The Quiet Light Podcast

What exactly defines an influencer in the marketing space? Do you need Oprah in order to sell your product? These days the term influencer is used so much as the concept spreads to become more of a "scope of influence" rather than just a celebrity endorsement. There are all kinds of influencers and within any industry, there are influential people out there, it is just a matter of finding them. When it comes to buying and selling a business, a company can add value to their business by diversifying their sources of traffic. The more diversity in traffic, the more the risk goes down for the buyer and the value goes up for the seller.

Today's guest, Shane Barker, teaches the "Personal Branding – How To Be An Influencer" course at UCLA. He's a seasoned marketing consultant, who for the past several years has become an expert in using influencer marketing to boost sales for brands. Shane believes that nowadays companies have got to run an influencer campaign just like any other facet of the funnel in order to maximize their brand's reach.

Episode Highlights:

• What exactly is influencer marketing?
• Finding that niche person for the product.
• Identifying real vs. fake followers and how feedback needs to be weeded.
• Measuring real engagement over just follower numbers.
• What is a good engagement rate to look out for.
• The influencer marketing software tools that are out there and how to use them.
• Aligning the influencer with the product.
• What is the typical cost per influencer?
• How can you track the influencer's impact?
• Why Influencer marketing works well.
• Tips and tricks on how to find influencers in your sphere.
• Cheaper alternatives to hiring a consultant to help with your IM campaign.

Mark: So this past weekend I was at Rhodium Weekend and we've talked a lot about Rhodium here on the podcast. It was out in Las Vegas and somebody that we know, somebody who's been on the podcast Shakil Prasla, a good friend of Quiet Light Brokerage happened to run into another Shakil; Shaquille O'Neal. And he has a great photo of himself on Facebook with Shaquille O'Neal and he told me and he said that Bobby Brobine called his attention and so Shakil just shouted out and said hey we share the same name and sure enough that called his attention and then resulted in Shakil our friend having a picture with Shaq; really really cool. It's always fun to be able to reach out to people who are well known and have some influence and obviously, this is something we can definitely use in business as well as in we are in a whole are of this in business and marketing called influencer market something I haven't done a lot of. Joe, have you done much influencer marketing?

Joe: You do it all the time Mark. We do … you just did it. You just did it for Rhodium Weekend. How many people that have signed up for Rhodium Weekend have gone to Chris's centurica.com website for due diligence because you're an influencer and you talked about it?

Mark: But I'm not on the same level of Shaq so you know.

Joe: Oh I don't know. I don't know.

Mark: I'm definitely not as big as Shaq in more ways than other knows because the guy's a big dude. I've seen companies use influential marketing before and it's crazy; the impact that you have on your business when you find the right mix.

Joe: Well you know a lot of folks think influencer marketing is … I've had a couple of listings where Dr. Oz mentioned the product or the ingredient and the revenue went … sort of skyrocketed. I sold one earlier this year where the product was named one of Oprah's favorite things, that's like the golden ring. That was back in like 2008 and they still get traffic and revenue from it and it's 2018. So that is what a lot of people think about in regards to influencer marketing like you and Shaq. And by the way, Shakil call out that was a great photo thank you for that I showed my kids. But that's not really just the influencer marketing that I think a lot of our audience should be thinking about. We've talked about it all the time when you've got multiple channels of revenue, multiple channels of traffic it brings the risk that you're going to lose business down and increases the value of your business; the lower the risk the higher the value. Influencer marketing should be another channel. The next generation buyers people they're … my kids, I have 2 teenage boys, I cannot get them off of Instagram watching videos. My son, 17 years old, he learns everything. The computer I'm on right now he learned how to build it on YouTube through influencers. They're all about influencer marketing. So the next generation is going to be just that. We had Shane Barker on the podcast, that's who you're about to hear folks. He's a UCLA professor. He teaches a class on influencer marketing at UCLA. He's a consultant and he helps people. He'll take over their campaigns and he'll just tell you how to do it. He had some great advice in terms of tools to use to track your influencer engagements; how to find them, how to measure their success, and what to do in terms of maybe interviewing them and negotiating with them and writing up contracts with influencers and all these different things. The one thing I didn't touch up on was workload but he said that when you frame it up right and you put the right package together in terms of your plan through a consultant so you don't waste a whole lot of money it can then be handed off to a VA who should be able to run with it fairly easily.

Mark: That's pretty cool. So is this going to help me get Shaq to a certain point in Quiet Light?

Joe: Hmm … Shaquille O'Neal, no not Shaquille O'Neal but Shakil Prasla yes. He's already an influencer [inaudible 00:05:01.2] is what he is.

Mark: I would rather have Shakil Prasla … actually, that's kind of a lie, sorry Shakil. All right let's get to it. This is actually a huge topic. I know this is going to be like the next big thing in marketing and this is one of those areas that people don't really know a lot about. Some people are doing it well. They're making a lot of money because of it. They're building their brands because of it. It'd be great to unlock this so why don't we go ahead and listen to it [inaudible 00:05:25.8].

Joe: Yeah I do. You've got to think about it just like an Amazon sponsored ad campaign, just like your content development for an SEO, just like your Google Ad Words campaign. You've got to run an influencer campaign the same way and Shane really talks about that in detail so let's go to it.

Mark: Awesome.

Joe: Hey everyone its Joe Valley from Quiet Light Brokerage. Today we're going to talk about influencer marketing with Shane Barker. Shane Barker is an expert in the space. How are you doing today Shane?

Shane: I'm doing awesome Joe. How are you doing man?

Joe: I'm good. You know back in my day there was no influencer marketing. It was pay-per-click and write good content and Google will reward you. Of course, my day wasn't that long ago. I sold my business back in 2010 but the world has changed dramatically since then and it constantly changed and you're on top of that and you are at the forefront of it which is one of the reasons that I will call it out right now why you haven't written a book about it yet because it's constantly changing right?

Shane: Yeah that's the deal. We talked a little bit before the podcast started today. The thing is it is an evolving space. I mean it started off back in the day and I said back in the day as we kind of joke around about that but you know I'm doing this for a while but it's really word of mouth marketing right? Which back in the day the presentations that I do I always talked about like as an example would be like Tupperware. That was kind of like Helen who is a lady that she would have these parties and have everybody over and she was influential in the area because everybody loved Helen. She was a great wife and she'd have beautiful little kids running around. Everyone wants to be like Helen and they'll all come too. They'd have a few drinks and the next thing you know they're buying Tupperware right? So it's that influential type thing, that's how it kind of all started and then obviously we evolved to Beats by Dre and some other ones like that where you see this people wearing the headphones and they would go and give them the free product. And you see all these athletes that are wearing this stuff and I mean obviously they sold I don't know it's like 3 or 4 billion dollars to Apple so you know it's obviously some-

Joe: I guess it's been around a while because celebrities have been endorsing products for years, for decades and they get paid for it.

Shane: Absolutely.

Joe: So that's influencer marketing right there let's do this. So Shane, I didn't tell you before we started recording we don't do fancy introductions. Obviously, we're a couple of minutes in already.

Shane: Yeah.

Joe: Can you tell those folks that are listening about your background, what you do, how you do it, and where you come from?

Shane: Yeah absolutely. So I reside out of Sacramento California but I'm in Los Angeles quite a bit because I teach at UCLA. I teach a class called Personal Branding and how to be an influencer. It's a quarterly system so I do how to be an influencer on one side and the other side on how to work with influencers. We work with brands down there as well. So yes I've been in the digital space for 20 something years. I really jumped in the digital space because I had my own business. So it was one of those like hey I want to bootstrap this thing and I didn't have a lot of capital. This was a long time ago. I've got a company called Hotpad that I had a patent on it; a reusable heat pack. I had a cool patent on it and so I had to do everything. I had to do the logo, I had to do the website and this was this is probably 15 plus years ago. So we were jumping on the internet, there really was no SEO. We just put something up and something went on the 1st page. We didn't know how it happened or what happened. We were just excited that that was happening. There was no … there was just nothing, there was not a lot of software, there was … we were grinding this thing out and it was kind of wild wild west. And so I jumped into it and was working with this … once again probably 15 years ago on called getafreelancer.com and now it's freelancer.com. So I was stating hey, listen I want to manage projects and I want to go work with people that know how to do these certain things that I didn't necessarily know how to do. I was … at that time I was in school and I'd already owned my own business. Just as I owned a bar and I had done some stuff. It took me 10 years to graduate not because I wasn't smart. Well, I don't know … maybe because I wasn't smart but maybe the bigger the reason was is because I want to travel and do this and I had my own businesses. So I jumped into that and like I said for about 10 years I owned a bar and did some other fun stuff; all offline type businesses. And then when I was doing Hotpad the reusable heatpad company I decided to go back to school and that's when I really started doing outsourcing and kind of figuring out how to work with other people and I've been doing that ever since. I mean right now I have a 31 person team that's all over the world. I don't have them … yeah, I have all like project management software or like all front stuff in place. And so I have like where I'm doing this interview today is I have an office here in Sacramento that's strictly for content creation; for us putting content together. And my team is once again all over the place so they're … so it's kind of awesome. So that's kind of catapulting me out once again where I'm at today. We do heavy content marketing, we do heavy influencer marketing. And then I'll kind of talk about my story a little later about like how I jumped into influencer marketing and all that. But I consider myself like a brand and an influencer specialist and then also a digital strategist. Because it's just that's what I've done for so long when … it started off on SEO and then obviously a lot of social stuff and now we do influencer marketing. We're always trying to … the new stuff that comes along it always seems to knock on my door whether I want to do something new or not when it comes to marketing. So that's kind of where I'm at today.

Joe: Well, our audience is full of people just like you and people that want to be like you; those that are leaving the corporate world. For influencer marketing, I want to go through some of the steps that you teach in that class at UCLA and the process. But let's 1st define it what exactly is the influencer marketing in your view?

Shane: Yeah so influencer marketing in which I said a little bit earlier is in the back in the day it was influencer marketing was not called influencer marketing but really it was working with celebrities and getting somebody that had some kind of influence because they're an actor, or celebrity, or some kind of singer, or something like that and you ask them to endorse your product. But usually, it was for the Nike's, the Toyota's, these bigger brands because you had to have a big budget. And the deal was that you were going to do some kind of a commercial, maybe sometimes radio, but mainly a commercial where you would go and this person would say oh my god I have this kind of car this, I love my … whatever my [inaudible 00:10:57.3], I love my Toyota, I love my Nike shoes whatever right, usually bigger budgets and once again somebody that has a really really high influence. Well, last in the 5, 6, 7 years you've seen this switch of where really anybody can have influence. You don't have to have … you don't have to be an actor; you don't have to be a famous person to do this. And you'll see this obviously on YouTube, Instagram, Snap … sometimes on Twitter and then on Facebook as well. The idea is that an influencer is anybody that has influence over their sphere … over their community. So as an example you Joe obviously are an influencer because you have influence over your podcast and what we have here. So that makes you an influencer because people follow you, they listen to your podcast religiously, and they go and they get great information from it and they go and apply that in the real world. So if you were to say hey guys this is some software that I use and I've used it for the last 6 months. I've tested it its absolutely awesome then guess what probably a lot of people in your podcast are going to go hey that sounds like an awesome product. If Joe uses it then I should use it. And so everybody has this type of influence and we look at this. So as Instagram as an example I look at people, let's say you have 5,000 followers or 10,000 people I go well are those influencers? They absolutely are. I mean if I have 5,000 or 10,000 engaged … a heavily engaged audience I would much rather work with that person let's say as an example yoga mat. I'm a yoga instructor and you as a brand you're selling yoga whatever quick bed or something. And so you come to me, I would much rather work with a yoga instructor that has a 5 or 10,000 following that's heavily engaged than somebody who has a million or 2 million or 5 million. Because really at the end of the day what … in the beginning of influencer marketing was like hey I want to go with the people with the highest following right? They have a milion followers like that's how … it's who I have to work with because of the fact that you look at all those eyeballs. But the issue is this … and we all realize this thru marketing is that back in the day it was like if I can get a million visitors that'd be awesome. It's not the amount of visitors it's the quality of the visitors; the type of traffic that you're getting from that. So same thing with influencer marketing you want to really niche down and find the person that is really going to be best for your product. The reason why and we'll go onto this later but the reason why there's these issue with influencers and fake followers is because brands were paying influencers on the amount of followers they had. So you get a situation where they say, Shane, if you have 10,000 followers I'll give you a 1,000 bucks. If you get 25,000 I give you 2,000. But if you have 100,000, my friend, I'll give you 10 grand and then guess what happens an influencer goes man how do I get to that quicker? How do I get to that mark faster because obviously I'm doubling, tripling, quadrupling my money? Well, then what happens is now they're doing something where they're adding fake followers and doing some stuff that's obviously unethical to be able to get to the next price point.

Joe: How do you measure engagement over followers?

Shane: Yeah that's the deal and it's funny when you talk about back in the day because it literally when I talk to people I've influenced I mean I always talk about back in the day that makes it sound like we're like 100 or something; like I went to school with Jesus or something or Moses or like I was on the boat or something. But you know for us it's like when I look at this like we were doing influencer marketing 5, 6, 7 years ago there was no software right? So there was nothing out there to really … I mean what we would really do is we would go and try to find these influencers by search. Like go on Instagram and look up hash tags and stuff like that which is still relevant today and we still do that say obviously. And we would go and we'd put these profiles together and I would manually go look at them. Because that was it, like that was my … an engagement for me was not necessarily a number but it was more … we ended up coming up with an equation over time that we looked at of followers, engagements, likes and stuff like that. So we had a little bit of an equation or some kind of … and we call that algorithm because it wasn't that crazy but where we would go and take a look at that. And we would just have these Excel spreadsheets that I would just take tons of notes and we would do all this kind of crazy stuff. Now there's plenty of software. There's all kinds of softwares you can use. I mean we use … Grin is one of them that we use that you can do. There's another klear.com which is with a K. There's Neoreach, there's Revfluence … I mean there's all kinds of them. There's all kinds of different ones that you can go. Some of them are free, some of them will cost … I have, I mean I'm very fortunate since I have access to almost all the softwares because they want me to look at their software and evaluate it and stuff so I'm very blessed in that sense.

Joe: You do?

Shane: Well I mean you know it's so funny. I'm very humble about that and I don't think of myself as an influencer but over time you start to realize you're like wow I guess I am an influencer you know. I'm just not … I don't know I just don't think of myself that way, like when I go to conferences and speak and do stuff it's [inaudible 00:15:08.8] people come up to me like I've been following you for a long time. It's always really … it really kind of shocks me. Or like while walking somewhere and I'm not that famous by any means but they will come up and say are you Shane Barker? And there's been a few times I'm like God do I owe you money, are you VISA or like I'm just trying to figure it out right. It's like this weird … so you know an influencer [inaudible 00:15:25.1] come up I guess and things are good and I've got some good foundation and people are following me so I'm not mad at that by any means but-

Joe: That's good. The software does it help you measure the engagements does it go that deep? What is this like Grin and-

Shane: It does. So this is the thing you have to look at when it comes to engagement, this is the key and when you talk about software … so software is that 1st level. So the 1st level of when you're going in you go and you take a look at it, you can put in hash tags, you can put in keywords, you can do this kind of stuff. So let's say it's yoga, that's the thing I'm looking for and let's say I'm I can sell this yoga mats all over the world. So it doesn't necessarily have to be in Los Angeles or Las Vegas or something. So I go all over the world, so what I do is now I can curate these lists. I mean go take a look at them, you add them to whatever … some kind of a folder or whatever it is, you pull those people in. That's the 1st step and it'll say the engagement. And it'll say your engagement is 3.5%of 5.6% and software is the 1st step. That's where you're you curating the list and you're saying hey okay I want to find 10 good influencers so I'm going to curate a list of a 100 or 200 or whatever. And then the next step to this whole thing is you … software is lovely but influencers once again because they want to make money and I'm not saying all influencers are this way but … well, we all probably want to make money but there's ways to fudge your numbers. So that's what we have to look at. I can go on to Fiverr right now and I can add any picture on Instagram and I can get 10,000 likes for $5, $10; whatever the number is.

Joe: Right.

Shane: And that's not engagement. I mean somebody like if you came into my store … let's take this offline. I own a store and Joe you came in and you knocked and you said hey Shane I was wondering do you guys have this and I just went [thumbs up] that's not engagement right? You're like okay so Shane no … so say that again so what do you have this I'm looking for this-

Joe: You just gave us the thumbs up.

Shane: The thumbs up, that's right I forgot we go audio and video on this. So the issue with that is that's not engagement right? Engagement is like oh hey Joe thanks for coming in my shop. If you're looking for these blue widgets then you want to go over here or let me show you some … blue widgets are cool but the yellow widgets are the ones I think you need because of this this and this. So that's where we kind of get this thing of where the software is awesome go take a look at it but engagement is conversation. So if I'm a yoga instructor or a brand and you're a yoga instructor or either way you know vice versa.

Joe: Yeah.

Shane: Then what I should do as a brand I should go look at your profile and find out 1st of all how many other sponsorships you've had. We don't want somebody that has a new sponsorship every day because the audience is going to be a little unauthentic … not authentic right?

Joe: You don't want somebody that has a new sponsorship every day you want somebody-

Shane: No, because think about that like this is a thing, it's like it's like dating. If you wanted to date a girl that's had a new boyfriend every day for the last 15 years like you got to think well there's got to be something wrong with that right? Like there's … it's not … the numbers aren't working they're not … you really want to develop your brand, you want to develop a longer relationship with an influencer. But if they're talking about something every day the problem is then you get to a situation where people start to go okay does Joe the influencer really like this product or is he just doing this for money? Because it just doesn't feel like we want Joe the influencer that says listen I've tried this product for 3 months you guys you know I don't promote tons of products this is a product that I've used it's absolutely awesome this is why I'm promoting it.

Joe: Okay.

Shane: Right, so you want to get authentic-

Joe: You're going to look at that engagement percentage and you're going to focus to see if they've had lots of different advertisers on a regular basis. Back to that engagement percentage so Shane, you had said 4 or 5% what they have … what is a good percentage? And I mean people talk about open rates and things of that nature in email campaigns, what is a good engagement percentage for people that are just starting off? What would they look out for; the number?

Shane: I would probably say it's like probably 3 to 5 % is a good engagement rate. I mean anything higher than that is awesome.

Joe: Okay.

Shane: And here's another thing we talk about that engagement because I'll touch on this as well is you have to look at the comments. So we have this list of let's say its 100 influencers and let's say I'm looking for 10 great ones. You want to go through … you want to look at their profile; A. look if they've done a thousand sponsorships then I would get away from them or you look at the engagement. But you want to look at what people are asking for like hey Joe the yoga instructor. Hey, I want to know … it looks like you're using that new mat or you're using a new water ball whatever like where did you get that? Or hey Joe when are you coming to town or hey this … like what you want to show that people are engaged with the content and this is where things get … where people can fudge numbers where if you go to somebody and they have an engagement rate of 10% you're like oh my God this guy's crushing it, this girl's crushing it, you go and look at it and they have 1000 emojis, that's not engagement right? So you can … from software standpoint an emoji is engage-

Joe: You want actual communication, people talking back and forth info and some responding, people asking questions.

Shane: Right. That's the thing and that's when we talk about the … when I said I'd rather have somebody of 5 or 10,000 or 15,000 than a million.

Joe: Yeah.

Shane: That's where the engagement rate stays higher because Joe what I would look at is Joe the influencer. What I want is that if people are asking questions and you get 20 questions there should be 20 answers by Joe.

Joe: Right.

Shane: Joe, you should be going in there and saying hey … where I think is that's engagement. That's showing that you have an engaged audience. When you get to the … I'll use Kim Kardashian as an example, you have 20, 30, 50 million; they're not responding to anybody for the most part because they can't physically do all that. And so the engagement rate is a lot less. You have your audience that's … you get eyeballs so if you're Coca-Cola you're going to say hey I'll go with Kim because I know that she's going to get eyeballs. I don't really care about the engagement. I'm looking at overall exposure and they've got a big budget. If I'm a brand you really want to go take a look at that and say who is … who's on the come up. They don't have to have a million followers but who's engaged? Who seems to be really into it? What's a good product alignment? You're at this … is your product and this influencer going to align correctly? And then what I do … and this is a big one a lot of people don't do this, I interview all the influencers. I do a call just like you're doing here Joe. I get on there and I say hey Jennifer I've got XYZ product I usually have some questions and I say so tell me a little about yourself or what … who you've worked with. They should have some kind of a media kit so there's some 1st steps that we take. And then I go so tell me a little bit what have you looked in [inaudible 00:21:17.3] XYZ company and they go … I mean I haven't looked into it but I know that you guys are offering 1,000 bucks a post so I was interested.

Joe: Right. And that's the thing I was just going to ask actually so thank you, you went there. How do you track this? How does it … what does it cost? I mean people do sponsored ads in Amazon, they do Google Ad Words, and it's a clear defined cost per click. What is it typically cost per engagement I guess or per influencer if they've got a 3% engagement and 5,000 followers?

Shane: Yeah that's the thing is it's everything is negotiable. So this is where it becomes a little harder because you do for if you're going after the keyword Sacramento DUI attorney you know that it's $3 per click. It's very easy. If you're going up with Amazon there's a … they have a model that they put in place to be able to understand once again how popular it is and what they're going to charge.

Joe: Yeah.

Shane: Influencer marketing is different because you're dealing … each influencer is different. Each influencer, in theory, should own their own company or their own brands. So what you do … I mean there's certain websites and stuff and calculators you can go to and kind of what you think would be fair but what I always tell people is this, the analogy I use is like let's say if I have a Babe Ruth signed baseball card. And everybody tells you and all the big guys go hey man that's worth a million dollars Shane; guaranteed a million dollars. There's only 2 of those out there. Yours is in mint condition it's worth a million dollars and I go well I'm going to wait to get a million dollars. And then Joe you come to me and say hey Shane I heard around the campfire that you have a Babe Ruth card I'd love to buy it from you. And I said well it's worth a million and do you know what Shane I appreciate that but how about if I give you 75,000? And I go okay you know I'm actually not off. I guess I don't need to hold on to it. I mean 75,000 is a good deal. And that's a good deal right? It's a supply and demand type thing. The cool thing about brands is there's hundreds if not thousands of influencers. So everything is negotiable. There are some companies or some influencers that will do free product. There are some of them that will do free product plus some type of an affiliate link where they're getting some kind of residual sales. There will be other ones that just want a flat pay per post. But everything is negotiable so it's very difficult to say you should spend this amount. You have to figure out what you think is going to be fair. So if I go in and say listen I want to get to 10 influencers I have a $10,000 budget so in theory I have $1,000 per influencer. What you have to do is go in and figure out those influencers and talk to them and say what would you usually charge. Well I charge $250 per post on Instagram let's say. And so my mind I'm thinking I get at least 4 right? So I say how about this why don't we do this, I'll go and pay you $1,000 we'll do the 4 things but I also want you to do two Instagram stories and I want you talk about a Snapchat for 2 times. If I think that's a good deal and that can move some traction and you think it's a good deal then it's a good deal. So that's where everything is different with everybody but I think what happens with brands and what they don't realize is these influencers once the followers start getting honey because that's what brands still look at most of the time. Is that they get pitched 5, 10, 15, 20, 30 times not a day but a week-

Joe: The influencers-

Shane: The influencers do.

Joe: Right.

Shane: And especially if you're up there then you're getting pitched over and over and over right? So the thing which you have to do as a brand, you have to 1st you have to differentiate. So make a nice little catchy subject line. You want to get their attention, not just looking to work for you that's just kind of yeah okay I get it. But come up with something kind of flashy. But in the email, you're going to tell them, you want to make it a win-win right? Because influencers are used to people saying hey if you post 2 pictures I'll send you a shirt. And that's kind of like ah okay thanks. So you want me to A. the reason why you got in contact with an influencer is because you love their content. So they probably have a video, they probably have a video guy and a photo person and all this kind of stuff. They have like … it's a business and you're telling them that you're going to send them a free $20 shirt for 2 posts when they have costs. I mean there's a reason why you picked that influencer because they have great content. If they're a lower influencer what I mean by that lower followers and they're doing it themselves then maybe that makes sense. And maybe they love your brand and maybe they will do it for free. They'll say you know what I love you guys as brand why don't we do … you guys send me one shirt a month, I'll do two posts a month and that's going to be a win-win for everybody.

Joe: Let me ask about tracking because you know with Google Ad Words you can track response at ads you can track … we know what cost per acquisition is. How do you do that with an influencer that you give $1,000?

Shane: Yeah there's a number of different ways of doing it you know the ones that just want a flat pay per post … I mean that's … the difficult part is … I mean what I would recommend is so this's the thing if this is my company this is my brand this and what I do with my clients. There's a number of ways to do it. There's coupon codes, so you put Jennifer25 so they should put something on hey this is Jennifer these are these products by these companies I've used it in the last few months everything's awesome and I've worked out a deal where you guys everybody gets 25% off hurry it's going to be gone in 40 hours; whatever the message.

