We had the pleasure of interviewing Ismael Wrixen, the Executive Chairman of FE International, the market leader in the sale of SaaS, E-commerce, and Content businesses. Over the past decade, Wrixen has overseen 1000+ successful acquisitions totaling more than half a billion dollars in value. Wrixen was also a (NACVA) 2018 40 Under 40 Award winner. Wrixen’s previous background was in large-cap M&A investment banking, where he executed several high profile public deals, namely in the technology sector.
Founded in 2010, FE International is an international company serving clients worldwide. It was named one of The Americas’ Fastest Growing Companies in 2021 and 2020 by The Financial Times and is also a three-time U.S. Inc. 5000 company.
[00:01 – 04:26] Opening Segment
- Introducing Ismael Wrixen and sharing our key takeaways from our conversation
- Transitioning from investment banking to mergers and acquisitions
[04:27 – 13:19] Quitting Your Job to Be an Entrepreneur
- Weighing risk vs. reward when transitioning out of corporate
- How work ethic and an entrepreneurial spirit is developed
- Advice for those who are transitioning out of their 9-5s
- Regrets and timing your exit
[13:20 – 22:33] Helping Over 1100 Founders Exit Their Business with FE International
- What FE International does and how they help business owners with valuations, exit planning, optimizing and acquisition processes
- What do mergers and acquisitions companies find attractive in a business?
- Between SaaS, E-commerce, and Content, which is easiest to run?
- Want some Amazon refunds? Check out Getida
- Promo code: FTM400
[22:34 – 43:28] Building a Sellable Business
- Discretionary earnings disparity between eCommerce and Brick and Mortar
- The aggregator market
- Things to do now to exit smoothly and profitably
- Brokers vs. Aggregators
- Learn more about Ismael in the Fire Round!
[43:29 – 44:58] Closing Segment
- Connect with Ismael. Links below
- Final words
“If you’re looking to take a business and scale it profitably over time, I’d say FBA and eCommerce, in general, is a great place [to look].” – Ismael Wrixen
“I think a lot of people have potentially been leaving value on the table by getting approached and selling to the first person who wants to have a conversation with them. There is a lot of value in a competitive scenario.” – Ismael Wrixen
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Ismael Wrixen 0:42
I think it’s just surrounding yourself with extremely positive people always helps because it can be a very lonely journey, especially if you know you don’t have this, and obviously there are fantastic networking groups out there and communities online today, which obviously didn’t necessarily exist in the same format as it may have done 10 years ago, let’s say. But I think that I mean, one of the things I mean, I do have a business partner, Thomas and I think I probably don’t give him enough credit for how much mental support and kind of bandwidth, he actually helps us. And it’s just a case of, you know, being able to bounce ideas off each other, I think that’s useful. There’s always value that’s being left on the table because when you’re in growth mode, that’s very different to optimizing ahead of the sale and you know, shoring everything up and making sure the business looks as good as it can. Because growth mode, you will just reinvest, you should just be continuously reinvesting which is a lot of experimentation, a lot of trial and error to see kind of exactly how far you can push the business. So sometimes there is a bit of optimization to be done between that and actually then going out and selling. So we do a lot of that initial consulting, valuation, exit planning, and then ultimately the sell side m&a as well. And there are a number of ways to value businesses you have DCF, discounted cash flow modeling, price repair, historic price regression, revenue regression, comp analysis as well. So you know, really, when you work with a valuator like us, I mean, we will look at multiple custom roles and figure out which one is most applicable to your business depending on kind of lots of factors, but growth rate is going to be one of them concentration around different types of skews, several times a year is going to be another one as well and where there’s a lack of those latter two things. That’s when sometimes we will end up using more of a forward looking numbers
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 are capable of more then join us, this show will help you build a business and grow your passive income streams in just a few short hours per day. And now your hosts, serial entrepreneurs David Schomer and Ken Wilson.
Welcome everyone to the firing the man podcast on today’s episode, we have the privilege to interview Ismael Wrixen. Ismael is the executive chairman of FE International, the market leader in the sale of SAS, e commerce and content businesses. Over the past decade, Mr. Wrixen has overseen over 1000 successful acquisitions totaling more than a half a billion dollars in value. Mr. Wrixen was also a 2018 40 under 40 winner through the NACVA. Mr. Wrixen’s previous background was a large cap m&a investment banker, where he executed several high profile public deals, namely in the technology sector. Founded in 2010, FE International is known for its extensive network of pre qualified international investors, with headquarters in New York and regional offices in Miami, San Francisco and London. FE International is a growing company that serves clients worldwide. It was named one of America’s fastest growing companies in 2021. And in 2020, it was named one of the fastest growing companies in the Financial Times. We are incredibly excited to have Ismael on the show. So, Ken we just got done interviewing Ismael, and this was an absolutely awesome interview. What were some of your key takeaways?
Yeah, you know, Ismael, he’s got a wealth of knowledge in the m&a and just in industry in general. And, you know, a couple of my key takeaways, you know, he spoke in depth about valuations and multiples, and it was really interesting to see that trending and where they’re, where they are now and where they’re going. As well as, you know, I asked him direct questions on what, between SAS, content and e commerce, which one is you know, which one is the money flowing into? And what he shares the information is really exciting. You’re gonna want want to stay tuned. David, what were your key takeaways?
