Ecommerce is ever evolving, and sometimes it’s hard to keep up. Today, WebsiteClosers.com co-founders Jason Guerrettaz and Ron Matheson give us the State of Ecommerce in 2022 so you can stay up-to-date on trends, tools to use, and how to grow your Ecommerce business.
Jason Guerrattaz: You can’t even imagine yet where we’re going, you know what’s going to happen. And as that happens you know, we’re going to be right there to see all the new kinds of companies that come out.
Ron Matheson: We were spotting this trend of Ecommerce and you fled to today. And we’ve got billions of dollars coming in spectrum from Smart Money, who knows where in the dawn of the sector and there is so much more to go.
Izach Porter: You are listening to the Deal Closers podcast brought to you by websiteclosers.com, a show about how to build your Ecommerce business to be profitable, scalable, and one day even sellable. Izach Porter and on the show today with me are my colleagues and our company’s founders of website closers, Ron Matheson, and Jason Guerrattaz. How’s it going guys? What’s happening?
Jason Guerrattaz: Hey, hey.
Ron Matheson: We are good.
Izach Porter: So today we’re going to talk about the state of Ecommerce in 2022. As we know, ecommerce is ever shifting, it’s ever evolving and it’s our job as Ecommerce, business brokers to make sure that our clients are on top of everything so that they can get the most value out of their businesses while they’re going through the sale process. So Jason, let’s start off with you. What are you seeing right now in Ecommerce and tech, mergers and acquisitions space and how is it different than it was maybe just a couple years ago?
Jason Guerrattaz: Yeah, it’s interesting how, you know, when it first, when the pandemic first hit, we were you know, before that happened, we were in a very good stage already, the tech and internet space had already been growing, you know, Ecommerce companies, especially those on marketplaces, like Amazon, continued to grow, you know, they had been relatively young, they still are a lot of them relatively young. But many of those that started at the beginning with Amazon are now growing into eight, you know, nine finger type companies. And you know, we’re seeing them continue to grow as well. And we’re seeing companies that are also more DTC related, that are starting to, you know, split more of a mix between DTC and Amazon and that’s increasing too. So you know, I think there’s been a lot of just overall increase in Ecommerce across the spectrum, you add the pandemic to it, and you know, people, you know, obviously started ordering online more, because retail, e commerce as a percentage of retail was only I think, at about 18, 19%, prior to the pandemic, and now I’m reading stories that it’s over 30%, which is still low, you know, I think we still have more to go there. But you know, when you consider that kind of growth in a very short amount of time, I mean, obviously, that’s going to trickle down into M&A. We see it in a lot of different ways. You know, one, we see all the money coming into the industry. I mean, whether it’s you know, aggregators that are getting funded with you know, billions of dollars in cash to buy these companies, or it’s private equity groups, and hedge funds that are in family offices that are starting to learn that you know, tech and ecommerce is the future, and maybe investing in some of those other retail establishments or more traditional brick and mortar companies, they’re not going to provide the growth that they need for their investors back in them. And so this is really the industry right now, where everybody is sort of focused, I mean, you can kind of look at the stock market to see that too, whether it’s Shopify Amazon thing, you know, just in general, this is where everyone’s sort of sort of looking you know. Ron, and I used to have to go and basically show people why they need to invest in Ecommerce, why they need to invest in tech companies. And a lot of the private equity groups and banks that were behind them just didn’t get it. You know, a few years ago, it wasn’t that long ago that most of them were terrified of Amazon companies, you know, companies that primarily sold on Amazon, you know, we would hear things like, I don’t really understand if that’s going to continue, what if Amazon changes something What if Amazon makes an algorithm change, you don’t control the customer, you know, and now it’s almost the opposite, where if you’re not selling on Amazon, you know, people aren’t interested in you. Because really, Amazon has become the go to place for the vast majority of products that you need in your home. So all of that is elevating the M&A world in our space, SMB, lower middle market, middle market, it’s all thriving. I see no reason why that will continue in the future.
Izach Porter: Awesome. I want to come back to the thought about kind of the distribution channel and the different business models that we represent at website closers. But before we do that, Ron, we’ve represented 1000s of companies at website closers. How was 2021 in terms of a year for mergers and acquisitions and what are you kind of foresee 2022 in terms of deal volume and multiples?
