is give some tips from you the expert. I get so much misinformation out there. I want you to talk about a few tips that newer folks should do so that it increases their success level. And then to those folks that are out there doing it now some of the things that you may be able to call from your travels and your experience that are new that are completely different than they were maybe even just 12 months ago. But how much money do you think somebody at a minimum should start off with and should they be focused on branding, wholesaling, arbitrage … what is your opinion on what they should do to get started and increase their chances of success so that they can have that big exit down the road? Kevin: Well I can say this 11 different ways to skin the Amazon cat. You can make money off affiliate market by doing wholesale, by doing retail, arbitrage, online arbitrage and there are several other ways. The best way, in my opinion, is private label. It has the most opportunity and the best margin. So if you’re looking to maximize your return you should really look at the private label side. Joe: Let’s define that if you would please? Kevin: Sure. Joe: Just for the new ones starting off. Kevin: The private label is where you’re actually basically creating a brand … attempting to create a brand or you’re actually taking products that already exist, maybe modifying them slightly and putting your name on it. It’s kind of like if you go to the supermarket and you look at that ketchup, there’s Heinz ketchup which everybody knows that do all the advertising and right next to it is the local store brand, Safeway, Kroger, whatever it may be brand of ketchup which often comes off the same factory. And it’s often the exact same materials they just has a different name on it usually at a slightly lower price. Joe: Right. Kevin: So that’s private label. So the idea behind the private label is to go onto Amazon use a lot of these tools, these 3rd party software tools, find the opportunities, and that could be either based on keywords or it could be based on complaints and customer reviews and you can fix the problem and you can come in and compete. The Amazon business itself is the number one most crucial skill you need to have is mass. This business is all about numbers and so if you’re not a numbers person you need someone on your team that is a numbers person. It’s not something where you get emotional and hey I built a better mousetrap or I’ve made a new invention. I mean there are opportunities there if you have a new invention or you have a new idea but there has to be the demand. And the beauty about Amazon and selling on Amazon is it’s a huge laboratory. I mean with 550 million or so products on there most of them with a review someone with thousands of reviews. It’s a great laboratory. I mean companies 10, 15 years ago used to have to do focused group marketing and all kinds of expensive research just to get this kind of feedback and it’s publicly freely available right now to anybody that wants it. So you can go in there and if you know how to mine this data you can find major opportunities. And so you want to look … it’s all about math. So back on how much should you start with you know that depends. I recommend you have at least 5 to $10,000. I mean you hear stories of people start with 100 bucks or 500 bucks but usually they may have started with 100 bucks but what they don’t tell you is that a week later they borrowed 50,000 from their rich uncle. They have these rags to riches story where they get terms from their supplier, there’s something else to it. You can’t start with it, I mean you could start arbitrage with a 100 bucks if you’re going to grow a real business you need money. You can start a business with a thousand or a hundred … hundred to a thousand but it’s going to be a really slow build. So the more you have the faster you can go. So what I always say is if you going to start this business how much do you need? You need 2 ½ times your initial inventory investment. So if your first round of products is going to cost you let’s say $4,000 to have made. So you’re buying 1,000 units of something. That means you can basically spend about $4 per unit landed cost. Landed cost means the cost to manufacture the item whether that’s in the United States or in China plus the cost to ship it and if you’re importing it all the taxes and shipping cost that’s basically landed in the Amazon warehouse. So you need 2 ½ times that. That means you need about $10,000 to start the business. If you don’t have $10,000 you need to find a different type of product to sell. If you only have 5,000 good, do the math and you have to find some things you can buy for about $2,000; your initial inventory. Joe: So if you’re buying 1000 pieces at 4,000 bucks what’s the other 6,000 for? Kevin: The other 6,000 is because in this business it’s a very cash intensive business. So if you’re successful you’re most likely going to have to be buying your 2nd round of inventory before you sold your 1st and probably before you’ve even paid for your 1st in full. So you’re going to need … the worst thing you can do on Amazon is to run out of stocks. If you run out of stocks on Amazon for more than a few days you’re basically starting over. That’s the death. Now 90% of people that start selling on Amazon fail or they take a course either they don’t launch or they fail because they don’t do the math right. They don’t plan it properly. They don’t pick products that are within their budget that they can maintain, that they can sustain. And in the other … you know in this case of the 4,000 so you might need another 4,000 to place your 2nd order and then the other 2,000 is for advertising cost. You might need some software, some other miscellaneous things. That’s the bare minimum. In my opinion, it’s better to have a better cushion than that but that would be the bare minimum. And then it’s all about math. It’s all about looking at keyword demand. It’s not trying to invent something new, that’s kick starter or that’s … you know there are other business models for if you have something that’s brand new that you want to do. But the best opportunity is to look at the demand on Amazon. Use these keyword tools. See what people are searching for, what they’re buying, what they’re complaining about, and go in and either make a slightly different product of that or fix the problem that people are complaining about and then come out with something. And so that that’s why I say it’s all math. It’s all about the financial side which most people are not good at and the forecasting and it’s all about the keyword and the demand side. And there are some great tools out there … 3rd party tools that have come a long way in the last 3 years that can really help you with it. But most people that even are paying for these tools … you know they’re paying 100 bucks for a tool like Helium 10 for example that’s one of the better tools out there. A lot of people don’t even know how to use the tools. It’s kind of like they have a nice race car with all these gizmos and buttons and all these kinds of things that they can do to really race down the track at 200 miles per hour but they’re just putting along at 40 miles an hour. So master these tools and learn these tools and you can do really well. Joe: Okay and that’s the 1st year really the mastery of those types of tools and things of that nature. Kevin: Correct. Joe: Got you and we say a lot of the same things. I put myself on mute because I’m struggling because we’re doing … one of the things I’m always saying is that and I’m actually doing a presentation next week and its, if you want to increase the value of your business in the year before you sell, don’t run out of inventory. You know that it’s going to kill maybe certain things in terms of momentum on Amazon. I know that when you run out of inventory it reduces your revenue and your profit and that times your multiple is going to be the loss on your business value. I just said a lot. It probably doesn’t make sense to most but just don’t run out of inventory. Do what you can; beg, borrow, steal, hillock, line of credit, credit cards, whatever it takes if you’ve got a good solid business. As far as the brand sell or the private label do you recommend and do you prefer seeing people picking a category, let’s say they’re going to … okay, I’m going to invent a new … I’m not going to invent, I’m going to build a better mousetrap and it’s a swimming pool cover and then all of the additional products evolve around swimming pools or do you think you find that great product there and then you do this search for the next great product and it may not be related at all? Kevin: I think there are two different ways to do that. I mean one is if building a brand is difficult, building a brand it’s not just sticking your name and your label on something. A lot of people think that’s a brand. They think that if I create a logo and stick my name on my pool cover I, therefore, have a brand and I have a bunch of pool and that’s not true. Brand is an identity. It’s something that people relate to. It’s like … you know think of Apple, people are lining up to get the new iPhone. It’s a certain cool you know Apple came out with that thing differently you know that it’s almost like a … it’s hard to build a brand and I don’t think Amazon is the place to build a brand in my opinion. I think Amazon is a great launching … if building a brand is your strategy that’s awesome and Amazon can be a great place to launch because the marketplace is already there. The view about Amazon is they already have a huge audience and just all these cool tools that you can use to figure out how to reach them. If you go out and you build your own Shopify site or your own ecommerce store you’ve got to figure out how they bring the traffic there. You’ve got to start doing Facebook ads, email list, PR, whatever it may be to bring the traffic there versus on Amazon you don’t have to do that it’s already coming. You’ll only use outside traffic … if you have to use outside traffic to drive sales on Amazon you’re doing something wrong. In my opinion, the only time you should use outside traffic to drive sales on Amazon is when you’re doing a launch. If you’re launching a new product and you need it to kind of influence the algorithm, that makes perfect sense and you should do that. But if you’re heavily weighted on driving outside traffic from Facebook and you’re sending it to Amazon just to make sales on Amazon then you shouldn’t be doing it. You should have sent that to your own store because when you send someone from Facebook to Amazon they’re not … they don’t become your customer. They’re not identifying with your brand, they’re identifying with the Amazon brand. They’re buying because it’s Amazon, they get it in a day or two. They trust Amazon. They know that it’s easy to return blah blah blah. In most cases, they don’t really care about your brand. So if you’re trying to build a brand you need to drive it to your own store. But using Amazon as a launch pad because it has a built in traffic and then you could use the data you get from Amazon you can refine your product get it fixed get that good feedback and then take that data from Amazon even as a 3rd party seller you can create what’s called [inaudible 00:21:36.9] and all kinds of stuff on Facebook and then go out and build a brand that would identify more with you. And I think the best opportunity to build brands using Amazon is on consumables … on people … maybe it’s dog treats or supplements or something like that where people will come in over and over and over. But if you’re selling pool covers … building a brand is difficult so what I tell people is still trying to really build a brand initially that may come and evolve into that is more build … go after an avatar. So rather than just trying to be the guy doing all the pool supplies, to give yourself the best opportunity on Amazon so you’re not stuck in a niche. I mean if you go after the pool supplies and you’re doing pool covers and pool chemicals and pool everything else you’re kind of stuck there. You’re like okay what else can I find in a pool category versus if you go after an avatar and you pick a person … let’s say it’s a runner. I’m going to go after an athlete, people who love to run outdoors, then you can actually go across multiple categories and you can do something like something in electronics category that’s a fitness tracker or a band to hold your iPhone on your arm or whatever and you could do socks and you could do water bottles. You can get across over all these different categories and you open yourself up to more opportunity. Or you can just … you know some people they don’t care; it’s just the shotgun approach. It’s like I just find opportunities I don’t care it’s just cash flow. Typically if you have a brand it depends on the buyer. Some buyers actually really value that and they’ll pay a higher multiple for that if you’re planning on selling. Others don’t care they just want the cash flow. So it depends and so when you’re 1st starting you might just … I don’t know that you need to think about that because it’s going to evolve. Most people their 1st or 2nd product doesn’t succeed, it’s more of a learn … some people get lucky and it does but you can ask most big sellers that are doing 7, 8, 9 figures a year and they’ll say yeah my 1st one it just I don’t sell it anymore it didn’t work. So I would get too stuck at that in the beginning. I would just keep going and then it’s going to come to you. You’re going to start seeing the opportunities and you’ll be able to drive off. Joe: I got you, great information. It totally makes sense, the avatar and being able to say okay I’ll do a running … people that are running. And it could be men, women, it could be kids. Again the products breath and depth is really really broad and deep as opposed to limiting to grilling products or swimming pool products. Kevin: Not to say you can’t do that, I mean you can do that but I think the opportunity is better if you go towards an avatar rather than just a niche. Joe: Yup, got it. I love it. Let’s talk about for those that are listening to this podcast Kevin obviously they can tell you know what you’re talking about. They probably already know your name and have seen your presentations. What things are you doing and are your 7 and 8 figure friends doing that is new and different and must be done to help take things to the next level? What kind of tidbits can you share there? Kevin: Well the number one thing is to me the thing I’ve learned in this business is it’s not about profit; it’s about ROI if you’re trying to grow a business. When I 1st started I was looking at products that would have nice profit margins. You hear people sometimes on Facebook say I’ve got 40, 50, 60% profit margins and those cases do exist rarely but I used to say bullshit on most of those people. The average in a private label business is between about 20 and 30% if you’re doing things right. Joe: Let’s call that seller’s discretionary earnings for everybody listening that’s … it’s you run a net profit and you run a profit loss in Quick Books you get net profit on the bottom then we’re going to add back those owner benefits like your salary like your meals and entertainment like your travel and things that nature that are not business related. So your net income plus your add backs equals your seller’s discretionary earnings that’s what we’re talking about. Kevin: Now once you do your add backs that could go a little bit higher. I’m talking about just on the books you know when you when you are factoring it all your cost is about 20 to 30% on private label. On wholesale, it’s closer to the 10 to 15% range. Joe: Right. Kevin: And wholesale businesses are a little bit harder to sell because you don’t have really a brand. You’re just selling other people’s products. You don’t have anything proprietary so they’re a little bit harder to sell that’s why I also said private labels is one of the better ones. So let’s say it’s in that 20 to 30% that’s average, some people are higher than that some people are lower. But if you’re in that 20 or 30% net you’re doing okay for the most part. But what I used to do is when I was … it’s … this business is all about choosing products. The product is the backbone of it. That’s where it has a stone in a walk for a lot of people is they’re afraid to pull the trigger because they’re like I only have 5 grand or 10 grand to start, did I pick the right product. And sometimes they get paralysis by analysis and they just don’t move forward. But when you’re choosing a product I used to look at the profit margins. I’d find a crate maker for example as one of my old products and you know it had about a 40% margin from what I could buy it from landed and from what I was selling it from and I was like okay this is great but the problem was I was ordering … I ordered 1,000 of them and it took me about 6 months to sell those 1,000. And then I ordered another 1,000 and it took me about 5 months to sell the next thousand. So that’s a turnover a little over 2 times per year. So I had a great profit on it but it was tying up my cash tying up my money and so ROI to me is the most important by far number in this business as you want to look at when you’re sourcing products is what kind of return on investment. And that’s basically how fast can you get your money back. And so I looked for ROI’s of at least 150% or greater on everything I do now. And that basically means how many times … if I have and maybe a lower profit margin. Instead of the 40% profit margin, I may have a 25% profit margin. But if I have 150% ROI I’m working and turning that money and that inventory much much faster. And I can grow a lot quicker without having additional outside capital, without having to go into my RA or whatever it may be, or take expensive loans that are out there and you can grow your business faster. So by picking high ROI products, you have a greater chance to success. For example, I recommend you at least turn your inventory 4 times a year in an Amazon business. So it’s basically every 3 months you need to be turning your inventory. Ideally 6 to 8. Some people you know a supplements business are at 12 or more. Just by example Walmart stores, their average inventory turnover is 8.3. So 8.3 times per year they’re selling through their entire inventory. That’s a critical number when choosing products and when choosing things to do in my opinion. So one of the bigger opportunities right now in the space is in the high ticket expensive items because all these courses out there they teach you find something if it fits in a shoe box it’s lightweight weighs less, it’s cost less than $20, it’s easy to source you can buy in for a buck or 2 in China and sell them for 20 bucks on Amazon and the problem is that everybody is there. That’s where everybody goes, that’s where all the courses … everybody finds the same products, the same weighted blankets, the same barbecue gloves, the same stuff and only a few of those people succeed. And so if you go outside the box and look at the more expensive stuff maybe you don’t have to buy a thousand units of them, you only have to buy some things that sell 5 per day but they’re selling for $300 versus things that sell 50 per day and they’re selling it at $20. You could make a lot more money on these more expensive things. And some people shy away from that because sometimes it’s a little bit more of an investment to get into it. But there’s great great opportunity there. And the other problem right now is what’s happened with all the low end stuff is the Chinese hackers … most of them are Chinese, there are some that are Russian and Eastern European but the vast majority are Chinese and it’s crazy what’s happening out there. There are leaks inside of Amazon where these guys over in China can get the actual data straight from Amazon, the actual conversion data, the actual … they’re doing all kinds of crazy stuff; hardcore competition and its part of their culture to do this. And most people don’t … aren’t aware of what’s happening and your chances of competing on that lower end are getting harder and harder and harder because of all this. Joe: So you recommend to start off that way or you’re thinking in terms of larger people … larger account owners to move into that category where its a larger ticket item and a high ROI? Kevin: Both. Joe: Both? Kevin: Yeah, both. Joe: Okay, you mentioned that if you’re sending traffic to your Amazon store from Facebook you’re doing something wrong on your Amazon … inside your Amazon seller account. What tools can be done what … and maybe it’s all basics, Kevin, maybe this isn’t anything new but what are the most important things to do to make sure you’re improving your traffic on Amazon as much as possible or is it a combination of a number of different things? Kevin: I mean if you’re a brand that already exists up there Amazon should just be a channel for you. You already have your own store. You’re already selling in retail Amazon is just a channel so that’s a little bit different approach. But if Amazon … if you’re starting this business and Amazon is your primary focus at the beginning which is what most people are doing now that they’re doing FBA business, Amazon is their primary focus in the beginning and that’s great and people always say you shouldn’t be an Amazon only business. You should be off Amazon and I agree with that but … and you could probably tell me more about this but my experience Joe in the valuations people always say well I don’t want to just sell on Amazon. What if Amazon shuts my account down? Amazon likes to shoot 1st and ask questions later and then I’m screwed. I need to be selling on Walmart. I need to be selling on Jet. I need to have my own Shopify site. But most people, the vast majority of people that’s a very small percentage of their sales and from my experience, unless it’s 20 or 30% between … you know most people say about 30 % maybe you have a better number of your sales it doesn’t really add to your valuation. If you got a sale or a buyer coming in if you got 2% of your sales in Walmart or [inaudible 00:30:59.9] if you get shut down on Amazon so what you’re still screwed you got to fire everybody. And so most people it’s hard to make that adjustment so my advice is if you’re going to be starting on Amazon take advantage of the platform. There’s never been a better opportunity. It’s one of the best business opportunities in the last 100 years of business to start selling on Amazon. And like I said earlier if you’re trying to build a brand then use that data and there are ways to do that to then start going off Amazon especially if you’re on the consumables side. But I think you’re better off taking that same energy that you’re trying to put into building a Shopify site or trying to launch on Walmart to go expand to Canada, go expand to Europe, or go expand to Japan. You’re much better off. You’re going to get a better valuation. Canada is like 5% of my sales compared to the US but that’s 2 ½ times what my sales in Walmart are and it’s easy. It’s same format. I already know how to do it. It’s natural and most people are afraid to do that. They’re afraid of other countries or they’re afraid of other tax systems or they’re … whatever. And its ego based. I want to be saying I sold on Walmart or I had my own site … it’s bad. Joe: Yeah a lot of the folks that you and I know that are buying up Amazon businesses; one of the 1st things they do is take them international. They buy them and take them overseas. Let’s talk about that for a minute- Kevin: But a lot of people don’t do that because it’s … you’re basically doubling your investment. Let’s say you want to go to Europe- Joe: They don’t have the capital. Kevin: Most people in this business are cash strapped and that’s where the opportunity right now is it’s like the people that you just said that you know and that I know that are buying these, they’re coming in with money and they see the opportunity and they come into play. And at first most of these entrepreneurs they use their life savings or … and then some to try to build this and they’re cash strapped so they can’t … I mean to go over to Europe you’re basically okay now I got to buy all new inventory and float it and they can’t do it. Joe: Yeah the people that are buying businesses like this that are coming into the entrepreneurial world for the 1st time say it’s great why in the world are they selling? And I always have to ask that question on what they need to understand and what they’re learning by going through the process is that most of these businesses whether it’s a Shopify store or an Amazon business even those that I’ve sold in the past that are a combination of both and have a utility patent. It’s still bootstrapped and most of the money being made is going back into inventory to keep up with growth. And they’re not able to pull a whole lot out and so they’re bootstrapping. And they don’t expand overseas because they don’t have any more places to dip into to pull more money. So somebody coming in from the outside that has that extra working capital and a mindset to take it beyond the 4 hour workweek and run it as you said a dozen times already as a real business and grow it into the different countries and take it beyond a one channel platform and beyond Amazon. You can take it to different countries and it’s going to increase your value; it is when you could take it beyond into building that brand off of Amazon into different platform it builds your value even more. But you’re got to be challenged. You got to look at that and say okay what … how long am I going to be in this game and how much am I going to invest in terms of time, energy, resources, risk into building a Shopify store and generating traffic to it. If you’re going to sell in 6 months for those that are listening and you hear Kevin’s advice you know multichannel he’s right but every story is different and unique. You don’t want to build a Shopify store and start driving traffic to it and investing a lot of money in breaking even or losing for 3 years down the road if you’re going to sell in 6 months. My advice is to do what you do and do it really well. Keep selling on Amazon and make that business strong and have some built in path to grow. Kevin: Another one too besides Europe I mean like … or expanding to other market … I mean Amazon’s into what 13 marketplaces now? But besides expanding to other marketplaces the other opportunity that’s out there is … it goes again back again that gets cash strapped is retail. I mean retail is not dead. I mean there are all these stories about retail is dead and tears is going out of business and Radio Shack went out of business and blah, blah, blah. They didn’t adapt. Amazon is going into retail. They’ve bought whole foods. They’re opening retail Amazon Go’s. They’re opening these 4 star stores out. They’re going … retail is not dead. It’s still 90% of all sales out there and it’s going to probably remain at above 80% for the next several decades. I mean ecommerce is gaining on … it’s going to take a bigger share but so going into retail using Amazon as a proven ground is a great way to get into retail too. Joe: How do you make that leap though in Amazon? How do you go okay I’m going to go into retail? Is there a Helium 10 for retail? Kevin: No there’s not a Helium 10 for retail, it’s a whole different animal. You’re just saying about the opportunities outside of Amazon is I agree going to Amazon … other Amazon Marketplace is first should be your top priority if you can. But going into retail I know several people that have started on Amazon and now they’re crushing it in retail. But that’s … again that’s another cash flow thing you know you’ve got to … it’s a whole different animal. There’s people that teach … like Karen Waksman stuff that teaches actually people how to go from Amazon to retail and how to get into retail and how to use your Amazon reviews and sales and demographics. And you have this data like look you know I have a lot of people in New York or these areas and you have 27 Target stores right here you know you should be tearing my products. There’s a lot you can do there but it’s it takes again it’s another financial thing. You got to wait 60 days or more to get paid or you got to use factoring to factor invoices and brief purchase orders and so it’s a whole different animal but there’s great opportunity there too. Joe: But it’s also as you’re saying it’s more cash but it’s also math figuring that out and pulling that data out of Amazon. A lot of people have trouble just pulling the data out. Kevin: Yeah they can’t that’s why I said in the beginning, this is math. If you’re not good at math or data analysis you need someone on your team that is. This business is not about … I see so many people go like I improved the product, I made it better, I know my product is good people should just buy it. If the demand is not there, if the data doesn’t work, the analyst … there’s too much competition you can’t … you don’t have the margins you’ve got to bail. To me, people get too emotionally tied to products and then it becomes their little baby and they don’t want to abandon their child. Sometimes you’ve got to kick the kid out of the house. So many people won’t do that. I have a rule that after 6 months … I get a product 6 months that I launch. When I launch a new product under my account if within 6 months it’s not throwing off at least $2,000 a month in profit, I drop the product because I can deploy that capital in a better way. And so I have … you know some people their business models add, add, add products they got hundreds or thousands of products in their portfolio, mine is not that. I have about 15 to 20 and I do 7 figures so it’s manageable. And I kick out once that I replace them with something that can give me a better … it’s like stocks you know. I treat products like stocks. And I look at them like stocks, where can I get the best return? And get rid of the low performing ones and replace them, deploy that money into getting something that’s higher return. Joe: Let’s talk about that just for a minute. We’re running a little short on time but I want to touch on new products and staying relevant. And it’s going to different for each one. But we’re talking now about again the people that are buying the Amazon businesses and one of the great things they can do if they’ve got capital is to expand to the other countries. What about launching new products is there any methodology to how often you should launch a new product? Or should you just adopt what you’ve talked about which is it needs to kick off this amount of profit or I get rid of it? And how many can you manage and the folks that you know that are doing … are they doing 10, 15, 20; what are they doing? Kevin: It depends on your … I know people that have 800 products doing 9 figures a year and I know people … typically the people that are doing 9 figures a year have a lot of products. The people that are doing 6 and 7 figures typically … I mean some of them have a lot of products some of them has 50, 60, 70 products. That seems to be kind of a ballpark range. For these guys there in the million dollar figures, they typically are in the probably at least 40, 50 products and then some thousands of products. But as far as launching new products it’s all based on the more products you can launch the better you can grow, its cash flow and its opportunities. I see opportunities all the time when I’m doing keyword research and product research and I can’t act on it I just don’t have the money or I don’t have the resources. I’m a small team you know. Some people have 20 people and they could deploy faster. They’re sitting in their underwear in their house and it’s just them and a couple of VA’s. So you’re limited by that as well. So it depends on your strategy and your resources how fast you could deploy but as you see opportunities and they still exist out there and there are still new ones coming up every day is taking advantage of those depends on your cash and your team size. And the more of them you can take advantage of the faster you could grow and the more you could sell for. But the money in this business too, one of the important point I want to make is I truly believe that money is made in the sourcing, not on the selling. A lot of people always go what can I sell the product for? It’s not what you can sell it for it’s what you can source it for. Because you have more price … you’re more immune to price competition that way. If everybody is going to Alibaba or global sources or online Google and stuff and just by example you know I just went to China. I went to the Canton fair and there are some socks that a friend of mine sold last year and sold like six … $700,000 for these socks Christmas time and they were paying something like 2 bucks a pair for these socks. Well I found those exact same socks by just going to the Canton fair at 57 cents. You’re not going to find that online so most people that are out there doing Amazon they’re sourcing online. They’re using Alibaba, they’re using global sources, my saying is get on a freaking plane and go to China. Because going in face to face you can … it’s a big deal in their culture and you could find a lot of stuff that just doesn’t exist. I found one supplier of these like Christmas bags that I was like okay great you have a lot of bags I might want to sell these next year as a seasonal item. I said can I go to your website? He said no I don’t have a website, oh if you have a catalog … no, I don’t have a catalog. I said so how do I order from you? He said take pictures. He had 10,000 different types of bags. Take a picture of what you want here and I’ll give you a price, that and the prices were ridiculously low from what I could find on Alibaba. Joe: Sounds like an awful and wonderful- Kevin: So I’m like this is the best opportunity ever because nobody else is going to find this guy. His quality is good, the prices are ridiculous. So that’s what I mean the money is made in the sourcing. So if someone else … if I buy a box of socks for example if someone else … you know if I’m buying them at 57 cents and someone else comes in and I’m selling mine say for 10 bucks and all of a sudden someone comes in and starts selling them for 5 bucks. Well, I’m like shoot if I got to go to 4.99 to compete and I’m paying 2 bucks there what my margin maybe I’m going in the hole even after the Amazon fees and everything. Because typically it’s about a 3rd a 3rd a 3rd … I mean just as a … if you’re doing math, get math, ballpark math Amazon typically takes about a 3rd of the selling price, about a 3rd of the selling price is your cost of goods sold and other expenses, and about 3rd is your profit. So I don’t [inaudible 00:41:52.6] 5 bucks there went all my profit but if I’m at 57 cents I can still compete. So that’s what I mean the money is in the sourcing and so don’t be afraid to get on a plane and go to one of these big fairs in China. Go visit factories that can make a huge difference. And people that are selling, you know the biggest thing that they’re already successful the number one thing you can do is if you’re sourcing from China especially is get on a plane and go meet your factory. Go eat strange bugs and weird stuff and monkey hearts and whatever the hell else they eat crazy stuff over there and get drunk with the supplier and watch what happens to your pricing. Watch what happens to your terms. All of a sudden 30% down 70% on delivery all of a sudden maybe you get a 60 day terms or you get some other things that can make a huge difference in your business and the pricing is lower. Now you’re their buddy you get priority on the production line when it’s Christmas time or before Chinese New Year your stuff goes out first. It’s amazing what you can do on the sourcing side. Joe: Wow Kevin that’s incredible stuff, a lot of tidbits there. Incredible; really, thank you. I understand why you’re traveling all over the world speaking and presenting here. If people want to reach out to you and find you how do they go about doing that? Kevin: Yeah sure I mean the probably easiest way is to go to AMZmarketer.com That’s A – M – Zed Marketer.com that just redirects to my Facebook page where you can … I don’t sell you anything there. It’s just where you can listen to all the different podcasts I’ve been on; a lot of free content. You might get some ideas or learn something. Or if you’re already selling at IlluminatiMastermind.com or if you’re new to the business and I always recommend this to people … if you’re new to the business or even if you’ve been selling for a while go to FreedomTicket.com there’s a webinar there. It’s about a two hour webinar it’s … you could choose a date on auto replay. It’s not live right now but just watch that. You don’t have to buy the course if you don’t want to but just watch the first hour of that webinar and I think you’ll walk away from that. It’s not a sales pitch in the first hour. It’s a lot of hard core data on how to choose the keywords, how to do things right in this business and just … it’s hard core training and just watch that and that might help you understand some stuff. Joe: That sounds great. I hope a lot of people will do that. Those people that are currently running their Amazon businesses and plan to exit someday and the people that are buying we want them to be successful and grow their businesses and come back and sell them someday so that’s awesome. Thanks so much, Kevin. I appreciate your time. I look forward to seeing you at the next event. Kevin: Cool, I appreciate it. Thanks. Links and Resources: AMZMarketer.comIlluminatiMastermind.comFreedomTicket.com  

Bill D’Alessandro believes that one of the most fulfilling things in life is working on hard things with smart people. The allure of the 4-hour work-week mentality can easily take over when starting out as an ecommerce entrepreneur, but might not be the smartest tactic for all businesses. There is now a trend gearing businesses towards something more lasting. Bill was living the 4-hour work week dream until he decided to change it up and “grow up” in his business. Since having made the decision to hire, Bill has seen business grow as his company, Element Brands, grows. He’s now able to step away less often but more easily because he runs his business with quality people, that he pays well, and who are motivated to help him grow. Bill is based in Charlotte, North Carolina and currently owns a portfolio of nearly 10 e-commerce sites primarily focused on household goods and personal care. Though Bill started the entrepreneur life as a digital nomad, he recently made the the switch to a corporate warehouse/office location in Charlotte and has 22 full time employees. Episode Highlights: The building of the Elements portfolio and how that process came about. Using in-house vs. a broker for brand acquisition. How Bill came to the choice of creating this more traditional business style. What Bill’s typical day is like. An example of when an employee saved Bill money as a result of their loyalty to the company. How the structure allows Bill to disconnect thanks to the competent team he has in place. Tips on hiring, vetting, and finding the cream of the crop. Bill’s own hiring process. Preferences for outsourcing people vs in-house training them. Noncompetes Bill has in place and how they work well for him. There are plenty of people out there interested in not being entrepreneurs but are interested in helping build great brands. Transcription: Mark: Okay one of the most popular business books that I can remember coming out in the past 15 years has been the 4-Hour Workweek by Tim Ferriss. And I’m going to admit I was a little annoyed when this book came out because all of a sudden everybody tried to become Tim Ferriss juniors where they were having their 2-hours per week that they were setting aside to answer e-mails and take phone calls. And so if I needed to reach out to them they would explain to me … they would say well I only answer e-mails during this time or I only take phone calls during this time and of course if it didn’t work with my schedule tough luck because they had their 4-hour workweek and they only had half of that dedicated to e-mails. And I think a lot of people went to that 4-hour workweek. During that time there was this allure of I can sit on the beach, I can take vacations and have this business that’s completely automated. That still has some allure today but more and more I hear people talking about being grownups in their business. Changing the way that they’re going about their business, hiring staffs instead of just doing pure outsourcing, building something that’s a little bit more lasting than what we’ve seen with some of that 4-hour workweek sort of business structure. So, Joe, I know you talked to a friend of ours Bill D’Alessandro. He was living that dream of the 4-hour workweek for a long time and then so to speak and Bill I would not say that you are a kid by any means but he grew up in business. Joe: Yeah, he did and let me say right now folks that I’m having my house power washed so you’re going to hear the people in the background. Mark: That’s why I was talking so long I was hoping that it would stop but it did not stop. Joe: We’re all entrepreneurs, right? Life of an entrepreneur, I’m working from home. These guys already took a lunch break and they’re back and so you’re going to hear them every now and then. Anyway lunch … I had lunch with Bill D’Alessandro. He lives in Charlotte … I live just north of Charlotte a couple of months ago and we were talking … Bill just got married and we were talking about the honeymoon and he said yeah no it was great because I hardly checked in. I was gone for two weeks and I hardly checked in at all. And then he goes back when I was a digital nomad I went to the same country, the same beach, but I felt like I had to work all the time because it was me and me only. I had to tell my VAs what to do and I had to do certain things every day. On this vacation I turned it all off because I had good quality people working for me, running my business while I was away on my honeymoon and I was making money. And it just sort of clicked. Like you said, you just said grown up right? And that’s really… I mean it is what it is but you don’t mean it to be and I don’t mean it to be offensive to those that choose not to run a business that way. I’ve sold many businesses where there’s one owner operator and that’s it doing his thing. Look at that you can actually see the people power washing in my window in the background. Mark: You know what it looks like? It looks like a scene from Oceans 12 where the guys on the background can really be is just setting up a big con on you Joe. You better look out. I hope you did a background check on these guys. Joe: It’s hilarious they actually have giant trash bags on and just the holes cut out for the sleeves. And literally, I’ve got a house … the entire house right now they’re choosing to do right in front of my office in the windows outside. So if you want to see it and see the trash bag folks go to the actual video instead of just listening to the audio. Mark: And we’ll make sure we put this one video up; at least this clip. Joe: At least this clip. Anyway, it just sort of … it was an epiphany with … Bill has an interesting story. I first learned about him back in 2015 in Savannah at the eCommerceFuel event and Darren was there with us; Darren Harden a former broker at Quiet Light. [inaudible 00:04:19.8] Joe you got to meet this guy he’s raised like 20 million dollars and he’s building a portfolio of e-commerce companies. I don’t know if that dollar amount was right. I didn’t feel the need to ask but I got a tour of Bill’s facility down there in Charlotte. He’s got an actual warehouse. He ships it all himself. He’s got rack space, he’s got staff, he’s got warehouse employees that he pays really well and they found ways to make him more money by cutting costs. And that’s really what this is all about, it doesn’t make sense to outsource all of this stuff two of 3PL, two VAs or does it make more sense for you in your business to bring it out in-house and run it and go to work every day, take vacations and not worry about it because you’ve got good people in place to do the job for you. Mark: Yeah, he talked on this topic if I remember right at eCommerceFuel last year and let’s give a shout out to Andrew Youderian from eCommerceFuel Live. Anybody that is in e-commerce I always recommend, take a look at eCommerceFuel as a community to join. That’s a fantastic community. But he gave this talk in eCommerceFuel Live and I remember being struck by it because it was something that we haven’t been hearing. And I’m going to double down on what you said, Joe, if you choose that lifestyle sort of business which was the business where you are running just remotely and maybe not four hours but maybe eight hours a week that’s a really good and viable option as well. I think a lot depends on your personal priorities but sometimes we’d look down at those businesses that require an office and going in and having employees and stuff like that. It is a really good alternative as well for a lot of people. I’m interested to listen to this one. Again hear what Bill has to say about this and kind of how he made that transition over to a fully staffed business. Joe: I’ll tell you right now there’s no doubt we’ll have Bill back on some day and we’ll be talking about his 50, 60, 70 million dollar exit because that’s the path that he’s going down. Now quickly before we go to that Mark we talked about eCommerceFuel, we talked about Rhodium, right now I’ll just name three or four other conferences that we’re going to and then we’ll go right to the podcast. Mark: We can actually name them. So Prosper Show is coming up if you do anything with Amazon … that’s in March and if you do anything with Amazon go to Prosper Show for sure. We’re going to have a presence at T&C at Traffic & Conversion. Joe: San Diego in February. Mark: That’s right and then we’re going to be doing Blue Ribbon Mastermind with Ezra Firestone; an awesome marketer. Everybody knows who Ezra is. We’re going to be at that event as well. Joe: Miami in January, there’s one more in there right? Mark: Capitalism.com absolutely … Ryan Moran’s conference. We’re going to be there and I’m looking forward to that as well. That’s in Texas right? Joe: Yes, it’s going to be in Dallas. So we’ve had Ryan on, we’ve had Ezra on, we’ve had [inaudible 00:07:01.8] on, we’ve had James on; we’ve had them all on. They’re great folks and we’ll be at each of those conferences and we’d love to get together with you guys for dinner, for an event that we might put