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How to Turn a Distribution Company Into a Valuable Business

June 11, 2021 |  

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Co-founders Eytan Wiener and Jonathan Goldman started Quantum Networks as a simple Amazon Reseller of technology gadgets. The business model was basic. Resell a semi-known brand’s product on Amazon, or source a device people wanted in China and resell it on Amazon at a slim margin.

But Wiener & Goldman wanted more than just a cash flow business. They decided to create a sellable company by promoting their brand (Blucoil), bundling products bought together frequently, and striking exclusive reseller arrangements with some brands. The three tactics jacked sales, took gross margin from around 5% to approximately 20%, and top-line revenue to $30 million, which caught the attention of Advantage Solutions (NASDAQ: ADV).

In this episode, you’ll discover:

  • Why owning your brand is essential to building a valuable company.
  • How to differentiate yourself in a sea of competitors online.
  • The surprising reason Wiener & Goldman decided to sell.
  • How inventory is valued.
  • How to know when an acquirer is motivated to close.
  • The psychological impact of selling your baby.

Show Notes & Links

(06:58) Eytan Wiener: “Yeah Blucoil, that was the brand.

(08:11) Eytan Wiener: “Jonathan Goldman, he was my partner for the last, let’s say 10, 11 years. So we were the partners, and we had a team of about 15 team people in New York City. Bunch of overseas people as well on the support and data side.”

(15:12) Eytan Wiener: “we take a podcasting mic from Sennheiser or Jabra, or Monster, whatever, I mean these big companies and we bundle it to create that value.”

(16:44) John Warrillow: “I just interviewed a guy who ran a company called BeastGear

(18:42) Eytan Wiener: “Amazon just shut down Chinese sellers that were doing billions of dollars of sales, because of reviews and replacement, and fakes and stuff.”

(25:36) John Warrillow: “I was listening to the Prof G podcast the other day..”

(26:11) Eytan Wiener: “I also started this Amazon seller show called The Prosper Show

(39:54) Eytan Wiener: “there’s a bunch of companies like Advantage Solutions, which was the acquirer that were like these retail, consumer product base, large, like selling into Costco, and Target, and Walmart, and lots of retail, there’s very heavy focus on retail that needed more E-commerce diversification and that was a really cool, strategic target, in my opinion, because they needed let’s say expertise.”

(1:06:28) Eytan Wiener: “it was an Audi… An Audi e-tron, which is the coolest car.”

(1:10:33) Eytan Wiener: “So I use different providers, and I actually had the Prosper Show, that other company that I found, this Amazon seller show, I met the guys from GETIDA, which is the company I’m working with now, and they were much better and sophisticated in their process and know how. And I use them as a tool for my company Quantum, to recover funds.”

(1:12:17) Eytan Wiener: “It’s called GETIDA, which is this little sign behind me here. So G-E-T-I-D-A.com, and you could read about it. Anyone selling in Amazon FBA, which is most sellers, we can support you whether you’re doing a million or 100 million in sales. We work with agencies, we work with brands, we work with all types of sellers, developing other products too, but really around this whole financial audit space.”

About Our Guest

Eytan Wiener, was the Chief Operating Officer and Co-founder of Quantum Networks, an online retail agency for global brands,  and played an integral role in the company since its inception.  Wiener oversaw the company’s expansion from a startup in 2008 to a multimillion-dollar company in 2014. His oversight gained the company a 4,566% increase in revenue, a rise deemed unprecedented in the industry,  making the INC 500 list three years in a row. Without any prior professional experience in the tech or online industries, Wiener has skillfully deciphered and mastered the e-commerce space to help create and maintain a revolutionary company dedicated to bringing next generation of technology to the masses.

Wiener also co-founded the Prosper Show, the largest and most renowned Amazon Seller Show, in 2016 with key industry leaders James Thomson, a former Amazon executive, Joseph Hansen, founder of leading Amazon agency Buy Box Experts, and Chad Rubin, founder of Skubana.

Both of Mr. Wiener’s ventures were successfully sold to publicly traded companies: Quantum to Advantage Solutions (ADV NASDAQ) in 2020, and Prosper Show to Emerald Expositions (NYSE: EEX ) in 2018.

For more than a decade, Mr. Wiener has created an industry-wide awareness of the discrepancies that occur during the lifecycle of inventory sent by sellers to Amazon’s fulfillment centers. Dissatisfied with both his solutions, as well as those of other providers, Wiener utilized GETIDA and discovered that they made the deepest impact in maximizing financial recovery for his company. GETIDA’s solution significantly affected his company’s bottom-line profit, thereby increasing the total value of the sale price, contributing to Wiener’s successful exit.

Wiener led a private investment round in GETIDA in early 2021 and is now the CEO of the company.

Get in touch with Eytan:

Watch the interview

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Transcript

Disclaimer: Transcripts may contain a few typos. With most episodes lasting 60+ minutes, it can be difficult to catch some minor errors.

John Warrillow:

When an acquirer becomes interested in your business, at some point in the process, there’s a quiet conversation that takes place in a boardroom. They close the door, they ask you not to come, and they have a conversation about whether it’s cheaper or easier to buy your business or simply compete with you. If you’re selling a commoditized product, something you sell by the inch, by the pound, for example, or you’re competing on RFPs, you’re just the low cost provider, many acquires will draw the conclusion that it’s frankly just easier to lower their price, enter a bidding war with you and essentially put you out of business. There’s no point in buying your company.

However, if you built something that is truly unique, a brand that consumers are loyal to, or some technology that you protected in some way, they may draw the conclusion that it’s way faster, way cheaper, way easier to buy your company than to replicate what you’ve designed. And that’s the secret behind Monopoly Control, one of the 8 Key Drivers of Company Value, and something my next guest, Eytan Wiener knew quite well. Eytan started out life as an Amazon reseller. But as he will describe in this episode, he quickly realized that he wasn’t building any value and he took three steps, three ways to build a point of differentiation in his company. I’ll let him describe how we did it and ultimately got his $30 million company acquired. Here to tell you the entire story is Eytan Wiener.

Eytan Wiener, welcome to Built to Sell Radio.

Eytan Wiener:

Hey, thank you. Thank you so much for having me today. Happy to be here.

John Warrillow:

So Quantum Networks, tell me in layman’s terms what this company did.

Eytan Wiener:

Sure. In layman’s terms, we were a third-party Amazon seller, which is when you sell on Amazon, and instead of selling to Amazon wholesale, which is called vendor or central, or first party, you sell on Amazon. So as most of the listeners probably have been reading, that’s a very popular thing these days, it’s a probably a $450 billion market as far as aggregate sales of sellers. But it’s different types of sellers. So, we were actually an interesting hybrid of a bunch of types of seller. Namely, we had our own brand and product, we had exclusives with other brands in a buy sell relationship model. And we had a bundle model where we put our brand together with these products to create a value added solution. So through that…

John Warrillow:

Can you give me an example?

Eytan Wiener:

Yeah. So through that we were able to differentiate. For example, podcasting is very hot these days. We sell these high end podcasting mics. Kind of high end. Now if you’d go to a store, if those exists so much anymore, or in the olden days, so to speak, maybe five years ago, you’d have a salesman actually tell you what you need. Amazon’s really great, but if you think about it, the Amazon page is quite ugly and disturbing. There’s so many things going on, it works for them, so they’re not going to change it. So when you want to buy the mic, the truth is you won’t just need the mic, you need the mic and a stand, and an adapter. So, we’re just like, hey, let’s make that as well.

So we would source products from China, primarily, and we sell a whole line of Blucoil that was around accessories for it. So now instead of buying the mic and me competing with 10 other resellers on Amazon, I am the only exclusive listing that has this podcasting bundle. So it’s the mic, it’s the filter, adapter, software cable, you buy, you’re happy. The brand likes us because we’re making them look good and differentiating. And we make maybe more margin, or we get the exclusive sale versus just competing with everyone else. So, we went from many bundle products to create exponential level of different variations to basically create these virtual product skews. So that was an example of the differentiation of the business.

Eytan Wiener:

And that led us from just being a reseller, to being inclusive, to being kind of special. Which led the margin, which led to exit. That’s how I would summarize it.

John Warrillow:

Got it. Love that, I’ve got so many questions about how that works on Amazon. So, I love your analogy of the podcasting mic, because that’s great, I get that. The mic stand, the mic, and so forth. So when you put together that bundle, because when I’m on Amazon I’ll buy a mic, and then they’ll say, “Hey customers also liked, these lights, or the stand, or whatever,” is that the kind of bundle you’re talking about, or is it something different?

Eytan Wiener:

No, that’s the kind but Amazon’s wonderful. But even though it’s like similar product suggestions, they’re algorithmically driven, they’re not so specific. But I had a team curating products here and trying to find out exactly what customers need based on several things. We would read reviews and see someone’s like, “Hey this mic is great but, it’s missing this and this and that.” So we would just go, some easier said than done, we would go make or produce this and this and that. Or, “This is great, but this doesn’t work.” Or whatever it may be, and learn from the feedback how to create a solution.