Joe: The influencers, for the most part, is saying use my coupon code and being up front and saying I'm getting a commission I'm getting paid I'm-

Shane: They're supposed to, FTC you're supposed to right? So the thing is because they don't want you like in theory fooling the public right? So it's no different than if you had whatever Snoop Dog talking about Toyota on a commercial at the bottom really low will say Snoop Dog was paid for this promotion. So there's … they want to make sure people aren't being fooled so you should put this as some kind of a sponsored ad or #ad or #sponsored something like that.

Joe: Okay.

Shane: They would put that in the hash tags it's … the FTC's there's always a little bit of gray area with that. But if you put some things like that you should be safe. The thing is that what you want to do when you have those like I said when those people reach out to you and you're trying to develop those time relationships. The thing is you have the coupon code so you can use something whatever that is the thing but one thing a brand realizes is just because you hire Jenny that has 50,000 followers they can't be a frequency deal. So email marketing if I want to go buy a Coca-Cola what I do is I see a commercial and then I see a banner and I see this when I go to the store I go, man, I feel like drinking a Coca-Cola for some reason. It's the same thing will influencer marketing, don't think 5, 6 years ago you could put up one post and probably make some great money; it's a frequency deal. So you don't … when you're negotiating with influencers make sure that there's 1, 2, 3, 4, 5 … there's multiple things that they're going to do for a set price assuming that's how you want to … but just make sure it's a multiple deal with the … so we have coupon codes, you have an affiliate link. So Instagram being the example there's only one place to put a link right so it's a very valuable valuable place. What we use … there's a number of different things you can use but with that you can either A. you can negotiate with the influencer and say hey we would like to give you an affiliate link that you put in your bio thing and we'd like for the next 2 weeks while you promote this product we'd like for you to have that affiliate link in there. So they can put link in bio or something like that. So it pushes them up there but you have to have a contract with that influencer and make sure they know what they're doing. That's another big thing with this is we have brands and if-

Joe: Where do you find these contracts?

Shane: You can look online. And we actually have some templates that we use that we could that I think … I'm sure I've shared them on multiple different posts but really just a brief right? You want a brief of like hey this is the hash tags you are going to use. This is the kind of content that influencers have used in the past that have been successful but give the influencer free reign to do what they want. Just give them basic guidelines. Hey, we're also looking for you not to do any anything within our competitors for the next 3 months so that you're not doing 10 different campaigns about the same kinds of stuff; just some basic stuff where you're covering yourself. We want to also want to make sure that our link is in your bio for at least 2 weeks or a month or once again everything is negotiable but you have to talk about those terms ahead of times and brands don't because they don't know. That's the reason why I always recommend hiring a consultant or somebody to help you with your 1st few campaigns because then they can … there's these things where you can lose a lot of money and not know what you're doing and just assume by hiring an influencer an influencer is going to do what's best for you. Most influencers aren't marketers; they aren't right?

Joe: Right.

Shane: The yoga instructor that just … he's a yoga instructor, he didn't go in and get his marketing degree and say hey I'm going to go and try to build this huge community. He just started doing what he does.

Joe: So he needs guidelines given to him from you on what to do and how to do it.

Shane: Yeah because if not then it … you just, you need some direction.

Joe: Got you. And you've talked about Instagram; my kids are always watching videos in Instagram. Occasionally they snap back and forth and I don't know how they're ever going to make money on Snapchat but I'm sure they are. I'm sure they probably are. But what social media outlets are the best options for people that are selling yoga pads [inaudible 00:29:20.6].

Shane: So Instagram is where we spend a lot of time because it's like that lifestyle; everybody wants to like have the pink puppy and be doing yoga be … have the perfect little cute little babies around and the perfect relationship. And so it's that lifestyle type you know when I'm always on my jet I'm eating caviar and life's good. And then we have YouTube which obviously is awesome because YouTube's always going to be out there. What I mean by that is YouTube's the number two search engine.

Joe: Yeah.

Shane: So we work with an influencer that does a review of a product or talks about your product they'll go and put that content and they have a huge subscribership let's say it's 10, 15, 20, 30, 100,000, 1 million and that video literally goes out to all those people and then you get those eyeballs on you.

Joe: So the software you mentioned before measure engagements on different mediums like YouTube and Instagram or?

Shane: It can. Yeah, there's multiple … there's different softwares that do different ones. I mean there's one or two that can measure engagement in all of those. Or what you can do … what you want to do is you can talk to the influencer and say hey put this in the brief. I want to make sure that I'm getting all of the inside information on my campaign and how it went and what we did and that kind of thing.

Joe: Okay. So Instagram number one, YouTube number 2, is there a 3rd that people should look out or a 4th or a 5th that you'd consider?

Shane: I mean Snapchat is not bad and then Facebook and Twitter there's some stuff going on there. But really where we spend our time is Instagram and YouTube just because it's the amount of how many people around them. I mean people spend I don't know … I guess like 55 minutes a day on Instagram. I mean I think it's after … like after you die it's like 8 months or something … I mean it's … of your life time. I mean it's crazy right and obviously people spend a lot more time on there and then YouTube once again as always it's that evergreen content that's always going to be out there when people are looking for certain things. If you have a … once again I have this thing and this is a brand new patented product and I get someone to do a review on it on YouTube and they've got a huge subscribership like my sales could go through the roof because of that.

Joe: Right we've got a number of transactions over the years where I've had businesses that had huge spikes because of Dr. Oz mentioning the product or the ingredient in the product. I sold one earlier this year … I think all these years have blended together, earlier this year where it was on one of Oprah's favorite things back in 2012 or 13 and that carried it for a long time. Would you recommend that the audience members that have the yoga mats of the world go after those big influencers or just focus on the smaller ones or maybe a combination of both because you might get lucky?

Shane: Right. You might get lucky. I mean it really depends on budget as well. So if you're going to go after I mean Oprah being the example that you give. Like if Oprah talks about your product then all you have to do is hire somebody to count your money at that point.

Joe: Right.

Shane: You got to … you physically have to figure … you have somebody and get maybe 100,000 and just have … and just count the money and just probably I will organize it through serial numbers just to get something to do.

Joe: I think these people would argue that you also have to scram like it's an inventory to fulfill those orders because that's what happens.

Shane: Oprah is not going to promote anything without knowing that you've got some good distribution in place.

Joe: A good problem. But that with free endorsement as well, it was sending products to that influencer looking for a free review and Dale called them one day and then said hey you're going to be in this issue and they're like oh my God that's two days from now.

Shane: So I'll answer your question, so Oprah obviously being the mega of this whole situation but there's no reason not to ask bigger influencers or smaller influencers … I mean smaller following. They're going to be probably more apt because they're hungry and they're just either getting started and that kind of stuff. You see the prices can be a little lower. They're going to be more engaged stuff like that. But I'm not saying don't shoot for the stars. I'm not saying don't send something to Oprah if you have a patented product that really takes care of a need that nobody knows about because you'll never know. You're saying right there that all of a sudden Dale gave the phone call and said hey we loved your product and you're like you've got to be kidding me right? The thing is nobody is going to knock on your door if you're not out there and pushing. If you're not out there sending that information to Oprah or whoever you'll just never know. And so what I would do is do a nice … I mean I would once again just pull in what … figure out who your buyer persona is and if it's Oprah's people because you have a book that you just read and it's a self-help book and you think you can really help everybody, you have a different angle, you've got a great phenomenal story then pitch Oprah. Go for it. Like why would you not? She's not going to know about people that don't pitch her but I would also say the smaller influencers are … you know ones of medium size and all that go after them as well. The other thing that I always do is like let's say I'm a newer company I go and look at my hash tag. So let's say I'm #whitecoffeemug so … great I go and look that up and that's the name of my company. You might already have influencers in your sphere that love your product.

Joe: Okay.

Shane: That's a no brainer right? Like that's a … you go in there I'm already talking about your product I don't … you need to convince me of anything except how much free product I can send you to keep spreading the good word about my product.

Joe: Okay, awesome. So for those that are listening again that are trying to sell yoga mats and use the medium influencers, forget the shooting for the stars and Oprah that type of thing. These people are usually entrepreneurs with maybe a remote contractor or 2 or 3 VA's here and there. They may take this project on themselves at 1st and then hire somebody to take it over once they've setup SOP's. What kind of time do you think it would take if it was me and I'm working 25 hours a week running my business which is pretty standard for the types of businesses that we sell, should we focus on a lot 5 hours a week to get started, 10 hours a week and what kind of budget would you suggest somebody starts off with that maybe they're doing a couple of million years in an annual revenue.

Shane: Yeah, so what I would recommend and once again I'm not just saying this because I'm a consultant. I would hire a consultant and say hey what do we need to do here? Because there's people that have paid me a lot of money for me to learn what I learned … what I know today. I recommend that with anything, not just influencer marketing, with anything; like if you want to jump in and do your own PPC figure out somebody that's a PPC consultant and have them so you listen I just want to hire you for 5 hours a month or 10 hours a month or whatever. I want to put together my ideas. If you can go in and tighten them up it will save you so much money because as entrepreneurs we always go hey we'll do it ourselves right? I'm a grown ass man I'm going to go do this, I can do it. It's not a problem. I'm not going to delegate because I have at least 2 more hours in the day. I'm only working 22 hours in the day I have at least 2 more hours, sleep is so overrated. I'm going to do it myself. Okay, that's awesome; take it on. I'm not here to squash your dream but what I am telling you is that if you have a consultant that helps you along the way they'll help you with you know these … they'll potentially save you money, save you a lot of time. And because there's like plans I'll put together for people and say listen now you go hire a VA or let me show you how to do this or put the plan in place and now these people can go and implement it and they will come back after a month and hey what problems did you have? Hey, you kind of messed up here let's look at the pitch emails you sent. Who responded? Now, what do we respond back to them? Like that's a person that wants to take it on themselves. We have two ways of working obviously, one is hey we'll do it for you like don't worry about it. You sit back we're going to just ask you questions you give us the answers. Or the other way of like hey you want to learn right? And a lot of agencies don't do that like you want to learn because they don't want to give up the secret sauce. I don't have a problem giving up the secret sauce. I want to help you out and I just want to make sure you're successful.

Joe: Well look I think what's going to happen is a lot of folks … you know we give up a secret sauce all the time. We help. If you help people they may say you know what I love this I think it's going to be great please do it for me because they're busy doing other things as well. So I think it's a great idea. Some of the people that are listening may want to give it a go and shoot from the hip and see if anything sticks which is probably not the greatest idea in the world. Others will hire a consultant to create a campaign and then they'll run with it, they'll hire the VA. And others may say look just please take this on and run with and we'll measure results with you and if you want we'll keep going.

Shane: Also, we're doing that thing too is we're actually developing a course as well. We're doing of course for influencers and for brands. So now we're in current stages of developing that. So they'll also be an inexpensive option or a cheaper option than hiring myself as a consultant or hiring my company to do everything for them where they can go in and take a course for whatever $97 or $300. And they'll go in and they can go through it and once again they'll have enough information there to be dangerous so they don't have me on an hourly basis. Or if they want a bigger project they can do that as well. But we're developing that ritual as we speak.

Joe: What's your timeframe? People are going to go okay great when is it going to be done?

Shane: I knew you we're going to hold me by the fire Joe because I told you about the book earlier and so then you put me on tonight.

Joe: I know.

Shane: It will be done by the 1st of the year.

Joe: Okay.

Shane: That's right, I said it.

Joe: When it's done make sure I get that link and we'll put it on the show notes of the podcast okay?

Shane: I can't wait but by the 1st. If not by the 1st then I would just … I'll drop off as an entrepreneur and just go and do something separate that's not online just because I'll be so ashamed.

Joe: 61, 71, you've got something like 80 days maybe to get it done okay.

Shane: Now you're just trying to stress me out, Joe. I mean come on I just gave you a date I mean now I got to go talk to my people and go listen we're going to have to double our staff-

Joe: [inaudible 00:38:00.2] for meditation for that stress. You'd be okay.

Shane: Okay.

Joe: You're not just … no, you're thriving on stress. Come on.

Shane: I love that, like the fact you just told me that like secretly I don't even need any more coffee. Like I just got these goose bumps on my back that I said you know what I'm going to show Joe. I'm going to show him by the 1st he forgets this.

Joe: Please do. Shane, I love the influencer marketing approach. So many people focus on one thing and you know when they diversify their revenue streams, their sources of traffic it de-risks or lowers the risk of the business and the lower the risk is for the buyer what happens the value goes up. So for those that are listening take a look at it. Take a look at influencer marketing. Hopefully, this episode of the Quiet Light Podcast has helped. Shane, tell the people that are listening how they would reach you if they want to talk to you about consulting or talk about maybe you taking over their influencer marketing campaign.

Shane: Yeah so you can reach me at ShaneBarker.com that's S-H-A-N-E-B-A-R-K-E-R.COM and my personal email is [email protected] just email me if you have any questions or if you need anything I'm here to help once again.

Joe: And if they want to be an influencer themselves they can just head on down to UCLA and take your course right?

Shane: Yeah, it's a really cheap course. It's UCLA, I mean it's only one of the top 20 universities in the nation. It's not a problem, just get a little bit of financial aid you'll be fine. Talk to your parents.

Joe: You must be doing something right if it took you 10 years to graduate and now you're teaching at UCLA so good for you.

Shane: I'll tell you. Thank you so much.

Joe: I appreciate your time make sure you give me that link. I'm going to hold you to it.

Shane: I'm on it.

Joe: All right buddy, talk to you later.

Shane: Thanks, Joe bye bye.

Links and Resources:

ShaneBarker.com

[email protected]

Influencer Marketing SaaS:

Grin.co

Klear.com

NeoReach.com

Today's guest is truly the epitome of what an entrepreneur looks like. As an immigrant to the United States, Ramon Van Meer spent many years self-employed, just making ends meet. So while a rags to riches story it is not, considering that he has been out of school and working for over 20 years, it's still somewhat of a surprise when you learn that someone in his position just signed a nearly 8 figure deal.

Ramon is sharing his backstory today. A few years ago people wouldn't have invested a few thousand with Ramon, but today they are lining up to work with him. A high school dropout who came up with an idea for a niche business that has grown exponentially in just a few short years? The growth and subsequent sale of his company, SoapHub, is an incredible story, not just for the size of the transaction, but also because of what Ramon accomplished to get there.

Episode Highlights:

• Ramon shares his difficult upbringing in Holland.
• How that time shaped his life and made him who he is today.
• The lesson here is not to quit school! Why a network and connections are so important.
• How this sale is 20 years of work in the making, even though on paper Ramon looks like overnight success.
• You'll hear the full roller coaster story of the sale from not one, but multiple buyers and offers that resulted in the final sale price being nearly double of what was originally set.
• What made the difference for the end buyer, both the buyer himself as well as the money behind the buyer.
• What Ramon has learned from his mistakes.
• Ramon shares his number one recommendation when preparing to sell a business.
• How essential the right lawyer is in these types of transactions.

Mark: At Brand Builders Summit back in August … that was August, right? Yes, it was August. Joe you brought somebody to me. You introduced me to somebody. We had dinner with him a couple of nights and he's a client of ours, we worked with him on multiple deals but he's just a quiet guy, very very nice kind of understated and didn't stand out to me too much; other than the fact that he was a client of course and I wanted to get to know him better. But it wasn't until lunch on I think the third day that we were there and you told me a little bit about his back story which was a heart wrenching, moving, inspiring, all those things in one and you have him now on the podcast sharing a bit of that story.

Joe: I do. He's really the American dream. He moved to this country nine years ago I think. He had a really really tough upbringing. He could have gone down many different paths. He could have wound up in jail very easily. He dropped out of high school at the age of 15. He started becoming an entrepreneur, working construction, doing whatever he could, has been self-employed more or less for the last 20 years and even up to three or four years ago was living month to month as an entrepreneur. Overnight success? Absolutely not. A long long road but we just closed a transaction that was nearly eight figures and you would never know it. Unless you have an eye for picking out the guy that … I think you told me just pick out the worst dressed guy in the room and he's probably the best well off or they at least get the most money. This particular gentleman Ramon he was very chill, very relaxed, people just talked to him, got along with him and then heard his back story and just blown away with what he's achieved. A few years ago people wouldn't give him $5,000 now they're just throwing money at him. Of course, he's not taking it because he's going to do this all on his own but it's an incredible story not just for the size of the transaction and what he's accomplished but what he's overcome in life to get there.

Mark: Yeah now well let's get to it. That's a really good story.

Joe: Hey folks, its Joe Valley here from Quiet Light Brokerage. And today our guest is my friend and my client, Ramon van Meer. Ramon, welcome to the Quiet Light Podcast.

Ramon: Thank you so much Joe for having me.

Joe: It's good to have you here man. You and I have been working together now for … gosh almost eight months right? We started in January.

Ramon: Yeah.

Joe: I got a call from our mutual friend and former broker here at Quiet Light, Darren Harden. He sold a smaller business of yours a couple of years ago and he called and said hey look you're looking to sell your business and he gave me a number that you wanted and I thought okay well let's see what happens. I took a look at your numbers. I knew you had a good history from Darren about you. And we kind of overshot that number a little bit. It took a while but we did it and I want to talk about that process here today. I want to talk about your background, your history, the type of person you are, the things that you have achieved in spite of your upbringing, and the challenges that you've overcome. And I'm going to dig a little deep and I hope you don't mind because I think it's a great lesson.

Ramon: Uh-oh, all right.

Joe: So with that why don't you tell the people listening a little bit about yourself, where you're from; all that big story there.

Ramon: All right very brief story. I'm originally from Holland, the Netherlands. I have a big accent so … but I came to the United States nine years ago. I now live in the Bay area close to San Francisco. I always have been an entrepreneur before I would say before entrepreneurship was a trend; even back home from construction companies, to promoting parties, to selling piñatas online, to running a … bootstrapping a site about soap operas of all topics.

Joe: You seem like a big soap opera guy. You're really into them right? I mean just a passion that you followed.

Ramon: Yeah because you know I have zero to do between 12 and four o'clock afternoon … no, and you know I know we go on that delay there down the line but I think it's really cool. A lot of people would say you have to really be passionate about the stuff that you sell or do. I have zero passion for soap operas and it turned out to be probably the biggest exit I have so far.

Joe: Yeah and clearly folks I'm being sarcastic about that because it's an ongoing joke that Ramon has never watched a single full soap opera in his entire life. Are you going to go to your grave someday never watching a soap opera or do you think you might sit down one afternoon and just watch an episode of Days of Our Lives or General Hospital or whatever is airing these days; just one?

Ramon: The problem is its … okay, so the show is one hour long. Of that one hour its 30 minutes commercials and all that 30 minutes is just very painful to watch. I'm sorry soap opera lovers it's just not really my cup of tea. I never spoke … said it out loud because of anyone, friends … you know my audience but it's … yeah.

Joe: These are words from a guy that had millions and millions of people visiting his website and YouTube channel every single day and he never watched a single full soap opera. All right we're going to get into that a little bit. So as I said for those listening he would not go deep enough so we're going to go a little deeper. You moved here from Holland nine years ago. Let's talk a little bit about your upbringing so that people that I think have had some challenges in life and are hoping to do what you've done can hear your story. You at one point in your life were homeless correct?

Ramon: Well.

Joe: Briefly.

Ramon: I think … well yeah. Well, it was more the fact that my age was very young but yeah I had to … I have slept on the streets. Not really on the street like I don't want to make it sound too dramatic and more-

Joe: I did that for you. I started off with that question. So at the age of 12 you had to spend a few nights on the street at the age of 12. And then friends' couches and then eventually worked it out and did you move back in with your dad or did you stay with friends from 12 to 15?

Ramon: Well yeah not to make it too long of a story my parents were separated. My mom eventually … I was living with my mom, eventually, she was not able to take care of me anymore so I had to move to my father's house. And he basically just kicked me out on the street when I was 12. He had a lot of issues with alcoholism and a lot of other issues. So I was … the first couple of days on the street then at some friends' houses and then one of the parents of one of the friends I was staying at tracked down my mom and my mom took me back in. But she was actually not in a state of mind to raise a child but there was no other way around it so … yeah.

Joe: And I've made you very uncomfortable in the first five minutes of this interview.

Ramon: Yeah thank you, Joe.

Joe: I do it because honestly every time I talk to you and I hear your story, I'm blown away with what you've achieved. I think there must be something just ingrained in your DNA that made you believe that you were going to be a success in life. Is that sort of … you always kind of knew you were going to go off and on your own and overcome these challenges that so many would just give up on and go down a terrible different path? Did you have a belief in yourself that you were going to be a successful entrepreneur even at a young age?

Ramon: Yeah and not every day but in the big picture I always believed that one day somehow I would be successful. I always had that entrepreneurial spirit in me. I was not good at school in that same phase of the stuff that happened at home. I got kicked out of some high schools and eventually just stopped going to school when I was 15 because … yeah and I started doing stuff for myself like as a business owner. So I always knew that with hard work and just being … keep on going. I think the stuff that happened to me in the past actually helped me. I almost now have a mentality that I survived all that stuff back then so the things that I'm dealing right now is actually nothing compared to back then if that makes sense.

Joe: No it's certainly made you who you are today and a better person for it. For those listening just to get the full picture, we just sold Ramon's business for just shy of nine million dollars. It's the second business that we've sold for Ramon through Quiet Light Brokerage and he's a serial entrepreneur. And I think you said to me a couple of weeks ago Ramon that just two or three years ago you could not get someone to give you or invest $8,000 in you and now there are people coming out of the woodworks to give you money to invest and buy businesses on their behalf; which you're not doing, you using your own for the most part. But when you have such a big success like this you're looked at very very differently. And you've done some incredible things and on top of that all you're a good person which makes a big difference. And the buyer saw that and I talked to him yesterday and he repeated that several times during my interview with him. Now first off for the children listening if there are any young entrepreneurs don't quit school just because Ramon did and he sold his business for nearly eight figures. Don't quit school, stay there, please.

Ramon: Stay there because look I'm 37 now right? So this is 20 years in the making. It's not that yeah I started this soap opera website three years ago so someone will say yeah you became … you went from zero to hundred in three years. But honestly, it actually took me 20 plus years to get this. So it's not the smart … it's not the easiest, it's not the smartest way to go about. The more and more now that I'm … especially the last year and I got to know a lot of other super successful entrepreneurs it's that networking and connections are so important. So if you are in school you will get all these connections and relationships with really key people that are going to be key people in your life and I had to do it the other way around.

Joe: Yeah and I think something that you and I saw at the Brand Builders Summit and the other events that you and I both go to is the connections with the people that are attending those events and the relationships that you build in the masterminds that you join, sharing ideas. Everybody has a different experience. Everybody has a different level of expertise on different things and for the most part, they're willing to share. Unless you're a direct competitor which is really … it's such a vast marketplace, selling … doing content sites like you do which is your niche and your level of expertise versus even a physical product site like Moyes, he … great success; huge story … willing to talk to you about tax liabilities and things of that nature that you have to deal with now; a very good problem that you have to focus on. So let's back up a little bit. Let's focus in on your niche and your specialty. I think you've looked at now a number of different niches now that you've sold your largest business content advertising site in a soap opera niche. You had considered building a portfolio in either physical products or SaaS or content sites and advertising sites, have you narrowed down where you're going to focus on now for the future?

Ramon: No, I have still not. So my dream is so to speak building a small … you know I call it like a private equity model where we have a small team, an in-house team where we can start or acquire or buy a stake into an existing company. Because our background is content and driving traffic, sales or viewers, eyeballs through content. And so using that strategy to either push sells for a SaaS product or for an e-commerce or for content. But yeah you and I have been going back and forth, I do think I need to specialize in one niche and every … e-commerce has its pros and cons and so is SaaS and so is content. And like you've mentioned to me many times before like the grass is always greener you hear stories, the success stories of people selling their e-commerce business for a hundred million dollars but it's not easy to do and there's a lot of … there are downsides of running an e-commerce and the same goes for content and also with SaaS. So I'm now taking the time to talk with as many people as possible and do research and then go from there.

Joe: So let's talk about SoapHub and the site that you sold.

Ramon: Okay.

Joe: We don't have to get into too much in terms of specifics but I want to talk about the path so that business owner sellers out there understand what an emotional roller coaster it can be.

Ramon: Yeah.

Joe: We listed the business for sale in … I think it was February of this year. We had multiple offers. We listed it I believe at five million dollars and came pretty close to asking price and put it under a lot of intent. I was driving home from Georgia probably I don't know 20, 30 days into due diligence moving along very well. The buyer was very happy. He flew out there to see you. And things are going extremely really well and you called me on a Saturday afternoon. Can you recount that conversation for the people that are listening?

Ramon: Yeah and I feel still … I still feel bad about that. So … but picture it as SoapHub was doing really well already, not just revenue wise but profit wise. And between the time that you sit down with Quiet Light and come up with a valuation and an asking price until that time you know, there's … time goes by right? Like I think we spoke first in December. It was the first initial and now we were at three months past and literally the revenue and profit of SoapHub was skyrocketing. And it took me a while to okay what should I do here? Should I keep going with this process and with this buyer that was under LOI with me or should I just say you know what let's hold off for a couple of months and increase the 12 month trailing? Because most businesses or all businesses that go through brokers their valuation is based on a multiple of the last 12 months of profit. So the more months of higher profit you can show, the higher the valuation. But yeah on that Saturday I also remember I was nervous. I didn't want to call you but I thought that's … when you're dealing with such a big event, this is a life changing event for me. Not just for me but also my family; my mom, my dad, my son, everybody involved, and the employees. I thought I had to do it. So I had to call you up and say "Joe, I'm really sorry but I think it's best for us to take the listing down for now and then and relist it again in four, five, six months."

