Recently Sold On Flippa: Tempi International Amazon FBA

Recently Sold On Flippa: Tempi International Amazon FBA

Amazon FBA businesses continue to be highly attractive acquisitions for first-time and strategic buyers on the Flippa platform. Igor Miller recently sold Tempi International, a 4-year-old Amazon FBA business selling metronomes and related musical products with the assistance of the Flippa Account Management team.

The business was brought to market swiftly and sold in under 3 weeks.

What is Amazon FBA?

Amazon has more than 300 million active customers, with 90 million Prime subscribers in the U.S. alone. Amazon FBA has become one of the most popular ways to earn income online with over 2 million people selling on Amazon worldwide.

An Amazon FBA storefront is an eCommerce storefront integrated within the Amazon ecosystem. Fulfillment by Amazon is exactly as it sounds. All customer orders are processed by Amazo who pick, pack, ship and provide customer service for a fee. FBA takes the hassle out of logistics and help’s entrepreneur’s scale their business and reach more customers.

What was for sale?

Founded in June 2015, Tempi International is an Amazon FBA business that sells products in the musical instruments and accessories niche. Tempi is a category leader with outstanding reviews on all products. The business has achieved over 1MM in lifetime revenue and serves over 22,000 musicians worldwide.

What did buyers like about this business?

The businesses age, brand and customer reviews were of particular interest to all buyers. In addition, it was quite clear that the business had performed poorly for the trailing 12 months due to a lack of cash on hand for advertising and inventory. Buyers identified that the business could easily be brought back to life with a simple injection of time and capital.

What worked well during the sales process?

Igor had detailed records of his financials prior to listing with Flippa. This ensured that as the business was brought to market at speed, buyers had the requisite information to pursue the opportunity. Furthermore, Igor was a highly motivated seller who was attentive to all buyers. The combination of a strong listing and an attentive seller ensured that a competitive negotiation process played out, resulting in a fast sale.

How can you find a similar site?

Click here to sort and filter by advertising sites and begin to look for a business operating in a niche with strong community engagement.

Igor Miller is a successful entrepreneur, internet marketer and hospitality professional who takes businesses to the next level through leveraging the power of digital marketing and social media. He has sold well over 7-figures of his own products online before his 20’s and has worked with many e-commerce and hospitality businesses just starting out to over 5MM a month in revenue to increase digital brand presence, business automation and free cash flow. He is an expert in Amazon, Shopify and WordPress platforms as well as e-commerce stores. Learn more about how Igor Miller at igormiller.com to take your business to the next level.

Understanding Due Diligence with Brian Diener from Centurica

Understanding Due Diligence with Brian Diener from Centurica

Brian Diener is the Director of Operations at Centurica. He has worked on over $50 million dollars in deals with buyers and sellers. Strong knowledge of Analytics, paid search and is a search engine optimization specialist. Experience operating and managing a portfolio of eCommerce and content websites.

“The goal of Due Diligence is to verify all of the information that has been presented. The offers that a buyer has made on a business is based on what has been claimed. During due diligence, the aim is to verify all of that information”.

In Brain’s talk, you will hear about what to expect as a Seller and he will walk you through a sample Due Diligence process.

Due Diligence takes place after the LOI has been signed by the Buyer and right up to the time of closing. This timeline can range from 1 – 2 weeks on the shorter side right up to 6 – 8 months on longer deals.

What is the purpose of Due Diligence?

  1. Verify Claims
  2. Identify Potential Risks
  3. Assess Opportunity

What’s involved in Diligence?

Typically it is broken down into a few key stages:

  1. Kickoff / Requests
  2. Financial Verification
  3. Operations Review
  4. Sales/Marketing Assessment
  5. Transition Planning
  6. Growth Plan
  7. Closing

There will be a lot of people involved in the process and it’s critical to keep it organized and start with a call between the buyer and seller. This sets the right expectations going forward.

“One thing that kills due diligence is when a buyer is send over an email every three hours. Keeping it all organized will ensure you don’t miss anything and move through the steps in a methodical process”

Key Tasks

  1. Confirm P&L data
  2. Show key financial trends
  3. Explain operations by task and role
  4. Breakdown key sales and marketing channels

What tools are used for Due Diligence?

There are hundreds of tools out there to help perform due diligence. Here is a link to a list of 60 tools that Centurica use for all of their DD clients.