on, something along those lines. Please let us know if you’re going to go to those conferences so we can connect. Mark: Sounds great. Joe: All right, off to the podcast. Joe: Hey, folks, it’s Joe Valley from Quiet Light Brokerage and on today’s podcast, I’ve got Bill D’Alessandro. A lot of folks from eCommerceFuel know Bill very well. Bill is from the Charlotte area right here in North Carolina and owns a portfolio of e-commerce sites and is a regular guest on the eCommerceFuel podcast. Bill, how are you today? Bill: Doing well Joe. Good to see you, man. Joe: You too man, you too. So I saw you a couple of months ago, I got a nice tour of the warehouse and you’re moving to a much much bigger one. And we talked a little bit about your experience and what you’ve gone through over the last several years but I want you to tell the folks that are listening who you are and what you do and give them a little bit of background. So we can start with that and then we’ll go from there. Bill: Yeah, sure. So for the folks that don’t know me … Hi, my name is Bill D’Alessandro. I’m the CEO and founder of Elements Brands. Elements Brands is a portfolio of consumer products brands. We focus on what we call household goods and personal care. So that’s everything from sunscreen, shampoo, body lotion, lip balm, laundry detergent; all sorts of things like that. We own nine brands today and are under LOI to acquire a 10th. I started life as sort of your classic 4-hour workweek digital nomad entrepreneur but since then the business has evolved and I’ve kind of made a conscious choice. And now we’re located … Elements Brands is located in Charlotte, North Carolina. We have as of this day of recording 22 full time employees and growing. And as Joe mentioned we are moving into a new 51,000 square foot office/warehouse kind of facility. So it’s a far cry from my early digital nomad days. Joe: Yeah, it’s definitely a far cry but one of the things that was interesting is that you kind of have more freedom in terms of when you want to take off from work. You can take off, turn your phone off and you’ve got a great staff there. So let’s talk a little bit about that. I want to talk a little first though Bill about how you managed to build a portfolio of nine brands and you’ve got one under LOI. Did you start with one small brand and kept adding them on? Did you raise some funds? Did you go to family and friends? How did that work out for you? What was your process? Bill: Yeah. So I started the 1st brand in 2010. I got it up to low hundreds of thousands of revenue; basically just enough to fund my digital nomad lifestyle. And at that point … you know I kind of did that for a while, and I realized that as I wrote on my blog Thailand will not make you happy. And I realize that it was fun but you go to Thailand, you sit on the beach and you’re still you. You’re sitting with you on the beach and all of your hopes, dreams, aspirations, problems, demons; all those things come with you to Thailand. And I also felt like I was kind of wasting my potential. So I thought all right how do I make this thing a lot bigger? And I come from an investment banking and M&A background so my thinking was I know how to run an e-commerce brand, I also know there are a bunch of people out there selling e-commerce brands, why don’t I go buy … I mean roll them up onto a single platform. So that led to our 1st acquisition in 2013 for which I basically used my entire life savings at the time and borrowed some money. And we bought that company and then in 2015 basically based on cash flow from the 1st one and we bought the 2nd one in 2015. And then we bought two in 2016. Then we bought another one in 2017. And then as I mentioned we’ll do another acquisition this year. So … and then also I was fortunate enough doing work with you to sell one of my other distracting side businesses too so I can focus on Elements Brands full time. Joe: Yeah. You know it’s funny because I don’t think we’ve mentioned that at all when we had lunch a few weeks ago. You’ve built these brands and we have a relationship … Quiet Light Brokerage is a business brokerage firm but we haven’t sold any of these to you. You’ve sourced most of these deals on your own through building networks and buying smaller troubled brands and turning them around directly for the most case wouldn’t you say? Bill: Yeah for the most part we … you’re always number one in my heart Joe but we do talk occasionally with some other brokers who shall not be named. And we also have fulltime staff here at Elements that is going out calling brands all the time to see if they’re interested in selling and to see if Elements Brands would be a good home for them. I have a guy and he’s an ex private equity guy and he spends his all day every day talking to new brands. Joe: So let me say right now, anybody that’s listening, you can go to ElementsBrands.com and find Bill and his staff. If you’ve got a household brand of … what size Bill? Does it matter what size if they’ve got something that might be a good fit do you think they should reach it out to you? Bill: Yes, so we look at basically between half a million to a million in revenue in the low end to probably about 10 million on revenue on the high end. Joe: Got you. Now if you want to save Bill the trouble call me and I’ll put together a great package and then I’ll call Bill. Bill: Exactly which we actually love Joe. Because on a lot of times when the seller does have a broker, it makes the whole thing go a lot more smoothly so call Joe first. Joe: The guys at 101 commerce, RJ Jalichandra from 101, they’re buying literally 101 FBA businesses. He said the same thing on a panel of buyers a couple of months ago at the Brand Builders Summit. He said look we’ve done this, we’ve done a lot, we’d prefer to work with a broker because all the vetting is done, the package is put together. It makes our buying process much smoother and much quicker. So please go with a broker and they’re going to choose a select few that they’ll work with and that’s it. It does make it quicker for you guys for sure. Why don’t we talk about a little bit of the advantages of a guy like yourself who I have to classify as a grown up in a sense. And I say that in the nicest possible way in putting myself down because I’m sitting here in my home office and I have no employees. None of us do at Quiet Light. We’re all independent contractors brokering from different parts of the country in some cases we all live here talking to Bryan. He’s usually in a different location. You, on the other hand, you’ve got 21, 22 employees that you are responsible for. You have a warehouse, you have offices. You are building a real business that maybe someday components of it will be sold off to private equity or the entire thing will be. How was that choice other than you just saying you’re limiting your potential by not doing it, how has that choice come to and what has it been like for your lifestyle as opposed to that 4-hour workweek that you started off with. Bill: Yeah so it was very intentional. I’m sitting here in my office right now and to my left here are 22 folks. I’ve just got my door closed in recording with you but I come in every day. I’m in typically before nine o’clock and I leave at six-ish. I take lunch. I only work about a mile off from my house. I kind of … the realization came to me while I was doing the digital nomad thing that one of the most fulfilling things in life is working on the hard things with smart people. And you know just as humans we love to solve hard challenges and it’s really rewarding to succeed with other people. And I realize that as a digital nomad a lot of the times I was working with VAs or contractors who were basically just pictures on Upwork profiles to simplify but I didn’t really have a relationship with these people and they … even if I had a full time VA I couldn’t grab a beer with them after work. And frankly when you’re hiring VAs oftentimes you’re operating on a shoestring and there’s a language barrier and you’re generally … and I will generalize here but I will say if you are operating a whole business on VAs and you may love your VAs but there’s a whole other level of caliber of employee that is out there that you’ve closed yourself off to because you’re not willing to give them a W2 and health insurance and their office that they’re meant to. A lot of really really brilliant people want that. Joe: Can you give an example of that? I know that we talked a little bit about your warehouse workers and how you pay them higher than average, there’s no turnover and they find ways to save you money and increase your profit. Can you give an example of maybe what we talked about there? I don’t remember the specific details … a thing to do with honestly this cardboard boxes so- Bill: Yeah. Joe: [inaudible 00:15:12.13] I might have tuned out a little but the overall picture was you took care of your people and you paid them well. They appreciated it and I think that they saved you a fair amount of money just by being loyal to you. Bill: Yeah so Joe what you’re referring to is we do all of our own warehouse and logistic. So instead of using a 3PL, we’ve got a warehouse and we’ve got a crew here that packs boxes. We ship them out of here. And if I talk to other e-commerce entrepreneurs either A. they outsourced their 3PL and complain about how much their 3PL sucks. Or they operate their own warehouse and complain about turnover and how hard it is to manage a warehouse. So going into it we pay our folks here in the warehouse easily 30 to 40 or more percent more than the minimum wage that they can get somewhere else. And occasionally we bring temps in and they go oh my God for less money I was putting chickens in bags in an unconditioned warehouse last week this is amazing. And we’ve had … unfortunate to say because we pay well we have had zero turnovers in our warehouse. And our warehouse crew they’re not packing Elements Brands orders in between packing other companies orders. So they’re thinking about our problems all day. And we had our warehouse manager, she came to me and said I’ve been looking at the way all the laundry detergent comes in on pallets and I think it’s not optimal. If we switch from eight packs to 12 packs I can fit X% more bags on a pallet and stack it higher and use more the footprint and it’s going to save us 20 plus percent shipping per bag. And we did it and we saved five figures because of that. And a 3PL would never do that for you or a VA that is not physically present could never see that stuff and even notice it. What I love about having employees is having people that think about Elements Brands all day every day. Like they think about it in the shower, think about it on their commute to work, like it’s the thing that they do. It’s their job and their career and they want to be good at it so I just love it a lot. Joe: So by taking care of them and putting a good environment together, a good employment package for them what does it do for you and the other folks that are focused on building the brands and building a larger portfolio? Are you able to put more focus on that and less nitty gritty on some of the other things? Bill: Yeah I mean I at this point … so I just went on my honeymoon that for two weeks we went ironically to Thailand. Joe: You sat on the beach but you weren’t alone, that’s good. Bill: Yeah so I’m not alone I was [inaudible 00:17:39.6] yeah thanks. And while I was there you know I was halfway around the world and spotty cell service and I was basically fully disconnected and the team ran the business in a fully … to use a digital nomad term fully automated way. But it’s not automated because I’ve got 22 people that come in here and they want to be good at their jobs. And they’ve got their own managers who come in to work every day and see them and if they don’t come and there’s … everybody says hey where are you I didn’t see you today, is your stock end gone? So for me, I found that when I was working with VAs because there is no senior person who the buck stops with, that person is you. You can never really unplug. You might be able to travel or you might be able to unplug for a week but when you unplug for a week everything kind of stops; like nothing moves forward. It might be in stasis but nothing moves forward. So when I was gone for two weeks I came back and we had launched the targeting marketing campaigns and we wrote a new product and it had progressed pipe on. Stuff actually moves forward without me because we’ve got senior people with accountability and a bonus structure that incentivizes them. As such they come into work every day without me. So I think in a way being really committed and put down some roots and commit to not just being in one place but also commit to your people they commit back to you and it lets you have even more freedom than if you pursued this digital nomad thing hardcore. Joe: And the reality is that it’s not just the digital nomad thing where you’re having more freedom because you’re not doing that. You can disconnect and recuperate on your honeymoon in Thailand on the beach for instance. But the beautiful thing is that while you are away you’re not stressed about it and other people are working hard to make money for you. Bill: Yeah. Joe: They’re getting paid for it and getting paid well for but that’s really truly a beautiful thing. So you have 21, 22 people on staff. That can be one of the hardest things to do; it’s to find good people. Do you have any secrets or tips on your process on how to find the right people and your interview process or techniques or just vetting them in getting to the cream of the crop? Bill: Yeah so as you alluded to hiring is the most important thing in business. And the more people I hire the more I realize how critical it is. Like the bigger, we get every time we hire somebody if I introduce one toxic person or one slacker into this group it poisons the whole well. So it gets harder and harder to get a job here as we get bigger and bigger which I don’t know if I would get hired at my own company today. So we do a series of written application with there are some gotchas in there where you have to follow directions extremely precisely and if you don’t you are disqualified. If you make it through the written application without stepping in it you get a phone screen. I try to keep those phone screens to 15, 20 minutes and during that time what I’m trying to figure out is A. do you really want this job or do you just apply to everything on the internet, B. are your salary expectations in line with what we intend to pay for this job, and C. are you somebody just off the top that I think has a positive personality that I want to work with. And you can do that in 15, 20 minutes if you would cut out the small talk; if you get right to it. Joe: And are you making every hiring decision or do you do the initial vetting or somebody else does it? Bill: So it used to be that I did everything. Now where at a point where my employees do the written application, phone screen, and the next bit of the process is a written assignment where it will say like in the case of if we’re hiring somebody to work on Amazon we’ll say here’s one of our Asense what do you think could be improved? No length limit, go and we’ll see when you get back. Or if we’re hiring a graphic designer we’ll say something like make an info graphic about go … something anybody can do, something that’s pretty broad but you’re going to know if somebody is a good graphic designer based on the effort that they put in and then the quality of that work output. And make sure homework assignments are good we typically bring in two to four for in person interviews and I sit in on the in person interview. And if you do well in the in person interview you’re hired. And my message to the team is I’m never going to tell you we have … I’m never going to force you to hire someone you don’t want to work with but I might veto somebody that I don’t think is right for the company. Joe: Okay, so you get that certain veto power for sure. If they’re not reporting directly to you, you let others make the decisions. Bill: Well up to the final interview, yes. Joe: Up to the final interview; got you. So if you’re sitting with a group of e-commerce entrepreneurs that have physical products are you generally advocating bringing on staff and having your own warehouse as opposed to outsourcing or are you simply saying it’s got to be right for you and you got to do what’s right for your situation? Bill: Different models are good for different people. I think the … what I see myself as doing and the model that I’ve become convinced is very good in a lot of situations and people don’t fully give a fair shape to is hiring full time employees and not hiring gig based contractors. And those full time employees … I think it’s awesome if they’re in the same physical location as you but even if they’re not, if they’re full time and you have video with them one on one every day and you create this personal relationship such that they don’t have any other clients and such that they begin to build up a confidence about your business so you don’t have to explain to them the task you want done at the beginning of every task. You want to build up this surf of confidence where they just know about your business and you can say hey do that and so much as widen it because they already work for you. So what I tend to advocate for is people really want to create this web of outsourcers or gig based people, I can say find a person … like you probably live in a town or near a town of a sizable amount of people and sizeable would be 100,000 or 200,000. Try to find somebody … consider finding somebody locally that’s talented that’s not a bottom of the barrel price type of person. Find a quality person locally and it will unlock you as a CEO because your time is way too valuable to be spent typing into at a box on Upwork in describing to someone how they should scrape locations from a website that you should not be doing that. So if you’re willing to pay somebody $50,000 a year which if you’re in the in the freelance world they’re like holy crap it is like [inaudible 00:23:49.8] the money, right? But $50,000 a year buys you a college educated American in your town likely or less even who is probably pretty smart and got a good GPA. And he will come in every day and you can teach them. That’s a good requirement. Joe: And be very very well. What about finding experts in certain areas that may not be available in your town? If you want to outsource your Facebook advertising and your Google advertising are you training and doing that in-house and putting them through courses and programs or are you hiring agencies to do that type of work? Bill: Yeah, so we … the answer is both with the preference for hiring and training. So when we’re absolutely pinched we use agencies but we have hired and trained a bunch of people in Amazon specifically. I’ve put people through courses on Amazon. I put people through courses on Facebook ads. I put people through courses on YouTube because if you hire a smart person who did well in school you just say guess what this is graduate degree. I’m going to spend a couple thousand dollars, I’m going to put you through these courses, and I’m going to train you then on the fly. You’re going to do … you’re going to learn for 4 hours in the course and you’re going to learn from the person you report to for 4 hours a day and before you know it you’re up the curve in a month, maybe two. I find about two months is before is the curve until someone can be dangerous. Joe: Is there any particular online programs and courses that you always dwell that you go to? Bill: I’ve used Ezra’s courses a fair bit; Ezra Firestone. I’ve used the guys at amazing.com, they operate a 40 bucks a month kind of subscription and there’s a bunch of courses in there so I picked out a few. I’ve used the copyrighting course by [inaudible 00:25:29.4] for some people to just kind of learn and write e-commerce copy that converts. Those are ones that come to mind. Joe: Yeah for the folks that are- Bill: I basically look- Joe: I’m sorry Ezra’s course is the Smart Marketer. We sat Ezra on the podcast. We actually just had a podcast go off, it will be a few weeks back once this airs with Bret Curry who created another course with Ezra on monetizing YouTube; smartmarketer.com you can find a lot of great courses there. I’m sorry, continue. Bill: There are others but if you invest a couple of thousand dollars in hiring someone you can create talent that you can’t find in almost any city. I mean we live in this world where there is incredible amount of information available on the Internet in courses and it’s relatively cheap. I mean a few grand you can … if you … people complain oh there’s no Amazon expert, you can’t hire them anywhere. Well, you can you should train them though. Joe: I love what you just said; you can create talent that you can’t find by spending a couple thousand dollars on a course and finding the right person to go through it essentially getting their graduate degree. And you know what it does? It makes them employable for the rest of their life either with you or remotely if they decide to move on some day or maybe they’ll become an entrepreneur themselves. That last point though, become an entrepreneur themselves, what do you do if anything in regards to non-competes? Because you’re teaching a lot of people how to compete with you and they could step out of Elements Brands and perhaps go and launch their own business that might be competing with similar products. Do you have NDAs in place when you hire people? Bill: Yup, we do. We have non-competes and NDAs. I view it as once I train them and make them great it’s now my responsibility to make sure they want to keep working for me. I want to give them access to nine soon to be 10 brands that they can work on. I mean I’m sure all the entrepreneurs out there listening remember you’re like God I read all these articles but I can’t do AB testing when I have 100 hits a week. Well I can teach them how to AB testing on a site that has 100 hits a minute. And you can do … pull in big leverage is just fun. So I got to make sure that they’re having fun with me. And if somebody wants to go out and do their own thing I mean at this point nobody is running the whole business. My marketing folks are running marketing, they have no idea how the warehouse works. They have no idea how supply chain works. So it’s harder than you would think for some of your employees to kind of see the whole business. And also … and this is the thing that I’ve really come to realize, I used to be of this mind that entrepreneurship is for everyone and everyone should be an entrepreneur and it is the best thing you could possibly do with your life. And I’ve started to realize that that’s not true. There are a ton of people out there that don’t want any part of this entrepreneurship thing and think it’s stressful and uncertain and lonely and all these and they’re just not cut … I don’t even want to say they’re not cut out for it. I’m saying their personality type is not fulfilled by it. So there’s lots of really bright excellent people out there that are not entrepreneurs and they want to be employees and they want to be employed by a great company. And sometimes I interview people that I think they’re to entrepreneurial and it makes them not a good fit. Joe: Right. And you know just to summarize everything I think you’ve done just that Bill, you’ve sort of … you’re pulling big levers but you’ve checked all the boxes I think to someday have a sizable exit if you ever choose to do that. It could be 40, 50 years from now. It will be the one in buffet of the e-commerce world right there at Charlotte, North Carolina. But you’re building amazing brands. You’re really focused on building brands with great quality products and you’re taking control of the whole process from beginning to end from the marketing to the fulfillment of it and you’re taking care of your people. You’re creating a local base of people that are going to focus on and think of your company first and helping building more value for the company, profits for the company that I have the feeling you go ahead and pay them back for through better facilities and more vacation time and bonuses and benefits and all that type of thing. You seem like a great guy to work for. If I ever decide to move on I might just try to fill up one of those applications but I think you’ll probably stump me and I’ll get thrown into the trash. Bill: We got a room in [inaudible 00:29:34.9] Joe. Joe: I won’t pass. I won’t pass, I know for sure. I’ll just come down and have lunch with you instead. Bill, listen I know you’ve got to jump to another call. I appreciate your time thanks for sharing your story, your success on building a great brand, company environment, and not living that digital nomad lifestyle and creating more freedom for yourself. Hopefully, the folks will take some nuggets from this and do that as well. Bill: Yeah thanks for having me on Joe. Good to see you, man. Joe: Talk to you soon.   Links and Resources: Element Brands Bill’s Blog Bill’s Twitter Upcoming Quiet Light e-commerce conference attendance: Prosper Show T & C Summit Blue Ribbon Mastermind CapCom Conference

Is really possible to acquire 101 Amazon FBA businesses in 2 years? At least once a month we receive a query from buyers and sellers about the company this week’s guest founded, 101 Commerce, asking who is behind it and if they’re going to be able to pull off what they say they will. It is hard to undertake, but of all the people that we’ve worked with here at Quiet Light, RJ would be the one to do it. He is here today to talk about what that process looks like so far. Richard Jalichandra, known as RJ, got his start in digital entrepreneurship back in 1994 and has been working in the space ever since. He is a CEO five times over, has held senior executive positions, and has generally been around the digital block several times over. While getting ready to retire – which of course hasn’t happened – he founded 101 Commerce under the premise that he and his group would buy, invest in, and relaunch 101 niche private label brands on Amazon. RJ has the experience, the funds, and the team in place to make it happen. Stay tuned. Episode Highlights: RJ shares a few of the impressive businesses he’s been involved in launching and growing in the past. How he got involved with 101 Commerce. Why the FBA business model attracted him the most. The 101 acquisition plan and how it came together. RJ stresses that this is not a fund, but an operating company. How 101 commerce is striving to create a next-generation CPG company. What top 3 things RJ and his team look for in a business to purchase. Why the person and the story behind the business matter immensely. How long Richard projects it will take to acquire all 101. RJ stresses the importance of the seller’s over package and presentation of a well-run company. Why he recommends using brokers and seasoned experts for efficient due diligence and transaction processes. RJ’s shares thoughts on brand expansion potential and tariff hikes. Why solid, prosperous deals need both a good seller and a good buyer to make them work. Transcription: Mark: It’s probably at least once per month that I get an email about a certain company in our industry that seems to be making waves and the general question that I get … and actually I’ve just got this email a few days ago from somebody else that has been our podcast and I won’t say who it was but asking who are these guys over 101 Commerce and are they going to be able to do what they keep saying that they’re going to try and do? Joe I know you talked to RJ over at 101 Commerce, people that we know pretty well at this point and you talked about what they’re doing. Joe: Yeah you know it’s pretty incredible. His ability to network and we’ve done a podcast on networking and I’m telling you just a year ago I spoke to him and he came out of the blue and called me and said this is what we’re trying to do and I told him that he was nuts. We laughed a little bit. I really should have looked him up on LinkedIn before I told him he was nuts because he’s one impressive guy. What he’s accomplished, what he’s achieved in the companies that he’s built I had him rattle them off after he did his intro. And I said stop being humble name names here and everybody listening will know some of the names that he named. But yeah they’re pulling it off. Their goal is to buy 101 Amazon FBA businesses. They love the platform. They love the fact that it’s got built in traffic and easy advertising platform and all they have to do is focus on a few things versus driving traffic which Amazon does for them. And I think they’re going to pull it off. It’s not going to happen in 24 months which was the original goal but they’re well on the way. I tried to nail him down on the time frame and he was a little wishy washy on the amount of time it would take. Mark: Well I know the question I get from people on this all the time is isn’t even possible to do what they’re doing? Buy 101 companies within 24 months or even if it’s 36 months. I mean could you buy that many companies? And my experience in this has been that I’ve seen people try to do this in the past, I’ve seen people try to acquire multiple businesses and roll them together and build this portfolio and they always end up running into buying a dog here and there. Or having an issue come up or trying to expand the team that quickly. So my response to people, who’s pretty much universal … and RJ if you’re listening to this, hopefully, you’re listening to this, I’ll tell you exactly what I tell everyone. It’s really really hard to do but out of the people that I’ve met, he’s probably the one person I would bet on being able to do this. And so I’m like a lot of other people I kind of grab my popcorn and I’m sitting back and I’m watching because this is really fascinating to watch them go through. How many are they up to right now as far as acquisitions that they’ve completed? Joe: I think the last time we chatted and we didn’t get into specific numbers on the podcast but the last time we chatted I think it was about 14 brands and they’re trying to get their systems and their processes in place and bring on more and more people. We ended up doing I think eight businesses for 14 brands with a total of three people. And then they realized we need to have some operations here and build some systems and processes so they’ve been hiring like crazy; and some really really talented people. So I’m with you. I think if anybody can pull it off … there’s a few that I think could, but I think RJ and his team are one of them. We’ve had some other folks that are doing similar things as you know that have purchased a couple from us; Brad, in particular, has sold two to them recently but I think they’ll pull it off. I think it will take longer than the 24 to 36 months. And I’d be betting on more from beginning to end maybe a total of 60 months. It’s a big undertaking. Mark: Yeah and folks I want to say that again how many in how long? Joe: 101 businesses. Mark: No how many have they done so far? Joe: Oh 14 brands. Essentially eight purchases but within that there are … I believe there are 14 brands. And that has been less than a year. I think the first one happened early in the summertime. So it’s really less than six months. Mark: Absolutely incredible and we’re seeing this from a few different places. I know we had Shakil Prasla on quite a while ago now. I’m talking about how many he’s bought, and he’s bought more since we had him on. At that point, it amassed eight different companies … acquisitions that he had done over just a few years. So there are ways to do this. And by the way, Shakil’s method is different than what RJ and 101 is doing. So there are a few different paths towards building up this portfolio and really scaling up pretty quickly. A fascinating example of somebody doing this at scale within the industry and definitely I’m sure this going to pop up there as one of the more popular episodes. Joe: So let’s you and I stop talking about it and hear what RJ has to say. Mark: Sounds great. Joe: Today’s guest is Richard Jalichandra … actually RJ. How are you doing today RJ? RJ: I’m doing great Joe. How are you? Joe: I’m fantastic. Good to see you. Hey, let’s do the thing where you tell everybody about you instead of making me read the script. Can you give everybody some background on yourself? RJ: Yeah I’m an old digital entrepreneur. I dig my gut onto the internet in January of ’94 building my first website for an agency client and I’ve been doing it ever since. I’ve done a whole bunch of different things. I’m a five time CEO now but I also hold senior executive positions at a whole bunch of venture and PE backed companies. So I just kind of have been around the block for quite a while. And then I tried to retire last year and then something I think you’re probably going to ask me about kind of like I got a bug in my ear and back to your podcast got in my ear a few times and maybe influenced my current gig. But yeah recently we founded 101 Commerce and essentially what 101 is doing is we’re buying, investing, and launching theoretically 101 niche ecommerce privately. We’re running it on Amazon and we’re a little bit into it as you know. Joe: A little bit. I remember that first conversation we had. Some guy named RJ called me out of the blue. I should have looked you up on LinkedIn before I told you you were nuts because that’s exactly what I said. Do you remember the conversation? RJ: Yup. Joe: You’re nuts. You’re going to buy 101 Amazon businesses and you’re going to run them, operate them, build a staff around that. You’re crazy. RJ: You weren’t the only one. Joe: You might still be crazy but you’re pulling it off. Well, listen you’re being very humble here in terms of your background. Come on share some of the businesses that you started and you rank them. Its name dropping please do it so that everybody knows. RJ: Well some of the ones that are … I mean depending on what your flavor is whether it’s fitness or video games or … yeah let’s see a couple, I mean I’ve done a bunch of things but the one that have seemed to kind of ring a bell on everybody, the video game space I was one of the senior executives of the company called IGN Entertainment where we ran a massive gaming network that have reached 50 million dudes; 13 to 34 year old dudes at the month. And famously of all the acquisitions I did, they are the one that always delights people at cocktail parties with Rotten Tomatoes. So I did a bunch of acquisitions there but Rotten Tomatoes is kind of the one that I can throw out there. And also everybody is like wow you did Rotten Tomatoes. I’m like no I didn’t found it but I did buy it. I’m really good friends with the founders of it still today. And then let’s see … I ran something called Technorati which at one point was a social media darling until a small search engine company in Nutview did some things that made it very hard to compete from other search engines. And then I ran- Joe: [inaudible 00:07:56.2] name. RJ: No we won’t name any names but yeah, just some small company in Nutview. And then let’s see, after that, I did a fitness company called Map My Fitness which was then sold Under Armour. I mean that was a really successful fitness set of apps Map My Run and Map My Ride [inaudible 00:08:14.8] doing the cardio, a lot of people touched those at some point. And then I did a company nobody ever heard of. I was an enterprise media space … advertising media space; I’m running behind the brands. I sold that in 2014 and then I tried to retire then. And then I decided to do one more fitness gig and was the CEO of BodyBuilding.com and then that led to my second retirement attempt. Then here we go. Joe: Maybe the third time will be a charm. I think the list of businesses you just mentioned probably touched on 90% of the people listening know of at least one if not more of those especially the Map My Fitness and all that good stuff. All right so about … what 18 months ago now? Or no it’s less than a year ago or about a year ago you and I had a conversation and you said hey look I’m reaching out, we’re putting together a fund. We’re going to buy 101 Amazon businesses. Why? Why are you focused on Amazon? Why are you not retiring like most sane people would do when they have the ability … no, I’ll skip that, why are you buying 101 Amazon businesses? What’s the theory? What’s the plan? What’s the concept? RJ: Well I’ll back up a little bit and kind of tell you how I stumbled into it. Joe: Okay. RJ: So I mean I was going to try and retire. I’m still young enough though. I figured at some point I might jump back into a CEO chair or something like that but I promised my wife I was going to take two years off. No W2ing, just literally going to play golf, mountain bike, have some fund, raise my daughter, advise, maybe do some angel investing. And that was kind of the plan but I was also I go and I ever do want to get back in the chair will be kind of hard to do. I just was really on the beach for two years and not really educating myself. So I had this idea that I was going to buy a solopreneur 4-hour workweek business which I’m sure you’ve heard that one a few times in your job. Joe: A couple of times. RJ: A couple of times today but that was literally the goal. It was to buy a 4-hour workweek gig. Joe: Yeah. RJ: And so hence I wanted something that was at least a couple of years old. So somebody else has already done all the hard work, done the early stage startups. I know how hard they are to get things off the ground. I wanted something that was more matured and seasoned where I was more twisting knobs than actually lifting heavy boxes. Joe: Yeah. RJ: I looked at a whole bunch of stuff, not just Amazon businesses. I looked at SaaS, content; I have a lot of experience in content. I sold a SaaS company. I looked at lead gen, affiliate, and I looked at digital content. I was on the board of a company called Click Think which a bunch of your listeners have probably heard of as well. I was the chairman there so I knew a lot about NAT ecosystems. I was looking at all whole bunch of different things and I kept coming back to Amazon FBA. And the more I dug in on it I was just kind of blown away by the operating leverage that you get out of Amazon FBA. I mean essentially as I explained it to people when I’m trying to fish investors or just tell people I’m doing this you know my last real job we had 800 employees, 6 fulfillment centers, 500 people on the warehouse and you have to generate your own traffic. We had to spend tens of millions of dollars on advertising and all that. Essentially with Amazon FBA, you outsource all those hard things. You don’t have to worry about fulfillment. You certainly don’t have to worry about traffic because you have 300 million of the highest converting consumers there are. So … and then, of course, the advertising platform is built-in. The customer service system is built-in. So basically I kept meeting and hearing about and listening to [inaudible 00:12:01.8] podcast including yours, people who are essentially running these really good businesses had really good net margins. And I wouldn’t be shocked you know there’s a plenty of people kind of running sub 1 million dollar businesses but every once in a while I meet somebody running a 15 million dollar business and was essentially a sole proprietor with a couple of VA’s and they’re running at 30% net. I’d scratch my head and go wow that’s a way better business model than setting up your own ecommerce site and got in your head against you know Google and Facebook and trying to get traffic as well as having to compete against an Amazon itself why not lean into it, take advantage of that operating leverage, and see if you can build something that was incredibly profitable at scale. Joe: What about the risks? A lot of folks that I talked to are saying no, no, no, I don’t want to buy an Amazon business. I think there’s too much competition. It’s too much risk and Amazon might pull the rug out from underneath me. They may just decide someday they don’t want any more seller accounts or third party sellers. What do you have to say to those folks? RJ: You’re right. Just go away. Don’t look at Amazon businesses. Leave them all for us. Joe: You know what my answer is there are people out there like RJ that are a lot smarter than me that are doing it so there must be something okay with it. RJ: Look I mean there is no doubt there’s proper risk of course. But when I was out in the open web there was platform risk as well. I’ve had Google like I said destroy one of the highest profile companies that I was at. Oh did I say that name? I shouldn’t have said that. But I mean in other places and I’ve seen it happen and- Joe: It’s okay don’t worry about it. RJ: Okay, all right. Joe: The panda update, the penguin update they’ve all have affected … those have affected probably again 90% of the people listening so it’s okay. They’re probably happy. RJ: So everybody knows what I’m talking about. Joe: Yes. RJ: There is platform risk wherever you go. And even in today’s thing where Google doesn’t have quite the sway they used to, now you have Facebook and Instagram risk because those are the big traffic drivers of other third party traffic sources and stuff. So you’re always going to have platform risk. And I just got comfortable with it because the FBA and the marketplace ecosystem on Amazon is literally what’s driving its growth right now. I mean if you look at all the stats behind the curtains or whatever, it’s driving the growth. And if you look at 20 years of operating history and behavioral study on Jeff Bezos he usually doesn’t throttle things that are growing like a wheat. Joe: That’s true. He doesn’t. That’s a good point. That’s the answer I’m going to use from now on when people ask me about that risk. All right so in terms of- RJ: But I will make it clear there’s a lot of stupid things you can that gets you into trouble and then there’s some inadvertent things that could happen to you that do present risk. I don’t want to make it sound like- Joe: It’s not risk free. RJ: It’s not risk free and we certainly are going into this with our eyes wide open knowing that even the best laid plan, buy 100 of these things who knows what happens. There’s a portfolio theory and it goes both ways; good and bad. Joe: Right now Mark had an expert on from a PE firm in the last podcast maybe and I actually listened to it yesterday. By the time this this airs it’s probably 3 or 4 weeks ago and the concept was buy them at a certain multiple pull them together and it’s worth more automatically. We’ve all talked about that concept. Is that what struck you initially in addition to the scalability because of the platform itself? RJ: Well the first thing you should do is you should introduce me to that guy and we should get to know each other because there may be something we could do. The second thing is … I mean there’s more to it than that. If it was just a financial arbitrage I probably wouldn’t be that interested in it. There’s a lot of places where you can do financial arbitrage. I love ecommerce so first off that just gets me from a personal standpoint. But what I like is just knowing that they’re with resources, working capital, domain expertise, specialty expertise, how much you can grow these things is really kind of what interests me. I guess I’m not just interested in the financial arbitrage. I would correct something else that you said kind of the outset that we raised a fund. A lot of people think that’s kind of what we do because they don’t understand the PE and venture markets. But I would absolutely categorize us not as a fund. We are absolutely an operating company that works closely with venture and private equity funds. Joe: Yeah it’s fine. We’re trying to put a label on you recently and what you do and what some other folks are doing and it’s … I mean it’s … well, what is the label? You’re just a company that happened to get some that you went out and raised money and are investing it in Amazon businesses. Is there an official label for your type of organization or is there not? RJ: Well what we’re trying to do is create a next generation CPG company. Joe: CPG stands for? RJ: Consumer Packaged Goods, more than a CPG because Amazon obviously sells more. But essentially what we’re doing is we’re putting together a portfolio … a wide and broad portfolio of niche private label brands that sell predominantly; not exclusively but predominantly on Amazon. And that’s really what it is. It’s a multi-brand platform. You could think of it as any multi-brand consumer goods company like a Procter & Gamble or something like that. Joe: Okay so not unlike our friend Bill D’Alessandro at Elements Brands and what he’s doing but it’s a little bit more specialty niche and- RJ: Absolutely. Joe: That’s what you focus on on Amazon. Okay. RJ: No and I love what Bill’s doing too but it’s very similar. He has a multi-brand strategy although he’s taken a little more narrow focus than we are. Joe: Absolutely. Okay, let’s talk for the sellers that are listening what is it that you and your team look for? What pops out to make you go I love that opportunity? Is it brand, is it gross margins, is it workload, is it … what three or four things do you generally look for when you’re looking at one of these opportunities? RJ: I mean the first three things that we look at when we’re just doing the highest level screens like when you send materials out we’re just looking for a couple of really broad things. Because there’s a lot of this for sale, between your guy’s brands … absolutely a great deal flow. Joe’s probably going to work at the Senate at some point but of our first cohort, almost 50% of the deals set were from Quiet Light so thank you for that. You guys do a great job. Joe: Thank you. RJ: With that said, some of your competitors also do a really good job putting together great materials and all that. So we’re evaluating stuff. We’re trying to screen just the sheer volume of things that come through the door. So we look at gross margin and net margin that tells us kind of a lot about the health of a business and what the opportunities are. But of course on Amazon the currency there is reviews so we’re looking for what we term review restructure. It’s not really a good phrase because what it really means is your relative strength, the velocity of reviews, quality of the reviews, how the reviews were generated. But right up the bat what we’re trying to do is look at those three broad metrics to decide if we want to dig deeper or not. Joe: Okay and once you find a business that checks all of those boxes