Joe: You're having as much trouble telling … say we're just recounting the story as you did the day you called me on that Saturday. It's kind of-

Ramon: I know.

Joe: You still feel bad about it. I knew when that call came through on a Saturday I thought okay this can't be good. Ramon's calling me on a Saturday afternoon and that's really odd. And I knew it was going to be a tough phone call. So you had recounted that basically we went through the numbers on the call and you had said look just I got to think about my family. This could be … this is a lifetime event sale and the business is growing so much that this initial … I think we're at a four time multiple now is dropping so low that you feel like you're giving the business away. And I think you and I went through the numbers and we said all right look if we wait another six months even if we just held the same multiple we'd be at a valuation at around seven and a half eight million dollars. The goal at the end of the phone call was just to step back, run the numbers, talk on Monday, and then break the bad news to the buyer if we needed to. And we did that and it was hard and he felt bad. He felt … he was very upset because it's great opportunity. So we pulled it back and we were going to just wait right? We're going to take the listing down and wait another six months more to pass. We updated the financials just as a recounting of the story. The numbers jumped tremendously and we reached out to the backup buyers based on the conversations you and I had. At the very least we've got to tell the current buyer of the situation and what we're going to do in six months or so. And then of course two other backup buyers were constantly reaching out to me and said if anything changes please reach out. So we pulled out of that LOI, it was a non-binding letter of intent and we backed out of that and ended up having multiple offers. It pushed the value of the business up well in advance of that six month period because we ended up closing well before that time ended. Was that an easy process? You know a lot of sellers think oh I want multiple offers. Oh, I want to be in a situation where it's getting bid up over asking price. Was that an easy process for you? Was it comfortable? No stress, really easy to go through or was it emotional?

Ramon: It was super emotional because you have multiple offers that most of the times are not identical. They're a little bit different and you also have to think who is this buyer? Of course, you're talking on the phone a couple of times but you have to think about "Okay who is most likely to close?" Because it's one thing to make an offer and sign an LOI but not everyone will be able to close. And then if the buyer at the last minute is not able to close then you lose two months of work. Due diligence periods and also lose that momentum where there are several buyers trying to outbid them. You know you have that momentum going that you are getting more over your asking price but if you have to go back after two months then you kind of lost that momentum. So yeah it was a very tough decision because especially the two top offers were from two buyers that I was … would like to work with them … both of them.

Joe: Right.

Ramon: So it was a difficult decision.

Joe: All three buyers were highly qualified and heck of a lot smarter than I am and brought a really good offer to the table. The difference for those buyers out there that are listening when you're in a multiple offer situation, the difference for the one buyer that ended up eventually buying the business was that he had some investors behind him and he brought them to the conference call, Ramon, right?

Ramon: Yeah.

Joe: So we got to not only speak to the buyer itself but the money behind the buyer. We got to have conversations with as well. Did that make a big difference for you?

Ramon: Yeah, definitely. Because that gave me confidence that this buyer is most likely to close and also close faster. People that are more experienced is more easier to work with. And so as a sellers point of view … because I've been sitting on both sides of the table, as a seller's point of view yes, of course, you look at the money, at the offer, the money … you know a mug money first but you also look at okay who is the buyer because you're going to have to work with this person for quite some time. How is he financing? Is this person being able to close this kind of transaction? So if you are in the race to buy something try to also make sure that the seller knows that yeah the seller goes with you that you're ready to close and you're able to close and you have experience and it will be a smooth transaction.

Joe: So we were going to close in … I think it was going to be 30 to 45 days. It was investor money behind it and we were marching along doing very well and then it fell apart again right? You pulled out of one LOI and then the money behind our buyer disappeared. They're … it was a family fund for those listening. It was a family fund and the two people that came forward and were on the call with Ramon and the buyers were fantastic … are still fantastic and I would still work with them if they came forward to buy a business from Quiet Light with either this buyer or another but the general manager of the Family Fund made a decision that he never makes and he said soap operas no I don't think so kill that deal. Just like that, it was gone. And did you call me and let's say vent … did you vent to me on the phone shortly thereafter? Out of stress and emotion, you said that you've yelled at me a few times but I call it venting. How were you feeling when that fell apart quickly and we put it back together obviously because we're having this conversation today but I mean what was going through your mind when you were literally … I think probably what two weeks away from closing this transaction and having an enormous amount of money deposited to your account and life changing life for you and your family. How were you feeling that day?

Ramon: Well it was two ways like of course I was disappointed because we put a lot of our work in to it. We were literally two weeks out right? So not only me but the whole team, everybody involved. We moved all our lives around that magic closing date of … in my case it was June 30 I believe or something like that right? It was the end of that month, we were two weeks out and then the deal fell through. So it was just more like man we worked so hard, we were so close and it now falls through. And it shows that there are so many moving parts and in my case or in this case everybody involved wanted to get this deal done but still, something small happened and out of everybody's control and that made the deal fall through. So there are so many moving parts in order to close a deal like this that yeah everything has to fall in place.

Joe: It was tough for sure.

Ramon: But it was tough and more also that a lot of the employees they got proper chance to sell and they were already in their mind shopping around. And I felt really bad to break the news to them because all this time leading up to it was like okay guys we're almost there, a couple more weeks let's keep the hard work going and stuff like that and then I had to break the news like oh sorry guys we have to move it up again. But I did … I did was you know … I knew that eventually, we'll be able to sell because it's a great website and it's you know … so.

Joe: Yeah that's the thing it fell apart for the strangest reason. One, because it was growing so fast you made a very tough but obviously financially intelligent decision and you took a little bit of a risk but you pulled back and said this is growing so so fast. And we're not talking about 10% month over month growth here folks. We're talking 200, 300, 400% month over month growth. So it was an easy decision yet tough on your part because you were disappointing the buyer and making a tough call to me. And then it fell apart but we go back to the value of having multiple calls with buyers in advance of signing a letter of intent. Because this particular buyer he really wanted the business and he had other sources of revenue or investors and he pulled it off. He convinced you and I that he had another path that he'd been working on the whole time. He hadn't gone down to that out of respect for the other buyers but as soon as the other investors as soon as they were out he opened up that other path and went down it very quickly. You and I did the same thing again. We needed to jump on calls with other people to have them instill confidence in us that they could get the job done. And you're right it was June 30 was the initial close date with that buyer and then I think it was near the third week of August where we ended up closing so another six or seven weeks does that sound all right? Okay, so the downside-

Ramon: Those were the longest weeks of my life.

Joe: I know. But the downside is that they are the absolute longest weeks, days, hours of your lives. Boy that does sound like a soap opera; days of our lives.

Ramon: Exactly.

Joe: But looking back in the blink of an eye it's gone. The time passed. And you benefited financially from that because you got to hold the business for another let's call it 60 days and got the profit from that business for another 60 days.

Ramon: Yeah.

Joe: It's almost like a bonus because you closed anyway. Was it worth the extra 45 days, 60 days that it took or do you wish that you went back instead June 30th I would have taken it all day long even today knowing what the end result is closing 45, 60 days later? Would you do it all over again and close on June 30th?

Ramon: That's a good question. Probably now, no I would have taken the extra because it's … we're talking about a lot of money. Two months extra of profit plus the buyer increased his offer a little bit as well when the deal fell through. He said I'm working on other things just give me some more time I will be able to close up if you give more time and then he increased his offer also a little bit. Now that everything fell exactly how it was supposed to be yeah I would have taken the money but it was a really good learning experience for me going into this. I've sold a bunch of websites; I bought and sold a bunch of websites but way smaller all in the … not even close to this one. I think the most was like around 200,000 I sold. And then dealing with an asset purchase agreement you don't really deal with attorneys, you don't really deal with a lot of things that now came on my plate. And it was dealing not just with my own attorney but then the other side's attorney and it's just so many people are involved and it was an emotional roller coaster. So I think now looking back its good because now it made me better for the next transactions if that makes sense.

Joe: You know most people would hang up their shoes and say I'm done with your kind of transaction sale but you're already focused on growing other businesses, buying other businesses and building up portfolios so kudos to you. You're a young guy you can do that.

Ramon: Yeah.

Joe: What would you recommend to people that are listening that are in a position to sell their business for a lifetime event sale for them, whether that's 100,000 a half a million, a million, five, ten million dollars; what are the most important things to consider as they begin that process and go down that road, things that you've learned?

Ramon: So the thing that I've learned and I did wrong … and you hammer on this on many podcasts is clean books. Clean books people, I made a mistake of having … it was not on purpose it was just out of laziness I think that I co-mingled different websites in what … so I had one LOC, one bank account, one account with Google. The issue is that Google does not allow you to have multiple AdSense accounts. So even if you have 100 websites with AdSense tags on it and all comes down in one Google account. But yeah I had … I bought different content sites in that last three years. I sold content sites. I invested in things all from that one bank account. So thankfully we were able to make it work but it was a lot of work from my end to really … I had to go back literally three years and every transaction I had to … oh this was for SoapHub, no this was not for SoapHub. And then whatever was not for SoapHub I also had to be able to back it up with proof or listing this was for this and here's the proof. And so it was a very tedious, long, stressful work including my CPA and my bookkeeper and thankfully it was able to … we were able to work it out. But I know for a fact in other cases that where people co-mingled and then they had real issues with their valuation. They were not able to get the top dollar because the buyers were not able to really dissect what is the real profit of that company. So that's … learn it from me, I did it. I learned it the hard way. So now I've set up different companies, different LOC's and run everything as clean as possible.

Joe: Okay.

Ramon: So that's one, the second is read on asset purchase agreements. The first time when an asset purchase agreement got sent to me it was so complicated for me, I didn't know what to look for, what did we have to be in it and then whatever my attorney advised me I basically say yeah well it makes sense why not you know. So the notes of my attorney I just blatantly copied and then send that to the buyer and said this is what we … I want to change in the asset purchase agreement. And then the buyer's attorney they came back with their notes and then went back and forth back and forth. I think now looking backwards now I kind of know what is important. I think attorneys try to … and I understand the reason but they try to overprotect their clients. So my attorney tried to overprotect me, the buyer's attorney tried to over protect them and somehow we have to find a middle. There are tons of examples where attorneys ruined the deal. You probably will have a lot of stories of that. So I think it's good if you kind of get advice from people, learn, read up on it online and see what is really needed and what not. So now I'm working on the deal right now with a great attorney but now I'm more experienced and I can say well this is what I don't want in attorney. I don't … I understand why you advised me that but it's not needed. I've done it before this is not needed and let's just keep it as simple as possible. Because … yeah, attorneys can ruin deals. Those are the two biggest advises.

Joe: Well I can agree with you on the attorney part wholeheartedly. I've been in situations where a relative of the seller completely killed the deal. I had a deal where the young guy just out of graduate school and he had a great business that he started in his undergrad and literally graduating from graduate school about to start his professional career and we've got a business that was under contract with three quarters of a million dollars … way way over the standard valuation but there was a problem. The problem was that his mother and father were both attorneys and his wife was a law student and they took that asset purchase agreement, shredded it, and fought tooth and nail for the tiniest tiniest little thing and were completely unreasonable to the point where the buyer who honestly was very reasonable walked away, threw their hands up in frustration. At the Brand Builders Summit you and I attended in Austin a few weeks ago Richard Jalichandra from 101 Commerce got up and he's bought three businesses from Quiet Light in the last six months, eight in all. And their goal is to buy 101 hence 101 Commerce. They've got enough experience where they are going to say look you can only work with this group of attorneys, there's no conflicts … [inaudible 00:36:00.5] have conflicts with us and our legal team. But these attorneys understand e-commerce and contract negotiations you got to work with one of those. It's almost you've got to have a contract attorney that understands fairness and balance and that it has to be a good deal and a good transaction for both sides. So I agree 110% on both of those points.

Ramon: Well just to piggyback up that also when you look for an attorney make sure this attorney not only has experience in internet space but also the niche where you are. Because an e-commerce deal is totally different than an asset … a content site where you're just buying an asset or a SaaS, so also try … if you find a … if you go out there and try to find an attorney that can assist you with an asset purchase agreement is see if they have experience in not just internet marketing but also the niche.

Joe: Okay. So overall the moral theory is that when you're selling your business it can happen very quickly. We put it under contract very quickly and we could have been through the entire process from listing it to closing inside of 60 days, 75 days tops the first time around. But you made the tough decision to pull back because the growth was astronomical. You made a good decision and you ended up almost doubling your value and that's a pretty huge number when it comes down to it. And not only that you made a lot more money along the way because you still held on to a great business that was doing great numbers and growing. There were times where it was tough and we collectively said look there are multiple options here and one of them is to stop this process, hold your business, take care of your family, take care of your staff, hold the business and keep running it. It got that frustrating at times and that emotional at times because it is a big deal if you sell a business of this size. And again it's actually a big deal to sell a business whether it's 100,000, 500,000, a million, or 10million, it doesn't matter. It does get emotional. I think the number one thing that people need to look for in an advisor is one that will set realistic expectations and that can manage emotions. And not just their own but those of the buyer and those of the seller and sometimes the third parties that are involved with their investors involved as well because no matter what most of these deals go slightly off the rails and it's our job to get them back on. But I couldn't have done it without you, Ramon. You've been fantastic. You've set some new goals in life though so I want to kind of wrap up with this. You and I had a conversation so people understand a little bit more about who you are and what you've accomplished and what you're gonna do in the future. You have a goal to help a certain number of people be successful in life based on the goodness that you've received I think. Is that … am I somewhere along the ballpark? Can you touch on that just briefly if you are comfortable enough sharing that?

Ramon: Yes.

Joe: Am I embarrassing you by the way?

Ramon: Everything I told you you're using against me, Joe. No, I'm just kidding.

Joe: Not quite everything.

Ramon: I just … as you might know, like I don't really like to be in the spotlight. I never really do podcasts or I had … I made one exception for a news outlet to do it but yes. So because I'm very entrepreneurial I think it's almost … it's your duty so to speak that when you quote unquote get to a level that you have to give back and help other people and which you can help … you know there are millions of ways of how you can help other people. I think for me is that I want to help people … like I see that I was blessed to achieve the American dream so to speak and I want to help achieve other people to to do that as well. And I have a number in my mind, I want to help 500 people not just by helping a … you can pay a year for school or something; no, helping to change really their lives how my life has changed. Like three, four years ago I was really literally going from paycheck to paycheck and not knowing where … how next month is going to look like. And three years ago and now three years later I'm in this position. So change can really happen and I want to help 500 people by … if they have a business idea by funding their ideas and helping them in starting their businesses or maybe I am able to acquire a business and then have somebody run that for me stuff like that. So it's more or less helping 500 people in achieving the American dream by starting their business or helping them grow their business.

Joe: Do you write down these goals? I think in talking with Ben the other day when he said he came to visit you in your office that you had some stuff on a whiteboard and he looked up and he said man just incredible goals that you've set and he said it'd be foolish for anybody to bet against you. Do you write these down on a white board? Do you just think about them in your head? Do you hear about a goal setting? How do you … what's your process?

Ramon: Yes so I write them down … actually, because I'm about to move today I'm at a house office and because I'm packing, I'm moving next week but I have notes almost everywhere of my goals. So for some weird reason I believe in re-civilization and so when I wanted to buy a specific house that was my dream I would print out pictures of my quote unquote dream house and I will just pin them everywhere. But I have a list of life goals so to speak and yeah I have printed that and that's in my office at the house.

Joe: Amazing. Ramon it has been a complete real pleasure working with you for the last eight months. For those listening, we've got somebody that overcame some pretty serious challenges in life. He has been an entrepreneur for 20 years even up for the three or four years ago as he said living paycheck to paycheck, buckled down, worked hard. As my baseball coach used to say … and I was not very good, he always used to say the harder you work the luckier you'll get. And I think Ramon worked very hard, visualized those goals, wrote them down, put them up on the board, and has achieved them. He made some tough decisions along the way. It was not easy. I can tell you that now. Some of it was quite emotional but it worked out in the end. Ramon, it's been a pleasure. Thank you for sharing your story with me and with the audience of Quiet Light Podcast. You're a good man; I look forward to doing business with you for years to come.

Ramon: Same here Joe, thanks a lot.

Joe: Talk to you soon.

Links and Resources:

Ramon's Email

John began his career working in politics, including as a writer in the Clinton White House, Office of Presidential Letters and Messages. He was also a Speechwriter in the California Governor's Office during the Davis Administration, and later he became an Attorney.

John gave up speechwriting and the law to become a blogger and podcaster! He helps business owners connect with anyone they want to connect with. And they find their businesses grow exponentially because of it. He also owns and operates a website and related Podcast called SmartBusinessRevolution.com where he shows entrepreneurs how to build and use relationships to build more value, revenues and profits in their businesses.

John's take on the business: The number one, most important thing that will determine your level of success or failure in business is your relationships.

In this Podcast episode John shares his insights on building stronger relationships, and connecting with people that can make a difference in your business.

Episode Highlights:

• John's history as a white house intern, staff writer, attorney and entrepreneur
• Why "helping first" matters most.
• How to build relationships without being awkward.
• How to break the ice with a new group of people.
• Learn some basic mechanics of talking with people.
• Making connections brings more value.
• Why delivering value works best.
• How making introductions builds value for you.
• How does John make a living in "networking".
• Events where "mixing" is required and new people are attending.
• How to monetize Podcasting

Mark: So I remember an event … I think it was three years ago, I was at Pubcon and I had hired a PR firm to be able to help with Quiet Light Brokerage and some things that we were trying … no was it four years ago we were trying to do and I had hired somebody to come with me from a PR firm and she was an awesome networker. I mean she was phenomenal at what she did. And she came out to me laughing at the networking event at Pubcon because she said this is so funny. She's like I'm so used to networking events where everybody's a professional networker and she said people here obviously are not because everyone was looking down at their phones and shuffling their feet and saying I don't really want to introduce myself to anybody so I'm going to pretend like I actually have something to do on my phone. And you know what that was also me. I'm a terrible networker. I'm not really good at it. I'm a natural introvert. Joe, I understand you had John Corcoran and he's a networker and you guys talked about networking. This is an area where I struggle so I'd love to learn a little bit more about what you guys discussed.

Joe: You know one of the first things John said was don't fall asleep, don't tune out because it's networking. You can grow your business dramatically by meeting the right people and being introduced to the right people. You don't go at it with that approach ias John's thought it's more just building relationships and those relationships lead to additional connections and relationships that can help grow your business; double, triple the size of your business. It's helped us dramatically through what this podcast we've met so many people. It's broken down doors and they feel like they know us more because of it. The networking that John talks about is exactly the same. It's through all of the different events that we might attend to. And he kind of gives some tips on breaking the ice to make connections and really kind of the Golden Rule approach to networking. It's a fascinating story. John's actually a fascinating guy. He used to work as a speechwriter for … I think it's called presidential letters during the Clinton administration. He did not know Monica Lewinsky. For those listening, I did ask. It was pre-recording but he absolutely didn't know her. Yeah, everybody chuckles poor girl really, seriously. He went to law school after doing that and eventually became a lawyer, practicing attorney and replaced his income as a lawyer by podcasting and blogging and doing that through networking. Pretty impressive guy, great story and I think he can help a great deal with people that don't realize how important networking is in helping other people is to their business at the end of the day.

Mark: Awesome let's go right on into it and learn a little bit more about networking.

Joe: Hey folks it's Joe Valley from Quiet Light Brokerage and today I've got a very special guest. His name is John Corcoran and he has a ton of experience both as a writer for the White House, as an attorney, and as a networking specialist. John, welcome to the Quiet Light Podcast.

John: Thanks to have had me, Joe.

Joe: Quite heavy here man. We met at the Prosper Show you're doing that very thing, walking around with a camera and a microphone, networking, talking to people, helping James do a great job there which they always do and I think you've been a big part of that. But that's my intro right there. I need you to tell these folks that are listening all about your background, your experience, who you are, and what you're all about.

John: Sure. Well hopefully, people didn't tune out when they heard oh networking I hate that stuff. That's a funny reaction that people have. It's kind of like sales right? We know it's important but we also kind of hate it. And oftentimes that's because we've had some kind of negative interaction or negative experience with it; some guy coming up and sticking you his business card in your hand, in your face trying to sell you on something at a networking event. I'm not an advocate of that. I think there's a lot smarter ways to do it, a lot of tools that we have available. My background you know when I was a kid I moved around a lot. My father lost a job three separate times and each time we had to move across the country 3,000 miles away; away from family and friends. That experience taught me the importance of building relationships in business and it's critically important. And as a result of that, I've had some amazing experiences in my career. As you mentioned right there in the White House, in the Clinton White House years, speechwriter with the Governor of California. I had my own legal practice for a number of years and now I've got a business called Rise25 and a blog and a podcast called Smart Business Revolution. That's really more of my focus now and we bring people together at live events and I really enjoy doing that.

Joe: Tell us a little bit about your background in terms of … I'm looking at your bio here and it says you went from party school to the White House. Just for the sake of the people that are listening, how the hell did you make that transition from being at a party school to writing speeches for the president?

John: It's strange I know. It's a strange trajectory. So yeah I mean basically I went from an English major, getting a BA in English at a party school to within a year of that I was a writer in presidential letters and messages in the Clinton White House. It's kind of like a second tier speechwriter. I'm kind of like a … you know as a speechwriter has pulled a hamstring then we would step in, that kind of thing. But it was an amazing experience. I had interned in the speechwriting office during college. It was an amazing experience and I went back to college. And networking lesson number one is keep in touch with the people in your network. And once you build a relationship with someone it's really important to keep in touch with them. And so I was back at college, I knew I'd love to get a job at the White House but not all former interns get that kind of gig and so I kept in touch. I would send things from time to time like speeches or articles or passages that I found that I would send to the speechwriters. Not as a way of saying like hey do you have a job for me? But they … it kept me top of mind and what do you know a month or a couple of months later, a year later something like that they reached back out and said hey we heard about this position for you and I ended up applying and getting it. So it was an amazing experience.

Joe: Were you taught that or did you just intuitively share information, stayed in touch and tried to help with little bits and informa,tion that you found?

John: Yeah looking back I think really it was part of how I grew up and having to be that kid who is new in the class. I remember what it's like to move in the middle of a school year into … I went from Southern California to Massachusetts which is a huge culture shock. From being a kid it was like out at the beach to like dock siders and button downs and stuff like that in Massachusetts. It's a very different kind of culture and showing up in the middle of the school year when everyone had been in the same group of kids for years and years. And so it taught me the importance of being able to go into a new community and be able to make friends essentially. And I did that a number of times growing up and so I just realize the importance of it. And also just with watching my dad struggle when he got laid off a couple of times, the importance of building a network before you need it. You need to have these things so that when the S-H-I-T hits the fan, which it does from time to time, the economy or your company going under or whatever you've got to have that network. You have to have built those relationships first so that you can use them when you need them.

Joe: Yeah I think it's essential. There are several mentors in my life that have given imparted wisdom. One of them is along those lines and it kind of goes with what I've recently studied which is a DarrenDaily … they call them DarrenDaily it's a Darren Hardy program, you know essentially it sounds like what you do about speechwriters was you gave something to them first. You didn't expect anything in return. You were giving them something to help them. Hey here's an idea and you were on top of mind because of that. And then you kept giving throughout the year and eventually, you got something back. Maybe it wasn't your intention to get something back but you were there, you were front of mind and you were offering something to them. I find that the same thing applies to what I do. You talked about networking it'll gross folks, don't tune out because of that. Same thing with a broker man, I'm a "broker" right? I'm a business broker. People get sort of turned off by that if they go with the general label of business broker. But more than anything else we just simply try to help. We try to help people with whatever the issue is, with the experiences that we have, with the knowledge that we have, with the relationships that we have. I refer people out all the time helping them connect with bookkeepers, attorneys, whatever it might be expecting absolutely nothing in return. Eventually, we'll run into them at a conference and spend some time with them and build a relationship with them and then they may refer somebody to us or if when they decide to sell their business they'll think of us first. I don't like networking. I don't. I never have. I'm a bit of an introvert. I love doing the podcast because it's just you and me it's not a whole group of people here. I don't have to walk up in a crowded room. I'm a kind of a low talker so people can't hear me. I've got a big microphone now so that helps. How do you advise people to sort of break the ice with a new networking group or a mastermind group or if they're at an event like Rhodium Weekend like E-commerce Fuel like Smart Marketer, like Blue Ribbon Mastermind, and to just walk up to a group of people and start talking? How do you recommend they do that? Just say hey because obviously, they're strangers too?

