Show notes
Is really possible to acquire 101 Amazon FBA businesses in 2 years? At least once a month we receive a query from buyers and sellers about the company this week's guest founded, 101 Commerce, asking who is behind it and if they're going to be able to pull off what they say they will. It is hard to undertake, but of all the people that we've worked with here at Quiet Light, RJ would be the one to do it. He is here today to talk about what that process looks like so far. Richard Jalichandra, known as RJ, got his start in digital entrepreneurship back in 1994 and has been working in the space ever since. He is a CEO five times over, has held senior executive positions, and has generally been around the digital block several times over. While getting ready to retire – which of course hasn't happened – he founded 101 Commerce under the premise that he and his group would buy, invest in, and relaunch 101 niche private label brands on Amazon. RJ has the experience, the funds, and the team in place to make it happen. Stay tuned. Episode Highlights: RJ shares a few of the impressive businesses he's been involved in launching and growing in the past. How he got involved with 101 Commerce. Why the FBA business model attracted him the most. The 101 acquisition plan and how it came together. RJ stresses that this is not a fund, but an operating company. How 101 commerce is striving to create a next-generation CPG company. What top 3 things RJ and his team look for in a business to purchase. Why the person and the story behind the business matter immensely. How long Richard projects it will take to acquire all 101. RJ stresses the importance of the seller's over package and presentation of a well-run company. Why he recommends using brokers and seasoned experts for efficient due diligence and transaction processes. RJ's shares thoughts on brand expansion potential and tariff hikes. Why solid, prosperous deals need both a good seller and a good buyer to make them work. Transcription: Mark: It's probably at least once per month that I get an email about a certain company in our industry that seems to be making waves and the general question that I get … and actually I've just got this email a few days ago from somebody else that has been our podcast and I won't say who it was but asking who are these guys over 101 Commerce and are they going to be able to do what they keep saying that they're going to try and do? Joe I know you talked to RJ over at 101 Commerce, people that we know pretty well at this point and you talked about what they're doing. Joe: Yeah you know it's pretty incredible. His ability to network and we've done a podcast on networking and I'm telling you just a year ago I spoke to him and he came out of the blue and called me and said this is what we're trying to do and I told him that he was nuts. We laughed a little bit. I really should have looked him up on LinkedIn before I told him he was nuts because he's one impressive guy. What he's accomplished, what he's achieved in the companies that he's built I had him rattle them off after he did his intro. And I said stop being humble name names here and everybody listening will know some of the names that he named. But yeah they're pulling it off. Their goal is to buy 101 Amazon FBA businesses. They love the platform. They love the fact that it's got built in traffic and easy advertising platform and all they have to do is focus on a few things versus driving traffic which Amazon does for them. And I think they're going to pull it off. It's not going to happen in 24 months which was the original goal but they're well on the way. I tried to nail him down on the time frame and he was a little wishy washy on the amount of time it would take. Mark: Well I know the question I get from people on this all the time is isn't even possible to do what they're doing? Buy 101 companies within 24 months or even if it's 36 months. I mean could you buy that many companies? And my experience in this has been that I've seen people try to do this in the past, I've seen people try to acquire multiple businesses and roll them together and build this portfolio and they always end up running into buying a dog here and there. Or having an issue come up or trying to expand the team that quickly. So my response to people, who's pretty much universal … and RJ if you're listening to this, hopefully, you're listening to this, I'll tell you exactly what I tell everyone. It's really really hard to do but out of the people that I've met, he's probably the one person I would bet on being able to do this. And so I'm like a lot of other people I kind of grab my popcorn and I'm sitting back and I'm watching because this is really fascinating to watch them go through. How many are they up to right now as far as acquisitions that they've completed? Joe: I think the last time we chatted and we didn't get into specific numbers on the podcast but the last time we chatted I think it was about 14 brands and they're trying to get their systems and their processes in place and bring on more and more people. We ended up doing I think eight businesses for 14 brands with a total of three people. And then they realized we need to have some operations here and build some systems and processes so they've been hiring like crazy; and some really really talented people. So I'm with you. I think if anybody can pull it off … there's a few that I think could, but I think RJ and his team are one of them. We've had some other folks that are doing similar things as you know that have purchased a couple from us; Brad, in particular, has sold two to them recently but I think they'll pull it off. I think it will take longer than the 24 to 36 months. And I'd be betting on more from beginning to end maybe a total of 60 months. It's a big undertaking. Mark: Yeah and folks I want to say that again how many in how long? Joe: 101 businesses. Mark: No how many have they done so far? Joe: Oh 14 brands. Essentially eight purchases but within that there are … I believe there are 14 brands. And that has been less than a year. I think the first one happened early in the summertime. So it's really less than six months. Mark: Absolutely incredible and we're seeing this from a few different places. I know we had Shakil Prasla on quite a while ago now. I'm talking about how many he's bought, and he's bought more since we had him on. At