Episode 73
Ben Leonard built a 7-figure business from his laptop…only to sell it after 3 years. You may be surprised and curious as to why Ben did it, but for him, it was the right thing to do. What were his reasons for this surprising decision? He drops by to tell us why. Ben is the epitome of “Firing the Man,” and if you are someone who’s just starting an eCommerce business, you still would want to check this episode out.
Tune in now and learn the right exit strategy for you in the e-commerce space!
[00:01 – 04:48] Opening Segment
- Let’s get to know Ben Leonard
- His path from ecology to e-commerce
- What is “learning by doing” for Ben?
[04:49 – 13:52] The Truth Behind Starting an E-Commerce Brand
- Ben walks us through the process of building his business
- This was the time he also had a full-time job
- Don’t miss this advice from Ben to start your own business!
- Ben’s regrets in his e-commerce business
[13:53 – 19:22] Selling at Peak Romance
- The day Ben went full-time in his e-commerce business
- Selling the business at its peak
- Should you do it?
- Want some Amazon refunds? Check out Getida
- Promo code: FTM400
[19:23 – 30:00] Crafting an Exit Strategy
- Ben talks about the process of selling his business
- What is the “Entrepreneur’s Relief?”
- How Ben can help you in your business
[30:01 – 39:22] What Your Business is Worth
- The right mindset to sell your business
- How to know the value of your business
- Know more about Ben in the Fire Round!
[39:23 – 40:53] Closing Segment
- Connect with Ben. Links below
- Final words
Tweetable Quotes:
“Sometimes, you just need one point of reference, and if it’s somebody who’s been there and done it, then that helps quite a lot.” – Ben Leonard
“If you risk nothing, you risk everything.” – Ben Leonard
Resources Mentioned:
Email ben@benleonard.pro to connect with Ben or follow him on LinkedIn, YouTube, Twitter, and Facebook. Check out his personal website and visit Ecom Brokers to learn more about his services.
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David 0:00
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Ben Leonard 0:41
Cuz I enjoyed my job and I was passionate about it. But at the same time, I was really starting to figure out Hey, I’m really enjoying this side hustle this hobby that was supposed to just give me something to do. Maybe earn me some extra pocket money on the side is actually Whoa, look at those numbers. Look at all those sales coming through on Amazon and on Shopify. I didn’t expect that to happen. This is exciting. If you think about what you’re good at, how can you look at your business through that lens? So if you’re really, really awesome at data, how can you apply those skills to your business to give you the edge over everybody else? Or if you’re really good at brand, or you’re really creative? Look at your business through that lens and think about well, what can I do with my creative skill set? e commerce is so overwhelming. And I think the reason it’s so overwhelming is because we live in an age where so much information is available online, whether it’s YouTube or podcasts or Facebook groups, and everybody is shouting that they are correct. I’m right. No, I’m right. No, I’m right. It’s overwhelming. You don’t know what to do. And sometimes you just need one point of reference. And if it’s somebody who’s been there and done it, then that helps quite a lot.
Intro 1:48
Welcome everyone to the firing the man podcast a show for anyone who wants to be their own boss. If you sit in a cubicle every day and know you were capable of more than join us. This show will help you build a business and grow your passive income stream in just a few short hours per day. And now your hosts serial entrepreneurs David Schomer and Ken Wilson.
David 2:12
Welcome everyone to the firing the man podcast. On today’s episode, we have the privilege to interview Ben Leonard. Ben is the founder of Beast Gear. But he built his business on a laptop in a cupboard in his spare time. And he successfully grew and exited his business after three years for seven figures. Welcome to the show, Ben, what’s going on?
Ben Leonard 2:32
Hey, it’s great to be here. Thanks for having me.
David 2:34
Absolutely, absolutely. So first things first, tell us a little bit about yourself.
Ben Leonard 2:38
Sure, yes. So most of your listeners, I’m guessing are in the States. And I’m across the pond over in Scotland, representing the UK on the podcast today. I got started in e commerce in in 2016. My background was not business. I worked in ecology. My background was that I was a professional whale and dolphin nerd I worked in I’m from a small city in northeast Scotland called Aberdeen, which is like the oil and gas capital of Europe. And my job was to help oil companies stay within the environmental regulations. And I liked my job there was you know, it was good. But late 2015, early 2016 like a lot of people, you know, a significant life event can change the course of their career. And that happened to me, I got pretty ill with a heart problem. And the doctors, it was like the third time I’d had it and we really needed to nip it in the bud before it became a long term issue. And I’m absolutely fine now, thanks to what we did, which was I took nine months of pretty strong drugs. And I had to stop all my physical hobbies like CrossFit, boxing, lifting heavy weights running around like a maniac. And what happened was, I needed something to occupy my time and my mind. And so I started working on this brand of fitness equipment called beast gear. And as luck would have it, I was actually pretty good at it. And after a couple years, I quit my job and after three and a half years I’d grown it to about 4 million British pounds a year whatever that is in US dollars. And I became time to sell and I sold and I’m still ecommerce now with a variety of roles. And it’s a great space to be in.
