What makes a business valuable and sellable? ⎜ Crossover Commerce Roundtable ⎜ EP 180

What's up, everyone? Welcome to my corner of the internet. I'm your host, Ryan Cramer, and this is Crossover Commerce presented by PingPong Payments, the leading global payments provider helping sellers keep more of their hard- earned money. Hello. Hello. Hello, everyone. Welcome to my corner of the internet. Again, this is Ryan Cramer and this is Crossover Commerce where I bring the best and inaudible in the Amazon and E- commerce space. So you can tell I'm already giddy about today's episode because of the format a little bit different of what we've traditionally done here in the past. But before we get started and we start going across the room and going across the world with our guests, let me go ahead and just set the table and say this episode is presented by PingPong Payments. PingPong is helping sellers and entrepreneurs and business owners send and receive money at the snap of a finger, keeping more of their hard- earned margins and putting it back to their bottom line. You don't want to pay fees, Amazon already takes a lot of those. If you're paying it out in shipping logistics, PPC, whatever that might be. You can actually save money by sending localized currency, and you can do that easily with PingPong Payments. Go ahead and sign up for free today by going to usa. pingpongx. com/ podcast, and that's where you can catch all of our previous episodes, both live and recorded. This is episode 180, believe it or not, that we've done in this format of our podcasting. Over the 179 episodes, I've been lucky enough to meet lots of different people virtually, have a lot of good talks about different varying topics and discussions. Of course, my job is always to have people step away from these episodes and apply actionable and reasonable insights into the Amazon and E- commerce industry. My background lends to that, my guests' background always lend to that. So that's why I want to paint those pictures for you, the listener, or if you're watching this live that you can watch and listen and understand and ask those questions to our guests that we have today. Why I say today's episode's a little bit different, if you're listening to this, you'll understand why. We'll have not just two talking heads, but we'll have a total of four. But if you're watching us live, you can actually you'll see myself that we've established in the title that we're going to do a round table episode of go ahead and putting on the title, What Makes a Business Valuable and Sellable? That is very important for lots of different brands, Amazon businesses, or just E- commerce businesses, in general. Whatever that that looks like to you, you might want to exit that business one day for what a lot of people have heard, the most profitable day in their lives as an entrepreneur. So that being said, I wanted to bring on lots of, I call friends of the show in the past who have different aspects and different insights into different parts of your business to achieve and get you to that part of your business so that you can exit and get that most profitable part of your business. If it's not profitable, we're going to be talking about that, or if it's not sellable, we're going to talk about that. But your questions are important to us, so if you have those, go ahead and put those in the comments in the bottom of where you're watching us on LinkedIn, Facebook, YouTube, or Twitter, or you can just put them in the show notes as well. You can let us know and tag our guests and we'll let you know how to reach all of our individual people that are coming up here on the show. So without further ado, on episode 180 let's go ahead and get started as a group. Welcome, both Chris Shipferling, Yoni Kozminski, and Ben Leonard of let's say E- comm brokers, Escala and Multiply Mii as well as Global Wired Advisors. To all you gentlemen, welcome from where you are tuning in today, all around the world. We have a global panel today, so it's nice to have you guys all on today.

Chris Shipferling: Thanks, man. Thanks for having us.

Ryan Cramer: Awesome. crosstalk Yeah. Well quick introductions, really, to set the room. Let's start with Ben since he was first on the stream. Ben, you were on recently. Let's give maybe a 30- second intro of you, yourself, what you do, and then we'll go around the virtual room.

Ben Leonard: Sure, got into E- commerce in 2016. Before that, I was in science, environmental scientist, started a fitness brand, turned out to be good at it, quit my job, scaled it up. We were doing about 6 million bucks when I sold it in early 2019, which was right before the explosion in mergers and acquisitions in E- commerce. I sold it through a broker who were not great, so I did the obvious entrepreneurial thing and made a better brokerage. So now I'm doing E- comm brokers with my co- founder, Allison, who is the brains behind the number crunching. I'm still building brands now, which means I still understand what it's like to be on the ground in this crazy E- commerce world that we're in, and that's me.

Ryan Cramer: Awesome. Chris, why don't you go ahead?

Chris Schifferle: Yeah. My background is in consumer products, so I worked in baby and toy for a really, really long time, what felt like dog years, but it was about 16 years. I worked for various different companies, ranging from 22 million all the way to a half- a- billion. In 2016, I pivoted my career based on hating a buyer's opinion and telling me what they thought about the products that I was presenting in line reviews. I said,"You know what? I am tired of this. I'm going to have the direct conversation with mom and dad, or a parent, or a caregiver." So I pivoted my career to really understand Amazon's soup to nuts, Seller Central, how to sell a widget, digital marketing as well, and really just trying to understand the other side of marketing. I was raised in the traditional side. Met my three other partners here in Charlotte, North Carolina, which is the second largest finance town outside of New York, fun little fact. They all came from the old bracket and investment banks working as managing directors in Citibank and Deutsche and Wells Fargo, all the household banks that everybody knows. We identified in this particular space that we believe that an investment banking process should be deployed for certain types of businesses and certain types of clients. So our thesis was," Hey, this is a good, I call it blue ocean," using some businessese words. We started back in 2018. Prior to all of these funds popping up, really, at that time, we were trying to take Amazon businesses and get private equity to actually care, which that was a lot of fun. But anyways, so fast forward now, we've got a team of 12 and we're on our way to getting registered through FINRA. Having a non- caring broker dealer, we've got a fully- functional research department and we've got a building on a transaction team and looking to do a lot of capital raising in the future as well, so offering, I'd say, more traditional investment banking type products, so that's us.

Ryan Cramer: Amazing. Awesome. crosstalk.

Yoni Kosminski: I know what you were thinking is," Save the best for last," so I'll go I'll jump crosstalk.

Ryan Cramer: Exactly. Yeah. crosstalk.

Ben Leonard: Like fine wine. crosstalk.

Ryan Cramer: The smartest and best looking of all of us, Yoni Kozminski, why don't you go ahead?

Yoni Kosminski: It's like you can't say the best accent because it's the second best accent here, so that's already tough. Ben definitely takes that cake.

Ben Leonard: That's right.