do you then go and jump right to the financial conversations with the sellers or do you say okay what platforms, are they selling in the US or can I expand internationally? Is there something else like a growth opportunity that sort of takes it over the top? RJ: Well one of the other things I love about what the materials you guys send us and some of … again some of your other- Joe: Include the competitors because this isn’t about padding Quiet Light Brokerage. RJ: No, no, no I mean- Joe: And I won’t pull a quote out of this just for the record. No, I’m kidding I- RJ: No, I’m good sorry. It’s not just you but the other top brokers and guys that really put together quality materials and stuff. It really does save us a lot of time because normally you got to do a screen call before you even want to setup a call with somebody. Because of the interviews that you guys do you get to hear a little bit of the narrative. I think this is something that people forget when they’re trying to sell businesses or sell anything; story and narrative is really important. If you basically have a very good narrative for everything from how you originally … what you did before you even started the business and then how that morphed into a business that narrative is really important for me to hear. And it’s really important when I’m out pitching our investors as well. There’s a lot of investment opportunities, a lot of money floating around and whatever but they want to know … they kind of want to hear your story and how the whole thing kind of morphed into what it is. And the same thing when I’m looking at even the smallest Mom-and-Pop business I’ve ever bought, I want to know about them. Where they’re from, what they did in the previous career, and then how all of a sudden this thing kind of caught fire. Because that’s really the moment like most of the things that cross those three bars, the first initial bars. Joe: Yeah. RJ: Somehow or another they’ve gotten some critical mass. They figured something out. In spite of the fact they might not have a working capital, they might not be a rocket scientist or an expert on PPC or fulfillment or something, they figured something out and that’s kind of what we want to hear in that narrative. Joe: And the person behind the business I think is what you’re saying matters tremendously it’s not the numbers. RJ: Absolutely. So in addition to that narrative, the way they present that narrative tells you a lot about them whether or not … and again you can get this just by reading your memorandums. You can kind of get whether they’re out for a quick walk or they’re kind of at the end of their line and maybe just running out of gas and it’s time for them to kind of move on and hand it to somebody who has even more gas. And it’s also part of that narrative is getting me excited about the product category or something like that. But it tells you and then, of course, you’re going to get to the … I know you’re going to ask this but by the time we actually get on the phone with somebody or in video or whatever one of the most important things that I understand if a person is … a person integrity. Are they honest? It’s often kind of like when you get on that first call, it’s usually not in the books. Occasionally it’s in one of the books but usually, on that first call a really honest person is telling you okay here’s all the warts, here’s all the things that aren’t going well, you need to be addressed, I wish I could do better that kind of thing. So I think that’s really important. So narrative and then the integrity comes out in that and then certainly I want to know … don’t ever try and kind of hide the bad stuff because if you tell a great story and then you get indulgence and then all of a sudden the warts start appearing and you’re like well you didn’t tell me about that then there’s an integrity. Joe: Yeah and you lose that trust. And this is not rocket science for the maybe the other brokers that are listening or people that are trying to sell their own business on their own. It’s important to act with full disclosure and ask those questions and answer them thoroughly so that when you do get on that phone call that trust is continued to be built. And as I say … look creating a great package is not the hard part, connecting with great buyers like yourself RJ is not the hard part. Going at a letter of intent is not the hard part. The hard part is getting from letter of intent all the way through due diligence to closing. And if you do everything right, free LOI that becomes easier. Things still go off the rails. You and I had one go off the rails a little bit this summer and it got back on but it helps tremendously with full disclosure and trust being built and the people behind the business acting with integrity. It’s not just the numbers. RJ: Right and the other thing you get and by those disclosures too is we also start operating the business pretty close. And I think that’s a really important thing. I mean you’re not operating a business but you’re starting to think like the operator. Joe: I was going to say we don’t … you don’t get any control of anything- RJ: No but you’re mentally putting yourself in the shoes of having a steering wheel in your hip. Joe: Right. RJ: And I think that’s really important because it gives you a lot more confidence to get to the finish line. Joe: So let’s talk about that and 101’s operations. When you buy a business from a solopreneur or someone who has a small staff or VA’s are you generally … and I know the answer to this, are you generally taking it over completely or are you bringing them on to help operate the business with you? RJ: That’s a TBD I mean it really depends on the entrepreneur and the situation. Frankly, there are some people that they’re just done. They want to go do something else. Joe: Yeah. RJ: This was their side hustle. They really love what they’re doing. They may have financial reasons that they want to get out. We are looking for the rare entrepreneur and then the other thing is they can even want to jump on our boat but they may not have the right personality to be in a really high speed tech thing where you got to work as part of a team and any time we put more people together. They’re humans and things don’t always work right when humans interact even with the best of intentions. So it really is a TBD thing. If there are … in our first cohort we were probably looking to just take the businesses and actually create kind of a sandbox with these where we can build what I call platformization of the company; people, processes, frameworks, technology that allow us to go do this another hundred times and a hundred times after that. So with that said the first eight businesses that we bought we now have … I wouldn’t call, I call it two principals have joined us from those eight. One was an owner and one was literally the guy who’s like the GM who is running the business. Joe: Okay. They’re going to help you with the other … what 93 that you buy, is that the plan and the goal? RJ: Yeah. 93 is the next milestone and then we’ll see what happens after that. Joe: You’re going to do that in 2019 or is it going to take a little longer? RJ: It’s probably going to take a little longer then. Joe: Okay, I’ll help as much as I can. RJ: I know you will. Joe: Talk to us about the importance of having a good presentation at package together before you ever get on that phone call in terms of … look I mean to be blunt you and I talked about you coming on the podcast a while ago and I said no. I said it didn’t make sense because I didn’t want people reaching out to you directly. And then I saw you up on the stage at Brand Builders Summit, you advocate now of a few different things. One is working with brokers because everything is handed to you kind of on a silver platter but then I think also you’ve talked about specific attorneys and things of that nature. What are those few things that you say now that you’ve learned and you’ve got a certain amount of deals under your belt that you’re going to sort of also not just in terms of the business three check boxes but your processes going forward for somebody that is also maybe building a portfolio even if it’s a smaller content site portfolio things of this nature, what certain things are you trying to put in place like working with brokers, like working with certain attorneys, and things of that nature, anything? RJ: Yeah no gosh you just hit on the mother lode there. Let’s go in no particular order but let’s start off first with the broker no broker question. So people heard about what we were doing, the word kind of got out there and frankly, we had hundreds of leads that came in through our website. A very few of those were for a surprising number that would have crossed kind of our minimum thresholds and something we would have been interested in. But when we do a deal like that we have to do a heck of a lot more work. A lot more work. And it’s kind of hard pressed to sift through that. If they don’t come with their own package, financials, a really good narrative, good transparency, it’s going to be a lot of work for us. And most people don’t know how to sell a business. I mean let’s just call it like they make selling business hard. So we’re happy; very happy to work with brokers because we feel there’s a couple of things that brokers do. You validate a deal for us. I mean basically, you’re not just going to take … your time is valuable; you have other opportunities and things like that. So we know that you’re already in a little bit of a quality … you’re checking a quality box. And then, of course, you help in put together really nice financials and things like that; things that you know are going to make it really fast for us to kind of do that. And then I’d say another really important thing for a buyer to consider and then we’re going to link with a lawyer or other professional services because frankly brokers pride in professional service. When you’re selling a business for the first time or even a second time, third time, fourth time, fifth time, but certainly the first time … if you’ve never done it before it is going to be emotionally traumatic. Joe: I know you’re going to go there. It is so emotional. RJ: And it’s your baby. It’s your baby and guys on the other side of the table they’re professionals and they do this for a living or whatever and it’s not that you’re going to feel like you’re outmatched. It’s just you’ve never been through it before and it’s incredibly stressful. And some buyers are going to ask … they’ve got investors and they require them to check a whole bunch of boxes before they actually write a check. So they’re going to ask you to check all those boxes too and that can be incredibly stressful. So having a shoulder to cry on i.e your broker and play- Joe: Or vent to. RJ: It’s not … no that’s it, a lot of it is just like I cannot tell you … I mean I have bought a small business once, probably 15 years ago … 14 years ago. I bought a small business that wasn’t represented by a broker and I am not exaggerating when I tell you I hired him a therapist. Because otherwise, we’re not getting … neither of us is going to get what we want because the guy is going to fall apart. And so I have a feeling a lot of people probably underestimate just how hard the emotional side of getting a seven figure deal done. There’s a lot at stake on both sides of the table and [inaudible 00:30:59.4]. So there’s a lot there. Of course, you guys do a lot on just the sheer process side that is there but I would say that’s an underestimated really big value thing. Just being the therapist through the whole process. Joe: Yeah it takes a good buyer too; a good broker, a good buyer. But what about the attorney side of it? You’ve had some experiences with great attorneys and maybe some tough ones too. What is your view in terms of that aspect? I think you actually … you and I talked to at one point where you’re going to do … are you still considering requiring your sellers to work with a select group of attorneys that you know have ecommerce experience? RJ: Yes. So and before I even get to that I would just give this is a huge bit of advice to any seller. Do not use your family attorney. Joe: Well there’s … I mean I have an unwritten rule that if somebody comes to me and they want me to sell their business I ask them point blank do you have an attorney and are they related? Is it your mother, brother, father, sister, cousin, aunt, uncle, etcetera? Because I had an experience where I had someone that was a few years out of grad school, they started a business in college. We got the business under a lot of intent, over asking price and it was a few years ago so I was fairly new RJ. But his mentor in grad school was an attorney, my trade. His fiancée was in law school and his mother and father were attorneys. The deal blew up. It was a one sided contract and there was absolutely no way to fix it. And the buyer was fantastic it was very fair. It was fantastic, it blew up, went away and I learned that lesson. So what you’re saying right now to anybody that wants to have a relative as an attorney it’s a really bad idea because they’re going to fight like rabid dogs for things that don’t necessarily matter and kill the deal for you. Is that what you- RJ: Yeah … no, I would take it even a step further. I actually wouldn’t mind if they were your family attorney if they happen to be an ecommerce lawyer because the domain expertise is also really important. You can’t just take somebody even if they’ve done M&A that they sold dry cleaner chains or something like that. Ecommerce and digital assets are just different and so if you don’t have a lawyer who has the domain expertise we’re probably going to have issues because we’re going to have to spend a lot of time educating. So I would highly recommend … and look Joe can recommend, most of the brokers have their stables of good recommended lawyers. But just because you have a lawyer, maybe you have a good business lawyer don’t necessarily use that one. Look for somebody with the exact domain expertise of what you’re getting into. And then the last thing I’d say about lawyers is lawyers love to point score. I mean this is kind of what they got graded on in law school when they’re doing all that. They like point scoring and the one thing … a bit of advice I give to anybody who hires a lawyer is remember the lawyer works for you, not the other way around. So you need to watch whether they’re going into point scoring mode just for the sake of wining points. And you have to understand it’s not 100 points in a deal. It’s usually like four or five that matter. And yet there’s the long contracts, it’s four or five that matter and then may be one or that lean or important to you and that’s kind of what you need to focus on. Make sure you that manage your lawyers so that they know what’s important to you. And they’re not worried in section 17 and 19 where it’s [inaudible 00:34:40.3] and crossing tees and that some warranties and things. Joe: I agree 100%. If I could look back at all the transactions, for the most part, the buyers are good people, the sellers are good people, and if we lived in a different world they could shake hands and the deal would be done. RJ: Yup. Joe: You do have to have contracts. We do have to have attorneys but it needs to be a fair and balanced deal for both parties. It’s … I’ve only had one deal fall apart because of the attorney and it was, in fact, that situation that I just mentioned. Let’s talk for a minute and jump over to owning an Amazon business for the people that are buying. We talked about what you look for from sellers but from people that are buying what are your thoughts on if it’s 100% US based Amazon business and they’ve got the capital? In your opinion and experience now should they look at either expanding these skews in the US or maybe looking at the EU and different market places or does it simply depend upon the brand? RJ: I think it’s highly contextual. Every situation is going to be very different. There’s a ton of these Amazon podcasts that say skew expansion and international expansion which both require working capital. I don’t think it’s as simple as that. I think you really have to kind of look I have met people literally in the last month where they tried to go overseas and failed miserably because their product category just wasn’t appropriate for European market or whatever market. So I think it really is highly dependent there. But it’s certainly worth investigating. One of the things I like about Amazon is that you can experiment relatively cheaply for thousands if not low tens of thousands of dollars where you may not get hurt too badly if you made a big mistake. Essentially taking existing products and doing a small MOQ and launching it in Europe, if it fails miserably again if you have the right gross margin structure you’re probably not going to lose money [inaudible 00:36:36.9] an opportunity cost. But look if you’re going to be successful … I mean you’ve said this on your podcast you got to take some swings at the play and you’re not going to always hit the ball. Joe: Got you. All right let’s talk about another big fear given that you’re an expert in this space now and you own … I’m not going to say exactly how many and neither are you probably, let’s say more than 10 brands and FBA businesses altogether. How big is your fear of potential tariffs getting your individual brands? Does it keep you up at night? Does it hit every single brand or certain categories? Can you just touch on that as an owner in the space now? RJ: Sure. It’s really also is highly dependent on your exposure to Chinese manufacturing. So yeah … so we certainly have our fair share of products that are manufactured in China. It’s certainly something that we are monitoring and we are thinking about. At the same time … and Joe you know this personally, we’ve expanded rapidly into Europe. We own two European businesses now and so we will look at it later to expand it even more with Chinese based products as we go into Europe. Look I mean- Joe: [inaudible 00:37:47.1] Europe and not being impacted. Is that … okay, and will you have an opportunity? Have you done the financials? Does it make sense if you do that and shift from China to Europe to then import from Europe to the US and avoid the tariffs or is that just simply too much cost shipping wise? RJ: Oh that’s a great idea, Joe. You should come work for us in our supply chain. Joe: No thanks I’m not that deep though you’ve got smarter guys than me. I know one of them … a lot of them actually. Is it something you guys are already working on and something you’ve crunched the numbers on? Come on I know you probably have. RJ: I think it’s still early days and look we’re thinking about it a lot. We’re thinking about well … I mean it’s too Wednesday about it. Everybody gets it. Everybody is all level playing field but it’s not that simple. If it changes the price dramatically where there’s price elasticity of demand issues in the category that can just impact overall demand. So look we’re worried about it. We’re hoping that it gets resolved and most of the time what you see in these geo political things is they usually the small period of exposure and everybody actually finally sits down and see when we get to the problem fixed. So that’s what we’re hoping for knock on wood. Joe: Let’s both do it. Everybody else do it now as well. All right let’s talk about a first, at least a first for me and I think a first for Quiet Light Brokerage although we’ve got a second in place now and it may happen before we close. On a transaction that we did together we actually instead of selling or transferring control of the Amazon seller account entirely we tested and successfully moved a brand from a well-established existing seller account took VA’s in and tested it in another account that you happened to own. Can you talk about that a little bit for those … and I’ll tell you why, because there’s always a fear. Some people want to keep their seller account in particular over in the European markets. For some reason, some people are a little bit more fearful in some other countries. For some it’s a legitimate fear, others I would say not but we tested that and it … can you just touch on that and what you did there and what you prefer whether it’s buying a brand and moving it into your own seller accounts or buying the seller account entirely? And what the difference is between the two for you got. RJ: Yeah no, no, no, we’ll just talk about the actual experience. So yeah we were certainly … we had our own questions, the exact process that we used was we did a test. So we didn’t move all of the Asense over at once. We took three Asense, a top selling Asense, a medium selling Asense, and actually, it was two medium selling Asense and one longer tail Asense. I didn’t want to jeopardize or risk a top selling Asense and until we moved into this other seller account. It was not equal. It wasn’t too far behind. But it was definitely a smaller seller account than the one where they originated from. Joe: Were the reviews on the second seller account that you moved it into were the seller account reviews better or worse than the one you were moving it from? RJ: Worse. Joe: Worse, okay. RJ: They weren’t bad but that’s a worse- Joe: 4 ½ to 4 or something, okay. Sorry I had to clarify. RJ: Yeah I think it was like 2000 like 1200 or something overall reviews. Joe: Okay. RJ: But look the product reviews go with the Asense. So that’s a really important thing in a seller account. If you are selling 3rd party products, you’re selling Nike’s and there are 20 other vendors on Nike’s and you’re fighting for the buy box, then your seller rating is a heck of a lot more important than the case for your private label. I know that’s important- Joe: The big mystery and big unknown that so many experienced Amazon sellers people that are doing half a million or a million dollars a month is we don’t know how important those seller account reviews are. When you … I mean obviously they’re important in some way but when you go from 4 stars to 4 ½ and 4 ½ to 5. So, in this case, you moved some of the Asense over, obviously the review … product reviews carried over and if … was it a … I think we did a three week test and talk about how it turned out and we ended up closing the transaction. RJ: It was a 15 day test and then we extended it for a couple of days so it was just under three weeks and the seller was awesome. He is super cooperative. We were also risk averse as he was risk averse. We are risk averse so we really cooperated well to see if we could make the test as well. The other thing we had to replicate is GPC campaigns so they were identical. Joe: Yeah. Was that an automated process or a manual process? RJ: I didn’t do it myself Joe so I can’t tell you the exact process. I try and keep my hands where they’re good and that’s not one of them Joe: Okay. RJ: But from what I understand the seller actually created these campaigns for us and literally proved that it was a cut and paste. And then our team put it into our seller account. And then he had access to our seller account too … or viewing access or whatever so that he could make sure that it was setup. Because like I said he always intended to make it work. Joe: Yeah. RJ: So he wanted it to work and we had a couple of checks in there on our side to make sure that there’s no way [inaudible 00:43:15.2] the situation even though we didn’t really have any fear with him in particular. But it is something that you want to like at least have a couple of safeguards that somebody is not running a big Facebook campaign and juice in the results or something like that. Joe: All right so just for point of clarification for everybody listening the typical way that an Amazon business transfers is that the entire seller account transfers. Generally, in asset sales, the new owner takes control of the seller account and you’re left with an empty shell of your corporation. What we did in this situation was move the Asense from one seller account to another. All the product reviews carried over. The seller account wasn’t as high quality. We tested it out for a few weeks in a few ways and duplicated the sponsored account. And it turned out great. The seller has to help and it’s in their best interest. And this is the big picture thing here Richard, it takes … and you talked about it throughout here, it takes a good buyer and a good seller to make a deal work. It’s … nothing is cut and dried, there is lots of emotions involved in the process when you’re selling and even for a first time buyer. Some people are putting their life savings on the line and they want to make the right choice so emotions run high all across the board. And it’s never a winner take all situation, both a buyer and seller have to be happy at the closing table. It begins way back at the initial call and building a good package and managing your own personal brand and reputation. Doing the right thing as a seller and thinking someday maybe you’re going to exit; maybe you’re going to pass it on to your kids. Either way, you want to pass on something really great because if your kids take it over you want them to be successful because it may be your retirement money. And if you pass it on to someone else you’re willing as a buyer Richard … RJ to pay more for a company that is really tidy and neat and you’re able to just take off with it as opposed to sifting through the details and fixing things first I would imagine, right? RJ: Yeah and I’m going to say something that my team would probably kick me into shins over but I fundamentally believe this. And my mentor who kind of trained me in my career he always said always be willing to overpay for a great asset because the good ones are hard to find. And as you were saying that … so again if somebody is really running a great business we’re not going to get in a pissing match over a couple of tens of a multiple or something like that. Because ultimately that’s a great asset, we know what we’re going to be able to do with it downstream and those are going to be rounding errors or something when we look back. You mentioned as you were saying that one of the things I’d like to remind sellers too is that I’m sure you kind of educate them as you bring them on board but there’s a lot of these businesses out there. In 2017 Amazon announced that there was 20 thousand 501 million dollar sellers so there’s a lot of choices; even if we’re only trying to buy 100 of them. Joe: Did you just read Walker’s book? What’s going on here? You just quoted him exactly. And maybe you guys are reading the same stuff. Walker Diebel has published a book called Buy than Build. RJ: Yeah. Joe: Yes Buy than Build, you’re not quoting him you’re just quoting- RJ: No, no, no, if you read my narrative you would hear that. But I think what I’m getting at though is don’t be a pain in the ass because we’ve got that 400 businesses in 60 days and we put … in that first 60 days we put eight in the LOI and then we bought a few more and whatever. My point is that at some point in this when we had a couple of your early ones get difficult, I remember being … Keith and Chris, they’re sitting there I’m listening to a conference call with a seller and a broker and I literally got up on the whiteboard and I got in giant letters and I wrote NEXT! and that became kind of a mantra. If you’re not acting your job well … it’s not even if you’re a jerk or whatever but if you’re not acting that you have your buttons up there’s a lot of another choice out there. And the same goes if you’re a really good asset there’s a lot of choice for you to who you sell to as well. If you’re a really well run business and you’re dealing with a jerk tell your broker find me the next one. Joe: Well let me say this you’re saying to the sellers don’t be a pain in the ass. To the buyers, the seller does have choices. The first time I was on a conference call with Keith we were on the call late at night with Max. Max was over in Europe and Keith was so professional, so good, so likable to the point where when the call was done my seller wanted to Keith to be the buyer. He did calls with other buyers. He wanted Keith to be the buyer and 101 Commerce. That is what you want to accomplish buyers on those conference calls. You want that seller to go I choose you because you’re not alone and the one that wants to buy a great business. And that’s hopefully what a lot of folks listening that are owners of the Amazon FBA business, and ecommerce, and SaaS businesses, content business in general. It really doesn’t matter if you want to build a great asset and build a great reputation for yourself so that guys like RJ and Keith and other great professional buyers are willing to pay you maximum value for your business in a seamless, painless, exciting process so everybody prospers at the end. RJ you’re awesome. I look forward to working with you for the next 24 months no more because you’re going to buy 93 in 24 months and then you’re done right? RJ: Yeah [inaudible 00:49:05.2]. Joe: All right I’ll work with you as long as you choose to work with us here at Quiet Light Brokerage. RJ: Or eventually at some point, I’m going to find somebody smarter than me to run this and then I’ll come work with you guys. Joe: There you go. Well, it’s a privilege talking with you. Thanks so much for your time. RJ: Awesome. Joe: I appreciate it. RJ: Okay, thanks, Joe. Take care.   Links and Resources: 101 Commerce  

Multiple streams of income bring more value to your business. One stream of income people often forget about is email marketing. Today’s guest Ken Mahar, founder of Email Broadcast, has been in the sales and email marketing arena for many years. Business owners nowadays are quick to find an expert in other media marketing channels, but when it comes to email marketing, they often implement it unprofessionally, ignoring the potential for campaigns to generate income. Ken’s company sets about optimizing your email marketing strategies by carefully preparing them months ahead and sticking with them, therefore nurturing that ongoing relationship with the buyer. Email marketing is the dinosaur of digital marketing tactics, yet remains one of the best. Ken has over 18 years of email marketing experience, going back almost to the dawn of the online space. Ken’s experience, along with the expertise of his team, helps clients launch and maintain successful email marketing campaigns. Today he’s sharing some of the mistakes people make and valuable ways to avoid those mistakes. Episode Highlights: Common mistakes people often commit with their email marketing strategies. What content planning takes place between the firm and a client before starting a campaign. How Ken helps clients bring a lead through the funnel. How often he refines the client’s automation processes and tracks the campaign’s performance. The importance of segmenting your audience. How personalization is important – to a degree. Tips for learning how to implement the technical side of an email campaign. Why outsourcing the email marketing side of your business can pay off. The importance of grabbing that email address! Why business should always offer something that people want (and not something they don’t). Transcription: Joe: Multiple streams of income bring more value, right Mark? Mark: Absolutely. Joe: All right. One stream of income so many people forget about because it’s hard, you have to learn things and it seems so old school is email marketing. But I understand you just had Ken from Email Broadcast on the podcast and he talked a lot about the benefits of email marketing. Mark: Yeah. One of the things he started out with in the call which I find to be just really poignant to so many entrepreneurs is we are really quick to hire people that are specialists in Facebook marketing or AdWords or different paid media but when it comes to email marketing a lot of us just say I’ll take care of it. And then we make it like this after thought, right? It’s kind of out there or is like okay we’re going to send out a couple of broadcasts e-mails. In fact, the number of people I talked to that own businesses and we talk about their different marketing mix they tell me oh yeah you know if we would be using our email list that would be a huge opportunity for growth but we just haven’t really done that yet. It’s staggering the number of people that are doing this. And I think the reason why we are not necessarily using our email lists the way we should is because it’s actually kind of tough to do. It’s easy to send out a broadcast to our list of potential clients or customers that are signed up for email notifications. But it’s really hard to actually sit down and say okay I’m going to segment that list. I’m going to set up automation sequences. I’m going to set up follow up sequences to these people. And I’m actually going to be intelligent about how I’m emailing my list. And so much of us just kind of give it this kind of head nod of like okay we’re doing something with our email but it’s not really optimized. And Ken from EmailBroadcast.com, that’s what his group does entirely. They help people set up an email automation sequence, email broadcast like editorial calendar months in advance so that you’re intelligently talking to your customers and your newsletter subscribers in a way that could actually nurture those relationships. One of the tidbits that he gave me which I absolutely loved was this idea of going to a conference. How many of us collect just dozens of contact cards at conferences and then what would we do with those? Maybe we send out an email after … maybe; most of us don’t,  saying it was nice to meet you but what Ken does is he takes all of those and he drops them into a sequence with his email system. And so we talked a lot about these ways that we can look at email marketing in probably a more sophisticated way than most of us are doing. And if nothing else this is a pitch to saying you have an email list but you probably aren’t using it the right way. And so I thought it’d be good to have him on since this is all his firm does to talk about some of the mistakes that they see in how entrepreneurs are running their email lists and what we can do to start to actually implement a few changes today and actually start utilizing that email list more appropriately. Joe: Yeah, I think people that are running their own internet businesses or buying one and wanting to grow it should seriously look at this. You know I’ve probably done a thousand valuations over the last six years and there are only a few … a tiny little handful, a fraction of a percent of people that focus on that and it makes a difference. Michael Jackness is one of them and he now travels around the country, actually sometimes the world giving presentations on his email marketing campaign that he does for one of his coloring books. It really is something that you can and should do and the customers actually when it’s done right they appreciate it. When it’s done wrong it’s a problem. We are imperfect ourselves in this regard Mark. I think you’ve sent out some emails in the last few weeks where I get it and it says that it’s … it’s to me, to joe@quietlightbrokerage and still says it’s dangerous, right? So doing it on your own even though it’s coming from Quiet Light to a Quiet Light email address stuff like that can still happen so I think doing it on your own is … it’s a gamble. So hiring somebody like Ken unless you’ve got the resources to really study it up and do it is a pretty smart idea. Mark: Yeah I mean just to bring it up into different sections; you have the technical side which is what we were running into. I had to setup the SPF and the DKIM records- Joe: What? Mark: Yeah right. Joe: I’m so glad you do that and not me. Mark: Exactly. So we had to go there but then you look at okay you have an email list but you don’t just treat it as one big blob of people that you’re talking to. You need to actually set up and start to segment that list. And then how are you actually interacting with these people. These things multiply. So if you segment your list into four segments which isn’t that much. And then you would consider okay these four segments are going to get distinct emails and there’s going to be an eight email sequence between this four segments. Now you have to write 32 emails in order to get all of these sequences in place. And then you have to measure and go back and do these and continually improve. It’s a lot of work and honestly the fact that we’re doing a lot of this on our own as entrepreneurs, is it a good idea? Maybe … maybe not; maybe it’s the time to hire somebody out but I think if nothing else think about it. Think about what you’re doing and how you’re using your email list. Are you treating this audience as one big blob of people and sending them all the same message? If so you’re leaving a lot of money on the table. Joe: I agree. If you can get a 2 or 3% lift in your discretionary earnings because of email marketing as long as it’s a profitable lift; it’s important. That adds a lot of value to your company. Jackness I believe you a little 50% of his revenue for his website comes from his email marketing campaign so that’s something serious to consider for people that have the right type of product. So let’s go to it, let’s see what Ken has to say. Mark: Sounds great. Mark: All right Ken thanks so much for having me. This is Ken Mahar. Did I pronounce that right Ken? Ken: Yup. Mark: Awesome. Thanks for joining me. You come from EmailBroadcast.com so this is going to be an episode really focusing on email habits, some of the mistakes people make with email marketing, and we’ll also wrap into this episode hopefully things that maybe what you should do from sell side to be able to prepare for selling your business and making sure that that part of the business has good opportunity and is well set up. But let’s start out real quick, Ken, if you can provide everyone just a background or a bio on you. Ken: How much time do we have? I’ll try to keep it short I guess. I’m Ken Mahar. I’m the founder and CEO of Email Broadcast. I’ve been running this company for 18 years so back before email marketing was really even a thing was when I got started. I actually have a sales background and I used email marketing for my own sales efforts. I found it to be tremendously helpful and successful. Itched it to some other businesses that I had worked for before, I’m saying you should guys really do this and then they’re like we don’t know how to do it so I started serving them. So yeah my background in sales is everything from retail to business to business. And then I got into inside sales for a high tech firm, I took over a territory. It was 11 states. We sold direct and through the channel. So I’ve kind of done everything there is in the sales arena. And the reason that I am still running Email Broadcast is because I found that email marketing is one of the best channels to impact sales. And so I kind of combined my expertise in the sales arena along with delivering email marketing from my entire team. We have the technical aspect; the writer’s, the operations and all that stuff and then I do my part on the sales and the strategy part. So I guess that’s a quick background on me. Mark: You’ve had the company for 18 years? Ken: Yeah. Mark: Holy cow man that’s ancient in the world of internet businesses. You’ve seen a lot. Ken: Yeah. In fact I thought about naming my business Constant Contact or they ever existed and I just thought that sounds a little too aggressive so I didn’t do that. But Email Broadcast is a pretty good name. Mark: Constant Contact aka we’re always going to be in your inbox is really really what we’re saying. Ken: Exactly. Mark: All right; pretty cool. You’ve seen a lot, 18 years is a long time. I’ve been online for about 20 years myself … actually, 2018; 20 years. I’ve been online for 20 years. I started my first site back in 1998 so that’s a really long time; cool. All right, email marketing; there is a lot that goes on with email marketing and I want to get from you some of the common mistakes that you see people do with email marketing. Everybody knows that you should be doing it. I know here at Quiet Light we recommend pretty heavily that people establish a good list and use this as a channel to acquire more customers. Primarily because out of all the things, all the customer acquisition channels that are available out there email is one of the only ones that you actually own and have the ability to control. Google you can’t control. AdWords you can’t control. Facebook you can’t control. Amazon you definitely can’t control. Email you can, so let’s sort out some of the common mistakes that you see people make with their email marketing strategies. Ken: Sure. Yeah, I think strategy is a good place to start. I think the big picture that I see people make mistakes around is thinking that email is about them. And what I mean by that is they look at email as just another channel for them to promote and to use their sales messages. When in my mind email is more of a relationship builder and a two way communication channel. And so I see a lot of people these people do a lot of mistakes made … in a strategy where people say okay let’s talk about what we want to do in our next sale and our next promotion and us, us, us, us, us, and it just becomes a channel for commercials. And if you think about it email is a media channel. And in media channels you should have content that people are interested and excited to hear; whether it’s educational or inspirational or whatever. And then you might have a commercial message every now and then. But if you are only commercials how long would you listen to that radio station? And people treat their email like that. They just promote, promote, promote, and they don’t add any value to their audience’s lives. So one of the big paradigm shifts that our clients go through is to realize this isn’t about you, this is about your audience. What do they want to learn? What are they into? What inspires them and to get them to think in that perspective. So I think that’s a pretty big mistake. What else? I think the second biggest strategy mistake I see is that people think that copy writing is email marketing. And they say oh yeah we need to get an email out, we haven’t had one for a while. Let’s get one out today and let’s make it really good. And that’s just a terrible, terrible strategy because the chances you’d be coming up with a great idea, creating great, well written, well researched content; actually having something so valuable to your audience that they’re willing to forward it to someone … you know one of their friends, getting your … making sure that every single link works, making sure that it’s grammatically perfect all like in 24 hours is just a recipe for disaster. So we look at it and go you should be planning this stuff out weeks or months ahead. My team is already done with November and we’re scheduling December messages right now. And we’ve been working on the November stuff for a while already. So planning ahead and having like an overarching strategy is a big mistake that people make. Mark: Let me go back actually to your first point. Mark: Yeah. Mark: We had Mike Jackness on the podcast several episodes ago and he talked a little bit about their email marketing that they do. They see crazy open rates of 30% plus on their stuff and they’re emailing their members almost every single day. So it’s a pretty heavy and intense email marketing strategy but really the key behind what he’s doing really isn’t a surprise. And he’s trying to offer ridiculous value with every single email so that people look forward to it. And your point about making it all about you, there’s a great BuzzSumo article where they analyzed 100 million headlines to see what got shared the most. I love this blog post. I actually go to it once every few months just to revisit some of the concepts in this. But one of the big things that they do there and I found that these headlines is that headlines that get shared, the headlines they get opened, the emails that get opened are the ones that promise something to the user. Who is the person that’s actually opening this? Is there a promise in that headline? And when you decide with this headline I’m going to promise something to the user that’s a much better reason to open it up. Nobody really cares about your big news for the day all that much but they do care about what they’re going to get if they’re going to open that email. Ken: Yeah, it’s funny when people put on their email marketing hat they’re like … they disconnect from their own mind about what do I want in my own inbox, right? Mark: Right. Ken: It’s something that I would really appreciate in value and go wow that was really good. And in fact, that’s kind of our litmus test where we ask ourselves is this so good that you would forward it to a friend? And if that’s a yes then you’re probably on the right track. Mark: Right, so you got to start with that value prop, make it into something about the other person and let your subscriber know what are you going to get from this is email. If you take the time to open it if you’re going to take the time to click it if there’s a link in there you’ve got to get something in return and you got to make that promise up front. I’m sorry to step all over what you’re saying. Ken: No, it’s okay, and I think … and this is a really important point. So it’s you take a page out of Gary Vaynerchuk’s book right? Jab, jab, jab, right hook. Of course you’re doing email because you have a strategy in mind and the strategy is you want a return on your investment right? But you need to think about the ratio, and 3:1 is a good ratio. Do you give, give, give between each ask or are you ask, ask, ask, ask, ask and maybe give once in a while, right? Mark: Right. Let’s talk about that strategy of you guys just finished November and for a reference, for people that … because this probably won’t actually air until maybe first day of November, it’s October 25th today. So we’re not even done with October. You guys have finished out your planning for your clients all the way through November. When you’re planning that out are you looking at sort of like this rhythm to the emails as far as … like you said give, give, give, sell, give, give, give, ask, or is it also kind of moving along with holidays? What sort of planning are you doing on behalf of your customers to plan that far out in advance? Ken: Right. Yeah, so that actually opens up another great strategy idea that I think people blow it on. One of the first things we do when we onboard a client is we come up with … in fact I got a meeting in about an hour on this where we come up with 50 to 100 different