Ken 4:15
So Ben, as you are growing your company on the side, were you working full time. Did you have a full time day job? Did you work full time in the e commerce or how did you split that?
Ben Leonard 4:25
Yeah, it was it was a busy time when I started my wife she was then my girlfriend she was studying. So she was super busy, which meant I had lots of time to work on this side hustle, right? I was still working my full time job as an environmental consultant which I enjoyed. And evenings and weekends I used to call this learning by doing with my business because I had no background in e commerce right but actually looking back is a little bit better than that because I have a background in science. In science we come up with a hypothesis, test it, we analyze the results and we tweak something and then we test something we go again. And it was that analytical scientific background that helped me to get going pretty quickly with e commerce by trying something testing, analyzing, tweaking and going again. And so yeah, my evenings and weekends, that’s what I was doing on a laptop in a cupboard in my apartment at the time. And working hard to develop this brand learning about my own DTC website, which I built in Shopify and learning about Amazon, and learning about branding and developing a range of products for fitness enthusiasts and building that out right across Europe.
David 5:30
Obviously, the show’s called firing the man, and we talk a lot about exiting your day job and pursuing e commerce full time. When Ken and I started the podcast, we both had full time jobs. And we have kind of documented that process to both of us firing the man. So can you walk us through like what is going on during the time when you have your side hustle, you’re starting to grow that. But you also have a steady paycheck coming in, you know what’s going through Ben’s mind at that time?
Ben Leonard 5:58
Yeah, it’s a really interesting one, isn’t it because you’re kind of caught in two worlds, because I enjoyed my job, and I was passionate about it. But at the same time, I was really starting to figure out, hey, I’m really enjoying this side hustle this hobby that was supposed to just give me something to do. Maybe earn me some extra pocket money on the side is actually Whoa, look at those numbers, look at all those sales coming through on Amazon. And on Shopify, I didn’t expect that to happen it’s a little exciting. So you know, on the one hand, it’s great because you have the steady income coming in. So you don’t need to worry too much about taking any bit money out of your new business, which is great, because it helps you to scale it. And on the other hand, the rest of your life goes out the window, because all your time is either working your job job, or working your new business. And that was fine for a period of time when my wife was studying. But after that, you know, it started to get into the way of you know, life balance. And eventually, it just grew to the point that it wasn’t sustainable, you know, you’re on the phone at 3am, crying on the phone to Amazon seller support. And yet, you’ve got to be up in the morning to go do your normal job. And you’re trying to do all your usual life things, whether it’s hobbies, or just you know, doing the shopping, right. And so there comes a time when you hit a tipping point, and you have to start thinking about quitting your job.
Ken 7:12
So Ben, you know, you mentioned it a little bit earlier about kind of your education and your background in science. And kind of I think it’s interesting how you kind of marry that up with your side hustle, right? Like, you mentioned that process of trial and error trying to study things and figure them out. Can you kind of describe, like, how you use that in your business? Did you do it with product development? Did you do it with the business side of things or everything?
Ben Leonard 7:39
Yeah, well, I guess pretty much everything. So like product development would be because I was never in a hurry never rushed. Because I, you know, when I started this out, it was purely supposed to be a hobby. And I didn’t have the intention to quit my job in the first instance until this started to really gain traction, I was able to take my time. So I would develop a product sample, test it myself, I had friends who were athletes, some of them professionals, just because I was fortunate to go in those circles. And we would test them and say, well, this component could be tweaked in this way, or let’s see what we can do with this. And so, you know, that was one side of it, the product development, but then you have like kind of the tactics online. So for instance, PPC, I knew nothing about PPC when I started Amazon PPC. So that was all one big experiment. And I got really, really good at that. with about a year and a half before I sold the business, I ended up outsourcing that. The only reason I outsourced it wasn’t because I wasn’t doing a good job. It’s just because I I didn’t have capacity anymore. I had to get it off my plate, I have to be working on the business and not in the business. But yeah, like the scientific approach really helped. It was almost like every facet of the business, whether it was product development, or PPC or Facebook ads for driving traffic to my own website, what copy works, let’s take a look at it. Let’s analyze the conversion rate when we change this data, the next thing, whether it’s your title, or your bullets, or your description, all sorts of things. I think taking an analytical approach to business really works because, you know, there comes a point where you really have to stop relying on emotions and start relying on data.