that point, it amassed eight different companies … acquisitions that he had done over just a few years. So there are ways to do this. And by the way, Shakil's method is different than what RJ and 101 is doing. So there are a few different paths towards building up this portfolio and really scaling up pretty quickly. A fascinating example of somebody doing this at scale within the industry and definitely I'm sure this going to pop up there as one of the more popular episodes. Joe: So let's you and I stop talking about it and hear what RJ has to say. Mark: Sounds great. Joe: Today's guest is Richard Jalichandra … actually RJ. How are you doing today RJ? RJ: I'm doing great Joe. How are you? Joe: I'm fantastic. Good to see you. Hey, let's do the thing where you tell everybody about you instead of making me read the script. Can you give everybody some background on yourself? RJ: Yeah I'm an old digital entrepreneur. I dig my gut onto the internet in January of '94 building my first website for an agency client and I've been doing it ever since. I've done a whole bunch of different things. I'm a five time CEO now but I also hold senior executive positions at a whole bunch of venture and PE backed companies. So I just kind of have been around the block for quite a while. And then I tried to retire last year and then something I think you're probably going to ask me about kind of like I got a bug in my ear and back to your podcast got in my ear a few times and maybe influenced my current gig. But yeah recently we founded 101 Commerce and essentially what 101 is doing is we're buying, investing, and launching theoretically 101 niche ecommerce privately. We're running it on Amazon and we're a little bit into it as you know. Joe: A little bit. I remember that first conversation we had. Some guy named RJ called me out of the blue. I should have looked you up on LinkedIn before I told you you were nuts because that's exactly what I said. Do you remember the conversation? RJ: Yup. Joe: You're nuts. You're going to buy 101 Amazon businesses and you're going to run them, operate them, build a staff around that. You're crazy. RJ: You weren't the only one. Joe: You might still be crazy but you're pulling it off. Well, listen you're being very humble here in terms of your background. Come on share some of the businesses that you started and you rank them. Its name dropping please do it so that everybody knows. RJ: Well some of the ones that are … I mean depending on what your flavor is whether it's fitness or video games or … yeah let's see a couple, I mean I've done a bunch of things but the one that have seemed to kind of ring a bell on everybody, the video game space I was one of the senior executives of the company called IGN Entertainment where we ran a massive gaming network that have reached 50 million dudes; 13 to 34 year old dudes at the month. And famously of all the acquisitions I did, they are the one that always delights people at cocktail parties with Rotten Tomatoes. So I did a bunch of acquisitions there but Rotten Tomatoes is kind of the one that I can throw out there. And also everybody is like wow you did Rotten Tomatoes. I'm like no I didn't found it but I did buy it. I'm really good friends with the founders of it still today. And then let's see … I ran something called Technorati which at one point was a social media darling until a small search engine company in Nutview did some things that made it very hard to compete from other search engines. And then I ran- Joe: [inaudible 00:07:56.2] name. RJ: No we won't name any names but yeah, just some small company in Nutview. And then let's see, after that, I did a fitness company called Map My Fitness which was then sold Under Armour. I mean that was a really successful fitness set of apps Map My Run and Map My Ride [inaudible 00:08:14.8] doing the cardio, a lot of people touched those at some point. And then I did a company nobody ever heard of. I was an enterprise media space … advertising media space; I'm running behind the brands. I sold that in 2014 and then I tried to retire then. And then I decided to do one more fitness gig and was the CEO of BodyBuilding.com and then that led to my second retirement attempt. Then here we go. Joe: Maybe the third time will be a charm. I think the list of businesses you just mentioned probably touched on 90% of the people listening know of at least one if not more of those especially the Map My Fitness and all that good stuff. All right so about … what 18 months ago now? Or no it's less than a year ago or about a year ago you and I had a conversation and you said hey look I'm reaching out, we're putting together a fund. We're going to buy 101 Amazon businesses. Why? Why are you focused on Amazon? Why are you not retiring like most sane people would do when they have the ability … no, I'll skip that, why are you buying 101 Amazon businesses? What's the theory? What's the plan? What's the concept? RJ: Well I'll back up a little bit and kind of tell you how I stumbled into it. Joe: Okay. RJ: So I mean I was going to try and retire. I'm still young enough though. I figured at some point I might jump back into a CEO chair or something like that but I promised my wife I was going to take two years off. No W2ing, just literally going to play golf, mountain bike, have some fund, raise my daughter, advise, maybe do some angel investing. And that was kind of the plan but I was also I go and I ever do want to get back in the chair will be kind of hard to do. I just was really on the beach for two years and not really educating myself. So I had this idea that I was going to buy a solopreneur 4-hour workweek business which I'm sure you've heard that one a few times in your job. Joe: A couple of times. RJ: A couple of times today but that was literally the goal. It was to buy a 4-hour workweek gig. Joe: Yeah. RJ: And so hence I wanted something that was at least a couple of years old. So somebody else has already done all the hard work, done the early stage startups. I know how hard they are to get things off the ground. I wanted something that was more matured and seasoned where I was more twisting knobs than actually lifting heavy boxes. Joe: Yeah. RJ: I looked at a whole bunch of stuff, not just Amazon businesses. I looked at SaaS, content; I have a lot of experience in content. I sold a SaaS company. I looked at lead gen, affiliate, and I