joe valley thank you for joining me today on acquiring minds good to be here well thanks for having me man joe you're the owner of quiet light brokerage a name that regular listeners of acquiring minds will certainly know quiet light is considered one of the highest quality brokerages of digital businesses including e-commerce so in your role at quietlight you are really at the front lines of acquisition activity in e-commerce and a great person to discuss today's topic with and that topic is this turmoil that we're hearing about seeing with the e-commerce aggregators and what that means for individual acquisition entrepreneurs which is this this audience the acquiring minds audience before we get into all of that though joe why don't you give us a little bit more of an intro on you uh if you would sure uh i'm an entrepreneur just like everybody listening in the audience if they currently are an entrepreneur if they're hoping to be one it's in that same situation once upon a time as well i started my first business i think scott i'm getting old now it's 1997. i left a company that i had i was the 34th employee by the time i left there were over a thousand and that was only in a two and a half year span so it was amazing awesome and awful at the same time but i've been self-employed since 1997 launched my first product in 1998 i owned a media buying agency for radio and then launched my first product on radio in 1998. eventually i did two tv infomercials with two different products and the last one i took to uh just 100 online in 2005. i took it through the best of and the worst of the economy came out the other end of 2010 kind of tired worn out woke up one day and decided to sell my business so i called the three online business brokerage firms that i could find um and uh thankfully one of them was a guy named mark doused at quiet lights and mark's like he gave the other two were just trying to get their hooks into me for a commission trying to get me sign an engagement letter mark was like well look based upon the review of your p l's he actually requested them reviewed them he said i think you know if you could sell now yes but if you wait another six months based on your trends you're easily going to make another six figures easily maybe you know instead of 600 another 100 maybe another 200 000 depends on the trends go i'm like you're telling me to go away it's in your best interest and i loved the guy i thought that was great so i waited uh came back he didn't call me didn't pester me didn't anything i reached back out in early october of 2010 and signed an engagement letter with quiet light mark was not my advisor it was jason yellowitz and we listed it had it sold i closed in in by the end of november and then i took 2011 off trying to figure out what to do with my life puttered around a little bit did some things back in the media buying world realized why i stopped it and uh i bought a business at a content site in april of 2012 and i joined quietlite at the same time the content site that i bought um was hit by the panda update actually i guess i bought it in 2000 in in march because it was hit by the panda update another penguin update in april of 2012 so i had something like 40 glorious days right i had i bought i sold a business that had amazing content i had like 300 000 unique visitors a month it was an e-commerce business i sold physical products but i always wrote good quality content so i sold that and i bought a piece of crap because it was i don't know i thought i knew everything and i was dead wrong got hit with a penguin update so i had six keywords on page one by um ten days afterwards they were all on page two then three then four then five and by the end of it all uh ten months later i was out you know 280 thousand dollars but it was a hell of a lesson learned a lot and uh really enjoyed the quiet light side of things um loved being in the middle of transactions and when i look back at my history well what have i excelled at what have i been challenged with i was challenged when it was just me google ppc and my developer meaning that five year stretch when all i was doing was promoting my my product online that was hard i didn't love it it was painful um my developer always wanted to spend a whole bunch of money that he'd hit her and then i didn't have the got the guts for it prior to that when i was running my media buying agency i was in the middle of clients i you know i'd buy media for my client on the buy side it would go to the call center and i was helping both parties it was often the intermediary between them both when they fought but their success was based on how well i bought media lo and behold you know i'm skipping you know a period of time from 2005 up to 2012 when i i fall in that same role again but i didn't realize it until a few years ago when i was review you know i had a business coach and looking at my strengths and weaknesses and what i excelled at what i did and i looked at the history of my entrepreneurship and it was being in the middle of transactions and helping people not hawking products or goods even though that's helping people too i just wasn't good at it but where i'm at now with quiet light you know it's a solid position mark and i became official business partners in 2017 uh we've got 15 advisors now and uh the the famous walker diable is on our team you weren't going to mention it i was going to mention it oh i'm going to mention it all day long i wrote the exit premieres playbook and walker wrote buy then build walkers probably sold 50 000 copies at this point i've sold a tenth of that and he lets me know that all the time but i i my audience is much smaller i'm on the sell side right and i was i was to defend myself with with statistics but he's done a hell of a job you know helping people buy businesses for sure well as i said at uh on our pre-call you know 90 of the people who sit in the chair that you're sitting in now my guests uh not only have read buy then build but it was in many cases their entree into the whole the whole concept the whole world of buying a business so what we really need to do here well is to get them to buy the playbook for the sell side and i'm going to give it away here for free so if anybody goes to exit preneur dot io forward slash acquiring minds they can get the free digital version and read it on their kindle their nook their ibook or whatever it is but it is the playbook for the sell side so as a buyer why the hell wouldn't you want to have it you know i think walker's book's amazing minus the