David 9:10
Absolutely. I think it’s really neat. Amazon and e commerce in general tends to kind of be a melting pot of people in terms of backgrounds. So for instance, like my background was accounting, everyone I worked with was an accounting major. And so it’s kind of like the same type of person. But you know, Ken’s a network engineer, you have background in science, and I’ve met people from all walks of life. And I think that’s really neat. Now, I know some of our listeners don’t have like that typical business background where maybe they were an accounting major finance major, they didn’t get an MBA, but they do have, you know, you were talking about like testing of setting a hypothesis and testing. So what advice would you give to say like a non traditional background person who’s involved in business?
Ben Leonard 9:54
In terms of what? Science or what do you mean specifically?
David 9:58
Yeah, I would imagine that there is a scientist listening to this right now. And they are probably sitting on the sidelines saying, I don’t know anything about business. It’s not my route. What would you tell that person?
Ben Leonard 10:09
Got it. So you know what, not even just scientists, but anyone, right? So everyone’s got a particular set of skills. And there’ll be people listening who are like well no I don’t, it’s like, well, yes, you do. Everybody does, right? And if you think about what you’re good at, how can you look at your business through that lens? So if you’re really, really awesome at data, how can you apply those skills to your business to give you the edge over everybody else? Or if you’re really good at brand, or you’re really creative, look at your business through that lens? And think about, well, what can I do with my creative skill set? Or maybe you’re amazing at writing your writing skill set. And how can you apply that to your business to make it better, and then the stuff that you’re not so good at, so I was good at the kind of analytical side, right? But there were plenty of things that I wasn’t so good at, I would get them off my plate and outsource them. So if you’re really creative, you kick ass at the creative stuff, get the data stuff, the nerdy stuff, the numbers stuff and get rid of that. Right? If that makes sense. So like, everybody’s got skills, look at your business through the lens of your skill set.
Ken 11:12
Yeah, so Ben, you know, I really want to get into kind of the, you know, the exit from beast gear but before we pivot and go in there, you know, for the listeners that are kind of like, you know, they’re selling, maybe they’ve been selling on Amazon for a year, maybe two years. And they’re kind of like, they’re at that tipping point of like, Hey, I, you know, I want to go full time they have those fears. This is a two part question. So, one, did you wish you would have went full time sooner? And do you have any regrets of not doing that?
Ben Leonard 11:39
Yeah, definitely. It’s a good question. So I was held, you know, yes, I wish I’d gone full time sooner. Because what held me back from going full time sooner was security, right, I wanted to make sure that me and my family were secure. I had a good job. And it felt like, it was funny because I went to university, I had two university degrees that contributed to getting that job. And it felt kind of weird that I just started like developing some stuff that I felt like I had no right to develop because I had no official education in e commerce, or fitness or product development. And suddenly, it was earning more than my job. And therefore, it felt kind of strange, almost as if, like I was an imposter and didn’t have the right to be doing that full time. And then there was the security side, and I wanted to make sure that my family was secure. And I was slightly risk averse. And as I’ve kind of grown into my entrepreneurial shoes, I guess I think we as entrepreneurs are risk takers, so I’ve begun to take more risks. And there came a day where I felt like I’d fully grown into my entrepreneur shoes, and I was ready to take that risk. I, you know, I came to realize that the biggest risk was actually not quitting my job, and not fulfilling the potential of the business and my new skills, because realistically, I was perfectly employable. And if it didn’t work out, after a year or two, I could go back and get a job. As it turned out, my boss was amazing. She knew I was doing this as a side thing, right? It had nothing to do with my day job. So she knew it wasn’t like a competitive interest. I went to her and I said, you know, I’ve been doing this B sku stuff, I really need to give this a shot full time. And she said, hold that thought, don’t quit. I’m gonna give you a year off. I’m gonna give you a year sabbatical. And hopefully, I’ll never see you again, because it’s going to go so well for you. But if it doesn’t, you’ve got your job back. So she was basically the best boss in the world. And not everyone has that. Of course, I understand that. But having said that, I didn’t know she was going to do that I was in her office ready to quit. And she very kindly gave me that safety net, which was incredible. But I wish I’d done that six months earlier, because realistically, financially, we could have easily afforded it maybe even a year earlier, but I just hadn’t grown into those entrepreneurial shoes fully yet. And I didn’t have that quite that risk taking mindset yet. But you know, I gotta give myself a break for that, to be honest.