looked at digital content. I was on the board of a company called Click Think which a bunch of your listeners have probably heard of as well. I was the chairman there so I knew a lot about NAT ecosystems. I was looking at all whole bunch of different things and I kept coming back to Amazon FBA. And the more I dug in on it I was just kind of blown away by the operating leverage that you get out of Amazon FBA. I mean essentially as I explained it to people when I'm trying to fish investors or just tell people I'm doing this you know my last real job we had 800 employees, 6 fulfillment centers, 500 people on the warehouse and you have to generate your own traffic. We had to spend tens of millions of dollars on advertising and all that. Essentially with Amazon FBA, you outsource all those hard things. You don't have to worry about fulfillment. You certainly don't have to worry about traffic because you have 300 million of the highest converting consumers there are. So … and then, of course, the advertising platform is built-in. The customer service system is built-in. So basically I kept meeting and hearing about and listening to [inaudible 00:12:01.8] podcast including yours, people who are essentially running these really good businesses had really good net margins. And I wouldn't be shocked you know there's a plenty of people kind of running sub 1 million dollar businesses but every once in a while I meet somebody running a 15 million dollar business and was essentially a sole proprietor with a couple of VA's and they're running at 30% net. I'd scratch my head and go wow that's a way better business model than setting up your own ecommerce site and got in your head against you know Google and Facebook and trying to get traffic as well as having to compete against an Amazon itself why not lean into it, take advantage of that operating leverage, and see if you can build something that was incredibly profitable at scale. Joe: What about the risks? A lot of folks that I talked to are saying no, no, no, I don't want to buy an Amazon business. I think there's too much competition. It's too much risk and Amazon might pull the rug out from underneath me. They may just decide someday they don't want any more seller accounts or third party sellers. What do you have to say to those folks? RJ: You're right. Just go away. Don't look at Amazon businesses. Leave them all for us. Joe: You know what my answer is there are people out there like RJ that are a lot smarter than me that are doing it so there must be something okay with it. RJ: Look I mean there is no doubt there's proper risk of course. But when I was out in the open web there was platform risk as well. I've had Google like I said destroy one of the highest profile companies that I was at. Oh did I say that name? I shouldn't have said that. But I mean in other places and I've seen it happen and- Joe: It's okay don't worry about it. RJ: Okay, all right. Joe: The panda update, the penguin update they've all have affected … those have affected probably again 90% of the people listening so it's okay. They're probably happy. RJ: So everybody knows what I'm talking about. Joe: Yes. RJ: There is platform risk wherever you go. And even in today's thing where Google doesn't have quite the sway they used to, now you have Facebook and Instagram risk because those are the big traffic drivers of other third party traffic sources and stuff. So you're always going to have platform risk. And I just got comfortable with it because the FBA and the marketplace ecosystem on Amazon is literally what's driving its growth right now. I mean if you look at all the stats behind the curtains or whatever, it's driving the growth. And if you look at 20 years of operating history and behavioral study on Jeff Bezos he usually doesn't throttle things that are growing like a wheat. Joe: That's true. He doesn't. That's a good point. That's the answer I'm going to use from now on when people ask me about that risk. All right so in terms of- RJ: But I will make it clear there's a lot of stupid things you can that gets you into trouble and then there's some inadvertent things that could happen to you that do present risk. I don't want to make it sound like- Joe: It's not risk free. RJ: It's not risk free and we certainly are going into this with our eyes wide open knowing that even the best laid plan, buy 100 of these things who knows what happens. There's a portfolio theory and it goes both ways; good and bad. Joe: Right now Mark had an expert on from a PE firm in the last podcast maybe and I actually listened to it yesterday. By the time this this airs it's probably 3 or 4 weeks ago and the concept was buy them at a certain multiple pull them together and it's worth more automatically. We've all talked about that concept. Is that what struck you initially in addition to the scalability because of the platform itself? RJ: Well the first thing you should do is you should introduce me to that guy and we should get to know each other because there may be something we could do. The second thing is … I mean there's more to it than that. If it was just a financial arbitrage I probably wouldn't be that interested in it. There's a lot of places where you can do financial arbitrage. I love ecommerce so first off that just gets me from a personal standpoint. But what I like is just knowing that they're with resources, working capital, domain expertise, specialty expertise, how much you can grow these things is really kind of what interests me. I guess I'm not just interested in the financial arbitrage. I would correct something else that you said kind of the outset that we raised a fund. A lot of people think that's kind of what we do because they don't understand the PE and venture markets. But I would absolutely categorize us not as a fund. We are absolutely an operating company that works closely with venture and private equity funds. Joe: Yeah it's fine. We're trying to put a label on you recently and what you do and what some other folks are doing and it's … I mean it's … well, what is the label? You're just a company that happened to get some that you went out and raised money and are investing it in Amazon businesses. Is there an official label for your type of organization or is there not? RJ: Well what we're trying to do is create a next generation CPG company. Joe: CPG stands for? RJ: Consumer Packaged Goods, more