You know, the thing I really like about him is his exposure to entrepreneurs, right? After seeing over 1000 deals going through, he has a tremendous amount of experience and so. We talked about the state of the e commerce buying and selling industry. And I asked him a very specific question on market multiples, and he gave one of the best answers I’ve ever heard to explain this question. So anyway, stay tuned, Ismael, welcome to the show. First things first, tell us a little bit about yourself.
Ismael Wrixen 5:17
Yeah, thanks for having me. I am the Executive Chairman of FE International, which is a mergers and acquisitions firm specializing, we specialize in e commerce, SAS and content businesses. So for the last 10 12 years, that’s really what I’ve been doing, after leaving my investment banking career. I live out here in the US now, I don’t regret moving at all. And yeah, so that’s kind of a very, very high level what I do.
Very nice. And how long ago did you make that transition from investment banking over to what you’re doing now?
Ismael Wrixen 5:47
Yeah, I made the transition, it must have been close to 2011 2012. But yeah, a decision I certainly don’t regret, you know, kind of making that switch over, it was nice, because I got a lot of extremely good training from the kind of investment banking system, which is, you know, if you’re into finance, and those type of areas have second to none from that perspective. But you know, myself and Thomas male, my business partner, we connected a while we actually went to college together. And then from there, he went off, started our company now. After a couple of years, I realized, hey, this thing’s you know, really going somewhere it adds a lot of value. And then I then left banking and came and joined him. So yeah, it must have been 2011 2012.
So Ismael, did you have any fears, like whenever you were going to, so you had obviously a comfortable job in investment banking? And then you transitioned over? Was there any fears or any, did you regret not doing it earlier?
Ismael Wrixen 6:42
Well, I honestly did it as early as I could, frankly. So at the time, it was I think I’d done about two, maybe three, four years in banking. And that was the stage where I was starting to become more associate level and above, which I think is where you have to kind of double down and really kind of decide is the long term path you want to go through. And I enjoyed the very fast pace, I learned a lot, I was actually fortunate enough to work in the technology sector, which kind of back then was a lot more telecoms, those kind of things as opposed to what we may naturally associate with technology today. I mean, the world has changed a lot over the past 10 or so years, I wasn’t really fearful, because my mentality was always you can go and do it for a year. And worst case, you can come back, nobody’s gonna judge you, you know, within a year for, you know, trying and maybe not 100%, succeeding, and then kind of coming back and kind of, you know, maybe try again at another stage in time. But I definitely would have regretted not taking that step. So that was, for me a very, very easy decision. And I remember kind of when I was speaking to my, I think my old manager at the time, he basically summed it up by saying, if you’re going to go off and be an entrepreneur, there’s nothing we can offer you that will keep you here, which is very true. That kind of path that you end up going down, and, you know, being your own boss and kind of building and adding your own kind of incremental value. That’s kind of a journey in itself. And so I mean, other than having to pay bills in the early years and now you know, now my job is mainly HR and making sure everybody else is happy. But it was a it’s certainly been a big transition. But yeah, I think the fears once I jumped in, but I think that was the thing, I did jump in with both feet. So I didn’t kind of leave, kind of try and do this on the side or anything like that. And I think that created a pressure of well, this has to work. So let’s put everything into it. But yeah, I think that, it may sound somewhat counterintuitive, but that made the whole process a lot less fearful because I was fully 100% in and invested.
Very nice. Now, would you consider yourself like a lifelong entrepreneur? For instance, like, did you have a lemonade stand when you were a kid? Or is it something that you kind of transitioned into following your investment banking career?
Ismael Wrixen 8:47
Yeah, I think I probably never gave my parents enough credit. But I think some of the things they subtly taught me over time, because they, you know, as you can tell, I am English. I’m also half French. So yeah, they moved over from France to England, with not a huge amount. And then from there, you know, they just worked very, very hard, a lot of the time and all of the time, frankly. And I would just see little ways where they were kind of, you know, my mother had two jobs at one stage so work ethic and those kind of items were always instilled from a very, very young age. But then yeah, I mean, but from, I wouldn’t kind of say I had the lemonade stand, but I always I thought a kind of study would kind of, you know, come in handy later. But I just had a very holistic way. I had a very holistic upbringing. And, you know, I think I have a very holistic way of kind of looking at the world and spotting opportunities. I think that was probably very environmental with kind of the kind of family I grew up with. But yeah, I mean, I think that you’ll see growing up in England is a little bit different to the US. It’s funny, because obviously a lot of good businesses a lot of fantastic entrepreneurs there. It is slightly less entrepreneurial, it’s very much that’s part of the American dream, I would say which I’m fully bought into now. I live out here. I’ve been here for obviously a while. But yeah, I would say that it’s something that I developed later in life, I think I just have very lofty goals, very high ambitions. And I figured that, you know, the banking side of things is great, but it’s not going to give me the platform that I want or need to go off and get to that next level. Which being an entrepreneur, especially a tech entrepreneur in that space has certainly played out well.