typos and i always have to mention that um because they're gonna give a hard time um but the sell side aspect of it you know when you're buying a business and you you're looking at something um and you think man that multiple's a little high but then you dig in the p l and like they didn't do a single ad back or they didn't do an ad back for their cash back money and i know how much they're spending on ads every month you start to go okay well that's a great price because they are giving me an ignorance discount because they didn't price it right so i'd say buy the buy the uh buy the playbook as well too grateful and it also just sounds like as a buyer of businesses that reading the exit preneurs uh playbook would help will help me understand the psychology and the process of that the seller has been through or not been through as the case may be and just you know understanding that the psychology of the person across the table from me is really valuable oh there's no doubt you know understanding the wants and needs of the seller is critical to getting what you want as a buyer i've been in situations where i've had two equal offers i actually have talked about this earlier today with somebody i sold the business uh several three now for a guy named syed balcke syed runs opt-in monster huge it's installed on like 10 million sites across worldwide including acquiring mines including acquiring mines there you go so syed had two offers full price uh multiple million dollar offers uh for this business i was selling for him one offer was from a guy that was offering all cash and he was really special and important and uh what not all you had to do was ask him and otherwise he was in other words he was a bit of a jackass because he had a lot of a lot of cash the other guy um researched syed learned where he went to school turns out that they went to the same college so the guy made sure to wear a gator's hat first time he talked to syed um and it is a gator's head i know i mentioned it was the wrong hat i wrote the competing school and then i had to wear the the right hat on a podcast when i had them both on uh it was pretty funny um i threw the hat away so yeah in case you're listening um but syed chose the buyer that he liked even though it was an sba deal and 10 of the purchase price was going to be on a seller note with a two-year standby and then a five-year repayment period and a balloon payment that's how it was back then it's different today but the cash buyer was a bit of a jerk he was going to be difficult in due diligence and odds are he was going to try to renegotiate the purchase price for no good reason and so yeah syed said no i don't want to deal with that guy and the other guy guy named nathan uh really understood that syed's team you know he cared about him and they were going to transfer the sale so nathan honed in on that as well so touch base in terms of making a connection in terms of where they went to school and really made sure syed knew that transferring the team and keeping the team was something that nathan absolutely wanted to do and that got him the deal even though he was offering a much less attractive offer so yeah yeah being a good guy no it works totally and it's it's a great anecdote and that theme comes up again and again where buyers really have to keep in mind that they need to they even though they're the buyer they need to sell themselves often to the buyer particularly in a competitive situation like the one you just described just be nice just be likable be inquisitive be helpful be kind all of those things that your mother taught you just be that way and it will help you acquire what you want to just don't be an well i think there was another example of this with again circling back to walker dabal can you share that one yeah can we just change his name to tarzan though like minnie tarzan because of his hair now i think come on all right i harass him about his hair on every podcast that i know i might might be listening to um so yes um years ago i had a listing for sale and walker was a potential buyer he didn't it was a somebody a really nice all cash buyer ended up buying it but walker left an impression on me it's the first time i'd ever talked to him and we had him in a buy or sell a conference call the seller really loved him but you know the other person was very nice as well and it was all cash deal versus i think in that case an sba deal about a month later my business partner mark had a listing that came to him privately he usually doesn't list businesses and the seller of that business was really protective she was concerned about listing the business publicly even concerned about listing the business at all so mark reached out and said look i've got a seller that really is hoping we can just find a pocket buyer but this buyer has to be somebody that's kind and trustworthy and likable they can't negotiate you know for just for the sake of negotiating so on and so forth and immediately 30 days after i had talked to walker he popped to the forefront of my mind and i introduced him to mark and he ended up buying the business and that was the uh the toilet business that he still owns today yeah that he still owns today so he got that just by being a nice guy he didn't get on the first one but he got it randomly he didn't go out looking for it it was never listed for sale but we reached out to him because he was such a great buyer wow well today we're going to talk about um not so great buyers i i think aggregators maybe don't have the best uh reputation as buyers but i'm getting a little ahead of ourselves here joe give us some some context so let's let's assume that some of the people listening don't you know aren't up to their eyeballs and in the e-commerce industry um and may or may not even know what an aggregator is so so tell us what an aggregator is what racio is and kind of this whole phenomenon that's been going on for the last few years all right so you mentioned thracia so carlos cashman um a couple of other guys that started that business let's just hone in on them or really go back a few years prior to that to a guy named uh richard or rj jolly chandra an aggregator is somebody that is well like well educated general i'm i'm making this up well educated probably really good looking and incredibly charming and all three of those things enable them to raise a lot of money to buy fulfilled by amazon businesses initially but it also makes them dangerous because like wow these guys are really smart they can do amazing things with my business