Further to this, it’s really important to realise that there are still human interactions, people selling and people buying. A lot of times (more often than not) the potential buyer has not even purchased the product from the company. Often they have never been to the website and signed up for the email newsletter, talked to customer support, interviewed any of the employees. Tools are critical, but the human side of due diligence is more valuable than any tool.

Here is a link to a list of 60 tools that Centurica use for all of their DD clients. It’s really important to realise that there are still human interactions, people selling and people buying. A lot of times (more often than not) the potential buyer has not even purchased the product from the company. Often they have never been to the website and signed up for the email newsletter, talked to customer support, interviewed any of the employees. Tools are critical, but the human side of due diligence is more valuable than any tool.

Top 5 Due Diligence Issues

It is very rare that you get through a diligence process where no issues have come up. If nothing has come up, the due diligence process most likely has not been digging deep enough. All small businesses have issues that are potential risks. Here are the top 5 issues Centurica see when

1. Lack of bookkeeping/accounting

There are so many million dollar businesses that don’t use any accounting software. Xero does a fantastic job of this. Categorisation and verifiable transaction items is super important. If you have more than business make sure they are not commingled and it’s clear. Keep things clean for each business makes the sales process much easier. If you can hire a bookkeeper and let the experts take care of it.

2. Undisclosed violations or warnings

A lot if not most businesses have issues. This is ok. The issue arises when you are not forthcoming and do not talk about it with the buyer. If you get three weeks into the dd process and the buyer uncovers an issue, the buyer will start wondering what else you have haven’t told them about. Make sure people are aware of these issues so the deal doesn’t fall over at the 11th hour.

3. Transferability Issues

Some accounts with supplies can be difficult to transfer so make sure you have this in order being going to market.

4. Legal / tax issues

Make sure there are no outstanding tax issues that will roll over to the new owner. Work through this with the seller. Ensure taxes are registered and properly collecting taxes where you should be. Always check for trademarks. Some factories overseas have started to trademark American brand names and register a trademark overseas in China. If you are selling and you are an established brand Centric recommend doing a search overseas and registering trademarks in Europe and anywhere else you think you might trade in the future.

5. Loss of trust

This is the most common due diligence issue. All of this can be resolved by being upfront and transparent with the buyer. As soon as this is gone, it is the number one deal killer. You very rarely recover from this.

Due Diligence Tips

  1. Let someone else represent your interest
  2. Maintain open communication and transparency
  3. Prepare for potential issues and questions
  4. Share both positive and negative experiences
  5. Provide operational guidance and support

Resources

For a more indepth checklist vist this post 
Brain’s tools list
Ecommerce Crew Podcast 274 How Due Diligence Helps Sell Your Business

Positioning your Business for Sale with Chuck Mullins of Quiet Light Brokerage

Positioning your Business for Sale with Chuck Mullins of Quiet Light Brokerage

Chuck Mullins is a serial internet entrepreneur. It all began in 1996 when, at 18 years old, Chuck started his first internet business. Since then Chuck has built, bought and sold businesses ranging from a few hundred dollars to seven figures. Chuck spoke at The Exit about the 4 pillars of value and how to position your internet business for sale.

“Know what your metrics are. What is your customer lifetime value? What is your acquisition costs? This builds credibility and show’s that you know what you’re doing”

Takeaway #1 Seller Discretionary Earnings

Online businesses are priced by taking the seller discretionary earnings (SDE) for the trailing 12 months and applying a valuation multiple.

Seller discretionary earnings are the net earnings of the business plus “add-backs”. Add backs are often thought of as a subjective concept, but in reality, there are standardized principles applied across the brokerage community. Add backs are non carry forward expenses, one-off expenses, and nonoperating expenses.

Takeaway # 2 Valuation multiples

Valuation multiples are proportional to the size of the business. Or, as the business gets bigger, so does the multiple. This is due to the types of buyers present at different price levels. On the lower end of the spectrum, you have mostly “mum and dad” investors purchasing with cash. At the top end, you have institutional investors with deeper pockets.

Takeaway # 3 How to structure your profit and loss statement

It’s best to present your profit and loss statement as accrual, rather than cash. Accrual accounting recognizes all cost of sales at the time the product is sold, rather than when the money hits the bank account. The result is a smoother P&L and a higher SDE.

Takeaway # 4 Risk

Age is a major component of evaluating the risk in a business. If you have at least 24 months of sales data, buyers can see the year to year comparison of the business. This lets buyers view seasonality, growth trajectory and so on. So Chuck thinks it’s best to wait at least 24 months before selling the business. Defensibility is also a key factor in evaluating risk.