Yeah, so you mentioned earlier in the investment banking, you kind of were in the tech side of it. So you kind of learned a little bit, kind of gave you a skill set to transition into your new role with. And then also, you said something that I really liked and I want to touch on is that you kind of jumped in with two feet, you were kind of like not looking back, you’re like I’m doing this and I’m just gonna go for it. Do you have any other advice for you know, an entrepreneur that is getting ready to make the transition from, you know, maybe a full time job or whatever to being an entrepreneur? Any other advice that went along with that?
Ismael Wrixen 10:49
Yeah, I think it’s just surrounding yourself with extremely positive people always helps, because it can be a very lonely journey, especially if you know, you don’t have this PSA. And obviously, there are fantastic networking groups out there and communities online today, which obviously didn’t necessarily exist in the same format, as it may have done 10 years ago, let’s say, but I think that, I mean I do have a business partner, Thomas, and I think I probably don’t give him enough credit for how much mental support and kind of bandwidth, he actually helps us. And it’s just a case of, you know, being able to bounce ideas off each other. I think that’s useful, but it doesn’t have, you can get that from multiple people. It could be a spouse, or a family member, or just, you know, peers, colleagues, I think that has been very, very helpful over time, because I’m a reasonably assertive person, if you do those kind of personality tests, and those kind of things. But at the same time, there is always that niggling in the back row, is there another way to do that? Am I maybe not seeing something that other people are seeing? And I think when you take both the in approach, like I said, it has to do with the idea that is that what you don’t necessarily have that safety net, which I think makes you think in a slightly different way to, you know, let’s say, if you have the safety net of, you know, still having a job or having lots of VC funding, or whatever kind of whatever else it may be, you may make slightly different decisions along the way that aren’t necessarily always as long term thinking. And with that, I think that the more people you can have around you, if you don’t have that safety net, the better because an opinion is always whether you choose to exercise that opinion or not, is always valuable, at least to see how other people can take the same information maybe in a different way. And sometimes, that can just bounce back and forth. And you know, Thomas and I, over the years have locked ourselves in rooms for days in some context until we get to the bottom of something. And yeah, just having that support in terms of a peer has been excellent.
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Well, very nice. You know, looking at your journey, we call it firing the man, right? You were working for the man and you fired the man. Do you regret not doing that earlier? In terms of timing your exit?
Ismael Wrixen 12:54
Yeah, I mean, I think with our business, I mean, we kind of have bootstraps, and kind of, you know, reinvested over time. So I think in an ideal scenario, there is that compounding nature of growth, which, you know, once the train takes a lot of effort to get out of the station, then once it starts moving very hard to slow down. So obviously, I wish I could go back even further and be further ahead than where we are now. But I think I pretty much did it as early on, in my kind of banking career as I could to make that jump across. But you know, I wouldn’t say that there’s an optimal time because it has to work on many levels. And I think you have to be personally ready to make that, that john mckuen. I didn’t have, at the time I didn’t have a family. I didn’t have a huge level of commitments outside of that. So I mean, quite frankly, the risks I took back then I probably wouldn’t take today in exactly the same court, I would do things slightly differently. But yeah, I mean, I think you can kind of take that leap, and that jump at any stage really. And I think what I know now, compared to that say, you know, 10 years ago is vastly different. And I’ll probably say the same thing again in 10 years. So no, I think the key was just taking that, just starting somewhere and just doing something and taking that step was key, and now we’re here.
Yeah. So Ismael, I appreciate you sharing your story with the audience. And yeah, it’s pretty inspirational, to be honest with you. So I’d like to pivot a little bit and get into FE International. So can you explain what FE International is? And how can it help the listeners?
Ismael Wrixen 14:20
Yeah, absolutely. So we are an m&a advisory firm. So we work with a lot of founders. And I guess for context, we’ve helped over 1100 founders exit their business at this stage. I would say we deal in anywhere from kind of zero to 100 million is really kind of our comfortable sweet spot in terms of what we do and we very much specialize in e commerce, SAS, and content businesses, though, and we focus very, very early on in our journey and in those areas. And that’s ebbed and flowed over time, there was a period in the 2010s 2013 14 where content was extremely popular, then it became a bit more sass and now obviously, you know, a lot of the invest Money is moving much more further towards FBA and which, you know, obviously Amazon as a platform, only the last five kind of five or so years where, you know, in terms of the amount of revenue they’re making from third party sites has really started to ramp. So in turn, you know, the interest across the sector’s have, you know, followed suit. But I mean, in terms of what we do, we tend to work with bootstrap and kind of self funded owners who may have had the door shut on them or on monetary have the exposure to the kind of traditional kind of finance or banking advice from kind of the bold bracket investment banking firms. And we really are here to help with you know, valuations, exit planning, optimizing and then taking businesses out and actually helping people go through that acquisition process. So I would say we work with the kind of founders that we work with is usually about, I would say, six to 12 months potentially of work before actually going through an acquisitions process, because there’s always optimizations that can be done, there’s always value that’s being left on the table. Because when you’re in growth mode, that’s very different to optimizing ahead of a sale and you know, shoring everything up and making sure the business looks as good as it can be, because growth mode, you will just reinvest, you should just be continuously reinvesting which is a lot of experimentation, a lot of trial and error to see kind of exactly how far you can push the business. So sometimes there is a bit of optimizations to be done between that and actually going out and selling. So we do a lot of that initial consulting, valuation, exit planning, and then ultimately, the sell side m&a as well.