and you sell it to them and they they so they roll up fba businesses is what they do so instead of you know a business that's doing 400 000 in discretionary earnings it might be worth 1.2 to 1.5 million dollars they own that one plus 20 more so when they pull them all together the multiple goes from three and a half to 12. and so by accumulating all of these different brands their combined value jumps dramatically because the multiple jumps dramatically first second they've got combined resources to work on the brands where an owner might not have the tools or resources and they've got incredibly deep pockets to theoretically never run out of inventory which happens with almost every e-commerce entrepreneur that i've ever spoken to and i say theoretically because it does happen so they've done an amazing job going back to 101 commerce which was one of the originals they ended up you know the first call i had with richard or rj he called me said this is the deal this is what we're going to do we're going to buy 101 fba businesses in the next 24 months and i said you're crazy it's not going to happen yeah i said not going to happen and he said yes it is and you know what i'm not going to log into a single one of them i said you are not going to succeed richard i'll help you however i can but dude there's not that many out there to buy and there weren't back then this might have been 2015 16 17 i can't even recall now and they ended up buying and the investors lost their faith in richard and they ended up selling to goja now there were three partners originally talk about incredibly talented people like walker dybal and i know i'm going on a tangent so you bring me back in well when you need to but it was richard a guy named keith c-a-i-t-h really great guy and a guy named chris chris duty chris joined the quiet light team recently joined the team in january great insight to the aggregator mindset and he's also partners in a very very small percentage with another aggregator called profound commerce but to answer your question an aggregator is somebody that raises money to buy fba businesses and i say again initially because some of them are expanding and they pull their resources to get more efficient and end up with a much higher multiple uh and so this one-on-one commerce this was an early attempt at this that was i guess a failure or certainly not the success that they were hoping for i think they got their money back but it didn't they didn't buy a 101 that's right they didn't buy 101 in 24 months yeah right and then but what has really put this on the map i believe of of the mainstream media i mean and and of silicon valley in general is thoracio thoracio is now a big name that's tossed around and so what's the thracio story when did it start and how big is it by comparison i i'm going to go back i think it might have been 2018 and by the end of 2018 they had raised some money to buy fba businesses and i know that they had purchased 20 i think altogether in 2018 and i might get the year wrong but of the 20 eight of them were purchased from quiet light so 40 of their purchases we sold them so they owned 20 fba businesses and they got a second raise valuation at 786 million dollars absolutely insane right i mean the businesses we were selling them were not large i think the largest they might have bought was one and a half or two million dollars back then um but they just got an incredible valuation and that just started the ball rolling with other would-be aggregators um and so they were just buying everything they could possibly buy and that's part of the problem they bought you know um children's toy brands they bought uh you know umbrella brands it's a german brand that i sold them they bought um mosquito brands they bought things to clean your hands after working on a car anything they could get their hands on electronic charging stations um and they just bought them and they've they really are the reason there's another hundred aggregators that are out there in the space today yeah yeah and they're good people let me just let me just say this they're actually really good people they're getting a bad rap right now um because they're they're blowing up in terms of imploding but they'll survive they'll survive carlos is a smart guy ken's there they're really they're good people they try to do the right thing i've had deals with them where um i literally had a deal under contract for an electronic charging station like while you plug it in during due diligence the cfo of the company bought it and it plugged it in at home and it started to smoke and almost caught on fire they still closed the transaction they worked hard to do that the problem i have personally with aggregators marketing is that they say that they're going to buy it for all cash and close in 30 days and it's completely untrue they don't close in 30 days with aggregators and they never pay all cash or i should say most times don't pay all cash they invented something called the stability payment you google it you probably can't find it and that's that you know well this is a risky business we need to hold back 10 in escrow for 12 months and then as long as the business is within 90 of the revenue it was when we bought it we'll release those funds that's not all cash that money sits in escrow for 12 months they look for two months back then they don't do as much now because of competition but they look for a couple of months of working capital money held in escrow that means you have three hundred thousand dollars worth of inventory that's three months worth that's two hundred thousand dollars that you're gifting them you know and the other thing they say is avoid the broker fee if you had the broker you wouldn't get you know you wouldn't be gifting them two hundred thousand dollars in um inventory but overall they're good people but the marketing i have a bit of an issue with what they've done really well uh for the industry is you know quietly and other firms like us have been trying to raise awareness of the sellability of fba businesses or fba brands and they come along you know nearly a billion dollar evaluation now everybody knows that you can sell it and the multiples have climbed there was a time when i would only list something if it's an fba business at a maximum of 2.74 and then it would round down to 2.7 online now we can list them for what they're really worth these are not brands that are going to completely implode amazon's not going to take them all in-house amazon's not going to sell you know all of their