John: Yeah I mean there's a high level and then there's the mechanics of what you use in a physical … a face to face type of interaction like that which also applies to online. You know a lot of networking we do these days can be through tools like LinkedIn or Facebook or something like that where you can really leverage relationships. So I would say first you got to start with okay am I at the right event to begin with? And that requires some really deep soul searching. Are you going in the right direction with your career? And people do pivots all the time. They change, they just … they lose passion for something. So you have to be sure you're going in the right direction because you can't squeeze blood from a turnip. And if you're at the wrong event then you're not going to find the right people there who you're going to want to engage with or you're going to want to talk to. So start with that and then secondly I think you're right about the give approach. You've got to focus on okay I'm going to give, give, give as much as possible and then after that people are going to want to return the favor. And that doesn't mean you should be taken advantage of but it means you should try and deliver value to people first before you try and hit them with a sales pitch. We've all been hit with a sales pitch right off the bat where people tries to get something from us or tries to get us to buy from them and it just doesn't feel right. It sits in our stomachs. So don't be that kind of person. Be a giver first. And then [inaudible 00:11:08.3] talking to people face to face in an event or something like that. Usually, I think people struggle because they over think it and they think okay I want to come up with some brilliant thing that will be related to my vocation, that will get us in a big discussion around what it is I do so that I can sell them on something. Well, the truth is you should spend a lot more time on just more human conversation. It could about hey how about this crazy weather we've been having or when did you get in? If you're at a conference you know where are you from? Maybe it's something on their attire, maybe they have an interesting shirt on or something like that. A lot of times there are little tidbits that you can you can pick out of there and then that gets you into a conversation. And then people leave little breadcrumbs all the time they just require exploring. People will mention oh yeah I was a little delayed my daughter had a volleyball tournament and so I wasn't able to get here when I wanted to. Well, that's a huge opening right there explore that. Go a little bit further and say oh really where did she play volleyball, what was the tournament, what was … how is she doing, what position is she in? Just taking an interest in people will get you really really far.

Joe: It almost goes back to our teenage days when our parents told us just to take an interest in the girls and ask questions and it would work out pretty well.

John: I know.

Joe: We were teenagers and we paid no attention and we got it all wrong. At least I did, I don't know about you though.

John: Exactly. I don't even know if my parents gave me that amount of advice so [inaudible 00:12:37.8].

Joe: I'm trying to do with my kids and I know that you're doing something with your son. I saw it on LinkedIn. I love that you're helping him sell some-

John: Yeah we're-

Joe: It's … I almost said Girl Scout cookies.

John: Yeah … oh no, it's Kab Scout. And it's funny he's like a natural born entrepreneur. He just turned eight and loves selling stuff, loves making money and so we're kind of using it as a teaching opportunity. But right there, there's a good example okay. You said I hate networking, a lot of people say that I hate networking but I love connecting with people. They'll follow it up with that and then I'll say okay well what do you think networking is really? I mean it's connecting with people. Maybe you hate being in a room full of strangers and not sure what to say, that's a given and that's fine. I totally get that. A lot of people get uncomfortable in that kind of situation. But me sharing my son's experience and experience we're going through with learning about setting up a website to sell Boy Scout popcorn as a fundraiser you know that's a way of remaining top of mind with people who are in your network on LinkedIn. And people see that and then it's also a way of teaching too because I'm also using it as a teaching opportunity as well. And it also personalizes me. I found … you probably found this too, when people they know more about you personally, a passion, or a hobby that you have or they know something about your kids or something they're a lot more connected to you. And I mean I discovered this a long time ago, long before I had kids. When I asked people about their children before I had kids I would ask too about their children because I notice they would light up. And it just breaks down these walls, breaks down these barriers, it allows you to really accelerate the connecting process so that you get to know that person a lot better and they're a lot more motivated to help you. They start to treat their interactions with you less transactionally and more like a true friend, a relationship; something that they actually are invested in helping. So that's why I do things like that is sharing a little piece … if you share a little piece about your life, it's not everything, but sharing a piece about your life it makes people more connected to me. It makes me top of mind and who knows where it might lead after that.

Joe: Right, I couldn't agree more. I saw it and I felt it humanized you and I felt like I knew you a little bit better even though we've only met a couple of times. I was a guest on your podcast, you're a guest on ours, and we met at the Prosper Show. So I totally get it. By way of example a lot of people listening they're either buyers or sellers and they love to monetize things. They say well how can I monetize something? And I want to give an example, I got a text today about two hours before this recording where someone was at an event in Miami and I introduced him to somebody else. They connected and he said to me, he sent me a text and he's like thank you for introducing me to so and so. I feel like I got 1.5 million dollars' worth of value out of that lunch and I'm buying a business from him for much less than that so I feel like I've doubled my money. And they were able to meet face to face for the first time and just get that connection. And that particular individual is making a point of helping lots of different people. I can't give you his name but every time I speak with someone that has connected with him it's not about what they got from him it's what … which they did get it's what he did for them. And that comes back around and it gets monetized in a variety of different ways. Most people listening again are either buyers or sellers thinking how the heck is this going to help me? Back when I sold my business in 2010 there weren't really any Mastermind groups. There were certainly not any Facebook groups. There weren't any Smart Marketer events or Rhodium weekend, any of these things that we go to now and connect with people over and over and over again and it's eventually just a trip to hang out with our friends. Hanging out with those friends now and sharing that information without expectations or getting back anything else is what I think is the way to immaterially monetize it. You can monetize it but you have a hard time calculating it. Do you have any direct experiences or examples where you can say you know I introduced these two people … this person connected with so and so and their business took off because of it?

John: Oh … I mean I couldn't narrow it down. I mean I have so many examples of that sort of thing and I do it more than most people. So I don't want to say that you need to spend all your time doing that. There are some connectors who spend too much time going out delivering value, connecting other people. But let me put it this way if you try the alternative … the opposite that certainly doesn't work. We know that doesn't work. If you just go out there and you don't try and deliver value and you just try and pitch people we all know that doesn't work very well right? So if you try the alternative, if you try the give first approach you will see dollars and cents to your bank account, others will see dollars and cents in their bank account. I can think of offhand two situations where I introduced two people to each other, kind of like you, you're just an introduction; no strings attached or anything like that. I just thought you two would get along and they started a business together. In one case those two individuals, they lived in the same state but opposite sides of the state. One ended up moving to the other part of the state so that they could work together and have a business together as a result of that one introduction. And you know those people will walk to the end of the earth for me after I've made that introduction. So it definitely turns into dollars and cents in terms of more clients, more referrals that sort of thing.

Joe: But that wasn't your intention right?

John: No … I mean it's not my intention but I will say this, look we're all in business, we're all motivated by making money, we want to keep the lights on, we want to keep food in the fridge right? So I don't say at all that you should go out there and you should just be randomly introducing everyone on the street or be doing it matchmaking or something like that. You should do it strategically. You should do it because it's good for your business. I'm not saying go on and do it because for charitable purposes although it is a great thing to do and it does great … it puts great good out into the world. I'm saying do it because it's good for your business. It's good for your career. And it has just been the experience that I've lived. There are great books out there by the way, Give and Take by Adam Grant, Dale Carnegie all the books that he's written. These books they give voluminous examples of people who have resulted in much value coming back to them as a result of the value that they put out in the world.

Joe: And you got to a lot of events, a lot of networking events where you have got both business owners, employees, founders, and potential buyers attending them; are there any particular events that you love because specifically the way that it's organized for networking that you can … through off the top of your head, two or three of your favorite events?

John: Is this cheating or can I say the ones that we do because they're-

Joe: You know people are probably going what the hell does this guy do for a living? It's networking, how does he make money so … answer the question how do you make a living?

John: Sure.

Joe: You're a networking guy, how do you make a living? What do you do?

John: Yeah. So … well, first of all, I was a practicing lawyer for many years. And even when I was a practicing lawyer I mean just introducing your clients is really valuable and giving … thinking about your clients because they will send more business back to you. Your referral partners would send more business back to you. So when I was actually full time practicing law I was practicing what I do today. Eventually, that pivoted into a blog and a podcast which replaced my income as a lawyer and I monetized both of those through a variety of digital courses and through affiliate promotions and that sort of thing. Today I run Rise25 with my business partner. We do live events. We go to conferences and we partner with conferences and hold on connection events like VIP receptions, like dinners, like all-day Masterminds at conferences. Again connecting people but we create the forum. We invite the people. We bring them in. Another thing we do also-

Joe: Just to understand so you're not actually putting on the entire event, you're putting on a segment of it or a specific group of attendees.

John: Right, and there's an important lesson in that because we've done our own standalone events but the reason that we do a lot of that now … an important lesson for others is it's a lot easier to go where the fish are already gathered to go fishing rather than try and pick some spot in the middle of the lake where there are no fish and attract them back to it. Go to the spot where all the fish are gathered which is what we do around conferences. The other thing we do is we do some Done-For-You lead generation as well. So we do Done-For-You lead gen so helping people with the process that we've used for years to generate leads for our self we help other businesses with that as well.

Joe: What types of businesses?

John: It's primarily professional services but e-commerce as well. So it's anyone who's … I mean who doesn't need leads right? Every business needs leads whether it's you're trying to connect with someone who might buy your business or whether you're trying to connect with new customers or clients or referral partners or strategic partners or whatever. You know there's a lot of different … the truth is everyone need … and like you're selling like a very inexpensive widget which is often the case with e-commerce there's often someone higher leverage who you are trying to connect with. So that might be other website owners or it might be other people who are selling on the same marketplace as you, or just other sellers that you want to connect with, or other professionals or something. It's a variety of different applications that we'd manage for people. But you asked … so you asked the question earlier was types of events that I'm preferable to. The type of event … and I want to answer that because that's an important question and it actually guides my decision making in what events I go to. I don't like going to events where the culture does not encourage people to mix with one another and what do I mean by that? Oftentimes you have events where at a local … this often happens on a local level like at a chamber of commerce or something like that where you have repeat people coming back month after month and they kind of know enough other people that there isn't enough mixing. I like events personally where I go to an event and I can just stick out my hand and talk to someone or someone else will stick out their hand and just talk to me where you feel free to meet other people. The other thing is I really like formats of events which breaks the mold. They're not just the boring, stuffy kind of reception type of format but I like the ones that are different. So actually just last night we had an event in Chicago which was a VIP food tour and we've done this a number of times, I did one in San Francisco a couple of weeks back and it's like a progressive dinner party meets a networking reception. We kind of combine the two and rather than keeping everyone in one room with watered down drinks and talking to each other all night or maybe being at a dinner table where you're stuck talking to the guy in the right of you and the guy in the left of you for the entire night, we take a group and we take them to multiple locations over the course of an evening. So you're up, you're down; you're sitting next to different people the entire time. You're walking or sitting on a bus next to different people. And we love doing that format because it gets people meeting more people which is really what we're about. So that's another piece of what we do. I realize [inaudible 00:23:45.3] to what we do but you asked the question what types of events so I really enjoy that format.

Joe: All right. Tell us about Rise25 and the blog … the podcast and the blog. I want to know more about that. I have a feeling here John that people are going to want to listen to your podcast and learn more about what you do.

John: Yeah.

Joe: Just … let's hear it.

John: Yeah so Smart Business Revolution I started it about eight or nine years ago now. It was a blog and a podcast, it still is. I continue to write there. I continue to publish podcasts. I started … this is an important lesson because now we do help clients with this as well so this is part of the lead generation piece is eight or nine years ago when I was a full time practicing law literally I had a client who came in and he hired me for a tiny little matter. It was $500 of writing a lease for him. I was reading about the guy and I was like wow this is a really interesting guy. He was an entrepreneur. He had started multiple companies one of which had gone public. So he's really successful. I was thinking how can I make … how can I turn this guy into like my best client? You know come back to me over and over again. Literally what I just did is I said hey do you have like 20 minutes I'd love to just like ask you some questions about your career and your businesses and everything. I'm going to record it and I'm going to publish it. I didn't even know how to do that. I didn't even know how to record or publish; podcasting wasn't even a thing back then. And so I ended up doing that, I asked him all these questions. What's amazing is you're publicizing that person. It's exactly what we're doing right now. But you're publicizing that person and you're also asking them questions about their challenges, their opportunities, you're figuring out are there other ways that you can help this person or deliver value to that person? And so what do you know he ended up turning into a great client. He ended up coming back to me and saying hey can you help me with this and this and this other thing too. And it's a strategy that I've used over and over again. I've done it probably three or 400 times with different people where you just simply take an interest in someone else. And you go the extra mile so you actually record it and you publish it and you give them a promotion, give them publicity, you send traffic, you send eyeballs to them. Again it's exactly what you're doing right now. You don't have to have a podcast to do it although podcasting is such an accepted and understood medium these days so that's really the best way to do it today. And I think everyone should have a podcast because it's so powerful.

Joe: And you've figured out a way to monetize the podcast and the blog as well which is really weird if we think about the fact that you went to law school, quit to be a podcaster and a blogger and you replaced your income. How did you manage to do that?

John: Well so, first of all, you can monetize a podcast … when people hear … I know I just wrote an article about this. I did a research study and I surveyed hundreds of podcasters and I asked them how they monetized their podcast. And so you can go to Smart Business Revolution and you can see the article now. It's at Rise25 also. And people generally thought … they thought of the traditional model, the old school media model. Like I'm just going to build up a big audience and then I'm going to sell ads or sponsorship. And that is only one of dozens of different ways of monetizing a podcast. It's actually probably the worst of all of them and yet everyone thinks that that's what you need to do. It's the most difficult to do. So I mean I've monetized my podcast in a variety of different ways including getting more clients, getting more referrals, filling live events, filling webinars, strategic partnerships; you name it. If you can connect what it is you do which is your business, your profession with the podcast which not everyone does a great job of connecting those two. Sometimes they are completely unrelated and if you have a hobby podcast that's fine that's not what we're talking about here. But if you connect those two and you use them to build more relationships with prospective clients, with referral partners, with strategic partners, you use that podcast in order to build more of those relationships and connect with SALT leaders and gurus and speakers and authors that you would never otherwise have a chance of connecting with then it's an amazing powerful tool. It's … I mean I've been able to have conversations with people who would never give me the time of the day you know what I mean? Like I can't email Gary Vaynerchuk and say hey man I would be in New York can you meet me at a Starbucks for 45 minutes? I want to pick your brain; I'm going to ask some questions about my business. Is that cool? [inaudible 00:28:00.1] like who are you I'm not going to do that but I had him on my podcast even though he's a busy guy because of the nature of the medium. So that's why I'm such a huge fan of the medium it's just … and it's a much better way to network. That's what we're talking about right? Connecting, building relationships, seeing how you can help each other, giving, all of those are encapsulated in the process of doing a podcast and everyone should do it.

Joe: I agree 100%. It's what we do; it's why we do it. Because we're connecting with people like you that might be hard to connect to or with otherwise.

John: Oh yeah absolutely, I wouldn't return your call if it weren't for that.

Joe: I know you're never going to list it … and it personalizes things right? You can write an amazing article, give some amazing advice but without that personality behind it, it's just words on paper. We had people tell us that if they chose someone else to go with someone else it's because they felt like they knew them because they listened to their podcast.

John: Yeah.

Joe: So I think the personalization of it is important. I think that for those listening that maybe an expert on an advertising business, content, blog, or a SaaS business, or an e-commerce business and you're wondering how the heck do you benefit from this, how would you start a podcast and what … how is it going to work for you? You're going to connect with people that are going to be experts giving advice and you're going to benefit from it in your own business being able to apply some of that advice and being able to pick their brain as well. In addition to other people that have had great success that may come onto to the podcast and share their story and may want to do business with you as well. You just never know what's going to come of it if you just help others and give. And yes it is business we're all in this to put food on the table and hopefully put some money in retirement and stop doing this someday when were not capable anymore but it's fun and it's enjoyable.

John: Yeah.

Joe: And we get to make a living from it which is kind of nice too.

John: Yeah and you know I say it's kind of personal and professional development that also doubles as marketing. Because you're enriching yourself, you're learning, you're asking questions, you're learning and you're also recording it and you're going to put it up on the internet and it's going to exist forever. So it's marketing that will be out there for you forever. And if you're asking well I sell a widget, it … I don't see how that's going to help me or maybe it's some other seller out there that you want to connect with or maybe it's potentially a buyer. I mean that's a great way to use that as a tool. It will help me with hiring, recruitment right? There's so many other ways that you can you can do it. I mean I'm sure Joe you've had this experience, I've had this experience when people come up to me and you have a conversation with them and they're just kind of like smiling as they listen to you talk because you know what's going on in their head they're thinking wow he sounds just like he does in the podcast. And people will say that, they'll be like man you just … you talk just like you do in the podcast. Well, guess what when I'm on the podcast that's me. I'm not putting out an act or anything like that I'm just actually being me you know. And we've had people that would go … a couple of people who came in to our event recently in San Francisco who had gotten to know me from the podcast and the funny thing is … and this takes a little getting used to, the funny thing is that they've been listening on their own time while I'm doing other things to episodes, past episodes, the whole back catalog and when they come up they feel like they've already built a relationship with you. That's wonderful because of the know like and trust process right? You are already that much further along so it then makes it just a lot easier to have a conversation with them around some kind of strategic partnership or a client … a relationship of some sort. It's just a lot easier. You'd move the ball a lot further down the field.

Joe: 100%, I couldn't agree more and I would recommend that everybody does it. For those that are going to events and I've been to many of them and I have that stigma of being a broker. We don't pitch at Quiet Light, we're just here to help so we have to get around that stigma some way. But I was at an event last March I think it was and I've had a conversation with two or three other people and this guy walked up and he just stood there and he started to shake his head up and down and you know at the right moment he just stuck his hand out and introduced himself. And that I think taught me a lesson. It's the hardest thing to do when you go to some of these events like this, you see groups of people talking and you'd say damn they all know each other. I really don't know anyone. It's my first time here. The reality is that even though they're talking and having a good time and having a drink and laughing they may have just met. That was exactly the case that night. The three of us had just met and this person came into our conversation not knowing whether or not we really knew each other and he was welcomed into it and that's what these events are all about. You should never be shy about walking up to somebody and saying hello. You should never be shy about talking to someone like John, talking to someone like myself if we have something that we can help with that's our operation. That's exactly what we do. We're going to give you any and all advice we can. And if someone like John and myself try to get their hooks into you for a commission they're the wrong people to work with. Just walk away, get what you can, and move on. But don't be afraid to stick your hand out and shake your hand and just say hello. It starts a conversation. It's the hardest thing to do but it's also the best thing to do wouldn't you agree?

John: I totally agree. Absolutely. Yeah. It's just funny as you're saying about having a stigma you know I think a lot of people feel that way. Especially when they're in business which most people are right? You're in business, you're at a networking event and you're thinking oh other people are thinking that I'm just going to try and sell them. I know this because people email me every day about this saying these things. And I think a lot of times we get stuck in our head a little bit and look I mean I totally get it. I worked for politicians. I've been a lawyer. I think I'm going to round up my career by working for the IRS or as a tax professional so just the most detested professions possible. So I'm used to being in that type of position. I totally get it but look if you approach not thinking about okay how am I going to get this person as a client as soon as possible and you approach thinking okay I'm just going to learn about this person. I'm going to learn what I can do if there's some recommendation I can provide. Maybe they're a huge fan of something else I'm a fan of and we can connect over that. That's it. That's all that matters. You're going to build up trust. You're going to get to know them. And then later there might be the possibility of doing business together but start with that first and that gives you a great foundation.

Joe: I agree if you do that enough your pipeline of new business will eventually fill up and it will be continually flowing.

John: Absolutely.

Joe: John, how do people find out more about you and learn about your experience and get to listen to the podcast and things of that nature?

John: Yeah, thank you sir. So Smart Business Revolution is the podcast on iTunes, Stitcher, wherever you listen to podcasts. SmartBusinessRevolution.com is the website. Rise25 is the other website and yeah reach out, I love hearing from people who heard me on a podcast so I appreciate it. It's a pleasure being here.

Joe: You're a good man John. Thanks for your time.

John: Thank you.

Links:

John's LinkedIn Profile

Smart Business Revolution Blog & Podcast

Rise25

Book recommendation: Give and Take by Adam Grant

Change is scary, and yes price trends do matter in the online marketplace, particularly if you are in the market for buying or selling a business. Today we're discussing the frightening possibility of tighter margins, particularly for Amazon businesses, as a result of the most recent US government tariffs on Chinese products. Here at Quiet Light, we get a lot of questions from buyers regarding what we can expect from the Amazon marketplace now and in the future. The reality is that entrepreneurs need to learn to see these changes as par for the course as well as opportunities for growth. The internet today is so much different than it was 11 years ago when we started Quiet Light Brokerage. In fact, we started the same year the first Iphone came out – to give some perspective on just how much things can change!

When it comes to the geopolitical nature of e-commerce, specifically as it relates to the US, who better to bring in than a Canadian? Today's guest, James Thomson, is a Partner for BuyBox Experts, a managed services agency specializing in marketplace management for brands, manufacturers, and resellers. He was formerly head of Amazon Services, the division of Amazon responsible for recruiting tens of thousands of sellers annually to the Amazon marketplace. He's crazy knowledgeable about everything Amazon. We're talking all about the tariffs and their potential impact on the e-commerce marketplace.

Episode Highlights:

• What tariffs are coming out and what tariff trends are going to affect business?
• Impact on first party sellers.
• Ways to work with and around these tariffs.
• How the manufacturers in China will see that they can suffer too.
• The length and scope of the tariffs' impact will have a lasting effect over time.
• Parallel imports may happen eventually, creating retail arbitrage.
• The foreseen impact for third party sellers.
• How the tariffs are creating more incentive for Chinese manufacturers to become sellers and sell products directly to customers in the United States.
• We discuss the consequences for Amazon sellers holding inventory.
• How Amazon monitors expected sell through rates to deflect inventory increases.
• Things sellers should keep in mind in order to keep their buy box percentages up.
• Indicators that there may be opportunities for competitors like Target to swoop in in certain spaces as early as the end of this quarter.
• If the tariffs prevail, one year from now will be the time when the retail increases will show.
• What countries might be viable alternatives to China as suppliers and when to start investigating those avenues.
• The people who end up capitalizing and doing well in situations like these are the ones that look at these problems as opportunities.

Joe: So Mark I just launched a listing a couple of weeks ago. It's under contract already, multiple offers, it went very quickly. Actually, it's a re-launch because when we launched last year it didn't sell because of flat trends on the top side, slightly down on the bottom side and we pulled it. And the owner of the business implemented all the growth opportunities that he wrote about and now business is up 27% so it went under contract very quickly. So for those people that are listening that don't think that trends matter they definitely do because eight months ago no one wanted to buy this. Eight months later it's under contract in what was literally like four days. And I can't say the price of course but the thing that I wanted to touch about in regards to that is that he's importing products from China and the potential tariffs have changed since we last listed the business. And so we addressed that in the client interview. We're trying to stay current with it and he has a person through his manufacturer that helped him with the proper coding of the brands. And there was a slight increase in terms of the landed cost of goods sold but it was so minute it really had no impact on the discretionary earnings or profit. And I think that this is a topic that we need to address more and focus on in our client interviews and make sure that the sort of scary possibility of tighter margins is really looked into because not everything is going to have an increase and those that do it may be so small that is a very tiny percentage of that landed cost of goods sold. Now you just had an expert on to talk about it, our old friend James Thomson, right?

Mark: Yeah absolutely when it comes to US issues and the geo political nature of e-commerce specifically as [inaudible 00:02:27.4] the US who better bring in than a Canadian? So, James Thomson, he is the first account manager within Amazon's marketplace. He's the co-founder of Prosper Show. He's a principal owner over at Buy Box Experts. The guy … I mean he's crazy knowledgeable about everything Amazon. And so we've been getting a lot of questions from buyers both on deals that are under offer right now and also from people just kind of trying to understand the landscape, what are we looking at here with Amazon in the future. So I thought let's go ahead and bring somebody on. Let's talk about it. Let's kind of dissect this. And he said a couple of things which are really really important about this and I'm not going to give all of it away because I need to tease of course so that people can actually listen to the entire interview but a couple of things. One, the nature of business is always changing. I mean the Internet today is way different than what it was when we started Quiet Light Brokerage. I'm actually just … I'm putting together a presentation right now for Ungagged coming up here soon early November and I'm taking a look back to when I started Quiet Light Brokerage. We started Quiet Light Brokerage the same year that the iPhone first came out so … I mean that's how much things have changed in just 11 years.

Joe: Wow.