So, instead of going all in, which we did at one point, just make a better product which is more expensive and risk laden, we just enhanced what was there with value. So when you go and you buy that product that you’re mentioning, maybe that bundle is good, but we would make sure it’s the perfect bundle for you. So if you’re a prosumer, you kind of know a little bit audio, you don’t have to research we, just rest assured based on our descriptions and our content, we got the best components for you, and this is not expensive, per se, but just utility and value, and you don’t have to worry about it. You have everything you need, you’re good to go.

John Warrillow:

And did you create a brand? You mentioned Blucoil?

Eytan Wiener:

Yeah Blucoil [crosstalk 00:06:59] that was the brand. B-L-U-C-O-I-L. So it started with just like a white label product, we put a brand to it and packaging, and people started to actually look for Blucoil because we had bundles for storage, we had bundles for streaming, we had bundles for podcasting. And that’s what led to a lot more value with our company and brand, and the proposition on Amazon, or on eBay, or whatever marketplace, that it’s a full solution. In addition, we’re able to sell those standalone bundle products on their own. So it may cost you $1 or so to make a product, but you could sell the charger for $15. We already had the economies of scale to buy them because we were bundling them so we could also sell standalone which is much, much more profitable.

But that’s like the whole ecosystem of bundles, is kind of endless if you do it right. There’s others that do it, I would say maybe in a more cheesy way. You know the guys say, “Here’s a camera and it’s the same price as everyone else, but you’re getting a million things.” They just throw in like everything. It’s a little too cheesy. This is very strategic and feedback customer driven, to make sure it’s what they need. And that’s why it’s unique.

John Warrillow:

Got it. Who’s the we in the company? You started this with some partners?

Eytan Wiener:

Yeah, so I started the company in 2008 with a partner, and then I had another partner join a few years later. His name is Jonathan Goldman, he was my partner for the last, let’s say 10, 11 years. So we were the partners, and we had a team of about 15 team people in New York City. Bunch of overseas people as well on the support and data side. So it’s kind of lean team.

John Warrillow:

Got it. But you grew to a fairly significant size in terms of sales.

Eytan Wiener:

Yeah. We grew really quickly in the beginning, I don’t want to go into the whole backstory which is lengthy, unless you want me to. But, we got to E-commerce accidentally, and then we grew on our own website, and then we hit Amazon and kind of exploded. It was much easier to succeed on Amazon then, it went from like zero to 30 million in like 18 months. It was like stupid growth, really not profit driven but just whatever we can to grow, learning every model. And then this bundle model I elucidated to you, is only … it only evolved or became something three or four years ago after we learned what to do, what not to do, how to differentiate. How to add value to the company, to sell the company, or what is it worth if we’re just a reseller? Not much.

But what if we have a brand? What if we have a bundle? Now that’s more interesting. What if we’re exclusive? That’s what led to a sale or a value versus just, a lifestyle business or just being some random wholesaler. And that’s what we did [crosstalk 00:09:29] time.

John Warrillow:

Let’s unpack each of those three. So you went from being a, I can’t think of a better word, like a generic reseller. So you’re just buying stuff and reselling it on Amazon, to kind of stumbling on this bundling model as kind of an epiphany in order to build values?

Eytan Wiener:

That’s a good way to summarize it, but it started from like, we were selling niche technology products that we were kind of exclusive, we had a higher margin. So there’s always some angle as to why we’re not just another reseller.

John Warrillow:

Okay.

Eytan Wiener:

Also a lot of our revenue where we were just another reseller. So we get rid of those models to say, okay, we’re the exclusive on this product, we’re going to manage your brand, make a higher margin, we’re going to manage everything. But, you’re a small company, you need the purchase orders. We’re not an agency, we’re buying and selling but, this is what we do for you. And then the bundle model kind of came after that for the more big brands, the household name brands that people know in audio, they don’t just need a reseller, it’s not interesting to them. So how do we get them to want to work with us? By offering bundles and variable solutions that they can’t or they don’t want to.

So you make settings. You have the exclusives, you have the high end products with our bundle model. So, yeah we went from becoming a strategic reseller, I wouldn’t say just the wholesaler, a strategic reseller, to a sophisticated, grand, bundle driven model, where we only took certain types of business because it was a certain profit requirement or a strategic relationship. I don’t want to just be a me too seller ever. It doesn’t value anybody. Maybe it’s a quick buck, but I don’t believe in that. Or maybe I did before and learned it doesn’t work.

John Warrillow:

In what way doesn’t it work? Just to be a simple reseller?

Eytan Wiener:

It’s kind of like quick money. So a lot of people … Amazon’s different these days because a lot of people are doing private label, they’re creating brands, and they’re selling their brands like crazy to all these companies that are in the papers. Which is interesting for me because I used to do this all day, and people had no idea what I did. Now it’s on the front page of The Wall Street Journal, that there’s these companies buying up Amazon brands. So it’s shocking to me, and it’s interesting. But, sorry I forgot the initial question.

John Warrillow:

Yeah, no. You went from being a relatively unsophisticated, reseller [inaudible 00:11:45] a strategic reseller, to this much more sophisticated version.

Eytan Wiener:

But the question was, what does it mean to be a basic reseller? I just forgot the-

John Warrillow:

Yeah.

Eytan Wiener:

… initial question.

John Warrillow:

Yeah like so when you’re just basically reselling stuff-

Eytan Wiener:

Okay. So-

John Warrillow:

… you’re sourcing stuff in third world-

Eytan Wiener:

Got it.

John Warrillow:

… developing countries.

Eytan Wiener:

Got it. Yeah.

John Warrillow:

And you’re reselling it effectively on Amazon.

Eytan Wiener:

Yeah, so there’s two sides. There’s like an arbitrage type game where people will go and they’ll buy stuff from the flea market, or on eBay, or even in Best Buy, and then flip it, right? So that’s cute, we kind of did that back in the past. That’s popular, it’s called retail arbitrage. It’s not so great because the brands don’t like it and it has its own problems. Then there’s just wholesale, we develop relationships with vendors, factories, you try to resell. But yeah, what are you doing for them? Amazon’s so popular now that the reseller model became a challenge because they realized they could sell on their own direct to consumer on Amazon, or they could sell to Amazon.

So we tried to create value for them where they want to work for us. Because we do their ads, because we do the bundles, et cetera. So the reseller model kind of slowly goes away, so we have to do it in a strategic way to keep it valuable. What’s happening now is that people are making their own brands and products, which is this whole other revolution that I was referring to. So you can make your own podcasting mic as well. I’m trying, that’s actually not that hard to do. And now that’s very competitive, because everyone’s making their own brands. But the concept now in the Amazon world is like, it’s the new mall, it’s the digital shelf, you can make a brand.

You probably bought stuff in Amazon where you’re not familiar with the brand, but it got good reviews. It’s a good cable so you buy it. That’s the new economy actually. And that’s why there’s all these aggregators buying Amazon brand. So I kind of was before that wave. I flirted a bit with the private label bundle model. But the new revolution is like, hey, make your own brand. So the resellers have kind of gone away, but there are still some that scrap here and there. The reason I don’t believe in it, as I said, which is your question, I think is, it’s kind of short term gains. You make money from the vendor, there’s some margin, there’s some inventory risk position but, long term why do they need you? They could drop you tomorrow.

There’s no value, they could do it on their own. There’s nine guys doing it. So how is that a business we go to sleep at night and be comfortable with your forward revenue? You can’t. You don’t have an agreement, even. Maybe you have a light agreement versus proprietary bundles, exclusive agreements, real value, guaranteed margin. That’s what I mean by sophisticated long term versus, fly by night or short term. You can still make a lot of money. I know guys who flip items, and they make millions of dollars but, they don’t know if they’re going yo make it tomorrow. They really don’t. And they say to me, “It’s not a real business. It’s a revenue stream.” It’s very different.

John Warrillow:

And that’s the kind of nature of our show so it’s music to my ears. I love-

Eytan Wiener:

I know, I know.

John Warrillow:

… Yeah.

Eytan Wiener:

It’s true.

John Warrillow:

Yeah, yeah. So you’re very much a hybrid because you, in some of the items, you branded under this Blucoil brand, so those were ones you owned. And then you were also bundling in other people’s products that you didn’t own, but you were included in this bundle. Is that right?

Eytan Wiener:

Correct. So we call like … Well, actually there’s three. So one is well, I would sell my own Blucoil charger. And that gave popularity because everyone was searching Blucoil so just to sell the charger was already a known product. We built the brand with a bundle, which is interesting. But then there’s two other kinds. There’s the podcasting bundle where there’s like three or four accessories within it. So we take a podcasting mic from Sennheiser or Jabra, or Monster, whatever, I mean these big companies and we bundle it to create that value. Then it was a little more detail. But that’s what I call a soft bundle, a hard bundle was actually two products together.

So this is a little deeper. What if you have a podcasting mic, but you really want a nice amplifier? So we weren’t going to make amplifiers because they’re actually sometimes more expensive than the mic. But guess what, we had a really good relationship with the amplifier brands, and those brands were thrilled to be on the same page or cross sold with Sennheiser or Jabra, but they’d never had the ability to because they’re just working about their supply chain. So if we could come and say, “Hey, we have this really cool product data visibility, that if we bundle your mic with their amplifier, you’ll both be happy. It’s this nice little marriage we arrange and we’ll increase our sales.”