own brands and not let other people sell on their platform that's just not going to happen they have shareholders that make a lot of money from third-party third-party sellers well let's talk more about what the what the terms are like and what they've done to the overall market but i i want to say one other detail i of course know about the the aggregator phenomenon or trend or whatever i didn't realize just how manic it got so just coincidentally yesterday the inside the the um the information the that uh tech um news website did a story on the aggregator ecosystem and they talked about uh here's just a quote from the article during the mania of 2021 so just last year amazon third-party businesses were sometimes selling for for up to four to five times earnings before four to five times evita uh and then they talk about how how much that's has come down or will come down and that's really going to be the meat of our conversation here joe but they in then they follow it up with the examples of some of the um the conferences where where aggregators and prospective sellers would get together that the tesla giveaway for referrals there was some there was some aggregator that if you just referred them a business that they ultimately buy or they buy ultimately would buy they'd give you a tesla i mean just crazy stuff that is just like you know you know alarm bells should be ringing in everyone's mind i didn't realize it was that white hot what what did you what is some of the crazy i mean do you agree with that characterization that it just felt kind of manic last year yeah yeah quite our business we only sold 30 of our transactions to aggregators in 2021 but we grew by 85 percent last year we had an average of 3.74 offers on every listing that we put out so there was a mania for all things digital you know and and we're not an e-commerce business broker solely we sell content and sas and some service agencies as well but probably 55 to 60 percent of our transactions were e-commerce and of those probably 70 were majority fba brands and so yeah it there was definitely a mania there are pop-up and i want to call them pop-up because they just imploded pop-up business brokers that focused solely on selling directly to aggregators and only aggregators well they're out of business because that was a very bad business model um but yeah it's been a frenzy to the point where we had to hire somebody to uh just be the person that aggregators would talk to and get a you know get it all organized and that way we could report anytime an aggregator makes an offer everybody would have access to a report that would talk about the previous offers that that aggregator made how they behaved in due diligence what the deal structure was and if they are currently or are going to be blacklisted in the next 24 hours because of what they did and we've had some that have had to be blacklisted because they behave very poorly in due diligence yeah and so often in in an environment like this just a land grab or a gold rush there's going to be some bad actors so there are among the in the aggregator community there are yeah there are and and and when i say what i said about thoracio they're not they're not bad directors right they're they're marketing materials are as are most of the aggregators when they're giving away a tesla sorry if i swearing here um just trying to be real um the whole the whole promotion you know it if you if you think about it i know that the audience are buyers but if you think about this from a seller's standpoint and go all right should i sell directly to this aggregator and avoid the broker fee or should i hire a broker to help me get maximum value for the business the broker's working on your behalf to make sure you get maximum value for the business the aggregator's job is to buy your business for as little as possible on the most favorable terms for them why in the world would you take your greatest asset that's worth the most you know net worth that you have and risk it and selling it directly to an aggregator i i it's it's it's my cross to bear that i have to try to get this out there i know that's not the audience but it's it's a frustration that i personally have it's not unlike the the uh situation in residential real estate with eye buying where the pitch of a big eye buyer is circumvent the broker quick to close um you know et cetera so if you just need to unload your house quickly uh we'll give you a fair market offer and we'll close in you know x number of days leaving the agents to scramble and demonstrate where they add value which is that they'll they're working for you the the owner of the house to optimize the the sale price that you get for your house so it's it it's similar now i buying is base the pricing is based on an algorithm supposedly thoracio's not doing that although they're pro and the aggregators are not doing that so i don't mean to the technology component might be different um but kind of the the the two um value propositions that the the seller of the business or the seller of the home are considering kind of those competing value propositions feel similar um joe i want to just go back um and to your history lesson there for a sec which was great you talked about how the the um commerce 101 guy or 101 commerce rj said i'm going to buy these businesses i'm not even going to log in to any of them uh one of the the other criticisms that i've heard of aggregators is that you know in a typical roll-up or business where you're assembling a fragmented industry and you know um developing systems that go across all of the different businesses synergies to use a word that nobody likes but you really are you know i mean your synergies is really part of the value proposition of your entire rollup um and and i just keep hearing and in thoracio i actually hear this about thoracio specifically that they that they don't do that as you said they just buy these completely disjointed businesses as opposed to let's say a bill d'alessandro who who he's building a business that is in a particular niche so it's you know pet products and lotions and potions as he calls it um and so you can it just makes a lot more sense that there would be you know if you're going to be a a cereal a buyer a serial buyer of e-commerce businesses that they would that they'd all be in the same category for example and it just doesn't seem like the aggregators have done that um how where was the value add other than multiple arbitrage that that these guys um sought to to to achieve if they're not even if he's