Get Innovative Investment For Your Amazon Seller E-com Business With Don Henig - Part 2
Get Innovative Investment For Your Amazon Seller E-com Business With Don Henig - Part 2
Things we mention in this session of Seller Round Table:
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[00:00:01] spk_2: Welcome to the seller. Roundtable e commerce coaching and business strategies with and er [00:00:06] spk_1: not and amy Wiis [00:00:08] spk_2: mm. So does it matter if this seller has zero credit or zero money? Do they have to be located in the U. S. Do you have any other requirements to qualify for your program? [00:00:26] spk_1: Great questions. So no credit. We don't care about credit, we don't look at credit, we don't look at financial statements. All we look at is the inventory and we analyze the inventory to see what's working, what's not working if some of the inventory is not working. We put it on the side and we've never had an argument over that every seller knows their inventory that's you know good and not good. So day one we say look this this product whatever it is it's just not working. Yeah I know I bought that blah blah blah blah blah. And there's always a story which is great and so they put that on the side and we don't we don't Give them money against that and we don't take any profits against that. So as that sells, they keep 100%,, it goes back into cash and then we will give them more money with that cash. So you know, they can always get more money as they convert that. [00:01:20] spk_2: So it's sort of like a small, you're giving them a little bit at a time and you're kind of keeping tabs on that money because the way you guys work, you're actually aren't you taking a piece, are you taking do you own part of their business or how does that part work? Because you guys do it a little bit differently than a traditional lender? So they don't have to have any credit. They only, you only look at their inventory, you want them to have a plan. But what is the cost of you giving them that money? [00:01:54] spk_1: Right. So yeah, we don't own the business at all. They are 100 equity owners of their business. We come in as a what we call a profit share partner. Okay. So we only are entitled to a percentage of profits as long as they use our money. That's it. And the percentage of profits is based upon how much money we put into the business. So, if the business has $100,000. And by that, I mean inventory cost plus amounts due from amazon. All right, call that $100,000. Well, let's call it $90,000 If we give them $10,000. So now we represent 10 of the business, right? They're 90 were 10%, whatever percent. We are cut it in half. So we would get five of the prophet that month And it changes every month. If we went all out, they had $100,000 and we gave them $100,000. So now we represent 50 of the business, We don't take 50 of the prophet. You cut it in half, we get 25 of the profit for that month, and it changes every month. So, you know, they always get the majority, they always get the lion's share. [00:03:08] spk_2: So even if they have to spend extra money on advertising that month to get that product launched. And let's say their profit is very, very small or maybe they're even break even or even negative. Um then you guys don't get anything that month, but if they can get their profitability up, then they get, you know, half of those profits and you share in the other [00:03:33] spk_1: half. Well, they get no whatever percentage of the business we represent. So if we're 30 of the business, we have 15 of the prophet. So a good example of this, this past year. So a year ago, uh we had a few really, really good private label sellers really doing well, making a lot of money and now comes march in april when they weren't able to send their products in and literally breaking even and then losing money. And they were concerned, what are we going to do? Because we're not earning any money. We're not a bank that they have to take money out of their losing business at that time and send it to us. There's no money coming to us at all and we're not owed any money. So, you know, I had to have conversations with them with three of them, actually just small number that we're losing money and they were all had the same concern. What are you guys gonna do? You're gonna shut us down? No, this is a business arrangement. Were with you, This is the way life is right now. This is not going to be the way life is going to be forever. So let's just play it out. You owe us nothing. And one guy said to me, Don if I he he had come out of an amazon loan, he was if I had to make payments right now, I would absolutely be out of business. That's a great point. You know? [00:04:53] spk_0: So Donna, I'm just uh so what you're saying is, is when you guys uh make a deal, you're you're not only betting on the horse, but you're also betting on the jockey. So I assume that, you know, you're definitely looking at, you know, what kind of processes they have in place. You know, if they, they've got some business experience, you know, some of the things that you're kind of betting on 22 for the long game, you know, maybe with a little help from you guys in terms of, you know, guidance, like you said, you know, coming in and kind of sounds like you kind of do the 80 20 with their, their product catalog like, hey, get rid of this 80%. We're gonna go really strong