Ken 13:53
Yeah, that’s interesting. And you know, Ben, that is the common answer we hear a lot is, you know, a bunch of entrepreneurs that are full time now they wish they would have done it earlier. But I think you said it you know perfectly like where you have to feel comfortable and you have to kind of grow into your, you know, your entrepreneurial shoes, you know, and fit that space. But yeah, it’s a common answer, um, you know, not going quick enough, you know, or soon enough.
David 14:18
So, one last thing that I want to ask before we dive into your exit, is what is going through your mind as you’re walking into the office to quit your job? Was it confidence? Were you nervous? What is going through your mind on that day?
Ben Leonard 14:35
I was calm and relaxed, because I had a great relationship with my boss. And I was confident because I knew that she was a good person, but at the same time, it’s never a good feeling or that’s the wrong phrase. It’s never a comfortable feeling to know that you’re about to quit your job. So it was like, uncomfortable excitement. I suppose the word for that is anxiety maybe. But I was like, excited because I knew that within however long the meeting was, half an hour, like that was it, I was going to be doing this full time. Okay, I was gonna have a notice period. But you know what I mean, right? That was it, it was all going to be off my chest. And I think if I’d been going into face like the worst boss in the world, that would have sucked. But it was a mixture of anxiety and excitement. But it was, you know, overall that I knew I was doing the right thing. So I think overall, it was the feelings whatever they were, it’s hard to describe them were were overwhelmingly positive I guess.
David 15:29
I would say that that is very similar to Ken and I, at least I can speak for myself on that one. Yeah, I was excited. But I was nervous. And I think we’ve talked about it on the show before is waiting to fire the man until the discomfort leaves. And the discomfort doesn’t leave, it’s there. Always. Yeah. I think that holds a lot of people in a job for longer than they need to be. But it’s really cool to hear your story and kind of your mindset going into this. So let’s dive into this exit. So you’ve got beast gear, you’ve grown it to do 4 million British pounds. How, let’s start at the beginning? Did somebody approach you? Did you put it up for sale? How did that go?
Ben Leonard 16:14
Sure, in early 2019, I came to the decision that I needed to start thinking about selling, because so much of the business was tied up in one sales channel, Amazon, albeit that was across multiple countries, all across Europe, the Middle East, Australia. But still, ultimately, you heard the horror stories, somebody could just press the big red button. And sure, I’d build a legitimate brand. And a significant portion of customers would come and find me on my website. But it would not have been a good day, if that had happened. And I got some advice. I got this advice from my dad actually, which was, um, sell the business at the point of peak romance. And what that means is basically you’re at the point where this, you’re thinking to yourself, wow, this could be huge. But also, it might not be, right? You’ve got this romantic notion that it could be huge. But it might not be huge. But you’re experiencing that growth that is demonstrating that, yes, this could be huge. So there’s like, there’s like a carrot on a stick for a potential buyer like this could be huge. Like this is on a great growth trajectory. There’s lots of meat left on the bone here. So you’re going to get a decent valuation. And so what happens is, if you sell at the point of peak romance, if it goes great after you’ve sold wonderful, if there’s a bit of an earn out, potentially, in the deal structure, depending on how it’s done, then wonderful, you’re going to hit those targets. If it doesn’t go great, then you’ve got out at the right time. As it happened, I sold and then COVID came along, which actually dramatically increased sales of fitness equipment. But at no point did I regret selling when I sold, it was the right thing for me and my family. You know, my wife was pregnant, we wanted to move house, I was what was I 30 or 31. It just made sense. And maybe if beast gear wasn’t my first business, if I already had an exit or two under my belt, and I had that financial safety net, then maybe I would have wanted to stick around and you know, experience the romantic ride of where the brand might go, right. But it wasn’t the right thing at the time. And so I came to the decision to to start planning to sell in early 2019 and I I approached a broker. Now you got to remember that in 2019, early 2019 even this whole buying and selling ecommerce business thing that has exploded in the last year and a half didn’t exist yet. No one had heard of Thrasio, they formed in September 2018. So I approached a broker in early 2019. And they were all right. But several things kind of went wrong during the process. And so it took a lot longer than I planned for them to get the business ready and actually it was myself and the accountant that did a lot more of the work, which is why obviously in the end, I was able to negotiate them down in their commission. But they ultimately did introduce me to the buyer and the buyer, took a look at my business gave me an LOI, a letter of intent, for those listening, which is basically a letter that says we intend to buy your business. Please give us X number of days, 30 45 days to do our due diligence. They did their due diligence, and at the end of October 2019 I sold the business.
David 19:12
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Ken 20:04
So you approached a broker and so that was about a 30 or 45 day period for due diligence. And then just immediately after that it was closed, or was there anything further than that? And also, can you describe kind of like your feelings for like, what was going on in your life? Like, at that point?