bragging about not even logging into any of the businesses that he's acquiring yeah it's it's it's the multiple arbitrage what it is uh and then ideally you know the goal is to get big enough to go public and that's where they make them the real money um and that's all gonna change right thracio and all of the other big players are now niching down i took some notes here i had a call with deanna on our team who deals directly with the aggregators before we started recording and let's see there's two or three aggregators that have now come you know completely changed up their model in fact we had some aggregators walk away after the thracio deal at the news that they're laying off 50 of their workforce or whatever the number is three or four of our deals fell apart because the lending partners behind the aggregators are there's only four of them are three or four of them and so they're all in a panic and saying look aggregator a b c d no more just buy whatever you want you got a niche down and so there's an aggregator that would buy everything that was a consumable adjustable or topical and so on and so forth that was their niche they're shifting and niching down to women's only products so it's if it's an adjustable if it's a topical anything like it's just for women that's incredibly niche oriented and i think that when 101 started or thrash started the idea was that well we got we can't niche down because we're not going to be able to buy as many we're not going to be able to grow and scale at the same level and now people are going okay we don't want to actually scale at the same level that thoracio did we can be very successful niching down and instead of buying you know 10 250 000 businesses let's just buy you know one 2.5 million dollar business and and you know make wise purchases that are in the same niche instead of just buy whatever and that's already happening we're seeing that happen uh to a great deal and i think that eventually it's going to happen with ras2 they're going to start selling stuff off and try to niche down a little bit or they'll they've got so many different categories they're just gonna um sort of compartmentalize them and maybe stick to three or four or five mm-hmm okay so you're talking about the go forward strategy for some of these aggregators is going to be to niche down and unload some of the businesses that they've acquired we talked about how how crazy things got up until through into 2021 we talked about how your the multiple that you were selling e-commerce businesses for before things got so hot and it was it became such a popular acquisition category was what did you say 2.74 was was the going multiple that was that that was on the high side yeah that was on the high side and so then it got according to the the information yesterday four and five became the norm is that is that does that reflect what would white light would sell out four and five well you gotta you gotta be careful with the multiples because in the four and five does it include or exclude inventory everybody about website closers excludes inventory they include it in their multiple so you just got it anytime a buyer is looking at multiples just determine whether or not it includes or excludes inventory but four to five okay uh sure but it depends upon the size of the business and the niche and how many skus they've got and the growth trends and all that stuff too okay okay but if you kind of apples to apples it it feels like going from 2.74 to four or five that's a 50 to 100 or 50 to 80 percent rise in prices of e-commerce businesses in how many years that your 2.74 number that was what 2017 2018. four years or so yeah in four years okay and so while all these aggregators have been out there and just making things so white hot and so competitive um what you said some what 30 of the quiet light sales were to aggregators what are what have the lone individual acquisition entrepreneurs like my audience been doing or how are they competing against these guys they're just being good people right they've got being nice like you we said i've got the right to to look at our listings see one of the things that we don't do when we list something is we don't just send it out to the aggregators it the aggregators some of the other firms and i'm not going to name any names but there they'll create a listing and they'll send it out to the aggregators only for a week or two and give the aggregators the first right to look at them um we don't do that ours go to the public and the aggregators are part of the public in our view they're on a list they'll get it when everybody else gets it and so that gives you know your audience walker's audience an opportunity to to buy it and compete along the same lines as as the aggregator and sometimes people just don't like what the aggregators aggregators have to say and the offers that they thought were going to be all cash from them are technically not and so they go with the other folks yeah yeah but it has i assume it's made it much harder for acquisition entrepreneurs i mean if nothing else prices have gone up so it was much easier prices go yeah prices have gone up um because people are competing for it right so 3.7 offers for every listing it's going to drive the price up i just did a podcast this morning where it was listed the business was listening and walker was the advising broker it was listed at 1.35 there were only two offers it sold at 1.55 10 days into due diligence the person the company from the uk that didn't it was an aggregator that didn't get the loi reached out to walker and said okay we'll double our price double our price so they went from like 1.3 to 2.6 and you know of course the owner of the business is like okay no we're just going to stick with what we have and i talked to our interviewer i'm like wow why didn't you get go for that money grab he's like we didn't feel comfortable with you know some of the things that they were saying we weren't confident they were actually going to close um we're getting above asking price by a couple hundred thousand dollars and we're closing quickly it closed in 37 days no we like who we have we're going to do the right thing and stick with them we signed a letter of intent and by the way this is something that buyers should pay attention to typically when you do a deal with quietly or anybody else or even directly the letter of intent often says its non-binding letter of intent fully contingent on due diligence and a further detailed asset purchase agreement as a buyer you might want to make it