Yoni Kosminski: But I'll keep it short. So I spent about a decade in digital, effectively doing strategy for the likes of Sony, MasterCard, Mercedes- Benz, Medtronic. I don't talk about it a lot, but I spent a lot of time in E- commerce early on building E- commerce websites before they were even inside of the Shopify platform, so it was a very different world back then. Fast forward to when I moved to Tel Aviv, so that's where I'm out of right now, and met a couple of guys. They had an Amazon store, they were doing 2 million. In the space of 12 months, I effectively built out a team and an operational infrastructure to scale them to 5 million. That business was acquired by Thras. As a result, we now have two companies really trying to help E- commerce sellers professionalize the operation. I think the one that's more relevant today to talk about is Escala, which is our process improvement consulting practice where we've deployed into north of about 70 E- commerce and Amazon sellers now building out their systems based on people, process, and technology. So we've looked under the hood of businesses doing even north of 150 million in annual revenue, and that's really what we bring to the table here today is talking more so on the op side and what makes a business valuable and sellable. So over to you, my friend, Ryan.

Ryan Cramer: Yeah. Well, and so setting the table, each of you, if you're a listener, a watcher, you know that each of these gentlemen brings so much different varying points of the business. I think it started between a conversation with Ben and I had said," I'm just confused of what's in this space, and I think I've called Chris. I think I've talked with Yoni." I go," I'm so confused of who is doing the right thing in the space again, who is going to be profitable, and who has staying power?" What I mean by that are businesses that are acquiring other brands to grow their business. Now, since that conversation, we've seen things of accelerators. We've seen aggregators. We've seen private equity firms. We've seen just incubators, in general, that have stemmed from this initial wave, I want to say, almost two years ago, again, businesses say," We've been around for five," so on and so forth, but really just the hot topic button issue of people keep being told I can sell my brand and sell my business. That's true, but what makes it valuable and sell? We put our heads together and said," We can talk about this as gentlemen and as people of experts from what we've seen in the past," because you guys talk with people on a day- to- day basis what's going to make their business worth a dollar sign or a pound sign or anything like that, wherever they're exiting their business. So long story short, brands have now more power than ever, and they can exit a business now more than ever. They always didn't used to do that, but now it's the thing to do. So that being said, getting started, maybe asking all of you, is every business online valuable or sellable?

Chris Shipferling: No.

Ryan Cramer: No? Chris, and why do you say that?

Chris Shipferling: I'll just flat out say it, well, for a lot of reasons. I think you need specific tenants of an asset in order to present it to someone who's going to find it attractive. When all of this first started, and I know that Ben and Yoni will agree with me, when all these roll- up funds, we call them aggregators, in the finance world they're roll- up. When these roll- up funds first started, they went out there and they were just seeking discounts for assets. That was the model. It was," I need a full- on discount because I told my investor base,'I'm buying here,'" and my end goal was actually up here. It was multiple arbitrage. That's what they were going after. Now, these were a bunch of finance guys that were going after assets. Now, I know finance guys pretty stinking well, and they're not great operators. They're really good at looking at a lot of different financial models, and they're really good at looking at a lot of different spreadsheets. They're good at analysis in a boardroom, but from an operating perspective, not so great; product perspective, not so great; bran perspective, terrible. So a lot of folks went out in the fund space and these are all new funds that have been raised in the past year- and- a- half, and they were just looking for discounted assets. So there was an impression that was left, I think, on the space and I think you guys would agree that," Okay. Well, it's just about product and profit. That's really what's going to sell right now." What's happened is these funds have now purchased what we call" hickeys." They've purchased product and profit that had massive amounts of secular tailwind, thanks to COVID. Now, through the COVID hangover these past five months, those businesses, they're not tradable anymore. Really, in the past five months, I know Ben would agree with me, it has gotten considerably harder to even just get a deal done, period. It's very, very, very difficult, and everyone needs to understand that. I think all four of us are on this, not singing the Lego movie song. Not everything is awesome right now. It just isn't. So you asked a question and I'll say this, and I'd like to hand it off to everybody else, but you know what actually makes a really good asset? I think that number one, you're going to have to get back to the basics of traditional marketing. You're going to have to start growing a brand. You're going to have to start having some level of staying power and innovation within your product roadmap, and you're going to have to start building a real brand. Now, we're going to talk about all that stuff, because that's a very vague term. You need to start seeing growth. Ben probably agrees with me the most here. When you're seeing a comp P& L year- over- year and it's down, I don't care what asset manager you're putting the deal in front of, everyone, everyone uses that against you, so you have to have some level of growth. You have to have some level of, I call it the Pinocchio syndrome, trying to be a real boy, trying to be a real company that's trying to figure out what it means to be a staying brand. It also means you got to really put your stinking head down and become a brand and product marketer and try and bring some level of good innovation inside of a product development strategy. So I'll pause there and hand it off to the other guys.

Ben Leonard: Yeah. Can I jump in?

Ryan Cramer: Way to really bring on the big guns-

Yoni Kosminski: Bring out the heat-

Ryan Cramer: Yeah. crosstalk Bringing the heat. Ben, I'll let you jump in there for sure.

Ben Leonard: Yeah. I echo what you say and it's interesting, because do you remember when third- party selling on Amazon exploded and it was the Wild West and everyone was selling random stuff on Amazon to make a buck? We all called it the Wild West and then, we entered more of a brand- focused phase and we all thought we left the Wild West behind. But, unfortunately, we're back in the Wild West now and people are getting caught up again in this, it's almost like they're a horse with blinkers on and they're getting far too caught up in trying to resent their business to make it sellable to a particular type of buyer rather than being a real boy, as Pinocchio would say, as Chris said there. So you really can't afford to do that because many of these buyers won't exist for very long, and shortly, the whole scene is going to change when big boy real private equity moves in. Actually, if you just focused on having your house in order and building a real brand and making it sellable regardless of what is going on in this bubble, if you want to call it a bubble, in the E- commerce space right now, then you will have a sellable brand. So when you focus on diversifying your sales channels, diversifying your markets, diversifying your skews, diversifying your traffic, actually, having some IP around your brand and building something that people are interested in, rather than just selling stuff. Unfortunately, when people are looking for advice, they're literally Googling," What makes my brand sellable?" Or," What makes my brand valuable?" Or they're attending webinars, or they're reading posts on social. The advice they're getting is coming from people who are telling them what makes the brand attractive to them, which is essentially, just what is their deal criteria and not what makes your brand sellable in the wider sense of the word. crosstalk So somebody will say," Well, you want have a couple of hero skews and sell everything on amazon. com." Uh-uh( negative). That might be so and so's deal criteria. That is not what makes your brand particularly sellable.