So that’s actually called a hard bundle, it’s a whole other topic but that’s also interesting. Because you allow different big companies to play together in a strategic way, you’re the strategic middleman. That’s hard to do, that’s hard to build. But once we had the reputation and we built it up, it was easier to do because we would just show other brands, “Hey, look what we did for these guys. Look what we did for these guys. Why would you say no?” Some would say no, but most were like, “That’s awesome. Please, help us differentiate. Or help me as a small brand be associated with a Monster or an Apple.” Because then, it shows that we’re legit. So that’s a little more complex, but it’s really … it works actually.

John Warrillow:

Yeah, yeah. It’s fascinating because I just interviewed a guy who ran a company called Beast Gear.

Eytan Wiener:

Yeah.

John Warrillow:

Did you-

Eytan Wiener:

I know him.

John Warrillow:

Did you hear that episode by any chance?

Eytan Wiener:

The guy … I don’t know if I heard your episode. Is this fellow from England who-

John Warrillow:

Yeah.

Eytan Wiener:

… spoke to Thrasio?

John Warrillow:

Yeah, Scotland. Yeah.

Eytan Wiener:

I met him on a Zoom, he’s a great personality. He made his own workout equipment. And he was one of the early acquisitions of Thrasio. Yeah he’s a cool dude. Yeah, I know.

John Warrillow:

Yeah. So cool story. He built … skipping ropes was his first product but he expanded into all these other workout products. And eventually he got to the point where, 90% of his revenue was coming from Amazon, and 10% was off Amazon. And he was really working hard to build his off Amazon brand because he knew that he was susceptible to the vagaries of Amazon’s algorithm. So he put stickers inside the gear saying, “Hey, make sure you opt in at this website and register above.” But when he went to sell the company, I think if memory serves, the only, I don’t mean to say only. I think he got three times profit for the business, and I think the acquirer said, “You’re pretty susceptible to Amazon. They could change the algorithm. They could delist you, blah, blah, blah, blah.”

And so I just wondered, in your case, what were your thoughts around being so dependent on Amazon? Was that something you guys were thinking about? So take me through your thinking there.

Eytan Wiener:

That’s a really great question and it’s also interesting based on what I said. That was always the fear. And I mentioned these sellers who were fly by night. Aside from the challenge of Amazon, people get suspended for not doing anything wrong, or for doing something that they don’t realize is wrong. You could be put out of business overnight. Amazon just shut down Chinese sellers that were doing billions of dollars of sales, because of reviews and replacement, and fakes and stuff. It’s super dangerous if you totally rely on them, it’s scary. Now over time I learned, we never actually really got suspended, we had some issues where it could have been those usually misunderstandings, you have to learn how to manage it.

But what’s interesting now is that, on the contrary, all these aggregators, like the one he sold to, are looking for Amazon brands, because that’s where the growth is, even though they understand the risk. Now of course it’s wonderful to buy a brand that’s on Shopify, and has their own website, and eBay, and Walmart. And even when we sold, yeah we probably had like 10 or 15% of our revenue from other channels, but that’s not that much. So we’re very reliant, that probably led to maybe a lower multiple, or a lower realized value. But on the flip side, our acquirer, another acquirer is actually one Amazon expertise. So the strategic public company I sold to is a retail base service provider, and they want that E-commerce and Amazon experience. So that’s what they wanted.

Obviously they’d love for us to sell on Walmart and eBay, which we do and it’s cool, but it’s just not as impactful. So, you’re right that it’s very risky, and it should lead to lower valuations, but on the contrary a lot of these brands, and these acquirers are looking for it. So of course the company that bought him, Thrasio, once they buy him maybe they’ll use their resources, the idea of a roll up, and try to get him onto the website, and try to get him on to Facebook and great. And maybe if he did it on his own before, he would have been worth more. So the answer is yes, it’s very risky, and it’s all in, but it’s like me telling you or anyone, you should be all in on selling your product to Walmart, or Kroger. That’s like the world of groceries, right?

So Amazon is even bigger than both of them combined. So it’s a different question now. Five years ago I was much more anxious about it. Now it’s like, you’re only on Amazon, what’s wrong with you? Obviously you want diversity, it’s very hard to create. What often happens is the opposite effect. So we created off of Amazon, brands and ideas, and then we went to Amazon and blew up because we already had the product. Now, a guy like him could make Beast Gear, whatever, be successful on Amazon, proof of concept with a huge market, and a huge total accessible market, and then be like, “Okay, now I’m going to be interesting and I’m going to do Facebook ads, and Instagram, and drive people to my website and do social, and do that.” And that’s cool.

It’s probably not going to be as much as Amazon because you just don’t have as many customers, but it could add a lot of incremental gain. So the answer is, was very risky, still is, but that’s the new rule. I don’t know how else to frame that if that makes sense.

John Warrillow:

Yeah, no, for sure. For sure. And were you … part of this you mentioned this bundling strategy and exclusivity, and building your own brand, you were able to get better margins. Because the other thing I’ve heard from a lot of Amazon sellers is this just razor thin margins.

Eytan Wiener:

Yeah. So, actually, not always margins. Because when I bundled, I almost ate the cost of the accessories. Maybe they were 20 or 50 cents, or a few dollars. But, it wasn’t really to get more margin per se, it was to get the sale, or to get the vendor to work with me. So if 20 people are selling the mic, I’m not going to sell so much, maybe I’ll rotate with this bio box with 20 sellers, so I’ll get 1/20 of the revenue. The cool thing about all these brands is they had mapped prices, you had to sell at a certain price. So that preserves margin and, hopefully if everyone listens, obviously this is bad actors. But if you could preserve that margin, hopefully you have whatever healthy margin.

Obviously in electronics it’s smaller. But by doing the bundles, you lead to more sales, and sales and mapped pricing, which leads to hopefully a minimal margin that you’re comfortable with. So to answer your question, it depends on the market and what you’re doing on Amazon. So if you create your own brand, and you know how to source from China, and it’s like, I don’t know, some shirt that cost you like $1, and you sell it for 30 because you know how to push it, that’s a raising margin, even with Amazon fees. But if you’re reselling someone else’s product, your second or third down the chain, of course you’re already diluted because there’s so many people that have to make money.

John Warrillow:

What kind of margin would you guys work on? Are you able to share?

Eytan Wiener:

Yeah, so roughly electronics are rough so, I think gross is close, I’d say 18 to 20%, gross, maybe 10 to 12% net. But again, that’s a specialty bundling, whatever. Typical electronics margins are like 5% or 4%, very low. So we had a higher margin because we took a better deal with brands for exclusivity, we got better pricing, but we did again, we did the work, we made them look good. But even 10, you could argue, or 12 is not so high based on other markets. Now if you make a private label brand and you do it right, you should or … like the guy you spoke to and the company that bought him, they look for 20, 30, 40%, sometimes even net margins.

Because you’re like the creator of the brand. You go to the factory, you make the brand, you build it. You have minimal overhead, you ship it straight from China to Amazon, it’s a lot of margin, there’s not that many middlemen. Obviously that’s harder because everyone, like he made jump ropes, whatever. So everyone competes with them and they fight on price and advertising. But if done right, you can make a lot of margin on Amazon. The problem now is that there’s so many people making brands or like you have competition. And as you know, there’s a lot of Chinese direct competition as well. Where, they go around you and just sell it on Amazon themselves. And well if it’s your product, there’s factories that will just be like, “Okay, great. And then we’ll make it by ourselves and sell direct to consumer.”

So those are the caveats to private label and margin. But, it depends. I know people who make 3%, but they do hundreds of millions. I know people who make 40% and only do 10 million, and they both have the same net profit. It’s kind of crazy, but that’s how it is.

John Warrillow:

Yeah. And for you guys you were, kind of in the electronic space, you’d expect 5% if you’re just a standard reseller. But then, because you were doing some of these things, exclusive contracts, building your own brand, bundling, you were north by kind of more than 20%?

Eytan Wiener:

Well, gross. Maybe net around 10 or-

John Warrillow:

Yeah gross margin, I mean.

Eytan Wiener:

Yeah, yeah, yeah. Yeah, correct.

John Warrillow:

Yep. Yep. This just goes to show the power of exclusivity and having those kind of special relationships.

Eytan Wiener:

Yeah but even even the gross, the fact that you got more gross margins, because for that brand we’re doing a lot. We’re doing ads, or we’re doing services, we’re making them look good so they give us that margin because instead of them hiring someone to do the branding, and the go to market, or the design, or the promotion, we’re doing it. So that’s how we create it. Now there’s a overhead costs for it but, that’s how you’re able to add value to them. You’re not just a reseller dude who just hawks their products, that’s the point. You make it look sexy and good, and diverse, and interesting, or in many different ways.