not non-binding that it's binding contingent on due diligence and a further detailed asset purchase agreement that way when that yahoo aggregator comes in after and tries to sweep in and steal it for an extra half a million or a million you know you're still in a good strong position and our sellers um will sellers tolerate that yeah okay okay they will being in a non-binding because they're individuals they're signing a letter of intent with the purpose of selling to who they sign the level of intent with right so we talked about my my buddy now and clients and ramon van meer who we're going to get on this show um ramon's a perfect example of that i had his b we originally listed his business for five million or so right and we were under letter of intent with a guy named matt great guy he bought four other businesses from quiet light and um i'm at a funeral on saturday down in georgia i'm driving home at a ramone called like oh this can't be good nobody calls me on a saturday and he tells me that revenue uh you know he gets his revenue in arrears and what not and his revenue grew to the point where he was netting three hundred thousand dollars a month just projected down three point six million a year he's not gonna sell the business for five million bucks he's like joe i can't do this i have victor my son i've got to really do this and he's like i i want to pull out a letter of intent i said well if i was in your shoes i would too let's do the math and i'm driving down the road and we figured it was going to be worth 8 or 9 million if you just waited six months and so i made a very difficult call monday morning to matt who below a gasket right talked about suing ramon and all this other stuff he had no legs to stand on whatsoever uh it took him a couple of days to cool down and he settled down and he realized that it was in ramon's best interest to do what he was doing but he was sad that he was losing out on that opportunity any new letters of intent that matt has signed since then have that binding aspect to it matt is now an aggregator he owns a company called profound commerce down in austin texas matt's a really good guy and anytime i was on a call with matt and competing buyers matt usually won because he's a really nice guy and they raised i think the number was 50 matt raised 53 million dollars in the q4 last year and he's going to be a smart aggregator he's going to buy the right businesses he's not going to buy a billion when he can buy a million right he's going to buy good businesses that are larger easy to manage and they're good product managers not they're not acquiring businesses and then acquiring staff uh to to to run them and train them right well joe you you're talking about him and and and you mentioned other aggregators that you're talking about them in in the kind of the indefinite sense as if they're not going anywhere uh so rocky waters for the aggregators right now but the concept isn't going away so so you know thoracio's making the news thoracio's laying people off and because it was the best known aggregator everybody including me are like okay well what does this mean for aggregators overall is the whole model is the whole model not sustainable um and and then you've got the bad actors and so they'll be shaken out so you know make a prognostication about just aggregator in general you you see the category surviving just getting stronger maybe a little less ambitious a little a little more disciplined yeah i see the category surviving because it makes sense when you just put it on paper um they're going to just niche down they're not going to just buy anything newly willy they're just going to get very specific on what they buy and have very specific criteria and they're going to be more patient they're not going to rush to buy 25 businesses they're going to be more patient with it and i know this is true because new aggregators are still popping up right there are three that contacted us in the last 30 days and that's after the news about thoracio so they're still raising funds or were in the process and still got it raised and still got it pledged to them they're just going to be smarter about it like profound commerce and even the existing ones are already selling off brands that don't fit with the vision that they are trying to now have um and they're just going to be a little bit more patient a little bit more specific a little bit more compliant um and a little less top-heavy in staff and make sure they don't make the same mistakes that thracio made thracio will survive i believe they will survive they're not going to be in the same um uh position right they're not going to go public anytime soon but they'll survive and they're teaching lessons to all the other aggregators how to um and i mean this in the kindest way case carlos is listening to not screw up like thoracio did so given this kind of um this chastening that the aggregators are are experiencing right now um so will will the multiples that have gone up so much come back uh pull back a little bit and does this does this herald a good buying um window next 12 or 24 months for my audience for the individual acquisition entrepreneur yeah i think so but it's not just because of the aggregator refocusing right not implosion refocusing it's not just because of that it's because of the stock market it's because of the potential looming recession that everybody's concerned about i think multiples will come down for a variety of reasons even supply chain issues if you think about an entrepreneur that has bootstrapped a business and is just keeping up with working capital requirements to maintain inventory and they're struggling the inventories cost is going up the container costs are going up and they're taking less cash out of the business they're getting burnt out frustrated and tired and just want to move on whereas you know nine months ago they would have you know demanded a four-time multiple now they'd be like please three times can you just get me three times it's going to happen really it's it's not happening yet but i guarantee it's going to happen because a lot of the times no matter how much i preach no matter how much walker preaches on the sell side and tries to teach and educate that you train for your exit you don't just wake up and decide to sell your business we as entrepreneurs don't listen we think we're going to run these businesses forever and we just wake up and decide to sell because we're tired and burned out in this situation you're going to wake up and decide to sell i think a