Ryan Cramer: For the listener, crosstalk

Ben Leonard: Sorry?

Ryan Cramer: I was going to say, Ben, for the listener that to people seems like that's the easiest thing for these people who are taking on these brands. It's going to be the easiest thing for them to do to unload it and to have them manage it, correct? Is that the easiest thing for them to do versus what actually is making the value of their brand, of what they see in your business that you put blood, sweat, tears, equity, all this time, money and effort into?

Ben Leonard: Yeah. It's the easier thing for the less sophisticated aggregators, if we're going to talk about aggregators, to do. But when you're selling your business and you're taking it through the right process, it should not just be these fairly unsophisticated aggregators who are necessarily at the table. Now, there's nothing wrong with selling it to an aggregator, provided your business has been through the right process. But the newer aggregators are smarter, more sophisticated. We know they are because the investors are smarter and they wouldn't have invested unless they'd seen that these guys have some operational chops. But more and more, we're seeing more mature organizations that have existed since before this explosion and now, they're moving into the E- comm space. They are sophisticated and they don't require you to have a couple of hero skews selling on amazon.com and everything going straight into the Amazon fulfillment center. They can deal with complexity. So you shouldn't worry," Oh, it's going to be too complex for a buyer." You shouldn't be worrying about that. That is very short termist. I'll hand over to you, Yoni.

Yoni Kosminski: Yeah. Well, on that, I actually want to take a few steps backwards. I feel like we've come out with guns a blazing here and talking about, I would even call it the middle step. We're all talking about aggregators as the be and end all, but Chris will be the first to tell you, well, there's a layer on top of that and that's called strategics. Then, when you bring that next layer, then we're talking about private equity, and these are the things that are coming. So whittling it all the way back down to the start, and depending on where the audience is listening at, you've got to change your frame of mind and realize the company, the aggregator, the strategic, the private equity investor, they're not buying you; they're buying your business or your brand. So when you are thinking through how you actually build out this brand and we'll go into what that means in a lot more detail, I'm certain of it here today. You've really got to understand," How do I build an infrastructure and a business that isn't heavily reliant on me, the individual business owner," because that's not coming across in the acquisition. So what we spend a lot of time doing inside of Escala is building out those operational efficiencies and saying," Well, how do we remove what has historically been a key fundamental driver of the business from the business to separate that and create an actual performing entity or brand?" Chris and I have for Global Wired Advisors and Escala have worked together on a number of projects in building out more valuable assets to appeal to a larger buying audience. When we talk about strategic and we talk about private equity, as you start to do bigger deals and bigger businesses, these things become paramount to even having someone even look into your business, and Chris, you'll be able to talk a lot more about that. But to echo the sentiment that's being shared here today, you need to really plan from day one as to," What does my brand look like?" I don't know about you guys, I'm sure you probably could it to, but I could list out to you the exact deal criteria that 95% of aggregators will list. It's got to be in pet. It's got to be in baby, outdoor might be included. I don't want to touch electronics. We're looking at, at least probably close to three quarters of a million to a million in EBITDA. We're all hearing the same things, and there's not a whole lot of differentiation on that side, but it will come. As we dive into talking about brand and what the coming years is likely going to look like, and I feel very blessed to be on a panel with three other guys that have such great insights. So, as much as I'm sitting here trying to add value, I know I'm going to learn a lot. So that's my two cents, just to open it up.

Chris Schifferle: Totally agree. Totally agree.

Ryan Cramer: That's a great point, Yoni. So where does this start, gentlemen? Does this truly start when you're forming your idea of what your business is going to do, whether it's what you're selling or what your services or what your brain represents, is this where it starts so that when you do want to make it sellable, invaluable, it has to be all the way at the beginning of what you're going to be doing from the beginning? Like you said, what category you can go to? That all starts at the beginning. You can't just say," Hey, I'm going to put this phone in the baby sector on Amazon." It just doesn't work that way. So is it truly just from the genesis of where you build your brand on or what you build that product on, and that's it, and that's where people have to start?

Chris Schifferle: Yes.

Ben Leonard: I'd ask the question though, as well, we're talking about the sellable asset right here, so very contextually, that's right. But at the end of the day, you also have to think through like," Is an exit the smartest thing for me to do tomorrow, is it in two years? Is it 18 months? Is it five years? How is that going to impact my lifestyle? Am I super profitable today? I have a moat around me and, therefore, I can sit and continue to grow this into something wildly more." Again, I'll pass it over to Chris, but I'd love to hear your position on what multiples look like when the businesses start to really increase and you're selling to a strategic versus an aggregator.

Chris Shipferling: Yeah. It's a lot different, honestly. So to try and be succinct about this, the answer is yes. Look, any major brain that's come up through the ranks, and let's just start with the brands that go to VC. They've got a great idea. They build out a business plan. They build out a full model, a full template. Whether it's almost at a point where it's about to, say, operate or it may have already started to operate because they took some seed money and now they're looking for a punch, some jet fuel, every single deck that you see that goes in front of VC always has an exit, some type of liquidity event in mind, period. So I would say yes, and also to Yoni's point, what is the objective? Stephen Coven says," Start with the end in mind." So what is your objective? Do you just want a cash flow of business? I'm looking at purchasing right now and buying a retail baby store down in Myrtle Beach, South Carolina, and that thing will never sell. It will always cash flow, always, period. So the objective of that is pure cash flow, right? I know it's not going to be a sellable asset, but it's going to be wildly profitable. So, really, you got to just think with the end in mind. I'd say for most of this audience, though, that's an anomaly, that's not the case. It's," I want to grow something that would provide a life- changing liquidity event." Okay, great. You got to get away from being a tactician and you need to be a strategist. You got to start really thinking really big about where am I going to start? What brand am I trying to create? What presents some really good opportunity for particular product differentiation and product innovation? These are all very traditional tactics that you deploy when you're in, I would call, just an every day CPG company. These are things that we would sit in and we would want to go into a new category when I worked at Evenflo, which is a very large baby products company. When we wanted to go into a new category, we would sit down and we'd identify," What channel is it going to sell in?" Even before that it was," What's the product innovation that's going to turn the heads? What fits within our brand promise?" Then, you start developing product that is based on everything that you've discovered through," Now, what channel is it going to go in?" So it's a lot of just sitting down and actually creating a real business plan for what you're trying to do. I think the education in this space, and I'll say this and hand it off to the guys, the education in this space, the first class of the gold rush of FBA was all about finding the garlic press that was the most profitable. That's not starting a real business; that's just arbitrage. That's it. That's just me trying to find are underneath the couch, but that was the first wave of education. Then, the aggregators have come along and they've really been the staple and bellwether of education currently in the space. Fine. Right, wrong or indifferent, are they going to actually sit there and educate you on how to build an asset that's more valuable that they have to pay more for? No. The answer is no. I've been listening to a lot of the content I've been listening to that content. I've gone to a lot of different events and it's a lot of tactical stuff, and I haven't heard one brand marketer, not one product marketer, not really, very, very few people standing on stage speaking strategically to the crowd. I'll hand it over to you guys.

