Arlen: Welcome to the eCommerce marketing podcast, everyone, I am your host. Arlen Robinson, and today we have a very special guest, Chris Shipferling is the Managing Partner at Global Wired Advisors, where he is also the first point of contact for Clients working to sell their online businesses. For the past seven years , he has focused exclusively on high-level consulting for multi-million-dollar omni channel, digitally
native, and Amazon-based private label and re-seller brands. Chris and his partners leverage their 70+ years of combined investment banking experience to provide a superior level of service that was previously unavailable in the lower middle market. Moreover, each member of the Global Wired team has owned, operated, and sold multiple digitally native and Amazon-based businesses, so not only do they have the expertise to offer comprehensive financial advice, they are also uniquely qualified to guide Client Companies through each step of the complex sales process.
Chris: Hey, thanks, Arlin. I appreciate it, man.
Arlen: Yeah, not a problem. And I’m really excited to talk to you because this definitely is one particular subject that we’ve never really addressed and that you know, the topic of today is going to be exit planning for your business. You know, a lot of times the focus of this podcast has been on marketing, growing your eCommerce business, going through strategies from a to Z.
But as everyone knows, and of course, as you especially know, there is always going to come to a point where you’re going to reach a crossroads and you’re going to make the
Arlen: whether you exit a certain way, whether you’re selling the business, whether you turn it over to a family member or whatever you do, you’ve got gotta plan for it.
And so I thought
Chris: that’s very, you know, very timidly because every
Arlen: business owner needs to address these things. So, um, before we get into all of that and the topic for today, why don’t you tell us a little bit about your background and specifically how you got into what you’re doing today?
Chris: Yeah. Good question.
So you did a great job of, of the introduction, so I appreciate that, which gives a little bit of a flavor of who we are and yeah, I’m equally excited. It’s always fun to allow people to see behind the curtain and see what Oz really does. The wizard of Oz really does look like, right. A lot of exit planning tends to be a bit mysterious in some cases just because not everyone is obviously involved in a day to day or year to year.
And typically folks go through it about one time. Maybe another time, but on average just wants. So very excited to dive in. A little bit about our background. So global wired advisors was really started out of our sister firm, which is privity, IOM group. Rubidium group is a middle market investment bank that also has a private equity arm as well.
Where we are looking to actively add to that portfolio of um, different businesses. And right now we’re focused actually in one sector, but then preventing them group. We moved away from the buy side and started a advisory because, you know, as you alluded to earlier, we’ve all kind of had different seats at the table at one point.
And what we found is that the traditional business broker that is out there. Currently selling businesses in that main street all the way up to 35 to $50 million range. The skill set, the acumen, the career experience, and real MNA and investment banking is lacking. There’s a big void in having a strong skill set, helping you as a small business or lower middle market business owner go to market.
And so them advisers was then started as the more traditional, lower middle market investment bank. And then certainly thereafter, global wired advisors was started. So I met up with these, uh, I have four partners in the firm. I actually met these guys through some different business dealings. That happenstance, I’d say.
And my background has been, traditionally, I’ve been a sales and marketing executive and businesses ranging from 22 million all the way up to half a billion dollars. So really kind of squarely in that lower middle to also middle market and as you know, just running teams, sales teams, running marketing teams, et cetera.
I pivoted my career, as was mentioned several years back. More, I’d say more concentrated or a heavier focus in digital marketing and also Amazon specifically, you know, seller central, because that’s really where one, that’s where a lot of the revenue concentration for e-commerce was. Now starting to go and to.
In my world, my traditional world, where I was playing as a sales and marketing executive. More and more revenue was being transferred out from the retail doors where we have lots of focus into the eCommerce stores, including also a direct to consumer strategy as well. So my three partners all come from large institutional investment banks, and I’ll skirt by it, but it’s important to mention it’s all household banks that they’ve been a part of.
Bank of America, Citibank, Deutsche bank. One of my partners ran a $11 billion hedge fund out of Miami, who was second in command and running the capital markets for them. Not too, not too far from you, Ireland. So our backgrounds are very rich, as you mentioned in the introduction, very rich in investment banking and what we believe this is a premise of who we are and why we exist.
We believe that just because you are a small business owner or you have a company that’s two, three, 4 million plus, we believe that you deserve better. We believe that you deserve an investment banking process that’s going to extrapolate more value and run your business when it comes time to exit through a much more sophisticated and premium process than just settling for what’s currently there, which is a traditional business broker, hands-off passive approach to selling your business.