content ideas before we even get this campaign started. So we have this giant treasure trove of content ideas. Once we learned about the audience we think we know who they are. We think about what would be important to them. And we come up with a lot of ideas. Some of them are just plain nuts but we document everything; we put it in a document. And so as we work with our clients, the November emails aren’t just planned, they’re actually planned, executed and already scheduled. So they’re in the can just waiting for the days to tick by until they get released. So we actually started working in November last month. So yeah probably another big mistake that people make beyond if like not thinking of content ideas ahead is not planning for email work. And it is weird people will just kind of go oh dude I tried to sneak it in between something else because that is blocking out real time and saying this is an important part of my business, it’s a huge channel for me. I’ve got to schedule time for this and they continuously under estimate how long it takes to write brilliant copy, have a copy edited, come up with great images, get it scheduled, think about how they can enhance it. And it’s one of those things that if you put it aside for a second and then you come back to it you have fresh new ideas, a fresh perspective and you can always make it a little bit better. So scheduling that time, getting on a rhythm, and doing it ahead of time is big paradigm shift for a lot of people. Mark: Yeah let me ask you, I don’t want to divert too much from kind of the thread we have going here but in the world of email marketing, we have a couple of different concepts as far as when people receive emails. Well if you start off at the very first contact with somebody who just joins your email list they might automatically be put into a campaign where they’re going to get different emails at certain times versus your … maybe your entire block of subscribers where you might just be sending out broadcast to those subscribers on a regular basis. I want to ask you a little bit about that. How much emphasis do you like to put on one versus the other? In other words if I come to EmailBroadcast.com and you have a lead magnet there and downloadable resource or something else, how long are you going to put me in a pre-defined process where you’re going to lead me through an arc and trying I guess funnel marketing right here but bringing you down that funnel to a certain point versus taking me out of that campaign where I’ve got this ready written emails that everybody else has received earlier and now I’m in your general kind of flow into your general broadcasts. Ken: Yeah well, I’ll speak to exactly what’s happening right now on our campaign. So we have a year-long champion going on right now that is a story format. We have some brilliant writers … in fact actual published and award winning authors and so we’ve tapped that and we’ve written out a fictional story about a guy who owns an RV lot and has a huge competitor move into town and is trying to figure out how to handle it with his marketing. And so right now when you sign up on our email list we kind of thought of it as kind of a Netflix situation where you binge on episodes until you get caught up. So right now when you sign up you get an email from us once a week until you’re caught up and then we do a monthly broadcast. So I’m not sure that completely answers your question but it still kind of depends on when you join but I think we’re in episode eight or nine right now. So for seven weeks in a row, you would get the next chapter of the story and then once you’re caught up it comes out monthly. Mark: Yeah, that makes sense. So it sounds like again when you’re planning out your broadcast schedule here for November and December as you go get into those months you really need to think about the fact the person that’s been with you now through that time they’ve already been through that. In this case a year-long journey, that’s pretty significant and they’ve already had that exposure to your company. And so you’re going to write and create that general broadcast strategy with that in mind that these are not people completely new to who you are. Ken: Right and then what we’ve done is we did have an interruption in the story, like a commercial interruption like the old school radio shows or something. But we had a message on like July that was like hey here are a couple of things you might think about and there were something promotional. There was a blog post. There was a different value ad but it was just kind of a little interruption in the normal sequence. So if you think about it we actually planned … the emails that are going out on November and December we planned last year; last fall when we outlined our storyline and figured out what chapters were going to go when. And so right now we’re working on our 2019 campaign which is going to be all different. We’ve been working on it for a month and a half or so and we’re kind of finalizing our strategy around that and so we hit the ground running in January. Mark: Yeah so much of marketing and I don’t think really matters what the format is whether it’s AdWords or Amazon Ads or email marketing, so much marketing seems to be this idea of measuring, refining, repeating. So you’re going back and you’re taking a look at what worked, what didn’t work, you’re testing things against each other. How often is your team if you have a client on board and you’ve drafted this this kind of initial sequence that people are going to get when they enter into one of the many different funnels that you have set up. How often are you going back and refining that for them? Ken: Well, we look at it monthly. It’s part of our process where … it’s on our checklist to go and review the automation for instance. So if we’ve built an onboarding series or a welcome series for a client we look at it monthly and we kind of track the numbers and we start and we look at it. If it’s not performing to our expectations then we’ll think about tweaking it. And so we’ll dig in in the messages and think okay what are people on the activity that we are getting what are people most interested in? Which of these has the best open rate? What clicks are … what things are people clicking on and maybe we should refine the message a little bit. So we look at it once a month. There’s a danger at looking at it too much. It’s like looking at your stocks every single two hour period, things go up and down and so you want to avoid the small sample bias and look at it over time but we look at it monthly. Mark: Okay. Let’s talk a little bit more about some of the mistakes people make. I’m going to throw one in and then you tell me if I’m spot on or if I’m off base here. I would say one mistake that I see is people taking a one size fits all approach to their email list. So everybody gets the exact same emails regardless where they came from. Ken: Yeah and a good example of that is we are on boarding a new client in the cosmetic medicine practice which serves 90% females but we are … and so part of our strategy is that we’re going to ask people to identify their gender when they sign up for our email list. And if they do say that they’re male we’re going to have a completely different first message for them making them feel very welcomed as a man in what is otherwise a woman dominated consumer market. And we think that’s going to be a big deal. It’s going to grow their practice through male audience without much effort at all. So yeah not segmenting your audiences is … you’re right it’s another big mistake. People think oh I’m just going to broadcast to everybody. Okay well, there are certain messages that are good for that and that maybe most of the time but really you should be thinking about your email lists thinking about what segments can I target. For instance, another example we have a large furniture retailer in Louisiana, Arkansas in Texas and we came up with this idea that we should target the people who have their private label credit card. And we also identified another sub market of people who are on their … so private label credit card is for people with pretty good credit and then they also have a kind of a buy here pay here market. So we get a different message to each of those segments. It turned out combined they were only 7.8% of the list but in one message to each of them we ended up driving $430,000 in new sales for the weekend for just that one segment. So by targeting a message just specifically to them with a specific offer that was really relevant; that we had huge response. Mark: That personalization is a huge issue right now. I saw one thing that was really cool. It was somebody who is qualifying their email subscribers before they signed up through a quiz. And the quiz was kind of fun and it was actually in the cosmetics field. So it was what’s the shape of your face? And it just had cartoon characters. It wasn’t offensive or anything like that. What’s the shape of your face? What’s the tone of your skin? And they went through probably about six, seven questions but then you were able to break out into this really cool like super segmented this is a female with this skin tone with this shape of face with this size of eyes this sort of thing and you can really cater the messaging. And this was more than … they were doing email marketing but also some other recommendations that is super super cool. Ken: Yeah, the danger around that … well, not the danger but the recommendation is don’t ask for anything you’re not actually going to use. So a couple of things around like I see a blast for last name in their email sign up forms and I think that’s like one step too far of getting a little too personal a little too quickly off the bat. And unless you’d actually have a use for somebody’s last name why are you asking for it? Even … but also people take that in the wrong direction as they say here sign up for our email list and all they ask for is the email address. Okay well, that’s not enough, right? It’s like at least get their first name because if you don’t you’re giving up on a huge personalization opportunity with putting peoples name in the subject line and addressing them by name and actually creating a relationship. When you’re saying give me your email address what you’re really saying is I’m going to blast you like I do everybody else on my list and I don’t really care who you are or anything about you. So there’s a check for your listeners if you’re only collecting email address you’re doing it wrong. Mark: Yeah and I’m going to make a plea here as well, this is turning into my great show here but one of the things I can’t stand with email marketers when they’re … when I get on a list is the hey buddy buddy sort of approach that comes without me even knowing who you are. Like there’s a point where you got one of the so corporate and stiff to the point where it just feels stale and separate. But if you come in and pretend like we went to college together that’s equally off putting to me. I want to have somewhere in the middle where I can get to know you a little bit and again kind of test out to see do you have value to offer. But I guess that’s where that copywriter comes in, having a copywriter who’s done thousands of these emails before. Ken: Yeah, and I would actually say that I would rather somebody do that if that’s really their authentic voice and that’s really who they are where they want to be buddies with you and if you’re not ready for that then fine get the hell off my list. I think that’s a better approach than trying to please everybody. You know I’d dig into authenticity around email marketing, it’s one of the things that we really drive home with our clients is to say I want people to know who you really are not who you’re pretending to be. So if you’ve only got six people on your team let’s celebrate that. You’re feisty and small and responsive and adaptive versus trying to pretend like you’re some mega-corporation. But yeah everybody’s different and you have to realize that. So really you should concentrate on attracting the people that you want to attract. Mark: Yeah. Ken: So if that’s important to somebody that they’d be buddies with you and you didn’t like that then maybe they did themselves a favor by not winning your business; who knows. Mark: Yeah, absolutely the authenticity is definite. I see sometimes with these people also lack of authenticity trying to win me over by being a little hokey. But if it is authentic to me then well so be it. The rest of the people buy me dinner first. So I want to shift gears really heavily here because I want to get to this before our time is up and I want to talk about the technical side of this. Ken: Yeah. Mark: This is just the hairy issue. There’s a lot of systems out there. We use drip marketing at Quiet Light Brokerage. I like the system but we also have an external CRM which means we need to get these two things to talk to each other. What tips would you have for people on that technical side? I know that’s really an open ended question but I’m going to have to throw it in your part as far as just the tips of working with the technical side. How much effort should people be putting into that sort of that technical side setup? Ken: Yeah, this will tie back into the strategy question too. One of the most under-utilized aspects of email marketing is the use of automation. When you can define what your sales process is and know where people are falling out of your funnel or use an automation series to take people from not step A to step B but from step D to step E. You know there are all kinds of opportunities to use email to kind of leverage your time. Basically having the platform do what you would do if you had a million hours in the day and all you did was write emails all day. Setting up the platform to do that is important. But you’re right that does take some technical integration stuff. So my tips, I would say work with the bigger players in the market is probably a good tip because they’ve been around for a while. They likely have the integrations for some of the bigger … so if you’re trying to choose an email marking platform and a CRM go … I wouldn’t go with a guy that’s brand new yesterday because he probably doesn’t have a very well developed API and it’s not a plug and play situation. So if you’re trying to save yourself some headaches go with bigger players in the market that have been established that have an API that already potentially connect. Look at the integration possibilities. But I’d also say that it’s generally worth it, right? There may be some pain involved in trying to figure it out but don’t give up. Get help, hire somebody and figure out how to get those things integrated because it can really make a big difference for you. You mentioned the CRM right? So we’ve got ours dialed in so I can fill out a single form and it populates both my email marketing to start a drip series but it also sends that exact same data to my CRM to save me from double entry. So yeah integration is the key. There is a lot to integrate; getting your sign up forms cracked on your website, getting the email thing dialed in, connecting your CRM. We’re going to be connecting in a medical records system for this latest client that we did and getting an API expert on that and we have that in house so we do not have that problem but it’s important. Mark: Yeah, so when we get into the actual set up of these things … I have another company that I own, I know those folks that listen regularly probably know about it but we use a lot of automation on our email side there. And even with that I mean you talked about the multiplying effect here, right? Let’s say that what you are going to segment your audience into just three different segments and then you’re going to set up automation sequences with a series of 10 emails in each. Well now you’re writing out 30 different emails with different email copy and on top of that you have your broadcast emails that are going to go out. And on top that may be some other campaigns and you have to try to make sure that these things don’t duplicate where people are receiving multiple emails because they’re accidentally subscribed to two different campaigns within our system and then figuring out how to make all the technology work together. So this is the part where I’m going to just make this quick pitch for the stuff that you guys do over at EmailBroadcast.com which is you guys do all of this. You are the full service sort of provider for this email automation of marketing right? Ken: Yeah, I have a team of people and I think that’s the key thing because each of my team members is a specialist. So I have an engineer that thinks in bits and bytes. I have copywriters. I have a sales strategist which is me. I have an operations manager to help keep things on track and then an account coordinator. We designated an account coordinator for each account so they truly understand who our client is, what their business is, what their goals are, what they’re trying to accomplish, and can really feel like a member of their team. So in effect, we are an email marketing department. Imagine a Fortune500 firm that had an entire department to handle email marketing. Well, we are that but for much smaller businesses who can get us for the cost of a part time employee. So yeah we handle everything from strategy to the copy writing, to the design, to the engineering, the mobile optimization, integrating it with the CRM, integrating it with medical record systems, setting up all the automation. Making sure things aren’t overlapping and you have people getting multiple stuff and somebody looking at it; somebody thinking about your campaign a month in advance. Thinking about the seasonal stuff like Q4 for us is heavy so we’ve been thinking about Q4 since July about how we’re going to get ready, which of our clients are going to want to do extra messages. That’s the value we add. We’re the people that you wish you had an entire department … and I think this is a different … I think this is an important point because some people go okay great this email something I’m going to outsource and I’m going to look for that one guy. Well, I’ve been doing this for 18 years and I’m not even that one guy. I’m not … I can’t be the best copywriter, the greatest sales strategist, the engineer to integrate everything, the operations manager to get it all done. I mean maybe that person is out there but you’re certainly not going to get them for a song. And so I think dividing the labor … you know divide and conquer and having each person in a team that’s used to working together is a great solution. And a lot of people don’t realize that this kind of solution is out there. They think that email marketing is something they have to do on their own even though they struggle. They’ve written the messages a bit inconsistent, the branding is not where they like it, they’re doing stuff last minute, they know they’re abusing their audience’s trust, they have low engagement, they’re like hell and they know there weren’t any other options. So we are out there. Mark: Yeah, fantastic. Regardless of whether or not somebody is going to use an outsource solution like what you guys offer which would be like an outsourced email department as you said it is something that I think people need to really pay attention to that aspect of the business. And you’re right, I look at a lot of businesses … I look at the health of a lot of businesses and see where they’re putting their time and efforts. And sometimes I see this really just beautifully built out Facebook campaigns, this really beautifully optimized Ad-words accounts, but it’s only been on a rare occasion where I see that applied in the email world. And when I do see it applied though it tends to be sort of a cash machine, right? All these other customer acquisition strategies are able to just funnel in there. And once they funnel in there those people are in because the systems are set up and ready to go. It does take time to plan. It does take time to refine. It does take time to go back there but this can be one of the biggest customer acquisition channels for pretty much any business that’s out there. So I think the work that you guys are doing is awesome. I love some of the tips that you had in there. I know that there are a lot more tips that we didn’t cover. I mean on one of our conversations you talked about hey what are you doing with the conference cards that you get? Do you actually follow up with them and is it just kind of one quick follow up or do you drop them into a sequence of some sort where they end up getting a series of emails; that’s brilliant. There you go, look at that you- Ken: I just attended a conference so I’m holding up a fan of contacts that I have and I … you know we walk or talk. I put these people into a segment in our email list and we’ve already emailed them twice which is more than anybody else who went to that conference has done. We have a third message already scheduled so yeah that and we advise people about their offline activities. Like we have customers … I had this customer one time, he literally interrupted my … our phone call to take a call. I only heard his part of the conversation. He sat there for five minutes helping this person out, they sell this rooftop tent deals and I’m like how many conversations like that do you have a day and he’s like I don’t know 15, 20. I go how many people are you getting emails from? Zero. I’m like wow okay huge opportunity for you. Ask for their email address after you just spent five minutes helping somebody. They’re going to give it to you. Put them on your list and now you’ve got a chance to market to them and then they’ll buy a tent. So yeah there’s a lot to email marketing and I hope your audience takes it to heart and really goes after it and figures out how can I add value? How can I make this amazing? And don’t worry about the immediate payoff. Trust me it’ll it will pay off in the end. What can I offer people that come to my website to actually get on my email list? If you’re saying sign up for my email okay you need to rethink that. What value is there? People don’t know what your email is. They probably haven’t defined how often it goes out. They don’t know what they’re going to get in return and so sign up for our newsletter you know who wants to do that? But if you can give me the top five tips in selling my business in the next year oh okay yeah that’s why I came to your website, that’s what I want to know about. So that’s the kind of thing you need to offer. Mark: Awesome so if people have questions about this or just want to bounce ideas off with you how can they reach you? Ken: Yeah, ken@emailbroadcast.com the phone number is 805-316-3201. And if you want a little branding tip or just have some fun call that number just to listen to our auto-responder. It’s pretty funny that we put together. You could go to our website at EmailBroadcast.com and on there there’s a pretty easy to find that you can schedule a 20 minute call with me free of charge just to be asked about your email. I can give you a couple of ideas, find out if … work out something that might be right for you but kind of get your head in the right direction. So hopefully that helps. Mark: Yeah absolutely. I’m actually going to call that number because that’s a pretty good tease to get them to call the number. Well put links to that on the show notes page so feel free to go to the show notes page and you’ll be able to see those links as well as contact information for you Ken. Thank you so much for coming on. I really appreciate it. Ken: Thank you, Mark, it’s been a pleasure and I hope everybody here is reinvigorated to do great email marketing. That’s why I exist in the world, to get people to up their game around email marketing. Good luck. Links and Resources: Email Ken Mahar Email Broadcast Website Call Email broadcast @ 805.316.3201  

What exactly defines an influencer in the marketing space? Do you need Oprah in order to sell your product? These days the term influencer is used so much as the concept spreads to become more of a “scope of influence” rather than just a celebrity endorsement. There are all kinds of influencers and within any industry, there are influential people out there, it is just a matter of finding them. When it comes to buying and selling a business, a company can add value to their business by diversifying their sources of traffic. The more diversity in traffic, the more the risk goes down for the buyer and the value goes up for the seller. Today’s guest, Shane Barker, teaches the “Personal Branding – How To Be An Influencer” course at UCLA. He’s a seasoned marketing consultant, who for the past several years has become an expert in using influencer marketing to boost sales for brands. Shane believes that nowadays companies have got to run an influencer campaign just like any other facet of the funnel in order to maximize their brand’s reach. Episode Highlights: What exactly is influencer marketing? Finding that niche person for the product. Identifying real vs. fake followers and how feedback needs to be weeded. Measuring real engagement over just follower numbers. What is a good engagement rate to look out for. The influencer marketing software tools that are out there and how to use them. Aligning the influencer with the product. What is the typical cost per influencer? How can you track the influencer’s impact? Why Influencer marketing works well. Tips and tricks on how to find influencers in your sphere. Cheaper alternatives to hiring a consultant to help with your IM campaign. Transcription: Mark: So this past weekend I was at Rhodium Weekend and we’ve talked a lot about Rhodium here on the podcast. It was out in Las Vegas and somebody that we know, somebody who’s been on the podcast Shakil Prasla, a good friend of Quiet Light Brokerage happened to run into another Shakil; Shaquille O’Neal. And he has a great photo of himself on Facebook with Shaquille O’Neal and he told me and he said that Bobby Brobine called his attention and so Shakil just shouted out and said hey we share the same name and sure enough that called his attention and then resulted in Shakil our friend having a picture with Shaq; really really cool. It’s always fun to be able to reach out to people who are well known and have some influence and obviously, this is something we can definitely use in business as well as in we are in a whole are of this in business and marketing called influencer market something I haven’t done a lot of. Joe, have you done much influencer marketing? Joe: You do it all the time Mark. We do … you just did it. You just did it for Rhodium Weekend. How many people that have signed up for Rhodium Weekend have gone to Chris’s centurica.com website for due diligence because you’re an influencer and you talked about it? Mark: But I’m not on the same level of Shaq so you know. Joe: Oh I don’t know. I don’t know. Mark: I’m definitely not as big as Shaq in more ways than other knows because the guy’s a big dude. I’ve seen companies use influential marketing before and it’s crazy; the impact that you have on your business when you find the right mix. Joe: Well you know a lot of folks think influencer marketing is … I’ve had a couple of listings where Dr. Oz mentioned the product or the ingredient and the revenue went … sort of skyrocketed. I sold one earlier this year where the product was named one of Oprah’s favorite things, that’s like the golden ring. That was back in like 2008 and they still get traffic and revenue from it and it’s 2018. So that is what a lot of people think about in regards to influencer marketing like you and Shaq. And by the way, Shakil call out that was a great photo thank you for that I showed my kids. But that’s not really just the influencer marketing that I think a lot of our audience should be thinking about. We’ve talked about it all the time when you’ve got multiple channels of revenue, multiple channels of traffic it brings the risk that you’re going to lose business down and increases the value of your business; the lower the risk the higher the value. Influencer marketing should be another channel. The next generation buyers people they’re … my kids, I have 2 teenage boys, I cannot get them off of Instagram watching videos. My son, 17 years old, he learns everything. The computer I’m on right now he learned how to build it on YouTube through influencers. They’re all about influencer marketing. So the next generation is going to be just that. We had Shane Barker on the podcast, that’s who you’re about to hear folks. He’s a UCLA professor. He teaches a class on influencer marketing at UCLA. He’s a consultant and he helps people. He’ll take over their campaigns and he’ll just tell you how to do it. He had some great advice in terms of tools to use to track your influencer engagements; how to find them, how to measure their success, and what to do in terms of maybe interviewing them and negotiating with them and writing up contracts with influencers and all these different things. The one thing I didn’t touch up on was workload but he said that when you frame it up right and you put the right package together in terms of your plan through a consultant so you don’t waste a whole lot of money it can then be handed off to a VA who should be able to run with it fairly easily. Mark: That’s pretty cool. So is this going to help me get Shaq to a certain point in Quiet Light? Joe: Hmm … Shaquille O’Neal, no not Shaquille O’Neal but Shakil Prasla yes. He’s already an influencer [inaudible 00:05:01.2] is what he is. Mark: I would rather have Shakil Prasla … actually, that’s kind of a lie, sorry Shakil. All right let’s get to it. This is actually a huge topic. I know this is going to be like the next big thing in marketing and this is one of those areas that people don’t really know a lot about. Some people are doing it well. They’re making a lot of money because of it. They’re building their brands because of it. It’d be great to unlock this so why don’t we go ahead and listen to it [inaudible 00:05:25.8]. Joe: Yeah I do. You’ve got to think about it just like an Amazon sponsored ad campaign, just like your content development for an SEO, just like your Google Ad Words campaign. You’ve got to run an influencer campaign the same way and Shane really talks about that in detail so let’s go to it. Mark: Awesome. Joe: Hey everyone its Joe Valley from Quiet Light Brokerage. Today we’re going to talk about influencer marketing with Shane Barker. Shane Barker is an expert in the space. How are you doing today Shane? Shane: I’m doing awesome Joe. How are you doing man? Joe: I’m good. You know back in my day there was no influencer marketing. It was pay-per-click and write good content and Google will reward you. Of course, my day wasn’t that long ago. I sold my business back in 2010 but the world has changed dramatically since then and it constantly changed and you’re on top of that and you are at the forefront of it which is one of the reasons that I will call it out right now why you haven’t written a book about it yet because it’s constantly changing right? Shane: Yeah that’s the deal. We talked a little bit before the podcast started today. The thing is it is an evolving space. I mean it started off back in the day and I said back in the day as we kind of joke around about that but you know I’m doing this for a while but it’s really word of mouth marketing right? Which back in the day the presentations that I do I always talked about like as an example would be like Tupperware. That was kind of like Helen who is a lady that she would have these parties and have everybody over and she was influential in the area because everybody loved Helen. She was a great wife and she’d have beautiful little kids running around. Everyone wants to be like Helen and they’ll all come too. They’d have a few drinks and the next thing you know they’re buying Tupperware right? So it’s that influential type thing, that’s how it kind of all started and then obviously we evolved to Beats by Dre and some other ones like that where you see this people wearing the headphones and they would go and give them the free product. And you see all these athletes that are wearing this stuff and I mean obviously they sold I don’t know it’s like 3 or 4 billion dollars to Apple so you know it’s obviously some- Joe: I guess it’s been around a while because celebrities have been endorsing products for years, for decades and they get paid for it. Shane: Absolutely. Joe: So that’s influencer marketing right there let’s do this. So Shane, I didn’t tell you before we started recording we don’t do fancy introductions. Obviously, we’re a couple of minutes in already. Shane: Yeah. Joe: Can you tell those folks that are listening about your background, what you do, how you do it, and where you come from? Shane: Yeah absolutely. So I reside out of Sacramento California but I’m in Los Angeles quite a bit because I teach at UCLA. I teach a class called Personal Branding and how to be an influencer. It’s a quarterly system so I do how to be an influencer on one side and the other side on how to work with influencers. We work with brands down there as well. So yes I’ve been in the digital space for 20 something years. I really jumped in the digital space because I had my own business. So it was one of those like hey I want to bootstrap this thing and I didn’t have a lot of capital. This was a long time ago. I’ve got a company called Hotpad that I had a patent on it; a reusable heat pack. I had a cool patent on it and so I had to do everything. I had to do the logo, I had to do the website and this was this is probably 15 plus years ago. So we were jumping on the internet, there really was no SEO. We just put something up and something went on the 1st page. We didn’t know how it happened or what happened. We were just excited that that was happening. There was no … there was just nothing, there was not a lot of software, there was … we were grinding this thing out and it was kind of wild wild west. And so I jumped into it and was working with this … once again probably 15 years ago on called getafreelancer.com and now it’s freelancer.com. So I was stating hey, listen I want to manage projects and I want to go work with people that know how to do these certain things that I didn’t necessarily know how to do. I was … at that time I was in school and I’d already owned my own business. Just as I owned a bar and I had done some stuff. It took me 10 years to graduate not because I wasn’t smart. Well, I don’t know … maybe because I wasn’t smart but maybe the bigger the reason was is because I want to travel and do this and I had my own businesses. So I jumped into that and like I said for about 10 years I owned a bar and did some other fun stuff; all offline type businesses. And then when I was doing Hotpad the reusable heatpad company I decided to go back to school and that’s when I really started doing outsourcing and kind of figuring out how to work with other people and I’ve been doing that ever since. I mean right now I have a 31 person team that’s all over the world. I don’t have them … yeah, I have all like project management software or like all front stuff in place. And so I have like where I’m doing this interview today is I have an office here in Sacramento that’s strictly for content creation; for us putting content together. And my team is once again all over the place so they’re … so it’s kind of awesome. So that’s kind of catapulting me out once again where I’m at today. We do heavy content marketing, we do heavy influencer marketing. And then I’ll kind of talk about my story a little later about like how I jumped into influencer marketing and all that. But I consider myself like a brand and an influencer specialist and then also a digital strategist. Because it’s just that’s what I’ve done for so long when … it started off on SEO and then obviously a lot of social stuff and now we do influencer marketing. We’re always trying to … the new stuff that comes along it always seems to knock on my door whether I want to do something new or not when it comes to marketing. So that’s kind of where I’m at today. Joe: Well, our audience is full of people just like you and people that want to be like you; those that are leaving the corporate world. For influencer marketing, I want to go through some of the steps that you teach in that class at UCLA and the process. But let’s 1st define it what exactly is the influencer marketing in your view? Shane: Yeah so influencer marketing in which I said a little bit earlier is in the back in the day it was influencer marketing was not called influencer marketing but really it was working with celebrities and getting somebody that had some kind of influence because they’re an actor, or celebrity, or some kind of singer, or something like that and you ask them to endorse your product. But usually, it was for the Nike’s, the Toyota’s, these bigger brands because you had to have a big budget. And the deal was that you were going to do some kind of a commercial, maybe sometimes radio, but mainly a commercial where you would go and this person would say oh my god I have this kind of car this, I love my … whatever my [inaudible 00:10:57.3], I love my Toyota, I love my Nike shoes whatever right, usually bigger budgets and once again somebody that has a really really high influence. Well, last in the 5, 6, 7 years you’ve seen this switch of where really anybody can have influence. You don’t have to have … you don’t have to be an actor; you don’t have to be a famous person to do this. And you’ll see this obviously on YouTube, Instagram, Snap … sometimes on Twitter and then on Facebook as well. The idea is that an influencer is anybody that has influence over their sphere … over their community. So as an example you Joe obviously are an influencer because you have influence over your podcast and what we have here. So that makes you an influencer because people follow you, they listen to your podcast religiously, and they go and they get great information from it and they go and apply that in the real world. So if you were to say hey guys this is some software that I use and I’ve used it for the last 6 months. I’ve tested it its absolutely awesome then guess what probably a lot of people in your podcast are going to go hey that sounds like an awesome product. If Joe uses it then I should use it. And so everybody has this type of influence and we look at this. So as Instagram as an example I look at people, let’s say you have 5,000 followers or 10,000 people I go well are those influencers? They absolutely are. I mean if I have 5,000 or 10,000 engaged … a heavily engaged audience I would much rather work with that person let’s say as an example yoga mat. I’m a yoga instructor and you as a brand you’re selling yoga whatever quick bed or something. And so you come to me, I would much rather work with a yoga instructor that has a 5 or 10,000 following that’s heavily engaged than somebody who has a million or 2 million or 5 million. Because really at the end of the day what … in the beginning of influencer marketing was like hey I want to go with the people with the highest following right? They have a milion followers like that’s how … it’s who I have to work with because of the fact that you look at all those eyeballs. But the issue is this … and we all realize this thru marketing is that back in the day it was like if I can get a million visitors that’d be awesome. It’s not the amount of visitors it’s the quality of the visitors; the type of traffic that you’re getting from that. So same thing with influencer marketing you want to really niche down and find the person that is really going to be best for your product. The reason why and we’ll go onto this later but the reason why there’s these issue with influencers and fake followers is because brands were paying influencers on the amount of followers they had. So you get a situation where they say, Shane, if you have 10,000 followers I’ll give you a 1,000 bucks. If you get 25,000 I give you 2,000. But if you have 100,000, my friend, I’ll give you 10 grand and then guess what happens an influencer goes man how do I get to that quicker? How do I get to that mark faster because obviously I’m doubling, tripling, quadrupling my money? Well, then what happens is now they’re doing something where they’re adding fake followers and doing some stuff that’s obviously unethical to be able to get to the next price point. Joe: How do you measure engagement over followers? Shane: Yeah that’s the deal and it’s funny when you talk about back in the day because it literally when I talk to people I’ve influenced I mean I always talk about back in the day that makes it sound like we’re like 100 or something; like I went to school with Jesus or something or Moses or like I was on the boat or something. But you know for us it’s like when I look at this like we were doing influencer marketing 5, 6, 7 years ago there was no software right? So there was nothing out there to really … I mean what we would really do is we would go and try to find these influencers by search. Like go on Instagram and look up hash tags and stuff like that which is still relevant today and we still do that say obviously. And we would go and we’d put these profiles together and I would manually go look at them. Because that was it, like that was my … an engagement for me was not necessarily a number but it was more … we ended up coming up with an equation over time that we looked at of followers, engagements, likes and stuff like that. So we had a little bit of an equation or some kind of … and we call that algorithm because it wasn’t that crazy but where we would go and take a look at that. And we would just have these Excel spreadsheets that I would just take tons of notes and we would do all this kind of crazy stuff. Now there’s plenty of software. There’s all kinds of softwares you can use. I mean we use … Grin is one of them that we use that you can do. There’s another klear.com which is with a K. There’s Neoreach, there’s Revfluence … I mean there’s all kinds of them. There’s all kinds of different ones that you can go. Some of them are free, some of them will cost … I have, I mean I’m very fortunate since I have access to almost all the softwares because they want me to look at their software and evaluate it and stuff so I’m very blessed in that sense. Joe: You do? Shane: Well I mean you know it’s so funny. I’m very humble about that and I don’t think of myself as an influencer but over time you start to realize you’re like wow I guess I am an influencer you know. I’m just not … I don’t know I just don’t think of myself that way, like when I go to conferences and speak and do stuff it’s [inaudible 00:15:08.8] people come up to me like I’ve been following you for a long time. It’s always really … it really kind of shocks me. Or like while walking somewhere and I’m not that famous by any means but they will come up and say are you Shane Barker? And there’s been a few times I’m like God do I owe you money, are you VISA or like I’m just trying to figure it out right. It’s like this weird … so you know an influencer [inaudible 00:15:25.1] come up I guess and things are good and I’ve got some good foundation and people are following me so I’m not mad at that by any means but- Joe: That’s good. The software does it help you measure the engagements does it go that deep? What is this like Grin and- Shane: It does. So this is the thing you have to look at when it comes to engagement, this is the key and when you talk about software … so software is that 1st level. So the 1st level of when you’re going in you go and you take a look at it, you can put in hash tags, you can put in keywords, you can do this kind of stuff. So let’s say it’s yoga, that’s the thing I’m looking for and let’s say I’m I can sell this yoga mats all over the world. So it doesn’t necessarily have to be in Los Angeles or Las Vegas or something. So I go all over the world, so what I do is now I can curate these lists. I mean go take a look at them, you add them to whatever … some kind of a folder or whatever it is, you pull those people in. That’s the 1st step and it’ll say the engagement. And it’ll say your engagement is 3.5%of 5.6% and software is the 1st step. That’s where you’re you curating the list and you’re saying hey okay I want to find 10 good influencers so I’m going to curate a list of a 100 or 200 or whatever. And then the next step to this whole thing is you … software is lovely but influencers once again because they want to make money and I’m not saying all influencers are this way but … well, we all probably want to make money but there’s ways to fudge your numbers. So that’s what we have to look at. I can go on to Fiverr right now and I can add any picture on Instagram and I can get 10,000 likes for $5, $10; whatever the number is. Joe: Right. Shane: And that’s not engagement. I mean somebody like if you came into my store … let’s take this offline. I own a store and Joe you came in and you knocked and you said hey Shane I was wondering do you guys have this and I just went [thumbs up] that’s not engagement right? You’re like okay so Shane no … so say that again so what do you have this I’m looking for this- Joe: You just gave us the thumbs up. Shane: The thumbs up, that’s right I forgot we go audio and video on this. So the issue with that is that’s not engagement right? Engagement is like oh hey Joe thanks for coming in my shop. If you’re looking for these blue widgets then you want to go over here or let me show you some … blue widgets are cool but the yellow widgets are the ones I think you need because of this this and this. So that’s where we kind of get this thing of where the software is awesome go take a look at it but engagement is conversation. So if I’m a yoga instructor or a brand and you’re a yoga instructor or either way you know vice versa. Joe: Yeah. Shane: Then what I should do as a brand I should go look at your profile and find out 1st of all how many other sponsorships you’ve had. We don’t want somebody that has a new sponsorship every day because the audience is going to be a little unauthentic … not authentic right? Joe: You don’t want somebody that has a new sponsorship every day you want somebody- Shane: No, because think about that like this is a thing, it’s like it’s like dating. If you wanted to date a girl that’s had a new boyfriend every day for the last 15 years like you got to think well there’s got to be something wrong with that right? Like there’s … it’s not … the numbers aren’t working they’re not … you really want to develop your brand, you want to develop a longer relationship with an influencer. But if they’re talking about something every