Ron Matheson: Yeah, actually 2021 was a phenomenal year, everything that we could have imagined happened, it was so busy and growing so quickly that we had to adapt to it now, it’s interesting, because just yesterday, we had a conversation with a friend of ours that owns an equity group in Dallas. And he actually, he purchased two companies from us last year alone, but he purchased 15 total. And so you know, he asked the same question. He said, we had our best year ever. And he goes, when or, is this going to end? And I think the answer to that question is right now there’s so much money out on the market. And that will continue, I think, for the indefinite, you know, future because there was a lot of money printed during the, you know, COVID period that they were using as bailout money. And that money has to find a place eventually, a lot of it hasn’t even been spent yet. So it’s still on the books, and it’s going to come out eventually. Now, one of the things too, in our sectors, I think we’re experiencing the perfect storm, because you’ve got a whole lot of sellers out there. And those sellers, you know, millions are actually, on Amazon alone, and every year, they’re growing these companies bigger and bigger. And a lot of these guys start companies with a credit card, they put all the money back into it to grow it. So they’re not really pulling a whole lot of money out of it. And suddenly they realize, you know, they could sell the company for millions. And so what they look for at that point is, you know, hey, I built something good. And I can, I can become a millionaire right now. And so a lot of them are coming out, the smart money is chasing returns, and they’re all coming into the Ecommerce sector. You know, there’s so much money coming from, you know, a lot of the large equity groups and you know, the groups that are controlling billions, and they’re funding the aggregators right now, which means that’s where the perfect storm starts, is, you’ve got all this money chasing all these sellers, who suddenly have built these companies that have become really big. Now one of the thing too, a lot of these sellers, you know, when they start, once again, they have no idea that they can create something that’s going to be worth a lot of money, all the creativity that goes into building that company, that’s what they thrive on. But suddenly, the company needs employees, and they have to start hiring, and they have to have you know, staffs to run it. And that’s when a lot of them start to lose interest. And that’s where a lot of the groups from, you know, the background come in, and they take over at that point and build them even bigger.
Jason Guerrattaz: Yeah, just to add on to that real quick, you know, it’s interesting how our firm has sort of filled the gaps out there in the tech and internet space. Because as these companies grow, they do grow into the lower middle and the middle market. And there are very, very few people out there that understand the nuances of tech and internet. And we are, you know, obviously the go to place for that. But one of the only places for that, there just are not a lot of firms out there that are capable of handling capital market transactions. And these companies that started up you know, 5, 6, 7 years ago on Amazon for one idea and one SKU, you know, some of them are doing a million dollars a day now. And when you’re doing that kind of volume, you know, you need to go to someone and the idea of going to an investment bank, that also was not going to have those skills is a little bit scary, and go into a business broker on the corner, that probably has no operational Tech experience at all, also is a little bit scary. So we do fill that gap. And I think that’s one of the reasons why we’re seeing so much volume, we’ve listed a business for sale at our company every day of the year for four years straight. The volume is tremendous. And what’s really interesting, because I handle the marketing with the firm is that, you know, we are certainly idling in place with respect to marketing, you know, we’re not pushing it very hard, we’re not throttling forward on it, it’s almost like we’re tapping on the brakes with respect to marketing, because we can only handle so many leads. So that’s why we’re growing our franchise network out. We’re growing our network into Europe right now, because we see international transactions is the future of this firm. There’s a lot of buyers in the space that are very interested in getting their hands on as an example, a German Amazon company, an Italian Amazon company, they want to grow too. And you know, finding those kinds of opportunities in foreign countries, especially when you don’t speak the language is very difficult. So we’re going to solve all of those problems by having boots on ground, or intermediaries on the ground in those countries. And that’s going to help, I think facilitate a more international global opportunity with respect to M&A in our space and in the tech space, specifically the lower middle market.
Izach Porter: The nuances of this space and kind of the amount of technical expertise that requires to really represent these companies effectively. I think can’t be overstated. There’s a lot of differences. We started to talk about distribution models, so I want to dig back into that a little bit. So you know, we talked about Amazon, FBA distribution, we represent a lot of Shopify, DTC sellers, we’ve got a number of sellers that maybe are in, you know, DTC or retail, how does that play into multiples right now? Where are you seeing the most valuable business models and what’s kind of the ideal that buyers are looking for. And then just add on to that, are there certain buyers that are looking for certain distribution models and will pay up for it?