lot of entrepreneurs just can't handle the struggle anymore and will just want to exit and they'll be willing to exit for less because of the stress and strain of cash flow because of the market the stock market the real estate market the supply chain challenges that are not going away yet or anytime soon and and yes because there'll be less competition because the aggregators are not going to buy as much all of it's going to bring multiples down all of it you know it's just all those headwinds that you're talking about for ecommerce it's so striking because e-commerce was just so hot aside from the aggregators that just during covet it was just the hottest thing uh i mean everybody again forget the aggregators every individual acquisition entrepreneur wanted to buy an e-commerce business e-commerce tiny little e-commerce businesses were just going crazy um but you know the return to pre-pandemic spending habits and then all these other headwinds i mean you know prices are going to come down across every asset class in my view that though will they're not going to come down to what they were in 2018 the multiples won't trade that much i think though what what's what may happen is that the multiples will will come down i believe but the deal structures will also also be more favorable to the buyers right because the aggregators again even though they say we'll pay all cash and close in 30 days they never paid all cash or 99 times out of 100 they didn't and so the buyers the sellers of these fba businesses became more familiar with burnouts with stability payments with seller notes seller notes on inventory and all these different things and and therefore are getting more comfortable with them anytime over the last decade when i speak to a seller i and i and i talk about those things are you willing to you know accept any of those things no of course not and then when they get to know their buyer they get a little bit more flexible right seller notes can actually be very good for a seller because as long as it's secured and they believe in the buyer it means they've got some steady income for a while after they sold their business because most of the people that are selling their businesses are not set up financially for life right it's a nice exit it's a 500 000 exit they're not set up financially for life they still need to earn a living and so if you as a buyer make an offer that is you know 350 000 in cash and 50 000 a year for the next three years at a fair interest rate personally secured um then they're more likely to take it it's not a terrible deal matt at profound commerce bought mike jackness's business colored mic goes all over podcast i've talked about it he's talked about it mike did a seller note on the inventory and six months in he extended the seller note on the inventory because he kind of liked getting the monthly payments it's a weird thing but they also liked and trusted each other very much and is there a a seller note percentage that's standard in e-commerce in the in the kind of offline world it's 10 to 15 percent is that yeah top side 25 yeah you're in the in that 10 to 25 percent right so the sellers are not banks right they shouldn't be funding your entire exit right um the the the biggest seller note i've ever seen in transactions that i've done and i've done a lot uh was 50 and it just blew my mind it's happened twice one was because the seller and the buyer acted like long lost sisters and absolutely fell in love with each other it was incredible the the buyer made an offer and she's like that's perfect i'm stepping into retirement i'll have that residual income until my as my portfolio grows right it worked for her and the other was a mom of four that had a uh a blog about coupon cutting and uh you know her husband worked full time and she was supposed to be working very part-time while raising four children and she ended up working 20 hours a week and it was too much uh she's making a hundred thousand dollars a year it was just honestly it was just too much so she sold it and did a 50 selling note on that too 12 that was a 12 month 12 month 50 so unknown but that's the most 10 10 to 25 i think is is comfortable i think the place where buyers can get the most um seller note is on the inventory right so if you're buying a business for a million dollars and there's a 200 000 of inventory offer a seller note on the inventory at the very least like if you're a cash buyer if you're getting 25 seller note on the business but you're buying the inventory ask for a six month seller note on the inventory and you know with a with a with a 60-day standby that means it's really you know uh 120 six months it's it's it's eight months right because you're not going to make that first payment it allows you to get some you know some money in the bank account to pay for that to sell or not pay for the inventory it's short buyers are the shorter it is the more buyers are coming the more sellers are comfortable with it joe you keep mentioning fba businesses specifically so is is should our conversation be con confined to that definition of e-commerce businesses or what about what about non-fba just general economics yeah that's where this aggregator roll-up started was with fba businesses yes um there are now uh sas specific aggregators and content specific aggregators there aren't really aggregators that have come out of the woodworks to buy just d2c brands that are non-fba that i know of deanna probably has a few on the list but they're not as uh popular for some reason which is i think they'd be more popular i mean they're they're more robust businesses they're not exactly the platforms exactly exactly uh so you know they're probably out there i just can't name any off the top of my head and there's probably someone we've got like 120 aggregators on our list now and there's probably you know a few in there that are just trying to buy shopify stores yeah that'd be they'd be the smarter ones my opinion okay you hear that audience there's the opportunity and speaking of which i wanted to close joe with just any other general tips you've already given a lot um but any like if you were talking to somebody who you know they're they they thought they were gonna spend a million two million dollars on a business in the next 12 to 18 months and they were maybe interested in e-commerce anything that you might tell them anything come to mind don't reinvent the wheel after you buy it it's already working don't go in and change things um a perfect example there's two piece pieces of advice that