day the problem is then you get to a situation where people start to go okay does Joe the influencer really like this product or is he just doing this for money? Because it just doesn’t feel like we want Joe the influencer that says listen I’ve tried this product for 3 months you guys you know I don’t promote tons of products this is a product that I’ve used it’s absolutely awesome this is why I’m promoting it. Joe: Okay. Shane: Right, so you want to get authentic- Joe: You’re going to look at that engagement percentage and you’re going to focus to see if they’ve had lots of different advertisers on a regular basis. Back to that engagement percentage so Shane, you had said 4 or 5% what they have … what is a good percentage? And I mean people talk about open rates and things of that nature in email campaigns, what is a good engagement percentage for people that are just starting off? What would they look out for; the number? Shane: I would probably say it’s like probably 3 to 5 % is a good engagement rate. I mean anything higher than that is awesome. Joe: Okay. Shane: And here’s another thing we talk about that engagement because I’ll touch on this as well is you have to look at the comments. So we have this list of let’s say its 100 influencers and let’s say I’m looking for 10 great ones. You want to go through … you want to look at their profile; A. look if they’ve done a thousand sponsorships then I would get away from them or you look at the engagement. But you want to look at what people are asking for like hey Joe the yoga instructor. Hey, I want to know … it looks like you’re using that new mat or you’re using a new water ball whatever like where did you get that? Or hey Joe when are you coming to town or hey this … like what you want to show that people are engaged with the content and this is where things get … where people can fudge numbers where if you go to somebody and they have an engagement rate of 10% you’re like oh my God this guy’s crushing it, this girl’s crushing it, you go and look at it and they have 1000 emojis, that’s not engagement right? So you can … from software standpoint an emoji is engage- Joe: You want actual communication, people talking back and forth info and some responding, people asking questions. Shane: Right. That’s the thing and that’s when we talk about the … when I said I’d rather have somebody of 5 or 10,000 or 15,000 than a million. Joe: Yeah. Shane: That’s where the engagement rate stays higher because Joe what I would look at is Joe the influencer. What I want is that if people are asking questions and you get 20 questions there should be 20 answers by Joe. Joe: Right. Shane: Joe, you should be going in there and saying hey … where I think is that’s engagement. That’s showing that you have an engaged audience. When you get to the … I’ll use Kim Kardashian as an example, you have 20, 30, 50 million; they’re not responding to anybody for the most part because they can’t physically do all that. And so the engagement rate is a lot less. You have your audience that’s … you get eyeballs so if you’re Coca-Cola you’re going to say hey I’ll go with Kim because I know that she’s going to get eyeballs. I don’t really care about the engagement. I’m looking at overall exposure and they’ve got a big budget. If I’m a brand you really want to go take a look at that and say who is … who’s on the come up. They don’t have to have a million followers but who’s engaged? Who seems to be really into it? What’s a good product alignment? You’re at this … is your product and this influencer going to align correctly? And then what I do … and this is a big one a lot of people don’t do this, I interview all the influencers. I do a call just like you’re doing here Joe. I get on there and I say hey Jennifer I’ve got XYZ product I usually have some questions and I say so tell me a little about yourself or what … who you’ve worked with. They should have some kind of a media kit so there’s some 1st steps that we take. And then I go so tell me a little bit what have you looked in [inaudible 00:21:17.3] XYZ company and they go … I mean I haven’t looked into it but I know that you guys are offering 1,000 bucks a post so I was interested. Joe: Right. And that’s the thing I was just going to ask actually so thank you, you went there. How do you track this? How does it … what does it cost? I mean people do sponsored ads in Amazon, they do Google Ad Words, and it’s a clear defined cost per click. What is it typically cost per engagement I guess or per influencer if they’ve got a 3% engagement and 5,000 followers? Shane: Yeah that’s the thing is it’s everything is negotiable. So this is where it becomes a little harder because you do for if you’re going after the keyword Sacramento DUI attorney you know that it’s $3 per click. It’s very easy. If you’re going up with Amazon there’s a … they have a model that they put in place to be able to understand once again how popular it is and what they’re going to charge. Joe: Yeah. Shane: Influencer marketing is different because you’re dealing … each influencer is different. Each influencer, in theory, should own their own company or their own brands. So what you do … I mean there’s certain websites and stuff and calculators you can go to and kind of what you think would be fair but what I always tell people is this, the analogy I use is like let’s say if I have a Babe Ruth signed baseball card. And everybody tells you and all the big guys go hey man that’s worth a million dollars Shane; guaranteed a million dollars. There’s only 2 of those out there. Yours is in mint condition it’s worth a million dollars and I go well I’m going to wait to get a million dollars. And then Joe you come to me and say hey Shane I heard around the campfire that you have a Babe Ruth card I’d love to buy it from you. And I said well it’s worth a million and do you know what Shane I appreciate that but how about if I give you 75,000? And I go okay you know I’m actually not off. I guess I don’t need to hold on to it. I mean 75,000 is a good deal. And that’s a good deal right? It’s a supply and demand type thing. The cool thing about brands is there’s hundreds if not thousands of influencers. So everything is negotiable. There are some companies or some influencers that will do free product. There are some of them that will do free product plus some type of an affiliate link where they’re getting some kind of residual sales. There will be other ones that just want a flat pay per post. But everything is negotiable so it’s very difficult to say you should spend this amount. You have to figure out what you think is going to be fair. So if I go in and say listen I want to get to 10 influencers I have a $10,000 budget so in theory I have $1,000 per influencer. What you have to do is go in and figure out those influencers and talk to them and say what would you usually charge. Well I charge $250 per post on Instagram let’s say. And so my mind I’m thinking I get at least 4 right? So I say how about this why don’t we do this, I’ll go and pay you $1,000 we’ll do the 4 things but I also want you to do two Instagram stories and I want you talk about a Snapchat for 2 times. If I think that’s a good deal and that can move some traction and you think it’s a good deal then it’s a good deal. So that’s where everything is different with everybody but I think what happens with brands and what they don’t realize is these influencers once the followers start getting honey because that’s what brands still look at most of the time. Is that they get pitched 5, 10, 15, 20, 30 times not a day but a week- Joe: The influencers- Shane: The influencers do. Joe: Right. Shane: And especially if you’re up there then you’re getting pitched over and over and over right? So the thing which you have to do as a brand, you have to 1st you have to differentiate. So make a nice little catchy subject line. You want to get their attention, not just looking to work for you that’s just kind of yeah okay I get it. But come up with something kind of flashy. But in the email, you’re going to tell them, you want to make it a win-win right? Because influencers are used to people saying hey if you post 2 pictures I’ll send you a shirt. And that’s kind of like ah okay thanks. So you want me to A. the reason why you got in contact with an influencer is because you love their content. So they probably have a video, they probably have a video guy and a photo person and all this kind of stuff. They have like … it’s a business and you’re telling them that you’re going to send them a free $20 shirt for 2 posts when they have costs. I mean there’s a reason why you picked that influencer because they have great content. If they’re a lower influencer what I mean by that lower followers and they’re doing it themselves then maybe that makes sense. And maybe they love your brand and maybe they will do it for free. They’ll say you know what I love you guys as brand why don’t we do … you guys send me one shirt a month, I’ll do two posts a month and that’s going to be a win-win for everybody. Joe: Let me ask about tracking because you know with Google Ad Words you can track response at ads you can track … we know what cost per acquisition is. How do you do that with an influencer that you give $1,000? Shane: Yeah there’s a number of different ways of doing it you know the ones that just want a flat pay per post … I mean that’s … the difficult part is … I mean what I would recommend is so this’s the thing if this is my company this is my brand this and what I do with my clients. There’s a number of ways to do it. There’s coupon codes, so you put Jennifer25 so they should put something on hey this is Jennifer these are these products by these companies I’ve used it in the last few months everything’s awesome and I’ve worked out a deal where you guys everybody gets 25% off hurry it’s going to be gone in 40 hours; whatever the message. Joe: The influencers, for the most part, is saying use my coupon code and being up front and saying I’m getting a commission I’m getting paid I’m- Shane: They’re supposed to, FTC you’re supposed to right? So the thing is because they don’t want you like in theory fooling the public right? So it’s no different than if you had whatever Snoop Dog talking about Toyota on a commercial at the bottom really low will say Snoop Dog was paid for this promotion. So there’s … they want to make sure people aren’t being fooled so you should put this as some kind of a sponsored ad or #ad or #sponsored something like that. Joe: Okay. Shane: They would put that in the hash tags it’s … the FTC’s there’s always a little bit of gray area with that. But if you put some things like that you should be safe. The thing is that what you want to do when you have those like I said when those people reach out to you and you’re trying to develop those time relationships. The thing is you have the coupon code so you can use something whatever that is the thing but one thing a brand realizes is just because you hire Jenny that has 50,000 followers they can’t be a frequency deal. So email marketing if I want to go buy a Coca-Cola what I do is I see a commercial and then I see a banner and I see this when I go to the store I go, man, I feel like drinking a Coca-Cola for some reason. It’s the same thing will influencer marketing, don’t think 5, 6 years ago you could put up one post and probably make some great money; it’s a frequency deal. So you don’t … when you’re negotiating with influencers make sure that there’s 1, 2, 3, 4, 5 … there’s multiple things that they’re going to do for a set price assuming that’s how you want to … but just make sure it’s a multiple deal with the … so we have coupon codes, you have an affiliate link. So Instagram being the example there’s only one place to put a link right so it’s a very valuable valuable place. What we use … there’s a number of different things you can use but with that you can either A. you can negotiate with the influencer and say hey we would like to give you an affiliate link that you put in your bio thing and we’d like for the next 2 weeks while you promote this product we’d like for you to have that affiliate link in there. So they can put link in bio or something like that. So it pushes them up there but you have to have a contract with that influencer and make sure they know what they’re doing. That’s another big thing with this is we have brands and if- Joe: Where do you find these contracts? Shane: You can look online. And we actually have some templates that we use that we could that I think … I’m sure I’ve shared them on multiple different posts but really just a brief right? You want a brief of like hey this is the hash tags you are going to use. This is the kind of content that influencers have used in the past that have been successful but give the influencer free reign to do what they want. Just give them basic guidelines. Hey, we’re also looking for you not to do any anything within our competitors for the next 3 months so that you’re not doing 10 different campaigns about the same kinds of stuff; just some basic stuff where you’re covering yourself. We want to also want to make sure that our link is in your bio for at least 2 weeks or a month or once again everything is negotiable but you have to talk about those terms ahead of times and brands don’t because they don’t know. That’s the reason why I always recommend hiring a consultant or somebody to help you with your 1st few campaigns because then they can … there’s these things where you can lose a lot of money and not know what you’re doing and just assume by hiring an influencer an influencer is going to do what’s best for you. Most influencers aren’t marketers; they aren’t right? Joe: Right. Shane: The yoga instructor that just … he’s a yoga instructor, he didn’t go in and get his marketing degree and say hey I’m going to go and try to build this huge community. He just started doing what he does. Joe: So he needs guidelines given to him from you on what to do and how to do it. Shane: Yeah because if not then it … you just, you need some direction. Joe: Got you. And you’ve talked about Instagram; my kids are always watching videos in Instagram. Occasionally they snap back and forth and I don’t know how they’re ever going to make money on Snapchat but I’m sure they are. I’m sure they probably are. But what social media outlets are the best options for people that are selling yoga pads [inaudible 00:29:20.6]. Shane: So Instagram is where we spend a lot of time because it’s like that lifestyle; everybody wants to like have the pink puppy and be doing yoga be … have the perfect little cute little babies around and the perfect relationship. And so it’s that lifestyle type you know when I’m always on my jet I’m eating caviar and life’s good. And then we have YouTube which obviously is awesome because YouTube’s always going to be out there. What I mean by that is YouTube’s the number two search engine. Joe: Yeah. Shane: So we work with an influencer that does a review of a product or talks about your product they’ll go and put that content and they have a huge subscribership let’s say it’s 10, 15, 20, 30, 100,000, 1 million and that video literally goes out to all those people and then you get those eyeballs on you. Joe: So the software you mentioned before measure engagements on different mediums like YouTube and Instagram or? Shane: It can. Yeah, there’s multiple … there’s different softwares that do different ones. I mean there’s one or two that can measure engagement in all of those. Or what you can do … what you want to do is you can talk to the influencer and say hey put this in the brief. I want to make sure that I’m getting all of the inside information on my campaign and how it went and what we did and that kind of thing. Joe: Okay. So Instagram number one, YouTube number 2, is there a 3rd that people should look out or a 4th or a 5th that you’d consider? Shane: I mean Snapchat is not bad and then Facebook and Twitter there’s some stuff going on there. But really where we spend our time is Instagram and YouTube just because it’s the amount of how many people around them. I mean people spend I don’t know … I guess like 55 minutes a day on Instagram. I mean I think it’s after … like after you die it’s like 8 months or something … I mean it’s … of your life time. I mean it’s crazy right and obviously people spend a lot more time on there and then YouTube once again as always it’s that evergreen content that’s always going to be out there when people are looking for certain things. If you have a … once again I have this thing and this is a brand new patented product and I get someone to do a review on it on YouTube and they’ve got a huge subscribership like my sales could go through the roof because of that. Joe: Right we’ve got a number of transactions over the years where I’ve had businesses that had huge spikes because of Dr. Oz mentioning the product or the ingredient in the product. I sold one earlier this year … I think all these years have blended together, earlier this year where it was on one of Oprah’s favorite things back in 2012 or 13 and that carried it for a long time. Would you recommend that the audience members that have the yoga mats of the world go after those big influencers or just focus on the smaller ones or maybe a combination of both because you might get lucky? Shane: Right. You might get lucky. I mean it really depends on budget as well. So if you’re going to go after I mean Oprah being the example that you give. Like if Oprah talks about your product then all you have to do is hire somebody to count your money at that point. Joe: Right. Shane: You got to … you physically have to figure … you have somebody and get maybe 100,000 and just have … and just count the money and just probably I will organize it through serial numbers just to get something to do. Joe: I think these people would argue that you also have to scram like it’s an inventory to fulfill those orders because that’s what happens. Shane: Oprah is not going to promote anything without knowing that you’ve got some good distribution in place. Joe: A good problem. But that with free endorsement as well, it was sending products to that influencer looking for a free review and Dale called them one day and then said hey you’re going to be in this issue and they’re like oh my God that’s two days from now. Shane: So I’ll answer your question, so Oprah obviously being the mega of this whole situation but there’s no reason not to ask bigger influencers or smaller influencers … I mean smaller following. They’re going to be probably more apt because they’re hungry and they’re just either getting started and that kind of stuff. You see the prices can be a little lower. They’re going to be more engaged stuff like that. But I’m not saying don’t shoot for the stars. I’m not saying don’t send something to Oprah if you have a patented product that really takes care of a need that nobody knows about because you’ll never know. You’re saying right there that all of a sudden Dale gave the phone call and said hey we loved your product and you’re like you’ve got to be kidding me right? The thing is nobody is going to knock on your door if you’re not out there and pushing. If you’re not out there sending that information to Oprah or whoever you’ll just never know. And so what I would do is do a nice … I mean I would once again just pull in what … figure out who your buyer persona is and if it’s Oprah’s people because you have a book that you just read and it’s a self-help book and you think you can really help everybody, you have a different angle, you’ve got a great phenomenal story then pitch Oprah. Go for it. Like why would you not? She’s not going to know about people that don’t pitch her but I would also say the smaller influencers are … you know ones of medium size and all that go after them as well. The other thing that I always do is like let’s say I’m a newer company I go and look at my hash tag. So let’s say I’m #whitecoffeemug so … great I go and look that up and that’s the name of my company. You might already have influencers in your sphere that love your product. Joe: Okay. Shane: That’s a no brainer right? Like that’s a … you go in there I’m already talking about your product I don’t … you need to convince me of anything except how much free product I can send you to keep spreading the good word about my product. Joe: Okay, awesome. So for those that are listening again that are trying to sell yoga mats and use the medium influencers, forget the shooting for the stars and Oprah that type of thing. These people are usually entrepreneurs with maybe a remote contractor or 2 or 3 VA’s here and there. They may take this project on themselves at 1st and then hire somebody to take it over once they’ve setup SOP’s. What kind of time do you think it would take if it was me and I’m working 25 hours a week running my business which is pretty standard for the types of businesses that we sell, should we focus on a lot 5 hours a week to get started, 10 hours a week and what kind of budget would you suggest somebody starts off with that maybe they’re doing a couple of million years in an annual revenue. Shane: Yeah, so what I would recommend and once again I’m not just saying this because I’m a consultant. I would hire a consultant and say hey what do we need to do here? Because there’s people that have paid me a lot of money for me to learn what I learned … what I know today. I recommend that with anything, not just influencer marketing, with anything; like if you want to jump in and do your own PPC figure out somebody that’s a PPC consultant and have them so you listen I just want to hire you for 5 hours a month or 10 hours a month or whatever. I want to put together my ideas. If you can go in and tighten them up it will save you so much money because as entrepreneurs we always go hey we’ll do it ourselves right? I’m a grown ass man I’m going to go do this, I can do it. It’s not a problem. I’m not going to delegate because I have at least 2 more hours in the day. I’m only working 22 hours in the day I have at least 2 more hours, sleep is so overrated. I’m going to do it myself. Okay, that’s awesome; take it on. I’m not here to squash your dream but what I am telling you is that if you have a consultant that helps you along the way they’ll help you with you know these … they’ll potentially save you money, save you a lot of time. And because there’s like plans I’ll put together for people and say listen now you go hire a VA or let me show you how to do this or put the plan in place and now these people can go and implement it and they will come back after a month and hey what problems did you have? Hey, you kind of messed up here let’s look at the pitch emails you sent. Who responded? Now, what do we respond back to them? Like that’s a person that wants to take it on themselves. We have two ways of working obviously, one is hey we’ll do it for you like don’t worry about it. You sit back we’re going to just ask you questions you give us the answers. Or the other way of like hey you want to learn right? And a lot of agencies don’t do that like you want to learn because they don’t want to give up the secret sauce. I don’t have a problem giving up the secret sauce. I want to help you out and I just want to make sure you’re successful. Joe: Well look I think what’s going to happen is a lot of folks … you know we give up a secret sauce all the time. We help. If you help people they may say you know what I love this I think it’s going to be great please do it for me because they’re busy doing other things as well. So I think it’s a great idea. Some of the people that are listening may want to give it a go and shoot from the hip and see if anything sticks which is probably not the greatest idea in the world. Others will hire a consultant to create a campaign and then they’ll run with it, they’ll hire the VA. And others may say look just please take this on and run with and we’ll measure results with you and if you want we’ll keep going. Shane: Also, we’re doing that thing too is we’re actually developing a course as well. We’re doing of course for influencers and for brands. So now we’re in current stages of developing that. So they’ll also be an inexpensive option or a cheaper option than hiring myself as a consultant or hiring my company to do everything for them where they can go in and take a course for whatever $97 or $300. And they’ll go in and they can go through it and once again they’ll have enough information there to be dangerous so they don’t have me on an hourly basis. Or if they want a bigger project they can do that as well. But we’re developing that ritual as we speak. Joe: What’s your timeframe? People are going to go okay great when is it going to be done? Shane: I knew you we’re going to hold me by the fire Joe because I told you about the book earlier and so then you put me on tonight. Joe: I know. Shane: It will be done by the 1st of the year. Joe: Okay. Shane: That’s right, I said it. Joe: When it’s done make sure I get that link and we’ll put it on the show notes of the podcast okay? Shane: I can’t wait but by the 1st. If not by the 1st then I would just … I’ll drop off as an entrepreneur and just go and do something separate that’s not online just because I’ll be so ashamed. Joe: 61, 71, you’ve got something like 80 days maybe to get it done okay. Shane: Now you’re just trying to stress me out, Joe. I mean come on I just gave you a date I mean now I got to go talk to my people and go listen we’re going to have to double our staff- Joe: [inaudible 00:38:00.2] for meditation for that stress. You’d be okay. Shane: Okay. Joe: You’re not just … no, you’re thriving on stress. Come on. Shane: I love that, like the fact you just told me that like secretly I don’t even need any more coffee. Like I just got these goose bumps on my back that I said you know what I’m going to show Joe. I’m going to show him by the 1st he forgets this. Joe: Please do. Shane, I love the influencer marketing approach. So many people focus on one thing and you know when they diversify their revenue streams, their sources of traffic it de-risks or lowers the risk of the business and the lower the risk is for the buyer what happens the value goes up. So for those that are listening take a look at it. Take a look at influencer marketing. Hopefully, this episode of the Quiet Light Podcast has helped. Shane, tell the people that are listening how they would reach you if they want to talk to you about consulting or talk about maybe you taking over their influencer marketing campaign. Shane: Yeah so you can reach me at ShaneBarker.com that’s S-H-A-N-E-B-A-R-K-E-R.COM and my personal email is shane@shanebarker.com just email me if you have any questions or if you need anything I’m here to help once again. Joe: And if they want to be an influencer themselves they can just head on down to UCLA and take your course right? Shane: Yeah, it’s a really cheap course. It’s UCLA, I mean it’s only one of the top 20 universities in the nation. It’s not a problem, just get a little bit of financial aid you’ll be fine. Talk to your parents. Joe: You must be doing something right if it took you 10 years to graduate and now you’re teaching at UCLA so good for you. Shane: I’ll tell you. Thank you so much. Joe: I appreciate your time make sure you give me that link. I’m going to hold you to it. Shane: I’m on it. Joe: All right buddy, talk to you later. Shane: Thanks, Joe bye bye.   Links and Resources: ShaneBarker.com Shane@shanebarker.com Influencer Marketing SaaS: Grin.co Klear.com NeoReach.com

Today’s guest is truly the epitome of what an entrepreneur looks like. As an immigrant to the United States, Ramon Van Meer spent many years self-employed, just making ends meet. So while a rags to riches story it is not, considering that he has been out of school and working for over 20 years, it’s still somewhat of a surprise when you learn that someone in his position just signed a nearly 8 figure deal. Ramon is sharing his backstory today. A few years ago people wouldn’t have invested a few thousand with Ramon, but today they are lining up to work with him. A high school dropout who came up with an idea for a niche business that has grown exponentially in just a few short years? The growth and subsequent sale of his company, SoapHub, is an incredible story, not just for the size of the transaction, but also because of what Ramon accomplished to get there. Episode Highlights: Ramon shares his difficult upbringing in Holland. How that time shaped his life and made him who he is today. The lesson here is not to quit school! Why a network and connections are so important. How this sale is 20 years of work in the making, even though on paper Ramon looks like overnight success. You’ll hear the full roller coaster story of the sale from not one, but multiple buyers and offers that resulted in the final sale price being nearly double of what was originally set. What made the difference for the end buyer, both the buyer himself as well as the money behind the buyer. What Ramon has learned from his mistakes. Ramon shares his number one recommendation when preparing to sell a business. How essential the right lawyer is in these types of transactions. Transcription: Mark: At Brand Builders Summit back in August … that was August, right? Yes, it was August. Joe you brought somebody to me. You introduced me to somebody. We had dinner with him a couple of nights and he’s a client of ours, we worked with him on multiple deals but he’s just a quiet guy, very very nice kind of understated and didn’t stand out to me too much; other than the fact that he was a client of course and I wanted to get to know him better. But it wasn’t until lunch on I think the third day that we were there and you told me a little bit about his back story which was a heart wrenching, moving, inspiring, all those things in one and you have him now on the podcast sharing a bit of that story. Joe: I do. He’s really the American dream. He moved to this country nine years ago I think. He had a really really tough upbringing. He could have gone down many different paths. He could have wound up in jail very easily. He dropped out of high school at the age of 15. He started becoming an entrepreneur, working construction, doing whatever he could, has been self-employed more or less for the last 20 years and even up to three or four years ago was living month to month as an entrepreneur. Overnight success? Absolutely not. A long long road but we just closed a transaction that was nearly eight figures and you would never know it. Unless you have an eye for picking out the guy that … I think you told me just pick out the worst dressed guy in the room and he’s probably the best well off or they at least get the most money. This particular gentleman Ramon he was very chill, very relaxed, people just talked to him, got along with him and then heard his back story and just blown away with what he’s achieved. A few years ago people wouldn’t give him $5,000 now they’re just throwing money at him. Of course, he’s not taking it because he’s going to do this all on his own but it’s an incredible story not just for the size of the transaction and what he’s accomplished but what he’s overcome in life to get there. Mark: Yeah now well let’s get to it. That’s a really good story. Joe: Hey folks, its Joe Valley here from Quiet Light Brokerage. And today our guest is my friend and my client, Ramon van Meer. Ramon, welcome to the Quiet Light Podcast. Ramon: Thank you so much Joe for having me. Joe: It’s good to have you here man. You and I have been working together now for … gosh almost eight months right? We started in January. Ramon: Yeah. Joe: I got a call from our mutual friend and former broker here at Quiet Light, Darren Harden. He sold a smaller business of yours a couple of years ago and he called and said hey look you’re looking to sell your business and he gave me a number that you wanted and I thought okay well let’s see what happens. I took a look at your numbers. I knew you had a good history from Darren about you. And we kind of overshot that number a little bit. It took a while but we did it and I want to talk about that process here today. I want to talk about your background, your history, the type of person you are, the things that you have achieved in spite of your upbringing, and the challenges that you’ve overcome. And I’m going to dig a little deep and I hope you don’t mind because I think it’s a great lesson. Ramon: Uh-oh, all right. Joe: So with that why don’t you tell the people listening a little bit about yourself, where you’re from; all that big story there. Ramon: All right very brief story. I’m originally from Holland, the Netherlands. I have a big accent so … but I came to the United States nine years ago. I now live in the Bay area close to San Francisco. I always have been an entrepreneur before I would say before entrepreneurship was a trend; even back home from construction companies, to promoting parties, to selling piñatas online, to running a … bootstrapping a site about soap operas of all topics. Joe: You seem like a big soap opera guy. You’re really into them right? I mean just a passion that you followed. Ramon: Yeah because you know I have zero to do between 12 and four o’clock afternoon … no, and you know I know we go on that delay there down the line but I think it’s really cool. A lot of people would say you have to really be passionate about the stuff that you sell or do. I have zero passion for soap operas and it turned out to be probably the biggest exit I have so far. Joe: Yeah and clearly folks I’m being sarcastic about that because it’s an ongoing joke that Ramon has never watched a single full soap opera in his entire life. Are you going to go to your grave someday never watching a soap opera or do you think you might sit down one afternoon and just watch an episode of Days of Our Lives or General Hospital or whatever is airing these days; just one? Ramon: The problem is its … okay, so the show is one hour long. Of that one hour its 30 minutes commercials and all that 30 minutes is just very painful to watch. I’m sorry soap opera lovers it’s just not really my cup of tea. I never spoke … said it out loud because of anyone, friends … you know my audience but it’s … yeah. Joe: These are words from a guy that had millions and millions of people visiting his website and YouTube channel every single day and he never watched a single full soap opera. All right we’re going to get into that a little bit. So as I said for those listening he would not go deep enough so we’re going to go a little deeper. You moved here from Holland nine years ago. Let’s talk a little bit about your upbringing so that people that I think have had some challenges in life and are hoping to do what you’ve done can hear your story. You at one point in your life were homeless correct? Ramon: Well. Joe: Briefly. Ramon: I think … well yeah. Well, it was more the fact that my age was very young but yeah I had to … I have slept on the streets. Not really on the street like I don’t want to make it sound too dramatic and more- Joe: I did that for you. I started off with that question. So at the age of 12 you had to spend a few nights on the street at the age of 12. And then friends’ couches and then eventually worked it out and did you move back in with your dad or did you stay with friends from 12 to 15? Ramon: Well yeah not to make it too long of a story my parents were separated. My mom eventually … I was living with my mom, eventually, she was not able to take care of me anymore so I had to move to my father’s house. And he basically just kicked me out on the street when I was 12. He had a lot of issues with alcoholism and a lot of other issues. So I was … the first couple of days on the street then at some friends’ houses and then one of the parents of one of the friends I was staying at tracked down my mom and my mom took me back in. But she was actually not in a state of mind to raise a child but there was no other way around it so … yeah. Joe: And I’ve made you very uncomfortable in the first five minutes of this interview. Ramon: Yeah thank you, Joe. Joe: I do it because honestly every time I talk to you and I hear your story, I’m blown away with what you’ve achieved. I think there must be something just ingrained in your DNA that made you believe that you were going to be a success in life. Is that sort of … you always kind of knew you were going to go off and on your own and overcome these challenges that so many would just give up on and go down a terrible different path? Did you have a belief in yourself that you were going to be a successful entrepreneur even at a young age? Ramon: Yeah and not every day but in the big picture I always believed that one day somehow I would be successful. I always had that entrepreneurial spirit in me. I was not good at school in that same phase of the stuff that happened at home. I got kicked out of some high schools and eventually just stopped going to school when I was 15 because … yeah and I started doing stuff for myself like as a business owner. So I always knew that with hard work and just being … keep on going. I think the stuff that happened to me in the past actually helped me. I almost now have a mentality that I survived all that stuff back then so the things that I’m dealing right now is actually nothing compared to back then if that makes sense. Joe: No it’s certainly made you who you are today and a better person for it. For those listening just to get the full picture, we just sold Ramon’s business for just shy of nine million dollars. It’s the second business that we’ve sold for Ramon through Quiet Light Brokerage and he’s a serial entrepreneur. And I think you said to me a couple of weeks ago Ramon that just two or three years ago you could not get someone to give you or invest $8,000 in you and now there are people coming out of the woodworks to give you money to invest and buy businesses on their behalf; which you’re not doing, you using your own for the most part. But when you have such a big success like this you’re looked at very very differently. And you’ve done some incredible things and on top of that all you’re a good person which makes a big difference. And the buyer saw that and I talked to him yesterday and he repeated that several times during my interview with him. Now first off for the children listening if there are any young entrepreneurs don’t quit school just because Ramon did and he sold his business for nearly eight figures. Don’t quit school, stay there, please. Ramon: Stay there because look I’m 37 now right? So this is 20 years in the making. It’s not that yeah I started this soap opera website three years ago so someone will say yeah you became … you went from zero to hundred in three years. But honestly, it actually took me 20 plus years to get this. So it’s not the smart … it’s not the easiest, it’s not the smartest way to go about. The more and more now that I’m … especially the last year and I got to know a lot of other super successful entrepreneurs it’s that networking and connections are so important. So if you are in school you will get all these connections and relationships with really key people that are going to be key people in your life and I had to do it the other way around. Joe: Yeah and I think something that you and I saw at the Brand Builders Summit and the other events that you and I both go to is the connections with the people that are attending those events and the relationships that you build in the masterminds that you join, sharing ideas. Everybody has a different experience. Everybody has a different level of expertise on different things and for the most part, they’re willing to share. Unless you’re a direct competitor which is really … it’s such a vast marketplace, selling … doing content sites like you do which is your niche and your level of expertise versus even a physical product site like Moyes, he … great success; huge story … willing to talk to you about tax liabilities and things of that nature that you have to deal with now; a very good problem that you have to focus on. So let’s back up a little bit. Let’s focus in on your niche and your specialty. I think you’ve looked at now a number of different niches now that you’ve sold your largest business content advertising site in a soap opera niche. You had considered building a portfolio in either physical products or SaaS or content sites and advertising sites, have you narrowed down where you’re going to focus on now for the future? Ramon: No, I have still not. So my dream is so to speak building a small … you know I call it like a private equity model where we have a small team, an in-house team where we can start or acquire or buy a stake into an existing company. Because our background is content and driving traffic, sales or viewers, eyeballs through content. And so using that strategy to either push sells for a SaaS product or for an e-commerce or for content. But yeah you and I have been going back and forth, I do think I need to specialize in one niche and every … e-commerce has its pros and cons and so is SaaS and so is content. And like you’ve mentioned to me many times before like the grass is always greener you hear stories, the success stories of people selling their e-commerce business for a hundred million dollars but it’s not easy to do and there’s a lot of … there are downsides of running an e-commerce and the same goes for content and also with SaaS. So I’m now taking the time to talk with as many people as possible and do research and then go from there. Joe: So let’s talk about SoapHub and the site that you sold. Ramon: Okay. Joe: We don’t have to get into too much in terms of specifics but I want to talk about the path so that business owner sellers out there understand what an emotional roller coaster it can be. Ramon: Yeah. Joe: We listed the business for sale in … I think it was February of this year. We had multiple offers. We listed it I believe at five million dollars and came pretty close to asking price and put it under a lot of intent. I was driving home from Georgia probably I don’t know 20, 30 days into due diligence moving along very well. The buyer was very happy. He flew out there to see you. And things are going extremely really well and you called me on a Saturday afternoon. Can you recount that conversation for the people that are listening? Ramon: Yeah and I feel still … I still feel bad about that. So … but picture it as SoapHub was doing really well already, not just revenue wise but profit wise. And between the time that you sit down with Quiet Light and come up with a valuation and an asking price until that time you know, there’s … time goes by right? Like I think we spoke first in December. It was the first initial and now we were at three months past and literally the revenue and profit of SoapHub was skyrocketing. And it took me a while to okay what should I do here? Should I keep going with this process and with this buyer that was under LOI with me or should I just say you know what let’s hold off for a couple of months and increase the 12 month trailing? Because most businesses or all businesses that go through brokers their valuation is based on a multiple of the last 12 months of profit. So the more months of higher profit you can show, the higher the valuation. But yeah on that Saturday I also remember I was nervous. I didn’t want to call you but I thought that’s … when you’re dealing with such a big event, this is a life changing event for me. Not just for me but also my family; my mom, my dad, my son, everybody involved, and the employees. I thought I had to do it. So I had to call you up and say “Joe, I’m really sorry but I think it’s best for us to take the listing down for now and then and relist it again in four, five, six months.” Joe: You’re having as much trouble telling … say we’re just recounting the story as you did the day you called me on that Saturday. It’s kind of- Ramon: I know. Joe: You still feel bad about it. I knew when that call came through on a Saturday I thought okay this can’t be good. Ramon’s calling me on a Saturday afternoon and that’s really odd. And I knew it was going to be a tough phone call. So you had recounted that basically we went through the numbers on the call and you had said look just I got to think about my family. This could be … this is a lifetime event sale and the business is growing so much that this initial … I think we’re at a four time multiple now is dropping so low that you feel like you’re giving the business away. And I think you and I went through the numbers and we said all right look if we wait another six months even if we just held the same multiple we’d be at a valuation at around seven and a half eight million dollars. The goal at the end of the phone call was just to step back, run the numbers, talk on Monday, and then break the bad news to the buyer if we needed to. And we did that and it was hard and he felt bad. He felt … he was very upset because it’s great opportunity. So we pulled it back and we were going to just wait right? We’re going to take the listing down and wait another six months more to pass. We updated the financials just as a recounting of the story. The numbers jumped tremendously and we reached out to the backup buyers based on the conversations you and I had. At the very least we’ve got to tell the current buyer of the situation and what we’re going to do in six months or so. And then of course two other backup buyers were constantly reaching out to me and said if anything changes please reach out. So we pulled out of that LOI, it was a non-binding letter of intent and we backed out of that and ended up having multiple offers. It pushed the value of the business up well in advance of that six month period because we ended up closing well before that time ended. Was that an easy process? You know a lot of sellers think oh I want multiple offers. Oh, I want to be in a situation where it’s getting bid up over asking price. Was that an easy process for you? Was it comfortable? No stress, really easy to go through or was it emotional? Ramon: It was super emotional because you have multiple offers that most of the times are not identical. They’re a little bit different and you also have to think who is this buyer? Of course, you’re talking on the phone a couple of times but you have to think about “Okay who is most likely to close?” Because it’s one thing to make an offer and sign an LOI but not everyone will be able to close. And then if the buyer at the last minute is not able to close then you lose two months of work. Due diligence periods and also lose that momentum where there are several buyers trying to outbid them. You know you have that momentum going that you are getting more over your asking price but if you have