Jason Guerrattaz: You know, if you just kind of talk about e commerce first among all the, I think we have 112 different divisions of kinds of companies that we represent in the digital space. But if you just kind of think about ecommerce for the for the moment, there are always certain sectors that always stand out, you know, as an example, anything in the baby space, the pet space, nutritional supplements, you know, anything that has that repeat order rate, high repeat order rate to it recurring revenue, subscription models, I mean, all of those tend to have higher multiples associated with them, they’re more exciting, they tend to have more buyers going after them. What’s interesting is that we’re seeing so much interest in a lot of different sectors to like, as an example, furniture used to be the, you know, for online furniture companies were very difficult to transact because they’re very heavy, usually, you have to use LTL carriers, the marketing for them tends to be a little bit more expensive. But now, it’s gotten so much easier, because people have gotten smarter about how they package these things, and those things. So even those kinds of companies now that may not have high repeat order rates, but they still, you know, tend to be in demand. And that’s what’s interesting is that so many of these now are in demand. But if you go outside of and maybe just look at E commerce broadly, rather than by category, some of the things that we see that really help companies kind of stand out and have higher multiples, because of it. I mean, obviously, growth rate, anything that has a nice growth rate associated with it is going to prevail over others. And in some of these companies we represent, it could be over 1,000%, growing year over year, I mean, it’s just crazy, some of the companies we see. But on average, we’re seeing, you know, 30, 40, 50%, year over year, 60% year over year, and when you have those, you kind of have to look towards the future too, and not just the past, because these are these companies are growing and the you know, the founders want to get the benefit of you know, the future. They’re thinking, you know, should I sell now, should I not sell now? And when you’ve got a growth company? You know, it’s a good question. And so, you know, we work with them to not only structure the deal in a way that captures that forward looking opportunity, but also ensures that we’re getting a strong multiple on the historic part of it too. And then, you know, more broadly outside of just the categories on ecommerce, you know, you think about companies that have created multi-channel opportunities, where they are, they are building a real brand off of Amazon, they’re building a real brand and DTC. Some of them do it through social media, some of it do it traditionally, through paid media, they may have influencers and affiliates, there’s a whole slew of things that some of these groups are doing to actually build a brand behind them, that will make them stand out above someone who’s and in the somewhat brand agnostic marketplace of Amazon, you know, customers don’t tend to go in there and search by brand, they search by product type. So you have that. And then also, as I mentioned earlier, international you know, these companies, they have to grow somewhere, and they need to find additional marketplaces and growing, at least on the Amazon platform is super easy. If you want to get over into the UK, or Continental Europe, with Amazon, it’s very, very easy to do now. And so just Amazon alone can give you that breadth that you need to get over into many other countries. And so if you’ve got that in place, that’s helpful. If you’re on store shelves, if you’re on Walmart, Target, Best Buy and those kinds of places, that will make a big difference, because the buyers coming in may have a ton of products themselves, they’ve been trying to get in at Walmart as an example for years. And now that you’ve got the buyers eyes, and you’re already you know, issuing POS and those kinds of things, putting those your own products in can be interesting. So that’s going to create demand from people that have the money that want to grow, and they need bolt ons to do that. Those are the kinds of companies you know that we’re really seeing, you know, the multiples growing. And like I said, I could go on and on and on all the other companies whether it’s, you know, an MSP, or it’s a you know, maybe it’s a registrar, a host or it’s a digital company, you know, maybe they do digital marketing, or they do web development, web design. I mean, there’s just so many different types of companies, and there’s reasons behind why each of them could potentially be interesting, but I think, literally, we could do a podcast on just that whole series just on that because each of them do have their nuances. There’s reasons why each of them right now at this stage, why each of them have different kinds of multiple opportunities, and that kind of changes it ebbs and flows as consolidation occurs in different categories of businesses. And that’s why you know, when you have a company like that, it’s a really good idea to, you know, go start talking to a broker early on you know, at least six months, you should be talking to a broker, about what does the marketplace look like, is now the right time? I’m thinking about selling in a year, six months, maybe I’m thinking about selling right now. But what do I need to do to you know, kind of put myself in the light most favorable to the marketplace, and you don’t want to wait to the end to do that, because there are things that can be done, especially, you know, as these things change it evolve with these deals.
Izach Porter: Yeah, that’s another great, great point and appreciate your comments there, guys are always just such a wealth of knowledge on this on this subject. So we had a previous podcast, I think, a couple weeks ago about preparing your financial statements for an exit and kind of things that sellers or people planning to sell their business can do to get their financials ready. But what are some of the most important things that that a business owner should be thinking about, if they’re planning on selling their business?