Mark: I know right. So I say that this Quiet Light Brokerage was the biggest event of 2007 followed shortly after by the iPhone of course. Anyway let's get into the point here, James and I talk a lot about why are the tariffs in place, what is going on with these tariffs, what is the future of it look like, how is it going to impact e-commerce business owners, what's the hope of the US government with these tariffs. And I'll cut to the chase there the hope is that people start buying from other countries and most importantly what should you be doing about it. And on one thing that I'm just going to say here, I reiterate this at the end of this discussion with James. These sort of changes need to be looked at as opportunities among people who own businesses, among entrepreneurs. I've been an entrepreneur for 20 plus years now and the nature of the internet is constantly changing. Those who are looking at these changes and saying there is opportunity here, I have a great opportunity here to be able to adjust to the changes, find a new problem and solve that problem they do really really well. They're the ones that are absolutely killing it. Those who take a look at stuff like this and get all scared they end up leaving and not continuing onto the world of the Internet, their entrepreneurial career. So this is an interesting topic, very relevant to our time right now. Definitely, take a listen to it and then James also offered an email address if you have any questions for him to be able to speak about it. He's got a couple of really practical solutions that you can implement right away to be able to absorb some of these costs both in working with the factories and manufacturers in China but also just some very simple things that you can do on your side with your product launches and your products coming out to be able to pass this cost on. I'll say one more thing and I know I've talked a ton here; I'm kind of all around the place here. And I think it's really important to understand that everybody is facing these problems. When your costs go up 10% it's not just you, it's all of your competitors are seeing the exact same things. So it's a matter of how do you absorb those costs, how do you plan to be able to compete with that, how do you address your Amazon account so that you're not getting … losing your buy box share so on and so forth. Pretty simple stuff but you do need to have a plan.

Joe: Yeah and I think you and I have been around long enough that we know it's not the end of the world, it's just another hurdle that an entrepreneur needs to get over. Get over the hurdle. And knowledge is power. If you learn about it, focus on it, and if and when you decide to sell your business you'll have that knowledge and you'll be able to address and tell people how you addressed it. And for buyers, same thing learn about it. Not every category is going to have an increase in tariffs and increase in cost of goods sold. So James is very bright, one of the smartest guys in most of the rooms he's in so I am looking forward to listening to this myself.

Mark: James welcome back to the Quiet Light Podcast.

James: Thanks for having me, Mark.

Mark: All right so let's start off with just a quick introduction as to who you are. You have been on the podcast once before. I'm going to let you introduce yourself as far as your background … especially your background with Amazon and Prosper Show and Buy Box Experts.

James: Right. Well, I'm James Thomson. People may know me as one of the co-founders of Prosper Show which is an educational event for large sophisticated third party sellers on Amazon. I am also the partner for Buy Box Experts which is an advisory and account management company at sports brands on Amazon. And I spent almost six years at Amazon doing a number of third party related responsibilities including running Amazon services and being Amazon's first FBA account manager many many many years ago. So thanks for having me back on again. I'm looking forward to talking about the ever increasing challenges of being a successful seller on Amazon.

Mark: Well, I'm going to admit this is a show that I have been sort of dreading to do.

James: Yeah.

Mark: But it's really necessary and I know we've been starting to see more and more questions on the whole issue of tariffs. Before we jump into it real quick I am just going to give a shout out to Prosper Show. We go to a lot of shows at Quiet Light, Prosper show is awesome. If you're selling on Amazon and you're looking for a show where you can actually learn things and make good connections check it out, Prosper Show, what we're going to be there next March probably with all the booth and all that so.

James: Thanks Mark, thanks.

Mark: The thing is I'll make it for you because it's worth making. And also I don't want to talk about tariffs but let's talk about tariffs. And as everybody knows we've had one round of tariffs slapped on a lot of products coming from China, 10%. There is a threat of more tariffs coming out in January. And I'm going to fess up publicly to everybody to say I've really been kind of putting my fingers in my ears and saying I don't want to know about this, please make it go away. Let's get everybody up to speed on this as far as the tariffs that are coming out and what the general political landscape is that we need to be aware of in moving forward.

James: So just to be clear I'm Canadian. I don't vote in the United States. I don't get to decide who does or doesn't make decisions around the tariffs that are going to be charged. But for folks that haven't been paying attention Mr. Trump is dealing … or has decided to enter into a tariff war with the Chinese around basically what dozens and now hundreds of products that are manufactured in China will be slapped with rather significant tariffs when they're imported into the United States. As many the people listening in today will know these private label sellers gosh we have a lot of stuff made in China that ends up being consumed and sold here in the US. So I work a lot with private label sellers who are saying gosh I thought I had the opportunity to make some decent margin being a private label seller but now that my products that are coming in from China with this extra 10%, 15%, and possibly 25% tariff depending on what specific type of product you happen to make, gosh that's an awful lot of money and I can't really absorb that long term without it destroying my financial situation. So what do I do? I think to tackle this problem we should split it into two parts. There are going to be those companies that wholesale products to Amazon. We'll call that the vendor central relationship and then there's all of the companies that are using seller central to sell those products themselves; two very different situations. Let's start with the … either one is really very easy but let's start with the vendor central situation. If you are a brand and you are bringing products in from China and you're turning around your wholesaling to Amazon … not surprisingly Amazon doesn't buy price increases and they don't really care about your profitability. That's your problem and so if you're now faced with an extra 10 to 25% COGS … 10 to 25% of higher COGS, absorbing that amount unless you're making insane margins most of us can't absorb that kind of money. And so the question then becomes A. can you get your manufacturer receipts absorbed? Some of that in cost reductions and we've definitely seen some situations where some of the overseas manufacturers are willing to make certain price concessions, especially if the North American sellers are buying the inventory in time to be able to avoid some of that initial tariff. So if you're prepared to load up on some of your inventories, if you load up on your inventory now then next year are the first lot of x-tiles and units your Chinese manufacturer may absorb some of that extra cost. Because the reality is the Chinese manufacturers they're also going to suffer through this. It's not just the American brands, it's Chinese manufacturers that also recognize that there isn't going to be as much demand unless they absorb some of this cost.

Mark: Yeah and let me just make a point here real quick. I mean the goal of this and the Trump administration has been pretty clear, the goal of this is to get China to change some of their policies towards the US. And so they're literally trying to disincentivize business owners importing from China you know a lot of these 1P and 3P as you put it, the vendor central and the other people selling through Amazon to buy from other countries. And so they're going to make … through these tariffs they're just making business more expensive for everybody. And ideally, there is going to be this internal pressure from the Chinese manufacturers on their government to be able to change some of the policies of the US. That's kind of big picture.

James: The problem is … and I speak anecdotal experience, I live close to the harbor in Seattle and I see all the used tanker ships come in and more than half of them come in from China. So if I think of all this product that comes in that we consume here in the United States is being manufactured overseas if more than half of that's being created in China the reality is our overall cost of buying stuff, whatever it is … plastic stuff, apparel, whatever … it's coming from China. And so unless some of these other countries can very very quickly not only ramp up production but more importantly identify themselves to companies here in the United States that otherwise buy from China, unless they can do that and find a way to say hey come and make your products over here instead of in China, the reality is this is going to take a while and some of this pain around higher costs is going to affect both the manufacturers in China, companies here in the United States, and of course consumers in the United States if in fact some of those costs overruns or pass through as higher resale prices.

Mark: Right and just to be clear I'm not a geopolitical expert by any means but China has been pouring money in subsidizing their manufacturers for a really long time to be able to ramp up production levels that can provide basically manufacturing services to the entire world. That's why their economy has really been juiced up to where it is today. So for people to look elsewhere to other countries it's going to be darn near impossible for somebody to find prices that can be matched in other countries that may be seeing this as an opportunity. And even if a country does pop up for a particular industry it's going to take years for the capacity to be able to grow up to the level where we really need it to grow up to.

James: Yes.

Mark: So this is a problem. Let me ask you a question on this real quick and I want to get into specifically how Amazon is treating this as well. You started to get into it. I think it's going to be an interesting conversation but isn't this going to affect everybody the same way? And at the end of the day I mean it's the consumers that you would think are going to be left on in vague. If there's a 10% tariff on Blue Widgets, all the Blue Widget sellers have to pay that 10% tariff.

James: Yes.

Mark: So eventually their cost is up so they're going to have to raise the prices as well. Is this really going to impact the businesses themselves in that way since they could in theory pass that cost on?

James: So there are a couple of things here, and different people go to market on Amazon with very different distribution approaches. So if you are buying product overseas, bringing it in into the United States and turning around and trying to wholesale it to Amazon through a vendor central account, Amazon has made it clear they do not accept price increases. This is your problem Mr. Brand; you need to figure out how to absorb this. So what I see happening is some brands will say gosh this is inconvenient right before Q4 our biggest time of the year. Some of these brands will say you know what, as much as we hate to do this we will suck it up and we will absorb this cost. And so many of these manufacturers will end up with much much smaller margins while Amazon continues to have the product at the same price that it had and some consumers won't see a price increase on those items. Unfortunately … and that's fine short term but long term these manufacturers are going to say unless I can find cheaper sources of manufacturing elsewhere I'm no longer going to carry these products or I'm no longer going to sell them to Amazon 1P or I'm actually no longer going to sell them anywhere on Amazon; that's one option. There is another type of distribution model that's very common on Amazon which is the product diverter, and I'm not passing judgment on the product diverter, the reality is there's a lot of product diverters on Amazon; companies that gray market source products. And so the opportunity for companies to go and proactively can parallel import and bring in products from let's say Europe that came in from China nut they're now coming in from Europe … I see an, potentially in some categories there will be a significant increase in parallel imports because somebody can buy that product in another country and to the extent, they're not necessarily answering all the questions correctly about where these products are manufactured there will be more opportunity and more incentive for companies to do parallel imports. Again so as to be able to bring products in at a cheaper price than what they would otherwise be paying if they bought directly from China.

Mark: Is that illegal or do you literally have to be lying on your forms in order to be doing this parallel importing?

James: Oh please deter, I'm not suggesting that anybody does this. I'm just saying I fully anticipate this is going to happen.

Mark: Sure.

James: And so if the other thing is if the tax … if you can ensure the tax has already been paid at least once there may be opportunity for you to capitalize on nonetheless being able to re-import it back in and be able to source it. Brands don't like product diversion and so knowing in there will be an issue there for brands long term having their products … basically, people capitalizing on retail arbitrage across borders and getting cheaper prices in one place so as to capitalize on that. What is more likely is if there is a price discrepancy in another country and you can buy the same item in Europe for 10% less than you can here in the US, some folks may decide to … depending on the math, it may decide to start buying stuff indirectly just because they can capitalize on price discrepancies in order to make things work. The logistics are more complicated but in the end, they still need to make some money and they're prepared to take on these extra logistic steps just so they can make some money. All of this is short term because in the long run if a brand wants to continue to wholesale on Amazon they have to make money. That's what … it's why we're all here. And so what I anticipate happening is some brands are going to stop supplying certain products and they're either going to go and find production in other countries or they're going to find completely different products that don't involve China at all. And so that will mean that some products that we as consumers rely on … and I think for example all the Q4 toys that get sold in this country, the vast majority of them are made overseas and a huge proportion of those are made in China. And so it will be interesting to see specifically in the toy category what happens because with Toys R Us going out of business this year, there's been a lot of discussions that some of the other brick and mortar retailers are going to be very aggressively going after Amazon. If Amazon for some reason in most of the toys that Amazon gets come from 1P, if those manufacturers for some reason say you know what we can't make any money selling you these products we're not going to sell it to you because you're not prepared to take a price increase, we may have a situation where Amazon actually runs out of stock on an awful lot of top selling toys. Which is bad, bad, bad for Amazon. So I think the toy category of all categories is the one that may push Amazon short term to accept the fact that it is going to have to absorb some higher costs in order to have inventory on absolutely critical selection in Q4.

Mark: Interesting, so let's move over to the 3P and I have also some questions maybe about competition to Amazon which hopefully we can get to but let's move over to the 3P. What's the impact that you see and I know we're all crystal ball in here but what's the impact that you see for 3P sellers? And 3P for anyone that doesn't know this would be FBA merchant fulfilled, anybody that is not selling vendor central but still selling through [inaudible 00:18:43.2].

James: I'm going to separate 3P into two groups there's the resellers and there are the private label sellers. If I'm a private label seller and buying stuff from China I make the decisions myself on what pricing should look like. So if I have to raise my prices 10% to maintain my margins I can choose to absorb some of that for competitive purposes. But I always have the flexibility of saying I'm going to raise my prices. An important … a very tactical issue, let's say that you're selling your product for $25 today on Amazon and you added list price information into the Amazon catalog, you can't just raise your price from $25 to $30 to cover your extra price. You need to also increase your list price because otherwise, Amazon's going to flag you in selling products significantly above the list price and also press your Buy Box. So you've got to make both of those adjustments at once. As it relates to resellers the question becomes if you're buying from a distributor or a brand here in the United States that you're then turning around and reselling who's splitting the cost increases there? And that's going to differ widely on brand by brand. Some brands may already have a lot of inventory here in the US and they say well we're just going to ride this out and hope this tariffs disappear sometime in Q1 or Q2 in which case they're willing to … you know if they're using some kind of a lifo … I'm sorry a phyto model of inventory there may not be any price increases at all for wholesale pricing. And so the retailer can turn around and continue to sell the product at the same price. The problem is all you need is one competitor in the same space on Amazon the whole price is tight and not move prices up and if they've got lower prices and they're still doing the right thing with organic search and driving traffic they may end up with a higher proportion of total traffic on their products. Granted it's very low margined traffic but it is nonetheless higher traffic. And so the question is how long is any particular reseller prepared to take lower margins for the benefit of higher traffic which isn't necessarily high quality business.

Mark: I mean in defense here we see this happen anyways where we have people come in and try to break into a market and will purposely go low margin just to be able to break into that market. But this is kind of who could hold off the longest with the higher prices.

James: So there's been a very important development this week with Mr. Trump getting out of the postal shipping rate agreement with China. There was a significant subsidy that the United States was paying for overseas companies to ship products one order at a time into the United States. A lot of these individual orders today don't clear customs with any customs payments. And so if you got a 25% tax for example on those products, if they're brought in bulk but there's no tax on the individual orders, you don't also want to create a situation where there's that much more incentive for example for Chinese sellers to send products one at a time in the United States by removing some of these price subsidies on the shipping costs that will help to balance things a little bit. But you still have a situation where a Chinese seller can send an individual order into the United States and realistically most of those orders are going to get through without customs being applied on those on off envelopes and boxes. So in many ways, the tariff only creates more incentive for Chinese manufacturers to become sellers and to sell products one at a time in the United States. And so that continues to be a challenge.

Mark: Let me ask you about a tactic that I've seen sellers employ here in trying to get ahead of potentially … I know there's threats of an additional tariff being imposed here coming January so possibly increasing the tariffs even more. And I've seen some sellers bulking up on inventory because of that; trying to get ahead of that. It has kind of a cascading effect though from what I understand if you're a 3P and especially using Amazon's fulfillment services. Does Amazon look closely at the amount of inventory that you're keeping with them and are there consequences for maybe having inventory sit on their shelves longer?

James: No it was early this year Amazon evolved the way that they designed how much FBA capacity every seller has. And it has to do with the sell through rate of each individual skew that they choose to put into FBA. If you're selling a product that sells a thousand units a day, Amazon will let you put as much of that in as you want. If you're selling a product that sells one unit a month you can't load up five years of inventory. Amazon actually won't let you put that in the FBA all at once. And so as much as a seller wants to ramp up their level of interest they hold in FBA, Amazon will cap it based on their expected sell through rates. So if you happen to sell products that sell fast enough you're not going to be putting more than six months of product into FBA, great you may load up a little bit more. But if you start bringing in pallets and pallets more than you'll ever sell in the next six months, Amazon's going to put the kybosh on that. And you're going to have to figure out where to hold that inventory. So I think it's a system that basically corrects itself. I think it's worth a seller today if they're planning on doing this in the next four to five weeks they should create an FBA shipment right now to see if Amazon even allows them to put whatever level of incremental inventory into FBA. They may well say sorry we don't have that space because your expected sell through rate doesn't by any means justify the load of inventory.

Mark: And I know a lot of sellers are using even a 3PL of sorts just to store Amazon inventory that they are eventually going to ship off to Amazon and that's … if you're not doing that and you store inventory for anywhere longer than a few months I think because of the storage rates you can get much better storage rates elsewhere but that's something to look at.

James: So to that point if you do have to bring in an awful lot more inventory and hold the inventory so as to bypass the expected additional duties that come likely in January, one thing we may see is an increase in the number of sellers that decide to start using seller for full prime. And that's a mixed bag in terms of whether it's a good thing for sellers, in some situations they may be able to use the higher shipping costs that come with seller for full prime that may be adequately smaller to offset the expected cost of having to pay another 15% in a tax on imports. But you know we may see some … in certain categories we may see more sellers deciding to use seller for full prime in part because Amazon says you can't send that much stuff into FBA but you know we'll have to have to see what happens. My view is I don't see this tax staying in place indefinitely. I see this is a game of chicken between two countries. And quite frankly I think the United States has more to lose than the Chinese do because the Chinese low cost production capabilities in China will continue to be there even if those costs are a little bit higher now that there's tax added to it. And so reality is we Americans, we like cheap stuff and so if you go to the source of cheap stuff … and so I suspect at some point that there will be some counterbalancing that happens and it's a matter of how long can people hold on without going out of business.

Mark: Yeah. Let's talk about the Buy Box a little bit. You touched on this earlier about things that you may want to watch out for if … when your changing prices on your site. What are some things people should keep in mind if they do decide to pass on some of those costs to the eventual customers at the end of the day? What are the things that they should watch out for so they don't lose their Buy Box percentages?

James: Well the first one is you still … when you offer your product you want to make sure that it's at or below the list price. So if you're having to increase your price over whatever the current list price is today then you want to make sure that you can update the list price information. If you are a reseller of someone else's products and they haven't updated the list price then you're going to be in trouble because you can't sell that $30 item for $35 when the list price is 30. And if the manufacturer controls the list price or you as the reseller don't have brand registry ability to go in and update the list price you're going to be in a situation where you don't have the buy box because you've had to sell the product in a price above the list price. So start that conversation now if you don't have the ability to change the list price on a product you resell have that conversation now because you need to get that information updated. Otherwise, the brand is going to lose out to any other brand that has the ability to update their list prices. So even if the brand you're reselling doesn't want to do this you need to explain to them listen if you don't do this everybody that sells your product is going to be in a situation where they can't win the buy box which means the consideration of your brand or other brands is going to be significantly hampered.

Mark: That's good advice. Let's move on to Amazon and their adjustments that they might be making on their side and also possible competitors. And I'm thinking Wal-Mart here who has been pretty aggressive in trying to eat in Amazon's market share. I don't know how successful they've been with their two day shipping on anything, no membership fees everything else. You've already described how Amazon is right now at least probably pretty unforgiving as far as price increases on them [inaudible 00:27:44.9] side.

James: Yeah.

Mark: Do you see any opportunity here for some of these competitors and even if it's not one competitor maybe that fragmentation of Home Depot taking care of their pit space and actually increasing their presence target doing the same, Wal-Mart doing the same, and have you seen any indication of this yet?

James: Well what I have seen … I go back to the toy example, what I've seen is that both Target and Walmart are aggressively looking for ways that they can win in the toy space this Q4. And it only takes one or two of the big toy companies to tell Amazon 1P that they're not prepared to send any shipments unless there is some modification to the pricing. Unless that happens … oh, I'm sorry if that does happen then I think it could be a very painful Q4 for Amazon in a category that they actually absolutely need to win. But the problem with Amazon is they usually win anyways. The reality is if they can't get it directly from the distributor or the manufacturer they find a secondary source. They go and find a distributor that will unload a product at low margin, Or they will do parallel imports. So I think if these duties remain in to place for 12 months it's going to be next November or December that the pain is really felt by brands. Because right now a lot of them already have inventory, they already brought in to the United States. While they may have paid 10% extra duty it's not 25% duty but at the time you have long term 25% duty that absolutely is going to impact what their retail prices look like. So as bad as it may be coming out of this December if that tax remains in place for another 12 months that's when companies are going to have to say okay we're going to have to discontinue certain skews. We're going to have to launch new versions of the existing skews under different UPCs so that we can have new list prices on these items. I've seen situations already with some companies where they're already loading the 2019 version of an item with very slightly modified packaging but that's the product that's going to replenish the 2018 version that they're very soon going to run out of and have no plans on ever replenishing as long as the tax is in place; i.e 2019 version cost 25% more retail because everybody has to continue to make money doing this.

Mark: Okay one of the things that we've been trying to educate people on especially in this e-commerce space there's a lot of people out there that want to find a couple of evergreen products that are just constantly bringing in cash. And then there's always the question of well how do you handle competition? When we brought it up time and time again now on this podcast where look good product based companies come out with new products on a regular basis and so that's actually … it's something I haven't heard before. That's a great way to be able to address this is come up with a 2019 version or a slightly different model version which your cost can absorb that new price and be able to work it out to the price that self. Last thing I want to talk about, let's assume that this does last for a while, you know a year or more. The intended effect is for US importers and retailers to move and look for other countries. So what are some of the countries maybe that people can start looking into. And I know it's going to vary industry by industry but what countries might be viable alternatives to China if people want to start looking at and look for manufacturers in different places that could possibly replace their current supply?

James: I don't know how much I knew I can add to this. I mean a lot of the companies I know they look in Thailand and Vietnam today. Some of them look in Laos. I know the Southeast Asian countries, a lot of them have low cost production but they're not necessarily known for the sophistication of bringing together manufacturers the way, for example, Canton Fair does. And so I see an opportunity here for … let's say I'm the business development government organization in Thailand or Vietnam to the extent of they can put together a major event that will attract thousands of manufacturers and thousands of overseas buyers, I mean I see that as being rather significant. If you can spin up a Canton Fair like event or even a very small verison of that in one of these other Southeast Asian countries. Part of the challenge here is visibility. There already is an Alibaba that helps people find every Chinese manufacturer. Is there a similar concept in Vietnam and Thailand? To this point, it's nowhere near as visible and so it becomes something that basically has to be centrally organized either by large associations of manufacturers in country or potentially the government. And so if one of those countries is able to step up and do something like this and create visibility that will help. But let's be honest even if I said to you your product can be made in another country basically the same way starting today you're still looking at six months of testing and small minimum order quantities to verify and make sure that you have got the right payment structures in place. And so I would challenge everybody who's listening today if we're looking at a 12 month or a long term situation with this tax being in place you've got to start these conversations in January figuring out where is my alternative source going to come from. Because it's going to take time to work through and figure out am I really getting the same quality? Am I really getting the same delivery promises and so on from my overseas manufacturers that are now coming out of a different country?

Mark: Yeah. So I've been an entrepreneur now for going on 20 years and the way … I would just like to close out here because some people might be hearing this and saying oh my gosh this is so incredibly scary. And what I want to say is this, these things happen. These things happen in business. The conditions change all the time and the people who end up capitalizing and doing really well are the ones who look at these problems as the opportunities that they are and figure out the way to make it work. There will be people who drop out. There will be people who do not pay enough attention to this and don't make the right moves. And so when we see these things rather than getting all scared and actually ironically enough this episode is probably going to air right around Halloween. I think we're going to publish it the day before Halloween and do our email newsletter advisory the day after … so you know a good timing for that. But to understand that there is definitely opportunity here. I think there's a couple of really good tactics. I think James you brought up just one simple one was just bringing up a new version of products that have and make them a 2019 version. That's a really simple type that we can have to see what's going to happen. And then also just have your ear to the ground as to where you can also find other products. So this has been really really enlightening. James, thank you so much for coming on. Where can people reach you if they have questions about this or honestly your work for consulting with Amazon sellers is unparalleled so if they have other questions even unrelated to this where can they reach you?

James: I can be reached at [email protected]. All those emails go directly to me. And I appreciate your time today Mark.

Mark: Yeah, absolutely. Thank you so much for coming on. Again James is one of the best in the business by far. Prosper Show check it out and then if you have questions feel free to reach out to me and I can do an intro or [inaudible 00:34:40.8] James. Thanks again for coming on.

James: Thank you, Mark.

Links and Resources:

Email James

BuyBox Website

Prospershow

James's LinkedIn

James's Book on Amazon

A private equity firm is in the business of buying, growing, and exiting companies, hopefully for more than they bought it for. For every industry there is a private equity firm out there.

As private equity diversifies, what are the key trends changing the nature of the deal? Today we are discussing where private equity firms come into play in the buying and selling space.

Today's guest, Andy Jones, is the founder and owner of PrivateEquityInfo, a private equity database that helps investment bankers and private equity firms close more deals by taking a look at the top trends to look out for when scouting an acquisition target. One major trend we discuss is the holding periods for private equity and how those can often reveal the direction of the overall economy. Studying these and other trends are useful for potential buyers to understand what to look out for in an acquisition deal.

Episode Highlights:

• Andy's history with Private Equity Info.
• A look at a typical private equity deal.
• What sellers should know about the private equity industry.
• Buyers don't want the ugly marbles. Why buyers prefer asset deals over stock deals.
• What ebita sizes private equity firms are looking for and why the size requirements are in place.
• Smaller ebitas and add-on investment trends in the private equity arena.
• Why larger acquisitions still make more sense.
• Best ways to find the private equity for your business.
• We touch on the topic of microfunds; what they are and how they work.
• Typical deal structures that Andy comes across.
• Why business founders don't have the same appetite for risk as PE firms.
• The typical holding period before an exit. How long is it?
• Exuberance trends typically show up when those holding periods experience a decline.
• Andy shares his top ten trend list for 2018.

Joe: Mark, I understand you had a great conversation with Andy Jones from PrivateEquityInfo.com.