to go back after two months then you kind of lost that momentum. So yeah it was a very tough decision because especially the two top offers were from two buyers that I was … would like to work with them … both of them. Joe: Right. Ramon: So it was a difficult decision. Joe: All three buyers were highly qualified and heck of a lot smarter than I am and brought a really good offer to the table. The difference for those buyers out there that are listening when you’re in a multiple offer situation, the difference for the one buyer that ended up eventually buying the business was that he had some investors behind him and he brought them to the conference call, Ramon, right? Ramon: Yeah. Joe: So we got to not only speak to the buyer itself but the money behind the buyer. We got to have conversations with as well. Did that make a big difference for you? Ramon: Yeah, definitely. Because that gave me confidence that this buyer is most likely to close and also close faster. People that are more experienced is more easier to work with. And so as a sellers point of view … because I’ve been sitting on both sides of the table, as a seller’s point of view yes, of course, you look at the money, at the offer, the money … you know a mug money first but you also look at okay who is the buyer because you’re going to have to work with this person for quite some time. How is he financing? Is this person being able to close this kind of transaction? So if you are in the race to buy something try to also make sure that the seller knows that yeah the seller goes with you that you’re ready to close and you’re able to close and you have experience and it will be a smooth transaction. Joe: So we were going to close in … I think it was going to be 30 to 45 days. It was investor money behind it and we were marching along doing very well and then it fell apart again right? You pulled out of one LOI and then the money behind our buyer disappeared. They’re … it was a family fund for those listening. It was a family fund and the two people that came forward and were on the call with Ramon and the buyers were fantastic … are still fantastic and I would still work with them if they came forward to buy a business from Quiet Light with either this buyer or another but the general manager of the Family Fund made a decision that he never makes and he said soap operas no I don’t think so kill that deal. Just like that, it was gone. And did you call me and let’s say vent … did you vent to me on the phone shortly thereafter? Out of stress and emotion, you said that you’ve yelled at me a few times but I call it venting. How were you feeling when that fell apart quickly and we put it back together obviously because we’re having this conversation today but I mean what was going through your mind when you were literally … I think probably what two weeks away from closing this transaction and having an enormous amount of money deposited to your account and life changing life for you and your family. How were you feeling that day? Ramon: Well it was two ways like of course I was disappointed because we put a lot of our work in to it. We were literally two weeks out right? So not only me but the whole team, everybody involved. We moved all our lives around that magic closing date of … in my case it was June 30 I believe or something like that right? It was the end of that month, we were two weeks out and then the deal fell through. So it was just more like man we worked so hard, we were so close and it now falls through. And it shows that there are so many moving parts and in my case or in this case everybody involved wanted to get this deal done but still, something small happened and out of everybody’s control and that made the deal fall through. So there are so many moving parts in order to close a deal like this that yeah everything has to fall in place. Joe: It was tough for sure. Ramon: But it was tough and more also that a lot of the employees they got proper chance to sell and they were already in their mind shopping around. And I felt really bad to break the news to them because all this time leading up to it was like okay guys we’re almost there, a couple more weeks let’s keep the hard work going and stuff like that and then I had to break the news like oh sorry guys we have to move it up again. But I did … I did was you know … I knew that eventually, we’ll be able to sell because it’s a great website and it’s you know … so. Joe: Yeah that’s the thing it fell apart for the strangest reason. One, because it was growing so fast you made a very tough but obviously financially intelligent decision and you took a little bit of a risk but you pulled back and said this is growing so so fast. And we’re not talking about 10% month over month growth here folks. We’re talking 200, 300, 400% month over month growth. So it was an easy decision yet tough on your part because you were disappointing the buyer and making a tough call to me. And then it fell apart but we go back to the value of having multiple calls with buyers in advance of signing a letter of intent. Because this particular buyer he really wanted the business and he had other sources of revenue or investors and he pulled it off. He convinced you and I that he had another path that he’d been working on the whole time. He hadn’t gone down to that out of respect for the other buyers but as soon as the other investors as soon as they were out he opened up that other path and went down it very quickly. You and I did the same thing again. We needed to jump on calls with other people to have them instill confidence in us that they could get the job done. And you’re right it was June 30 was the initial close date with that buyer and then I think it was near the third week of August where we ended up closing so another six or seven weeks does that sound all right? Okay, so the downside- Ramon: Those were the longest weeks of my life. Joe: I know. But the downside is that they are the absolute longest weeks, days, hours of your lives. Boy that does sound like a soap opera; days of our lives. Ramon: Exactly. Joe: But looking back in the blink of an eye it’s gone. The time passed. And you benefited financially from that because you got to hold the business for another let’s call it 60 days and got the profit from that business for another 60 days. Ramon: Yeah. Joe: It’s almost like a bonus because you closed anyway. Was it worth the extra 45 days, 60 days that it took or do you wish that you went back instead June 30th I would have taken it all day long even today knowing what the end result is closing 45, 60 days later? Would you do it all over again and close on June 30th? Ramon: That’s a good question. Probably now, no I would have taken the extra because it’s … we’re talking about a lot of money. Two months extra of profit plus the buyer increased his offer a little bit as well when the deal fell through. He said I’m working on other things just give me some more time I will be able to close up if you give more time and then he increased his offer also a little bit. Now that everything fell exactly how it was supposed to be yeah I would have taken the money but it was a really good learning experience for me going into this. I’ve sold a bunch of websites; I bought and sold a bunch of websites but way smaller all in the … not even close to this one. I think the most was like around 200,000 I sold. And then dealing with an asset purchase agreement you don’t really deal with attorneys, you don’t really deal with a lot of things that now came on my plate. And it was dealing not just with my own attorney but then the other side’s attorney and it’s just so many people are involved and it was an emotional roller coaster. So I think now looking back its good because now it made me better for the next transactions if that makes sense. Joe: You know most people would hang up their shoes and say I’m done with your kind of transaction sale but you’re already focused on growing other businesses, buying other businesses and building up portfolios so kudos to you. You’re a young guy you can do that. Ramon: Yeah. Joe: What would you recommend to people that are listening that are in a position to sell their business for a lifetime event sale for them, whether that’s 100,000 a half a million, a million, five, ten million dollars; what are the most important things to consider as they begin that process and go down that road, things that you’ve learned? Ramon: So the thing that I’ve learned and I did wrong … and you hammer on this on many podcasts is clean books. Clean books people, I made a mistake of having … it was not on purpose it was just out of laziness I think that I co-mingled different websites in what … so I had one LOC, one bank account, one account with Google. The issue is that Google does not allow you to have multiple AdSense accounts. So even if you have 100 websites with AdSense tags on it and all comes down in one Google account. But yeah I had … I bought different content sites in that last three years. I sold content sites. I invested in things all from that one bank account. So thankfully we were able to make it work but it was a lot of work from my end to really … I had to go back literally three years and every transaction I had to … oh this was for SoapHub, no this was not for SoapHub. And then whatever was not for SoapHub I also had to be able to back it up with proof or listing this was for this and here’s the proof. And so it was a very tedious, long, stressful work including my CPA and my bookkeeper and thankfully it was able to … we were able to work it out. But I know for a fact in other cases that where people co-mingled and then they had real issues with their valuation. They were not able to get the top dollar because the buyers were not able to really dissect what is the real profit of that company. So that’s … learn it from me, I did it. I learned it the hard way. So now I’ve set up different companies, different LOC’s and run everything as clean as possible. Joe: Okay. Ramon: So that’s one, the second is read on asset purchase agreements. The first time when an asset purchase agreement got sent to me it was so complicated for me, I didn’t know what to look for, what did we have to be in it and then whatever my attorney advised me I basically say yeah well it makes sense why not you know. So the notes of my attorney I just blatantly copied and then send that to the buyer and said this is what we … I want to change in the asset purchase agreement. And then the buyer’s attorney they came back with their notes and then went back and forth back and forth. I think now looking backwards now I kind of know what is important. I think attorneys try to … and I understand the reason but they try to overprotect their clients. So my attorney tried to overprotect me, the buyer’s attorney tried to over protect them and somehow we have to find a middle. There are tons of examples where attorneys ruined the deal. You probably will have a lot of stories of that. So I think it’s good if you kind of get advice from people, learn, read up on it online and see what is really needed and what not. So now I’m working on the deal right now with a great attorney but now I’m more experienced and I can say well this is what I don’t want in attorney. I don’t … I understand why you advised me that but it’s not needed. I’ve done it before this is not needed and let’s just keep it as simple as possible. Because … yeah, attorneys can ruin deals. Those are the two biggest advises. Joe: Well I can agree with you on the attorney part wholeheartedly. I’ve been in situations where a relative of the seller completely killed the deal. I had a deal where the young guy just out of graduate school and he had a great business that he started in his undergrad and literally graduating from graduate school about to start his professional career and we’ve got a business that was under contract with three quarters of a million dollars … way way over the standard valuation but there was a problem. The problem was that his mother and father were both attorneys and his wife was a law student and they took that asset purchase agreement, shredded it, and fought tooth and nail for the tiniest tiniest little thing and were completely unreasonable to the point where the buyer who honestly was very reasonable walked away, threw their hands up in frustration. At the Brand Builders Summit you and I attended in Austin a few weeks ago Richard Jalichandra from 101 Commerce got up and he’s bought three businesses from Quiet Light in the last six months, eight in all. And their goal is to buy 101 hence 101 Commerce. They’ve got enough experience where they are going to say look you can only work with this group of attorneys, there’s no conflicts … [inaudible 00:36:00.5] have conflicts with us and our legal team. But these attorneys understand e-commerce and contract negotiations you got to work with one of those. It’s almost you’ve got to have a contract attorney that understands fairness and balance and that it has to be a good deal and a good transaction for both sides. So I agree 110% on both of those points. Ramon: Well just to piggyback up that also when you look for an attorney make sure this attorney not only has experience in internet space but also the niche where you are. Because an e-commerce deal is totally different than an asset … a content site where you’re just buying an asset or a SaaS, so also try … if you find a … if you go out there and try to find an attorney that can assist you with an asset purchase agreement is see if they have experience in not just internet marketing but also the niche. Joe: Okay. So overall the moral theory is that when you’re selling your business it can happen very quickly. We put it under contract very quickly and we could have been through the entire process from listing it to closing inside of 60 days, 75 days tops the first time around. But you made the tough decision to pull back because the growth was astronomical. You made a good decision and you ended up almost doubling your value and that’s a pretty huge number when it comes down to it. And not only that you made a lot more money along the way because you still held on to a great business that was doing great numbers and growing. There were times where it was tough and we collectively said look there are multiple options here and one of them is to stop this process, hold your business, take care of your family, take care of your staff, hold the business and keep running it. It got that frustrating at times and that emotional at times because it is a big deal if you sell a business of this size. And again it’s actually a big deal to sell a business whether it’s 100,000, 500,000, a million, or 10million, it doesn’t matter. It does get emotional. I think the number one thing that people need to look for in an advisor is one that will set realistic expectations and that can manage emotions. And not just their own but those of the buyer and those of the seller and sometimes the third parties that are involved with their investors involved as well because no matter what most of these deals go slightly off the rails and it’s our job to get them back on. But I couldn’t have done it without you, Ramon. You’ve been fantastic. You’ve set some new goals in life though so I want to kind of wrap up with this. You and I had a conversation so people understand a little bit more about who you are and what you’ve accomplished and what you’re gonna do in the future. You have a goal to help a certain number of people be successful in life based on the goodness that you’ve received I think. Is that … am I somewhere along the ballpark? Can you touch on that just briefly if you are comfortable enough sharing that? Ramon: Yes. Joe: Am I embarrassing you by the way? Ramon: Everything I told you you’re using against me, Joe. No, I’m just kidding. Joe: Not quite everything. Ramon: I just … as you might know, like I don’t really like to be in the spotlight. I never really do podcasts or I had … I made one exception for a news outlet to do it but yes. So because I’m very entrepreneurial I think it’s almost … it’s your duty so to speak that when you quote unquote get to a level that you have to give back and help other people and which you can help … you know there are millions of ways of how you can help other people. I think for me is that I want to help people … like I see that I was blessed to achieve the American dream so to speak and I want to help achieve other people to to do that as well. And I have a number in my mind, I want to help 500 people not just by helping a … you can pay a year for school or something; no, helping to change really their lives how my life has changed. Like three, four years ago I was really literally going from paycheck to paycheck and not knowing where … how next month is going to look like. And three years ago and now three years later I’m in this position. So change can really happen and I want to help 500 people by … if they have a business idea by funding their ideas and helping them in starting their businesses or maybe I am able to acquire a business and then have somebody run that for me stuff like that. So it’s more or less helping 500 people in achieving the American dream by starting their business or helping them grow their business. Joe: Do you write down these goals? I think in talking with Ben the other day when he said he came to visit you in your office that you had some stuff on a whiteboard and he looked up and he said man just incredible goals that you’ve set and he said it’d be foolish for anybody to bet against you. Do you write these down on a white board? Do you just think about them in your head? Do you hear about a goal setting? How do you … what’s your process? Ramon: Yes so I write them down … actually, because I’m about to move today I’m at a house office and because I’m packing, I’m moving next week but I have notes almost everywhere of my goals. So for some weird reason I believe in re-civilization and so when I wanted to buy a specific house that was my dream I would print out pictures of my quote unquote dream house and I will just pin them everywhere. But I have a list of life goals so to speak and yeah I have printed that and that’s in my office at the house. Joe: Amazing. Ramon it has been a complete real pleasure working with you for the last eight months. For those listening, we’ve got somebody that overcame some pretty serious challenges in life. He has been an entrepreneur for 20 years even up for the three or four years ago as he said living paycheck to paycheck, buckled down, worked hard. As my baseball coach used to say … and I was not very good, he always used to say the harder you work the luckier you’ll get. And I think Ramon worked very hard, visualized those goals, wrote them down, put them up on the board, and has achieved them. He made some tough decisions along the way. It was not easy. I can tell you that now. Some of it was quite emotional but it worked out in the end. Ramon, it’s been a pleasure. Thank you for sharing your story with me and with the audience of Quiet Light Podcast. You’re a good man; I look forward to doing business with you for years to come. Ramon: Same here Joe, thanks a lot. Joe: Talk to you soon. Links and Resources: Ramon’s Email

John began his career working in politics, including as a writer in the Clinton White House, Office of Presidential Letters and Messages. He was also a Speechwriter in the California Governor’s Office during the Davis Administration, and later he became an Attorney. John gave up speechwriting and the law to become a blogger and podcaster! He helps business owners connect with anyone they want to connect with. And they find their businesses grow exponentially because of it. He also owns and operates a website and related Podcast called SmartBusinessRevolution.com where he shows entrepreneurs how to build and use relationships to build more value, revenues and profits in their businesses. John’s take on the business: The number one, most important thing that will determine your level of success or failure in business is your relationships. In this Podcast episode John shares his insights on building stronger relationships, and connecting with people that can make a difference in your business. Episode Highlights: John’s history as a white house intern, staff writer, attorney and entrepreneur Why “helping first” matters most. How to build relationships without being awkward. How to break the ice with a new group of people. Learn some basic mechanics of talking with people. Making connections brings more value. Why delivering value works best. How making introductions builds value for you. How does John make a living in “networking”. Events where “mixing” is required and new people are attending. How to monetize Podcasting Transcription: Mark: So I remember an event … I think it was three years ago, I was at Pubcon and I had hired a PR firm to be able to help with Quiet Light Brokerage and some things that we were trying … no was it four years ago we were trying to do and I had hired somebody to come with me from a PR firm and she was an awesome networker. I mean she was phenomenal at what she did. And she came out to me laughing at the networking event at Pubcon because she said this is so funny. She’s like I’m so used to networking events where everybody’s a professional networker and she said people here obviously are not because everyone was looking down at their phones and shuffling their feet and saying I don’t really want to introduce myself to anybody so I’m going to pretend like I actually have something to do on my phone. And you know what that was also me. I’m a terrible networker. I’m not really good at it. I’m a natural introvert. Joe, I understand you had John Corcoran and he’s a networker and you guys talked about networking. This is an area where I struggle so I’d love to learn a little bit more about what you guys discussed. Joe: You know one of the first things John said was don’t fall asleep, don’t tune out because it’s networking. You can grow your business dramatically by meeting the right people and being introduced to the right people. You don’t go at it with that approach ias John’s thought it’s more just building relationships and those relationships lead to additional connections and relationships that can help grow your business; double, triple the size of your business. It’s helped us dramatically through what this podcast we’ve met so many people. It’s broken down doors and they feel like they know us more because of it. The networking that John talks about is exactly the same. It’s through all of the different events that we might attend to. And he kind of gives some tips on breaking the ice to make connections and really kind of the Golden Rule approach to networking. It’s a fascinating story. John’s actually a fascinating guy. He used to work as a speechwriter for … I think it’s called presidential letters during the Clinton administration. He did not know Monica Lewinsky. For those listening, I did ask. It was pre-recording but he absolutely didn’t know her. Yeah, everybody chuckles poor girl really, seriously. He went to law school after doing that and eventually became a lawyer, practicing attorney and replaced his income as a lawyer by podcasting and blogging and doing that through networking. Pretty impressive guy, great story and I think he can help a great deal with people that don’t realize how important networking is in helping other people is to their business at the end of the day. Mark: Awesome let’s go right on into it and learn a little bit more about networking. Joe: Hey folks it’s Joe Valley from Quiet Light Brokerage and today I’ve got a very special guest. His name is John Corcoran and he has a ton of experience both as a writer for the White House, as an attorney, and as a networking specialist. John, welcome to the Quiet Light Podcast. John: Thanks to have had me, Joe. Joe: Quite heavy here man. We met at the Prosper Show you’re doing that very thing, walking around with a camera and a microphone, networking, talking to people, helping James do a great job there which they always do and I think you’ve been a big part of that. But that’s my intro right there. I need you to tell these folks that are listening all about your background, your experience, who you are, and what you’re all about. John: Sure. Well hopefully, people didn’t tune out when they heard oh networking I hate that stuff. That’s a funny reaction that people have. It’s kind of like sales right? We know it’s important but we also kind of hate it. And oftentimes that’s because we’ve had some kind of negative interaction or negative experience with it; some guy coming up and sticking you his business card in your hand, in your face trying to sell you on something at a networking event. I’m not an advocate of that. I think there’s a lot smarter ways to do it, a lot of tools that we have available. My background you know when I was a kid I moved around a lot. My father lost a job three separate times and each time we had to move across the country 3,000 miles away; away from family and friends. That experience taught me the importance of building relationships in business and it’s critically important. And as a result of that, I’ve had some amazing experiences in my career. As you mentioned right there in the White House, in the Clinton White House years, speechwriter with the Governor of California. I had my own legal practice for a number of years and now I’ve got a business called Rise25 and a blog and a podcast called Smart Business Revolution. That’s really more of my focus now and we bring people together at live events and I really enjoy doing that. Joe: Tell us a little bit about your background in terms of … I’m looking at your bio here and it says you went from party school to the White House. Just for the sake of the people that are listening, how the hell did you make that transition from being at a party school to writing speeches for the president? John: It’s strange I know. It’s a strange trajectory. So yeah I mean basically I went from an English major, getting a BA in English at a party school to within a year of that I was a writer in presidential letters and messages in the Clinton White House. It’s kind of like a second tier speechwriter. I’m kind of like a … you know as a speechwriter has pulled a hamstring then we would step in, that kind of thing. But it was an amazing experience. I had interned in the speechwriting office during college. It was an amazing experience and I went back to college. And networking lesson number one is keep in touch with the people in your network. And once you build a relationship with someone it’s really important to keep in touch with them. And so I was back at college, I knew I’d love to get a job at the White House but not all former interns get that kind of gig and so I kept in touch. I would send things from time to time like speeches or articles or passages that I found that I would send to the speechwriters. Not as a way of saying like hey do you have a job for me? But they … it kept me top of mind and what do you know a month or a couple of months later, a year later something like that they reached back out and said hey we heard about this position for you and I ended up applying and getting it. So it was an amazing experience. Joe: Were you taught that or did you just intuitively share information, stayed in touch and tried to help with little bits and informa,tion that you found? John: Yeah looking back I think really it was part of how I grew up and having to be that kid who is new in the class. I remember what it’s like to move in the middle of a school year into … I went from Southern California to Massachusetts which is a huge culture shock. From being a kid it was like out at the beach to like dock siders and button downs and stuff like that in Massachusetts. It’s a very different kind of culture and showing up in the middle of the school year when everyone had been in the same group of kids for years and years. And so it taught me the importance of being able to go into a new community and be able to make friends essentially. And I did that a number of times growing up and so I just realize the importance of it. And also just with watching my dad struggle when he got laid off a couple of times, the importance of building a network before you need it. You need to have these things so that when the S-H-I-T hits the fan, which it does from time to time, the economy or your company going under or whatever you’ve got to have that network. You have to have built those relationships first so that you can use them when you need them. Joe: Yeah I think it’s essential. There are several mentors in my life that have given imparted wisdom. One of them is along those lines and it kind of goes with what I’ve recently studied which is a DarrenDaily … they call them DarrenDaily it’s a Darren Hardy program, you know essentially it sounds like what you do about speechwriters was you gave something to them first. You didn’t expect anything in return. You were giving them something to help them. Hey here’s an idea and you were on top of mind because of that. And then you kept giving throughout the year and eventually, you got something back. Maybe it wasn’t your intention to get something back but you were there, you were front of mind and you were offering something to them. I find that the same thing applies to what I do. You talked about networking it’ll gross folks, don’t tune out because of that. Same thing with a broker man, I’m a “broker” right? I’m a business broker. People get sort of turned off by that if they go with the general label of business broker. But more than anything else we just simply try to help. We try to help people with whatever the issue is, with the experiences that we have, with the knowledge that we have, with the relationships that we have. I refer people out all the time helping them connect with bookkeepers, attorneys, whatever it might be expecting absolutely nothing in return. Eventually, we’ll run into them at a conference and spend some time with them and build a relationship with them and then they may refer somebody to us or if when they decide to sell their business they’ll think of us first. I don’t like networking. I don’t. I never have. I’m a bit of an introvert. I love doing the podcast because it’s just you and me it’s not a whole group of people here. I don’t have to walk up in a crowded room. I’m a kind of a low talker so people can’t hear me. I’ve got a big microphone now so that helps. How do you advise people to sort of break the ice with a new networking group or a mastermind group or if they’re at an event like Rhodium Weekend like E-commerce Fuel like Smart Marketer, like Blue Ribbon Mastermind, and to just walk up to a group of people and start talking? How do you recommend they do that? Just say hey because obviously, they’re strangers too? John: Yeah I mean there’s a high level and then there’s the mechanics of what you use in a physical … a face to face type of interaction like that which also applies to online. You know a lot of networking we do these days can be through tools like LinkedIn or Facebook or something like that where you can really leverage relationships. So I would say first you got to start with okay am I at the right event to begin with? And that requires some really deep soul searching. Are you going in the right direction with your career? And people do pivots all the time. They change, they just … they lose passion for something. So you have to be sure you’re going in the right direction because you can’t squeeze blood from a turnip. And if you’re at the wrong event then you’re not going to find the right people there who you’re going to want to engage with or you’re going to want to talk to. So start with that and then secondly I think you’re right about the give approach. You’ve got to focus on okay I’m going to give, give, give as much as possible and then after that people are going to want to return the favor. And that doesn’t mean you should be taken advantage of but it means you should try and deliver value to people first before you try and hit them with a sales pitch. We’ve all been hit with a sales pitch right off the bat where people tries to get something from us or tries to get us to buy from them and it just doesn’t feel right. It sits in our stomachs. So don’t be that kind of person. Be a giver first. And then [inaudible 00:11:08.3] talking to people face to face in an event or something like that. Usually, I think people struggle because they over think it and they think okay I want to come up with some brilliant thing that will be related to my vocation, that will get us in a big discussion around what it is I do so that I can sell them on something. Well, the truth is you should spend a lot more time on just more human conversation. It could about hey how about this crazy weather we’ve been having or when did you get in? If you’re at a conference you know where are you from? Maybe it’s something on their attire, maybe they have an interesting shirt on or something like that. A lot of times there are little tidbits that you can you can pick out of there and then that gets you into a conversation. And then people leave little breadcrumbs all the time they just require exploring. People will mention oh yeah I was a little delayed my daughter had a volleyball tournament and so I wasn’t able to get here when I wanted to. Well, that’s a huge opening right there explore that. Go a little bit further and say oh really where did she play volleyball, what was the tournament, what was … how is she doing, what position is she in? Just taking an interest in people will get you really really far. Joe: It almost goes back to our teenage days when our parents told us just to take an interest in the girls and ask questions and it would work out pretty well. John: I know. Joe: We were teenagers and we paid no attention and we got it all wrong. At least I did, I don’t know about you though. John: Exactly. I don’t even know if my parents gave me that amount of advice so [inaudible 00:12:37.8]. Joe: I’m trying to do with my kids and I know that you’re doing something with your son. I saw it on LinkedIn. I love that you’re helping him sell some- John: Yeah we’re- Joe: It’s … I almost said Girl Scout cookies. John: Yeah … oh no, it’s Kab Scout. And it’s funny he’s like a natural born entrepreneur. He just turned eight and loves selling stuff, loves making money and so we’re kind of using it as a teaching opportunity. But right there, there’s a good example okay. You said I hate networking, a lot of people say that I hate networking but I love connecting with people. They’ll follow it up with that and then I’ll say okay well what do you think networking is really? I mean it’s connecting with people. Maybe you hate being in a room full of strangers and not sure what to say, that’s a given and that’s fine. I totally get that. A lot of people get uncomfortable in that kind of situation. But me sharing my son’s experience and experience we’re going through with learning about setting up a website to sell Boy Scout popcorn as a fundraiser you know that’s a way of remaining top of mind with people who are in your network on LinkedIn. And people see that and then it’s also a way of teaching too because I’m also using it as a teaching opportunity as well. And it also personalizes me. I found … you probably found this too, when people they know more about you personally, a passion, or a hobby that you have or they know something about your kids or something they’re a lot more connected to you. And I mean I discovered this a long time ago, long before I had kids. When I asked people about their children before I had kids I would ask too about their children because I notice they would light up. And it just breaks down these walls, breaks down these barriers, it allows you to really accelerate the connecting process so that you get to know that person a lot better and they’re a lot more motivated to help you. They start to treat their interactions with you less transactionally and more like a true friend, a relationship; something that they actually are invested in helping. So that’s why I do things like that is sharing a little piece … if you share a little piece about your life, it’s not everything, but sharing a piece about your life it makes people more connected to me. It makes me top of mind and who knows where it might lead after that. Joe: Right, I couldn’t agree more. I saw it and I felt it humanized you and I felt like I knew you a little bit better even though we’ve only met a couple of times. I was a guest on your podcast, you’re a guest on ours, and we met at the Prosper Show. So I totally get it. By way of example a lot of people listening they’re either buyers or sellers and they love to monetize things. They say well how can I monetize something? And I want to give an example, I got a text today about two hours before this recording where someone was at an event in Miami and I introduced him to somebody else. They connected and he said to me, he sent me a text and he’s like thank you for introducing me to so and so. I feel like I got 1.5 million dollars’ worth of value out of that lunch and I’m buying a business from him for much less than that so I feel like I’ve doubled my money. And they were able to meet face to face for the first time and just get that connection. And that particular individual is making a point of helping lots of different people. I can’t give you his name but every time I speak with someone that has connected with him it’s not about what they got from him it’s what … which they did get it’s what he did for them. And that comes back around and it gets monetized in a variety of different ways. Most people listening again are either buyers or sellers thinking how the heck is this going to help me? Back when I sold my business in 2010 there weren’t really any Mastermind groups. There were certainly not any Facebook groups. There weren’t any Smart Marketer events or Rhodium weekend, any of these things that we go to now and connect with people over and over and over again and it’s eventually just a trip to hang out with our friends. Hanging out with those friends now and sharing that information without expectations or getting back anything else is what I think is the way to immaterially monetize it. You can monetize it but you have a hard time calculating it. Do you have any direct experiences or examples where you can say you know I introduced these two people … this person connected with so and so and their business took off because of it? John: Oh … I mean I couldn’t narrow it down. I mean I have so many examples of that sort of thing and I do it more than most people. So I don’t want to say that you need to spend all your time doing that. There are some connectors who spend too much time going out delivering value, connecting other people. But let me put it this way if you try the alternative … the opposite that certainly doesn’t work. We know that doesn’t work. If you just go out there and you don’t try and deliver value and you just try and pitch people we all know that doesn’t work very well right? So if you try the alternative, if you try the give first approach you will see dollars and cents to your bank account, others will see dollars and cents in their bank account. I can think of offhand two situations where I introduced two people to each other, kind of like you, you’re just an introduction; no strings attached or anything like that. I just thought you two would get along and they started a business together. In one case those two individuals, they lived in the same state but opposite sides of the state. One ended up moving to the other part of the state so that they could work together and have a business together as a result of that one introduction. And you know those people will walk to the end of the earth for me after I’ve made that introduction. So it definitely turns into dollars and cents in terms of more clients, more referrals that sort of thing. Joe: But that wasn’t your intention right? John: No … I mean it’s not my intention but I will say this, look we’re all in business, we’re all motivated by making money, we want to keep the lights on, we want to keep food in the fridge right? So I don’t say at all that you should go out there and you should just be randomly introducing everyone on the street or be doing it matchmaking or something like that. You should do it strategically. You should do it because it’s good for your business. I’m not saying go on and do it because for charitable purposes although it is a great thing to do and it does great … it puts great good out into the world. I’m saying do it because it’s good for your business. It’s good for your career. And it has just been the experience that I’ve lived. There are great books out there by the way, Give and Take by Adam Grant, Dale Carnegie all the books that he’s written. These books they give voluminous examples of people who have resulted in much value coming back to them as a result of the value that they put out in the world. Joe: And you got to a lot of events, a lot of networking events where you have got both business owners, employees, founders, and potential buyers attending them; are there any particular events that you love because specifically the way that it’s organized for networking that you can … through off the top of your head, two or three of your favorite events? John: Is this cheating or can I say the ones that we do because they’re- Joe: You know people are probably going what the hell does this guy do for a living? It’s networking, how does he make money so … answer the question how do you make a living? John: Sure. Joe: You’re a networking guy, how do you make a living? What do you do? John: Yeah. So … well, first of all, I was a practicing lawyer for many years. And even when I was a practicing lawyer I mean just introducing your clients is really valuable and giving … thinking about your clients because they will send more business back to you. Your referral partners would send more business back to you. So when I was actually full time practicing law I was practicing what I do today. Eventually, that pivoted into a blog and a podcast which replaced my income as a lawyer and I monetized both of those through a variety of digital courses and through affiliate promotions and that sort of thing. Today I run Rise25 with my business partner. We do live events. We go to conferences and we partner with conferences and hold on connection events like VIP receptions, like dinners, like all-day Masterminds at conferences. Again connecting people but we create the forum. We invite the people. We bring them in. Another thing we do also- Joe: Just to understand so you’re not actually putting on the entire event, you’re putting on a segment of it or a specific group of attendees. John: Right, and there’s an important lesson in that because we’ve done our own standalone events but the reason that we do a lot of that now … an important lesson for others is it’s a lot easier to go where the fish are already gathered to go fishing rather than try and pick some spot in the middle of the lake where there are no fish and attract them back to it. Go to the spot where all the fish are gathered which is what we do around conferences. The other thing we do is we do some Done-For-You lead generation as well. So we do Done-For-You lead gen so helping people with the process that we’ve used for years to generate leads for our self we help other businesses with that as well. Joe: What types of businesses? John: It’s primarily professional services but e-commerce as well. So it’s anyone who’s … I mean who doesn’t need leads right? Every business needs leads whether it’s you’re trying to connect with someone who might buy your business or whether you’re trying to connect with new customers or clients or referral partners or strategic partners or whatever. You know there’s a lot of different … the truth is everyone need … and like you’re selling like a very inexpensive widget which is often the case with e-commerce there’s often someone higher leverage who you are trying to connect with. So that might be other website owners or it might be other people who are selling on the same marketplace as you, or just other sellers that you want to connect with, or other professionals or something. It’s a variety of different applications that we’d manage for people. But you asked … so you asked the question earlier was types of events that I’m preferable to. The type of event … and I want to answer that because that’s an important question and it actually guides my decision making in what events I go to. I don’t like going to events where the culture does not encourage people to mix with one another and what do I mean by that? Oftentimes you have events where at a local … this often happens on a local level like at a chamber of commerce or something like that where you have repeat people coming back month after month and they kind of know enough other people that there isn’t enough mixing. I like events personally where I go to an event and I can just stick out my hand and talk to someone or someone else will stick out their hand and just talk to me where you feel free to meet other people. The other thing is I really like formats of events which breaks the mold. They’re not just the boring, stuffy kind of reception type of format but I like the ones that are different. So actually just last night we had an event in Chicago which was a VIP food tour and we’ve done this a number of times, I did one in San Francisco a couple of weeks back and it’s like a progressive dinner party meets a networking reception. We kind of combine the two and rather than keeping everyone in one room with watered down drinks and talking to each other all night or maybe being at a dinner table where you’re stuck talking to the guy in the right of you and the guy in the left of you for the entire night, we take a group and we take them to multiple locations over the course of an evening. So you’re up, you’re down; you’re sitting next to different people the entire time. You’re walking or sitting on a bus next to different people. And we love doing that format because it gets people meeting more people which is really what we’re about. So that’s another piece of what we do. I realize [inaudible 00:23:45.3] to what we do but you asked the question what types of events so I really enjoy that format. Joe: All right. Tell us about Rise25 and the blog … the podcast and the blog. I want to know more about that. I have a feeling here John that people are going to want to listen to your podcast and learn more about what you do. John: Yeah. Joe: Just … let’s hear it. John: Yeah so Smart Business Revolution