Jason Guerrattaz: Well, you know, I mean, definitely, financials are step one, you know, I mean, we’re talking mergers and acquisitions here, the very first thing that any buyer is going to look at are the financial statements. And you know, I’ve been buying companies for you know, a long time now, 15 years plus, and I can tell you that the very first thing I look at is a financial statement. And if a broker is trying to sell me on, you know, maybe just a handwritten, you know, document that kind of outlines what the earnings are, you know, I’ve just passed. So one of the things we do at our firm is, we really do a lot of upfront work with clients to make sure that the financial statements are market ready, you know, when we’re going to market, we have a data room ready to go, that’s got all the information in there for the buyer, you as a client want that, you do not want to go to market where there’s a lot of questions up front, you’re going to lose buyers, that way, the buyers are going to lose faith in the broker, if they lose faith in the broker, then they’re going to lose faith in your deal. And usually, you’re exclusive with that broker. And so you’ve made a mistake there. So with our firm, we’re not going to mess around with trying to cheat the marketplace or try to get around something with respect to financials, either the company’s a good one to sell or it’s not, and we pass. So 100% you know, financials, that’s the thing you know, and these days, the vast majority of our clients do have them, it’s just sometimes they have them, and they’re not set up for the exit process. And that’s something that we help with a lot too, you know, when you run a small business like I do, and you guys, do you know that the taxman is out there. And there’s opportunities for you to write certain things off. And you know, you might set your business up in a pro tax efficient standard, versus a pro exit standard. And there’s definitely two different things there. As an example, they might be running their business on a cash basis to save on taxes. And you know, they shouldn’t be you should never sell the business on a cash basis. If you’re a growing company, if you’re not growing, it doesn’t matter. But if you’re a growing company, it should never be cash based. And so, you know, we want to walk through them with that. So I would say that’s step one. And step two, is find the right broker. I mean, this is a business that for most people, I would say, over 90% of the people that we see, this is the biggest thing in their life. I mean, you know, you’ve spent your entire life day in and day out building this business, and you’re going to put on the market to sell it. First of all you want the most for it. But more importantly than that, you don’t want some idiot out there representing your company, saying things are not supposed to say or making you look bad. You know, because you at the end are the one that’s selling that business, not that broker, and you want someone that understands the business, they’re either running the businesses or have run them in the past, very similar to yours and knows it. And so I would say step two is definitely start talking to brokers. Even if you don’t go with us, you know, you certainly want to have a conversation with us, but have a conversation with two or three, get a good feel for a guy or a gal and go with that person throughout the process. Because that person is going to lead you through the financial aspect of it. They’re going to teach you what diligence looks like they’re going to help you prepare for diligence. The due diligence process can be like grinding, you know, sausage, and it’s very, very difficult to get through. You need somebody that can help you understand that you can help you arrange the data room and get it set up prior to you know, even going to market. These are things that good M&A intermediary should be doing that we just don’t see happening a lot out there. And we do it on every deal. I would say those are some things that I see anyway, Ron, what do you think, what have I missed that they should be thinking about?
Ron Matheson: Yeah, just summing it up. I mean, a good broker/brokerage will always drive the price up, when you go to sell your company, if you’re dealing with experts, they will get you more money every single time. And you know, a couple of the points that were made are, you know, on a fast growing company, you want a GAAP accounting, you know, versus cash, you definitely, in this day and age, a lot of the due diligence is getting extremely sophisticated. And the more data you have, the easier it is to get through unscathed. I mean, oftentimes, when you’re doing due diligence, if you can’t supply all the data that they’re looking for, they’re going to ding you in the end, they’re going to lower the price during due diligence, that’s where we can come in to help prevent that from happening. Now, you know, another thing too, is that, depending on the size of the deal, in some cases, taxes are extremely meaningful, especially on smaller deals. And other ones, the larger ones, that’s pianos that drive it. So you know, we’re going to be able to kind of focus on the areas where we need to focus the heaviest, you know, the last thing you know, is once again, the clarity of the numbers will drive the multiple, and, you know, keep it from collapsing during the due diligence.
Izach Porter: Yeah, so for me, I always, when I’m talking with sellers, I say, you know, there’s a few things to consider. But the quality of the firm is extremely important. The quality of the broker you’re dealing with is extremely important. And I’ve made this analogy, and I wanted to get your take on it. So I’ve compared websiteclosers.com to the Ecommerce equivalent of the MLS in real estate. We have we have all the inventory, we’ve got the most listings, and I feel like buyers come to websiteclosers.com. Because they know that. How do you guys feel about that?