Arlen: That’s good stuff. And that’s really good to know because there’s a ton of businesses out there, businesses that I deal with on a day to day basis, eCommerce businesses that, you know, when they are thinking about selling or exit planning, and they see a lot of the big guys and the big transactions down, they think a lot of that is unattainable.
So it’s good to know that there’s some guys like you that. They can work with those types of businesses and kind of show them the the guiding light, so to speak.
Arlen: great. That’s really good to know. Now, one of the things that I, you know, I kind of alluded to at the beginning. Is that exit planning even is an inevitable place that a business is going to have to get to.
At some point, every business owner would like to think that their business is going to just continue on forever and ever and you know, just get passed down and passed down. But you know, regardless. All of us have, you know, an expiration date at some point. And even though we may not be the ones to see it all the way through beyond generation, we have to do a little bit of planning just to make sure that our vision carries on and there’s gotta be some things that are in place.
And so for, let’s say, any average eCommerce business that’s considering. Selling, if they feel that that’s their exit strategy, when should they really start planning for this exit and how much lead time is usually required?
Chris: Yeah. I would say just a blanket answer is 18 to 24 months. The reason why we say, or we give such a long runway, there are a lot of factors that are involved.
So instead of waking up one day, which I know never happens, but just for the sake of conversation, waking up one day and saying, all right, I’m ready to sell my business. Well, you may come and sit across the table from us and all of a sudden now we’re going to give you 10 to 20 different pieces of homework or things to do to start really getting your business prepped.
And now that runway was, well, I’m gonna have sell it now. To actually now I really need about six, maybe seven, maybe eight months, maybe 12 months, to really truly get my business ready. There’s a lot of factors that go into that, right? So as investment banking professionals, we’re not just going to look at the basics.
We’re really going to dive in and take a look at, I would say. Forensically at all aspects of your business, every function of your business, and we’re going to be taking temperatures on the health of how the market will respond. And it’s all about extrapolating as much value as possible. So if you want to extrapolate lots of value, you’ll want to talk to guys like us about 18 to 24 months before you’re really starting to think about going to market.
Arlen: Okay, great. Yeah, that’s really good to know because you did mention, of course, and this is really kind of what I had expected. When thinking about just the whole process of exit planning that I know once any business approaches guys like you, you’re going to give people a list of homework and things that they got to do.
So with regards to this homework and things that they have to get in place, what are these specific items that need to be in place for everything to go smoothly?
Chris: Yes, sir. So, you know, I’ll start with the basics. Basics are going to be your books, right? How clean are your books? How clean are your tax returns?
That’s also a very important piece as well. During due diligence, tax returns are going to be a part of that. As long as there’s no quote unquote funny business, as we like to say with tax returns. Well, want to take a look at that and just make sure that everything adds up and everything is congruent to what your P and L is stating.
But cleaning and organizing your books are going to be important. You know, organizing the structure of the company, making it very clear that there are processes in your business. Is there automation in your business? Can you put more automation into your business? I mean, these are all things that are going to be important because when you’re looking to sell to gen two, that’s going to be a variety of buyers and the less they have to invest in actual, call it work capital, human capital per se, then the more value it brings to the cash flow of your business.
So that’s more or less the basics, let’s say. Kind of digging in just a look, just a layer more. And you know, when you talk to us about selling your business, we can go into all the layers, as I just alluded to in the last question, but where’s this company going to be in two to three or four years, right?
Have you hit a ceiling? Can you actually scale this business? And there’s a lot to that, which we don’t have to get into D two today, but it’s a loaded and kind of broad question, but it’s also a very pointed question. Can your business actually grow? And if it’s going, if it can grow, how would you do it?
What are the things you would do to grow your business? And then that’s a question to say, okay, that’s part of the opportunity we’re going to present to the market. Or it’s something you can go ahead and start to implement ASAP to extrapolate more value out of your business. So also cashflow, focusing in on cashflow.
And cashflow is a number that a lot of people get confused by. They believe cashflow is just the number they have in their bank account. And it’s, that’s not the case. Cashflow is a measurement or it’s a. Some of both net income as well as what would be considered add backs, owner and operator related expenses that are add backs to create that cashflow number.
In larger, more enterprise businesses. Everything is run on an EBITDA level where you know you’ve got a business that’s currently got a strong structure with lots of employees, et cetera. Obviously it’s going to be on that. It’s going to be focusing on the EBITDA, so just focused in on your EBITDA number.