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Now, I’m very interested in your answer to this question, having seen 1100 companies be bought and sold. If someone said, Listen, tomorrow, you need to go out and buy a company, and you have the option of picking a content company or a SAS company or an FBA company, describe what that company would look like in terms of, you know, where do you see over the next five to 10 years, there being serious opportunity?
Ismael Wrixen 16:56
Yeah, I think that you have to, there is a lot of money that has been flowing into that, I think, you know, just within our network, I mean, we pulled it the other day, I think we have close to $8 billion now in dry capital just assigned to ecommerce and FBA businesses in general. So that’s of about 26 billion or so. So I mean, that is a growing number. And I think that if you’re looking to start a business or you’re looking to acquire businesses, you said, I think that you have to take that into consideration. Because there are a few certain things in life, one of those things is going to be that if you own a business, one way or another, you are exiting that business. So you want to make sure that there’s a good amount of demand for whatever it is that you’re potentially getting yourself into. And then obviously, that same thing can apply in in SAS, and in content as well. And content has been getting more and more difficult because Google keep updating the algorithms keep changing the game, and good and bad, because it means that there are more, there are fewer businesses, that multiples go up in time, but it means that, you know, if you’re buying in that space, you will be acquiring theoretically higher and higher quality assets over time, SAS is obviously extremely attracted to the predictable nature of the revenues, I think, you know, it is it can be highly technical. So you know, it’s not necessarily something that you know, for the one person with a very small team in some contexts to kind of take on and, and roll with. So you are usually inheriting kind of, you know, teams that are in place, and there is a lot more kind of reserved HR and management and you know, the more kind of traditional things you’d sometimes associate along with running a business along with a lot of technical growth and knowledge you need as well. And that’s why I think a lot of people have been pivoting, you know, their interest and time towards FBA and towards other e commerce businesses that have solid three PLs in place, because ultimately, a lot of that burden and responsibility is taken off your hands. Amazon itself is a search engine at this stage. And it has a native ad platform and review algorithm and everything else that goes in with that as well. So if you’re looking to take a business and scale it profitably over time, I say that FBA and e commerce in general is a great place. And obviously, you know, pandemic, horrible for many, many reasons, but it has been the e commerce after the initial blip of inventory and supply, which you know, is, port of LA we’re still having problems, but I would say the sector has exploded over that period of time. And I think that that is now a behavioral change that is just going to continue into the future so we would expect this industry to keep growing so yeah, more specifically, I would dive in on evergreen businesses, things as close to the home as possible, anything kitchen related or around there is kind of where we’re seeing a lot of interest over time and and where the end, you only get limited data, you know, working with Amazon, let’s say for example, where the end using we do have inflation, you know, there may be other things and products within a similar category, you can continue to sell to them over time to increase their lifetime value. I think those are the kind of businesses I would personally be most focused on.
Interesting. Follow up question on that Ismael, if someone who came to your team and let’s say they recently left corporate america and they wanted to just do you know, go out on their own. So maybe they had, you know, 500,000 to maybe 5 million range of funding. Which business model, from SAS, content or e commerce, which one is like, let’s say, the easiest to run, you know, in your opinion?
Ismael Wrixen 20:11
Yeah, I would definitely say e commerce. I mean, there are some very highly technical elements within that, especially given a lot of them have very high PPC spend. So you kind of need to, you need to know what you’re doing with that. But obviously, if you’re buying a business, then let’s say the 5 million or above level, you would expect there to be a very solid strategy in place. And that’ll be part of your kind of your diligence that you’re doing before acquiring the business. So you expect to inherit a lot of equity, a lot of the business, the brand, the goodwill, and products and everything that goes with that as well, but hopefully some talent that would come with it at that level and above. But yeah, I mean, I would say that that’s where, you know, if we just look at the volume of new inquiries that we get from potential buyers wanting to join our network, then I would say that, you know, that is the space where we’re seeing the most amount of interest. And I think for good reason, it’s becoming easier and easier to use the platform over time. I think Amazon itself has actually done a reasonably good job of shoring up its own policies. And I know, there’s still issues over time, and there are fringe cases, and, and all sorts of things that happen. But compared to five years ago, I think that, you know, now we’ve got the gating everything, I think that it is kind of really moving in a better direction over time as well. So yeah, I mean, like, from an investment perspective, I’d say that’s a very good place to be putting capital, but obviously, it comes down to the kind of deal you’re getting. And there’s risk in every business, and that needs to be structured in. And that’s not just, you know, on the buy side, I mean, it helps on the sell side as well, because the multiples are going up over time. And that’s being driven by a lot of aggregators, a lot of other players coming into the space. And as those multiples will move up, you know, business owners looking to exit and need to understand as well that you can get these higher multiples, but there needs to be some sharing of the you know, that burden of risk over time as well. So, yeah, I think that, you know, that’s kind of generally the area that I’d be most focused on. But you know, within that itself, it then comes down to a business by business basis, because no two businesses look alike. Even if they are selling very similar products, we think they’re very similar audiences, they can be set up in extremely different ways. And that is going to categorize you know, how you kind of risk things in and move forward.