Jason Guerrattaz: You know, a lot of people will ask us, you know, how do you sort of standout you know, what makes you different when you’re selling a company. And that also is very important for people to understand, I think we’ve gone over some of that here, with respect to our operational capabilities, our knowledge. But you know, as to your point with respect to volume that is absolutely critical to what Ron mentioned, with driving demand, we like I said, we list of business every day of the year. And when you do that, when you have that amount of volume, every single day of the year, every buyer that is in the space is going to gravitate to you. And so they become you know, Facebook followers, they become, you know, people on our email blasts for free when we send those out every day, they become followers and now we’re well over a million people that are following us around the world. So if you’re selling a company, and you want as many people as possible to know about the fact that it’s for sale, not that exact company, obviously because everything is private and confidential. But if you want to get as many eyeballs on that company as possible, you probably want to go with the one that’s got the most volume. And the reason why is because the more people you can get putting offers in on your business, the more likely it is that you’re going to achieve the asking price or over the asking price. And the more likely you’re going to get better deal terms that are structure. Because if we have five offers in hand, we go to some of the buyers and we say, well, we don’t know how you know how important this deal is for you. But in order for you to get it, you’re going to have to do X, Y and Z. Are you willing to do that? Well, we can’t do that if we don’t have the other buyers in place. And if you’re working with a business brokerage that doesn’t have that kind of demand and that kind of following, there’s a very good chance that they’re going to be getting one or two responses a week to two listings when they go out. And there’s just not they’re not going to be able to create that demand. With us. It is not uncommon for us to get 100 to 200 responses in the first hour that we list a business for sale. I mean, that is that is unbelievable. In the business brokerage space. Nobody has anything like that nobody has ever seen anything like that. And it’s because once again, like you said, we’ve kind of become the MLS of these deals. And people are watching us every day. They have atomizers attached and RSS feeds attached to our web pages. They’re watching and engaging with our social media pages. We’re trying to actually grow some of our other social media because people are using it so much. So I think that if I were a seller, and I was thinking about getting the most exposure possible, using brokers that have specific experience, operational experience, and a boatload of closing experience, which is also really, really important. I don’t see how you choose anyone other than us. I don’t think there is a competitor out there that compete with us.
Ron Matheson: Yeah, one other thing too that’s pretty interesting is that we have grown our brokerage so large that you know our goal right now for every client isn’t to get a quick commission like most brokers do. Most brokers are making a living, okay, the faster they can sell a company, the faster they can get paid. And so it’s meaningful for them to get to the finish line quickly. It’s meaningful for us to get the maximum price because, you know, we’re aligned at the hip with all of our sellers, because we’re commissioned, the more we get them, the more we make. So we drive the demand now What’s really interesting on that is when we first started, you know, these companies came in and all our competitors at that time who were much more well-known than we are, we’re pricing everything into three times multiple. Now, Jason is the one that started it. And he said, why would you do that? One, this company is clearly far superior than this one. And so he started applying metrics to the different, you know, why would one be worth more than another? And soon, we started pricing ours higher than everyone else. Now, what’s interesting is that a lot of the buyers will come to us and say, we love your inventory, we hate your prices. And we’d say, well, we’re getting them, the best companies are now coming to us, because we have the ability to recognize why they’re better than everyone else, we started turning down a lot of the not so great companies. And we would see those pop up all the time with our competitors. And we still do now the companies we represent, we now have a reputation for basically representing the best companies out there, not just the most, but the best. And that’s what’s allowed us also to drive these multiples up to a point where it’s win, win for everyone. I mean, number one, it’s even win for a buyer, because you could say, okay, it’s a higher multiple, but I’d much rather pay a higher multiple for a high quality company, then for you know, a lower multiple from a bad company. And so it makes perfect sense to want to buy the best company out there by getting more on the multiple, our sellers are benefiting as well as.
Izach Porter: Absolutely, absolutely. So Ron, how have you seen structurally deals kind of evolved over the last year or two, you know, in terms of the percentage of cash or earn out or rolled equity, synthetic equity you know, what trends are you seeing?
Ron Matheson: You know, all of the above, and I’ll tell you why is because the buyer field now is so wide. And you know, everybody’s got a little bit of a different goal on it. You’ve got the aggregators, you’ve got the family offices, the private equity groups, you’ve got the individuals that are coming out of, you know, industry, and you know they work for corporations, they want to go out on their own. And so, you know, depending on whether it’s a smaller deal with SBA, that’s primarily cash with a note. But as you get into the higher deals that the aggregators are getting, then a lot of that is becoming even on those particular deals, the cash portion has been going up. And so we’re seeing that as a positive. A lot of these aggregators are now competing against themselves. So they’ve got to up the ante. And that’s why a lot of the earn outs even though we still see earn outs, they’re not quite as aggressive as they once were. Now they’re, they’re more real. In other words, once upon a time, it was like, if you can double your sales, I’ll pay you more. Now it’s more like if you can maintain the same growth that you’re getting now you will get your earn out. So the earn outs are really once upon a time they had a bad reputation, because they were so ill conceived. Now, they’re pretty spot on and most of these deals, so they do make sense.