Takeaway #5 Growth

Buyers want to know about growth opportunities. So don’t fix all the issues with the business, or you’ll remove the upside for a new buyer. If you’re making any changes to the business before the sale, do these at least 6-12 months before selling to ensure you capture the uptick in revenue.

Takeaway #6 Transferability and Documentation

Before selling a business the transferability of the business needs to be considered. Vendor accounts, supplier relationships, even staff, and contractors all need to be considered. Professional and well document SOP will add value to the business.

Takeaway #7 Timing

Timing is key. Sell when the business when it is growing steadily, not during a high growth phase.

Takeaway #8 Clean data

It’s imperative to maintain clean financials and data to capture buyers’ attention and close off a deal. Know all the key metrics such as average order value, customer lifetime value, and a number of repeat purchases.

What Buyers are Looking for with Stacy Caprio, Ted Dhanik & Bryon Brewer

What Buyers are Looking for with Stacy Caprio, Ted Dhanik & Bryon Brewer

In this session, you will hear from three buyers who are actively on the hunt.

Panel introductions:

Stacy Caprio

Stacy is the creator of Her.CEO, a website that inspires entrepreneurs and shares website buying and selling experiences of her own and the Her.CEO audience. While still in a 9 to 5 job, Stacy got her start buying websites on Flippa, which is what allowed her to gain financial independence and break free from her corporate job. She now works for herself buying and selling websites as well as managing her current portfolio of sites. Stacy’s perspective is from the website buyer side, and she is happy to answer any questions related to the individual buyer perspective and what others in her position are looking for when purchasing a website.

Ted Dhanik

Ted is a co-founder of engage:BDR, Inc. Ted serves as Chief Executive Officer & Chairman of the Board, overseeing all aspects of engage:BDR’s businesses.
In 2017, Ted took engage:BDR public on an over-subscribed IPO, which has yielded successful acquisitions and more than $50M in capital raised. Prior to engage:BDR, Ted was with MySpace.com from its launch, developing strategic marketing initiatives. Working very closely with founders Chris DeWolfe and Tom Anderson, Ted was responsible for launching the brand in its infancy. Also, Mr. Dhanik innovated the business development practice at LowerMyBills.com in its early stages through acquisition by Experian; he was an integral part of the early development and launch of the consumer lending program at NexTag Corporation, a competitor to LowerMyBills.com and LendingTree at the time.
Mr. Dhanik has worked for or been a partner at several other companies in the areas of business development, sales, and key managerial positions. Ted sits on boards or advises other tech startups and is an active mentor to Los Angeles-based startups.
Ted is passionate about remaining a thought-leader in the digital advertising industry. His writings are regularly published in publications including Ad Age, Forbes, Fast Company, AdExchanger, VentureBeat, and several other top-tier U.S. publications. He contributes to the development of industry standards and positive change, sitting on IAB committees including Anti-fraud Workgroup, Anti-malware Workgroup, Traffic of Good Intent Task Force, Programmatic Counsel, Digital Video Committee, Mobile Advertising Committee and Performance Marketing Committee.

Bryon Brewer

Bryon is the CEO/Owner of Human Proof Designs. His company has been helping entrepreneurs start and grow online businesses since 2013. Bryon started his career in technology twenty years ago as a development engineer and spent many years providing technology consulting services for large U.S. based firms such as Microsoft, Accenture, Berkshire Hathaway, and Exxon. He started his first consulting firm 12 years ago and has since founded several online businesses. Bryon currently manages a remote team of 60+ professionals across multiple countries building and growing online businesses.

Q: Tell us what it is like to take a company public?

Ted: It’s very exciting. I’m a startup guy and going public means I am no longer a startup guy.

Q: What was the first thing you bought and did it work out for you?

Stacy: Unfortunately, the first thing I bought was not a success. Due Diligence is key. Make sure you get access to everything you can to verify it. Cross you i’s and dot your t’s.

Q: What are you looking to acquire and why that asset?

Bryon: Looking for opportunities where the site can be improved. Where can I save costs and where are there revenue opportunities that are being missed. It’s about finding those that have upside and can be improved.

Ted: I don’t want to inherit someone else’s problems. Accountability is key from the seller and looking for single points of failure and bottlenecks. Currently looking for Apps and websites with traffic either with or without ads.

Q: What do you want to acquire next?