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Sorry to interrupt the episode, you may have heard Ken and I talking recently about a new tool that we’re using for Amazon refunds. Now I have used other refund tools like this. However, I can tell you in the first seven days, they scrub the back end of my Amazon account going back 18 months, and found $5,000 of refunds. And the nice thing about this is, it’s my money, Amazon made a mistake, and they are just auditing my account. The other thing I really like about this tool is there is no monthly fee, they only charge a commission if they are successful in getting you your money. Go to GETIDA.com GETIDA and enter promo code FTM for firing the man FTM 400. This is an awesome tool. I can’t say enough good things about it. Now back to the episode. Now, you were talking about multiples. And I’d like to dive in here. And just a little bit of background on this question. I spent eight years in transaction services before I fired the man. And while I was doing that our typical client was private equity fund that was say buying a manufacturing facility in rural Ohio. And that type of company would typically trade at like seven to eight times EBITDA. And when I started getting into this industry, obviously valued on sellers discretionary earnings for purposes of this question, and for the listener, basically the same, three to four times sellers discretionary earnings, it seems like there’s kind of a disparity between ecommerce companies and like your traditional brick and mortar. And when I think of those differences, obviously, the balance sheet is going to look a little bit different. For instance, most of our portfolio companies, the only assets we have are our inventory and our computers, right, so not really an asset intensive type of business, in terms of like fixed assets. But do you have any explanation for like that disparity? Or am I off here, do you think?
Ismael Wrixen 24:29
Well, I think that the multiples have been moving up. I mean, we’re seeing deals, mainly, I would say in the four and a half to six times in some cases, it really depends on how competitive the process gets. I mean, I think that’s kind of one thing. I think a lot of people have potentially been leaving value on the table by getting approached and selling to the first person who wants to have a conversation with them. So I think that there is a lot of value in kind of that competitive scenario. But then at the same time, the businesses are offline versus online, you know, in that context There are a lot of differences in those, I mean, I’m not sure what was on the balance sheet or those businesses, you know, whether that was incorporated, you know, within those kind of obviously not on the EBIT multiple side, but you know, in the wider, you know, transaction that may have kind of diversified the risk of the whole deal versus, you know, the risk of online deals, and ultimately, in the kind of brick and mortar, you know, you are not on somebody else’s platform at the end of the day. They can kind of you know, change the rules. So that’s kind of something else to consider. But then I think one of the wider components, and this doesn’t just go for e commerce or FBA, this goes across the board, I would say, is the scale that’s been achieved, I think that’s kind of one thing as well, if you’re a business that’s managed very successfully to get to, you know, a high six, seven or low eight figure valuation that’s obviously you know, fantastic one thing, but the scale that what may be required to take it to the next level could be a huge amount of working capital that you may not have. So somebody may come in and look at that and go, Okay, I can take your $10 million business, and I can turn that into a $50 million business. But that’s going to cost me $10 million in working capital on top of the acquisition price. And I’m not going to pay you an additional 3x multiple on top of the five I’m giving you, for example, for the privilege of doing that. So because I’m burdening the risk, so actually, then go off and do that myself. So I think that’s where a lot of it comes into. Because when we get to the, you know, the mid 8 figure and above deals that we represent I mean, the multiples are closer and sometimes higher than what you are discussing there. So it depends where you are on that scaling journey, and then how much additional is going to be required. Because the thing with buyers is I mean, and buyers are extremely savvy that they look at things from an ROI perspective, but not just how much did I pay on the way in? How much am I getting on the way out, they’re looking at the IRR. So they want to see the Internal Rate all the way through and how much of the growth is going to be supported by the business how much of the growth is going to be supported by additional working capital, how that whole investment across the lifecycle of the acquisition benchmarks against weighted average, cost of capital, time, value of money, other opportunities that may be scaling faster or slower than the business that you’re running. So all of these things really factor in when it comes to setting up multiple and the more you’re scaling and the less capital intensive that scaling is, then that’s where and the more that can be supported by the business’s existing operations. That’s where you’re gonna start getting those, like I said, five, six or above multiples, which it does scale it does keep going depending on where you end up.
Yeah, so it’s been, so David and I, we went to prosper show last month, and it was pretty well noticed that those aggregators are exploding right now, you know, thrasio, bashatt velocio. And so there’s money freely flowing in right. Now, do you think the competition of the aggregators is pushing the multiples up higher? Or do you think there’s just the market itself is so much more opportunity of e commerce penetration? Or is it a combination of all?