Ben Leonard: You almost did. You actually almost did, Chris, that inaudible invariably got sick.

Chris Shipferling: That's right. That's right.

Ben Leonard: I want to give the listeners some good news, which is that because Chris, you were saying there it starts with the end in mind. Ideally, it does. But a lot of people will be sitting there going," Oh, well, I didn't start with the end in mind," and it's not too late. It's not too late to strengthen your business to make it more sellable.

Chris Shipferling: Totally agree.

Ben Leonard: You can absolutely do that provided you're not doing arbitrage and just trying to find a dollar under the couch and provided you're not selling Me Too stuff. If you build a more mature brand, you can absolutely strengthen your business to make it more attractive, sellable, and valuable. The key thing is what I touched on before, is that you make it attractive, sellable, and valuable in the broader sense of the term, rather than purely what is going to be attractive to a particular E- commerce aggregator steel criteria, bearing in mind that aggregator probably won't exist pretty soon, so that's the good news. But in an ideal world, it does start with the end in mind. So for anyone listening who, perhaps, has already got exit under their belt, or is in the position where they're just starting out, potentially, is in a great position and has quite a lot of money behind them to start something new, then absolutely, start with the end in mind. Make sure that you are building your business to sell. There's some classic books on this topic, which break it down in very simple terms really, but I make no apology for recommending them because I think they're great. Built to Sell by John Warrillow is a really great book, I think and then the absolute classic, which everyone ought to read anyway, The E- Myth Revisited by Michael E. Gerber is superb. Following the advice of those books when you begin will really mean that you're in a much better position when the time does come to start thinking to sell. Yoni, you touched on a really important point is when do you want to sell? Do you want to sell now, nine months time, 10 years time? You need to be asking yourselves these questions and also be being realistic. Some people will be listening saying," I never want to sell," but you need to ask yourself," Well, what's your life going to look like in three years, five years, 10 years, 15 years? What's the industry going to look like? What's technology going to even look like? Are we all going to be walking around with phones literally in our palms of our hand literally stitched in there or something?" Probably not, but you know what I mean. So you need to think about how the space is going to change, how your industry is going to change, how regulation is going to change, how Amazon is going to change. Are you going to be able to keep up with all of that? Do you want to hand this business over to your kids? What's your life going to look like? The answer is, it's probably going to want to be some end game and that's probably going to, if you've done it right, be an exit. So you need to make sure you're in as good a position as possible, which means making your business sellable and valuable.

Ryan Cramer: crosstalk.

Yoni Kosminski: I'd love to-

Ryan Cramer: Yeah, go ahead, Yoni.

Yoni Kosminski: I love to ask a question to the room, but, obviously, particularly given E-comm brokers and global wide advisors, this is what you guys do. I think a really good starting point so we can get into some more media content is aggregators, strategics, private equity, they're looking for key to actually put a dollar value amount on the business, like trailing 12- month EBITDA, aspects like that. I'd love to ask you guys, the professionals, what are they looking for as a starting point? Because on the back of that, we can start to talk about well, how do you pump that up to make it worth your while? So I'll pass it back over to you guys.

Chris Shipferling: Yeah. I'll take a first stab. Look, you're talking specifically about multiples in this particular space right now and where things are headed. Is that really the question on the table?

Yoni Kosminski: Yeah, not specifically like am I going to get a multiple of three or 10 or five, more so if I'm the seller, so Ben, to your point, and also mine, if you start with the end in mind or you continue with the end in mind and you're looking to build this smart and you're looking to build out your brand, what is the end outcome? We could even use a hypothetical here. Let's say my goal is I wanted to make 5 million, or I wanted to make 10 million, whatever that number looked like for me to live comfortably for the rest of my life, or whatever my next venture looked like. How do we step backward now and say," This is how it's going to be valued," and moving into how we can start to add a little bit more for those listening?

Chris Shipferling: Yeah. I would say let's start with today, and then I'll talk about two years from now. I have a specific reason to talk about, call it two or three years from now. Right now, Amazon platform risk amongst private equity and corporate strategics is still very real and really, what's happened is private equity has invested fairly heavily inside of the vehicle, inside of the platform, which is, Silver Lake just billion dollars of equity, Bain 750 inside of Berlin Brands. Advent has invested inside of Thras and you've got other institutional investors that are investing pretty heavily inside of the platform, the vehicle. Really, because of that platform risk what's happened is the canary has gone into the coal mine, and they're waiting for the canary to come out of the coal, because there's a lot of macro and microeconomic risks that these aggregators currently face in the past five months have been tough. Everything was awesome through COVID, as I said earlier, and now you've got to become a real operator and that really is what it boils down to. It's, how well can these particular vehicles, how well can they operate? So right now, unless you're pet seriously getting a corporate strategic to wake up and look at your business and take you very seriously, it's quite difficult. It's not impossible. We've actually sold a couple of businesses to strategics that are all Amazon businesses, so it is possible. Private equity is a little bit more laxed on that platform risk, but really, what everyone's waiting for is," Okay, let's see what happens to the canary. So what happens two years from now?" We believe at Global, and a shameless plug of our research report that just came out today and it'll be available to everybody. But we believe that crosstalk yes-

Ryan Cramer: Very convenient, Chris.

