Ben Leonard is the Co-founder of Ecom Brokers, an e-commerce brokerage firm that is based in the UK and works with businesses worldwide. He is also an e-commerce consultant and the Founder of Beast Gear, an independent fitness brand. He grew Beast Gear to an international seven-figure business and successfully exited after three years. Ben now helps other business owners to do the same with his e-commerce consultancy firm.
Here’s a glimpse of what you’ll learn:
- What Ben Leonard has learned from recent M&A transactions
- How to make a business attractive to investors
- Ben talks about the Ecom Brokers movie
- Where to learn more about Ben and his company
In this episode…
What does it take to build a sellable business? What do investors look out for when assessing a company?
According to M&A expert Ben Leonard, there are five key areas to look into when building a sellable business — your brand, growth and profitability, risk, transferability, and documentation. Preparing your brand for a future sale early increases your chances of selling it for a higher multiple. Ben also advises business owners to do their due diligence before accepting to exit.
Ben Leonard, the Co-founder of Ecom Brokers, joins Rich Goldstein in this episode of the Innovations and Breakthroughs Podcast to discuss lessons learned from recent M&A transactions. Ben also shares tips for making a business attractive to investors and how not to sell your e-commerce business.
Resources mentioned in this episode:
- Goldstein Patent Law
- The ABA Consumer Guide to Obtaining a Patent by Rich Goldstein
- Ecom Brokers
- Ecom Brokers The Movie
- Ben Leonard’s website
- Ben Leonard on LinkedIn I Facebook I Twitter
- Ben Leonard’s email: email@example.com
- “Can You Infringe on Someone’s Patent With Your Own? With Ben Leonard”
- Beast Gear
Sponsor for this episode…
This episode is brought to you by Goldstein Patent Law, a firm that helps protect inventors’ ideas and products. They have advised and obtained patents for thousands of companies over the past 25 years. So if you’re a company that has a software, product, or design you want protected, you can go to https://goldsteinpatentlaw.com/. They have amazing free resources for learning more about the patent process.
You can email their team at firstname.lastname@example.org to explore if it’s a match to work together. Rich Goldstein has also written a book for the American Bar Association that explains in plain English how patents work, which is called ‘The ABA Consumer Guide to Obtaining a Patent.’
Welcome to Innovations and Breakthroughs with your host Rich Goldstein, talking about the evolutionary, the revolutionary, the inspiration and the perspiration, and those aha moments that change everything. And now here’s your host, Rich Goldstein.
Rich Goldstein here, host of the Innovations and Breakthroughs podcast, where I feature top leaders in the path they took to create change. Past guests include Joe Polish, Roland Frazier, and Mitch Thrower. This episode is brought to you by my company, Goldstein Patent Law, where we help you to protect your ideas and products. We’ve advised and and obtained patents for thousands of companies over the past 28 years. So if you’re a company that has software, product, or a design you want protected, go to goldstein patent law.com where there are amazing free resources for learning about the patent process. And you could email my email@example.com to explore if it’s a match to work together. You could also check out the book I wrote for the American Bar Association that explains in plain English how patents work. It’s called the ABA Consumer Guide to Obtaining a Patent. Returning to the show today is Ben Leonard.
Ben founded his company B Skier, which was a fitness equipment company, uh, and he went and grew the company on his laptop in his spare time. Uh, and then he continued to grow to an international seven figure business, successfully exited after three years. Uh, he sold it to Thio and was one of their first acquisitions. Uh, Ben now helps others to do the same with his e-commerce consultancy and e-com brokerage. Now I attend a lot of e-com events, and, and I’ve more than once been talking to someone and Ben’s name came up, uh, and, uh, you know, Ben’s way over there in Scotland and I go to events over in the us but, um, people mentioned Ben Leonard, and I say, oh yeah, Ben’s great. And I’ve had him on my podcast of Boil Back, and so I’m extra pleased to welcome Ben Leonard back to the podcast. Welcome back, Ben.
Hey, Rich. It’s good to be back. Thanks for having me on. Thanks for the kind works.
Yeah, my pleasure. Um, and so let’s talk about m and a, because you consult with a lot of brands to help them get ready to be acquired. Uh, and 2022 has been a weird year for m and a. So like, let’s, I guess let’s talk a bit about what you’ve seen and kind of what you’ve learned that that could help people that are looking to position themselves for, for selling themselves, selling their brand eventually.