on this 20% things like that. Um, I would love to know the difference between, I think I pretty much know the difference, but our audience might not between a company like yours and uh, you know, everyone's talking about the ratio and, and uh, you know, that's that's the new, the new hot company that grew really quickly and has all this funding and everyone, you know, so, so tell me, tell, tell people the difference because, uh, in a way, this sounds like a better deal because you're holding on to the business. Whereas, you know, thrash feels kind of taking it over. [00:05:54] spk_1: Oh yeah, they're not kind of, they are taking it over and nothing wrong with that. That's, you know, what's the goal? The goal should be at some point in time. You build your business strong enough and big enough that you're gonna get a ton of money and you're done forever. And that's a great feeling. So, you know, throw ratio, they have a great model. What they'll do is they'll come out and buy your business and, you know, terrific. However, the problem with ratio and most of their competitors is that they don't offer you a very high multiple. But now that there's so many of them doing this there, it's called an industry roll up. So they're looking to buy hundreds of sellers, maybe more. So they create this big, huge company. A good example. If you ever want to look at it, you ever see in just about everywhere in the country, you'll see waste management, you know, the waste manager, right? The big garbage company and they do everything. Well remember they started with this guy down in, in uh, in Miami wayne Heinz Singer. Uh, he was the owner of the Miami Dolphins and on and on and on. But he literally was a garbage man. He had one truck and he took that one truck and went and went public with it. And then he went to the next garbage man and said, look, I'll buy your one truck and your business and I'll give you stock and then the next one and the next one and here we are. He quickly rolled up uh, you know, waste management. Then he did the same thing with blockbuster. So you know, this is exactly the model that they're going for. So here's the question. When you have one company that's buying amazon sellers, they don't have to give you a very big multiple, right? They can, you know, the only game in town. But if you have to the multiple is gonna go up a little bit. You have 20, the multiple is going to go up a lot. So right now there's probably about 20 companies, most of them started within the last year that are looking to buy amazon selling businesses, which is great from a seller standpoint. However, if you're selling your business this year, You're going to get multiple of maybe 2.5. If you sell it next year or the year after the year after, you might be getting four or five or six multiple. So it makes sense to, you know, if you can hold out and then it also makes sense to double the size of your business and then double it again before you sell. That's where we come in. We'll give you the growth capital. This is real growth capital Where you can grow and grow and grow so that when you're getting a four multiple or five multiple, it's not on a million dollar business, it's on a $5 million dollar business. Now, you're making a killing now. It's life changing. So that's the different that I explain that. [00:08:38] spk_0: Yeah, absolutely. The other thing I'm interested about is we talked a little bit about support. Um, are you guys kind of like more like silent investors? Are you, uh, you know, do you have any team members that come in and kind of assist these businesses? Uh, I mean one of the things with ratio was that, you know, they'll sometimes make a deal where you keep a little bit of of the um, of the company. Um, and if it hits, you know, a certain threshold after two years, they, you know, they've got all these crazy uh, ways of doing things. But the cool thing about the ratio is they have somebody on the team who is an S. E. O. Expert. They have somebody on the team who is a PBC expert, Pr expert. You know, they got, you know, it's it's like going to a Nike or some someone right as a brand because they check all the boxes in terms of specialists on all these different fronts. Do you guys have any support in terms of, you know helping these sellers? [00:09:26] spk_1: We do and and we help sellers all the time with questions they have and and you know issues and such and also truthfully we go out to some of the consultants in the industry. You know this industry is not short on consultants and and not short on good consultants. You know people like you guys you and Amy like not for anything if any of these sellers needed help on specific things that I know you guys are experts in. I mean that's what we would we would do we would most likely just make that introduction and help these guys out for a few months and and help them pay for it. You know that's we just want to help them. [00:10:05] spk_0: Yeah. Well that's that's that's that's interesting. I like that you know you you kind of farm it out to two you can get even somebody better than that works at the ratio because you can literally go and shop the top people and all the different aspects. So that's a that's an interesting way of doing things like [00:10:19] spk_1: little things that you would know but I'm not a you know an e commerce expert right? You know so you would you guys would know