Chris Shipferling: Very convenient. So we believe that the assets that the private equity are by investing in the vehicle, they're really wanting to see what's going to happen in two years. We think it's going to rotate. They're going to start investing more heavily inside of the asset, not the vehicle, that's what we think is going to happen. So the other thing and big event, once it does happen, once you see a public equity event, an IPO through any one of the aggregators, those multiples fire off are like 32X. It's just absolutely insane. Institutional cash will pour in like crazy. So back to Yoni's question, what does that all mean for the guy who's like," I just want to make$ 5 million or$ 10 million." Well, the reality is right now, the market is going to change over the next two years. More corporate strategics are going to get heavily involved. More private equity is going to get heavily involved first, and that dramatically changes the multiples and the way you should be viewing your business. Corporate strategics model everything differently. They want you and your asset and they roll it into their current distribution program. So they really look at things and they model financially much different, and those multiples tend to be larger because of the financial modeling. Private equity, they want you and your team, that's what they want. They want infrastructure. They want to buy the whole kit and caboodle. They have a fund. They have a general partner. They have limited partners, and they've got a guy that sits on two or three seats on your board, but they need you and your team, and not necessarily you. They'll probably replace you with another CEO, but they need all of your infrastructure. So you got to think about that as where where things are headed. To Ben's point, he's alluded to this, they may not be around tomorrow. There's going to be a lot of consolidation in the strongest operators are going to survive. I could name them off right now, who we believe are the strongest operators, but we won't do that right now. But the strongest operators within that roll- up strategy, they're also going to exist. Here's the good news for everybody. Here's the secret, multiples are going to expand for really great assets, period. The average multiple in the space right now is around five for a good asset. In CPG, it has averaged seven to 14 over the past two decades, and it's going up depending on the category. When you look at public equities right now, Unilever, P& G, Clorox, those multiples for acquisitions, 13, 17. 7, and 15.4. That's a whole different world, because those guys go after great assets and that's where everything is headed. That's just my opinion.

Ryan Cramer: crosstalk Yeah, I was going to say, go ahead, Ben, before I make a distinguished crosstalk.

Ben Leonard: Sure. So the last three, four minutes of what Chris said should just be recorded and put on a loop and put in front of everyone in this space, to be perfectly honest, because it's nice to hear some truth bombs being dropped. What I would just add to that is a couple of things. Chris, you mentioned there are multiples in this space, FiveX, a lot of people will be raising their eyebrows to hear that because they're hearing a very different narrative elsewhere, so it's important that people understand that. The other thing I just wanted to hone in on is you mentioned there about some of the more operationally capable aggregators, if we're going to talk about those guys for a moment, will still be around in a couple years, and some of them won't. Some of them will have just died and some of them will have got eaten up. What I would just say about that then is, if you are the person who's thinking," Ah, I just want to sell my business for five to 10," then what you're hearing now about how to sell your business now won't necessarily be true in two years, which is why it boils right back to what we said right at the start of the conversation was get back to simply what makes a great business, regardless of what's going on in this bubble? I'm talking to people all the time who are like," Oh, I need to get out now," and I'm not in the business of encouraging people to just flip their business. I'm like," Well, actually, you really don't. You've got a good business and it's heading in the right direction. Actually, when the time comes to sell it, regardless of everything that's going on, there will be a right buyer for it." Actually, the situations going to be a lot better for sellers in the next few years, I think, as this space matures and some of the crazy stuff that we're seeing going on changes. Again, Chris, you mentioned there that the better operators will still be around, and I just want to touch on that. So I think probably 80% of the aggregators will not exist as they exist now in a couple years. Over 20% that remain, probably 10%, so probably half of those guys, are pretty good operators and the other half are not, but they will survive purely because the enormous hammer they are using to hammer the square peg into a round hole is just so big-

Chris Shipferling: That's a good analogy.

Ben Leonard: ...they will still exist.

Chris Schifferle: Yeah.

Ben Leonard: For some sellers, they'll be thinking," Oh, I really need to make sure that I sell my business to the operator who's extremely capable." For some, they'll just be saying," I don't care, just give me the money." I said I understand where those people are coming from, but the moral of the story is, get your brand right. Get your business right, and don't worry too much about all the noise that's happening at this exact point in time, because things are going to change anyway.

Ryan Cramer: Right. You're going to receive an email multiple times a week for your brand that you're seeing," Hey, exit your business, now's the time to do it." That makes sense, right? That's their business model as of right now. I think the important distinguishing factor I wanted to get back to is product or your asset versus people power. I hear of the people who know what they're doing to build that business plan moving forward of," This is who we're going to attack. This is who we're speaking to. This is who trusts us. We have assets such as a loyalty group or something we can tap into constantly in terms of marketing that we are aware on a shelf when people can look at a product and they go,'That's Ben's baby products,' instead of,'Oh, that's a cute little blanket,'" or something like that. There's a distinguishing factor of brand versus asset. So in that regard, if people are starting to and to hear," Oh, I can exit now, and they're buying my assets, it's great." But in the future, if they want to build a brand or buy a brand, I've always tried to figure out what that distinguishing factor is. Is that really true, Chris? Is that on the nose of people are going to start being acquired by bigger money, and people don't have that sense of money, there's more money out there that can enter the space and start throwing their weight around. Is that the distinguishing factor that we're talking about now?

Chris Shipferling: Layer in on that a little bit more so I fully understand what you're saying, because to answer your question about more money, yes. The amount of money that's been raised and currently in this space is a very, very small amount compared to how much cash flows through hedge funds right now.

Ryan Cramer: So correct me if I'm wrong, inaudible have been out on the road, you've been talking to sellers and brands more. I've just been talking with bigger heads through Zoom calls in forums like this. My sense is that we've hit this first wave. We've hit this first ripple, this tsunami, it feels like right now, because it's the only thing we know of. Multiple people are exiting their businesses, but it seems like it almost died down. We've hit that low period or if it's a hurricane, we've hit the eye of the storm. But then you're going to start to hit up this next wave of people are going to come in and they're going to start throwing even more weight and more power and more money, and that in general, when it makes it harder for this brands who are holding on, and I think that there's a lot of amount there they're holding on. They're like," We got this right now and we're operating just fine. We don't need you right now." That then they're going to be enticed to move away from their business. What does that mean for brands who are holding out right now and they're saying there's greener roads or greener pastures down the road and that next wave is going to hit maybe Q1, Q2 of 2022?