Mark: Yeah private equity is one of these things that buyers and clients that we talk to and even … I'm sorry sellers and clients that we talk to and buyers as well often ask us about. Is private equity buying online businesses? Are they buying Amazon businesses? Are they buying SaaS businesses? Where do they start buying? When do they … what are the lines for it? How does it work? Andy Jones is somebody that I've known now for probably seven, eight years. He's always been very primed by complimenting me on the content we put out. So anyone that complements me is immediately somebody I like and so we talked about having him on the podcast-

Joe: Hold on just a second, you're awesome Mark. You're a really good guy and I'm proud to be your partner.

Mark: I thought you're stopping the podcast here.

Joe: No, I'm just complementing you; that's all. Like you see I just wanted to be liked by you today.

Mark: Okay well continuing … thank you, Joe. We will talk about increasing your equity stake in Quiet Light Brokerage after this call.

Joe: Awesome.

Mark: It's kind of easy guys, it's really that easy. And so Andy has PrivateEquityInfo.com. It's a fantastic database of private equity activity across the spectrum. So anything from manufacturing to the online world but something that they do at PrivateEquityInfo.com is they take a look at the trends and what is going on in the world of private equity and these can be leading economic indicators. And he gave me one trend in particular, I'm going to let him get into the details of it but it's the holding period for private equity. Because private equity, what they typically do for anyone that may not know that they're going to make a lot of investments with the goal of growing these businesses but then exiting these businesses as well or at least a portion of these businesses that they're building up. And the holding period, how long they hold them can really tell us a lot about the direction of the economy and what to anticipate next. And so they look at this holding period, the average number of years that a private equity is hanging on to business before they exit it. Right after the recession that holding period went up to like a number of I think it was like eight or nine because they bought at the peak and they had to wait for the economy to recover before they could exit. So I'm going to tease here and just say listen to the podcast to see what the average holding period is right now, what number we want to look out for to be able to understand okay maybe the economy is going to start to retract a little bit and use that for the decisions we want to make.

Joe: This is going to be fascinating. I think we're going to learn about the future of the economy here as well. Hey before we move to the podcast I just want to give a shout out to Mike Nuñez from affiliate manager. Mike, you're probably out riding your bike right now listening to this podcast, I appreciate all the positive feedback you've given us in the last few months. Thank you very much. Let's go to the podcast with Andy Jones.

Mark: Andy thanks for joining me.

Andy: Thanks for having me.

Mark: All right let's start off with a little bit of background on yourself and where you come from. I'll let you do that part.

Andy: Yeah I'd be happy to. So my name is Andy Jones. I'm the founder and owner of Private Equity Info. We're an Austin, Texas based company. We own several websites but our flagship website is really PrivateEquityInfo.com and this is where we provide and emanate research database that helps investment bankers and private equity firms and even the corporates close more deals. So I have an engineering background and investment banking background that's kind of what lead me onto this journey of entrepreneurship 14 years ago.

Mark: Yeah pretty cool and you are one of the people … I will confess you feed my ego whenever we send out messages by saying really great content Mark. I'm like hey, I like this Andy guy.

Andy: Yeah yeah.

Mark: Good stuff, I like that. Well cool. We're going to talk about private equity today because you have PrivateEquityInfo.com and really good information through that site. How long have you had that now?

Andy: So yeah we launched 14 years ago, January of '05 so this year is our fourteenth.

Mark: I remember when everybody's site is full. It was like three, four years old and somebody who had like an eight year old site it was like ancient.

Andy: I know I'm that guy.

Mark: You know you're that guy right? I own a 20 plus year old site and then Quiet Light Brokerage this is going to be our 11th anniversary coming up next month.

Andy: Wow.

Mark: Actually by the time this episode airs we've surpassed 11 years so … really really cool. So again private equity was what we're going to talk about today. We get this question all the time from buyers. People want to know things like who's buying online businesses and would private equity be interested? At what levels are private equity interested in and how do those deals sort of differ from other deals? And you've got a pulse in the industry more so than anybody else that I know so I thought hey let's talk about this. I think this is-

Andy: Sounds good.

Mark: -sort of thing to go into. So let's talk about just kind of the typical private equity deals from what you are seeing and from your experience. I mean what is a good intro for somebody who owns a business that might be thinking about selling and they think well maybe private equity would be interested? What should they know about this industry in general and the different PE firms out there?

Andy: Okay. Well, that's a pretty broad question; let me see if I can tackle it from the few angles there. So I'm going to come at this from the assumption that there is some general knowledge of private equity but maybe some inexact knowledge and I'll just kind of ram a little bit and we can flesh it out. But essentially let me just start with the basics what a private equity firm is. A private equity firm, they're in the business of buying growing and exiting companies for hopefully more than they bought it for. And the way they do that is they typically raise a fund through their limited partners. And limited partners are typically institutional money, pensions and retirements, high net worth individuals, [inaudible 00:06:43.1] and such. They raise a fund that has a 7 to 10 year lifetime and the private equity firm then puts that money to work by buying companies. And their hope is to grow those companies, produce cash flow, and exit at a good return on investment for their limited partners and also for themselves. So that's kind of the mechanism of how they work. We can create … we can talk about how they create value later if you want to but you know is a private equity firm the right buyer for your company? Well now that depends on a lot of factors; primarily size but also industry. So by way of size, there's a huge range of private equity firms out there and they go from billions of dollars of interest in price value, company size down to single digit millions. And so there's a long tale of the firms out there. But at some point, the transactions get small enough that it's not really just logistically practical to make investments of small sizes for a platform investment. But I will also say that for add-on investments, you know private equity firms often have this model whereby they buy a platform investment and then we have add-on investments to it. Most private equity firms have size criteria for platforms but for add-ons, it can be more strategic interest rather than size. And so usually there's not a lower limit on the add-on acquisitions. Process size is one limitation, geography being another, and industry. If you have an industry there is a private equity firm interested in it. There's a lot of private equity firms out there. The trick is finding which ones are interested in your company and that's where we come in.

Mark: Yeah so I want to talk a little bit about these different sizes because we … as a broker I get these emails all the time from private equity firms that are out there. They're reaching out to just these large databases of brokers and they typically are saying hey we're looking for investment opportunities in manufacturing with this, that, the other thing. A lot of times it just does not fit what we do at all. Obviously, there's no reason but they always list a minimum EBIDTA that they want to see. And typically what we're seeing from the ones that reach out to us would be EBIDTAs of a minimum of 10 million, 5 million, 2.5, and in some rare cases 1 million but almost never below that.

Andy: That sounds about right.

Mark: Yeah. So what do you see with that? I mean, first of all, I think we can ask the question why, [inaudible 00:08:58.2] the listeners of everything we're all … it's obvious but for those that may not be cashing out of that why do they have these size requirements in there? And then second of all if you comment on that breakdown I mean are private equities looking for these [inaudible 00:09:10.6] smaller in the world of bootstrapped entrepreneurs a million dollars EBIDTAS is a decent deal but for private equity firm that's tiny little bits of money there. How does that break down?

Andy: Yeah let me answer those in reverse. So the spread you kind of set it right. Yeah most of them are 10, 25 million in EBIDTas that's for the bigger firms. In the upper middle market, firms are going to be and middle market firms is targeting down the 5 million down to 1 million in EBIDTA [inaudible 00:09:36.7]. But there are firms that will do it. And I think really the trick there is if you're operating in that size range, the trick is not to be considered a platform investment. You want to be considered an add-on investment. And the single best way to find the right private equity firm for your company if you're selling it and if you're down in that range … even half a million, a million dollars in EBIDTA it's getting pretty low. But it is to use a database like ours to keyword search based on keywords that describe your company the portfolio companies that are owned by private equity firms and we allow you to do this. You can search almost 80 … I guess a little over an 80,000 of them now and find those portfolio companies that are currently owned by private equity firms and that is … yeah, they look like your company. So that's the single best gauge to determine a private equity firm's fit or interest in your firm and your company is if they've already made a platform investment and you might be a likely add-on. So that's the process I would go about to discover the sort of rifle shot hits that you're looking for and you can use a tool like ours to find that. Why the size limitations? Well, they have a fund and they have to deploy that money. And if you have a hundred million dollar fund and you're deploying it at single digit millions at a time it is too much work. You'll never get it deployed. And that's really just driving your limitations there.

Mark: Right. I think we have addressed this at the podcast topic a while ago on should you buy big or should you buy small. I've addressed this topic in a number of times as well where if you have the resources available to be able to run a larger enterprise from just making your dollars work; the larger acquisitions make so much more sense. The workload, the resources that go into a lot of internet companies doesn't really scale at the same rate as the revenues do. And so it makes sense to do that. So for a private equity firm to come in and try and buy out a company doing 250,000 in EBIDTA just doesn't make much sense. They're not going to reach the goals that they're looking for. And also the capitalization rights, I mean how large are these private equity firms when … how much capital are they trying to deploy through acquisitions?

Andy: It really depends on the firm. You know if you wanted to … I don't know off the top of my head but I've done studies on this based on our data. And I've done some data size and probably shoot to our blog. So if people want to visit our blog you can read more about it but it's very typical to have fund sizes and it'd be hundreds of millions of dollars.

Mark: Right. So let me take a little bit of a diversion real quick. I want to ask you a question that a trend that I've seen in our space here in the online acquisitions space, I call them micro funds because I don't really have another word for them.

Andy: Okay.

Mark: But these people that are raising 10 to 15 to 20 million dollars and they're doing it following that private equity sort of model of bringing in those investors. Their goal is to bring in a few companies, have some synergies between those companies, grow them, and hopefully sell them off. Are you guys tracking those at all at this point?

Andy: So at that level what we typically see is a firm that has raised capital because they have an operating partner with very specific industry experience and they're looking to buy a company or two. In that case, they're likely not in our database and it's not because we don't know about them, it's just for fit reasons. Most of our customers that we serve are middle market investment bankers and because of that, we want to provide them a data set of firms that are likely going to close the deal. And if you're buying one or two companies the probability of you closing that deal is pretty small especially if you've already closed one.

Mark: Right.

Andy: So the firms in our database are only those firms that have committed capital that are closing deals in the marketplace. Or sometimes they're from a sponsor but they have to demonstrate that they're actually closing deals. Because at the end of the day investment bankers and firms like yours you want to close a deal so you want to make sure that the people that you're approaching from our database have some probability of making that happen.

Mark: Yeah that makes complete sense. All right let's talk a little bit about … and again you've said this a couple of times so I'm going to reiterate it but talk in generalities when I'm asking you some of these questions. Every firm operates differently. Some like the sort of incubator method … you really it's going to be different from one from the next but I want to talk about typical deal structures. And let's say that we have somebody who … they built up a company and let's say that they're in that seven figure EBIDTA range or low eight figure EBIDTA range as well. I know I'm working with people on that low eight figure EBIDTA range, they're looking for an exit down the road and they're definitely in that private equity territory where that's what makes most sense.

Andy: Okay.

Mark: So when you're approaching private equity firms with a business … let's just focus mainly on the seven figure EBIDTA range, the one to five million, say that we have some people there, some PE firms there. What sort of deal structures do you typically see? Are they completely asset based acquisitions, are they stock, are they management buy-outs with the managers staying on and if there's no general rule that's fine too of course.

Andy: There's no general rule but there are some factors as you know that sway the rules. Let me organize my thoughts on how to answer that. So asset deals versus equity deals, there's no all encompassing rule for that. Generally speaking, let me just sort of educate the audience a little bit and there's a good analogy for this. If you think about your company as a bag with a bunch of marbles in it and marbles are the assets, buyers like to come in and pick out the marbles they want. That's an asset deal. I want this marble, this marble, and this marble and that's what I want; that's an asset deal. You keep the corporate entity and all the other marbles I don't want. Whereas a start deal … equity deals says I will just buy the bag and all the marbles in it; good, bad and ugly. Well as a general rule, buyers prefer an asset deal and sellers prefer start deals because it's just [inaudible 00:15:21.8]. Buyers don't want the ugly marbles; the litigation, the potential liabilities … you know that stuff, so just for your audience though typically we find that the buyer wins because they're the ones with the money. So if you want a deal done you're going to do an asset deal. So there's not a hard and fast rule, the exception to that is often times when there's customer contracts in place that you don't want to have to renegotiate, you don't want to create a new corporate entity and then often times those become start deals just for just the core purposes. That's the other part of your question, you're looking at a seven figure in EBIDTA deal.

Mark: So the basic structure of it. I know we've run into some cases where we've worked with private equity firms but they wanted to have a management team in place before.

Andy: Right.

Mark: Or the structure of the deal you know as a cash or as a cash financing and as a-

Andy: All right, again it's going to be all over the place but generally speaking if the owner is retiring … owner-founder is retiring, the seller that's one case whereas if they're wanting to stay on and run it and grow it that's another case. If they're retiring it's going to be more … mostly a cash out kind of deal. But if there's a continuity there and they're selling the vast majority of their equity to a private equity firm retaining a small minority stake on the order of 10, 20% that's a different sort of deal. And that's probably the preference for most private equity firms. Again we're talking generalities. All firms operate differently. If you have a strong management team that wants to stay on the private equity firms are going to be interested in that. If they're interested in your company because of its industry, its size, its growth trajectory, and its promise to go on forward they want that management to stay on and they want them properly incentivize and aligned. So typically what we'll see it's not unusual at all to see a certain sort of enterprise value established at the exit of the majority of your stake. And then the private equity firm infusing that company with capital and all sorts of tools to create value. And then having a subsequent accurate equity exit whereby the original owner's second exit is as much as or more the first exit. It happens quite frequently. It doesn't mean it will happen obviously but it's not so unusual.

Mark: Yeah and I think that falls in this territory of thinking outside the box of some of the regular deals that most people think of. I talk to a lot of sellers who they want that 100% exit, they got in love with the market but they moved on. But sometimes a really good deal is if you do find that good firm involved just getting that partial exit or that first exit and then that second exit later on can be like you said just as lucrative or if not more lucrative as you got this thing behind you. Let's talk a little bit about 2018 and some of the trends in the-

Andy: Let me add … I'm going to add on to that a little bit before we move on.

Mark: Yeah, please.

Andy: So one of the things that people I guess wonder is how … why is it a private equity firm can come in buy a majority position the equity and create value where I couldn't? A lot of that stems from they're just … they don't have their entire net worth tied up in that company or a huge swath of it whereas an owner and founder does. So they can come in and infuse it with capital where an owner would go I don't know if I want to throw the rest of my [inaudible 00:18:29.6] that I got in the basket. The same basket is already all in. And so a private equity firm and can take greater risks because it's a small percentage of their portfolio in total. And you know and as a bootstrapped operation there's a mathematical limit to how much you can grow your company without outside capital. It has to do with your profit margins, there's a straight mathematical relationship. Your profit margins are X your growth can be Y and no more. So your opportunity for outside capital is debt or equity and founders oftentimes don't have the appetite for debt and this is where private equity can come in and infuse the company with capital at a risk for them that's much more acceptable than it is for the owner-founder and try some things that are maybe riskier and get that company to grow through multiple expansion and taking on your projects and what not. So that's kind of why they're able to do that whereas an owner sometimes isn't going to take that leap of faith.

Mark: I think there's another aspect to that as well. I think … I'm glad you stopped me with that, we talk a lot on this podcast and conferences, just people that we talk to in general; entrepreneurs. These bootstrapped entrepreneurs or even the guys that have come in and maybe bought something smaller and that growing it. I put them in that same category of this bootstrapped entrepreneur who this is their livelihood and if it's not 100% of the livelihood it makes up a good part of it. A lot of people are not operating with an aim towards an exit. Maybe it's in the back of their mind so a few things here and there and they do this but a private equity firm has this holding period. They have this goal of we're growing this, we're going to get the cash flow from this, and in most cases … in a lot of cases, they're looking for that exit with that company as well where they could profit from it.

Andy: That's right and it drives a huge sense of urgency day after day after day. And once you're owned by a private equity firm, it's hit the ground running. It really is because they're driving that growth because they need to grow the company and exit it before their fund timeframe runs out and so it's a bit of a race. With that comes a lot of operational efficiencies, they'll add to your institutionalizing the company in terms of process fees and measurement and systems in short governance and it's all the stuff that you should do as a company but sometimes that stuff falls and kind of cracks.

Mark: I'm going to make a plug so Walker Diebel who works with Quiet Light Brokerage and how he's the executive producer of a number of documentaries and one of them is Print the Legend on Netflix. And it's about the 3D printing industry. There's a really cool part in there where you see [inaudible 00:20:58.0] go through this transition of bootstrapped you know the classic starting in the warehouse garage everybody is really agile doing what they have to do and then they take outside money and it becomes institutionalized. And one of them … I cannot remember what her name was but she said just like I call this part trying to put the skeleton into the jellyfish, trying to get it back on in a jellyfish.

Andy: That's a great analogy.

Mark: It is. It's a great movie by the way. Print the Legend, you can get on Netflix and again that's my genius plug for Walker.

Andy: I love it.

Mark: Yeah. So let's talk about 2018, let's talk about some of the trends that you're seeing in 2018. Actually no let's back up we're going to talk about that in a minute because we've just said that they buy these companies with a goal of exit. What is a typical timeframe? What is the holding period that most companies are … most of the private equity firms are looking to hold companies before doing that exit?

Andy: We do a report about every six months to update the holding period and we say well of all the companies that have exited in 2018 how long were they held and we compare it to six months ago and 2017, 2016, going back in time. And I set you a graph of this beforehand and we can post that if you want to or whatever or make it or you can visit our blog and see that study. But generally speaking, I think most people would say look the general private equity holding period is 3 to 7 years. That's the right answer. It's fairly generic and that's kind of all-encompassing but I wrote down some stats here. The medium holding period right now as of a couple months ago is 4.8 years. So of all the companies that have exited in 2018, they were held just shy of five years. By way of comparison, we saw a max holding period of 5.6 years in 2014. Well, why was it so long then? Well if you think 2014 and you subtract out 5.6 years, if you're looking at companies [inaudible 00:22:48.7] and say you're looking at companies that were bought at a peak of evaluations right before the recession. So those are companies that are portfolio companies owned by private equity firms that got bought at the beginning of 2008, unfortunate timing, and then just hit the recession and they just had to hold a lot longer to either breakeven or realize any value. So that increased the hold rate. And we saw a minimum conversely in the year 2000 when we have a .com boom out of 3.0 years. And we saw another minimum in 2008 you know at the peak of that it bubbled there at 3 ½ years. So that leads me to think that if you start getting around … I'm going to say holding periods of 4 years or less it might … maybe it's an indicator of a little bit of exuberance in the market. And so right now we're at 4.8 years and it is declining. It is consistently going down every time we track. So we're aiming to the 4, we're not there yet.

Mark: That's fascinating data. We've actually had that conversation internally quite a bit as far as the trends in the market and what we're thinking. And what we're seeing right now we're seeing one of the more aggressive markets in the 11 year history of Quiet Light. Now granted Quiet Light Brokerage when I first started it was 2007 and we were really just getting our feet wet and getting go-ins. So we didn't have a lot of data … real useful data then we hit a recession. So you take the first six, seven years it's pretty bearish. They [inaudible 00:24:13.3] are working with.

Andy: Right.

Mark: So comparatively like this is the time that we're in right now feels really good and strong and that [inaudible 00:24:19.9].

Andy: And we can talk about statistics because one of the great things about having a database is that it learns itself to this during data studies and slicing and dicing a data. It really pops out interesting trends. Right now valuations are high. No secret I think everyone in your industry knows valuations are high and I'll actually tell of you guys a little bit here or your world of investment banking and business brokerage. If you are a company owner and you are thinking about selling in the next 3 to 4 years and it's even on your horizon there may not be another time that is this good for valuations. It is as good as it gets. I mean there are a couple of economic factors there. There is sort of meta … macro-economic factors that are happening that are making this as sort of sustained seller market but that'll change. Those factors are just real quickly … money is cheap right now. Monetary policy has made interest rates low. It's cheap to borrow money. It's fueling a lot of growth. Companies are growing but consequently, those people with money are looking for where can they get a better return on my capital instead of CD's and treasuries and stuff like that. So they're looking at the alternative asset space. They're putting money into private equity which has created more private equity firms than ever before, larger funds than ever before, looking for the same deals as everybody else. So there's a huge … from a financial buyer perspective there's a huge demand. And then the other factor that plays with that is a social factor and that is you probably thought this as the eye. When the baby boomers were going to retire and then we had 60's we thought that there would be these huge influx businesses for sale as they start to retire and that largely didn't happen. They just kept working. The baby boomers just kept working and that only eventually come out a buy plan but right now because they've held their businesses longer they've built up a pent up demand because they're limiting the supply. So, on the one hand, you have money in trying to chase deals, on the other hand, you have fewer deals. That's what's creating this sustained seller's market where valuations are high. It will change. It will go back down and we're going to remain. You cannot … this is my opinion not data, but you cannot make money on the assumption that someone else is going to over pay in the future years like you did today.

Mark: Right … no I think that's absolutely right that when … last year on this time I wrote one of the last blog post that I personally wrote. We started the podcast instead. Before we started recording here I was telling you that I like doing this [inaudible 00:26:49.6]

Andy: Yeah, right.

Mark: But I talked about the history of what we've seen over the years and during those recessionary years boy if you've got a 2.7 or 2.8 discretionary earnings for a business it was a really solid deal. And today people are looking that and saying why would I ever sell for that. Understanding multiples, they're relative to the time, they're relative to the supply and demand within the marketplace and what money out there and what other investment vehicles are out there as well. Even when you're thinking about when to exit when you're thinking about buying and growing and turning this around in the case of a private equity firm that's crucial data to really kind of hone in on and understand. What are you seeing trending this year? I know I was contacted by Buzz Feed a while ago about private equity firms starting to get into the Amazon space and really looking more towards e-commerce specifically within the Amazon Marketplace. What are you seeing as far as different trends in the private equity space or is there any industries that seem to be popping up right now?

Andy: There are you know we studied the portfolio companies and what's changing over time. I sort of have a top 10 list for 2018 that I'll run down with you. On top of the list has always been and maybe always will be manufacturing.

Mark: I see that all the time.

Andy: Everyone likes a solid just basic manufacturing company, no frills just consistent cash flow, consistent growth; predictable money. With that said manufacturing as a percentage of the portfolio companies is way less than it used to be. So coming hot on its heels are … number two and three and four positions which number two is software. So far this year software deals are a big deal. At number three is technology. This kind of go together and it makes sense. Anything that you can scale like you can with a software and technology private equity firms are interested in the ability to find the concept that scales with very low capex which software and technology tend to do. And also have this component of recurring revenue also a big theme for the private equity firms. The others I'll run down … number four was health care. Interestingly enough number five was data businesses, information services which I'm on. Six would be oil and gas which is interesting because there for a while that went away. When it went down so cheap and thus nobody … everybody was losing money in all the oil and gas services companies and the PE firms just weren't doing that but it's coming back. Seventh is medical. Eighth, construction which has been interesting, traditionally we would not see much construction related private equity investments mostly because it tends to be very capex heavy. Number nine was transportation and logistics. And number ten was engineering so another kind of services company.

Mark: Fascinating. The software I presume SaaS businesses with kind of all that-

Andy: Well that's the preferred. Yeah, that's the preferred model. Not always but that's where everybody's going. Everyone's going to SaaS and everyone's going to the club.

Mark: Right. What about consumer products? I mean that's obviously not in your top ten list.

Andy: You know off the top of my head I don't know where it is. There are a number of private equity firms that specifically build consumer product brands and focus on that exclusively. Some well-known firms they have done really well. I know that for a while food and sort of ingredient businesses we're pretty hot. I don't know if that trend is still as hot as it used to be but consumer brands is definitely a hot industry it's just not on our top ten. I hear it all the time.

Mark: Sure. But what are some of the things that private equity firms just love to see when they're looking for an acquisition target?

Andy: Some of the things we already touched on recurring revenue. I mean it's all about stability of cash flow. So I would say stability of cash flow spur the quality of earnings kind of companies. Scalable businesses that have strong cash flow and a track record of growth. And those firms that are maybe a little more venture capital minded might say you know what's the opportunity here in terms of can this just blow up as a trend or is this software tool just meeting this huge demand in the cloud space that's going to be the next revolution of software so that sort of thing. But really it's all about cash flow stability or scalability.

Mark: All right then what are some of the things … I mean people will probably come up with conclusions but what are some of the things that they'd want to avoid?

Andy: Yeah so in addition to just like the opposite of those private equity firms it would be difficult to find firms that will do project based financing as opposed to just an outright purchase acquisition. They don't want to finance your projects. They typically will not do projects that require a lot of capex. With that said I did say construction was in the top 10 so I am not sure about that but traditionally it's just hard to scale companies when you have to put a lot of money on upfront for property client equipment. And then lastly at least for the firms that we track, we do not track those that are not in this particular data site those that invest in real estate. In a traditional buyout M&A private equity firms, we just need a longer time horizon than seven or 10 years to make sure that real estate pays off like it should. So what we do track in another data model institutional real estate investor, that's a different animal altogether and probably outside of this group but … out of this conversation but they typically are just not going to buy real estate.