Izach Porter: Yeah. So just a follow up question to that. So I’ve seen a lot of deals recently with stability payments. So can you kind of describe the difference between traditional earn out and a stability payment?
Ron Matheson: Sure, a stability payment is typically this, you’re making X amount of dollars over the last 12 months, provided in the next 12 months, you can maintain exactly where you are now, we will pay you the following. It’s almost like a note, but it’s a note based on you’re not dropping, if your company, you know is on a downward trend, then you’ll have a problem. If it’s even or up, you will get paid. Now as a good broker, we’ll fight on the stability payments, versus somebody who doesn’t know what they’re doing. Because, you know, is it fair that I say you need to make a million dollars to get this big chunk of money in the first 12 months, and you make 950 and you don’t get a dime? And so you know, we’ll have a sliding scale and make sure that you do get paid even if you don’t get the full amount when you get done probably but you are dropping. So you know that’s more of a stability payment and earn out is based on you have a growing company, you want a large multiple, I think your company is going to keep growing, I’m happy to pay you that large multiple. So based on the trajectory you’re on right now, I’ll continue to pay you into the future as long as we keep doing what we are now.
Jason Guerrattaz: Hey, just to interrupt here real quick. I thought maybe it would make sense to actually tell everyone here listening what an aggregator is because some people might not know. For us. It sounds crazy that someone might not know what that is right? But there’s over 100 of them now. So they are out there. These are groups that have basically raised capital in the sometimes the capital markets, sometimes in other places, to the tune of hundreds of millions of dollars to do nothing more than buy Amazon companies. Some of them are also buying direct to consumer websites, but the vast majority of them are just buying Amazon companies. So you know why that’s important as a seller to understand I mean, a lot of those groups have been funded by those hundreds of millions of dollars and they’re using marketing techniques to go directly to people, it’s relatively easy to find out who a seller is on Amazon. So they’re reaching directly out to them. So it’s not uncommon for someone to come to us and say, Hey, I’ve gotten five offers on my company. So these folks come to us. And we explained to them you know, you have to understand that, yes, you know, those are those people are out there. But if you’re not represented, during the process, there’s a very good chance that they’re going to change that deal. As you get through diligence. You need representation to make sure they don’t do that that’s one thing. And two, if you don’t have any other buyers in the spectrum, other than that aggregator, you know, chances are, you’re lowering the bar for your transaction. And we see that a lot. So it’s good to understand these aggregators, because if you’re primarily selling on Amazon, chances are somebody has reached out to you and said, we want to buy your company. And they do want to buy your company because they have so much money, they have to deploy, that they’re not, they’re not even going to really care about your brand. They just need to get it deployed, because they’re going to end up paying interest on it. And so you have to ask yourself, if you struggled to build this business, and you really care about that brand, do you want to put it into the hands of somebody that might not take care of it? Or are you just going to be another number that just needed to be purchased? You have to wonder about all those things. That might not be the case for all the aggregators, but for some of them, we have definitely seen that and we’ve seen a lot of them fail. Because of that, because they’re just trying to bring on way too many brands at one time. So you know, you should talk to a broker, again, whether us or someone else, you should talk to a broker about what they have seen with some of the aggregators, and consider the alternative of bringing in alternative buyers to the spectrum so that you are getting the best deal possible.
Izach Porter: Yeah, I think I think for me, from a seller’s perspective, the logic is pretty simple, you create demand for your business, which creates competition and when there’s competition, the price goes up. And the other point, I think, that’s interesting from a seller’s perspective, is, if you want to really understand what the true market value of your businesses, you can’t get that if you just deal with one buyer, if you run a full process, and you talk to, you know, a dozen buyers, and you’ve got six different ones that you’re considering you know, with a high degree of certainty that you’ve maximized the value for your business, when you choose what buyer you’re going to go with.