this uh one of our accounts came to us and he had a problem because he bought, remember correctly it was perfume and it was a hazardous product and he didn't know it at the time. So now he was stuck, I need to know what to do. So we went out to an industry expert consultant who has helped us in his referred accounts to us and you know put them together and straightened out like in a day it was it was amazing. No you have to use a different type of shipping situation. Here's anyway, walk them through. It didn't lose any money. Thank God [00:11:00] spk_0: love it. That's fantastic. Uh So uh step us through the process in terms of how does it work? How do you, you know, what are the criteria that you used to work with companies kind of, you know, Hey uh my name's Andy Don. I want to I really need support with my amazon business, you know, I sold over a million last year. Yeah. Well here my products, you know, do you want to work with me on board me? What do we do next? [00:11:26] spk_1: You know? So you know, we've made it I think as simple as possible. But I will tell you some of the things that we do that are a little bit different from anybody else that's out there. So on our website at Crew me dot com, there is a simple form. It's basically a questionnaire and it takes, we say it takes three minutes, it doesn't take more than two minutes. It's like, you know how, what's the name of your business, how long you've been doing this? We look for people that this is going to be shocking to you, but you know, we're looking for at least six months in the business. That's not a long time. We're looking for profitable for them to be profitable as well on their current inventory. Um And now we've made out, we've raised our minimum to 10,000. It used to be 5000. Uh So you fill out that form, you get an immediate response with what we believe based upon the answers you gave us, how much we could offer you. And then we asked for access to your account so that we can pull down, look at the inventory, run it through, we get the Cpus we see what the profitability is and then we schedule a call and and this is what's different from probably anybody else is that we talked to everybody and I talked to most of the sellers because you know we are doing something different And it's you know, it takes a few times to to hear it to really understand it. You know, if I talk to you about lending, lending has been going on for 2000 years literally, you know, we talk interest rates and payment and term everybody would understand it, but we're doing something a little bit different. We think it's a lot better and much lower risk for the seller without question. But it's different. So we go through it with them, we call it a key points document and it's like 15 bullets written in plain English, not by a lawyer. I can tell you because I wrote it. So it's written in Brook Brooklyn ease and uh and we go through to make sure that everybody really, really, really understands it. And then if that's the case, we move forward, there is one other requirement that we have and it's that the seller being LLC, which most cases that's the, that's the case. But if they're a corporation that's okay as well, they just have to form a new LLC, the corporation will own the LLC. So it's a simple process. And the reason that we do that is because if we invested in a corporation, we would have to take ownership in it. We couldn't get around it. We've tried multiple ways and we keep trying but we can't get around owning their business so we don't want to own their business. We want the seller to work with us grow, get the benefit out of it. And then when they're done, they move on and they keep the business themselves 100%. So one other thing, there are companies that are working with us right now that are making no payments and they plan to make no payments for a year and a half to two years because they are planning on selling their business and they're getting ready to sell and all they want to do is grow and and they're doing it. And so when they go to sell their business, all we get back is the money we put in plus whatever accrued profits we we earned, they keep all the upside, which is what they love. [00:14:42] spk_0: So accrued profit, meaning the percentage that you took uh for the for the months that they took, the took the, uh, I guess you called alone. [00:14:52] spk_1: Well, no, we don't call it alone, but we, we make an investment [00:14:55] spk_0: gotcha. [00:14:56] spk_1: And again, we don't take Any ownership in the business. We are not listed as the equity partner were just, they are 100 the equity partner. We are the special member called the profit share member. [00:15:10] spk_0: That's it. So [00:15:11] spk_1: as soon as we're paid out, the deal is done. [00:15:13] spk_0: So really, it sounds like the best case scenario is if you have an amazon business, you know, of course, you know, if you watch the shark tank, you, I see this somebody who doesn't have is screwing really quickly, doesn't have the money to fund inventory. That would probably your dream person, um, or somebody who is still profitable, has good systems in place, um, knows how to scale, but you know, maybe doesn't have enough uh to scale quick enough. Um You know, I wish you were around in, in 2012 when I started um I left so much money on the table because I did not scale quickly. It was kind of just