I started it about eight or nine years ago now. It was a blog and a podcast, it still is. I continue to write there. I continue to publish podcasts. I started … this is an important lesson because now we do help clients with this as well so this is part of the lead generation piece is eight or nine years ago when I was a full time practicing law literally I had a client who came in and he hired me for a tiny little matter. It was $500 of writing a lease for him. I was reading about the guy and I was like wow this is a really interesting guy. He was an entrepreneur. He had started multiple companies one of which had gone public. So he’s really successful. I was thinking how can I make … how can I turn this guy into like my best client? You know come back to me over and over again. Literally what I just did is I said hey do you have like 20 minutes I’d love to just like ask you some questions about your career and your businesses and everything. I’m going to record it and I’m going to publish it. I didn’t even know how to do that. I didn’t even know how to record or publish; podcasting wasn’t even a thing back then. And so I ended up doing that, I asked him all these questions. What’s amazing is you’re publicizing that person. It’s exactly what we’re doing right now. But you’re publicizing that person and you’re also asking them questions about their challenges, their opportunities, you’re figuring out are there other ways that you can help this person or deliver value to that person? And so what do you know he ended up turning into a great client. He ended up coming back to me and saying hey can you help me with this and this and this other thing too. And it’s a strategy that I’ve used over and over again. I’ve done it probably three or 400 times with different people where you just simply take an interest in someone else. And you go the extra mile so you actually record it and you publish it and you give them a promotion, give them publicity, you send traffic, you send eyeballs to them. Again it’s exactly what you’re doing right now. You don’t have to have a podcast to do it although podcasting is such an accepted and understood medium these days so that’s really the best way to do it today. And I think everyone should have a podcast because it’s so powerful. Joe: And you’ve figured out a way to monetize the podcast and the blog as well which is really weird if we think about the fact that you went to law school, quit to be a podcaster and a blogger and you replaced your income. How did you manage to do that? John: Well so, first of all, you can monetize a podcast … when people hear … I know I just wrote an article about this. I did a research study and I surveyed hundreds of podcasters and I asked them how they monetized their podcast. And so you can go to Smart Business Revolution and you can see the article now. It’s at Rise25 also. And people generally thought … they thought of the traditional model, the old school media model. Like I’m just going to build up a big audience and then I’m going to sell ads or sponsorship. And that is only one of dozens of different ways of monetizing a podcast. It’s actually probably the worst of all of them and yet everyone thinks that that’s what you need to do. It’s the most difficult to do. So I mean I’ve monetized my podcast in a variety of different ways including getting more clients, getting more referrals, filling live events, filling webinars, strategic partnerships; you name it. If you can connect what it is you do which is your business, your profession with the podcast which not everyone does a great job of connecting those two. Sometimes they are completely unrelated and if you have a hobby podcast that’s fine that’s not what we’re talking about here. But if you connect those two and you use them to build more relationships with prospective clients, with referral partners, with strategic partners, you use that podcast in order to build more of those relationships and connect with SALT leaders and gurus and speakers and authors that you would never otherwise have a chance of connecting with then it’s an amazing powerful tool. It’s … I mean I’ve been able to have conversations with people who would never give me the time of the day you know what I mean? Like I can’t email Gary Vaynerchuk and say hey man I would be in New York can you meet me at a Starbucks for 45 minutes? I want to pick your brain; I’m going to ask some questions about my business. Is that cool? [inaudible 00:28:00.1] like who are you I’m not going to do that but I had him on my podcast even though he’s a busy guy because of the nature of the medium. So that’s why I’m such a huge fan of the medium it’s just … and it’s a much better way to network. That’s what we’re talking about right? Connecting, building relationships, seeing how you can help each other, giving, all of those are encapsulated in the process of doing a podcast and everyone should do it. Joe: I agree 100%. It’s what we do; it’s why we do it. Because we’re connecting with people like you that might be hard to connect to or with otherwise. John: Oh yeah absolutely, I wouldn’t return your call if it weren’t for that. Joe: I know you’re never going to list it … and it personalizes things right? You can write an amazing article, give some amazing advice but without that personality behind it, it’s just words on paper. We had people tell us that if they chose someone else to go with someone else it’s because they felt like they knew them because they listened to their podcast. John: Yeah. Joe: So I think the personalization of it is important. I think that for those listening that maybe an expert on an advertising business, content, blog, or a SaaS business, or an e-commerce business and you’re wondering how the heck do you benefit from this, how would you start a podcast and what … how is it going to work for you? You’re going to connect with people that are going to be experts giving advice and you’re going to benefit from it in your own business being able to apply some of that advice and being able to pick their brain as well. In addition to other people that have had great success that may come onto to the podcast and share their story and may want to do business with you as well. You just never know what’s going to come of it if you just help others and give. And yes it is business we’re all in this to put food on the table and hopefully put some money in retirement and stop doing this someday when were not capable anymore but it’s fun and it’s enjoyable. John: Yeah. Joe: And we get to make a living from it which is kind of nice too. John: Yeah and you know I say it’s kind of personal and professional development that also doubles as marketing. Because you’re enriching yourself, you’re learning, you’re asking questions, you’re learning and you’re also recording it and you’re going to put it up on the internet and it’s going to exist forever. So it’s marketing that will be out there for you forever. And if you’re asking well I sell a widget, it … I don’t see how that’s going to help me or maybe it’s some other seller out there that you want to connect with or maybe it’s potentially a buyer. I mean that’s a great way to use that as a tool. It will help me with hiring, recruitment right? There’s so many other ways that you can you can do it. I mean I’m sure Joe you’ve had this experience, I’ve had this experience when people come up to me and you have a conversation with them and they’re just kind of like smiling as they listen to you talk because you know what’s going on in their head they’re thinking wow he sounds just like he does in the podcast. And people will say that, they’ll be like man you just … you talk just like you do in the podcast. Well, guess what when I’m on the podcast that’s me. I’m not putting out an act or anything like that I’m just actually being me you know. And we’ve had people that would go … a couple of people who came in to our event recently in San Francisco who had gotten to know me from the podcast and the funny thing is … and this takes a little getting used to, the funny thing is that they’ve been listening on their own time while I’m doing other things to episodes, past episodes, the whole back catalog and when they come up they feel like they’ve already built a relationship with you. That’s wonderful because of the know like and trust process right? You are already that much further along so it then makes it just a lot easier to have a conversation with them around some kind of strategic partnership or a client … a relationship of some sort. It’s just a lot easier. You’d move the ball a lot further down the field. Joe: 100%, I couldn’t agree more and I would recommend that everybody does it. For those that are going to events and I’ve been to many of them and I have that stigma of being a broker. We don’t pitch at Quiet Light, we’re just here to help so we have to get around that stigma some way. But I was at an event last March I think it was and I’ve had a conversation with two or three other people and this guy walked up and he just stood there and he started to shake his head up and down and you know at the right moment he just stuck his hand out and introduced himself. And that I think taught me a lesson. It’s the hardest thing to do when you go to some of these events like this, you see groups of people talking and you’d say damn they all know each other. I really don’t know anyone. It’s my first time here. The reality is that even though they’re talking and having a good time and having a drink and laughing they may have just met. That was exactly the case that night. The three of us had just met and this person came into our conversation not knowing whether or not we really knew each other and he was welcomed into it and that’s what these events are all about. You should never be shy about walking up to somebody and saying hello. You should never be shy about talking to someone like John, talking to someone like myself if we have something that we can help with that’s our operation. That’s exactly what we do. We’re going to give you any and all advice we can. And if someone like John and myself try to get their hooks into you for a commission they’re the wrong people to work with. Just walk away, get what you can, and move on. But don’t be afraid to stick your hand out and shake your hand and just say hello. It starts a conversation. It’s the hardest thing to do but it’s also the best thing to do wouldn’t you agree? John: I totally agree. Absolutely. Yeah. It’s just funny as you’re saying about having a stigma you know I think a lot of people feel that way. Especially when they’re in business which most people are right? You’re in business, you’re at a networking event and you’re thinking oh other people are thinking that I’m just going to try and sell them. I know this because people email me every day about this saying these things. And I think a lot of times we get stuck in our head a little bit and look I mean I totally get it. I worked for politicians. I’ve been a lawyer. I think I’m going to round up my career by working for the IRS or as a tax professional so just the most detested professions possible. So I’m used to being in that type of position. I totally get it but look if you approach not thinking about okay how am I going to get this person as a client as soon as possible and you approach thinking okay I’m just going to learn about this person. I’m going to learn what I can do if there’s some recommendation I can provide. Maybe they’re a huge fan of something else I’m a fan of and we can connect over that. That’s it. That’s all that matters. You’re going to build up trust. You’re going to get to know them. And then later there might be the possibility of doing business together but start with that first and that gives you a great foundation. Joe: I agree if you do that enough your pipeline of new business will eventually fill up and it will be continually flowing. John: Absolutely. Joe: John, how do people find out more about you and learn about your experience and get to listen to the podcast and things of that nature? John: Yeah, thank you sir. So Smart Business Revolution is the podcast on iTunes, Stitcher, wherever you listen to podcasts. SmartBusinessRevolution.com is the website. Rise25 is the other website and yeah reach out, I love hearing from people who heard me on a podcast so I appreciate it. It’s a pleasure being here. Joe: You’re a good man John. Thanks for your time. John: Thank you.   Links: John’s LinkedIn Profile Smart Business Revolution Blog & Podcast Rise25 Book recommendation: Give and Take by Adam Grant

Change is scary, and yes price trends do matter in the online marketplace, particularly if you are in the market for buying or selling a business. Today we’re discussing the frightening possibility of tighter margins, particularly for Amazon businesses, as a result of the most recent US government tariffs on Chinese products. Here at Quiet Light, we get a lot of questions from buyers regarding what we can expect from the Amazon marketplace now and in the future. The reality is that entrepreneurs need to learn to see these changes as par for the course as well as opportunities for growth. The internet today is so much different than it was 11 years ago when we started Quiet Light Brokerage. In fact, we started the same year the first Iphone came out  – to give some perspective on just how much things can change! When it comes to the geopolitical nature of e-commerce, specifically as it relates to the US, who better to bring in than a Canadian? Today’s guest, James Thomson, is a Partner for BuyBox Experts, a managed services agency specializing in marketplace management for brands, manufacturers, and resellers. He was formerly head of Amazon Services, the division of Amazon responsible for recruiting tens of thousands of sellers annually to the Amazon marketplace. He’s crazy knowledgeable about everything Amazon. We’re talking all about the tariffs and their potential impact on the e-commerce marketplace. Episode Highlights: What tariffs are coming out and what tariff trends are going to affect business? Impact on first party sellers. Ways to work with and around these tariffs. How the manufacturers in China will see that they can suffer too. The length and scope of the tariffs’ impact will have a lasting effect over time. Parallel imports may happen eventually, creating retail arbitrage. The foreseen impact for third party sellers. How the tariffs are creating more incentive for Chinese manufacturers to become sellers and sell products directly to customers in the United States. We discuss the consequences for Amazon sellers holding inventory. How Amazon monitors expected sell through rates to deflect inventory increases. Things sellers should keep in mind in order to keep their buy box percentages up. Indicators that there may be opportunities for competitors like Target to swoop in in certain spaces as early as the end of this quarter. If the tariffs prevail, one year from now will be the time when the retail increases will  show. What countries might be viable alternatives to China as suppliers and when to start investigating those avenues. The people who end up capitalizing and doing well in situations like these are the ones that look at these problems as opportunities. Transcription: Joe: So Mark I just launched a listing a couple of weeks ago. It’s under contract already, multiple offers, it went very quickly. Actually, it’s a re-launch because when we launched last year it didn’t sell because of flat trends on the top side, slightly down on the bottom side and we pulled it. And the owner of the business implemented all the growth opportunities that he wrote about and now business is up 27% so it went under contract very quickly. So for those people that are listening that don’t think that trends matter they definitely do because eight months ago no one wanted to buy this. Eight months later it’s under contract in what was literally like four days. And I can’t say the price of course but the thing that I wanted to touch about in regards to that is that he’s importing products from China and the potential tariffs have changed since we last listed the business. And so we addressed that in the client interview. We’re trying to stay current with it and he has a person through his manufacturer that helped him with the proper coding of the brands. And there was a slight increase in terms of the landed cost of goods sold but it was so minute it really had no impact on the discretionary earnings or profit. And I think that this is a topic that we need to address more and focus on in our client interviews and make sure that the sort of scary possibility of tighter margins is really looked into because not everything is going to have an increase and those that do it may be so small that is a very tiny percentage of that landed cost of goods sold. Now you just had an expert on to talk about it, our old friend James Thomson, right? Mark: Yeah absolutely when it comes to US issues and the geo political nature of e-commerce specifically as [inaudible 00:02:27.4] the US who better bring in than a Canadian? So, James Thomson, he is the first account manager within Amazon’s marketplace. He’s the co-founder of Prosper Show. He’s a principal owner over at Buy Box Experts. The guy … I mean he’s crazy knowledgeable about everything Amazon. And so we’ve been getting a lot of questions from buyers both on deals that are under offer right now and also from people just kind of trying to understand the landscape, what are we looking at here with Amazon in the future. So I thought let’s go ahead and bring somebody on. Let’s talk about it. Let’s kind of dissect this. And he said a couple of things which are really really important about this and I’m not going to give all of it away because I need to tease of course so that people can actually listen to the entire interview but a couple of things. One, the nature of business is always changing. I mean the Internet today is way different than what it was when we started Quiet Light Brokerage. I’m actually just … I’m putting together a presentation right now for Ungagged coming up here soon early November and I’m taking a look back to when I started Quiet Light Brokerage. We started Quiet Light Brokerage the same year that the iPhone first came out so … I mean that’s how much things have changed in just 11 years. Joe: Wow. Mark: I know right. So I say that this Quiet Light Brokerage was the biggest event of 2007 followed shortly after by the iPhone of course. Anyway let’s get into the point here, James and I talk a lot about why are the tariffs in place, what is going on with these tariffs, what is the future of it look like, how is it going to impact e-commerce business owners, what’s the hope of the US government with these tariffs. And I’ll cut to the chase there the hope is that people start buying from other countries and most importantly what should you be doing about it. And on one thing that I’m just going to say here, I reiterate this at the end of this discussion with James. These sort of changes need to be looked at as opportunities among people who own businesses, among entrepreneurs. I’ve been an entrepreneur for 20 plus years now and the nature of the internet is constantly changing. Those who are looking at these changes and saying there is opportunity here, I have a great opportunity here to be able to adjust to the changes, find a new problem and solve that problem they do really really well. They’re the ones that are absolutely killing it. Those who take a look at stuff like this and get all scared they end up leaving and not continuing onto the world of the Internet, their entrepreneurial career. So this is an interesting topic, very relevant to our time right now. Definitely, take a listen to it and then James also offered an email address if you have any questions for him to be able to speak about it. He’s got a couple of really practical solutions that you can implement right away to be able to absorb some of these costs both in working with the factories and manufacturers in China but also just some very simple things that you can do on your side with your product launches and your products coming out to be able to pass this cost on. I’ll say one more thing and I know I’ve talked a ton here; I’m kind of all around the place here. And I think it’s really important to understand that everybody is facing these problems. When your costs go up 10% it’s not just you, it’s all of your competitors are seeing the exact same things. So it’s a matter of how do you absorb those costs, how do you plan to be able to compete with that, how do you address your Amazon account so that you’re not getting … losing your buy box share so on and so forth. Pretty simple stuff but you do need to have a plan. Joe: Yeah and I think you and I have been around long enough that we know it’s not the end of the world, it’s just another hurdle that an entrepreneur needs to get over. Get over the hurdle. And knowledge is power. If you learn about it, focus on it, and if and when you decide to sell your business you’ll have that knowledge and you’ll be able to address and tell people how you addressed it. And for buyers, same thing learn about it. Not every category is going to have an increase in tariffs and increase in cost of goods sold. So James is very bright, one of the smartest guys in most of the rooms he’s in so I am looking forward to listening to this myself. Mark: James welcome back to the Quiet Light Podcast. James: Thanks for having me, Mark. Mark: All right so let’s start off with just a quick introduction as to who you are. You have been on the podcast once before. I’m going to let you introduce yourself as far as your background … especially your background with Amazon and Prosper Show and Buy Box Experts. James: Right. Well, I’m James Thomson. People may know me as one of the co-founders of Prosper Show which is an educational event for large sophisticated third party sellers on Amazon. I am also the partner for Buy Box Experts which is an advisory and account management company at sports brands on Amazon. And I spent almost six years at Amazon doing a number of third party related responsibilities including running Amazon services and being Amazon’s first FBA account manager many many many years ago. So thanks for having me back on again. I’m looking forward to talking about the ever increasing challenges of being a successful seller on Amazon. Mark: Well, I’m going to admit this is a show that I have been sort of dreading to do. James: Yeah. Mark: But it’s really necessary and I know we’ve been starting to see more and more questions on the whole issue of tariffs. Before we jump into it real quick I am just going to give a shout out to Prosper Show. We go to a lot of shows at Quiet Light, Prosper show is awesome. If you’re selling on Amazon and you’re looking for a show where you can actually learn things and make good connections check it out, Prosper Show, what we’re going to be there next March probably with all the booth and all that so. James: Thanks Mark, thanks. Mark: The thing is I’ll make it for you because it’s worth making. And also I don’t want to talk about tariffs but let’s talk about tariffs. And as everybody knows we’ve had one round of tariffs slapped on a lot of products coming from China, 10%. There is a threat of more tariffs coming out in January. And I’m going to fess up publicly to everybody to say I’ve really been kind of putting my fingers in my ears and saying I don’t want to know about this, please make it go away. Let’s get everybody up to speed on this as far as the tariffs that are coming out and what the general political landscape is that we need to be aware of in moving forward. James: So just to be clear I’m Canadian. I don’t vote in the United States. I don’t get to decide who does or doesn’t make decisions around the tariffs that are going to be charged. But for folks that haven’t been paying attention Mr. Trump is dealing … or has decided to enter into a tariff war with the Chinese around basically what dozens and now hundreds of products that are manufactured in China will be slapped with rather significant tariffs when they’re imported into the United States. As many the people listening in today will know these private label sellers gosh we have a lot of stuff made in China that ends up being consumed and sold here in the US. So I work a lot with private label sellers who are saying gosh I thought I had the opportunity to make some decent margin being a private label seller but now that my products that are coming in from China with this extra 10%, 15%, and possibly 25% tariff depending on what specific type of product you happen to make, gosh that’s an awful lot of money and I can’t really absorb that long term without it destroying my financial situation. So what do I do? I think to tackle this problem we should split it into two parts. There are going to be those companies that wholesale products to Amazon. We'll call that the vendor central relationship and then there’s all of the companies that are using seller central to sell those products themselves; two very different situations. Let’s start with the … either one is really very easy but let’s start with the vendor central situation. If you are a brand and you are bringing products in from China and you’re turning around your wholesaling to Amazon … not surprisingly Amazon doesn’t buy price increases and they don’t really care about your profitability. That’s your problem and so if you’re now faced with an extra 10 to 25% COGS … 10 to 25% of higher COGS, absorbing that amount unless you’re making insane margins most of us can’t absorb that kind of money. And so the question then becomes A. can you get your manufacturer receipts absorbed? Some of that in cost reductions and we’ve definitely seen some situations where some of the overseas manufacturers are willing to make certain price concessions, especially if the North American sellers are buying the inventory in time to be able to avoid some of that initial tariff. So if you’re prepared to load up on some of your inventories, if you load up on your inventory now then next year are the first lot of x-tiles and units your Chinese manufacturer may absorb some of that extra cost. Because the reality is the Chinese manufacturers they’re also going to suffer through this. It’s not just the American brands, it’s Chinese manufacturers that also recognize that there isn’t going to be as much demand unless they absorb some of this cost. Mark: Yeah and let me just make a point here real quick. I mean the goal of this and the Trump administration has been pretty clear, the goal of this is to get China to change some of their policies towards the US. And so they’re literally trying to disincentivize business owners importing from China you know a lot of these 1P and 3P as you put it, the vendor central and the other people selling through Amazon to buy from other countries. And so they’re going to make … through these tariffs they’re just making business more expensive for everybody. And ideally, there is going to be this internal pressure from the Chinese manufacturers on their government to be able to change some of the policies of the US. That’s kind of big picture. James: The problem is … and I speak anecdotal experience, I live close to the harbor in Seattle and I see all the used tanker ships come in and more than half of them come in from China. So if I think of all this product that comes in that we consume here in the United States is being manufactured overseas if more than half of that’s being created in China the reality is our overall cost of buying stuff, whatever it is … plastic stuff, apparel, whatever … it’s coming from China. And so unless some of these other countries can very very quickly not only ramp up production but more importantly identify themselves to companies here in the United States that otherwise buy from China, unless they can do that and find a way to say hey come and make your products over here instead of in China, the reality is this is going to take a while and some of this pain around higher costs is going to affect both the manufacturers in China, companies here in the United States, and of course consumers in the United States if in fact some of those costs overruns or pass through as higher resale prices. Mark: Right and just to be clear I’m not a geopolitical expert by any means but China has been pouring money in subsidizing their manufacturers for a really long time to be able to ramp up production levels that can provide basically manufacturing services to the entire world. That’s why their economy has really been juiced up to where it is today. So for people to look elsewhere to other countries it’s going to be darn near impossible for somebody to find prices that can be matched in other countries that may be seeing this as an opportunity. And even if a country does pop up for a particular industry it’s going to take years for the capacity to be able to grow up to the level where we really need it to grow up to. James: Yes. Mark: So this is a problem. Let me ask you a question on this real quick and I want to get into specifically how Amazon is treating this as well. You started to get into it. I think it’s going to be an interesting conversation but isn’t this going to affect everybody the same way? And at the end of the day I mean it’s the consumers that you would think are going to be left on in vague. If there’s a 10% tariff on Blue Widgets, all the Blue Widget sellers have to pay that 10% tariff. James: Yes. Mark: So eventually their cost is up so they’re going to have to raise the prices as well. Is this really going to impact the businesses themselves in that way since they could in theory pass that cost on? James: So there are a couple of things here, and different people go to market on Amazon with very different distribution approaches. So if you are buying product overseas, bringing it in into the United States and turning around and trying to wholesale it to Amazon through a vendor central account, Amazon has made it clear they do not accept price increases. This is your problem Mr. Brand; you need to figure out how to absorb this. So what I see happening is some brands will say gosh this is inconvenient right before Q4 our biggest time of the year. Some of these brands will say you know what, as much as we hate to do this we will suck it up and we will absorb this cost. And so many of these manufacturers will end up with much much smaller margins while Amazon continues to have the product at the same price that it had and some consumers won’t see a price increase on those items. Unfortunately … and that’s fine short term but long term these manufacturers are going to say unless I can find cheaper sources of manufacturing elsewhere I’m no longer going to carry these products or I’m no longer going to sell them to Amazon 1P or I’m actually no longer going to sell them anywhere on Amazon; that’s one option. There is another type of distribution model that’s very common on Amazon which is the product diverter, and I’m not passing judgment on the product diverter, the reality is there’s a lot of product diverters on Amazon; companies that gray market source products. And so the opportunity for companies to go and proactively can parallel import and bring in products from let’s say Europe that came in from China nut they’re now coming in from Europe … I see an, potentially in some categories there will be a significant increase in parallel imports because somebody can buy that product in another country and to the extent, they’re not necessarily answering all the questions correctly about where these products are manufactured there will be more opportunity and more incentive for companies to do parallel imports. Again so as to be able to bring products in at a cheaper price than what they would otherwise be paying if they bought directly from China. Mark: Is that illegal or do you literally have to be lying on your forms in order to be doing this parallel importing? James: Oh please deter, I’m not suggesting that anybody does this. I’m just saying I fully anticipate this is going to happen. Mark: Sure. James: And so if the other thing is if the tax … if you can ensure the tax has already been paid at least once there may be opportunity for you to capitalize on nonetheless being able to re-import it back in and be able to source it. Brands don’t like product diversion and so knowing in there will be an issue there for brands long term having their products … basically, people capitalizing on retail arbitrage across borders and getting cheaper prices in one place so as to capitalize on that. What is more likely is if there is a price discrepancy in another country and you can buy the same item in Europe for 10% less than you can here in the US, some folks may decide to … depending on the math, it may decide to start buying stuff indirectly just because they can capitalize on price discrepancies in order to make things work. The logistics are more complicated but in the end, they still need to make some money and they’re prepared to take on these extra logistic steps just so they can make some money. All of this is short term because in the long run if a brand wants to continue to wholesale on Amazon they have to make money. That’s what … it’s why we’re all here. And so what I anticipate happening is some brands are going to stop supplying certain products and they’re either going to go and find production in other countries or they’re going to find completely different products that don’t involve China at all. And so that will mean that some products that we as consumers rely on … and I think for example all the Q4 toys that get sold in this country, the vast majority of them are made overseas and a huge proportion of those are made in China. And so it will be interesting to see specifically in the toy category what happens because with Toys R Us going out of business this year, there’s been a lot of discussions that some of the other brick and mortar retailers are going to be very aggressively going after Amazon. If Amazon for some reason in most of the toys that Amazon gets come from 1P, if those manufacturers for some reason say you know what we can’t make any money selling you these products we’re not going to sell it to you because you’re not prepared to take a price increase, we may have a situation where Amazon actually runs out of stock on an awful lot of top selling toys. Which is bad, bad, bad for Amazon. So I think the toy category of all categories is the one that may push Amazon short term to accept the fact that it is going to have to absorb some higher costs in order to have inventory on absolutely critical selection in Q4. Mark: Interesting, so let’s move over to the 3P and I have also some questions maybe about competition to Amazon which hopefully we can get to but let’s move over to the 3P. What’s the impact that you see and I know we’re all crystal ball in here but what’s the impact that you see for 3P sellers? And 3P for anyone that doesn’t know this would be FBA merchant fulfilled, anybody that is not selling vendor central but still selling through [inaudible 00:18:43.2]. James: I’m going to separate 3P into two groups there’s the resellers and there are the private label sellers. If I’m a private label seller and buying stuff from China I make the decisions myself on what pricing should look like. So if I have to raise my prices 10% to maintain my margins I can choose to absorb some of that for competitive purposes. But I always have the flexibility of saying I’m going to raise my prices. An important … a very tactical issue, let’s say that you’re selling your product for $25 today on Amazon and you added list price information into the Amazon catalog, you can’t just raise your price from $25 to $30 to cover your extra price. You need to also increase your list price because otherwise, Amazon’s going to flag you in selling products significantly above the list price and also press your Buy Box. So you’ve got to make both of those adjustments at once. As it relates to resellers the question becomes if you’re buying from a distributor or a brand here in the United States that you’re then turning around and reselling who’s splitting the cost increases there? And that’s going to differ widely on brand by brand. Some brands may already have a lot of inventory here in the US and they say well we’re just going to ride this out and hope this tariffs disappear sometime in Q1 or Q2 in which case they’re willing to … you know if they’re using some kind of a lifo … I’m sorry a phyto model of inventory there may not be any price increases at all for wholesale pricing. And so the retailer can turn around and continue to sell the product at the same price. The problem is all you need is one competitor in the same space on Amazon the whole price is tight and not move prices up and if they’ve got lower prices and they’re still doing the right thing with organic search and driving traffic they may end up with a higher proportion of total traffic on their products. Granted it’s very low margined traffic but it is nonetheless higher traffic. And so the question is how long is any particular reseller prepared to take lower margins for the benefit of higher traffic which isn’t necessarily high quality business. Mark: I mean in defense here we see this happen anyways where we have people come in and try to break into a market and will purposely go low margin just to be able to break into that market. But this is kind of who could hold off the longest with the higher prices. James: So there’s been a very important development this week with Mr. Trump getting out of the postal shipping rate agreement with China. There was a significant subsidy that the United States was paying for overseas companies to ship products one order at a time into the United States. A lot of these individual orders today don’t clear customs with any customs payments. And so if you got a 25% tax for example on those products, if they’re brought in bulk but there’s no tax on the individual orders, you don’t also want to create a situation where there’s that much more incentive for example for Chinese sellers to send products one at a time in the United States by removing some of these price subsidies on the shipping costs that will help to balance things a little bit. But you still have a situation where a Chinese seller can send an individual order into the United States and realistically most of those orders are going to get through without customs being applied on those on off envelopes and boxes. So in many ways, the tariff only creates more incentive for Chinese manufacturers to become sellers and to sell products one at a time in the United States. And so that continues to be a challenge. Mark: Let me ask you about a tactic that I’ve seen sellers employ here in trying to get ahead of potentially … I know there’s threats of an additional tariff being imposed here coming January so possibly increasing the tariffs even more. And I’ve seen some sellers bulking up on inventory because of that; trying to get ahead of that. It has kind of a cascading effect though from what I understand if you’re a 3P and especially using Amazon’s fulfillment services. Does Amazon look closely at the amount of inventory that you’re keeping with them and are there consequences for maybe having inventory sit on their shelves longer? James: No it was early this year Amazon evolved the way that they designed how much FBA capacity every seller has. And it has to do with the sell through rate of each individual skew that they choose to put into FBA. If you’re selling a product that sells a thousand units a day, Amazon will let you put as much of that in as you want. If you’re selling a product that sells one unit a month you can’t load up five years of inventory. Amazon actually won’t let you put that in the FBA all at once. And so as much as a seller wants to ramp up their level of interest they hold in FBA, Amazon will cap it based on their expected sell through rates. So if you happen to sell products that sell fast enough you’re not going to be putting more than six months of product into FBA, great you may load up a little bit more. But if you start bringing in pallets and pallets more than you’ll ever sell in the next six months, Amazon’s going to put the kybosh on that. And you’re going to have to figure out where to hold that inventory. So I think it’s a system that basically corrects itself. I think it’s worth a seller today if they’re planning on doing this in the next four to five weeks they should create an FBA shipment right now to see if Amazon even allows them to put whatever level of incremental inventory into FBA. They may well say sorry we don’t have that space because your expected sell through rate doesn’t by any means justify the load of inventory. Mark: And I know a lot of sellers are using even a 3PL of sorts just to store Amazon inventory that they are eventually going to ship off to Amazon and that’s … if you’re not doing that and you store inventory for anywhere longer than a few months I think because of the storage rates you can get much better storage rates elsewhere but that’s something to look at. James: So to that point if you do have to bring in an awful lot more inventory and hold the inventory so as to bypass the expected additional duties that come likely in January, one thing we may see is an increase in the number of sellers that decide to start using seller for full prime. And that’s a mixed bag in terms of whether it’s a good thing for sellers, in some situations they may be able to use the higher shipping costs that come with seller for full prime that may be adequately smaller to offset the expected cost of having to pay another 15% in a tax on imports. But you know we may see some … in certain categories we may see more sellers deciding to use seller for full prime in part because Amazon says you can’t send that much stuff into FBA but you know we’ll have to have to see what happens. My view is I don’t see this tax staying in place indefinitely. I see this is a game of chicken between two countries. And quite frankly I think the United States has more to lose than the Chinese do because the Chinese low cost production capabilities in China will continue to be there even if those costs are a little bit higher now that there’s tax added to it. And so reality is we Americans, we like cheap stuff and so if you go to the source of cheap stuff … and so I suspect at some point that there will be some counterbalancing that happens and it’s a matter of how long can people hold on without going out of business. Mark: Yeah. Let’s talk about the Buy Box a little bit. You touched on this earlier about things that you may want to watch out for if … when your changing prices on your site. What are some things people should keep in mind if they do decide to pass on some of those costs to the eventual customers at the end of the day? What are the things that they should watch out for so they don’t lose their Buy Box percentages? James: Well the first one is you still … when you offer your product you want to make sure that it’s at or below the list price. So if you’re having to increase your price over whatever the current list price is today then you want to make sure that you can update the list price information. If you are a reseller of someone else’s products and they haven’t updated the list price then you’re going to be in trouble because you can’t sell that $30 item for $35 when the list price is 30. And if the manufacturer controls the list price or you as the reseller don’t have brand registry ability to go in and update the list price you’re going to be in a situation where you don’t have the buy box because you’ve had to sell the product in a price above the list price. So start that conversation now if you don’t have the ability to change the list price on a product you resell have that conversation now because you need to get that information updated. Otherwise, the brand is going to lose out to any other brand that has the ability to update their list prices. So even if the brand you’re reselling doesn’t want to do this you need to explain to them listen if you don’t do this everybody that sells your product is going to be in a situation where they can’t win the buy box which means the consideration of your brand or other brands is going to be significantly hampered. Mark: That’s good advice. Let’s move on to Amazon and their adjustments that they might be making on their side and also possible competitors. And I’m thinking Wal-Mart here who has been pretty aggressive in trying to eat in Amazon’s market share. I don’t know how successful they’ve been with their two day shipping on anything, no membership fees everything else. You’ve already described how Amazon is right now at least probably pretty unforgiving as far as price increases on them [inaudible 00:27:44.9] side. James: Yeah. Mark: Do you see any opportunity here for some of these competitors and even if it’s not one competitor maybe that fragmentation of Home Depot taking care of their pit space and actually increasing their presence target doing the same, Wal-Mart doing the same, and have you seen any indication of this yet? James: Well what I have seen … I go back to the toy example, what I’ve seen is that both Target and Walmart are aggressively looking for ways that they can win in the toy space this Q4. And it only takes one or two of the big toy companies to tell Amazon 1P that they’re not prepared to send any shipments unless there is some modification to the pricing. Unless that happens … oh, I’m sorry if that does happen then I think it could be a very painful Q4 for Amazon in a category that they actually absolutely need to win. But the problem with Amazon is they usually win anyways. The reality is if they can’t get it directly from the distributor or the manufacturer they find a secondary source. They go and find a distributor that will unload a product at low margin, Or they will do parallel imports. So I think if these duties remain in to place for 12 months it’s going to be next November or December that the pain is really felt by brands. Because right now a lot of them already have inventory, they already brought in to the United States. While they may have paid 10% extra duty it’s not 25% duty but at the time you have long term 25% duty that absolutely is going to impact what their retail prices look like. So as bad as it may be coming out of this December if that tax remains in place for another 12 months that’s when companies are going to have to say okay we’re going to have to discontinue certain skews. We’re going to have to launch new versions of the existing skews under different UPCs so that we can have new list prices on these items. I’ve seen situations already with some companies where they’re already loading the 2019 version of an item with very slightly modified packaging but that’s the product that’s going to replenish the 2018 version that they’re very soon going to run out of and have no plans on ever replenishing as long as the tax is in place; i.e 2019 version cost 25% more retail because everybody has to continue to make money doing this. Mark: Okay one of the things that we’ve been trying to educate people on especially in this e-commerce space there’s a lot of people out there that want to find a couple of evergreen products that are just constantly bringing in cash. And then there’s always the question of well how do you handle competition? When we brought it up time and time again now on this podcast where look good product based companies come out with new products on a regular basis and so that’s actually … it’s something I haven’t heard before. That’s a great way to be able to address this is come up with a 2019 version or a slightly different model version which your cost can absorb that new price and be able to work it out to the price that self. Last thing I want to talk about, let’s assume that this does last for a while, you know a year or more. The intended effect is for US importers and retailers to move and look for other countries. So what are some of the countries maybe that people can start looking into. And I know it’s going to vary industry by industry but what countries might be viable alternatives to China if people want to start looking at and look for manufacturers in different places that could possibly replace their current supply? James: I don’t know how much I knew I can add to this. I mean a lot of the companies I know they look in Thailand and Vietnam today. Some of them look in Laos. I know the Southeast Asian countries, a lot of them have low cost production but they’re not necessarily known for the sophistication of bringing together manufacturers the way, for example, Canton Fair does. And so I see an opportunity here for … let’s say I’m the business development government organization in Thailand or Vietnam to the extent of they can put together a major event that will attract thousands of manufacturers and thousands of overseas buyers, I mean I see that as being rather significant. If you can spin up a Canton Fair like event or even a very small verison of that in one of these other Southeast Asian countries. Part of the challenge here is visibility. There already is an Alibaba that helps people find every Chinese manufacturer. Is there a similar concept in Vietnam and Thailand? To this point, it’s nowhere near as visible and so it becomes something that basically has to be centrally organized either by large associations of manufacturers in country or potentially the government. And so if one of those countries is able to step up and do something like this and create visibility that will help. But let’s be honest even if I said to you your product can be made in another country basically the same way starting today you’re still looking at six months of testing and small minimum order quantities to verify and make sure that you have got the right payment structures in place. And so I would challenge everybody who’s listening today if we’re looking at a 12 month or a long term situation with this tax being in place you’ve got to start these conversations in January figuring out where is my alternative source going to come from. Because it’s going to take time to work through and figure out am I really getting the same quality? Am I really getting the same delivery promises and so on from my overseas manufacturers that are now coming out of a different country? Mark: Yeah. So I’ve been an entrepreneur now for going on 20 years and the way … I would just like to close out here because some people might be hearing this and saying oh my gosh this is so incredibly scary. And what I want to say is this, these things happen. These things happen in business. The conditions change all the time and the people who end up capitalizing and doing really well are the ones who look at these problems as the opportunities that they are and figure out the way to make it work. There will be people who drop out. There will be people who do not pay enough attention to this and don’t make the right moves. And so when we see these things rather than getting all scared and actually ironically enough this episode is probably going to air right around Halloween. I think we’re going to publish it the day before Halloween and do our email newsletter advisory the day after … so you know a good timing for that. But to understand that there is definitely opportunity here. I think there’s a couple of really good tactics. I think James you brought up just one simple one was just bringing up a new version of products that have and make them a 2019 version. That’s a really simple type that we can have to see what’s going to happen. And then also just have your ear to the ground as to where you can also find other products. So this has been really really enlightening. James, thank you so much for coming on. Where can people reach you if they have questions about this or honestly your work for consulting with Amazon sellers is unparalleled so if they have other questions even unrelated to this where can they reach you? James: I can be reached at info@buyboxexperts.com. All those emails go directly to me. And I appreciate your time today Mark. Mark: Yeah, absolutely. Thank you so much for coming on. Again James is one of the best in the business by far. Prosper Show check it out and then if you have questions feel free to reach out to me and I can do an intro or [inaudible 00:34:40.8] James. Thanks again for coming on. James: Thank you, Mark.   Links and Resources: Email James BuyBox Website Prospershow James’s LinkedIn James’s Book on Amazon