Yes, absolutely. And you’re right, 2022 has been a tough year. It’s been a weird year. We’re starting to see a slight return to normal, but I think it’s important that we reflect a little bit on what happened right before 2022. Of course, 2019 was really the, the emergence of the aggregators in the eCommerce space business model to, to roll up eCommerce businesses and then either sell them on or go public, and none of them have gone public yet. Then of course, covid hit and all of a sudden everybody was shopping online, bit of retail therapy to help us through the hard times of covid. D things went crazy. Multiples were sky high, and a lot of people were getting very rich, selling pretty average businesses for very high multiples. And then Covid finished, or it didn’t quite finish, but we came out the other side and we started to see the impacts of c you know, post covid, the shopping spree has been over, so sales have been falling, but costs have still been rising because production costs were rising because of supply and demand.
Lots of factories were closed even after Covid when factories reopened. There was a lot of a backlog. We, we all know what happened with shipping prices. They’re starting to come down now, thank goodness, but they were sky high for quite some time. And of course, competition has continued to rise. We’re still seeing more and more people becoming entrepreneurs and seeing eCommerce as the best way for them to do that. And that’s fantastic. I love entrepreneurship. I’m glad they’re doing that, but that means there’s more competition for us as eCommerce business owners and eCommerce sellers are getting smarter. It’s no longer quite so easy to stay ahead of your competition because everybody’s smarter and up to date on what are the latest things that they need to be doing. So it’s been tough for everyone, including aggregators. And the aggregators have suddenly had this big reflection where they said, oh, this wasn’t quite as easy as we hoped it would be.
Right. The model didn’t work as easy as they predicted of like, well, if we take these brands together, we’ll get all these efficiencies of running multiple brands with one team, or it didn’t quite go as they intended.
Absolutely, yeah. And so they’re saying, oh, we need to get our act together. And you know, a lot of it was a little bit of a lack of foresight from not all the aggregators, I must point out, you know, they lack operational capability. You know, perhaps a little bit, there was a little bit of arrogance, you know, a little bit of, um, these aren’t real big boy grown up businesses. This is just selling stuff online. We can just buy them below multiple, they’ll keep running. We can grow them through economies of scale and work with in. But actually, yeah, they’ve had a realization that the model isn’t quite as easy as they thought. They can’t just use an enormous hammer to hammer a square peg into a round hole until it works. And so they’ve had to really hold back on their investments. So that’s what’s happened, right?
And so as a result of all of that, all the difficulties post covid, this reflection from a lot of aggregators that it’s not that easy we’re seeing, or we have seen a big change in the market, and some of it was just a correction of coming back to normal from people being paid very high multiples for pretty average businesses. And some of it has been a bit too, too far, but more than a correction. So multiples have been down, particularly for weak brands, and that is because deal volume is down. The appetite of investors to back aggregators, out of aggregators to buy brands has been down. They don’t wanna buy, they don’t wanna make as risky an investment as frequently. Their risk appetite has dropped, their due diligence periods have gone up, they won’t do it, do their due diligence in say, 30 days. Now it’s more like, say 45 to 80 days. You won’t see an LOI on the table after 24 hours of seeing a pnl now, you know, five days, two weeks, even before you’ll get that. And so it is a very different environment from what it was before. But the great news is if you have a great brand and are building a brand that looks and fuels and behaves like a CPG brand, rather than just stuff being sold on the internet, that multiples are still high and there are still people who wanna buy your business.
Yeah, no, that’s awesome. And so, um, I mean, what are the things that you think a seller needs to have in, in, in line, um, or set up correctly in order to be one of those that are still attractive to
An Yeah. Yeah. So I, I mean, one of the things I try to encourage e-commerce business owners to do is actually ask themselves, well, would I buy my business? And very often if they, if they ask themselves that question, honestly, it’s, well, actually I wouldn’t, it’s a good business. But there are things here that make me kind of take a step back and say, Hmm, it’s not, doesn’t make it quite such an attractive, uh, target for acquisition. And so I encourage sellers to look through the, the lens of the buyer. And so there’s a, there’s a model that we use, which is the value pyramid, which is the five main things that a buyer is thinking about when they’re looking at your business and saying, do we wanna buy it? And we stack them up into a pyramid, almost like, like a Mayan pyramid, you know, with the, with the blocks, right?
Not, not like an Egyptian one, but like a Mayan pyramid with these five layers. And so at the bottom you’ve got brand, then you’ve got growth and profitability, then you’ve got risk, then you’ve got transferability, and then you got documentation. And the reason brand is right at the bottom is, in my view, that is actually most important because if you don’t have a brand, you’ve really just got a shop, a store online, and investors and buyers are no longer willing to pay such a high multiple or even take a punt on just a selling account, there needs to be a brand identity there. There needs to be longevity, sustainability associated with having, you know, raving fans who continue to buy your stuff and buy your new products when you launch them. So the first thing is, is having a legit brand identity. The next one is growth and profitability.