John Warrillow:

And I know I was reading, I was listening to the Prof G podcast the other day and he was saying that the advertising business of Amazon, when Amazon basically works with third party resellers and sells them ads, it’s right below Facebook and some of these major platforms, in terms of how much revenue they generate just from selling advertising. It’s massive.

Eytan Wiener:

Yeah so this is like a whole other podcast which we could do. But, I got to tap Amazon advertising when it started, which is, believe it or not, only like 2017 or ’18. And I also started this Amazon seller show called The Prosper Show, which I also sold. And I always tell people the first Prosper Show there were no advertising companies, meaning solution providers that help you with advertising. And then when we sold the last show in ’19 there was like 15 of them. To your point, Amazon I think estimated for last year 25 billion, and I think this year it’s going to be maybe 30 or 40. But think about it, they already have a platform where everyone buy stuff from them. And now, similar to Google, yeah, but Google only makes money on the click, Amazon makes money on the commission of the sale and the ad.

So they’re charging you pay to play in order to rank. Which, ethically or whatever, is interesting. Because it doesn’t mean it’s a great product because the rank is high, but they don’t really care. So yeah, you have to spend a lot on advertising, which to the previous point, decreases your margins because there’s a lot of advertising costs. It’s a huge interest [inaudible 00:27:03] for them, it’s similar to AWS, which everyone reads about, that came about just by accident, because they had their infrastructure of hosting. Amazon makes so much money on margin on AWS, and so too on advertising. It’s just like a virtual way to make money on the platform that they already have. It’s insane. It’s going to probably be 100 billion soon.

John Warrillow:

Amazing.

Eytan Wiener:

But it also makes it very hard for sellers to compete. When I started on Amazon, there was no ad. So it wasn’t a thing. Now, if you don’t have an ad strategy, you can’t even play.

John Warrillow:

So if you went to one of these brands and said, let’s do an exclusive deal, we’ll handle all of your marketing, go to market, your advertising, is the actual cost of advertising been borne by you? The actual payment of those ads or by the brand?

Eytan Wiener:

Okay great question. So it depends how you structure it. Since I’ve sold, in the last few years there’s lots more agencies and people that have been doing this, it’s typically a revenue share model. So I’ll manage your brand, and then I’ll take a percentage of sales. I won’t even buy inventory. So we did not do that, we were like a buy sell. So in our buy sell agreement for some of the exclusive brands, we would run the ads, they would pay the cost of ads. Initially we marked it up a bit as a service, because we had people doing it and we’re experts just like an agency would, but to your point, the Amazon ad price became so expensive that we couldn’t really mark it up because it’s just really high, so we just ate it.

So they would cover the cost of ads, and we would manage it. And because of that, because if we’re doing that favor or service for them, they would give us this higher margin because like, we were just left [inaudible 00:28:32] managing everything. But now, there are agencies that manage your advertising or that manage your Amazon sales and take a rev share, but you still pay the cost of ads. So you’re kind of paying the cost of ads and you’re paying a rev share to the agency, it gets expensive. But you actually really need experts to do it because it’s very sophisticated.

John Warrillow:

Yeah, yeah. Let’s get into the sale of this business. So what triggered you to want to sell it?

Eytan Wiener:

Yeah, I don’t know it’s not like something popped in my head one day, I think I just had a lot of fatigue, and I was burned out from the day to day of doing it. I’m really entrepreneurial, and I’m always doing a bunch of other things, and I had other things up my sleeve. And, I wasn’t involved in the day to day as much, maybe as my partner, because I just wasn’t as enamored or excited. And I like the excitement. It’s not just about money, obviously, an enjoyment. And, I also saw consolidation where, as we discussed, now there’s thousands of agencies, and every seller is like, “Hey, I’m an agency, I’ll help you too, I’ll do revenue …” it’s crazy. I didn’t realize how consolidated it would be, I didn’t realize there would be a pandemic.

So I was like, let’s sell before it’s so consolidated. We have this unique model, there’s been some similar comp acquisitions of strategic Amazon resellers that’s selling to big companies, there’s like a few. Now there’s many, again, because of this whole wave. But again, this is pre the wave so it was quite unique. So I was like, we could continue and make decent income or salary. The other problem is, with the inventory of businesses, is most of your money is usually in the inventory, or in the business-

John Warrillow:

Right because you weren’t just [crosstalk 00:30:02], yeah you were buying the products and then reselling.

Eytan Wiener:

Yeah, you have a lot of inventory, it’s very heavy and risky in that regard, as discussed with Amazon and brands. And, you take these big positions and hopefully the partners make some money or distribution when the cash flow is proper, or when the time is right. But, it’s kind of a very rough crime, obviously, the realization of being able to make a multiple of income on an exit is much more interesting. If you’re able to do it, then just making whatever salary a year. Unless you have some crazy business where you’re making that much more.

John Warrillow:

So you’re taking these positions, you’re buying the routers, the mic stands or whatever from China, you’re actually paying cash. So you’re you’re pushing out cash to bring them in, and then you’re selling them. And so it’s a negative cash flow cycle and since you’re providing the product upfront, so costly. For you, are you pulling down a living wage at this point? Are you paying yourself market [crosstalk 00:31:10], a market rate salary from the company?

Eytan Wiener:

Yeah. So when I started, I didn’t even know about how much money I was making really in detail, it was kind of like, just let me sweat and figure out this, and then understand, start taking a draw. So as we get more mature, I was taking a decent salary to maybe cover my expenses, if that. But nothing significant because I really wanted to be in the business. But again, with this inventory fluctuations, and reserves, and swings, it’s hard to really just pull that X amount of money with cash flow. I wish we could talk about lines of credit and whatnot.

So, that was one of the reasons I was like, how I realized more money from this and value for all that I’ve done, because it’s worth a lot, but I’m not seeing a lot every day. So-

John Warrillow:

It’s not like those [crosstalk 00:31:50] businesses where the owner is sucking out like-

Eytan Wiener:

No, no.

John Warrillow:

… a million or two a year in dividends really?

Eytan Wiener:

No, and there are Amazon resellers that are like that, but again, it’s very hard and it’s very inconsistent. So the idea of selling was interesting because of that, in addition to the fact that I wanted to kind of move on and do something newer, see how it would work. I didn’t know we would be able to sell or if we’d be successful. But those reasons of money, or time, or mindset kind of made me want to see if I can go through this process, which we did. So long, interesting learning process, but that’s kind of what spurred it, I would say.

John Warrillow:

Where was Jonathan add on the topic? He’s running the business more day to day [crosstalk 00:32:29].

Eytan Wiener:

Yeah, he also … we had interesting conversations in both ways. But he also wanted to do it, which is good, obviously we’re aligned on that, or at least to see what we could or could not get, because he also was tired with a lot of the same things. Even though he was really great at it and liked it, he wanted to maybe learn to do other things and see how we could maximize what we have. So, we’re pretty much aligned, even though we had different roles and mindsets. It took us a while to figure out that we should do this, and how to do it. Which we could talk about, but we were aligned, it just took a while to get to the right … Speaking to a lot of people and researching a lot to get to the right path or trajectory, and how it should be done when, and all that stuff.

John Warrillow:

As you guys are having these conversations, do you have a sense in your mind of what the company might be worth? Are you using any benchmark or industry multiple, what are you thinking?

Eytan Wiener:

Yeah so I started with brokers, and I realized it was too downstream. I wanted more of like an investment bank, even though we’re not that big, but we’re mid market which is like big term.

John Warrillow:

You’re like three million in revenue at this point?

Eytan Wiener:

Yeah.

John Warrillow:

Ish?

Eytan Wiener:

Yeah ish. But again, whatever the income is on that, and the … It’s like the bankers will try to see what you’re going to make, and their percentage of it.So if you’re going to sell for 10, or 20, or 30 or 40 million, maybe they’ll play with you because it’s worth their time or it’s worth their retainer. So we’re this mid market where it’s not too much, it’s not too little, I guess for them, where, are they going to put in their all and their effort to really get a maximum sell, when we will just get the minimum amount? Or how do you create upsides within their agreement to incentivize them to work harder? Because they’re just really a matchmaker.

The brokers are more downstream where they make more money on their first million, they have this whole reverse model. And it’s like, that was like the spiel. We’ll put you up on a site, we’ll list you on a … that was too primitive. I was like, let’s do something strategic. Because you read online and the paper that strategic is the best thing because one plus one equals 10. And they want you and you want them and it’s like this amazing concept. Which is a little fairy tale ish, but fundamentally it’s true. Meaning if the acquirer could really needs you, and then you have the right synergy, you could blow up with the outcome. So I wanted to find the strategic acquirer versus just like … even just a private equity group, or a money group that I just didn’t really think would be fit.

John Warrillow:

So are you thinking it’s a multiple of your EBITDA that you’re-

Eytan Wiener:

Yeah, I didn’t answer your question. Yeah, multiple of EBITDA based on these brokers and bankers and people I spoke to, obviously inventory comes into the play as well. Value of inventory.

John Warrillow:

Yeah, how does that work?