Ben Leonard 20:24
Absolutely. I mean, it was crazy, because it was early 2019, I came to realize, wow, I could take a lot of money off the table here. And I approached the broker, and I was quite excited about it. But they took a long, long time. So you know, I think I contacted them in February or March, by the time the business was ready to go to market so to speak, it was early September 2019. It was a crazy time in my life, our daughter was born in April. And because of all the delays with the broker, I was hoping that this deal will be done and dusted. But we, my wife and I had arranged to go backpacking around northern Italy, traveling around on the Italian rail system with our five month old daughter. And we went ahead and did it. So we’re like walking through the streets of Venice during the day. And in the evenings, I’m on calls with like, every different person from the Department of this potential buyer. And this went on for like our three week trip round Italy, it’s kind of hilarious. My wife was not too impressed, but I was saying, Listen, if we pull this off, we’re gonna have a good amount of money. So like, let’s just, you know, let me get on with this. And we still had a great holiday. It was good fun. Yeah, so we got we got home, you know, in October, and they finished their due diligence. And then there’s the next part after they’ve done their due diligence is the legal stuff, right. So I had a legal representative, back and forth with their legal team on the SPA the share purchase agreement. So one of the things I wanted to do was I wanted to sell the whole entity, the limited company, rather than the assets, which would just have been the brand. And the reason for that, and this is common among people in the UK, is that we have something called entrepreneurs relief, which is basically a tax relief to encourage entrepreneurs to grow businesses in the UK to boost the economy. And instead of paying 20% tax on the sale, you only pay 10% tax on the sale, up to a particular threshold up to 10 million pounds. So you could do this, you could repeat this until you’ve made 10 million pounds selling businesses now, the new government has just changed that threshold to I think, a million pounds. But nonetheless, when I sold it, the threshold was 10. So I was going to be fine, because I wasn’t selling for 10. And so yeah, I wanted to sell the Limited Company, which was not common at that time for American buyers, I sold the business to an American organization, I can say who it is it’s Thrasio. And it wasn’t common for an American organization to buy a British company, they would typically just buy the assets. But I was like, well, I want to sell the company so that I can get this tax relief. So that made the process last a little longer, because their lawyers weren’t used to it. And so we had to just kind of iron out a few bits and pieces, which took a bit longer, which made me like a little bit more nervous, because you know, you’re adding on several more weeks to the process, you’re now dealing with things that people aren’t necessarily comfortable with, because they haven’t done it before. But in the end, it all worked out fine. And the deal was done at the end of October 2019. And that was pretty surreal, you know, to wake up the next morning, and you don’t own the business anymore.
David 23:23
I want to dive into that a little bit more. Having never gone through an exit, I would anticipate a little bit of sadness. I have spent so much time with my brand. It is like a child, you know what I mean the 1000s and 1000s of hours. So what was that like? I mean, did you get cold feet? What were your emotions there?
Ben Leonard 23:43
I didn’t get cold feet. On the one hand, there was a sense of relief, because it was intense, it was intense. And of course, it needs to be intense. And it should be intense, somebody who’s going to give you a lot of money for your business, they need to know, every single teeny tiny detail and due diligence is pretty intense. So I was relieved that it was done. And on the other hand, there was this tinge of sadness, that I didn’t own it anymore. But on the other hand, I was the founder, I would always I will always be the founder, right? I will always be that guy. And if the brand continues to go in the right direction, that will be a pretty cool thing to always be the founder. And I was also able to negotiate on the side of the deal, a side agreement whereby I would have involvement in the development of products, which was one of the aspects of the business that I enjoyed the most. So that was great. And that’s something that I help people do with now with my brokerage, that type of thing. And so that was fantastic. I felt like I still was almost like having my cake and eating it. You know, I still got to do the fun bit. And it was also excitement, there was a sense of excitement about where I could see the brand going. And then of course, the financial side. I was waiting for the first chunk of money to hit my bank account so that I could take a screenshot of it. I was never ever gonna have that amount of money in my bank. It was a roller coaster of emotions.
Ken 25:00
So, Ben, so, now so you sold beast gear to Thrasio? And then yeah, can you describe kind of what’s next, you had mentioned you alluded to that you’re kind of waiting for the screenshots. So maybe if you can go into a little bit of the details like maybe it’s earn out or pay out or whatever. And then, and kind of what you spent your time on after that, because obviously, you know, you worked full time building beast gear, and now it’s gone, then what do you do, then?