than a CPG because Amazon obviously sells more. But essentially what we're doing is we're putting together a portfolio … a wide and broad portfolio of niche private label brands that sell predominantly; not exclusively but predominantly on Amazon. And that's really what it is. It's a multi-brand platform. You could think of it as any multi-brand consumer goods company like a Procter & Gamble or something like that. Joe: Okay so not unlike our friend Bill D'Alessandro at Elements Brands and what he's doing but it's a little bit more specialty niche and- RJ: Absolutely. Joe: That's what you focus on on Amazon. Okay. RJ: No and I love what Bill's doing too but it's very similar. He has a multi-brand strategy although he's taken a little more narrow focus than we are. Joe: Absolutely. Okay, let's talk for the sellers that are listening what is it that you and your team look for? What pops out to make you go I love that opportunity? Is it brand, is it gross margins, is it workload, is it … what three or four things do you generally look for when you're looking at one of these opportunities? RJ: I mean the first three things that we look at when we're just doing the highest level screens like when you send materials out we're just looking for a couple of really broad things. Because there's a lot of this for sale, between your guy's brands … absolutely a great deal flow. Joe's probably going to work at the Senate at some point but of our first cohort, almost 50% of the deals set were from Quiet Light so thank you for that. You guys do a great job. Joe: Thank you. RJ: With that said, some of your competitors also do a really good job putting together great materials and all that. So we're evaluating stuff. We're trying to screen just the sheer volume of things that come through the door. So we look at gross margin and net margin that tells us kind of a lot about the health of a business and what the opportunities are. But of course on Amazon the currency there is reviews so we're looking for what we term review restructure. It's not really a good phrase because what it really means is your relative strength, the velocity of reviews, quality of the reviews, how the reviews were generated. But right up the bat what we're trying to do is look at those three broad metrics to decide if we want to dig deeper or not. Joe: Okay and once you find a business that checks all of those boxes do you then go and jump right to the financial conversations with the sellers or do you say okay what platforms, are they selling in the US or can I expand internationally? Is there something else like a growth opportunity that sort of takes it over the top? RJ: Well one of the other things I love about what the materials you guys send us and some of … again some of your other- Joe: Include the competitors because this isn't about padding Quiet Light Brokerage. RJ: No, no, no I mean- Joe: And I won't pull a quote out of this just for the record. No, I'm kidding I- RJ: No, I'm good sorry. It's not just you but the other top brokers and guys that really put together quality materials and stuff. It really does save us a lot of time because normally you got to do a screen call before you even want to setup a call with somebody. Because of the interviews that you guys do you get to hear a little bit of the narrative. I think this is something that people forget when they're trying to sell businesses or sell anything; story and narrative is really important. If you basically have a very good narrative for everything from how you originally … what you did before you even started the business and then how that morphed into a business that narrative is really important for me to hear. And it's really important when I'm out pitching our investors as well. There's a lot of investment opportunities, a lot of money floating around and whatever but they want to know … they kind of want to hear your story and how the whole thing kind of morphed into what it is. And the same thing when I'm looking at even the smallest Mom-and-Pop business I've ever bought, I want to know about them. Where they're from, what they did in the previous career, and then how all of a sudden this thing kind of caught fire. Because that's really the moment like most of the things that cross those three bars, the first initial bars. Joe: Yeah. RJ: Somehow or another they've gotten some critical mass. They figured something out. In spite of the fact they might not have a working capital, they might not be a rocket scientist or an expert on PPC or fulfillment or something, they figured something out and that's kind of what we want to hear in that narrative. Joe: And the person behind the business I think is what you're saying matters tremendously it's not the numbers. RJ: Absolutely. So in addition to that narrative, the way they present that narrative tells you a lot about them whether or not … and again you can get this just by reading your memorandums. You can kind of get whether they're out for a quick walk or they're kind of at the end of their line and maybe just running out of gas and it's time for them to kind of move on and hand it to somebody who has even more gas. And it's also part of that narrative is getting me excited about the product category or something like that. But it tells you and then, of course, you're going to get to the … I know you're going to ask this but by the time we actually get on the phone with somebody or in video or whatever one of the most important things that I understand if a person is … a person integrity. Are they honest? It's often kind of like when you get on that first call, it's usually not in the books. Occasionally it's in one of the books but usually, on that first call a really honest person is telling you okay here's all the warts, here's all the things that aren't going well, you need to be addressed, I wish I could do better that kind of thing. So I think that's really important. So narrative and then the integrity comes out in that and then certainly I want to know … don't ever try and kind of hide the bad stuff because if you tell a great story and then you get indulgence and then all of a sudden the warts start appearing and you're like well you didn't tell me about that then there's an integrity. Joe: Yeah and you lose that trust. And this is not rocket science for the maybe the other brokers that are listening or people that are trying