A private equity firm is in the business of buying, growing, and exiting companies, hopefully for more than they bought it for. For every industry there is a private equity firm out there. As private equity diversifies, what are the key trends changing the nature of the deal? Today we are discussing where private equity firms come into play in the buying and selling space. Today’s guest, Andy Jones, is the founder and owner of PrivateEquityInfo, a private equity database that helps investment bankers and private equity firms close more deals by taking a look at the top trends to look out for when scouting an acquisition target. One major trend we discuss is the holding periods for private equity and how those can often reveal the direction of the overall economy. Studying these and other trends are useful for potential buyers to understand what to look out for in an acquisition deal. Episode Highlights: Andy’s history with Private Equity Info. A look at a typical private equity deal. What sellers should know about the private equity industry. Buyers don’t want the ugly marbles. Why buyers prefer asset deals over stock deals. What ebita sizes private equity firms are looking for and why the size requirements are in place. Smaller ebitas and add-on investment trends in the private equity arena. Why larger acquisitions still make more sense. Best ways to find the private equity for your business. We touch on the topic of microfunds; what they are and how they work. Typical deal structures that Andy comes across. Why business founders don’t have the same appetite for risk as PE firms. The typical holding period before an exit. How long is it? Exuberance trends typically show up when those holding periods experience a decline. Andy shares his top ten trend list for 2018. Transcription: Joe: Mark, I understand you had a great conversation with Andy Jones from PrivateEquityInfo.com. Mark: Yeah private equity is one of these things that buyers and clients that we talk to and even … I’m sorry sellers and clients that we talk to and buyers as well often ask us about. Is private equity buying online businesses? Are they buying Amazon businesses? Are they buying SaaS businesses? Where do they start buying? When do they … what are the lines for it? How does it work? Andy Jones is somebody that I’ve known now for probably seven, eight years. He’s always been very primed by complimenting me on the content we put out. So anyone that complements me is immediately somebody I like and so we talked about having him on the podcast- Joe: Hold on just a second, you’re awesome Mark. You’re a really good guy and I’m proud to be your partner. Mark: I thought you’re stopping the podcast here. Joe: No, I’m just complementing you; that’s all. Like you see I just wanted to be liked by you today. Mark: Okay well continuing … thank you, Joe. We will talk about increasing your equity stake in Quiet Light Brokerage after this call. Joe: Awesome. Mark: It’s kind of easy guys, it’s really that easy. And so Andy has PrivateEquityInfo.com. It’s a fantastic database of private equity activity across the spectrum. So anything from manufacturing to the online world but something that they do at PrivateEquityInfo.com is they take a look at the trends and what is going on in the world of private equity and these can be leading economic indicators. And he gave me one trend in particular, I’m going to let him get into the details of it but it’s the holding period for private equity. Because private equity, what they typically do for anyone that may not know that they’re going to make a lot of investments with the goal of growing these businesses but then exiting these businesses as well or at least a portion of these businesses that they’re building up. And the holding period, how long they hold them can really tell us a lot about the direction of the economy and what to anticipate next. And so they look at this holding period, the average number of years that a private equity is hanging on to business before they exit it. Right after the recession that holding period went up to like a number of I think it was like eight or nine because they bought at the peak and they had to wait for the economy to recover before they could exit. So I’m going to tease here and just say listen to the podcast to see what the average holding period is right now, what number we want to look out for to be able to understand okay maybe the economy is going to start to retract a little bit and use that for the decisions we want to make. Joe: This is going to be fascinating. I think we’re going to learn about the future of the economy here as well. Hey before we move to the podcast I just want to give a shout out to Mike Nuñez from affiliate manager. Mike, you’re probably out riding your bike right now listening to this podcast, I appreciate all the positive feedback you’ve given us in the last few months. Thank you very much. Let’s go to the podcast with Andy Jones. Mark: Andy thanks for joining me. Andy: Thanks for having me. Mark: All right let’s start off with a little bit of background on yourself and where you come from. I’ll let you do that part. Andy: Yeah I’d be happy to. So my name is Andy Jones. I’m the founder and owner of Private Equity Info. We’re an Austin, Texas based company. We own several websites but our flagship website is really PrivateEquityInfo.com and this is where we provide and emanate research database that helps investment bankers and private equity firms and even the corporates close more deals. So I have an engineering background and investment banking background that’s kind of what lead me onto this journey of entrepreneurship 14 years ago. Mark: Yeah pretty cool and you are one of the people … I will confess you feed my ego whenever we send out messages by saying really great content Mark. I’m like hey, I like this Andy guy. Andy: Yeah yeah. Mark: Good stuff, I like that. Well cool. We’re going to talk about private equity today because you have PrivateEquityInfo.com and really good information through that site. How long have you had that now? Andy: So yeah we launched 14 years ago, January of ’05 so this year is our fourteenth. Mark: I remember when everybody’s site is full. It was like three, four years old and somebody who had like an eight year old site it was like ancient. Andy: I know I’m that guy. Mark: You know you’re that guy right? I own a 20 plus year old site and then Quiet Light Brokerage this is going to be our 11th anniversary coming up next month. Andy: Wow. Mark: Actually by the time this episode airs we’ve surpassed 11 years so … really really cool. So again private equity was what we’re going to talk about today. We get this question all the time from buyers. People want to know things like who’s buying online businesses and would private equity be interested? At what levels are private equity interested in and how do those deals sort of differ from other deals? And you’ve got a pulse in the industry more so than anybody else that I know so I thought hey let’s talk about this. I think this is- Andy: Sounds good. Mark: -sort of thing to go into. So let’s talk about just kind of the typical private equity deals from what you are seeing and from your experience. I mean what is a good intro for somebody who owns a business that might be thinking about selling and they think well maybe private equity would be interested? What should they know about this industry in general and the different PE firms out there? Andy: Okay. Well, that’s a pretty broad question; let me see if I can tackle it from the few angles there. So I’m going to come at this from the assumption that there is some general knowledge of private equity but maybe some inexact knowledge and I’ll just kind of ram a little bit and we can flesh it out. But essentially let me just start with the basics what a private equity firm is. A private equity firm, they’re in the business of buying growing and exiting companies for hopefully more than they bought it for. And the way they do that is they typically raise a fund through their limited partners. And limited partners are typically institutional money, pensions and retirements, high net worth individuals, [inaudible 00:06:43.1] and such. They raise a fund that has a 7 to 10 year lifetime and the private equity firm then puts that money to work by buying companies. And their hope is to grow those companies, produce cash flow, and exit at a good return on investment for their limited partners and also for themselves. So that’s kind of the mechanism of how they work. We can create … we can talk about how they create value later if you want to but you know is a private equity firm the right buyer for your company? Well now that depends on a lot of factors; primarily size but also industry. So by way of size, there’s a huge range of private equity firms out there and they go from billions of dollars of interest in price value, company size down to single digit millions. And so there’s a long tale of the firms out there. But at some point, the transactions get small enough that it’s not really just logistically practical to make investments of small sizes for a platform investment. But I will also say that for add-on investments, you know private equity firms often have this model whereby they buy a platform investment and then we have add-on investments to it. Most private equity firms have size criteria for platforms but for add-ons, it can be more strategic interest rather than size. And so usually there’s not a lower limit on the add-on acquisitions. Process size is one limitation, geography being another, and industry. If you have an industry there is a private equity firm interested in it. There’s a lot of private equity firms out there. The trick is finding which ones are interested in your company and that’s where we come in. Mark: Yeah so I want to talk a little bit about these different sizes because we … as a broker I get these emails all the time from private equity firms that are out there. They’re reaching out to just these large databases of brokers and they typically are saying hey we’re looking for investment opportunities in manufacturing with this, that, the other thing. A lot of times it just does not fit what we do at all. Obviously, there’s no reason but they always list a minimum EBIDTA that they want to see. And typically what we’re seeing from the ones that reach out to us would be EBIDTAs of a minimum of 10 million, 5 million, 2.5, and in some rare cases 1 million but almost never below that. Andy: That sounds about right. Mark: Yeah. So what do you see with that? I mean, first of all, I think we can ask the question why, [inaudible 00:08:58.2] the listeners of everything we’re all … it’s obvious but for those that may not be cashing out of that why do they have these size requirements in there? And then second of all if you comment on that breakdown I mean are private equities looking for these [inaudible 00:09:10.6] smaller in the world of bootstrapped entrepreneurs a million dollars EBIDTAS is a decent deal but for private equity firm that’s tiny little bits of money there. How does that break down? Andy: Yeah let me answer those in reverse. So the spread you kind of set it right. Yeah most of them are 10, 25 million in EBIDTas that’s for the bigger firms. In the upper middle market, firms are going to be and middle market firms is targeting down the 5 million down to 1 million in EBIDTA [inaudible 00:09:36.7]. But there are firms that will do it. And I think really the trick there is if you’re operating in that size range, the trick is not to be considered a platform investment. You want to be considered an add-on investment. And the single best way to find the right private equity firm for your company if you’re selling it and if you’re down in that range … even half a million, a million dollars in EBIDTA it’s getting pretty low. But it is to use a database like ours to keyword search based on keywords that describe your company the portfolio companies that are owned by private equity firms and we allow you to do this. You can search almost 80 … I guess a little over an 80,000 of them now and find those portfolio companies that are currently owned by private equity firms and that is … yeah, they look like your company. So that’s the single best gauge to determine a private equity firm’s fit or interest in your firm and your company is if they’ve already made a platform investment and you might be a likely add-on. So that’s the process I would go about to discover the sort of rifle shot hits that you’re looking for and you can use a tool like ours to find that. Why the size limitations? Well, they have a fund and they have to deploy that money. And if you have a hundred million dollar fund and you’re deploying it at single digit millions at a time it is too much work. You’ll never get it deployed. And that’s really just driving your limitations there. Mark: Right. I think we have addressed this at the podcast topic a while ago on should you buy big or should you buy small. I’ve addressed this topic in a number of times as well where if you have the resources available to be able to run a larger enterprise from just making your dollars work; the larger acquisitions make so much more sense. The workload, the resources that go into a lot of internet companies doesn’t really scale at the same rate as the revenues do. And so it makes sense to do that. So for a private equity firm to come in and try and buy out a company doing 250,000 in EBIDTA just doesn’t make much sense. They’re not going to reach the goals that they’re looking for. And also the capitalization rights, I mean how large are these private equity firms when … how much capital are they trying to deploy through acquisitions? Andy: It really depends on the firm. You know if you wanted to … I don’t know off the top of my head but I’ve done studies on this based on our data. And I’ve done some data size and probably shoot to our blog. So if people want to visit our blog you can read more about it but it’s very typical to have fund sizes and it’d be hundreds of millions of dollars. Mark: Right. So let me take a little bit of a diversion real quick. I want to ask you a question that a trend that I’ve seen in our space here in the online acquisitions space, I call them micro funds because I don’t really have another word for them. Andy: Okay. Mark: But these people that are raising 10 to 15 to 20 million dollars and they’re doing it following that private equity sort of model of bringing in those investors. Their goal is to bring in a few companies, have some synergies between those companies, grow them, and hopefully sell them off. Are you guys tracking those at all at this point? Andy: So at that level what we typically see is a firm that has raised capital because they have an operating partner with very specific industry experience and they’re looking to buy a company or two. In that case, they’re likely not in our database and it’s not because we don’t know about them, it’s just for fit reasons. Most of our customers that we serve are middle market investment bankers and because of that, we want to provide them a data set of firms that are likely going to close the deal. And if you’re buying one or two companies the probability of you closing that deal is pretty small especially if you’ve already closed one. Mark: Right. Andy: So the firms in our database are only those firms that have committed capital that are closing deals in the marketplace. Or sometimes they’re from a sponsor but they have to demonstrate that they’re actually closing deals. Because at the end of the day investment bankers and firms like yours you want to close a deal so you want to make sure that the people that you’re approaching from our database have some probability of making that happen. Mark: Yeah that makes complete sense. All right let’s talk a little bit about … and again you’ve said this a couple of times so I’m going to reiterate it but talk in generalities when I’m asking you some of these questions. Every firm operates differently. Some like the sort of incubator method … you really it’s going to be different from one from the next but I want to talk about typical deal structures. And let’s say that we have somebody who … they built up a company and let’s say that they’re in that seven figure EBIDTA range or low eight figure EBIDTA range as well. I know I’m working with people on that low eight figure EBIDTA range, they’re looking for an exit down the road and they’re definitely in that private equity territory where that’s what makes most sense. Andy: Okay. Mark: So when you’re approaching private equity firms with a business … let’s just focus mainly on the seven figure EBIDTA range, the one to five million, say that we have some people there, some PE firms there. What sort of deal structures do you typically see? Are they completely asset based acquisitions, are they stock, are they management buy-outs with the managers staying on and if there’s no general rule that’s fine too of course. Andy: There’s no general rule but there are some factors as you know that sway the rules. Let me organize my thoughts on how to answer that. So asset deals versus equity deals, there’s no all encompassing rule for that. Generally speaking, let me just sort of educate the audience a little bit and there’s a good analogy for this. If you think about your company as a bag with a bunch of marbles in it and marbles are the assets, buyers like to come in and pick out the marbles they want. That’s an asset deal. I want this marble, this marble, and this marble and that’s what I want; that’s an asset deal. You keep the corporate entity and all the other marbles I don’t want. Whereas a start deal … equity deals says I will just buy the bag and all the marbles in it; good, bad and ugly. Well as a general rule, buyers prefer an asset deal and sellers prefer start deals because it’s just [inaudible 00:15:21.8]. Buyers don’t want the ugly marbles; the litigation, the potential liabilities … you know that stuff, so just for your audience though typically we find that the buyer wins because they’re the ones with the money. So if you want a deal done you’re going to do an asset deal. So there’s not a hard and fast rule, the exception to that is often times when there’s customer contracts in place that you don’t want to have to renegotiate, you don’t want to create a new corporate entity and then often times those become start deals just for just the core purposes. That’s the other part of your question, you’re looking at a seven figure in EBIDTA deal. Mark: So the basic structure of it. I know we’ve run into some cases where we’ve worked with private equity firms but they wanted to have a management team in place before. Andy: Right. Mark: Or the structure of the deal you know as a cash or as a cash financing and as a- Andy: All right, again it’s going to be all over the place but generally speaking if the owner is retiring … owner-founder is retiring, the seller that’s one case whereas if they’re wanting to stay on and run it and grow it that’s another case. If they’re retiring it’s going to be more … mostly a cash out kind of deal. But if there’s a continuity there and they’re selling the vast majority of their equity to a private equity firm retaining a small minority stake on the order of 10, 20% that’s a different sort of deal. And that’s probably the preference for most private equity firms. Again we’re talking generalities. All firms operate differently. If you have a strong management team that wants to stay on the private equity firms are going to be interested in that. If they’re interested in your company because of its industry, its size, its growth trajectory, and its promise to go on forward they want that management to stay on and they want them properly incentivize and aligned. So typically what we’ll see it’s not unusual at all to see a certain sort of enterprise value established at the exit of the majority of your stake. And then the private equity firm infusing that company with capital and all sorts of tools to create value. And then having a subsequent accurate equity exit whereby the original owner’s second exit is as much as or more the first exit. It happens quite frequently. It doesn’t mean it will happen obviously but it’s not so unusual. Mark: Yeah and I think that falls in this territory of thinking outside the box of some of the regular deals that most people think of. I talk to a lot of sellers who they want that 100% exit, they got in love with the market but they moved on. But sometimes a really good deal is if you do find that good firm involved just getting that partial exit or that first exit and then that second exit later on can be like you said just as lucrative or if not more lucrative as you got this thing behind you. Let’s talk a little bit about 2018 and some of the trends in the- Andy: Let me add … I’m going to add on to that a little bit before we move on. Mark: Yeah, please. Andy: So one of the things that people I guess wonder is how … why is it a private equity firm can come in buy a majority position the equity and create value where I couldn’t? A lot of that stems from they’re just … they don’t have their entire net worth tied up in that company or a huge swath of it whereas an owner and founder does. So they can come in and infuse it with capital where an owner would go I don’t know if I want to throw the rest of my [inaudible 00:18:29.6] that I got in the basket. The same basket is already all in. And so a private equity firm and can take greater risks because it’s a small percentage of their portfolio in total. And you know and as a bootstrapped operation there’s a mathematical limit to how much you can grow your company without outside capital. It has to do with your profit margins, there’s a straight mathematical relationship. Your profit margins are X your growth can be Y and no more. So your opportunity for outside capital is debt or equity and founders oftentimes don’t have the appetite for debt and this is where private equity can come in and infuse the company with capital at a risk for them that’s much more acceptable than it is for the owner-founder and try some things that are maybe riskier and get that company to grow through multiple expansion and taking on your projects and what not. So that’s kind of why they’re able to do that whereas an owner sometimes isn’t going to take that leap of faith. Mark: I think there’s another aspect to that as well. I think … I’m glad you stopped me with that, we talk a lot on this podcast and conferences, just people that we talk to in general; entrepreneurs. These bootstrapped entrepreneurs or even the guys that have come in and maybe bought something smaller and that growing it. I put them in that same category of this bootstrapped entrepreneur who this is their livelihood and if it’s not 100% of the livelihood it makes up a good part of it. A lot of people are not operating with an aim towards an exit. Maybe it’s in the back of their mind so a few things here and there and they do this but a private equity firm has this holding period. They have this goal of we’re growing this, we’re going to get the cash flow from this, and in most cases … in a lot of cases, they’re looking for that exit with that company as well where they could profit from it. Andy: That’s right and it drives a huge sense of urgency day after day after day. And once you’re owned by a private equity firm, it’s hit the ground running. It really is because they’re driving that growth because they need to grow the company and exit it before their fund timeframe runs out and so it’s a bit of a race. With that comes a lot of operational efficiencies, they’ll add to your institutionalizing the company in terms of process fees and measurement and systems in short governance and it’s all the stuff that you should do as a company but sometimes that stuff falls and kind of cracks. Mark: I’m going to make a plug so Walker Diebel who works with Quiet Light Brokerage and how he’s the executive producer of a number of documentaries and one of them is Print the Legend on Netflix. And it’s about the 3D printing industry. There’s a really cool part in there where you see [inaudible 00:20:58.0] go through this transition of bootstrapped you know the classic starting in the warehouse garage everybody is really agile doing what they have to do and then they take outside money and it becomes institutionalized. And one of them … I cannot remember what her name was but she said just like I call this part trying to put the skeleton into the jellyfish, trying to get it back on in a jellyfish. Andy: That’s a great analogy. Mark: It is. It’s a great movie by the way. Print the Legend, you can get on Netflix and again that’s my genius plug for Walker. Andy: I love it. Mark: Yeah. So let’s talk about 2018, let’s talk about some of the trends that you’re seeing in 2018. Actually no let’s back up we’re going to talk about that in a minute because we’ve just said that they buy these companies with a goal of exit. What is a typical timeframe? What is the holding period that most companies are … most of the private equity firms are looking to hold companies before doing that exit? Andy: We do a report about every six months to update the holding period and we say well of all the companies that have exited in 2018 how long were they held and we compare it to six months ago and 2017, 2016, going back in time. And I set you a graph of this beforehand and we can post that if you want to or whatever or make it or you can visit our blog and see that study. But generally speaking, I think most people would say look the general private equity holding period is 3 to 7 years. That’s the right answer. It’s fairly generic and that’s kind of all-encompassing but I wrote down some stats here. The medium holding period right now as of a couple months ago is 4.8 years. So of all the companies that have exited in 2018, they were held just shy of five years. By way of comparison, we saw a max holding period of 5.6 years in 2014. Well, why was it so long then? Well if you think 2014 and you subtract out 5.6 years, if you’re looking at companies [inaudible 00:22:48.7] and say you’re looking at companies that were bought at a peak of evaluations right before the recession. So those are companies that are portfolio companies owned by private equity firms that got bought at the beginning of 2008, unfortunate timing, and then just hit the recession and they just had to hold a lot longer to either breakeven or realize any value. So that increased the hold rate. And we saw a minimum conversely in the year 2000 when we have a .com boom out of 3.0 years. And we saw another minimum in 2008 you know at the peak of that it bubbled there at 3 ½ years. So that leads me to think that if you start getting around … I’m going to say holding periods of 4 years or less it might … maybe it’s an indicator of a little bit of exuberance in the market. And so right now we’re at 4.8 years and it is declining. It is consistently going down every time we track. So we’re aiming to the 4, we’re not there yet. Mark: That’s fascinating data. We’ve actually had that conversation internally quite a bit as far as the trends in the market and what we’re thinking. And what we’re seeing right now we’re seeing one of the more aggressive markets in the 11 year history of Quiet Light. Now granted Quiet Light Brokerage when I first started it was 2007 and we were really just getting our feet wet and getting go-ins. So we didn’t have a lot of data … real useful data then we hit a recession. So you take the first six, seven years it’s pretty bearish. They [inaudible 00:24:13.3] are working with. Andy: Right. Mark: So comparatively like this is the time that we’re in right now feels really good and strong and that [inaudible 00:24:19.9]. Andy: And we can talk about statistics because one of the great things about having a database is that it learns itself to this during data studies and slicing and dicing a data. It really pops out interesting trends. Right now valuations are high. No secret I think everyone in your industry knows valuations are high and I’ll actually tell of you guys a little bit here or your world of investment banking and business brokerage. If you are a company owner and you are thinking about selling in the next 3 to 4 years and it’s even on your horizon there may not be another time that is this good for valuations. It is as good as it gets. I mean there are a couple of economic factors there. There is sort of meta … macro-economic factors that are happening that are making this as sort of sustained seller market but that’ll change. Those factors are just real quickly … money is cheap right now. Monetary policy has made interest rates low. It’s cheap to borrow money. It’s fueling a lot of growth. Companies are growing but consequently, those people with money are looking for where can they get a better return on my capital instead of CD’s and treasuries and stuff like that. So they’re looking at the alternative asset space. They’re putting money into private equity which has created more private equity firms than ever before, larger funds than ever before, looking for the same deals as everybody else. So there’s a huge … from a financial buyer perspective there’s a huge demand. And then the other factor that plays with that is a social factor and that is you probably thought this as the eye. When the baby boomers were going to retire and then we had 60’s we thought that there would be these huge influx businesses for sale as they start to retire and that largely didn’t happen. They just kept working. The baby boomers just kept working and that only eventually come out a buy plan but right now because they’ve held their businesses longer they’ve built up a pent up demand because they’re limiting the supply. So, on the one hand, you have money in trying to chase deals, on the other hand, you have fewer deals. That’s what’s creating this sustained seller’s market where valuations are high. It will change. It will go back down and we’re going to remain. You cannot … this is my opinion not data, but you cannot make money on the assumption that someone else is going to over pay in the future years like you did today. Mark: Right … no I think that’s absolutely right that when … last year on this time I wrote one of the last blog post that I personally wrote. We started the podcast instead. Before we started recording here I was telling you that I like doing this [inaudible 00:26:49.6] Andy: Yeah, right. Mark: But I talked about the history of what we’ve seen over the years and during those recessionary years boy if you’ve got a 2.7 or 2.8 discretionary earnings for a business it was a really solid deal. And today people are looking that and saying why would I ever sell for that. Understanding multiples, they’re relative to the time, they’re relative to the supply and demand within the marketplace and what money out there and what other investment vehicles are out there as well. Even when you’re thinking about when to exit when you’re thinking about buying and growing and turning this around in the case of a private equity firm that’s crucial data to really kind of hone in on and understand. What are you seeing trending this year? I know I was contacted by Buzz Feed a while ago about private equity firms starting to get into the Amazon space and really looking more towards e-commerce specifically within the Amazon Marketplace. What are you seeing as far as different trends in the private equity space or is there any industries that seem to be popping up right now? Andy: There are you know we studied the portfolio companies and what’s changing over time. I sort of have a top 10 list for 2018 that I’ll run down with you. On top of the list has always been and maybe always will be manufacturing. Mark: I see that all the time. Andy: Everyone likes a solid just basic manufacturing company, no frills just consistent cash flow, consistent growth; predictable money. With that said manufacturing as a percentage of the portfolio companies is way less than it used to be. So coming hot on its heels are … number two and three and four positions which number two is software. So far this year software deals are a big deal. At number three is technology. This kind of go together and it makes sense. Anything that you can scale like you can with a software and technology private equity firms are interested in the ability to find the concept that scales with very low capex which software and technology tend to do. And also have this component of recurring revenue also a big theme for the private equity firms. The others I’ll run down … number four was health care. Interestingly enough number five was data businesses, information services which I’m on. Six would be oil and gas which is interesting because there for a while that went away. When it went down so cheap and thus nobody … everybody was losing money in all the oil and gas services companies and the PE firms just weren’t doing that but it’s coming back. Seventh is medical. Eighth, construction which has been interesting, traditionally we would not see much construction related private equity investments mostly because it tends to be very capex heavy. Number nine was transportation and logistics. And number ten was engineering so another kind of services company. Mark: Fascinating. The software I presume SaaS businesses with kind of all that- Andy: Well that’s the preferred. Yeah, that’s the preferred model. Not always but that’s where everybody’s going. Everyone’s going to SaaS and everyone’s going to the club. Mark: Right. What about consumer products? I mean that’s obviously not in your top ten list. Andy: You know off the top of my head I don’t know where it is. There are a number of private equity firms that specifically build consumer product brands and focus on that exclusively. Some well-known firms they have done really well. I know that for a while food and sort of ingredient businesses we’re pretty hot. I don’t know if that trend is still as hot as it used to be but consumer brands is definitely a hot industry it’s just not on our top ten. I hear it all the time. Mark: Sure. But what are some of the things that private equity firms just love to see when they’re looking for an acquisition target? Andy: Some of the things we already touched on recurring revenue. I mean it’s all about stability of cash flow. So I would say stability of cash flow spur the quality of earnings kind of companies. Scalable businesses that have strong cash flow and a track record of growth. And those firms that are maybe a little more venture capital minded might say you know what’s the opportunity here in terms of can this just blow up as a trend or is this software tool just meeting this huge demand in the cloud space that’s going to be the next revolution of software so that sort of thing. But really it’s all about cash flow stability or scalability. Mark: All right then what are some of the things … I mean people will probably come up with conclusions but what are some of the things that they’d want to avoid? Andy: Yeah so in addition to just like the opposite of those private equity firms it would be difficult to find firms that will do project based financing as opposed to just an outright purchase acquisition. They don’t want to finance your projects. They typically will not do projects that require a lot of capex. With that said I did say construction was in the top 10 so I am not sure about that but traditionally it’s just hard to scale companies when you have to put a lot of money on upfront for property client equipment. And then lastly at least for the firms that we track, we do not track those that are not in this particular data site those that invest in real estate. In a traditional buyout M&A private equity firms, we just need a longer time horizon than seven or 10 years to make sure that real estate pays off like it should. So what we do track in another data model institutional real estate investor, that’s a different animal altogether and probably outside of this group but … out of this conversation but they typically are just not going to buy real estate. Mark: I’ve got a question for you on general multiples and let’s talk software and tech and if you don’t have this data right now I know I’m kind of … I’m springing this on you, I didn’t prep you on this one. Andy: That’s all right. Mark: But we talk often that there’s a bit of a multiple shift when you get to certain levels in EBIDTA. Andy: Yeah that’s right. Mark: This is something that companies don’t typically get the strongest multiples as you move up we see these multiple shifts. What are some of the demarcation lines that you see for EBIDTA as one of these multiples that you start to inch up? Or is it just kind of a gradual scale where you’re seeing that happen? Andy: You know I don’t know if there is definite lines and I don’t know if I’m going to know the answer to that question but just let me talk kind of about a hand waving principles around. Mark: Sure. Andy: I think it just kind of scales generally with size. Companies that are bigger tend to be more stable. And when you’re more stable that’s perceived to be less risk for a buyer and therefore more valuable and hence a higher multiple. And so that is why one of the methodologies that private equity firms use is this buy and build platform an add-on strategy. It is you buy the platform company, you take a smaller add-on investment, you buy it for … I’m just going to make up a number, 6X EBIDTA and suddenly you put it in, you fold it into a bigger company and that same sort of producing asset is now repaid X because it’s part of a bigger company. So you got a 2X sort of free value out of that built on. And I can remember meeting with … I won’t name the name, but a private equity firm we’re meeting with one time we we’re working on a deal back when we used to do deals and he was outlining that strategy for me. He’s like yes it’s really not just rocket science, that’s what we do. It’s pretty simple and you buy it for a five and you get seven automatically; free money. Mark: Right. I have these conversations with buyers over the years that their first footsteps into the space of buying … in our case online businesses start with maybe on Flippa and buy me [inaudible 00:33:51.5] out of $20,000 $30,000 sites and that was their appetite. The next thing you know they’re doing an SBA loan and they’re buying something bigger. Andy: Right. Mark: In variable … invariably once they have enough success that light bulb goes off in their head where they look at that and say wait a minute I can bolt on my company over here which is more valuable, a company that is less valuable here and if I can fill them in I’m getting this multiple jump and I’m adding value immediately. And in addition especially with the sizes that we’re looking at I can buy something with EBIDTAs of 500,000 but if I buy four of these, combined them, now I’m not buying at a multiple of 2.8 or three. I’m buying at a multiple … I’m now able to sell it maybe at 3.3, 3.5 or whatever the case maybe for that industry. Andy: Right. Mark: It’s this double whammy of the valuations that go up. And as that light bulb with them goes off for where then the next thing I know they’re building their fund around to be able to do that. Andy: Now it’s easy for us to say it’s much harder to implement. So you can say you are just free money. Yeah, there’s a lot of hoops you got to jump there to make that happen and integrations and all that. And it’s hard work and that’s why not everyone is doing it. But if it is kind of conceptually not that difficult to understand. Mark: Right, okay where can people find you if they want more information and if they want to start kind of exploring this world of private equity outside of the blog that’d be a great place to start but what if they’re finding for more information? Andy: So you can go to our website PrivateEquityInfo.com at the bottom there’s contact us, you’ll see my phone number and my email. I’m happy to take calls. I’m happy to answer your emails. If you have questions about private equity, questions about your business and [inaudible 00:35:32.0]. Just pick my brain that’s fine. We’re happy to do that. We love to talk to customers and potential customers and help people. Mark: Very good. Hey, thanks so much for coming on. I can see you having [inaudible 00:35:42.3] 2019 rolls around and we get in to some of the trends there. Start paying attention to these holding periods that are happening I think that’s a really cool stat to be able to be tracking here. And also just kind of see where the trends are with these top industries that are kind of popping up as time goes by here. Andy: Yeah well thanks for having me. It has been fun. Let’s do it again. Mark: Yeah thanks, bye. Andy: All right bye-bye.   Links and Resources: Andy’s LinkedIn Andy’s Company PrivateEquityInfo blog