i want to give out here but that's the first one so buy the business and just sit on it for the first 90 days and learn everything you can about that business when i sold my business will i sold it in november of 2012. the best time for that business it was a supplement brand the best time was q1 right my buyer tripled the ad spend right i was spending 20 000 a month he tripled it in q1 went to 60 000 with no experience in google adwords came back to me in june of 2012 and said hey look i've kind of screwed up would you be interested in buying back into the business and of course i said yes 51 he goes well that would be working for you i said yes you screwed it up he ended up keeping the business and did okay um but definitely don't fix something that's not broken another example quiet light just brought bought a brand it's not a it's not a it's not a brand it's a it's a lead generation business okay and we used to we we used to get referrals from this company we bought it 30 days after we bought it our cmo changed pay-per-click companies and so for like a week and a half we got zero referrals like we invented we we reinvented the wheel we shouldn't have should have sat on it um the other piece of advice would come from somebody that i mentioned often when i'm doing podcasts it's my mentor one of them is a guy named uncle walter walter abbott's my wife's uncle i call him uncle walter i was out golfing with him a decade ago and he gave me advice which was as an entrepreneur you should always have a line of credit set up wherever you can either through your investment partners a heloc meaning a home equity line of credit or with your bank if your business is established get a line of credit set up because you will need it someday i didn't take his advice will and in 2012 i sold my business and i wanted to buy a business that was much larger than the little content site that i bought and i filed my taxes in april of 2012 and then i went to my bank to set up a a heloc and to get that line of credit set up and they they were a local bank i had a great relationship with them but you know pat said joe you don't you don't have any income i'd love to help you but you don't have any income i can't give you a help i had you know like a million dollars of equity in my house more than that in my investments but of course i didn't want to take it out because the market had crashed but i couldn't do anything because i didn't take walter's advice and set up a line of credit so set up a line of a line of credit number one number two or number one and number two and number one just don't change anything immediately after buying the business you're not smarter than the guy that bootstrapped it and built it and is able to sell it learn from them and then grow it wait 90 days and then then add your touches to it and joe one of the things on that topic about just the transition period that a lot of my guests experience and want to talk about is how you manage the team when when you come in as the new owner uh for e-commerce businesses what what is the team size for um i guess we'll have to we'll have to frame it for like a million dollar business um i mean let me put it this way when is there a team like what level of revenue does an e-commerce business have to hit before there starts to be a team i assume any of your businesses transact and it's just the owner yeah like you said it depends greatly on the size so if it's if it's selling for a million dollars right it's probably in the 250 to 350 000 discretionary earnings range right odds are their team is maybe a husband and wife team a couple of business partners and they do everything or it's one owner and a va or two right and the the va's would transfer with the sale if um if it's a larger business like syed's syed it was a multi-million dollar business he had a team of like five or six people that were essential to the business so the buyer absolutely wanted them to stick around and say i'd cared about them so he wanted them to transfer so our average transaction size last year was about 1.8 million and the team may consist of two or three va's at that size okay that's great that's really helpful great joe give us that url one more time where people can get the the exit printer playbook yes uh exitpreneur.io forward slash acquiring minds there it is very good and how can people reach out to you personally joe they can hit me up at the joe at quietlight.com or uh that's probably the best place i want to say linkedin but it's i don't check it every day so joe quietlite.com right and quietlite.com of course um everybody go subscribe to uh get new listings there it is as i said at the top really considered the the gold standard you guys the the listings that you um have for sale or are curated i mean that's all that's often the word that i hear people say about quiet light that it's a really it's a curated um pool of listings that you can go and go there and feel feel confident that they're going to be a quality business for sale is that fair that is fair absolutely true we put a lot of work into the packages to answer all of the buyers questions before they think to ask them so that it streamlines the process from listing uh to loi to closing as far as being on the hunt for businesses though if people are if they don't already know about censurerica's marketplace they should so c-e-n-t-u-r-i-c dot com there's a marketplace tab where they can subscribe to new listing alerts from all of the online business brokerage firms that centrica trusts or works with and they can get very specific there if they only want to do sba they check a box that says sba and they'll only get fed sba listings if they only want sas businesses they'll only get sas businesses because it's a ton of work trying to buy a business when you're competing in so many people and you're looking at fe international website closures empire flippers acquisition station and a dozen others um yeah what what's great point chris and now nate who just bought it over there they've done a great job streamlining that process for buyers and of course they're doing it because they want you to know who they are because they're a great due diligence firm as well sure yeah no that's a great tips and trick everybody and what they fundamentally do is is is due diligence for e-commerce and also sas and basically any all manner of digital businesses correct yep exactly cool yep great joe valley of quietly thank you very much for your time and thought sir this has been great my pleasure thanks for having me on will