The more cashflow, the more EBITDA. The larger your accent, hands down, period, because 99.9% of the businesses that are out there are not Tesla or Uber, right? They’re not necessarily disruptors getting these insane Silicon Valley type evaluations. Now, some of your listeners may have that, but for the majority, it’s going to be based on, yes.
Do you have a moat around your business? Do you have some type of exclusivity that is very difficult for someone else to replicate. Do you command lots of market share if you’re selling consumer products or even if you’re in a SAS related business, but for the most part it’s going to be a solid focus in on that EBITDA number.
How good are you at making money?
Arlen: Yeah, and I know one of the things that you kind of alluded to, is there like a moat around the business or what is a, I know a lot of the value is going to be, what’s the secret sauce? Because especially with e-commerce, if we’re talking about eCommerce product businesses that are selling specific products.
What is it? Is it a product that. 1 million other sellers are out there selling bore. Is there something specifically unique about yours? And then I think from there, I guess there’s, there’s other things that I’m sure the business would, I guess where that goes into the actual value of it, whether it’s a patented product that they have existing licenses.
With this particular product, comma, their trademarks and those things. I know all of that really kind of adds on to the, the perceived or the, the actual value of the company. Now, you know, speaking of value, which is really the bottom line, that most businesses want to determine how really it actually is the valuation determine and it’s a really like a set formula or are there other factors that all kind of fit together to determine the business
Well, it’s interesting. So you know you’ve got a lot of folks out there that will tell you they’ve got some amazing secret detail oriented formula to create valuation. I’ve heard them all and a lot of them are very, are very complicated, and a lot of them are used to just, I call them kind of the, the worm on the fishing pole to try and get you through the door.
The reality is it’s actually quite simplified, but there’s a lot of complexity that goes into. Coming to a, I would say a good valuation range, so you fully understand what the market will perceive about your business. Again, it’s based on EBITDA or it’s based on what’s called seller discretionary earnings.
Just depending on how your business is run. If you are an owner operator business where. Very few employees, you’ve got lots of outsource, you know, assistance, etc. But mostly it’s owner operator. You’re going to be running on what’s called an SDE number, which is seller discretionary earnings, taking owner related benefits and adding that all back.
And then of course, if you’re running a more complex enterprise, it’s going to be based on your EBITDA and the multiple, just depends on where you’re selling, how you’re selling the channels you’re selling, where’s your revenue concentration. Everything that we just talked about in terms of do you have exclusivities, do you have mode?
You have a moat, what is your IP? What type of runway do you have for the business? All of that’s going to go into your multiple range and where either sophisticated capital or personal capital is going to eventually land on a valuation for your business.
Arlen: And you mentioned several times that EBIDTA. For those listeners that aren’t familiar with that term, what exactly is
It is earnings before interest, taxes, depreciation, and amortization. Okay.
Arlen: That’s right. It’s kind of a mouthful there, right?
Chris: No, it is. I have to really slow down and make sure I don’t have any marbles in my mouth. Oh, I see.
Arlen: Right. I understand. Okay. And, uh, I know that’s something that can be determined if a business has their books in order.
And is that something that. They can easily determine based on just their financial reports, whether they’re using QuickBooks or any other financial software.
Chris: Basically, yes, and I mean, honestly, I would just tell your listeners this. This is kind of the mediums that are out there. If you’re an all Amazon business, if you’re running all of your revenue through Amazon, you will get multiple suppression.
But the median is about a three to sort of form multiple based on your cashflow. So you take cash flow times three or four plus your inventory is probably more than likely going to be the valuation of your business. But when you’re. But real mid, lower middle market companies that have a good diversified revenue concentration and many different channels, you know, growing, thriving business and you have at least 3 million or one to $3 million in EBITDA.
Typical consumer product multiples, normal multiples run six to eight, nine times your EBITDA. So it really just depends on. We’ve got to basically extract all the data from your business and then we can get to the data plus coming to that cash flow or EBITDA number can apply a, I would say, a good multiple to the business that would be accepted out in the market.
Arlen: Okay, that sounds good, and that’s really good to know. Now, let’s just say hypothetically, we’ve got a business and eCommerce business, and. They say, okay, they’re looking long range, and they’re saying, okay, I want to sell the business. They’re taking heed to what you said. They are starting some planning, you know, at least 1824 months out trying to get some things in order.