Eytan Wiener:

I think about it sometimes. Sometimes people do kind of cash free. debt free and inventory is transferred and sometimes it’s part of the deal, because it’s like an asset. So there’s lots of ways to do it. I know these aggregators do it one way but, I don’t even know how … maybe I kind of overlooked that component [inaudible 00:35:31]. Because let’s say you sell your business for $10 million, but you have four million of inventory. So, is that in addition? Is that part of it? Is there a networking capital component which, it might though there was, so it’s kind of dynamic.

John Warrillow:

Yeah, let’s talk about your deal. So, I want to get to the inventory later because that’s an important this.

Eytan Wiener:

Sure.

John Warrillow:

But before we go there, you’re thinking it’s a multiple of EBITDAs is the way, do you have some sort of range that you think is reasonable, or that you would consider? Again, before you take it to market, what are you thinking?

Eytan Wiener:

Yeah, so based on speaking to bankers, brokers, people in this kind of premature market, and some comps, I’m thinking like, depends on the acquirer, but maybe a range of, I don’t know, five to seven, next adjusted EBITDA, based on lots of conjecture, but some comps and reason again, based on the acquirer and what they’re going to do with it. But that’s obviously a big range as well, five to seven, four to eight, obviously some bankers will tell you more because they think they can or they want to impress you. But, that was where we kind of thought.

John Warrillow:

Got it. Got it. And what was the next step? It sounds like you did hire an M&A firm to take you-

Eytan Wiener:

Yeah. So I didn’t want to go through brokers, I interviewed a bunch of bankers, that was very tough because of this middle market thing and a lot of them were just kind of not impressive, in my opinion, because they weren’t full-on investment banks and some were, okay. So we wound up working with a bank that’s pretty good that, was like a middle market investment banker, a banking firm that had interesting structure. This kind of maybe market was newer to them. I was going to go with another bank that had done a deal similar in the space, I just didn’t feel it, the chemistry and the process there. I figured it would be good because they did a similar transaction.

But then I learned through my research then and even after the fact, a lot now why that would have been not a good idea. So that … this is kind of [crosstalk 00:37:33] a dicey period. I learned that there was kind of just like a bunch of … you call it a bank, a bunch of people like freelance, interesting personalities, interesting drama that I would not have been able to swallow and I don’t think they’d be able to get the process done, or be efficient, and professional. Kind of-

John Warrillow:

Which signs did you [crosstalk 00:38:01] and-

Eytan Wiener:

It was kind of interesting.

John Warrillow:

… one of the questions we get a lot is, how do I find an M&A firm to take me to market? What do I look for, et cetera? So what was it that you saw in that firm that you were uneasy about? Was it the way they communicated with one another? Or their logo? Or just like, what was it that you thought, that doesn’t look quite right?

Eytan Wiener:

Honestly, the person … The reason I … in this example if you want to go there, the person I consider had done a similar kind of deal with similar kind of company, to a similar target that I was looking at. So I was like, oh this is perfect, just you’ll sell us too and you’ll probably get more because they love you and they want more of this. But on a personal level, the person’s personality, and the makeup of the firm, and my confidence that they’d be able to do it, just meeting the people, which I flew out and met them and understood them, just didn’t really jive with me. Also, they were on the west coast … they were on a, I don’t want to go any deeper.

They were on a different coast than me, I didn’t want to travel and meet them and like, I’m going to meet clients and meet them, I’d rather have someone close to me and meet them in person and meet people in their office, which is actually really important. People … I mean now it’s different with COVID but people belittle that, it’s really important to have that, be close to them and to be close to meeting. So the bank I worked with was in New York and we could just go to their office, have a meeting with them, with the auditor or with an acquirer, whatever we needed to get the deal done. It was like our little office just for that, it also helps, right? Which is a separate topic I’m sure you talk about it by telling your team, I don’t want everyone to know what’s going on, per se right away so we had a certain level of privacy and confidentiality. And that was very helpful, which is cool.

John Warrillow:

So who did you think was, you mentioned this original firm that you were considering had sold a business similar to a firm and you’re like, yeah, let’s do that. So who did you think was the strategic acquirer? What was the … Who did you think was-

Eytan Wiener:

There was a bunch of-

John Warrillow:

… interested in buying your business?

Eytan Wiener:

So there’s a bunch of companies like Advantage Solutions, which was the acquirer that were like these retail, consumer product base, large, like selling into Costco, and Target, and Walmart, and lots of retail, there’s very heavy focus on retail that [inaudible 00:40:06] E-commerce diversification and that was a really cool, strategic target, in my opinion, because they needed let’s say expertise. They already have all these brands, and know how, and access, why not just take it online in an Amazon play, that would be helpful to them? Or furthermore, what about a digital agency that’s helping brands with Google, I mean, now it’s kind of ubiquitous, believe it or not, and it went like two years.

But then, there’s all these agencies doing Google on Facebook and Instagram, but not Amazon. Now, they all have an Amazon play, but then they didn’t. So I was like, maybe we could sell to them. That proved to be harder because we weren’t really an agency, like a rev share model, we actually had inventory. So, that was a little [crosstalk 00:40:43].

John Warrillow:

… for those guys.

Eytan Wiener:

That was a challenge for us so we sold to this company that was more used to inventory and more used to retail. So that was another [crosstalk 00:40:50] kind of interesting lesson.

John Warrillow:

What did your investment bankers think this … So you had these idea that it was digital agency, maybe a consumer packaged goods company with a retail distribution. What did your M&A firm think the ideal strategic would be?

Eytan Wiener:

I mean those were two of the targets that we kind of set. Again, I knew a lot about this subspace, and they knew people in places, that’s another challenge with the bank, who do they know? A lot of times actually, I introduced a lot of the leads because I knew it from my networking. And even this acquirer I actually knew beforehand, or I knew of them. So that’s interesting. But they thought those ideas were fine, like a digital agency, consumer product company, or even a retail store that wanted an online presence. Or maybe … and that’s on the strategic and then maybe, a little less strategic but like, a roll up, a private equity group that wants a company with … to roll it up with some others, or just invest in a stand alone and take it to the next level.

There’s lots of different angles that we tried, and reached out to, to come to an outcome, or and [crosstalk 00:41:57].

John Warrillow:

Who kind of bedded in and how many companies did you negotiate with?

Eytan Wiener:

We had some offers from some private equity companies that wanted to take it over and run it on their own, and take it to the next level with their cash and know how. Nothing so impressive to me as far as chemistry or fit, but interesting, and obviously it helps in the process, because you want to create a competitive process and almost like poker kind of, let people bid on you. We tried to do that, it was somewhat successful but, that’s always a game. And some other company similar to the acquirer that were interested. But then this acquirer kind of came in pretty aggressive and we just were like, okay, this makes sense. So there [crosstalk 00:42:47] wasn’t that much … there wasn’t that much poker, so to speak.

The acquirer was a company called Advantage Solutions, which is a public company, they weren’t actually public then, they went public in 2020.

John Warrillow:

Got it. And so when you say they came in aggressively, first of all, Advantage Solutions, tell me a little bit … They had brands they were selling into retail stores? Just describe it.

Eytan Wiener:

It’s a very large company, honestly, I don’t even understand every something that they do. I worked for them for years, I got that whole corporate understanding, which is very interesting, to say the least. But they [crosstalk 00:43:23].

John Warrillow:

… now?

Eytan Wiener:

Exactly. Let’s say you’re selling products into Walmart and Target, and Kroger, or even Best Buy, it’s more foods, also product. They’ll help you get in, and they have reps to get you into retail, and they help you with fulfillment, and they help you with the coupons, and the marketing, and the point of sale. Lots of these things behind the scenes that you see when you go to a Costco, they do. They have a team of like 20,000 part time employees that do all the tastings in the Costco for their products.

John Warrillow:

Okay. So they’re almost like a marketing agency.

Eytan Wiener:

Yeah, it’s like this giant company, I didn’t even understand, that does product samples, and display, and logistics for it, and field teams and … But again, this is all for retail, right, what about E-commerce? So they started buying E-commerce companies because they’re like, “Hey, all these retail brands that we help for Costco, why can’t we get them onto Amazon? Why can’t we get them onto eBay? So they built a whole digital division, now there’s like nine companies in it. We were like maybe the sixth, that just focused on web, which is obviously smart, based on what’s going on in the world.

John Warrillow:

Sure.

Eytan Wiener:

Like let’s take our old school, so to speak, retail, full service company into the internet. That’s what they do, or that’s what they tried to do, or that’s what we tried to do.

John Warrillow:

So Advantage Solutions would work with the brand and they would say, “Great, we can help you get into Kroger, and we’ll do merchandising for you and sampling, and we’ll do slotting and et cetera. So they were similar to what you guys did, not exactly, but similar.

Eytan Wiener:

Yeah. But on [crosstalk 00:44:50] a retail level.

John Warrillow:

Yeah on a retail level-

Eytan Wiener:

So they wanted to [inaudible 00:44:52] brands I mean, we didn’t have that much opportunity to cross pollinate with this, whatever short time I was there but, they wanted an E-commerce arm too. So eventually once that’s built up, they could take all their brands and roll it into that and say, “Hey, we do everything for you. We do retail, we do E-commerce, we do whatever you need.” That’s like the holy idea, you know? How that comes to fruition is often difficult.