to sell their own business on their own. It's important to act with full disclosure and ask those questions and answer them thoroughly so that when you do get on that phone call that trust is continued to be built. And as I say … look creating a great package is not the hard part, connecting with great buyers like yourself RJ is not the hard part. Going at a letter of intent is not the hard part. The hard part is getting from letter of intent all the way through due diligence to closing. And if you do everything right, free LOI that becomes easier. Things still go off the rails. You and I had one go off the rails a little bit this summer and it got back on but it helps tremendously with full disclosure and trust being built and the people behind the business acting with integrity. It's not just the numbers. RJ: Right and the other thing you get and by those disclosures too is we also start operating the business pretty close. And I think that's a really important thing. I mean you're not operating a business but you're starting to think like the operator. Joe: I was going to say we don't … you don't get any control of anything- RJ: No but you're mentally putting yourself in the shoes of having a steering wheel in your hip. Joe: Right. RJ: And I think that's really important because it gives you a lot more confidence to get to the finish line. Joe: So let's talk about that and 101's operations. When you buy a business from a solopreneur or someone who has a small staff or VA's are you generally … and I know the answer to this, are you generally taking it over completely or are you bringing them on to help operate the business with you? RJ: That's a TBD I mean it really depends on the entrepreneur and the situation. Frankly, there are some people that they're just done. They want to go do something else. Joe: Yeah. RJ: This was their side hustle. They really love what they're doing. They may have financial reasons that they want to get out. We are looking for the rare entrepreneur and then the other thing is they can even want to jump on our boat but they may not have the right personality to be in a really high speed tech thing where you got to work as part of a team and any time we put more people together. They're humans and things don't always work right when humans interact even with the best of intentions. So it really is a TBD thing. If there are … in our first cohort we were probably looking to just take the businesses and actually create kind of a sandbox with these where we can build what I call platformization of the company; people, processes, frameworks, technology that allow us to go do this another hundred times and a hundred times after that. So with that said the first eight businesses that we bought we now have … I wouldn't call, I call it two principals have joined us from those eight. One was an owner and one was literally the guy who's like the GM who is running the business. Joe: Okay. They're going to help you with the other … what 93 that you buy, is that the plan and the goal? RJ: Yeah. 93 is the next milestone and then we'll see what happens after that. Joe: You're going to do that in 2019 or is it going to take a little longer? RJ: It's probably going to take a little longer then. Joe: Okay, I'll help as much as I can. RJ: I know you will. Joe: Talk to us about the importance of having a good presentation at package together before you ever get on that phone call in terms of … look I mean to be blunt you and I talked about you coming on the podcast a while ago and I said no. I said it didn't make sense because I didn't want people reaching out to you directly. And then I saw you up on the stage at Brand Builders Summit, you advocate now of a few different things. One is working with brokers because everything is handed to you kind of on a silver platter but then I think also you've talked about specific attorneys and things of that nature. What are those few things that you say now that you've learned and you've got a certain amount of deals under your belt that you're going to sort of also not just in terms of the business three check boxes but your processes going forward for somebody that is also maybe building a portfolio even if it's a smaller content site portfolio things of this nature, what certain things are you trying to put in place like working with brokers, like working with certain attorneys, and things of that nature, anything? RJ: Yeah no gosh you just hit on the mother lode there. Let's go in no particular order but let's start off first with the broker no broker question. So people heard about what we were doing, the word kind of got out there and frankly, we had hundreds of leads that came in through our website. A very few of those were for a surprising number that would have crossed kind of our minimum thresholds and something we would have been interested in. But when we do a deal like that we have to do a heck of a lot more work. A lot more work. And it's kind of hard pressed to sift through that. If they don't come with their own package, financials, a really good narrative, good transparency, it's going to be a lot of work for us. And most people don't know how to sell a business. I mean let's just call it like they make selling business hard. So we're happy; very happy to work with brokers because we feel there's a couple of things that brokers do. You validate a deal for us. I mean basically, you're not just going to take … your time is valuable; you have other opportunities and things like that. So we know that you're already in a little bit of a quality … you're checking a quality box. And then, of course, you help in put together really nice financials and things like that; things that you know are going to make it really fast for us to kind of do that. And then I'd say another really important thing for a buyer to consider and then we're going to link with a lawyer or other professional services because frankly brokers pride in professional service. When you're selling a business for the first time or even a second time, third time, fourth time, fifth time, but certainly the first time … if you've never done it before it is going to be emotionally traumatic. Joe: I know you're going to go there. It is so emotional. RJ: And it's your baby. It's your baby and guys on the other side of the table they're professionals and they do this for a living or whatever and it's