like, oh, I got the side business, yeah, it's growing every month. Oh yeah, we're making money. Uh you know my day job, you know, [00:15:52] spk_1: first off I hear that from a [00:15:53] spk_0: lot of people, you know, I [00:15:54] spk_1: wish, I wish I knew about you guys two years ago, but if you think about it, you just brought up a great point as as a business owner, all of us when you see the opportunity, that's when you have to jump And you know, we all went through 2020 and it was a great year for most sellers and 2021 looks like it's going to be even a better year. You know e commerce has exploded and it doesn't look like it's going to slow down any time soon. So most sellers right now are facing opportunities. And when you I can tell you in business, when you see that opportunity jump on it, make it happen, go after it because it's not going to be there forever. You don't know how long this amazon run is going to be. It could be a year, it could be five years. Could be seven years. I don't know what it is. Nobody knows. But it's gonna it will change at some point in time. Take advantage while you can. [00:16:47] spk_0: Yeah absolutely. You know this is the old adage with you know PBC when when when we were talking to some clients and you know they're like oh yeah you know I've got a $20 budget on my P. B. C. And you know we're getting a 10% roh acid and uh you know I keep budgeting out and I'm like wait what a minute your capture budget and your budgeting out every day. But you've got this huge profit. Oh yeah well you should probably remember I talked to this guy uh like north Carolina, south Carolina. He was selling a product that is you know on XP inspired wow I can't speak right now inspired. You know I always tell people you know the kind of product you want to sell on amazon or things like toilet plungers right? It's the one that you're afraid of are embarrassed to talk about it a party. Those are the products that are probably gonna do really well because nobody is thinking about that nobody wants to be the toilet plunger guy. Um, But anyway, he was, he was selling this product and it was, he was getting a 5%, uh, costs and his, his budget budget was capped at like $10 a day. And I said, Why haven't you scale that up? I, I don't know. And so it's one of those things where, you know, to me, it sounds like even if you know, don said, he talks to everyone. So whenever you get an opportunity to talk to somebody who's been in business for a really long time, you know, usually they have the Robin Hood kind of mentality, right? They love to give that knowledge to you. Even if you don't end up working with Dawn, I know that I'm this way as well when it comes to partnerships or people I talked to, you know, you, you have this urge to, you know, spread the love in terms of, hey, I've done, well, I wanna, I wanna share what I've learned. So you know, whenever you get a chance to talk to somebody like don, you know, I would say take it because you know, in the end he might go through your product catalog and decide, hey, I don't really want to work with you. But in that instance you might say, hey, here's the 80 20 these are the products you should be concentrating on, get rid of those. Here's some plans, You know, here's some stuff that I would do that might work for you. Uh, you know, maybe come back in two months after you've done some of this stuff and we can work together. So, um, you know, that, that, those are the kinds of things I love to do as, as I progress in my, my entrepreneurial uh journey. Um so yeah, I agree, [00:19:00] spk_1: I agree. And you know what, Andy and I'm sure you'll agree. I do love talking to everybody and I learn a lot and I meet so many great people. I'm I love that. What's life about man, life's about, you know, the people in the life, right? You know, whether they're, you know, your family or even just people that you meet as an acquaintance and you're able to help, you know, it's wonderful. I'll give you a quick story real quick. This uh call right before this, I was asked to be on the board of a, a nonprofit hospital oncology center in Arizona and you know, very big, very great. And it's just somebody that I met at a conference, you know, maybe four or five years ago in a different industry and before you know it now this whole business and I've helped them out multiple times, in in in in their growth. And now they're coming to me to ask me to be on their board and be, you know, one of their advisors, which is just wonderful, you know, that's the way life is. [00:20:00] spk_0: Yeah, [00:20:01] spk_2: definitely. Well done. We always end our podcast with two things. The first one is if you with all of your vast experience in business and all the different things that have been done, if you had one piece of advice to give somebody just getting started any commerce with their own private label. what would that be? [00:20:27] spk_1: Well, the thing that I would say, and it's outside of e commerce, you know, transcends all businesses is saying that I've used my whole career starts stupid, you're not going to know everything, just go. So to give you a, for instance, with this business. Here we are. We come up with this great idea. We outline it. We, you know, we don't have any technology at the time. We have no experience in amazon and e commerce, you know, little bit in e commerce in the past and but