Are there any really last minute things that a business can do. To increase their value, you know, other than, you know, going viral overnight or just having an explosion of sales. Is there anything that they can do cleaning up wise that can kind of bump their value up at all?
Chris: Not really, because cleaning up and organizing your books are all just ex normal exercises for to go to market.
So I mean, that’s something that has to occur anyways, and it’s a little bit like governance, to be honest, right? The wheel just does it move that fast, you know? There’s not something that you can just. Kind of put a quarter into the vending machine and immediately start getting candy. The reality is if you want to extrapolate more cashflow out of that business, the market isn’t going to sit there and just pay you for being a good cost cutter.
My son, who’s 10 years old, he could do really good cost cutting too, you know, cause he understands math. So the market isn’t going to pay you for that. You know, to really implement good things and good. I’d say, you know, preferred ways to increase value of your business. It’s a little bit more longer term.
So last minute is not synonymous with exit planning. I see. They usually, last minute stuff is you’re just trying to get it prepped and you’re trying to get on the market as fast as possible. And usually that usually means you’re either in a fire sale mode or distress mode. So. That makes
Arlen: total sense. So it really just sounds like, yeah, if you’re at the point where you know you have to sell, you’re planning to exit your, the main thing is just you’re getting your things in order.
You’re making sure your books are straight and you’re going to be presenting. The way you presented at that point is really the way it is going to be. You know, there’s not a lot you can do to really increase that. So I totally understand that. So it really just sounds like a business owner from the day of inception.
Really has to be just kind of mindful about a lot of these best practices, I guess you could say. So that when they do get to the point where they’re considering selling, it’s not going to be too much of a headache for them to kind of get things in order. So
Arlen: that’s really the main thing to keep in mind.
As you mentioned, things don’t really happen overnight. You just have
Arlen: take everything day by day, and then it just makes sure that you’ve got your. Your ducks in order for sure. And so that’s a, I totally understand that and that really makes sense. You know, unfortunately, we all want to. Believe that there’s some type of overnight thing that we can do that can it just miraculously millions of dollars of value to the business
Chris: right, man.
Arlen: because it’s not possible.
Chris: If you could go down the street Arlin and go to universal studios and go get a Harry Potter wand and it would actually work, then that’s probably the only method to do something very quick. Right. It’s just a lot of patients, basically.
Arlen: That is so true. And, uh, yeah, I don’t think, uh, getting a functional Harry Potter wand at this point is practical for any business owner.
But, uh, yeah. So you’ve given us a lot of things that adjust already and as we get ready to kind of close things out, what. Are some resources that you can actually recommend for eCommerce businesses that are considering an exit?
Chris: Yeah, got a couple things. One, I would say, look, if your revenue concentration is heavily focused in on a marketplace like an Amazon, specifically Amazon, I would say do what you can to rotate away from Amazon.
There are many, many methods to do that. Hiring a great digital marketing firm, running the digital marketing yourself, you know. Buckling down, learning how to do that, but the more you rotate away and start selling through specifically your own website, it’s going to bring more multiple to the business.
We know that for a fact, anytime that we’ve sold a business that was inverted in the way that they as a digitally native brand, where they had. Small percentage, Amazon larger percentage through their own website, the multiple almost doubled because you own the data and you know this, you know this as a digital marketer and as an eCommerce, you know, guru owning the data is everything and everybody has their own opinions.
They have personal things about. Privacy and data. But the reality is owning that data is very valuable to go and find more and more people to purchase the things that you’re selling. So that’s, I’d say one. And then a couple of things in terms of just metrics, you know, on your own website, if you’re selling a consumer product, um, and this would apply to even, I’d say content folks and etc.
But just making sure the metrics that matter. So for instance, you know, zeroing in on consumer products. Try and increase your AOV. That’s just make you more attractive when going to market high AOVs are very attractive to a potential acquirers. I already talked about owning the data. That’s also very important.
Increasing your LTV, having something that where you can get these folks to come back. I mean. Honestly, it’s one of the reasons why sass multiples right now are on fire. We have a current SAS business that’s under LOI, which is called letter of intent. Basically, it’s just a fancy way of saying that they’re going through due diligence and working towards a close from an EBITDA number.
They’ve got a little bit of consumer product mixed in, but from an EBITDA perspective, that multiple right now, is that an 11. Because SAS, man, you just get people come back. That reoccurring revenue is so valuable. So again, just kind of focusing in on the metrics for whatever you’re doing. Just focus in on those metrics to try and increase all of them.