Chris Shipferling: Yeah. Look, there's a misconception. I think I can drive on what you're saying. There's a bit of a misconception that," Oh I got to exit now, like right now," and the reality is no, it's just not true. In our executive summary in this research report, we literally compare this to the hedge fund space of the 1990s, and I'll quote my research report. However, any short term consolidation or capital reallocation shouldn't derail long- term industry growth, ultimately, investment flows into aggregators should continue unabated given the attractive spread between three piece seller acquisition multiples and publicly traded consumer product companies, which aggregators will increasingly resemble. This isn't going anywhere. It's just going to get refined. It's going to get sophisticated, and with sophistication, you, the person listening, needs to also become professionalized and sophisticated in where everything is headed. So if you've got pencils down, head down, actually not pencils down; if you've got head down and pencils up and you're looking to continue to refine your brand, and maybe you have been that garlic press type company. You've been the Alibaba type company, and now you really want to become Pinocchio, a real boy, I would say strategically find a way to do that through lots and lots of good resource that's out there and there's to do it. People grow brands all the time without having to use the juice of Amazon. It's happened for decades upon decades, upon decades. Ben right now is growing a brand and starting a brand from scratch that doesn't necessarily need the juice of just," I've got a product and profit." So I would just encourage anybody right now to say," Hey, look," and exactly what Ben was saying and what we've been saying on this panel." Look, man, there's a lot of white noise and aggregators are pushing you because they want your assets now at a discount. They want what you've built currently at a discount." Keep your head down, keep pushing, surround yourself with strategic people who understand how to grow true brand, true product innovation, growing a real product roadmap, and just keep trucking, because the money is going to just get better. If you do that and you refine your own business to professionalize and become more sophisticated, your asset in the next few years is going to be wildly more valuable for sure.

Ryan Cramer: Right. Yoni, I was going to say, what does that mean to you?

Yoni Kosminski: Well, I was just going to say to that effect, and we're talking future state and future tense versus current and what's going to happen in the next few years, if we take it back to aggregators for a second and you look at how much capital is being raised right now and Chris, we've spoken about this at length, the reality is in order for aggregators to move the needle into appeasing investors, the actual acquisitions they need to make are much larger. So you need to be putting your head down and building a brand because an acquisition at half- a- million EBITDA is not going to do anything for that, but it's not even looked over anymore. So investing in your professional growth and leveraging professionals who can help guide you through that process is, ultimately, even if you want to get out in the, let's call the short- term over the next 12 to 18 months, even if you want to get out in the short term, you're still going to have to grow larger than you would've had to a year ago and two years ago before that. So that's a critical thing that you need to think about, I would say in the short term, and then as we talk about, and as your research paper outlines, it's going to be super interesting to see who really has that staying power to build something that will stand the test of time. So investing in things like product development and understanding like Ben, when you showed me the technical drawings around your products, I almost fell off my seat. That was some of the most professional stuff I've ever seen in my life, and so it just goes show for someone who's been through that process before and is now going again, I can only imagine. It's a very different reality that you find yourself in.

Ben Leonard: You have to treat this as a big boy business, and what I don't mean by that is to belittle anyone who's not doing enormous numbers. I would say that if you're not doing half million, a million, 2 million EBITDA, you can still sell your business. There are buyers out there who will buy it. It's almost like if you think of it like a food chain, if we're talking about aggregators inaudible at the top, they're much, much smaller players, some of who really do have operational capability and they're just cutting their cloth accordingly and they're being quite smart in how they do this. They're going onto the radar and they, themselves, probably want to get acquired after they've rolled up a few small brands. So you absolutely can, but what doesn't change, whether you're very, very small or you have aspirations to be gigantic is treatment as like a grown- up business. So, for example, you kindly mentioned my new brand. I am in the fortunate position where I've already got an exit under my belt, and so I'm able to put quite a lot of capital into pretty sophisticated product development. But this is the type of product development that really, even if you don't have the money, you can still do it on a smaller scale. You should be asking yourself," Well, what do real invert brands do?" No matter what vertical you're in and do that. So work with proper product designers and have your product properly designed. Work with proper intellectual property attorneys and build some IP around your brand. Work with proper branding experts and build some kind of brand identity. All of this stuff matters. Slapping a product on Amazon because you think that some aggregator is going to give you a skew in next year just is not a sustainable approach.

Chris Shipferling: It's not.

Ryan Cramer: I was going to say, Ben, that brings a good point. We're talking today and again, a lot of people are going to talk about like," What about today?" Going back to that point, what matters today the most is, it product? Is it audience? Is it just logistics in general? What are the things that are truly mattering and being a valuable asset that you can sell today? What are those top three things that people can walk away and say," Hey, if I get my ducks in row and I at least have those things going for me, I know I'll have the highest multiples possible presently today in my lap?"

Ben Leonard: For me, Maybe we can each around and just throw a few out there. For me, it's product and brand are the big two. Then, underneath that, you need to have the systems, the processes, the intellectual property, the supply chain to support that. But front- facing, it's product and brand. If you don't have a good product that solves a problem and works, and you don't have a brand with an identity that people can get behind, then you don't have anything, in my opinion. I believe that more buyers in this space value brand and their investors value brand and, ultimately, that's what matters

Ryan Cramer: Yoni crosstalk you say?

Ben Leonard: I'd agree. Oh, go ahead. Sorry. crosstalk.

Yoni Kosminski: Yeah. I crosstalk.

Ben Leonard: No. Go ahead, Yoni.

Yoni Kosminski: I would definitely agree, too. I would say as well, if we're talking specifically about selling an asset, then making sure that you've built that runway on that trailing 12, making sure that you've really squeezed every bit of juice out of that lemon and made sure that, for example, if I put myself in the position of a potential acquirer, especially, if we go back to aggregators for a second now, I have a unique ability to understand where they're investing, or unique insights into where they're investing in their operations and where they're not. So you as the business or brand owner, and one of the things that will always remain special is that you had the passion behind the business and the product and the brand that you created. A W2 seller who sat there and become the brand manager isn't going to have the same level of passion behind what it is they're creating. So if you can build out that roadmap and you can really say," Right, well, this is what the next three in five and 10 products look like," that becomes entirely well, a lot more attractive to a potential acquirer if you've built out functionality and aspects to the business that they don't have capabilities for right now, when you think about the aggregator model in its current state. So, obviously, not to pitch us, but the reality is having your processes and your systems had outlined really established so that you are not the linchpin in the business, and you are not the one that is driving all that dependency. That's what I'm looking for. If I'm a strategic buyer, I want to really understand that I don't need this human or even this team in the current state. When we start talking about private equity, they'll buy the baby and the bath water altogether. But at this point in time, it's a different state. So I would agree with everything Ben has said as well.