very little. So what do we do? We took money out of our own pockets and went out to about a dozen sellers and gave them money with this parameters of a crew. Me and we went into it fully expecting we were going to lose our shirts here, but we will learn a lot and by learning a lot, will be able to adjust and make a great business. We didn't lose anything and we got to see sellers really, really grow and love it. And almost all of them are still with us. I think there's two, Maybe three that have left, but we're still friends with them, which is great, I love that. So start stupid. Don't you'll never know enough. Just go, [00:21:44] spk_2: I love that advice. Start stupid. I've never heard it put that way like Andy and I always say just start like you know we have our sourcing small master class and it's all about just start like get out of your analysis paralysis and go, so I love that advice, it's amazing. Okay, so our next question that we asked before we wrap it up is we always ask [00:22:07] spk_1: what [00:22:07] spk_2: is it that is keeping you as an entrepreneur motivated? Are you listening to any podcasts? Are you reading any books? What is it today that you're watching, listening to learning from? Um right now? [00:22:23] spk_1: Well, you know, I listened to a ton of podcasts and I do enjoy them all, But truthfully you know, I've been in business, you know, since I was like, you know, 18, I've read every business book you can ever imagine. And I watched the new books coming out. I'm like that's the same as that book and I like that I read, you know, and I enjoyed them all and you know, it's it's great. Um But as far as you know, I just lost my train of thought. Amy [00:22:56] spk_2: well you said you've read all the books, you know, you have all the experience. The books are kind of repetitive. Is there anything that's still keeping you motivated though that's new for you? That that maybe somebody else will take from that? [00:23:12] spk_1: So, you know, you have to have your y right, we all heard that with Simon Sinek, you know, what's your why? And I had a hard time with that because, you know, life was too good and too easy for me this last time around, you know, sitting on the sideline boating all the time with my wife and kids and friends and golfing and traveling around the world. I didn't want to come back to work, so I had to find my wife and you know, helping people is a great thing, but you know, I plan, I'm not gonna do this just to help people. I want to make a lot of money and what am I gonna do with that money? So I had to think about it and I had to spend serious, you know, soul searching like what is my why and my why I will tell you is uh there's something that, you know, it is what it is, and it might be a little embarrassing, it is what it is. But I am a firm believer in eliminating human trafficking. And so my goal is to make a shitload of money and to go out and make a difference in this world in different ways. And I've already made a difference and I have made a difference in many ways, but in specifically in human trafficking is what my goal is. And that's my why that's why I'm doing this every day. [00:24:26] spk_2: I hope you reach that goal. [00:24:28] spk_1: I hope so too. Amy, I don't miss many goals I'm gonna meet. I'm gonna get there. [00:24:33] spk_0: I love it. It's fantastic. All right for those of you who are listening to this on the podcast. Uh if you didn't know yet, you can join us live every Tuesday at one PM pacific time. That's where you get to be in the zoom call with us. It's free. We don't charge anything where it's not anything like that. We just love that uh that we didn't have you guys in the podcast to ask our guests questions directly. You know a guy like Don, if you wanted to get him on the phone, he, you know, if he's not doing business with you, say, hey Don, I want some consulting, he'd probably charge you, you know, multiple hundreds of dollars if, if at all, you know, he might be like, no, I'm going on my boat today, screw you. I don't need the money. So this is where you guys need to come sell round table dot com forward slash live to talk to people like Don. Um, and and then you can ask us questions at the end here. We don't record the questions at the end just because sometimes people share things that we don't want to go into the whole audience but join us live guys, it's, it's a lot of fun and you get to during the podcast you can ask questions so we can, you know, integrate that into the podcast makes it more interesting. Um and if you haven't yet, please review subscribe to the podcast, we're growing every single month, month after month, which is really exciting. Um and we love helping you guys. So thanks for for doing that, for sharing it and all that good stuff. And as always we would love to have you live and we'll see you next time on the seller roundtable. Thank you so much for coming down. [00:25:53] spk_1: Thank you. Thanks and the thanks amy. Thanks for tuning in, [00:25:57] spk_2: Join us every Tuesday at one PM Pacific [00:26:00] spk_1: standard time for live Q and A. And [00:26:02] spk_2: bonus content [00:26:03] spk_1: after the recording [00:26:04] spk_2: at cellar round table dot com, sponsored [00:26:07] spk_1: by the ultimate [00:26:08] spk_2: software tool for amazon sales and growth seller S C O dot [00:26:11] spk_1: com and amazing at home dot com.