John Warrillow:

So you mentioned you had these private equity companies sniffing around, did you get any LOIs from them?

Eytan Wiener:

Yeah, a few, but I didn’t really feel the synergy, or the, I don’t know if it would have closed or wasn’t … didn’t feel great for me.

John Warrillow:

So tell me about that. Because I think a lot of our listeners would be getting some inbound interest right now from private equity groups. And, it’s hard for them to know what’s serious, what’s not-

Eytan Wiener:

Yeah, I don’t know. I learned a lot about strategic, public companies, private equity, and even within private equity, different subsets of private equity, I have a good friend that partnered another business that’s in a private equity firm, he educated me a lot. The idea there is, always there’s something strategic. Let’s roll up lots of companies and build this nice, little sub thing that could sell for that much more, and you could make a second buy, and you could roll equity, and that whole concept. So from what I read, and what I’ve heard, that sounded really cool.

But the ones that approached us weren’t so, maybe polished in that matter, or they didn’t even understand what we did enough, which is funny, because now that’s like the older age, everyone’s rolling up Amazon companies, but they didn’t get that, so it wasn’t there. But yeah, for your listeners, that’s a cool option. From what I learned, and you probably know this or maybe you disagree. Private equity moves quicker, but they’ll pay you less. Strategic is slow and clunky, but they’ll pay you more. So like great, let’s get more, if it works. But, I had some private equity options I think would have maybe even been better in hindsight, I don’t know. I just didn’t feel it, just did-

John Warrillow:

Were they [crosstalk 00:46:41] offering you cash or were they [crosstalk 00:46:43].

Eytan Wiener:

I think they were, I don’t honestly recall all of it, because not all of them were super solid offers because I didn’t really … I kind of set them out so into that, even term sheet or whatever you want to call it. But somewhere most of it had some kind of burnout component, which is a separate conversation about our notes, which we could talk about. But usually like a cash plus, or an out model, or like join this new group and you could be on the team, and do this and next thing your career. One was just like all out. We’re going to take over, we’re going to get rid of you in three months, have a nice day.

I didn’t really … I mean that’s great, I didn’t think they’d be able to, and I didn’t really believe in that company. I think it was a good offer, from $1 perspective. But, I’m sure people say this on their show, it’s also like your baby, right? It’s not just about money at all, you want it to find the right home, and I just think these guys would destroy the company. Even though the money was great. But it’s not just about that. Also my [crosstalk 00:47:42] where are my employees going? I want them to be very loyal to them, they’re loyal to me, I want them to be happy. So it’s very … I learned this more in retrospect, but it’s very multifaceted who we partner with.

John Warrillow:

Yeah. In terms of Advantage Solutions, you mentioned they came in aggressively, what do you mean by aggressively?

Eytan Wiener:

Maybe aggressive is not the word, but relative to all the other interested parties, they were much more serious about the term sheet, the timing. I think they wanted to, again, just a little disclosure, I don’t know how much I’m allowed to say because they’re public or whatever, so it may be a little vague on purpose if people don’t understand to clarify. But, they went public so now I could say it. So they wanted to acquire revenue on EBITDA. So they had goals, and timelines, and all these things that were behind the scenes that I kind of knew, I kind of heard whispers, so I knew they’d want to get the deal done for that, for better or worse.

So maybe that’s what I mean by aggressive like [crosstalk 00:48:43].

John Warrillow:

… IBM sales training, this goes back 50 years ago. The whole, make sure they have budget, and they have authority, I can’t remember. It’s some acronym, I can’t remember what it is. But essentially, you are almost doing diligence on them. They look motivated, they had a reason, they had a strategic rationale, they have money clearly, that’s what you were doing, you knew that, that that …

Eytan Wiener:

Yeah I knew that and I said, so I mean, they had a timeline. They wanted to close, I think they made the offer in August, they wanted to close it by the end of the year, which is also kind of aggressive. Was the offer as aggressive or strategic? I don’t know, I guess we could discuss in retrospect if it was or wasn’t. But-

John Warrillow:

Yeah. So how did they structure the offer?

Eytan Wiener:

… that’s what transpired.

John Warrillow:

Yeah, how do they structure the offer?

Eytan Wiener:

I can’t talk to the details of the detailed structure, but it was similar to what I mentioned. Certain cash components or none component over time. So a certain upfront cash, and a certain a certain amount of upside based on performance over a period of time of the company under their management.

John Warrillow:

That makes sense. And multiple, can you give us sort of a range of where it landed?

Eytan Wiener:

Somewhere in between the the range I mentioned to you before. Which is like four to six, or five to seven. With the earn-out and the potential, I could tell you where that actually was. Because the earn-out, if you add it, changes the multiple, the aggregate number but, maybe it was a little, maybe the offer was a little less than I expected, but maybe with earn-out, the value will be more of what I thought it would be, it’s really hard to say because I’m still looking back at the quick year that it worked for them and what happened and transpired on the numbers level, which is very sophisticated at a corporate level and that was kind of hard for me to understand, to be frank.

But yeah, I think it was within the range of what I expected. I was a little surprised that we didn’t get some other offers from other parties, but I also think it was the timing. Like now, if we would have sold post COVID once we blew up further because of the market and Amazon, and tech, and everything we sell, and work from home, we will probably got many more offers. But that’s timing, that’s life. Or I could have argued the opposite. When COVID happened I was like, oh shoot, we’re done. We’re not going to do any sales, or earn-out’s going to be zero or whatever, negative and everything’s bad.

And that was true for two weeks and then we turned it around and we did great, because we just, it’s a whole story, but we mixed and matched it wherever we could to stay alive and then Amazon exploded, and E-commerce exploded, and the world changed, and that’s the story. But, yeah timing is very key, as you see from this story.

John Warrillow:

Yeah. So you did the year, so the earn-out was one year?

Eytan Wiener:

Approximately.

John Warrillow:

Longer but you left early? You don’t have to say.

Eytan Wiener:

No comment, no comment.

John Warrillow:

Fair enough. What was it like to work for a big company, your an entrepreneurial guy?

Eytan Wiener:

It’s very hard for me because I’m used to controlling, not controlling, but being able to control, I’m not a controlling person, I just like to understand and know. So to have … the truth is they most of the functions we were continuing, but corporate finance team, and all that, and transitioning, and all these brands and revenue, and numbers, the transition was very difficult for me. The team, most of the team was fine, we continued the process. But on some of the processes it was hard because you kind of have to roll to a much bigger company, right? We’re a 15 person company going into like a 40,000 person company with four billion in revenue, and all their corporate compliance and systems, and public checks and balances was insane.

So I was way under my pay grade as far as handling finance, or management, or operations for that, and I kind of needed them to help me with it. And, eventually we figured it out, but it takes time. It takes a lot of time. And it’s just totally different than what I’m used to. I mean I got into business, I didn’t mention this in the beginning, I was in dental school, I dropped out, I just started business on my own, I figured things out. And I tried to do the best I could. And then I came into this corporate world I’m like, and I learned a lot. Like how it works and why, I know a lot about finance. But it was just so diametrically different than what I’m used to, culture, processes, motivation, bonus, everything, it was very shocking to me, very hard to understand, even why businesses would function that way.

But they’re well, they’re a public company and that’s how it works. But I was like, I did not even understand what I was getting into, to be frank.

John Warrillow:

I know we can’t talk specifically about the earn-out, and I understand that.

Eytan Wiener:

Sure.

John Warrillow:

If you and I were having a beer, and I was like, I’m thinking of signing up for an earn-out. I’ve got this deal, they want me to stick around for three years. 30% of my value is going to be at risk in this earn-out, what advice would you give me over that beer?

Eytan Wiener:

A lot of people told me, when I got this earn-out offer, the risk and reward. You just don’t know what’s going to be, and how it’s going to roll, and what’s going to happen and why. So I wasn’t sure what to do. But I guess, if we were having a beer I would say, not necessarily based on my experience, but based on all my research and stories I’ve heard, try to get as much as you can up front because you just never know. So if you really feel/ this is something I didn’t do. Not that that led to a problem per se but, I didn’t really research the company and understand exactly how it worked because I couldn’t, it was just a huge company. It’s not like, Oh, you guys, whatever, you’re going to buy us, let’s go see what the culture is and figure it out, and talk.

This is a huge company with all these layers, there’s no way I could have known. But I probably should have done more research and everyone should. So if you do that research and you really feel good that there are earn-out goals and the way it’s going to be calculated and organized is transparent, and clear, and you could hit it, then you should consider it. But if you don’t really know what that means, you shouldn’t really begin to consider it because you don’t even know what that means. It’s just like paper stock, okay maybe I’ll get this. Okay what if your agreement, and this is a legal thing too it says, okay, but these are the restrictions.

So it’s very risky, I think, unless you really know what you’re getting into, and you have a very solid understanding of your business and their business, and how it’s going to work, and what the agreement is. Without that, it’s very risky to do an earn-out because, you’re getting less money, and you may never get the remainder that you should have. So the caveat is, yeah, but if you really feel good about it, you’re really confident, it’s probably worth the risk. I guess the lesson is, you have to understand that now, you’ll tell me I’m sure your other speakers will, or guests will say, “Well, you just don’t know sometimes.”