Mark: I've got a question for you on general multiples and let's talk software and tech and if you don't have this data right now I know I'm kind of … I'm springing this on you, I didn't prep you on this one.

Andy: That's all right.

Mark: But we talk often that there's a bit of a multiple shift when you get to certain levels in EBIDTA.

Andy: Yeah that's right.

Mark: This is something that companies don't typically get the strongest multiples as you move up we see these multiple shifts. What are some of the demarcation lines that you see for EBIDTA as one of these multiples that you start to inch up? Or is it just kind of a gradual scale where you're seeing that happen?

Andy: You know I don't know if there is definite lines and I don't know if I'm going to know the answer to that question but just let me talk kind of about a hand waving principles around.

Mark: Sure.

Andy: I think it just kind of scales generally with size. Companies that are bigger tend to be more stable. And when you're more stable that's perceived to be less risk for a buyer and therefore more valuable and hence a higher multiple. And so that is why one of the methodologies that private equity firms use is this buy and build platform an add-on strategy. It is you buy the platform company, you take a smaller add-on investment, you buy it for … I'm just going to make up a number, 6X EBIDTA and suddenly you put it in, you fold it into a bigger company and that same sort of producing asset is now repaid X because it's part of a bigger company. So you got a 2X sort of free value out of that built on. And I can remember meeting with … I won't name the name, but a private equity firm we're meeting with one time we we're working on a deal back when we used to do deals and he was outlining that strategy for me. He's like yes it's really not just rocket science, that's what we do. It's pretty simple and you buy it for a five and you get seven automatically; free money.

Mark: Right. I have these conversations with buyers over the years that their first footsteps into the space of buying … in our case online businesses start with maybe on Flippa and buy me [inaudible 00:33:51.5] out of $20,000 $30,000 sites and that was their appetite. The next thing you know they're doing an SBA loan and they're buying something bigger.

Andy: Right.

Mark: In variable … invariably once they have enough success that light bulb goes off in their head where they look at that and say wait a minute I can bolt on my company over here which is more valuable, a company that is less valuable here and if I can fill them in I'm getting this multiple jump and I'm adding value immediately. And in addition especially with the sizes that we're looking at I can buy something with EBIDTAs of 500,000 but if I buy four of these, combined them, now I'm not buying at a multiple of 2.8 or three. I'm buying at a multiple … I'm now able to sell it maybe at 3.3, 3.5 or whatever the case maybe for that industry.

Andy: Right.

Mark: It's this double whammy of the valuations that go up. And as that light bulb with them goes off for where then the next thing I know they're building their fund around to be able to do that.

Andy: Now it's easy for us to say it's much harder to implement. So you can say you are just free money. Yeah, there's a lot of hoops you got to jump there to make that happen and integrations and all that. And it's hard work and that's why not everyone is doing it. But if it is kind of conceptually not that difficult to understand.

Mark: Right, okay where can people find you if they want more information and if they want to start kind of exploring this world of private equity outside of the blog that'd be a great place to start but what if they're finding for more information?

Andy: So you can go to our website PrivateEquityInfo.com at the bottom there's contact us, you'll see my phone number and my email. I'm happy to take calls. I'm happy to answer your emails. If you have questions about private equity, questions about your business and [inaudible 00:35:32.0]. Just pick my brain that's fine. We're happy to do that. We love to talk to customers and potential customers and help people.

Mark: Very good. Hey, thanks so much for coming on. I can see you having [inaudible 00:35:42.3] 2019 rolls around and we get in to some of the trends there. Start paying attention to these holding periods that are happening I think that's a really cool stat to be able to be tracking here. And also just kind of see where the trends are with these top industries that are kind of popping up as time goes by here.

Andy: Yeah well thanks for having me. It has been fun. Let's do it again.

Mark: Yeah thanks, bye.

Andy: All right bye-bye.

Links and Resources:

Andy's LinkedIn

Andy's Company

PrivateEquityInfo blog

Ben Carpel has purchased two of the largest listings from Quiet Light Brokerage in the last six years. One is a SaaS business, the other a publishing site. In this episode of the Quiet Light Podcast, Ben shares how he raised funds and beat out multiple offers in both transactions.

In his pre-entrepreneurial life, Ben was an institutional investor. He sourced deals and made business investment decisions as part of a larger investment fund. At the time, he played no role in the management of the businesses purchased.

Over time, Ben made the conscious decision to move into the digital space where owning and operating the company entirely would be his new role. He did this through raising funds, negotiating professionally, being likeable, thinking about others, and never over-promising and under-delivering.

If you want to raise funds, be a better buyer for yourself, for your investors, and negotiate and win on competitive deals, this Podcast episode is perfect for you.

Episode Highlights:

• [0.32] Who is Ben Carpel
• [3:40] Are the multiples higher or lower in the online space?
• [5:32] Three Steps to winning in multiple offers scenarios.
• [9:07] What two buyers stood out in Joe's own transaction.
• [11:04] What makes Ben a great buyer that sellers love to work with.
• [14:59] Why doing what's best for the seller is important.
• [16:10] Does being a "nice guy" help or hurt?
• [17:03] How to raise money.
• [20:09] Why being open and honest matters.
• [22:07] Get your "money" involved early on.
• [24:42] The upside of things going sideways.
• [26:14] Why managing communications is critical.
• [27:59] Don't do this…it kills relationships.
• [31:14] What will win in the long run.

Mark: Whenever we do these podcasts we'd like to have a nice clear hook that we want to kind of tempt listeners with. Something that you're going to learn, something that you're going to pull away from this episode and a real actionable item but sometimes it's really just good to sit down with a buyer who's been super experienced, has a proven track record of doing really really good work and have been successful in what they're doing and today we have that sort of a guest. Joe, you sat down with Ben … is it Carpal or Carpel or do we know?

Joe: You know what I think I say I've been saying Carpal for years but it's Carpel. We'll let him pronounce it properly and just go with that instead.

Mark: We really need to improve in this part of our podcasting career. We should stick to brokering. All the same Ben we won't rank as far as how much different buyers have bought from us but Ben is the definitely one of our top five all time buyers as far as what he's done through Quiet Light Brokerage. And you spent some time talking to him about how he's financing some of these deals, how he has been [inaudible 00:01:40.7] money and also just some of the things that we can pick up [inaudible 00:01:45.1] we can pick up from somebody who's done as much as he's done.

Joe: Yeah if anyone out there listening is thinking about making an investment in a web based business they should listen to Ben's approach. Because it just makes me, the broker, want to work with him more and more and more. He's easy to work with. He's always trying to under promise and over deliver. He's continually giving updates. And he thinks first about the seller, trying to make the deal work for them. Naturally, it's got to work for him but he doesn't mind overpaying for a great business that has incredible growth opportunities. He comes from or came from years ago the larger investment banking world where he worked for a company Family Fund and they would buy larger manufacturing companies. He took a lot of what his mentor shared with him there and brought it over into his own world which is him working from his house and running two now multimillion dollar businesses. He's bought them both from me, purchased two or three others along the way but it works. He's got a system in place and a process in place and one of the most important, we'll touch on it, I won't give away too much but it's when he has money behind him, an investor he brings that investor into the mix early on. And with a business that he bought recently we had multiple offers and Ben made the choice to bring the investor in on the original conference calls with the seller and that sealed the deal and that's why he was chosen over the other two.

Mark: That sounds great. Well, again I think these conversations are super useful for anyone that is interested and just kind of been a fly on the wall. For somebody that's been there done that and done that well. So why don't we go ahead and get to the interview and see what we can pick up?

Joe: Hey folks it's Joe Valley at Quiet Light Brokerage and today I have got a very special guest. It's Ben Carpel. Ben is a buyer and he's actually bought two of my largest listings. One for just under nine million dollars, another by my math just under four-ish. But that's just my math; it all depends upon how you work it out. Ben thanks for joining us on the podcast.

Ben: Thanks for having me Joe. I'm happy to be here.

Joe: I'm glad you're here man. Hey, listen I would love for you to tell your story. Let these folks know who you are. Give them a little bit of background on yourself if you wouldn't mind.

Ben: Perfect. The quick overview is a Midwest guy born in Minnesota actually where at Quiet Light is based, where Mark is based. And I grew up kind of in the investing world actually a little bit. So I was doing institutional investing. And what I mean by that is I was an investment professional. So I was a sourcing, negotiating, structuring, evaluating deals always though in the context of managing someone else's money. So myself, my former colleagues we are there to make investment decisions for investors in a fund, [inaudible 00:04:38.0] fund. And about six years ago now, seven or eight actually maybe closer to it I was at a place that invested in a lot of growth companies, a lot of growing businesses and small businesses and the trend I saw was it was entrepreneurs of all shapes and sizes. And I knew Joe since I was a little kid like I knew I kind of wanted to always have that operator and that entrepreneurial role. I just didn't know when or how or when or why or what it was going to entail all those big questions. And I knew at a certain point it would happen so I kind of I guess really it was these digital acquisitions, the digital businesses that made my switch purely looking at investments into more okay now we have to deal with operations. So I wanted that, I wanted to seek out … we have customers to deal with, we have vendors and suppliers to deal with, we have strategy and marketing sales to think about. Whereas in an investment world you're thinking about that but you're more disconnected from than the actual operations in the business. So like I said about six years ago we were seeing … again a lot of people that had started businesses of all shapes and sizes, all different industries and I was inspired by that and I wanted to get into that. And I knew I think location independence especially now in 2018 is a big thing for a lot of us and I knew a web based or digital based businesses can be a path for that. Currently, I'm based in the West Coast but open to living and moving … we're all over, I mean I know a lot of your buyers come from all over the place and I think it's a big advantage that Quiet Light deals and box the table consistently. What I've seen, what we've been on, there's a location independence factor to it. So it's a big plus for me. You can kind of put roots where you need to be for your kids or your family or your friends. You can choose to live and work where you need to be. That's been the case of the businesses you and I have worked on together as well the one that's been sold. Well, my ramble just ended but the short version is former investor turned I guess operator via high quality Quiet Light deals. And I got the chance to put my investment skills to work and do the things I craved in sales and marketing and customers and vendors.

Joe: That's interesting from your former investment world where you were the investor in an institutional sense did you find that the multiples were much higher than what you're looking at in this online world than with a deal in the operator space?

Ben: Yes, very very much the case and it still persists to that day. So for the past decade, it's gone up and down a little bit depending on the broader economy and depending on supply and demand. But I can consistently say that when you're buying or when buyers and sellers are negotiating in the standpoint of maybe a traditional brick and mortar business such as a legit manufacturer or factory manufacturer if you will those multiples, or a distributor, or a wholesaler, a publisher whatever it may be they tend to be higher. And so what's great for buyers in this space and buyers looking at Quiet Light deals is they can … I would say affordable … relatively more affordably put their business acumen to work without having to invest in say real estate or the public stock market or private businesses at this fund level. So you can get a little bit … by definition, they're going to be smaller businesses and so there's more risk than buying into the S and P or an apartment building or whatnot but if you are really willing to put the work in and evaluate properly and operate properly I think the payoffs can be really attractive from a buyer perspective. And then from a seller perspective too I mean they're working with you guys and you're giving them sage advice, you're giving them a quality just advisement of what to do. It's a path now that you didn't use to be I think 10, 15 years ago especially. If you've created a digital business or an online business what are you going to do with that? How are you going to monetize it? But now Quiet Light becomes a path for sellers to exit something that might otherwise be a very illiquid investment.

Joe: Got you. So with each of the transactions that you've purchased from Quiet Light and from me specifically Ben you've been in a situation where there have been multiple buyers. You've had to compete with other buyers that approached it and maybe pushed the value up against your offer.

Ben: Yeah.

Joe: Can you talk a little bit about how you approach making offers and putting structures together and how you work with the seller in terms of making the deal a win-win for both of you guys?

Ben: For sure. That's a great question and as a buyer, you often don't know what the seller … the Quiet Light and the seller have all the cards and know what's going on but for me, I think it's two maybe three things. And the first is personality, the second is about just being upfront and clear managing expectations, and the third and is professionals. So I'll touch a little bit on those. So the personality I think in a situation where you and your clients are having two or three or five or 10 or how many bids at the end of the day the numbers are going to start to blend together a little bit but there's a big … I think it's beyond just the number on the paper. There's a reason a buyer chooses to look the seller and vice versa. There's a reason a seller looks in the buyer. Sometimes the personality fit is a big deal because it's this dance of going from two complete strangers you right there in the middle of managing everyone expectations and the end of the day it's two people having to work together in a transition for a few months and so you can't have two completely [inaudible 00:10:11.17] personalities. So I think a big … it's us being kind and considerate but as well as getting that same vibe from the seller too. So that's a big part of it. Second I talked about communication upfront. I think it's always been really important from the start to manage expectations and communicate even if it's disappointing blips of information here and there that we have to communicate. As you know Joe we've done these very stressful emotional sales and so for me what I've always done is to have empathy and put myself in the shoes of a seller and know what would they want to know, what do they … might be thinking. And as you know there have been times where in a stressful process we've had to deliver news that wasn't the greatest but the main thing is if we're communicating that and we're being clear about it I think that's a big positive for you and your clients to hear. And finally is the professionalism, I think that was I think a big part of what I learned from my … it's I'm grateful to my former bosses and colleagues in learning that skillset. It's not just a buyer trying to get the lowest possible price and extracting value and punishing a seller for … because every business out there is going to have positives and negatives and so I can't sit here and talk only about the negative in order to drive down price and value. I approach it as a professional it's like we're here to … everyone is incentivized to get a deal done, the seller, you, the buyer. And so for me, it's not about knocking down the flaws or the weaknesses of the business, it's about being professional and understanding and valuing what the seller has done and the hard work they've put in to get a business you're interested in. So it's the personality that kind of jives with that too but it's just being very clear, very communicative, very professional and not trying to take advantage of the seller. Because that's not what it's about at all if you have to pay market a little higher if that's the end of what gets the business to you end of the day you know that's what's going to be valued by you and your client.

Joe: Yeah let me touch on this just for those buyers out there that are wondering how do you compete with an all cash fire? How do you compete with other buyers when there's multiple offers? Everything Ben just said is absolutely on target. And I'm going to talk about it as if I was a seller because I have been a seller. When I sold my business through Quiet Light in 2010 I had five or six conference calls with potential buyers and two stands out. One the guy was just a jerk. This is one that stands out. He was rude, he cut my business down, he didn't let me finish my sentences and I kept thinking "Why am I even on this call? If he makes me an offer I'm not selling him the business." I wasn't going to do it. The other one that stood out was the person that started the call with "Hey man thanks for creating this product line. I've actually used similar products and it's made a huge difference in my life, thank you." and then he went on. Actually one of the shortest conference calls that I had but he was professional. He was … you used the word kind. He was courteous and he actually ended up buying my business. And I was happy to do business with him. If he had offered me $10,000 less than the other guy I would have taken it.

Ben: Yeah.

Joe: Simple.

Ben: I know.

Joe: Because it's a choice, a lot of the time sellers have choices even when they have multiple offers. And I've been in another situation recently not as the seller but as the broker where I had two offers full price 2.3 million-ish and one was an SBA deal one was all cash. The seller chose the SBA deal even though he had to take a 10% note because he really liked that seller. He was going to keep the staff in place, he was going to run the business well, had a … just a good fit. The cash buyer he felt like he was going to be really hard in due diligence, really hard in transition and he just didn't have time for that in his life. So keep that in mind buyers because it's really important. Now, Ben, I want to talk … we've done two deals together and I don't want to talk about the … I don't want to reveal names here or anything like that so we could talk big picture stuff. You've heard me say it and I'm not blowing up your ego or anything like that. I don't think you need it but out of all the deals I've done … and I've done like 52, 53 million in total transactions now, you stand at the top in terms of professionalism, the way a buyer behaves and acts and I'm always winging people in your direction. There's a couple of others and strangely enough on the last deal we had like two all-time favorite buyers were making an offer. So it's really hard. It's you and the other guy, Matt. Matt, if you're listening you're right up there. But on the first deal, we were in a situation where we had multiple offers and it turned out that it was going to be much greater tax consequence to the seller than we realized initially because he had a sequel operation. Can you talk about what you did and how you pivoted to make that work for him if you recall? I know it was five years ago, four years ago can you remember the details?

Ben: Yeah I remember that coming up I think towards the beginning, middle of the process and that's something that is often underrated and it's maybe this is an inflection point probably if you have a business as a seller that where you have to think about the tax implications of depending on the corporation but I think that's maybe on the scope of what we want to talk about today. But I remember for us it came down to just being willing to accommodate the seller's desires as it relates to the tax. So it was a little bit less favorable for us from the buy side but it's still got us the business. I mean at the end of the day again you're lining up offers, Joe and this seller is looking at everything and comparing everything. It's a competitive situation and tax can be a big part of that when it comes down to all the fees that come out and the taxes that come out there's a net cash. So for us, we were willing to say okay let's do something that benefits the seller because it's going to help nudge across. So from … you know as it relates to this, the structure that's going to be unique because when you're selling a business the business has been formed years ago there's not much you can do to look in the past but when that exit happens there's typically … it's a stock or an asset sale and is there the willingness on the other side of the Quiet Light table, is the buyer willing to work with you that maximizes the value. And for some buyers it may or may not make sense. I would say based on that transaction in the digital world as well as what I've seen in kind of that institutional world, typically more often than not if you're a seller and you're working with Joe buyers should be willing to come to the table in terms of needing what you would like and how you would like to structure that transaction. More often than not buyers will accommodate the seller, not always because there's sometimes going to be a unique quirk to a particular business. But again those are nuances that aren't even willing. And that's tax experts and legal experts that think about tail risk and stuff. Generally speaking of a buyer like myself or a digital buyer is going to be willing to work with you so it shouldn't be a big fear in the seller's mind I think.

Joe: Yeah and I agree and as you said you work around the situation so that benefits both of you. There have been situations in the last six years where I've had a buyer in due diligence try to take advantage and discount the price because of a certain situation. Everything was 100% laid out exactly as it should have been, there were no surprises but they felt as though now that they have them under a lot of intent they're going to try to pivot and reduce the price and it's just not the way that we work. Everything is fully disclosed up front. And in your situation I specifically recall there was a change in the structure; it benefited the seller. It helped him out and you were okay with that. It might have cost you an extra dollar or two or a thousand or two whatever the number might have been but in the long run, it got you the deal. It closed the transaction and I believe it's worked out fairly well for you correct?

Ben: Yeah exactly and when you look back at the tax and you calculated it it's something where if you're a bidder and you're a buyer and this is your goal to take over business and own a successful business this is a new show of the deals is the tax implications. So unless there's a particular quirk or nuance to a business because there's a liability or there's something unique about it I think it's best to work with Joe and his clients in doing what's best for the seller. This is a … it's again it's a big decision for them, it can be life changing, it's emotional more often than not and when it comes to these details they can matter. So yeah in the end as you just perfectly illustrated Joe that worked out best for him at the time and for us going forward.

Joe: I just have to repeat some of this Ben because it's … I know I should be so obvious, for those listening, buyers this information is coming from someone that has spent over 10 million on transactions. It's not I made a $100,000 $200,000 purchase, each situation Ben has been in with me and with Quiet Light it's been multiple offer situations where he's negotiating up against someone else and has bought the business by being a nice guy.

Ben: Yeah.

Joe: And thinking not only about himself but about the seller as well and he's gotten the deal done. The first one worked out great. Let's talk about the second one because you are not even 30 days in at this point right?

Ben: Correct. Yeah exactly.

Joe: So this particular business and again I'm not going to name names, not going to talk multiples or anything like that but I want to talk deal structure on this one in terms of funding. Because we had a situation where it was going down one pass and then we had to pivot.

Ben: Yeah.

Joe: And I was comfortable with pivoting because it was you. You had set up an alternate path just in case this one doesn't go I've got this one ready. And it took a little bit longer but it worked out both for you and you know what the business is growing so fast that the seller got to keep a whole bunch more money because he got to keep it for an extra 30 days. But let's talk if you will a little bit about how you come up with funding. How do you structure a deal? Where do you get … unless you're sitting … are you sitting on millions and millions of money in your account?

Ben: I wish, if I would we'd be doing this … I will love nothing more just to podcast all the time and do this all day long. Hopefully in the future but no I'm not.

Joe: So you're using other people's money.

Ben: In this case yeah.

Joe: Where you … you know you learned about that from the investor world so let's talk about that with someone that is new to this and may have a few hundred thousand to invest and is looking to buy a five million dollars business. How the heck do they do that? How do you do that?

Ben: Yeah so first and foremost guys if you hit that situation know that there's going to be some stress because you're managing expectations for Joe, for Joe's client, for the fund that's backing you, perhaps for a bank that's backing you in the fund. There's a lot of juggling. There's stress for Joe and the seller side and there's stress for you. So that's going to come up no matter what but how does that come about? You know just like almost anything private, it could be a real estate deal, it could be a restaurant or a bar, it could be a zone project, it could be a private business. There's … if there's I wouldn't say the word lucky but if you have a history with someone you know has capital behind them that puts you in a spot. But even beyond that you'd be surprised at the amount of just average guys … I was, I came up in and a pretty regular background and it shocked me out that there's a fair amount of people that just work hard and save their money and if you can tell a compelling story of why you should do a transaction with Quiet Light there is going to be a lot of support for you at that deal. But taking it back to the specific example that Joe and I worked on together the stress for me was … and you know I like to think and I as I said in the beginning of the call I like to have empathy. I like to have professionalism. And that means doing things with honor, so, for example, it was the capital of a former boss of mine they were very interested in the deal, full support. And from the start, they said okay don't show this to anyone else I want to back this deal. You work with Joe you've been the face of it. I want to put my capital work. That was it pretty much right Joe? It kind of … not only that but it wasn't just me, I also wanted to introduce that person to Joe and Joe's clients such that they had a face.

Joe: And let me let me say right now, no names again; that sealed the deal for you. Again we had multiple offers in the situation and what you did was you brought in the money into the conference call with the seller. And so myself and the seller felt much more comfortable when you were bringing in other people's money that those people got on the call, asked really professional questions, were professional, had the same kind of demeanor you did. And we just really liked them. It just made a difference for us and liking who you're doing business with it kind of matters.

Ben: That matters a lot, yeah.

Joe: Because as you said there's a lot of stress, this is for the person that's selling the business it's often … can be a lifetime event sale and they've got other people that they're promising things to and taking care of and over promising and under delivering is never what people want to do.

Ben: Exactly.

Joe: You do that very well so that particular buyer, the money though it disappeared on us.

Ben: It disappeared and the frustrating … the infinite frustration that I had to bear during the process and the recommendation of how to avoid that is perhaps a representative of what their money is. I knew from the start I could have made two or three or four called, this was my background and there would have been backing but I out of respect, out of honor when that person said Ben don't show this to anyone else I took them at their word I said fine. Knowing that in a rare event when rarities happen, it happened, they decided to back out. I was going to have to scramble and completely restart not only my process but Joe's time and his client's time. And that was going to be frustrating for them, it was going to be frustrating for me. Now I had confidence so I'd still be able to but I knew we'd lost a good six weeks of hard work from everyone's part. So the first thing yeah, the first piece of advice I have if you're using other people's money, if it's a rich uncle, if it's a rich fund, if it's cobbled three or four people I would say always the money man, the person with the account the big account get them in about there; have them meet the seller. As Joe said it makes a big difference rather than you just saying I'm an agent on behalf of someone else, I'm representative, I'm an executive on behalf of someone else; in this world, it makes a huge difference. The second piece of advice as Joe just said is if you're really serious and you are the guy passionate and wanted to do the deal it matters that you want to have your ducks in a row and potentially have a contingency plan as I did should that first fall through. Now like I said I had put my own self in the scramble due to how I do business and that was respecting them saying I'm not showing it to anyone else, we're going down this buyer path together and they backed out. They kind of put me … and as Joe you know they profusely apologized and felt bad for you, they felt bad for me, they felt bad for the seller.

Joe: They were very professional.

Ben: Yeah, they knew the implications of whatever analogy they want to use they knew the pile of what that they have put us all in.

Joe: Yeah.

Ben: But I think you sensed it, Joe and I think the seller sensed it that I was so determined for it to not abandon, not under deliver that I was doing … willing to do almost anything to make sure the deal would conclude and [inaudible 00:25:32.5] which it did. And it actually had a fairly favorable outcome because I was personally willing to give up a few things in terms of escrow, in terms of amount that they were a little bit more I would say not stripped down but more … their world was a little bit more maybe weighted to the buyer and I was more empathetic to Joe and Joe's client. So it ended up being a win. They had … Joe and Joe's client had … they waited an extra month but it ended up being worth it to them materially on a money perspective. So yeah the advice to buyer's is bring the money people on early, bring them to the table. Don't hide them there's no … you're not protecting their height, you know there's no upside to hiding it. Be upfront. Communicate the negative. When we had to do a three way call, it was Joe, myself, and my former colleague boss and they communicated that bad news but we had to. We just don't want to be sitting here as a buyer or a potential bidder having Joe and his client wonder what's going on. And then thirdly as a buyer, if you can and you really want that business again have that plan B have that plan C ready to go ready to pull the trigger should something bad in plan A happen.