Ismael Wrixen 27:52
I would definitely says it’s a combination of both, I think the multiples are pretty stable for a while around that three to four times mark as a, then the aggregator started coming in, and they’ve been there for I mean, it’s all about, thrasio for example, I mean, we know them, we’ve been dealing with them for you know, three, four years. So they have been ramping up their activity over time, and obviously raising more and more as they go. But I mean, they are obviously very early in the space. I’d say now, we probably have 120 to 150 aggregators, from all over the world a lot in Europe, cropping up now as well. So there are there are a lot there. And what you tend to find is that, obviously, the bigger names will continue because they have a different strategy at that stage, a lot of them are looking to go public. So they need to keep buying businesses. And I completely understand why. But then you have a lot of smaller aggregators are going a little slow, but the newer aggregators that need to play catch up, so they are less sensitive to multiples than they may allude to being because they realize that, you know, they’re a year later into or a couple of years later into the game, and therefore they need to be acquiring, you know, businesses at a faster rate to kind of bridge the gap. So I think that there is kind of a second wave of this aggregate market coming along. And that’s going to keep pushing multiples up for a little bit. But I would say that there’s a lot of other interest as well. And what we’re seeing, especially on the private equity side, we’re seeing private equity firms that just kind of fall into raising other types of private equity firms that may have portfolios in the content space, for example, and they realize, hey, we can actually bolt on FBA businesses. And instead of using you know, Amazon’s affiliate program, we can start you know, swapping some of that out with our own brand products that we then own. So there are other pockets of value being created there as well. Obviously, high net worth individuals, I would say they usually cap out at about 5 million, which is Incidentally, you know, where the FBA program caps out and lots of other reasons, but they’ve always been there, they will always be there. And then obviously, there are the more strategics as well. So I think there are a number of reasons. I would be more concerned if it was just listen, there are 10 aggregators, and they’re pushing everything. That’s where it kind of creates a bit of a more risky scenario, especially from a buyers perspective, but no, I think that there is a lot more depth to what we’re seeing in this stage. Does that mean in a year we’re talking of higher multiples? Maybe not. I mean, you know, I don’t think that it’s just gonna keep going forever in that direction in quite such a linear path. And we saw this in SAS, actually, about five or six years ago, there were a lot of SAS aggregators, you know, in the kind of 2015 2016, they were very aggressive with acquisitions, and then they slowed down a little bit. And then they started to focus on the operations and making sure the synergies they thought they’re acquiring are actually operating as well as they want. So you know, the bigger names will probably after a while, start, maybe start to slow down a bit. There’s a second wave of kind of other names coming through now in the aggregate space P and other forms are picking that up as well. So yeah, I think there is good depth and stability to the increase we’re seeing.
So just a follow up to that. So earlier, so you’re saying the Amazon FBA native or pure FBA businesses are trading in that 4.5 to six range? Is that what you’re seeing recently?
Ismael Wrixen 31:02
Yes, yeah, I would say. And depending on the type of business that will also depend on whether that’s more of a historic multiple, right here right now, or sometimes a forward looking. So if the business has very little seasonality in it for me, and there are, you know, there are some businesses and some niches that have very little seasonality, sometimes you can then use a little bit more of a forward looking multiple in that calculation. And there are a number of ways to value businesses, your DCF, discounted cash flow modeling, price repair, historic price regression, revenue regression, comp analysis, as well. So you know, really, when you work with a valuator like us, I mean, we will look at multiple custom models and figure out which one is most applicable to your business, depending on kind of lots of factors, but growth rate is going to be one of them, concentration around different types of skews different times a year is going to be another one as well. And where there’s a lack of those latter two things, that’s when sometimes we will end up using more of a forward looking numbers, or that five times more forward looking could actually be 8 times historic. So it really does depend. And that’s why I always recommend, you know, having conversations with advisors early on, well before you’re thinking about exiting, just to get a sense of where exactly your business falls, so that you know, you know what to refocus on, you know, 6, 3 6 months before you’re taking an exit more seriously.
Very nice. Now, as you in terms of like prepping for an exit, you know, say somebody was wanting to exit a business in a year? What are some things that they can be doing now that are going to make that exit when they reach that point smooth? And hopefully capture as much value as possible?
Ismael Wrixen 32:38
Yeah, I mean, I think, obviously rebuilt to sell, that’s always a good starting point. But no, I think a lot of things, it depends on the scale of the business, if you are running a, let’s say, zero to $2 million value business, you are probably going to be heavily involved in that company, you may have some staff you’re working with, you know, maybe kind of a couple of different managers, certainly on the PPC side or on the marketing on the kind of operations, you would hope to have at least and customer support, you’d hope to have kind of something in place, even it was not full time, you would have kind of some kind of resource. And but that’s, you know, beyond that, you should really be you know, trying to get yourself out of the business beyond the strategy. And, you know, visionary thinking as possible. I think bounders do a reasonably good job of that anyway, sometimes when they speak to us, we give that extra push they need, we can show them a lot of data to say actually, you’re a very good company, here’s the step, here’s how much you should be spending in these areas that here’s where you may be over optimized or under optimized? And how exactly to go about it. So I think you’re taking yourself out, you know, when it makes sense, from a value perspective, I think that’s one thing. I think the other kind of practical thing is just having the financials in very good order. I think it’s very, very common for us to pick these people and say, the initial conversation, they say, listen, we’re doing this much revenue. Here are our gross margins, here are our net margins, and then you get in and you’re like, this is completely wrong. And it’s not just to make our lives easier. It’s also if you have a very accurate sense of where your financials are, at any given point in time, you will make you theoretically will make better decisions as you go on how much you want to reinvest, versus just looking at, let’s say, the bank account and how much free cash is left at any point in time. So I think that when we start to get into conversations about how profitable are particular skews, how much concentrations around certain kind of skews, and you know, where should you be kind of reinvesting the most heavily. I think that’s where a lot of people are, you know, sometimes I get it I run a business as well, some cases it isn’t working. So let’s not, you know, kick the hornet’s nest too much. But you know it once you start, because we will dig into all that. And we will sometimes show you that these are the areas that you’re valued at this level now, but you could add multiple millions of dollars if you just spend another six months boost. And that’s to your point about could you have started sooner if people have that in place. And that accounting and that reporting. I think a lot of people just rely on QuickBooks, and they rely on zero the information that goes into But the information is only so good as the input you have. So I’d say the first thing we do is and I’m watching this, yes, everybody does this, but we will always switch cash flow to accrual accounting. And then you can actually start to dig in to see the underlying true profitability of the business. And sometimes people realize, well, actually, based on that, I will make this decision or this decision. And I think that’s an area that the sooner people get started and have a good bookkeeper and good CPA, I think that’s always, not a decision anybody is going to regret.