Jason Guerrattaz: Yeah, to that point, Izach, just interrupt you real quick, I mean, it’s a great point. Because a lot of people think that it’s an asset. So it’s got a value, it’s got a known value. And that just isn’t the case here, that there isn’t a known value for this business. This isn’t not a piece of real estate, this is not a house, you know, we’re not putting this on Zillow, we are creating the value in the business, we’re creating the narratives, we’re showing the future growth of this business, there’s a lot that goes on, there’s a lot of nuance that and narratives that are created around a company that again, put it in a light most favorable to the marketplace. And so you know, someone might say, well, you know, business are worth 4x to 5x. Well, that that’s not doing anybody any favors, because the company might be worth 8x, what are we even talking about 8x of the last 12 months, the next 12 months, the next 4 years, and next 5 years? What is the number we’re using to multiply off of anyway. And there’s a lot that goes into all those things. So you can’t open up a book, you can’t go online and do some Valuation Tool, none of that stuff is gonna work for these businesses if you really want to maximize your value. So to your point, exactly, if you’re only getting one offer on a company, first of all, they’re obviously not starting with the best offer. And if they have no competition at all, they are not going to give you a very good deal. And even if they did want to give you a good deal, they are constrained by the covenants that they have in the back and the back end with respect to the investors behind them.
Ron Matheson: You know, one other thing too is, surprisingly enough, we have a really good relationship with all the smart aggregators. And the reason why is once again, I mean, they’re looking for the best companies out there and have to pay more for a quality company is worth I mean, they’ve got all this money to deploy. Do you really want to pick up the natural good companies? Or do you want to add the best inventory to you know, your portfolio, it’s pretty obvious.
Izach Porter: Yeah, absolutely. So changing gears a little bit. Thinking about kind of the future of Ecommerce, the future of the tech sector. You know, how do you guys see crypto currency, Metaverse and FTS playing into you know what, what we do? Is there a market for that right now? Is that Is that something we’re going to see, more sales transacting in those kinds of subcategories?
Jason Guerrattaz: Oh, I mean, again, a whole other podcast. The opportunities for the few Future in E commerce, we can’t even think of them yet. You know, there’s so much AI, there’s so much technology being built right now that you know, it hasn’t been deployed yet. But as we kind of progress as an evolve in the E commerce spectrum, we’re going to see more involvement in things like seeing yourself get dressed in a shirt and seeing what you look like as your, your avatar is going to look identical to you, it’s going to have your same specs and the shirt that gets put on that avatar is going to look and feel like it should, you’re going to be able to walk all the way around, you’re going to be able to talk to other people with that shirt on for a while you know, and those people are going to be, you know, also with the goggles on, you know, looking at other people and those kinds of things. They’re all going to be, you know, bait in these virtual malls. I mean, these are things that people are seeing. I was listening to the CEO of Nvidia the other day, and he was kind of saying some of the same things. And you can’t even imagine yet, where we’re going, you know what’s going to happen. And as that happens, you know, we’re going to be right there to see all the new kinds of companies that come out, things that we can’t even fathom yet because people are brilliant, they come up with so many different ways to make money. You know, and I think that the Metaverse is going to be a huge opportunity once you know, it kind of takes hold, and it might take a while, you know, it took it took a while for people to have faith buying things in the internet, you know, a long time because people didn’t trust that their credit cards were going to be safe. And you know, all of that sort of waned. And so now people are pretty comfortable paying for things online. So imagine what it’s going to be like when you can sort of put yourself into this whole other world. And shopping is just an example. You know, I mean, there’s so many other things you could be thinking about. What about design and development in the Metaverse? You know, you’re potentially going to create your own store and you need someone to design it. You know, those graphic designers there, I mean, will that become an NFT on its own? And can you sell that? NFT? Can you sell that asset? That’s just a storefront inside of the Metaverse and oh, by the way, what is the Metaverse? What platform? Are we going to be on? Will there be multiple platforms you know, what is all of that going to look like? And I just think it’s really interesting to think about where we might be going now. We’re slowly seeing aspects of that ourselves. You know, I just saw an ad for sunglasses or eyeglasses the other day where you literally put them on and now they have almost perfected it to where you can see what you look like with eyeglasses on and that it took them I think 10 years to work on that technology to make that look good. But now that they have that, you know, again, you kind of progress it, Okay, where do we go next? You know, you don’t want to go to the mall, like nobody wants to go to the mall. But you kind of have to for certain reasons, because you don’t know if the clothes that are going to show up are going to fit you.
Izach Porter: Yeah, well to that point. I think when whenever I make my avatar for the Metaverse, he’s gonna be a lot better looking than I am, and then my shirts aren’t gonna fit when I shot.