not that you're going to feel like you're outmatched. It's just you've never been through it before and it's incredibly stressful. And some buyers are going to ask … they've got investors and they require them to check a whole bunch of boxes before they actually write a check. So they're going to ask you to check all those boxes too and that can be incredibly stressful. So having a shoulder to cry on i.e your broker and play- Joe: Or vent to. RJ: It's not … no that's it, a lot of it is just like I cannot tell you … I mean I have bought a small business once, probably 15 years ago … 14 years ago. I bought a small business that wasn't represented by a broker and I am not exaggerating when I tell you I hired him a therapist. Because otherwise, we're not getting … neither of us is going to get what we want because the guy is going to fall apart. And so I have a feeling a lot of people probably underestimate just how hard the emotional side of getting a seven figure deal done. There's a lot at stake on both sides of the table and [inaudible 00:30:59.4]. So there's a lot there. Of course, you guys do a lot on just the sheer process side that is there but I would say that's an underestimated really big value thing. Just being the therapist through the whole process. Joe: Yeah it takes a good buyer too; a good broker, a good buyer. But what about the attorney side of it? You've had some experiences with great attorneys and maybe some tough ones too. What is your view in terms of that aspect? I think you actually … you and I talked to at one point where you're going to do … are you still considering requiring your sellers to work with a select group of attorneys that you know have ecommerce experience? RJ: Yes. So and before I even get to that I would just give this is a huge bit of advice to any seller. Do not use your family attorney. Joe: Well there's … I mean I have an unwritten rule that if somebody comes to me and they want me to sell their business I ask them point blank do you have an attorney and are they related? Is it your mother, brother, father, sister, cousin, aunt, uncle, etcetera? Because I had an experience where I had someone that was a few years out of grad school, they started a business in college. We got the business under a lot of intent, over asking price and it was a few years ago so I was fairly new RJ. But his mentor in grad school was an attorney, my trade. His fiancée was in law school and his mother and father were attorneys. The deal blew up. It was a one sided contract and there was absolutely no way to fix it. And the buyer was fantastic it was very fair. It was fantastic, it blew up, went away and I learned that lesson. So what you're saying right now to anybody that wants to have a relative as an attorney it's a really bad idea because they're going to fight like rabid dogs for things that don't necessarily matter and kill the deal for you. Is that what you- RJ: Yeah … no, I would take it even a step further. I actually wouldn't mind if they were your family attorney if they happen to be an ecommerce lawyer because the domain expertise is also really important. You can't just take somebody even if they've done M&A that they sold dry cleaner chains or something like that. Ecommerce and digital assets are just different and so if you don't have a lawyer who has the domain expertise we're probably going to have issues because we're going to have to spend a lot of time educating. So I would highly recommend … and look Joe can recommend, most of the brokers have their stables of good recommended lawyers. But just because you have a lawyer, maybe you have a good business lawyer don't necessarily use that one. Look for somebody with the exact domain expertise of what you're getting into. And then the last thing I'd say about lawyers is lawyers love to point score. I mean this is kind of what they got graded on in law school when they're doing all that. They like point scoring and the one thing … a bit of advice I give to anybody who hires a lawyer is remember the lawyer works for you, not the other way around. So you need to watch whether they're going into point scoring mode just for the sake of wining points. And you have to understand it's not 100 points in a deal. It's usually like four or five that matter. And yet there's the long contracts, it's four or five that matter and then may be one or that lean or important to you and that's kind of what you need to focus on. Make sure you that manage your lawyers so that they know what's important to you. And they're not worried in section 17 and 19 where it's [inaudible 00:34:40.3] and crossing tees and that some warranties and things. Joe: I agree 100%. If I could look back at all the transactions, for the most part, the buyers are good people, the sellers are good people, and if we lived in a different world they could shake hands and the deal would be done. RJ: Yup. Joe: You do have to have contracts. We do have to have attorneys but it needs to be a fair and balanced deal for both parties. It's … I've only had one deal fall apart because of the attorney and it was, in fact, that situation that I just mentioned. Let's talk for a minute and jump over to owning an Amazon business for the people that are buying. We talked about what you look for from sellers but from people that are buying what are your thoughts on if it's 100% US based Amazon business and they've got the capital? In your opinion and experience now should they look at either expanding these skews in the US or maybe looking at the EU and different market places or does it simply depend upon the brand? RJ: I think it's highly contextual. Every situation is going to be very different. There's a ton of these Amazon podcasts that say skew expansion and international expansion which both require working capital. I don't think it's as simple as that. I think you really have to kind of look I have met people literally in the last month where they tried to go overseas and failed miserably because their product category just wasn't appropriate for European market or whatever market. So I think it really is highly dependent there. But it's certainly worth investigating. One of the things I like about Amazon is that you can experiment relatively cheaply for thousands if not low tens of thousands of dollars where you may not get hurt too badly if you made a big mistake. Essentially taking existing