Ben Leonard 25:27
Sure. So I can’t go into too much detail on the specifics of the deal, obviously, for contractual reasons. But yes, there was an earnout. So I received an amount upfront, and then an amount depending on the performance of the business over the next couple of years, and I was very comfortable with those targets, because I’d negotiated on those, I knew the business well, and I knew the trajectory we were on. And I knew that we were very likely to hit those. So that was great. And so the money came along, and I had a bit of a break a bit of a breather from really doing very much of anything. We had a new daughter, and we just moved house. And so it was time to just have a break, I was helping you know, when you sell the business, there is a transition period where you’re going to kind of onboard the new owners to the business. But there’s nothing particularly strenuous. And I began to think about my new projects. And what I was going to do with myself. At one point, I even considered going back to my old job, which I think I thought about for about half a day and then thought that’s a stupid idea. You know, I have all these new skill sets, why would I do that I liked my job, but I don’t want a job. Right. And, you know, I realized that I have developed the ability to build a valuable asset that is a brand, and then sell it. So I’m doing three things now really, I guess I have three hats. I’m developing brands, partly because I love it. Partly because I know, like I said, I now know how to develop a brand into something valuable and then sell it. And partly because I can’t do my other two things properly without still running ecommerce businesses. So I consult with e commerce business owners, and I run a brokerage called econ brokers. And I can’t properly advise people, if I am not in the trenches on the ground with a real lived understanding of e commerce. And I believe that I couldn’t even do it properly if I said oh well I owned an e commerce business, and I sold it, well, that’s fine. But this industry is moving so fast, even now, a couple, year and a half later, things have changed. And it’s not good enough to just have had that lived experience in the past, you need to have that lived experience now of owning and running an e commerce business. So those are my three hats. I build brands, I consult with ecommerce business owners, you know, just the benefit of my experience to help them get control of their business and scale it up, you know, there’s no, there’s no magic potion, there’s no secret sauce, there’s no superduper course that’s gonna turn their business into something amazing overnight, there’s no pictures of me standing in front of a Lamborghini on Facebook. Then there’s the brokerage, which takes the lessons that I learned from selling my business. And I partnered with my accountant who played a significant role in selling that business. And she’s got like 20 years experience in mergers and acquisitions. And so we decided that we felt like we could do a better job of being a broker. And our position in the UK and Europe is quite an interesting one, considering now the huge growth of e commerce, this side of the Atlantic, we’re working globally. But it’s quite interesting, because there’s like, a lot of buyers in the states buying up businesses, our side of the Atlantic, and vice versa, there are an emerging number of buyers, this side of the of the pond, buying up businesses over there. So it’s an interesting place to be.
David 28:39
I think that when you talk about running your own e commerce business, and that making you as successful consultants, I wish more people in the industry had that attitude. That makes so much sense, you know, go back to like academia, I always had a lot more respect for professors that have real world experience. And with Amazon changing as much as it does it is if you’re an expert two years ago, and we’re only bringing that skill set to the table as a consultant that the atmosphere has changed so much, in just two short years. So I really like that and respect that. And if some of our listeners have an existing brand, like specifically what type of consulting do you do? Or or where do you find your expertise to be?
Ben Leonard 29:23
Yeah, so what I don’t do is I don’t run people’s accounts, so I don’t get in there and open their account and do the nitty gritty of that side of things. It’s more of the strategy. And that’s on everything from the product development, to the logistical side to branding of your specific products on your overall brand and marketing those products. It’s the whole you know, because I managed my business on my own except for three, you know, freelance team members who are doing customer service and social media. So I teach the strategies that I use to build, scale and then sell my business and provide I guess my point of view on what they’re doing to help them get clear on where are you now? Where do you want to be? Right? You need a reference point of where you are now you need a reference on what is your plan? Where are you trying to go? Then you can reverse engineer that, figure out how you’re going to do it. And to help people do that. And that gives them a sense of control. Because ecommerce is so overwhelming. I think the reason it’s so overwhelming is because we live in an age where so much information is available online, whether it’s YouTube, or podcasts or Facebook groups, and everybody is shouting that they are correct. I’m right. No, I’m right. No, I’m right. It’s overwhelming. You don’t know what to do. And sometimes you just need one point of reference. And if it’s somebody who’s been there and done it, then that helps quite a lot. So that’s what I do.
David 30:42
Ken, anything else before we get into the fire round?
Ken 30:45
No. Yeah. You know, I would just like, yeah, to add on to what David said, Ben is like, you know, I really respect the fact that you’re, you know, building brands and kind of staying in the game while you’re advising and, you know, and doing the broker side of it, I think that marries really well. And I think it adds a ton of value to your clients. Kudos to you.