Jason Guerrattaz: Yeah, you have to be honest aspect of it. But it’s just it’s so interesting to think about what kind of companies are going to be within the Metaverse that will be sold as those digital assets. And, and I can’t wait to be involved with that process. And I don’t think it’s that far away.
Izach Porter: It will be a fun ride. I mean, if you go back eight years, I remember, we were spotting this trend of Ecommerce. And we had just closed a deal. One of our last ones and bricks and mortar. And we talked to a banker who was pretty efficient, she got the job done. I asked her if she’d be interested in backing the companies that we normally represent. And she looked at me and said, you know, that internet stuff, I just don’t get it. And I said, well, what is there not to get? And she goes, I just don’t get it. And I said well, it’s like picture this a shopping mall online. Amazon has all these stores, and you’re basically going in them to buy product. And she goes, I don’t think we could do that. I just don’t understand it. Now you fled to today. And we’ve got billions of dollars coming into the specter from smart money. Who knows where in the dawn of the sector, and there is so much more to go.
Jason Guerrattaz: Yeah, to that point, Ron and I were flown out to one of the largest SBA lenders in the country. And the goal there was for us to get them interested in the idea of actually starting to do e commerce companies, primarily Amazon companies. And we sat down with their CEO and their executive staff and their IT people and we showed them, you know, because we sell on Amazon so we were able to show them the back end and show them you know what it’s like and how you enter products and we showed them from A to Z and at the end of it they said we just don’t get it you know, we just don’t feel comfortable. And those guys have been all left by behind, you know, the ones, the ones that did invest in I mean, these companies all continue to grow. And you know, those, those SBA banks that just kind of backed, you know, some of the old establishments, I mean, all those companies are going bankrupt. We look what happened during the pandemic, I mean, how many restaurants and those kinds of businesses all failed? You know, and that’s what we were kind of showing people now I think it’s changed tremendously. Now, I’m not seeing pushback by any lender, any investor, anybody in the space. And this kind of goes to the whole point of what you brought up earlier, Isaac, you know, what is the status of M&A right now, and it really does, you know, kind of land hand in hand with what’s going on and the capital markets, and that includes the SBA. Everybody’s on board. Now, I don’t ever see anybody question whether or not they should invest in the sector.
Izach Porter: Yeah, well, to that point, I get calls from bankers, SBA lenders you know, at least weekly, that want to look at our deal flow, they want to look at financing the deals that we’re putting out to market. So I think that that’s definitely come full circle, there’s a demand and an appetite for it and lenders get it and they want to be part of it.
Ron Matheson: Only a couple of years ago, we were doing so much volume that banks halfway through the year would have to tell us that they had to pull the plug because their portfolio was too weighted in our sector. Well, I mean, that kind of tells you where everything is going.
Jason Guerrattaz: But that weighting has definitely changed. You know, I mean, again, it’s there’s just no trepidation anymore. And there’s no trepidation on Amazon. I mean, people just kind of get it now. But it did take a long time. That same thing is gonna happen as we transition into the Metaverse. As, as you know, people need to get comfortable with well, what do you mean, you’re a storefront in some random space? And why is that valuable? You know? And also, what are the payment processors going to look like? When you walk in as your avatar? You know, do you have to pay for something? Are you just going to walk out with it? You know, the whole thing needs to be worked out. And there’s going to be little businesses along the way that are all going to want to sell one day, because they built their businesses in the Metaverse.
Izach Porter: Alright guys, so how can our listeners connect with you? What’s the best way to get in touch?
Jason Guerrattaz: Yep, [email protected] is the very fastest way. But also we have a phone number, the old fashioned way is 1-800-251-1559 if you want to give us a call, but definitely go to our website. You know, our websites got a massive amount of information on there. You know, we have this podcast. We’re issuing episodes now almost every week that there’s a great deal of information. You know, Izach is leading up this effort on our podcast, doing an awesome job. We’re also starting to do some episodes with sellers, where we kind of talk about their journey, building the company, all the nuances and pains and sufferings they had as they’ve kind of built it, and then what it was like to sell it as well.
Izach Porter: Well, that was Jason Guerrattaz and Ron Matheson websiteclosers.com. Thanks everyone for listening to this episode of the Deal Closers podcast brought to you by websiteclosers.com. If you like the show, be sure to rate us, write a review, press the follow button and share it with your network. And of course, if you’re looking for help selling your Ecommerce business, be sure to visit websiteclosers.com. This episode was edited and produced by Earfluence. I’m Izach Porter, follow me on LinkedIn and we’ll see you next time on the Deal Closers podcast.