How to grow your e-commerce Business by Buying a Business
On this podcast, Walker Deibel of Quiet Light Brokerage will be teaching about how to grow your e-commerce startup through acquisition.
Can a 7-figure Amazon seller grow an e-commerce startup through acquisition?
It’s a lot easier in the USA than the UK where 90% of deals in Quiet Light Brokerage in 2019 were in the USA.
Cash is so available right now while interest rates are low.
Rule of thumb for buying an e-commerce business
He’d want at least $100K to allocate towards acquiring an e-commerce startup.
If you have more, it’s easier.
Say you have $50K on your e-commerce startup, you could probably buy a business with an SBA loan.
A lot of it comes to your comfort with debt as a vehicle.
If you’re comfortable with maximizing debt
Make note you have the right skillset.
You could buy a business doing 500K
83K will be principal and interest payments on the acquisition so you get about 183K in free cash flow.
Equity buildup takes the real estate model to e-commerce startup Acquisition entrepreneurship
With a physical asset like a house, you have the physical asset.
There is more of a margin of safety if you wait long enough, the real estate market will always turn around.
Walker bought the printing company first because the bank was willing to use the equipment as collateral.
- Harvard strategy
- Customer power
- Supplier power
- New entrants
Threat of substitution
Channel concentration is also needed.
In online you need to add “marketplace power”.
If you have an e-commerce startup that is 100% on Amazon, Risks might be
- Algorithm changes
- Organic ranking changes
- Start charging $20 for no reason on every ad
You could look at something driven by Google or Amazon but this is a virtual version of selling all your products via Walmart.
How to Lower Risk of an Amazon business
The trend – Amazon has become acceptable.
You could say that all Amazon businesses have a type of risk.
At QLB, they sell all types of online businesses.
24 months ago, buyers were saying “Why would I buy an FBA business?”
⁃ “Amazon has too much power”.
Today 2020 Amazon has become a completely accepted distribution channel. Just like Google.
Coffee maker example
“This is really crowded”
- Great organic rankings
- 100s of reviews
- Historical performance of
- Email list off Amazon
You can use this as an infrastructure to build a new e-commerce startup business.
Let’s say you launch in this, then a 2nd one does.
The mindset of e-commerce entrepreneurs vs. Investors – is there a different mentality?
Not so much a difference but some people just don’t know about the model.
90% of self-funded buyers never actually end up buying something.
They don’t know what they are looking for. They look at it like items on a menu.
If you order a ham and cheese sandwich, you don’t need to know anything.
Before you start to shop and understand what it is you bring to the table.
What does the empirical evidence suggest makes a successful entrepreneur?
An intelligent, driven individual committed to a good opportunity.
Intelligent – It is correlated to success
Driven and committed. – You put in the success equity and get it done
The aptitude of the business buyer
What skill sets do they bring to the table? Spectrum between:
⁃ Revenue generator
⁃ Profit maximizer (reduces costs)
People have a natural tendency to live in one place or another on the spectrum knowing how you want to spend your time.
Racing bikes tell you what you kind of business buyer you are
Men buy based bikes on what they want to be.
Women buy based on where they are today!
For example, Walker has a $20K bike he doesn’t ride.
Two types of people who want to be in Amazon
- Those who know Amazon and have it mastered
- Those who want to live the 4 Hour Workweek
It’s okay to buy a business where you want to build the skillset, but business is business.
It’s all about how you run the business.
Different growth or profit-maximizing opportunities are available to that person who has it mastered.
Skills for buying a business
Video training, business valuation
Dealflow is critical for business buyers
At the end of the day what you need is deal flow.
The team at Quiet Light Brokerage does an amazing job.
There are worthy competitors out there too.
It’s easy to get a bad deal flow.
The fastest way is to go to quietlightbrokerage.com
Start looking at deals.
Watch how fast deals move.
Come up with your own ideas – don’t waste anyone’s time if you don’t have a real interest.
You’ll educate yourself and gain confidence In your ability to
Be patient, be smart, be cautious!
Acquisition entrepreneurship is a huge opportunity
Acquisition entrepreneurship will be the greatest opportunity of our lifetime
- Baby-boomers own more companies than in history retired at 10,000 a day, will stay 10 years $10T in business values
- Online markets -product-market fit – huge opportunity of applying amazon and online skills to businesses coming up for sale
- Huge cash available – PE $1.2T plus banks looking to lend as low interest
Other Podcasts on Amazon Business Buying and Selling
The Business Buying Process with Walker Deibel of Quiet Light Brokerage
How to sell an Amazon Business with Mark Daoust of Quiet Light Brokerage
Business valuation with Terry Lammers
Selling your Amazon Business to Private Equity with Chris Shipferling of Providium