Ben Leonard 31:05
Thanks. Yeah, I think just add one other thing I mentioned to David a second ago, the whole idea of having a map. And that applies as well to people, when they want to think about their business in terms of the exit. So there’ll be people who listening or thinking, yeah, might want to exit, and they’ll be people who are listening, like, I know I never want to exit. I love my business, I just want to keep holding, both of those things are fine. But the worst thing you can do is wake up one morning and say, I want to sell my business. Can’t do that. Well, you can but it’s a mistake, what you want to do is wake up one morning and say, now I’m going to plan how to sell my business. Because even if you don’t want to sell it, you need to understand what is it worth, right? People regularly have their houses valued, or you know more or less what your car is worth based on depreciation, right? Depending on when you bought it. You really need to have a handle on what is your business worth. So it’s important to have your businesses valued by somebody competent to value it, and then say to yourself, okay, is it worth half a million, is it worth 100 grand? Is it worth a million? Is it worth 10 million? Doesn’t matter. And then ask yourself, What am I willing to sell that for? Or am I willing to sell it at all? and then reverse engineer that and think about the steps that are going to get you there and work with somebody who can help you to break that down and stack up the dominoes and get to that point. And there are some people who will just wake up and say I want to sell my business and then they’ll just kind of they’ll go to one of the standard kind of flipper style brokers and slap it on the website like the the eBay of businesses, and you won’t realize what it’s really worth. What you need to do is have a plan.
David 32:36
Yeah, I think that makes a lot of sense. And, in terms of that value, any recommendations on you know, if someone’s wondering what their business is worth any back of the napkin math or multiples that you would recommend or you think going through a valuation practitioner is the way to go?
Ben Leonard 32:53
Getting it valued is the way to go. And you can get it done by a professional pretty quickly, so we can do that econbrokers.com.UK, if you want that, we can figure out what it’s worth, and then either work with you towards a goal or sell it now or sell it, you know, very soon, depending on what your goals are or not at all. On the other hand, you can be there is a back of a napkin, way to do this, but I don’t particularly recommend that people do. But when we’re talking about multiples. The question is multiple of what. So different people have different definitions of that. But the multiple really ought to be the trailing 12 months SDE which stands for sellers discretionary earnings. So what is sellers discretionary earnings, that is basically your net income plus add backs, what are add backs, I hear you ask, add backs are in layman’s terms are effectively costs associated. So costs that appear on your profit and loss sheet, which you can add back because the new owner won’t have those costs. So that could be your salary could be any other expenses you’re putting through the business like your phone bill. But it could also be costs that you’ve paid for that the new owners are never gonna have to pay for again. So the cost of doing the trademarks, well, you’ve already done them, the cost of your product photography, well you’ve already done it. The cost of that consultant that you hired, you’re not really paying him anymore, the cost of your virtual team, no, the new owner has their own team, right, etc, etc, etc. So you need to get it valued by somebody who is competent to actually calculate what all these add backs are, and there are a lot of them. And there are lots of things that can be done by a competent ecommerce accountant to do that. So then once you’ve figured out your sellers discretionary earnings, you need to think about what kind of multiple you’re gonna get. And there’s a range, right, so there’s, this exists on a spectrum, but say you had an SDE of 100 grand, and your business was two years old, and it was pretty well diversified and it was growing, probably going to get between three and three and a half x, although it’s going up all the time, at the moment. But if your business is five years old, and your SDE is 500 grand, and you’ve got massive off Amazon sales on your own DTC website, and you’ve got lots of intellectual property and enormous growth could be four or five and a half x, the way things are going. So it’s important to recognize that exists on a spectrum. And the problem that business owners have is they’re very emotionally tied to their business and they’re quite likely to overvalue it. So it’s important to get somebody impartial to take a look. And we can do that if you want.
David 35:19
That makes a lot of sense. That makes a lot of sense. Do you have I always like, whenever I’m talking to a broker, I always like to ask him this. If you look at like traditional private equity companies that are buying brick and mortar like manufacturing, typically that’s going to trade somewhere between like six and seven times EBIT, da, which for purposes of this conversation is very similar to SDE, aside from physical assets on your balance sheet, there does not seem to be a huge difference, in my opinion, between, say, a manufacturing company and an e commerce company. But there’s a big disparity between multiples. And what’s your opinion on why that is?