products and doing a small MOQ and launching it in Europe, if it fails miserably again if you have the right gross margin structure you're probably not going to lose money [inaudible 00:36:36.9] an opportunity cost. But look if you're going to be successful … I mean you've said this on your podcast you got to take some swings at the play and you're not going to always hit the ball. Joe: Got you. All right let's talk about another big fear given that you're an expert in this space now and you own … I'm not going to say exactly how many and neither are you probably, let's say more than 10 brands and FBA businesses altogether. How big is your fear of potential tariffs getting your individual brands? Does it keep you up at night? Does it hit every single brand or certain categories? Can you just touch on that as an owner in the space now? RJ: Sure. It's really also is highly dependent on your exposure to Chinese manufacturing. So yeah … so we certainly have our fair share of products that are manufactured in China. It's certainly something that we are monitoring and we are thinking about. At the same time … and Joe you know this personally, we've expanded rapidly into Europe. We own two European businesses now and so we will look at it later to expand it even more with Chinese based products as we go into Europe. Look I mean- Joe: [inaudible 00:37:47.1] Europe and not being impacted. Is that … okay, and will you have an opportunity? Have you done the financials? Does it make sense if you do that and shift from China to Europe to then import from Europe to the US and avoid the tariffs or is that just simply too much cost shipping wise? RJ: Oh that's a great idea, Joe. You should come work for us in our supply chain. Joe: No thanks I'm not that deep though you've got smarter guys than me. I know one of them … a lot of them actually. Is it something you guys are already working on and something you've crunched the numbers on? Come on I know you probably have. RJ: I think it's still early days and look we're thinking about it a lot. We're thinking about well … I mean it's too Wednesday about it. Everybody gets it. Everybody is all level playing field but it's not that simple. If it changes the price dramatically where there's price elasticity of demand issues in the category that can just impact overall demand. So look we're worried about it. We're hoping that it gets resolved and most of the time what you see in these geo political things is they usually the small period of exposure and everybody actually finally sits down and see when we get to the problem fixed. So that's what we're hoping for knock on wood. Joe: Let's both do it. Everybody else do it now as well. All right let's talk about a first, at least a first for me and I think a first for Quiet Light Brokerage although we've got a second in place now and it may happen before we close. On a transaction that we did together we actually instead of selling or transferring control of the Amazon seller account entirely we tested and successfully moved a brand from a well-established existing seller account took VA's in and tested it in another account that you happened to own. Can you talk about that a little bit for those … and I'll tell you why, because there's always a fear. Some people want to keep their seller account in particular over in the European markets. For some reason, some people are a little bit more fearful in some other countries. For some it's a legitimate fear, others I would say not but we tested that and it … can you just touch on that and what you did there and what you prefer whether it's buying a brand and moving it into your own seller accounts or buying the seller account entirely? And what the difference is between the two for you got. RJ: Yeah no, no, no, we'll just talk about the actual experience. So yeah we were certainly … we had our own questions, the exact process that we used was we did a test. So we didn't move all of the Asense over at once. We took three Asense, a top selling Asense, a medium selling Asense, and actually, it was two medium selling Asense and one longer tail Asense. I didn't want to jeopardize or risk a top selling Asense and until we moved into this other seller account. It was not equal. It wasn't too far behind. But it was definitely a smaller seller account than the one where they originated from. Joe: Were the reviews on the second seller account that you moved it into were the seller account reviews better or worse than the one you were moving it from? RJ: Worse. Joe: Worse, okay. RJ: They weren't bad but that's a worse- Joe: 4 ½ to 4 or something, okay. Sorry I had to clarify. RJ: Yeah I think it was like 2000 like 1200 or something overall reviews. Joe: Okay. RJ: But look the product reviews go with the Asense. So that's a really important thing in a seller account. If you are selling 3rd party products, you're selling Nike's and there are 20 other vendors on Nike's and you're fighting for the buy box, then your seller rating is a heck of a lot more important than the case for your private label. I know that's important- Joe: The big mystery and big unknown that so many experienced Amazon sellers people that are doing half a million or a million dollars a month is we don't know how important those seller account reviews are. When you … I mean obviously they're important in some way but when you go from 4 stars to 4 ½ and 4 ½ to 5. So, in this case, you moved some of the Asense over, obviously the review … product reviews carried over and if … was it a … I think we did a three week test and talk about how it turned out and we ended up closing the transaction. RJ: It was a 15 day test and then we extended it for a couple of days so it was just under three weeks and the seller was awesome. He is super cooperative. We were also risk averse as he was risk averse. We are risk averse so we really cooperated well to see if we could make the test as well. The other thing we had to replicate is GPC campaigns so they were identical. Joe: Yeah. Was that an automated process or a manual process? RJ: I didn't do it myself Joe so I can't tell you the exact process. I try and keep my hands where they're good and that's not one of them Joe: Okay. RJ: But from what I understand the seller actually created these campaigns for us and literally proved that it was a cut and paste. And then our team put it into our seller account. And