Chris Shipferling: 100%. I would say one of the things when I was working, even in a small business, which was the first company I worked in, it was a Japanese stroller business called Combi. Both at Combi and even going to Evenflo working in a much more larger environment, and I worked around a lot of P& G X, P& G X Clorox X, really strong CPG executives. Two things that we worked on pretty much all the time as a larger broader executive team was one, we were always working on our brand, always, period. We were always looking to see how we could improve the emotional benefit that the parent was going to receive from using an Evenflo car seat, or an Exersaucer, some of these proprietary nomenclature big brands, and always looking to try and improve how we were perceived because most of the way that we were perceived inside of that particular organization was on a Walmart, Target, Bed, Bath& Beyond, Sears, Kmart, Burlington shelf. So we were always looking to improve brand and we were always echoing exactly what everyone has said here, always looking three years out by channel on a product roadmap. Literally three years out, we would have our EVP of product marketing, and then we would have our brand marketers. We'd have our product marketers. We'd have the sales team and we would all be talking about individual channels and a three- year product roadmap at any given time. So I think that's a really good principle. Now the individual solopreneur Amazon seller may be thinking," Well, I have no team." It's fine." Just take some time to really go," Okay, I'm going to take a few steps back, and I'm going to think more strategically about my business," because if you think about brand a lot and you put a lot of effort into improving brand, truly improving your brand and understanding what emotional benefit you bring to the table that a particular person is going to receive from your particular brand, and the product innovation inside of your product roadmap, you're going to have a very valuable asset. I can guarantee you that.

Ryan Cramer: Great. Can a brand be too maximized or maximized out in its current state to be sellable? Does that make sense, where-

Chris Shipferling: No, branding.

Ryan Cramer: ...if I'm an crosstalk Okay.

Chris Shipferling: Sorry, go ahead. You keep going, man.

Ryan Cramer: No, I was going to say what I mean by that is, can I have operations and expansion in marketplace? I'm running in all these different channels. I'm running D2C, can I be maximized out to a point where, say an aggregator, again, someone who's going to acquire my business, is we don't have the capabilities to grow that any further or we can't take it to that next step so that on our books make ours look more profitable and valuable crosstalk.

Ben Leonard: Find another aggregator.

Chris Shipferling: Then, the aggregator, if they're saying things like that, they have zero confidence in their operating ability. If they're literally looking at something and going," I can't grow this anymore," well, then you should just shut down your shop and leave and fire all your people that you hired from all these big companies, because that's just not a real thing. Brand is infinite. Apple is infinite. BMW is infinite. It's the innovation that they bring into the particular product roadmap that keeps them moving and going. Hi, I crosstalk

Ryan Cramer: That's awesome.

Chris Shipferling: What iPhone are we on now? 13?

Ryan Cramer: 13.

Chris Shipferling: Okay. There you go. What type of chip is being used in the MacBook today that wasn't being used 10 years ago, M1. The brand's infinite. Product roadmap and innovation is what grows a particular CPG company, because if that doesn't exist, then you just become commoditized which unfortunately, I believe, majority of Amazon three piece sellers have found themselves inside of that particular microcosm of commoditizing their own particular product, so I would disagree. I think there's plenty of room to grow. There's this misconception because we think so short term of," Well, if I'm already in these channels, no one else can grow this." No, no, no, no, no, no, no. If you built your brand the right way and you have a real product roadmap that introduces strong innovation inside of that particular product roadmap, and you've got real product extensions inside of that product roadmap, brands have been around for decades upon decades and continue to grow. I got into Combi, it started at 4 million and we grew it to 22 million and it just kept growing. Evenflo, when I came, it was half- a- billion. It went down to 280 million and is actually now back up to half- a- billion again. I just spoke to my buddy who still works there. No, that it's not a real thing. I get frustrated because I've heard that a lot. They're like,"Oh, I don't know if I can grow this." It's just so stupid.

Ryan Cramer: Right.

Chris Shipferling: You just don't know product. You don't know operating.

Ryan Cramer: To that point, gentlemen, I know we've talked an hour and we've covered a lot of features, both actionable insights, both short- term and long- term, but for the sake of time, and I know we're going to have to deal parts 2, 3, 4, 17 down the road of looking back at where we currently state, what are some closing insights that we can take in for the listener or the brand owner that we can provide them for 2022, and maybe just starting on that journey, whether it's they want to exit or they want to do it in the next 12, 18 months, or they want to build a brand that's going to be very profitable in the next 10 years? What are those insights that you want to leave people with today?

Ben Leonard: You want me to go first?

Ryan Cramer: Sure, please do.

Ben Leonard: Okay. I guess if you're looking at an exit in this near to medium term, then you need to make sure that you have all your ducks in a row. So if you fall down the stairs tomorrow and break your legs and you're in the hospital and your business isn't going to run without you, then it's not very transferable. So pretend you've broken your legs and you can't run your business for the next couple of weeks and ask yourself that question. If the answer is," It's all going to fall apart," then you need to make sure that you've got some more systems and processes in place to get it running smoothly. Obviously, Yoni's your man to talk to about that. Ensure that everything is neat and tidy. The Ts are crossed and the eyes are dotted in terms of your intellectual property, your accounts, and making sure that your business is defensible and it's actually some an asset that somebody's going to want to buy. So that means making it diversified on your sales channels, your markets, your skew count, your sources of traffic. Obviously, making sure you've got everything neat and tidy in terms of your supplier relationships. Are they audited? Are they complying with the right standards? Have you got automation going on in your business? Is it the type of thing that somebody's going to want to buy? Have you got anything, a gray area or a black hat that you need to stop doing immediately, for instance? More long- term, it's what we spoke about. It's focusing on the broader strategy rather than getting too caught up in the latest tactics that everybody's going nuts about in the space. It's being a real boy and focusing on head down, pencil down, concentrating on developing your brand rather than short- term- ism of what's going to make it potentially attractive to an aggregator when actually, the landscape, when you do want to sell is going to be completely different anyway.