So the answer is … So if I had a beer with you I would say, don’t do it, unless you really understand exactly how it’s going to work, and you have a great feeling about it, you have a great understanding of it. And even then, obviously there’s risk, but it’s much more calculated risk, versus just a random roulette, which is not wise in any business or anything in life.

John Warrillow:

Yeah-

Eytan Wiener:

That’s my long winded, convoluted answer. But I think it makes sense.

John Warrillow:

I realize we have to be a bit sensitive to-

Eytan Wiener:

Yeah, yeah, yeah.

John Warrillow:

… the company. [crosstalk 00:56:14]

Eytan Wiener:

… I had a great or bad experience, it’s just like looking back what people told me, what happened, how it works, understanding, and a lot of people who’ve sold that I’ve spoken to. I’m sure you get it a lot but usually, I mean I could ask you, usually people say, “Don’t go for …” I don’t know, what do people say to you as the common answer on the show?

John Warrillow:

Yeah [crosstalk 00:56:33].

Eytan Wiener:

… that question. Right. So okay, so-

John Warrillow:

[inaudible 00:56:35].

Eytan Wiener:

Okay so-

John Warrillow:

Get your cash up front.

Eytan Wiener:

Okay so there’s a straight beer answer but the caveat is, what I said. That, it depends. I know someone who did amazing in her earn-out. I know another company who sold to a different company that did amazing, and maybe my trajectory could have been similar or the same, I don’t know. It’s just risk, it’s added risk but, who knows? Maybe there’s that reward.

John Warrillow:

Yeah, I think that’s right. I mean I think if it were me and you having a beer I’d say, “Get your minimum number upfront in cash meaning, if the earn-out comes to nothing, you don’t get any of it, you won’t look back on selling with tremendous regret. That if you hit the earn-out, it’s like amazing, you guys … If you don’t, then it’s still a single in a baseball analogy.

Eytan Wiener:

Correct.

John Warrillow:

Yeah. Yeah. How did your relationship with Jonathan evolve during the negotiations with Advantage?

Eytan Wiener:

That’s a interesting question. So as I said, as the business got older, we spread our roles and functions, and priorities. And he was more into business and I was more like development, figuring out next steps, kind of burnt out. But when we sold, we were much more aligned. But the good thing is that, since he’s a really great operator, he was able to run the business and keep it going, and keep the growth, which is really helpful, when you sell. You want to go out with a bang on a lift. And I was able to, vet the bankers, meet the brokers and the bankers. And then obviously, he helped and he was on the calls, but I was able to kind of quarterback that process with his help, but I really ran it, I really owned it.

Which was fun for me, in a way it was like a challenge. And then, once we got the offer, okay, let’s … I got to run the diligence, and I got to meet with these accountants and lawyers, and all these people. And, so we worked tightly to do it, but I was doing a lot more of the detail on this, versus him running the business, which is great, because I’m sure he got a lot of founders that say or, people on your show that say, “Oh I was selling, but I was so busy with diligence that our numbers got screwed up.”

John Warrillow:

For sure, all the time.

Eytan Wiener:

It’s like classic, right? So, we were able to, I think, balance that well so that our numbers were, I guess, as good as they could be. And this because [crosstalk 00:58:57]

John Warrillow:

… Jonathan run the business, I’ll do the process. I’ll keep you in the loop but just-

Eytan Wiener:

Yeah, I mean obviously, he’s still helped and he was involved, and I wasn’t really running so much of the business then. So, it wasn’t so much of a difference. It was just like, okay, your turn, now go, we got it. Now you take it to the next level, and I’ll help and it was a good dynamic.

John Warrillow:

And how did Advantage, I’m curious to know because, a lot of people listening to this will have that sort of similar, owner versus second command, or president, CEO role separated, whatever, where they have someone kind of running the business day to day, making sure that trains get there on time, et cetera. And then you have a founder who maybe a little less involved in the day to day. How did Advantage lock Jonathan up? Did he get an earn-out? How did they ensure that the person actually doing the work stayed?

Eytan Wiener:

Yeah, I can’t really talk to details of the structure of the deal. But, we stayed for a bit, I think their approach, and what’s become these approaches is like, it’s nice to have the founder. And as I told all potential acquirers, yeah, I’m happy to stay on. I’ll do what I can. That’s the right thing to say, and it’s true, I want it to be successful. But I really would like to move on eventually. “Why are you selling then? What’s going on?” Yeah, we need to take it to the next level, we need a partner, and I want to move on, but everything’s great and I’ll help you as much as I can.

So that was kind of the thing with them. I think since they’re very big and they don’t want to rely on an entrepreneur, they want to build it into their process. So they’re okay with, let’s say, a founder leaving, but they want to know that they have you for a certain time. It’s not like if I left after a certain time there’ll be a problem but, obviously it would affect their earn-out, it would affect their transparency. So between me and Jon, there were some discussions, we told them what we feel and how we feel. I think we were both open to see what it was like to work for a corporation, and it wasn’t so much my speed and Jon I-

John Warrillow:

Did he stay?

Eytan Wiener:

Well, he stayed a little more than me, but he’s not there now.

John Warrillow:

No, no.

Eytan Wiener:

He also thought maybe he could learn certain things, and he did, and what will be best for him and what wouldn’t. So that was a very hard decision for him. It was more easy for me, just based on my personality, or ambitions. But, whatever, to each his own. So, again, they wanted us to say but if we didn’t, they’d probably try to figure it out. I’m not sure where that will lead the company in the future because, not involved. But, it’s interesting. That was an interesting topic, so to speak.

John Warrillow:

Yeah. And how did it work with you and Jonathan at the time? Because clearly you wanted to move on, he was a little more on the fence. Because if I were Jonathan I’d be like, “Dude, don’t leave me holding the bag here. I need you to come too.” Were those conversations going on?

Eytan Wiener:

You’re saying before we sold whether I was going to continue?

John Warrillow:

Yeah, it’s like, I can’t think of a good analogy. But you’re partners in this business, you’re thinking of selling to this giant fortune 500 company, was the conversation around like, I’ll stay but I need you to stay. Was there that conversation that happened that-

Eytan Wiener:

Yeah. Well, so again, I mentioned we had our earn-out so we wanted to make sure we maximize that. That was [crosstalk 01:02:23] mutual-

John Warrillow:

[inaudible 01:02:24]. Yeah.

Eytan Wiener:

Yeah. So we … but yeah, obviously. Yeah there wasn’t … okay so I guess … Yeah it was a company level thing or an equity level thing, it wasn’t specific to each person. So I could [crosstalk 01:02:34] say that, or I said that. So it behooves everyone to try to stay and make the best of it, and benefit. Comes tricky a little if I didn’t want to stay, but if I didn’t, and then the numbers went down, that would affect him and I feel bad. So, whatever, obviously, we’re partners in it together and very close so we wanted to do the best for each other. And we tried to do that to the best of our ability.

John Warrillow:

How did they handle inventory in the valuation? You mentioned it was a multiple of EBITDA. What-

Eytan Wiener:

Yeah I don’t know if I can talk to the exact details but, it was an asset purchase. So it was kind of funky how inventory was treated, but it’s not like an additive number, it’s part of the value of the business that’s purchased. So they assess the value of the inventory and the reserve of it, and they audit that to make sure it’s accurate, and it’s kind of part of that chunk of what you’re worth. Because even EBITDA is a derivative of inventory value, it’s like all tied together. But it wasn’t the kind of thing like, “Hey, we’ll pay all this for your inventory, and all of this for your businesses,” like one big picture, there’s other ways to do it, obviously.

Whether it was right or wrong, or recommended, that’s a separate conversation of tax ramifications and hot assets. It’s a whole thing but, I think it’s conventional. I know with these aggregators they treat it a bit differently. They pay something for inventory, a cost basis and they pay something for multiple, but there’s like a threshold. So I don’t know exactly how it rolled out, but in our case it was kind of like one large discussion.

John Warrillow:

Yeah, yeah, yeah. Yeah, I think that’s more common than not. I think in very small companies, the inventory often gets treated separately, but I think in businesses that are more the size of yours, to multiple EBITDA the inventory-

Eytan Wiener:

I think so.

John Warrillow:

… goes along with it. Yeah, yeah. You mentioned you’d been running this company for years, and moving the money from one PO to another, and kind of not pulling out a lot of cash for yourself. Did you reward yourself in any way when you sold and the cash came in? Was there a trophy? Was there … How did you mark that when the money was finally in the bank?

Eytan Wiener:

Yeah. It’s kind of weird for me, because I was always pretty tight, so to speak, all of my money was in the company. So I had a decent amount of money in the bank, it was interesting. Again not the key to happiness in life by any means, and I actually felt very interesting when I sold. I didn’t feel, just a separate … I didn’t really feel like oh, I made it, I’m so fulfilled or like, everything’s great. Obviously money is important, supporting my family is important. I’m not such a showy, or materialistic person. I don’t know, I moved to a new house that was nice. I was … I … I don’t know, maybe got some stuff for my wife. Maybe it’s more stuff that we needed that we just went ahead and bought.