You know, you need to recognize that a buyer is gonna buy your business if it’s got good growth history and it’s profitable, but also there’s growth potential. You know, a buyer wants to buy your business before you’ve maxed out growth, and then experience more growth for themselves. And even better, if you’ve built in some roots to growth for them, you know, I call them growth levers, you know, you set them up and they can just come along and pull these levers. Could be launching new products, getting into more international markets, getting onto more channels, you name it. And then there’s risk buyer doesn’t wanna buy a business, which is particularly high risk, perhaps because you’re in a risky niche or because you are reliant solely on a couple of SKUs or one Facebook ads account, or you’re in a highly regulated category or a brand new category that’s likely to become regulated.
So whatever you can do to de-risk your business, particularly by diversifying it, that’s gonna make it more attractive to a buyer. Then there’s transferability. A buyer wants to pick your business up, your brand up and drop it into their existing setup. So the more transferable it is, the better. So that means making it efficient, automating as much as you can, outsourcing as much as you can. Having an operations manual full of systems and processes, you can just hand over and say, here you go. That’s how to run the business. And then lastly, it’s documentation, right? When a buyer is doing their due diligence, they’re gonna turn over every stone to make sure that they’re not buying something that’s gonna leave them liable, and that they understand everything they need to understand about the business. So all your documentation needs to be up to date and meticulously recorded. So all your tax information, all your company formation documents, everything to do with safety of your products, pretty much anything that’s a document needs to be recorded.
Cool. So you, you, you said you stack them up like a pyramid, kind of like Maslow’s hierarchy of needs, I guess. Totally.
Where that’s exactly it.
Where, where you’ve got at the base like, you know, Maslow’s hierarchy of needs is basically like you’ve got, um, security and safety at the bottom, because without that, you can’t get to the top of the pyramid, which is like, you know, self-actualization or something. Like if you, if you’re not safe and secure, then you can’t work on the other things. So here it’s kind of like, if you don’t have a brand, then, um, like if you don’t have a solid brand, then why even consider the documentation or the transferability? Because like, you know, the, like without the, the base established of brand and then above that growth, et cetera, et cetera, you don’t really have something that’s sellable.
Yeah, absolutely. And, and actually like the, the layers towards the bottom say growth and brand can help to, if they are in a good position, they can mitigate if there’s weaknesses further up the pyramid. So like, you know, if there are aspects of your business which are not particularly efficient or you haven’t set things up to be quite as transferable as it could be, and it’s gonna be a bit of a headache for a new owner to onboard, they’ll be willing to accept some of that in exchange for a highly profitable growing business with a fantastic brand identity, for instance.
Yeah. Got it. And, and so like, it’s just, it’s a matter of looking at the, the, the biggest factors, um, that need to be present at the bottom and at the top, it’s a matter of, um, how you dot the i’s and cross the T’s. So like with, for like documentation for example, that’s like how you wrap it up neatly in a bow. But essentially, if it’s not something that’s worth wrapping up neatly, um, and tying it up with a bow, then it’s not something that even matters if you’ve kind of wrapped it up neatly and tied it with a bow, if that makes sense.
Yeah, absolutely. And actually something that just occurred to me right there while you were talking, which I hadn’t really thought about it this way before, was this is quite convenient. It’s five layers, right? Which means each layer is, is is worth 20%, albeit not quite true because the, some of the layers are bigger than the others, but let’s pretend for a second, they’re all of equal size. Well, according to, uh, to the 80 20 principle, we wanna focus on the 20% that’s gonna give us 80% of our outcomes. Turns out that one of the 20%, the layer that’s most important in my view is brand.
Yeah. Got it. Oh, that makes perfect sense. Um, yeah, absolutely. And I love 80 20, I mean, really, you could describe nearly anything in the world with the 80 20 principle.
Absolutely. Can, yeah. Yeah.
Um, cool. And, and so, um, uh, tell me about, um, the, um, the e-com movies that you made. Um,
Econ broker movies, is that what you call
Them? Yeah, yeah, yeah. So, so our websites Econ Brokers dot Go uk and if you go to Econ Brokers dot code uk slash movie, you’ll see the Econ Brokers movie, which is actually, uh, four, four or five one minute videos that we made in order to, uh, tell what could otherwise be quite a dry story, what could be quite boring in a fun and engaging way. We wanted to, um, to create a little bit of, of, of content that, that, that people would have a charcoal at and potentially share. Uh, so we made the Econ Brokers movie to highlight the people, uh, the pitfalls of how not to sell your eCommerce business because whenever, whenever something new comes right into the world, and we gotta remember that really buying and selling physical eCommerce brands only became somewhat mainstream about three years ago. Really, whenever something new comes along, people rush to the gold rush, right?