And I know that sounds blanket, but really get your head out of the minutiae if that’s what you need to hear and really focused on. What can I do as a business owner, eight, to just take the gravitational pull up on all these important metrics for my, for my
Arlen: business. That’s really good to hear and some great advice for sure, and I like what you said with regards to making sure that you own as much of your data as possible because.
There’s so much value in that. And um, there’s so many things that you have to go through if you’re dealing with Amazon as far as the metrics that are coming from there. And it just, there’s really a lot to say about just really taking control of your data. And you also mentioned some other things that I know a lot of businesses are starting to focus on more as far as getting the value up and increasing their revenues.
And that’s the, the average order value, the AOVs so that. You can offer some upsells, some ancillary products that, believe it or not, a lot of people don’t see it from the outside, but just increasing the average order value just by even, you know, depending on your numbers, but just even major of your few cents or something like that.
If there’s, if you’re talking about large volumes
Arlen: that can go a long way. And so those are really good things to focus on. Well, I’m Chris, it’s been a pleasure talking to you. It’s been. Awesome learning about what a business needs to do, specifically eCommerce businesses need to do with regards to exit planning, because it’s something that I think is always in the back of, I think every business owner’s mind.
They’re wondering, do they need to go that route? If so, when and what do they need to do to make it happen? And so it’s good. Good to know that we’ve got guys out there like you and. And your team that can help businesses out. But, um, what I like to always do now to kind of switch gears and have learn a little bit more about you personally, is why don’t you let us know a little bit about one particular fun fact that our audience would maybe be surprised to know about you.
Chris: Well, surprise is probably not the best way to describe it, but I will tell you that I am a huge Liverpool football club fan, and I’m a big fan of the EPL and Liverpool is having one of the best years they’ve ever had. It looks like they’re going to win the league, the EPL. And they’re also on part. I’ll win champions potentially this year too.
So it’s been a fun ride. That’s kind of my, uh, I want to kind of check out and just really vege her a little bit. Watching soccer is my go to man.
Arlen: That sounds good. Yeah, that’s great. I don’t hear that coming from a lot of. A lot of us guys. I know people over in Europe, in the UK. I mean you don’t get to see, it just goes without saying that they follow soccer.
I talked to a lot of people all over the world and it’s just like a religion really.
Chris: All it is. It is, man.
Arlen: Yeah. So that’s good stuff. It’s good to hear. Um, cause I know a lot of people, of course here in the U S. Right now we’re getting ready to approach the Superbowl and all the other football
Chris: is, that’s right.
The other football, I mean, original football here in the U S right.
Arlen: Yeah, exactly. It’s really big here, but yeah. Good. I appreciate you sharing that. That’s awesome. And, uh, you know, finally, before we close things out, if our listeners want to pick your brain anymore about exit strategies for their businesses, what is the best way for them to get it to get in touch with you?
Chris: Com I’d say probably the best way is to go to our website. So it’s either just, you know, go directly to www.globalwiredadvisors.com or go search us on Google, or for the 5% of your audience that uses bang, they can also go to Bing or just there too. And for the 1% that uses Yahoo. They can also search us there too.
So just type in global wired advisers and we’ll pop right up. We’ve got two main ways. One, you could call it a consultation form, just kind of goes through a few questions prior to us getting on a phone call or we have evaluation tool and you know, we’ve created the evaluation tool to be consumer products focused specifically to digital brands.
We do have an Omni channel button. You’re going through the different data questions and the data points. But that’s been a really good way for folks to kind of understand a first handshake with where is my business valued. And then I would just, I caveat and I also, you know, kind of give the fair warning, devil’s in the details.
You know, once that valuation is done, we do a complimentary evaluation where we dig in everything we just talked about on this call. It’s all all complimentary. And then, yeah, we get you a really good valuation for your business, takes a good temperature and talk to you about a view of what it looks like to go to market.
Arlen: right. Great. Well that’s awesome. I appreciate you sharing that and I hope the listeners out there that are interested in going down that road and exploring some exit planning options. We’ll definitely take you up on that. So thanks again, Chris for joining us today on the eCommerce marketing podcast.
Chris: Thank you so much and I really appreciate it. Thank you for listening to the eCommerce marketing podcast.
Managing Partner at Global Wired Advisors