But I didn’t buy a yacht or anything remotely close to that-

John Warrillow:

You’re not touring around New Jersey in a Ferrari or anything like that?

Eytan Wiener:

No, no, no. I just got actually a cool car that I like.

John Warrillow:

Oh you did get a Ferrari?

Eytan Wiener:

I did, I did. But that was only, I’ll be honest, yeah. But there’s a little caveat to that but I-

John Warrillow:

What’s the caveat?

Eytan Wiener:

The caveat is that …

John Warrillow:

I can’t believe you bought a Ferrari. You’re like [crosstalk 01:06:00]

Eytan Wiener:

I got a cool, electric SUV which is a little more expensive than I normally would have bought. But the caveat is that, I learned, and I have my new company which if you want, we could talk about. So now I have my own LLC or entity, and you could deduct the car, all this fun stuff. I’m not the kind of guy to buy something really expensive, it bothers me principally, because it’s not necessary. But [crosstalk 01:06:24].

John Warrillow:

Did you get the Y or the X?

Eytan Wiener:

No actually it wasn’t Tesla it was an Audi [crosstalk 01:06:31] and Audi e-tron, which is the coolest car-

John Warrillow:

How do you like it?

Eytan Wiener:

I love it. And I’m not Mr. car, Mr. showy, but it’s the coolest thing, it’s like a spaceship. So yeah that was more expensive than I would typically whatever. But I was like, no, I’m going to do this, and I have the federal discount. I’m always thinking about cost basis. So I was explaining to my friends like, yeah, this is really nice but if you think about it, the effectual cost is only the price of a Honda Accord, because I’m going to deduct it. So like, okay, it’s okay, you could buy a nice car, relax. So I’m not into that. So it was weird for me. But the answer … The truth is, yes. I did buy a cool car and I moved to a bigger house for my family, which is nice and in the area that I wanted to move to. So, I don’t know if those are trophies or just … maybe they are. But, yeah, that was cool.

John Warrillow:

They’re rewards for a job well done, it sounds like. You mentioned you weren’t happy when you, I don’t want to put words in your mouth. But you mentioned you didn’t feel the way you thought you’d feel when you sold your business. So what did you feel when you sold?

Eytan Wiener:

Yeah, I wanted to maybe bring it up. I don’t know I … well it was very hard because I went from selling to doing an inventory and going straight into this other company, and going into an earn-out period, which is very stressful and difficult, and changing in dynamic. So I never got the time, let me just, maybe edit my statement. I never got the time to even relish or understand, or accept, okay, I did this. Because I went straight into crazy pressure to perform, which is very hard. Especially when you can’t control your outcome fully. So I never got the time to celebrate, or have a drink, or go out with my wife, or whatever it is, to celebrate.

But in addition I felt a little empty in that, I was like, okay, this is what it’s about, okay, now what? Do I feel really happy as a person? Is that the point of life? What about all the other things are important to me? Or religion, or family or, there’s nothing to do with this. It’s good to have some money, it’s very important, super important, obviously it doesn’t buy happiness, it’s very good to have and it’s very helpful. But it’s just, I also really enjoy the game. I enjoy business and building, and entrepreneurship and I was like, wait, I sold this company. But that was like my fun, that was like my baby. So I felt a little, I don’t know, it was very weird, psychologically, for me for a while. And then just running into this whole earn-out stressful period.

And then the pandemic. And then last year was like, I don’t know, it was very tough for me mentally, just adjusting, calibrating. So I wasn’t like, oh, great, I made some good money, I should be so happy and everything’s great. Not at all. I wanted the next challenge I’m very into challenges and, which so I’m part of this new company now, which is great. I actually have a place where I could grow another company. And a lot of founders don’t find their space and they get maybe even depressed or, you have the stories, people win the lottery and they go back up, obviously not like that, but like, okay, now what? You think because of all the hoopla, that that’s the end goal.

But, I like working, I like people, I like helping, I want to do charity. So, I was just like in this weird transition. I’m still not there yet, to be frank.

John Warrillow:

Well, I appreciate you sharing and-

Eytan Wiener:

Sure.

John Warrillow:

… with such candor, because I think it’s a very real thing and it’s part of the journey. So before we let you go, tell me about the new company. What are you doing now?

Eytan Wiener:

Oh, sure. Yeah. So, I’ll try to make it brief. So, we sell on Amazon, as discussed, Amazon sometimes makes mistakes with inventory, and data, and numbers. So I actually created a software back in 2011 in house, to find these discrepancies in data. And I had this developer, and he kind of started other company doing it, which is another discussion. But, I always knew that there was a problem, even if it’s one or 2%, if you’re thinking about getting that money back similar to auditing phone bills or shipping, it’s important. So I use different providers, and I actually had the Prosper Show, that other company that I found, this Amazon seller show, I met the guys from GETIDA, which is the company I’m working with now, and they were much better and sophisticated in their process and know how.

And I use them as a tool for my company Quantum, to recover funds, which is … and they were much more successful and robust than the competition out there, and then what I could do in house, and I became kind of closer with them along the way, and I sent them a lot of business, just like for fun to see what they could do, and all the clients were happy. So I realized there was something significant to it. And I wanted to stay in the space that I was in within Amazon, and the seller community from the show, and from my business. So, I got more serious with them about like, “Hey, how can I take you to the next level?” How can I be a part of it?” I was more interested in like equity and upside, and growing, than salary or something like that.

Long story short, I kind of worked during the pandemic, part of it in their office, and I became really close with the founders. And I brought a lot of business just as a token to show what I could do and I negotiated a partnership position, and then I invested as a CEO, and now we’re trying to take it to the next level, where we, again, help sellers get money back, to the topic of selling companies, all that money that we get back falls to the bottom line, which is a multiple, which helps me. So I talk to large strategic sellers as an example. I’m like, I believe in this company, I’m putting my money behind it. I’m the CEO of it, this is the real deal. This is why it’s better than the competition, or this is why you should be doing it.

Most people don’t know this a thing, most people don’t know they could audit their phone bills or their electric, and sometimes it’s significant, sometimes it’s not. But, it’s free money. So it’s a great, easy sell, we only charge money … We only charge a percentage of recovery when recovered, no long term agreements. And-

John Warrillow:

What’s the name of the company and where do people find out about it?

Eytan Wiener:

It’s called GETIDA, which is this little sign behind me here. So G-E-T-I-D-A.com, and you could read about it. Anyone selling in Amazon FBA, which is most sellers, we can support you whether you’re doing a million or 100 million in sales. We work with agencies, we work with brands, we work with all types of sellers, developing other products too, but really around this whole financial audit space. And it’s also like three minutes from my house, which is great, so I don’t have to go back and forth to the city with three hours commuting.

John Warrillow:

You have nowhere to drive the Audi.

Eytan Wiener:

It doesn’t have such a long range this car, I mean it does, but not compared to a Tesla. So, yeah, I drive it on the weekends, or I drive it whenever that’s true. But, yeah, I should start walking to work for exercise, I’m thinking about it. But it’s really nice. I’m very local, the work life balance is very different. I have four kids, I’m right here and, can spend more time with them. So, that’s important to me. I worked a lot on my first company and just to balance this is always challenging, so hopefully this will be a bit more balanced. And, yeah, that’s what I’m up to now.

John Warrillow:

The URL is GETIDA.com, we’ll put that in the show notes of BuiltToSell-

Eytan Wiener:

Cool, thank you.

John Warrillow:

… .com. Eytan, thanks for doing this.

Eytan Wiener:

Thanks for having me.

John Warrillow:

Hey if you like today’s episode, you’re going to love my new book, The Art of Selling Your Business. The book was inspired by the cohort of my guests over the years who have been able to negotiate an exit far better than the benchmark in their industry. Sometimes two or three times more than I would have expected. I was curious to understand the tactics and strategy to these entrepreneurs, and what they do differently from average performers. The result is a playbook for punching above your weight when it comes to selling your business. To learn more, go to BuiltToSell.com/Selling. Where we put together a collection of gifts for listeners who order the book. Just go to BuiltToSell.com/Selling.

Built to Sell Radio is produced by Haley Parkhill. Our audio and video engineer is Denis Labattaglia. If you like what you’ve just heard, subscribe to get a new episode delivered to your inbox each week. Just go to BuiltToSell.com.

Outro:

Thanks for listening to Built to Sell Radio with John Warrillow. For complete show notes with links to additional resources, visit BuiltToSell.com/Blog. John is the Founder of The Value Builder System™. To find out how to improve the value of your business by 71%, visit ValueBuilderSystem.com. John is also the author of Built to Sell: Creating A Business That Can Thrive Without You, and The Automatic Customer: Creating A Subscription Business in Any Industry. Connect with John at Facebook.com/BuiltToSell, or on Twitter @JohnWarrillow. W-A-R-R-I-L-L-O-W. Thanks for listening.

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