And try to, to sell shovels to the gold rush rather than actually digging for gold themselves. And you gotta watch out cuz a lot of these people selling shovels, they’re selling really terrible knockoff shovels. So what I’m talking about are, are intermediaries who are perhaps not the right way to go when it comes to selling your business. So there’s, there’s four, four characters that we, uh, we created in, uh, in the Econ Brokers movie for, for you to have, have a laugh with, uh, there’s the aggregator, uh, the flipper, the consultant, Golin and marketplaces. And if you, uh, if you go watch the movies, you’ll uh, you’ll be able to see, uh, who, who we’ve been inspired by for those characters. I gotta say marketplaces is my favorite.
Nice. And and so you, you created these characters to really tell the story about what it takes to have a business acquired and, and I guess, um, the mishaps you could have in, um, in in getting yourself set for Yeah. Position.
Yeah. Yeah. So the, the, the movies are based around a character, Tom who’s, uh, who’s sitting in his office, uh, thinking about, about his business. He’s probably, I don’t know, he’s probably struggling with his ppc, I’m not sure. And, uh, he’s visited by these four characters, kind like, uh, kind like Carol, kinda like a Chris Carol by Charles Dickens. Yeah. Uhhuh visited by these four characters, but fortunately, somebody very familiar to the audience after you’ve watched this or listened to this podcast episode, uh, saves the day and, uh,
The IP lawyer
And it’s good fun.
No, no, I, no, not the IP lawyer.
Not the IP lawyer. No, not this time. Next time that’ll be, that’ll be the next episode of the econ broke movie.
That’s econ Broken movie two <laugh>.
Yeah, yeah. Return of the Lawyer
<laugh>. Right. Return of the Lawyer. Exactly. Originally was gonna be entitle a revenge of the lawyer. Then they realized that, you know, that’s a little bit of a stall wars joke there,
Anyway, um, I’ll, I’ll leave that where it as. Um, so cool. But that sounds like a lot of fun. Uh,
It was great fun,
A lot of fun and, and a great way to kind of, um, get people to pay attention to what matters, right? Sometimes humor is what it takes to get takes to get people to pay attention to what really matters.
Yeah, absolutely. Absolutely. So go, go check those out and if you enjoy ’em, uh, share them with your friends cuz uh, they are, they are good fun. And sometimes, you know, uh, this, this space, especially the m and a side, it is pretty dry and it feels quite overwhelming the number of options that you have. And so just breaking it down and something that’s pretty easy to understand, humorous at the same time just seemed like a good way to, uh, to, to get the message across.
Okay. Yep, that sounds great. Um, and so that’s e-com brokers.com is the website, correct?
Nope. E-comm brokers.co uk
Yeah, it’s a UK domain, but we’re actually, we’re actually all over, all over the world. Um, we’ve got a deal director sitting in Chicago now as well, John. Um, so yeah, deals all over the
World. Okay. Econ brokers.co.uk. Um, awesome. Yeah, I mean, I just have a little bit of a, you know, a us bias towards saying like everything’s dot com of course it’s not, that’s just my, um, you know, typical American bias toward things. Um, but yeah. And so if, um, if people wanna learn more about you or get in touch with you, how do they go about doing so?
Sure, yeah. Um, easy. Email me, ben econ brokers.co uk. Um, I’m on LinkedIn. Our handle for all social media is at Econ Brokers. My handle on social media is Ben Leonard Pro. Um, those are the, those are the main ways. Uh, head on over, uh, click on the big yellow button, get a consultation, we’ll have a chat and see how we can help. And I’m, you know, I’m a seller myself. I’ve built and sold my own business. I’m always happy to help people and point them in the right direction, even if, if we might not be the right people for them. So just get in touch and I’ll, I’ll, I’ll do my best to help.
Awesome. I appreciate it. And, and Ben, thanks so much for taking the time to, to come back to the podcast.
Pleasure. Thanks for having me, Rich.
Thanks for listening to Innovations and Breakthroughs with your host Rich Goldstein. Be sure to click subscribe, check us out on the web at innovationsandbreakthroughs.com and we’ll see you next time.