then he had access to our seller account too … or viewing access or whatever so that he could make sure that it was setup. Because like I said he always intended to make it work. Joe: Yeah. RJ: So he wanted it to work and we had a couple of checks in there on our side to make sure that there's no way [inaudible 00:43:15.2] the situation even though we didn't really have any fear with him in particular. But it is something that you want to like at least have a couple of safeguards that somebody is not running a big Facebook campaign and juice in the results or something like that. Joe: All right so just for point of clarification for everybody listening the typical way that an Amazon business transfers is that the entire seller account transfers. Generally, in asset sales, the new owner takes control of the seller account and you're left with an empty shell of your corporation. What we did in this situation was move the Asense from one seller account to another. All the product reviews carried over. The seller account wasn't as high quality. We tested it out for a few weeks in a few ways and duplicated the sponsored account. And it turned out great. The seller has to help and it's in their best interest. And this is the big picture thing here Richard, it takes … and you talked about it throughout here, it takes a good buyer and a good seller to make a deal work. It's … nothing is cut and dried, there is lots of emotions involved in the process when you're selling and even for a first time buyer. Some people are putting their life savings on the line and they want to make the right choice so emotions run high all across the board. And it's never a winner take all situation, both a buyer and seller have to be happy at the closing table. It begins way back at the initial call and building a good package and managing your own personal brand and reputation. Doing the right thing as a seller and thinking someday maybe you're going to exit; maybe you're going to pass it on to your kids. Either way, you want to pass on something really great because if your kids take it over you want them to be successful because it may be your retirement money. And if you pass it on to someone else you're willing as a buyer Richard … RJ to pay more for a company that is really tidy and neat and you're able to just take off with it as opposed to sifting through the details and fixing things first I would imagine, right? RJ: Yeah and I'm going to say something that my team would probably kick me into shins over but I fundamentally believe this. And my mentor who kind of trained me in my career he always said always be willing to overpay for a great asset because the good ones are hard to find. And as you were saying that … so again if somebody is really running a great business we're not going to get in a pissing match over a couple of tens of a multiple or something like that. Because ultimately that's a great asset, we know what we're going to be able to do with it downstream and those are going to be rounding errors or something when we look back. You mentioned as you were saying that one of the things I'd like to remind sellers too is that I'm sure you kind of educate them as you bring them on board but there's a lot of these businesses out there. In 2017 Amazon announced that there was 20 thousand 501 million dollar sellers so there's a lot of choices; even if we're only trying to buy 100 of them. Joe: Did you just read Walker's book? What's going on here? You just quoted him exactly. And maybe you guys are reading the same stuff. Walker Diebel has published a book called Buy than Build. RJ: Yeah. Joe: Yes Buy than Build, you're not quoting him you're just quoting- RJ: No, no, no, if you read my narrative you would hear that. But I think what I'm getting at though is don't be a pain in the ass because we've got that 400 businesses in 60 days and we put … in that first 60 days we put eight in the LOI and then we bought a few more and whatever. My point is that at some point in this when we had a couple of your early ones get difficult, I remember being … Keith and Chris, they're sitting there I'm listening to a conference call with a seller and a broker and I literally got up on the whiteboard and I got in giant letters and I wrote NEXT! and that became kind of a mantra. If you're not acting your job well … it's not even if you're a jerk or whatever but if you're not acting that you have your buttons up there's a lot of another choice out there. And the same goes if you're a really good asset there's a lot of choice for you to who you sell to as well. If you're a really well run business and you're dealing with a jerk tell your broker find me the next one. Joe: Well let me say this you're saying to the sellers don't be a pain in the ass. To the buyers, the seller does have choices. The first time I was on a conference call with Keith we were on the call late at night with Max. Max was over in Europe and Keith was so professional, so good, so likable to the point where when the call was done my seller wanted to Keith to be the buyer. He did calls with other buyers. He wanted Keith to be the buyer and 101 Commerce. That is what you want to accomplish buyers on those conference calls. You want that seller to go I choose you because you're not alone and the one that wants to buy a great business. And that's hopefully what a lot of folks listening that are owners of the Amazon FBA business, and ecommerce, and SaaS businesses, content business in general. It really doesn't matter if you want to build a great asset and build a great reputation for yourself so that guys like RJ and Keith and other great professional buyers are willing to pay you maximum value for your business in a seamless, painless, exciting process so everybody prospers at the end. RJ you're awesome. I look forward to working with you for the next 24 months no more because you're going to buy 93 in 24 months and then you're done right? RJ: Yeah [inaudible 00:49:05.2]. Joe: All right I'll work with you as long as you choose to work with us here at Quiet Light Brokerage. RJ: Or eventually at some point, I'm going to find somebody smarter than me to run this and then I'll come work with you guys. Joe: There you go. Well, it's a privilege talking with you. Thanks so much for your time. RJ: Awesome. Joe: I appreciate it. RJ: Okay, thanks, Joe. Take care. Links and Resources: 101 Commerce