So Ismael, there was a question that was posed in one of my masterminds that I go to, and it was, can you speak to like, let’s say, so there’s, you mentioned earlier, there’s upwards of 120 aggregators worldwide now. And they reach out. So David and I, you know, all business owners on Amazon are getting emails pounded weekly. And so can you speak to the benefit of going to a broker versus going directly to one of these aggregators? And why it’s beneficial, and maybe even put some hard numbers to like, you know, like, cuz people are like, Oh, the brokers fee. Well, can you pick that apart a little bit?
Ismael Wrixen 36:05
No, absolutely. And it Yeah, I mean, it is a good strategy by them, and I think that the aggregators, they’re not necessarily doing it in a sense of, if we go privately, we can get slightly better deals all the time, because they’re cutting out the road, they just realized that to hit the volume, they kind of need to hit, they may or may not get that going through advisors every time because we are a little bit slower in our approach, and we’re a bit more considered, and we want to run a competitive process, because ultimately, our client is the business. And it’s the seller. And if it takes an extra, you know, a couple of weeks or months to run a competitive process, but you get more out of it, we’re very happy with that. And so are our clients in the end, but I mean, these aggregators won’t, they have been reaching out, they will continue to reach out, I would say one of the challenges that we hear a lot is the you know, some people will get approached and then they’ll realize, okay, my business does have a value it’s not just me that sees this, I will consider you know, selling and that affirmation kind of sometimes gets the ball rolling mentally before exiting. And one of the things that we see a lot is, you know, digital offer comes in, the promises are very lofty, we’re not really going to do that much diligence, we have our own team, don’t worry about it, we’ll get this done in two to four weeks and signing an LOI. And then from there, it starts to crack. And then once you’re signed, then you know they may have other obligations, because you know, you’re not the only conversation they have. And their time needs to be kind of firmly focused front and center. And if you’re not running a competitive process, then that’s where it may be challenging because you’re in a one horse race at that stage, you have a buyer, they have a level of exclusivity, there is some cost fallacy with it as well, you are continuing to invest time and give them more and more information. So you’re either feeding them a bunch of information they could eventually use against you. Or you’re pushing yourself further down this path, which means that ultimately, you know, after the third fourth week, when they need to extend it by a couple of weeks because of, name today’s reason, you know, that’s where, you know, you’ll just keep going and you know your business grows during that period, it may be worth, depending on how long it takes it could be worth more money. And if you don’t have somebody, firstly, running a competitive process, keeping them on is always having that threat of well, there are other buyers who would want this if you step out of line, or if you’re not adhering to the terms of the LOI we agreed or pushing things in the right direction. And you know, one thing we will do, obviously, we board at every business before they go to market. So we have very little concern that there are going to be financial issues coming up and due diligence. But we also have general counsel in house. So we’ll push the legal aspects of it so that if we know there’s a legal issue, we don’t need to find that out after you know, four weeks of due diligence, we’ll find that out after four days, because we have a separate team negotiating with their legal attorneys to make sure that everybody is on the same page about the multiple facets adhere to actually closing. So I think there’s a lot of value, I think it’s a bit of a false economy when people say, Well, I’m not paying the broker fee in this contract, well, you don’t know how much money you’re leaving on the table. And I guess we’ve actually got deals done. So with some of the aggregators we’ve spoken about, we’ve got deals done, where they’ve actually had conversations with a business owner, you know, before the conversation may or may not have gone anywhere. And then we actually kind of get to the bottom of what the business is really worth presenting information, probably have the data and have all the financials audited, and the very clear growth opportunities, and then take it back to the same aggregators and they say, Oh, actually, we do really want this business. But now we see it in the way in this way it’s being presented, you know, obviously, the owner was very busy in that particular context and couldn’t get the information. And it’s a lot to try and manage the growth in your business, especially going into end of q3 q4, that is a very important time of year you take your foot off the gas, and suddenly that offer can disappear. So that’s a lot to manage in itself. And yeah, I mean in that particular case, we got the deal done. We actually got it done with a different aggregator which was nice to stick to them ultimately, but that wasn’t particularly helpful for the owner there but the competitive process really adds something because they, if you want to focus on aggregators, I mean they really, it’s a land grab for them they have to be buying as many good businesses as possible. And ultimately, the cost for them, you know, the smoothness of working through an advisor versus doing everything privately, they’re not doing the hand holding the whole way, which means the negotiation is on our side, not on their side, which means the you know, the offer is one bit, you can go and get an offer tomorrow if you really want one, but offer through closing is where we earn our fee, and making sure that, you know, the terms don’t change that, you know, things actually get pushed through timely, smoothly. And then often these deals have performance elements. So we don’t just disappear, the date of the initial deal is done, we’re there, you know, doing all the accounting doing all the reconciling, so that everything no matter how long it takes, whatever is agreed is ultimately paid to the business, which is, you know, something that we assume responsibility for, because we are a partner in that journey. So you know, it’s in our best interest and our clients best interest.