Ben Leonard 35:58
It’s multifaceted. Part of it is to do with the risks tied up in the fact that significant portions of the revenue are coming from marketplaces like Amazon, which have ownership of the customer, and which could suspend you at any time. Although that risk diminishes with the age of your business how mature your account is. And of course, whether you’re playing by the rules, which you of course should be. Part of it is because of the hesitance of banks essentially to lend money for the purchase of e commerce businesses, which comes back to that risk. Part of it is simply the age of this right. Until relatively recently, the last few years, nobody was buying and selling ecommerce businesses, particularly commonly or at least, people were not raising enormous sums of money in order to do so. But since the emergence of thrasio in late 2018. This has exploded with the emergence of more of these venture capitalists aggregators, if you want to call them that, there’s more competition, there’s more buyers, and therefore, multiples are getting pushed up. And we’re starting to see businesses go for higher and higher multiples, which is, which is a good thing. Because these businesses are legitimate businesses, the internet has existed for decades buying and selling products online for decades. It is simply unfair, it is wrong, that somebody can pour their blood sweat and tears into a business, and will not realize the same value something truly because it doesn’t have a door and a roof.
David 37:19
I am with you there. I’m with you there. And from a cash flow standpoint, you know, cash flows, cash funds. And so I am looking forward to multiples continuing to climb. And, you know, I think that increased supply of buyers is going to hopefully continue to push those up. So anyway, Ken let’s dive into the fire round.
Ken 37:43
Yeah, yeah. Real quick before the fire round, Ben, one more question. You know, since you’re in that broker space, and you see a lot of things and hear a lot of things. What’s one kind of prediction for the next six months? Where do you see the kind of the market going? Or is there going to be any shockers or?
Ben Leonard 37:59
Multiples are going to continue to go up, but I don’t think that they’re going to go up astronomically. I think that we’re, you know, this is they’re not definitely not going to go above traditional multiples, and they’re going to, we’re reaching, I think, a plateau in that point of view. In terms of the space in general, many of these aggregators have raised their money. Some of them are raising more. But by and large, they’ve raised a lot of money, and now they need to spend it. And they want to spend it fast. So if you’re thinking about selling, I would want to get the balls rolling, because getting deals done before q4 would be smart. I think this is gonna go in waves. So people are gonna raise money, spend a ton of money, raise some more money, spend a ton of money. I don’t see this like a.com bubble that’s gonna burst in that sense.
Ken 38:52
Alright, let’s hit up the fire round. Ben, are you ready?
Ben Leonard 38:55
I’m ready.
Ken 38:56
All right. What is your favorite book?
Ben Leonard 38:58
Can I give you a business one on non business one?
Ken 39:00
Absolutely.
Ben Leonard 39:01
Cool. Business the E myth revisited by Michael E. Gerber non business Harry Potter. I am a Harry Potter nerd and I’m proud.
Ken 39:09
That’s awesome. Heck, yeah. What are your hobbies?
Ben Leonard 39:13
Fitness and music.
Ken 39:14
What do you think sets apart successful ecommerce entrepreneurs from those who give up, fail or never get started?
Ben Leonard 39:20
We have grit and determination. We take risks. Like I said at the start, right? I didn’t used to take risks I had to learn to take risks. I’ve come to realize now the biggest risk. If you risk nothing, you risk everything right? If you don’t do anything, well, all you’re gonna see is downside because you haven’t tried.
David 39:36
I really like that. And oftentimes when people do identify that downside, it’s not that bad. I don’t know how it is in the UK.
Ben Leonard 39:43
No, you’re absolutely right, you know. What is the risk? What is the consequence? And can you live with that?
David 39:48
Worst case scenario, you go bankrupt, and they don’t, at least in the US, they don’t put you in jail for filing bankruptcy. You can start over and it’s hard to get a credit card for a couple years. But it’s really, the down side is not that bad. So I like that grit and determination. Last question, how can people get ahold of you?
Ben Leonard 40:07
Yeah, sure. I’m on all the major social media channels. My handle is Ben Leonard pro Leonard LEONARD like the golfer, Justin Leonard, Ben Leonard Pro. If you want to have a conversation about either selling your business or even just, you know, thinking about what’s it worth, head over to econbrokers.co.UK, click on the Big Yellow Button says sell your business. If you want to take a look at my website. That’s Ben Leonard.pro
David 40:29
Awesome. Well, thank you so much for being a guest on the podcast and I look forward to connecting again soon.
Ben Leonard 40:35
Pleasure. Thank you for having me.
Ken 40:36
Yeah. Thanks, Ben.
Ben Leonard 40:37
Cheers, guys.
David 40:38
Thank you everyone for tuning in to today’s firing the man podcast. If you like this episode, head on over to firingtheman.com and check out our resource library for exclusive firing the man discounts on popular e commerce subscription services that is firingtheman.com\resource. You can also find a comprehensive library of over 50 books that Ken and I have read in the last few years that have made a meaningful impact on our business, for that head on over to www.firingtheman.com/library. Lastly, check us out on social media at firing the man, on YouTube at firing the man for exclusive content. This is David Schomer
Ken 41:18
and Ken Wilson. We’re out
David 41:35
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Transcribed by https://otter.ai