Ryan Cramer: Love that. Yoni?

Ben Leonard: It's so hard to go after that guy, Ben, he always has all the best points here. I'm just going to echo virtually, not virtually, everything you said. It is really about becoming a real boy. I'm actually just going to share, like I'm not selling on E- commerce right now, but we leverage professional services everywhere. We have a global financial tax lawyer. We have a fractional CFO. If we don't have the resources internally, and I've got a team of over 200 on payroll today, if we don't have the best in class professional services internally, I'm identifying where I can find them. So there is a wide world of great solutions out there that exist. Make sure that you are make sure that your future proofing your business and where you are weak, you are finding assets. We'll leverage a development house if we don't have the internal capabilities, to your point, Ben, about building a heavy or intelligent tech stack that's going to have staying power. I'd say, if you broke your hands, probably more challenging than your legs with eCommerce businesses, but that's really it, is," How do I exit the business today, me as an individual contributor so that it has staying power and it will stand the test of time?" For a potential acquire, it becomes a much more attractive asset, and I have a product roadmap and I understand." What does 12 and 18 and 24 months look like to build? We spent an immense amount of time on our four DS, four disciplines of strategy execution, building our wildly important goal and building our lead measures and the inputs to drive towards our collective company objectives? So I'm saying just taking assets and aspects like that to educate yourself on how you can build a better business, not just doing keyword research on helium 10 for a product that maybe has a gap in the market and changing a few widgets on it and off you go. That's no longer going to work today.

Chris Shipferling: Yeah. Man, I got to bat third after all that. That's even harder, man. So look, every everything that's been said is exactly what I think is some of the best wisdom and some of the best nuggets that anybody listening can take away. One of the things that we find when we work with our clients is to really summarize some of the points, know your data, actually know it. Know your qualitative and quantitative data. Know your financials. It's something 98% of clients that we work with do not understand. So know your financials and really take the time to actually clean them up. You don't have to go through a gap audit process and go to a KPMG to get those done, but know your financials. I'd say finally, and this is something that I think is really a good summary point for everything that's been said, just have a view. Have an actual view of your business, like where is it going? What is it today? What do you want to be when you grow up? When we work with a lot of clients, they tend to not really have that view, and so part of the work that we do at Global Wired is helping them strategically paint that picture of what a fully- optimized form of this particular business is going to look like. But if you come to the table already with a view, it just makes all of that so much easier for you to be able to paint that picture to whoever wants to purchase your particular asset, and it makes you more attractive and valuable.

Ryan Cramer: Good points by all. I'll wrap it with that since we hit the hour mark of all very much, it's going to change again in the next two years. I think if you could look into the brains of people who are acquiring businesses right now, their insights are way different than they were a year ago, six months ago, three months ago. Again, if you're looking from the acquisition side of things, they're constantly going to change what they're looking for, what's valuable. It used to be all strictly selling on Amazon. Now, it's changed a little bit where we would like some omnichannel or diversification and building brands a little bit on Amazon. But that being said, gentlemen, thank you so much for hopping on today. Again, I could probably talk to you all for a couple hours straight, but I know we have businesses and things to do, and I have another podcast in another hour. So we're going to have to do this again all over, but how people can reach out to each of you. I know we linked to this in the comment section. Quickly, if you want people to touch base with you then, and then we'll work around again once more and how they can touch base or connect with you?

Chris Shipferling: Yeah, I'll go.

Ryan Cramer: Yeah, go ahead. crosstalk.

Chris Shipferling: Go to Google and type in Global Wired Advisors and you'll see our website and go to the website and you'll find many ways to contact us. For the 3% of users who use Yahoo still and Bing, if Bing's even still a thing, you can do the same when we come up. So go to our website, globalwireadvisors. com. We've got a lot of good white papers. We've got some good content. Our research paper is dropping, our first one. It's called Amazon Aggregators: A Profile of Risk and Return from the Digital Frontier, so it's a good one. We also have a way for you to get in touch with us via consultation. Also, we have an evaluation tool, just if you want to have some fun, plug in some numbers and at a 90, 000 foot view, see what your business is worth.

Ryan Cramer: Amazing. Yoni?

Chris Schifferle: So for me, you can look up Multiply Mii, Mii spelled M-I- I for our staffing business, or We Are Escala for our consulting practice. If you really want to get me personally, then I'm pretty active on LinkedIn, so Yoni Kozminski, but we've got a smart enough audience who will figure it out.

Ryan Cramer: Exactly.

Yoni Kosminski: Also, there's show notes.

Ryan Cramer: Yeah. There's show notes. Again, I link out to everything. Sometimes you just have to tell people directly. Yeah. Ben, finally with you, I feel like you've actually appeared the most on my podcast so people should know by now, but-

Ben Leonard: Hopefully.

Ryan Cramer: Yeah.

Ben Leonard: Or they'll just be fed up with me," Oh, it's this guy again?"[crosstalk 01: 02: 41 ] We're ecommbrokers. co. uk. It's a UK domain, but we're working all over the place. I'm on all the main social media channels at Ben Leonard Pro and particularly LinkedIn. So look me up on there. You should find me. You can email me if you want, ben @ ecombrokers. co. uk. I'm happy to help, and thanks for having us all on the show, Ryan.

Chris Shipferling: Yeah, I appreciate it, Ryan.

Yoni Kosminski: Thank you.

Ryan Cramer: Absolutely. Then, everyone else who's watching, obviously, you know how to connect with me in our episodes. Obviously, go to usa. pingpongx. com/ podcast or search Crossover Commerce on your favorite channel. That's it for today. I'm just going to go ahead and wrap it up and say, gentlemen, it was a pleasure and an honor to share the stage with you all. Chris dropping some information in our private chat that I can't wait to dive into. I'll say this, it was one of the two businesses that I figured that they were alluding to and they were saying," Prepare for another big drop," so another big raise from another aggregator coming up. So stay tuned, look over at our channels to see what we're talking about. That being said, we'll catch you guys next time on another episode here and I'll say in less than an hour on Crossover Commerce. Take care, everyone.