Okay. All right, Ismael, we’re going to move into the fire round. Are you ready?
Ismael Wrixen 40:55
Yes, I think so. Let’s find out.
Alright, what is your favorite book?
Ismael Wrixen 40:59
It’s the goal by, I’m probably going to butcher the name, Eliyahu Goldratt. Which I think is about 40 years old now, but it’s about the notion of continuous improvement actually highly relevant for e commerce in general because it is actually set in a manufacturing facility and kind of an oldie but Goldie, I would say with with that book.
- Book is brand new with some places being underlined
- Goldratt, Eliyahu M (Author)
- English (Publication Language)
Okay, awesome. I’ve not read that. I want to put it on my list. What are some of your hobbies?
Ismael Wrixen 41:24
Oh, I have recently very unsuccessfully taken up paddleboarding. That’s not going so yeah, a lot of face firsts in the water. But, it’s harder than it looks. But no, I know I have a I am reasonably outdoors. I have a couple of dogs. So we’re always outdoors kind of biking and those kind of things. It’s just nice to get away from the computer screen for half an hour.
Absolutely. Yeah. You know, my girlfriend talked me into doing that paddleboarding once. And that is some core strength right there. You have to have some core strength.
Ismael Wrixen 41:53
Really? Yes. Yeah, I refuse to try yoga. So I did that as a compromise.
Alright, what is the one thing that you do not miss about working for the man?
Ismael Wrixen 42:04
I’m a bit of a perfectionist. And that is a struggle for me when I’m not in control of the situation at all points. Yeah, that the notion that other people can compromise on their standards, and you are you know, you’re then a part of that. That’s something that I mean, it’s something that I definitely struggled with. So yeah, don’t miss that, and it’s something I try and instill in everybody that works with us now.
Okay, yeah, I like that a lot. Last one, what do you think sets apart successful ecommerce entrepreneurs from those who give up, fail or never get started?
Ismael Wrixen 42:36
I think it’s the double feet thing, I think it’s just jumping in. And you kind of have to trust that you will figure it out as you go. And that’s kind of part of the journey. It is a rite of passage, you are meant to fail a lot of times until you get it right. And that’s I think a lot of people kind of they have they hit that first element of like, Okay, give up and going back to whatever I did before, because I think that it’s very easy to get suckered into the success stories you see online. And one thing you have to keep in mind, or that I keep in mind is for every one article you read, or you know, somebody that’s done extremely well, there are 999 other people that didn’t necessarily do well the first time around, and then a subset of those persevere and keep going and kind of you know, gets wet and maybe supersede the person that did well here that the original. So I think that there’s a lot of kind of value in failure and kind of starting over and continuously growing over time. I mean, over the last 12 years, I dread to think of the amount of things that we tried and didn’t go in the right direction. But then it’s good because then you know not to try things again in the future. Where you get stuck as if you fail, and then do the same thing again a year later forgetting you did it before. That’s where, yeah, just pivot, innovate, etc. But yeah, I think that people who have a, this is my exact plan, this is how the plan has to go. And I’m very strict on that. I think that you know, that mindset can trip you up, I think that it’s meant to you know, most of the people we work with, the business we’re selling for them isn’t their first business, it isn’t their first idea, and frankly, probably pivoted it a number of times before getting to a stage where they want to sell. So I think that’s perfectly, that’s part of the journey. And should, you know if you’re in that stage, keep going.
Excellent. Very good. David, you want to wrap up the show?
How can people get a hold of you?
Ismael Wrixen 44:18
Well, so our website is probably the best place, www.feinternational.com. Yeah, I think that’s, all the details are up there as well as but as you said, like we just published our first half 2021 market reports, so kind of really diving into a lot of the data around what these aggregators are up to where the demand is and where the multiples are etc, that will be plotted on the homepage as well. So, that’s the best place for resource.
Very nice. Very nice. Well, thank you for being a guest on the firing the man podcast. We’ll talk to you soon. Thank you everyone for tuning in to today’s firing the man podcast. If you’d 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 www.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, and on YouTube at firing the man for exclusive content. This is David Schomer.
And Ken Wilson. We’re out
Before you go, fun fact for all you Amazon sellers out there when you start selling in international marketplaces, all of your reviews come with you. At the beginning of this year, Ken and I sat down and talked of ways that we could double our businesses in size and landed on international expansion as our number one initiative this year. We partnered up with Kevin Sanderson from maximizing e commerce and he has made the process an absolute breeze walking us step by step through the process. If you want to grow your revenue and reach new customers, head on over to www.maximizingecommerce.com/fire and connect with Kevin Sanderson today. Now, back to the show.
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