Stacy: I’m looking for something that has a very strong brand. Not reliant on one source of traffic. For example, the website is reliant on Google search so if there is a Google update I want a lot of direct traffic so it won’t be as adversely affected.

Bryon: No blackhat practices. Give a lot of the information up front as we are buying 5 – 10 sites a month so we don’t have time for a lot of back and forth.

Ted: Just to add to that, there is this holy grail of organic traffic that doesn’t exist. A lot of the big sites out there it’s about content arbitrage and we love it. As long as you are buying traffic from the right places. Your only limitations are capital. We can grow a business fast just based on what media we are buying. That is where we think a business can grow. Being able to really demonstrate where your traffic is coming from. Demonstrate you know how to buy media.

Q: What do you think about conduct and how a seller should conduct themselves?

Bryon: Developing a personal relationship and get to know the owner. Develop a connection with the seller. Be realistic about what the market is saying it will sell for. A buyer will not pay 40x if they can only sell if for 30x in three months’ time.

Stacy: I agree with Brian and how the market sets the pricing. You do have to be able to sell at the same rate. Responsiveness is key as a seller.

Q: Is the expectation that founder and/or owners stick around?

Ted: I don’t want to buy anything where someone leaves. I’m not buying commodities I’m buying businesses that require people to continue to run them until knowledge transfer has happened. We set that tone from day one.

Q: Are you structuring earnouts?

Bryon: Typically if the deal is more than $20k we have some form of earnout that guarantees successful transfer or training that the seller has to participate in.

Ted: Just one thing to be careful of projections perspective because that is what your earnout is going to based on.

Q: What does a good deal look like?

Ted: I think it depends. I’m not in the business of repairing things. We tend to take things that are marginally losing money and optimize if through resources being removed. The bottom line is that our valuation is based on a multiple of EBITDA. We base it on that.

Stacy: When you can see something in the site that the current owner doesn’t. If you buy a site for 20x multiple, I look to earn that back in 10 months.

Bryon: The biggest one is financials. Lots of businesses we encounter are not tracking financials correctly. Likelihood is that if you don’t have clean financials, we will get it a discount.

Ted: Get a real accounting firm involved. These are tech businesses, so all your development can be capitalized and they go on your balance sheet and removed from your P&L. Now you are profitable. All the money you spent building the site is now on the balance sheet and removed from your expenses and that could be the difference between being profitable and a valuation standpoint. That is a big win I normally find.

Buyer Insights with Blake Hutchison (Flippa CEO)

Buyer Insights with Blake Hutchison (Flippa CEO)

Blake Hutchison is an accomplished entrepreneur and the CEO of Flippa.com. Prior to Flippa Blake was the general manager and chief revenue officer of Luxury Escapes and head of strategic partnerships at Xero. Blake was also the founder of GOOD44, a venture capital-backed specialty food marketplace helping small business owners target a new customer base.

50,000 online businesses have listed with Flippa in the trailing 12 months. Over 60,000 buyers. This is a dynamic and growing space.

BUYER INSIGHT #1 Content sites are, currently, king.

Content-based websites are hot. 51% of buyers, surveyed by Flippa, recurrently hunting for websites monetized by ads and affiliates. The benefit of these business models is that there is less volatile/seasonal revenue bass, less intensive and there is simple revenue-generating add ons readily available.

BUYER INSIGHT #2 – Experience

Buyers are experienced. Sellers are less so. 55% of buyers actively searching Flippa.com own 3 or more websites, whilst for most sellers, the experience of selling will be there first.

BUYER INSIGHT #3- Ready to purchase

Our buyer community is highly active and ready to purchase. 61% are in the market now and want to acquire within the next 12 months. There’s never been a better time to sell.

BUYER INSIGHT #4 – Deal terms

Buyers often want to offset some of the risk of the deal to the seller. 15% of buyers want to acquire on Seller Financing terms or a combination of cash + debt. The debt to be held with the seller. Seller financing provides cash flow and risk benefits to the buyer and allows buyers to get access to bigger deals without having to look to institutional/bank financing.

So when selling, being flexible and having knowledge in how to structure has never been more important.

BUYER INSIGHT #5- Distressed inventory.

78% buyers are looking for businesses that are somewhat underperforming. For buyers creating operational efficiency is a path to growth.

BUYER INSIGHT #6 Strategic vs Lifestyle

There is a 50/50 split for buyers looking to acquire for personal vs business/strategic reasons.