Joe: Yeah. The key thing with the outcome there in terms of communicating the negative and them calling … not just an e-mail but a call and you're on the line, they were in line and conveyed the message that things went sideways where they were they can't continue with the deal. The outcome, in the long run, is if you ever call me again and love another listing and ring them in I'm going to listen because they were professional. They called and I'd love to do business with them. I know and you know why they said no to this one, it wasn't their choice. They had to say no. There was logic behind it to a certain degree but it worked out. Again like you said we pivoted the next step was another person really with the purse strings in a sense and the first thing we did was what? We scheduled a conference call.

Ben: Exactly.

Joe: We had to instill confidence in the seller of the business that we're not just dragging our knuckles that the business you still of interest to you and to the other source of funding and so we had a call. We set new expectations and managed them well. You actually gave us at one point daily updates which I think must have been driving you nuts because sometimes there wasn't much to report.

Ben: Yeah, sometimes there's not much … you guys you know these processes just happen and there's a process to them. There's not always a daily update. It's not like there's a daily sales report so sometimes you're kind of like okay this is the most minor thing I ever go put it but again buyers I recommend that communication and not just any communication but as a human being it's not just a transaction. So the vibe, the connection … it's the managing of expectations too; good and bad. You don't want to be in a situation … and of the first business we bought with Joe as I'm the operator of that business that's how I've chosen to run things. There's … we get dozens of emails a day from our customers who want a product feature, it's a software company so they want a product feature and always we're up front and we say we'll add it to the [inaudible 00:28:38.9] we'll add it to them both but we can't promise it a lot of the detail. And that's I think a big thing as a buyer, you don't want to over promise and under deliver because it's not just the client's time and their hopes and dreams but it's Joe's means. He is the gatekeeper, he is the advisor, he's the one who's been through this and advised so many big companies and so many professional sellers who have built unique business. You don't want to waste … as a buyer you do not want to waste Joe's time if you can. So managing … not just putting out an offer for everything you see, not just doing conference calls for everything you see, really waiting to make the right targeted strike for what's best for you so that you can judiciously use his time and his advice. And I think that's a big part is the managing of expectations.

Joe: Yeah, the advice I always give is … to buyers, look at his many possible listings that you can so that you know the right fit when it comes along and if you can act quickly. You don't want to be in a situation where you're not, you're sort of looking part time and then you like one and then you have to go find funding for it. By the time you come back if it's a great business, it's going to be gone. The other thing you absolutely don't want to do is be in a situation like Ben said where you don't bring the money person forward if there's somebody else that's doing the funding. Even if you're doing an SBA deal and there's two of you putting the 10 or 15% down. We had a situation recently where that was the situation, multiple offers, these two partners were chosen and one of the partners was not on the initial conference call and decided to walk away because of one particular situation which was fully disclosed in the client interview. It's all there but he didn't bother looking in advance. So the broker is thinking to himself and he gave the guy advice he said look you can't have this happen you call me again and if you're making an offer and someone else is making an offer my sellers are going to say what do you know about the two of them?

Ben: Yeah.

Joe: The broker is going to have to say well I had a deal with these guys and they just walked away in due diligence, his partner flaked.

Ben: Yeah.

Joe: The partner is still around yes so you want to be making use of the advisor broker's time as well. As Ben said we're all busy, we all have a lot of clients to work with. We work with as many buyers as we do so it's probably more actually buyers and some of them like Ben is just going to rise to the surface. When Ben sends me an email and has an interest in a listing, I'm like ah man I love doing business with Ben, always works out great, sellers love him and you going to get more attention than somebody that might have walked away on a deal for some strange flaky reason.

Ben: Yeah and that institutional lull that I came from originally, that same thing happens where it could be huge huge company but sometimes firms get a reputation for saying one thing and doing another and know that they become the shop where they're going to … in an LOI they say X Y and Z but you know at the end of the day it's going to turn out to be something less than X Y Z and it doesn't work out as well for the seller. And so that reputation sticks and I think from the sell side too. I think from a buyer what I can unilaterally say is both having closed on deals, bid on deals and looked but passed because it wasn't the right fit. And I say this not because we're just doing this podcast, but Quiet Light I think you know already has the best digital businesses and web based businesses out there that their reputation speaks for itself. Their ability to conduct, as a buyer too I've been talking about professionalism and what you need to do but it's a two sided coin. Sellers and the sell side needs to be doing the same and I've seen situations from other shops where there was not the most scrupulous behavior by the advisor the broker and it burns the buyers a little bit. So it's a two sided coin and some trust issue and at the end of the day we are all humans and the tiny mistakes are made may be here and there but it's honesty, it's communication, it's a big part of that. I use the word vibe but just the personality fit is what's going to get things done. I mean there's no reason to be cold and cagey and do what you can to get … extract value in this transaction. If the business is the right fit for you as a buyer you can pay 95% or 105% or whatever it is around that price and driving down the price and making the seller and Joe angry isn't going to win in the long run. What's going to win in the long run is you taking over that business and operating it with hard work and honesty and integrity and all the things that make the customers continue to be happy. That's if you overpay a little bit or you don't get them to drive down the price because you're not insulting them but it gets you the deal that's a very important consideration.

Joe: I think we have to finish it on that right there Ben. That was the best advice I think of [inaudible 00:33:28.9] give potential buyers.

Ben: Yeah.

Joe: All right listen man, I appreciate your time, I know you're a busy guy thanks for sharing your time. I look forward … it might be another three or four years before we get into it again but I look forward to it. Thanks so much Ben.

Ben: No. Yeah, thanks for your interest and your time too. And thanks for being again you're the great guy in this space. So I look forward to us working together in two, four years from now.

Links:

Ben's LinkedIn Profile

Plan your own exit – get an initial valuation

After 10 years in the music industry, Dustin Ray started to hear about entrepreneurs in the tech space and felt the pull towards the flexibility that the online entrepreneurial field had to offer. As Dustin points out, there is no ceiling in the industry – as long you can build something scalable, you can take it as far as you want. The notion that you can create a value and see return relatively quickly was also an intriguing concept to Dustin.

Dustin's company IncFile, specializes in the formation of business entities. Since starting, they have assisted more than 150,000 entrepreneurs and small business owners form their businesses. When Dustin got his start with the company they were not thriving but he and his team managed to grow it into an 8-figure company in a relatively brief amount of time. Today he's here discussing how modifying funnels and honing customer acquisition strategies allowed for that growth. We also touch on the challenges of scaling a team to that size in a short time span and navigating the growing pains that inevitably pop up.

Episode Highlights:

• How Dustin got into IncFile.
• The processes that Dustin and his partner put into place to ensure the rapid growth of the company.
• How IncFile is filling a gap and taking care of the stuff that no entrepreneurs want to deal with.
• Through streamlined tactics and low costs, IncFile has become the leader in the industry and has continued to grow despite increasing competition.
• Dustin shares the key elements to a good sales funnel and the tools his the team uses to work and refine their funnel.
• Dustin shares his a 3-point strategy for finding a good starting point to getting into entrepreneurial tech.
• How Dustin's company was able to pass those pivotal "choke points" that many growing companies experience.
• Scaling doesn't necessarily equate with hiring. Hire slow and get the right people.
• The importance of worrying about what you're good at and building on that rather than trying to improve what you are not good at. Double down on your strengths.
• Buyers who are often the most successful in their acquisitions are those who hone in on what they are good at.

Joe: So it amazes me, Mark, the people that we meet at these different events and that are just laid back casual seem like just good guys you want to go hunting or fishing with … not that I hunt or fish, it's been a long time. I live in a lake but I haven't gone fishing for a while or I haven't caught anything for a while. Anyway, Dustin Ray strikes me as one of those people. I met him at Rhodium a few years back; totally laid back. I think you introduced him to me and surprised me later when you start talking about the numbers and what this guy is doing and so humble yet doing such incredible numbers. You had a chance to have him on the podcast recently.

Mark: Yeah I did and Dustin is one of those guys whenever he and I talk on the phone and you know it's not as frequently as maybe I would like but whenever we talk it ends up being like an hour and a half conversation. Rest assured this is not an hour and a half long podcast but it could have been because he's got a ton of information. His background is fascinating. He started out in the music industry promoting some of the biggest artists that we know. He was telling me that when he was driving down through Las Vegas and seeing some of the artist's stuff on the board that are coming in, I mean these are … he knows who's behind these things. This was his industry for a long time but he decided to leave that industry and was really drawn to the internet world and got his start with a company that was not doing that great at the time. He didn't know it at the time but didn't know at the time and he's now a partner of that company. And really under his guidance and some of the other work his team has done they've grown it into an eight figure company relatively quickly. And really just through being able to modify their funnels, understand better customer acquisition strategies, and get that conversion rate as high as it can and really make it a product that works well for his customers. A really cool discussion about modifying those funnels, modifying your customer acquisition process but also we touched on and I want to have him back on again. I say this with a lot of guests but I definitely want to have him back on again about some of the challenges as well of scaling a team when you go from this one million in revenue up to five million in revenue, up to ten million in revenue and then beyond that as well. There's always this natural choke points where it's not as easy to scale that team and they've been going through that. They've been going through some of those growing pains but doing it really really well. So we talked about a little bit of that as well in this episode.

Joe: Well Dustin's much more interesting than the both of us so let's jump right to the podcast.

Mark: Sounds great.

Mark: All right Dustin hey thanks so much for joining me on the podcast.

Dustin: Hey thanks for having me, Mark.

Mark: I know you're a loyal listener like you don't miss a single episode of this thing so you know what we do. We know that we'd like you to introduce yourself. Why don't you give just kind of a quick background on yourself?

Dustin: Sure my name is Dustin Ray and I'm a co-owner at the IncFile.com. We're an incorporation service that services all 50 states. We help people form LOCs incorporations. We've been in business for a little over 15 years now and we've helped over 150,000 entrepreneurs get their business launched.

Mark: You didn't start in this though, I mean this is … you have a background beyond that and you … full disclosure you and I met at Rhodium. What was it three years ago now I think?

Dustin: Yeah.

Mark: Yeah and we talked over dinner a little bit and you shared some of your background. You have a background in the music industry as well.

Dustin: That's right so I kind of accidentally fell onto the tech space I guess you could say. So I grew up playing sports, going to school. I kind of grew up in the music scene and that meant recording stuff with friends and then throwing parties and club promoting and working at eventually a managing company, a record label, and then I went over and launched the hip-hop division for music marketing nationally for Monster Energy Corporation. So I was in the music business for about 10 years and it was ironic that we're here talking on the podcast because literally as I'm in the music business I kind of stumbled upon entrepreneurship in a podcast about it and that was kind of how I got introduced to the whole tech space. And when I was listening to just the different entrepreneurs … you know I didn't have any friends around me in the tech space. I didn't grow up coding. I'm not a coder. I'm not a technical person. So it was very much like an outer space experience when someone mentioned something tech. And so for me, it opened up a whole new world for me and it started speaking to every existence in my body about it. I love the fact that it was flexible. It's not like a physical store that you're at every single day. You need your laptop, you need your phone and you could be anywhere in the world. So I like that flexibility and I like the fact there wasn't a ceiling. As long as you can build something scalable you could take it as far as you want. And then the other thing, of course, is the trading was I mean the value creation right? It was like you would read an article and it was like how in the world would somebody build something in 18 months and then they're selling it or it's getting acquired for millions of dollars. Like how is that even possible? That was like a foreign concept to me. I thought you got work hard, put in the time, be a savvy investor and when you have a lot of white hair then you have your money. So that was kind of how I got introduced to the tech space and then I'll let you take it from there if I'm not rambling on but that was my introduction into the tech space. And then I found my way in through Incfile.

Mark: Cool. Yeah, I want to get into that but I just made a quick observation and something I've noticed over the years is that people who come from outside of the tech world depending on your background it's fascinating to watch what you're able to bring in. The music industry and the entertainment industry in general and you can correct me if I'm wrong but I'm pretty sure this is accurate; crazy competitive space right? You've got to be top of your game if you're going to be promoting artists and I mean everybody wants to be a music star of some sort. So if you're in that promotions game you've got to be on top of your game there. I mean-

Dustin: Yeah just like a lot of businesses I mean competition is fierce. You got a singer or a rapper or something on every corner and just like really in any other businesses it's how are you going to stand out? How are you going to break through? It's not always just talent. That's where it starts but it's really the first events that really … it's what separates an entrepreneur, a musician, an artist, a rapper from the next. So yeah it's completely … and it's not a pretty industry either. I mean you hear some of the horror stories. I mean you've got to fight and claw your way to just get the money that's even owed to you. It's not like we have this automatic draft where if you owe me it's got to be paid or this automated payments like we do in the tech space where it's automatically … an invoice comes in and it's paid. I mean in the music industry you have to have some fight in you. You have to know how to do all of that. Navigate and fight your way through to survive. And that does translate into any business but in tech space too I mean super competitive. Anybody can come in and make you either irrelevant with new technology or they could come in with more resources and push you out. So you still have to have that the same perseverance inside.

Mark: That's fantastic and I have a story to tell but I'm not going to tell it right now. Maybe you and I can talk about this another time or anyone that's listening if you meet up with me at a conference I'll tell you the story about the time I sat on an airplane and sat next to a multiple gold album recording artist who was sitting back in coach and had made millions and millions of dollars at the music industry and had almost none of it to his name because of managers and stuff like that that were taking the money from him. A fascinating conversation, a spoiler alert he was crying by the end of the conversation. So fun story but we would definitely go down a rabbit hole I don't want to get into right now. I want to talk about Incfile. I want to talk about kind of your background there, how you got into it and also the scalability and some of the challenges that come along with scaling a business like you have with Incfile. So that's about 15 years old, how did you get into Incfile in the first place?

Dustin: So I've been with Incfile now for 4 ½ years in all in perspective. So the way I got in was a good friend of mine and business partner for a time; we had a graphic design company. And parlaying into the music conversation we were working with record labels in designing all the marketing packages for some of these artists that they have. You know the album covers, [inaudible 00:09:31.3], mind spaces at the time, anything graphic design wise. And ironically through a mutual friend, my business partner now at Incfile who grabbed me in, co-founder Nick he liked for what he saw out there as far as one of the designs we have put out. And by way of a mutual friend, I got introduced to him and we started working in a design capacity for Incfile. And at the time Incfile was much smaller than it is today and so there was ups and downs and I started kind of building rapport and Nick and I shared a lot of the same philosophies on business and perspective. It was interesting for me at the time because just like I mentioned I was listening to podcast and super fascinated with this world at that time and this is back in 2009 probably. You know we started working, Nick was open to new ideas and I didn't have experience but I was just kind of sharing thoughts and experience because when you think about design you think about user experience at that time. I didn't have any training but a lot of it is just psychology. It's human behavior, human nature, kind of how people operate. And so Nick and I would collaborate on these efforts and be speaking late until the night and then into the early morning building that rapport. So at the time Incfile really needed to kind of turn a corner and so I started consulting with Nick. He asked me to help him to kind of redefine our sales funnel and our work process. And at the time it was a big deal, I didn't realize how big of a project it was for Incfile it was … there wasn't a lot of business coming in at the time so it was a kind of critical moment but I didn't know that at the time or there would have been more pressure. So I started helping Nick and we started collaborating on redefining the order process and it really was our big sling at trying to turn a corner. And luckily enough through the efforts and months that we put in doing that it started to turn a corner and things started getting better and Incfile started growing. And we kind of continued helping each other out over the course of the next few years and it just finally got into a point where we're saying look what we could do part time what could we accomplish together if we are both all in? And then that's when I'd left Monster Energy and jumped in all in with Incfile at the time. And that was in 2014.

Mark: That was in 2014. I don't want to get into specific numbers and ask you to be sharing numbers but you guys have been growing pretty much consistently since 2014 right?

Dustin: Yeah. We've been steadily growing year over year. Our business has been growing at a healthy rate as well. So anywhere between 50% to 80% year over year and that's both top line and bottom line. And so we really are at this point we're focused on growth. We're a growth company. And we're just constantly trying to redefine and push the anvil up to continue that growth.

Mark: Yeah. So let's talk about the funnel work that you did when you first came on. Did Incfile have funnels in place before that or did you come in and tweak what was already existing or did you have to kind of rewrite that book?

Dustin: Now we had to rewrite the book. And I mean, to be frank, this is both from Nick who's at Incfile and started the company and then myself coming in and helping. You know these are two guys that are just figuring out at how to go. He didn't have previous experience in the tech world or building an online business and neither did I. So it's literally just two guys figuring it out. So there wasn't any specific processes in place or any sort of funnel analyzation or anything like that going on because again it's back in '08, '09. Things are a lot more sophisticated now in terms of analytics and marketing and tools and things like that. But we were literally just figuring it out. We didn't … we weren't … at the time we didn't have a lot of data to kind of drive some of the decision makings. So we just figured it out as we went and that's why I think I said luckily we did something right and it started turning around. And to be frank and to be honest I mean we're still figuring out as we go. We've been growing and I guess part of that is intuition with part of the strategy that we're deploying. The other half is having a phenomenal team. We have great team members to help. I mean everybody is … it's an understatement to say everybody is working hard because it's beyond working hard. Everybody is really pushing a full play and we've been able to grow but literally, we're starting to figure it out and getting a little bit more pieces in place to be more strategic and more structured. But up until really recently I mean we've just been figuring out as we go.

Mark: One of the things that I love every time that we talk you're always talking about tweaking and finding other things of that sales funnel that you missed before. I absolutely love that because I tend to set and forget. A lot of times I'd get a sense from you guys that you're always looking, always experimenting with your funnels.

Dustin: Yeah and that's a good point to touch on because one characteristic too that Nick and I share is that we have this obsession with a fish in sea and process. And so tweaking it is really the game that we like to play. So we like to be building the product. We like to be refining it. We take pride in trying to be innovative and have the best product in the industry. Not even as a strategy but just more of a personality and characteristics traits. That's what we've been doing since day one. It's just constantly keeping our head down focusing on the product and making it better every single day.

Mark: Yeah and obviously having a good product helps quite a bit. And we've talked a little bit about your product privately and what it does. I mean some of the services you guys offer are phenomenal. Making sure things are kept up to date and having that subscription portion of it as well. People can literally not worry at all about their filings. It's a really cool service because I know I had to file actually in Texas for a company of mine and I started getting these notices and I'll tell you as a business owner and entrepreneur you get all these things from the government all the time and you're like I don't want to deal with this. I don't want to have to spend an afternoon trying to decipher all of this. And so you guys are really committed to filling that gap which is cool.

Dustin: Yeah and I'm sitting in the same seat as you. Having private companies to even working at Incfile same thing, I didn't know even what a registered agent was or what a franchise tax report was for the state of Texas. Somehow I must have put myself or something down for it but it wasn't until I got to Incfile where I actually even understood it. And that's where I think we fill a big void in the entrepreneurial journey. It's just taking care of that stuff that really no entrepreneur wants to take care of. It's not a sexy business in terms of like the way we might talk about the music industry or celebrities but it's a fundamental core piece of running a business. If you're going to be an entrepreneur and you're going to be in business you're going to have to take care of these things that we offer. So we try to make it … we streamline the process and make it easy. So we're constantly innovating to make things faster and at the same time, we're the low cost leader in the industry so we drive the price down. So where most people that may go to … historically speaking it's a little bit more out there now because a lot of people are comfortable with doing business online now versus 10 years ago. But it really was the kind of fundamentals where people would know that they need to have a registered agent. There's this state mandate that's saying you have to do these things. But like I said it just frankly isn't fun or people don't want to deal with it. When you're starting a business you've got 15 hats you're wearing and you're putting out fires, and you're worried about sales, and doing all these other things. So we've really drove down the prices well to make it convenient and affordable to where a lot more entrepreneurs these days. It's just part of starting a business nowadays. Nowadays it's like okay I know I don't want to worry about that it's only going to cost me this much money so let them worry about it and they can deal with it for as long as I'm in business.

Mark: Yeah, that's cool. I want to go back over to the funnel stuff and ask you kind of a basic question. What in your opinion makes up the key elements to developing a funnel, a good sales funnel?

Dustin: One is always … I mean some of this stuff may sound rudimentary but simplicity, right? Because in an industry like ours where things are very technical, you've got secretary of state, you've got government agencies, and the IRS and a lot of formalities with these bureaucracies that it could become intimidating and cumbersome when you think about legal services in general. So us not being attorneys for one has kind of served and helped us in a lot of ways as well. We are entrepreneurs our self so we can put our own hand on and think about how would we want this to work and simplicity is number one. I mean don't make me think is the philosophy. If I had to think about something it's already too difficult, too hard, and our sales funnel isn't as fast as like selling a t-shirt. I mean you still … even though we've simplified and streamlined it you're still going through in some cases depending on which package you have you may go up to 15 pages to get through the end of the funnel. So it's very important to be fast. Just ask me the basics of what we need and in some cases, we'll [inaudible 00:19:15.7] process where we will gather additional details that may be needed. But if you frontload your funnel that's a recipe for disaster because people get exhausted and if you get in too many decisions you give them too many chances to change their mind. And really they want to get it done that's why they came there. So if you can make it a simple process to go through and then worry about making the connection and introducing yourself and working one on one if need be to solve the rest of the information gaps. But we see a lot of our competitors … I mean it is very word heavy and very cumbersome to go through their cellphone. So we just try to streamline that.

Mark: Yeah, keep it all simple. When you say front loaded you mean asking all the questions on that page one and somebody sees this big huge form and they have to get through that he would form it with complex language?

Dustin: That is one but also I mean front loaded just meaning the entire funnel. So if once you get to the back end of our system, if there's additional information or if there's something that is unique to your business that we may need additional information on those are emails and conversations that we can gather afterwards. But I mentioned we may have a funnel that could be 15 pages but if we put everything into the funnel they may need … it could be much longer and people don't want that. They want to get in, they want to pay, they want to have information; know that we are taking care of it and if you need something let me know but I'm already … once I click pay if you're handling it and I'm off to the next thing.

Mark: What are some of the tools that you use to really work and refine that funnel? I mean it sounds like you're trying to gather some intelligence from your customers and watch their behavior to see where is the sticky points, where people are tripping up, do you guys use different tools to be able to collect some of that information and figure out hey you know what this is just not working?

Dustin: We do not. Like I said we were just figuring it out and working along intuition for years. It's kind of how you are where any business is focused on sales, you're focused on sales and then you're focused on servicing those sales. So years go by and business grows and at some point, we're like man it's a lot harder to implement these processes now that the train is moving at 120 miles an hour to implement the process. So that's been an extreme challenge for us for the past couple of years. But we're at the point now to answer your question about tools where we now have complete tracking setup for all engagement. So a lot of it goes through GA but we're using a lot of different … whether it's a UDM code or whether it's an event tracking code on the website to understand where people are coming in and coming out. We're using user testing on the back end so things like VWL for user testing and constantly refining that. Just tinkering with every page or basically not everybody married to anything on the page. So it's kind of a philosophy where hey just because we've stared at it so many times for so long don't get stuck in it. Everything is fair game, anything can go. And now we're using VWL and Google Analytics and a lot more tracking into Google Analytics to tell us some of that data behind what's happening in there. And we just started doing live user testing as well. So besides the quantitative data we're using web services that actually have live users coming in that aren't familiar with your page and then going through and giving you kind of like we are with this podcast a stream recording with their … they're speaking while they're going through it and giving you all the pitfalls and challenges and get things that they like and don't like about it. So marrying that quantitative data with qualitative has really helped us just in this year alone.

Mark: Yeah and just to be clear GWL being Google Web Optimizer I would assume right?

Dustin: Yeah we use that as well, the search console but VWL is a—

Mark: Oh VWL.

Dustin: VWL.

Mark: Okay.

Dustin: In other words, it's a Visual Website Optimizer; VWL.com for user testing. There are other competitors for that but that's worked for us so far.

Mark: If you can answer this … don't feel like you have to but how many experiments would you say that you guys run in any given month?

Dustin: Not that many. Because we were running at least … or I should say we wanted to run five to 10 in a week and just kind of push it up, push it up, push it up. But now we're content having more patience and so we want to get it right. So we're not being short sighted with it and now we're really trying to really just run things that don't interfere. It may just be one test a week, two tests a week at the most that we're introducing only because we want to compare apples to apples. So if we make too many variable changes then the numbers and the statistical significance get kind of skewed and then assumptions come into play. So we limit it to one to two now.

Mark: All right so you're throwing around words statistical significance and you're looking at biases and you're looking at all these different assumptions that are coming into it but you started off on this without really any background in CRO and kind of this funnel optimization. Somebody listening to this that they just bought a business or maybe they're looking to do something similar on their own, what's a good starting point in your opinion for somebody that is just starting out in this area? Or maybe somebody that's intermediate and knows a little bit about it but hasn't really seen the returns yet from focusing on this continual tweaking and improvement?

Dustin: Yeah I mean and you're right I didn't know anything coming in. So for me literally not having friends in the industry, peers of any sort, nobody around me locally, I rely heavily on podcast. You know podcast people speak freely, it's a casual environment, people want to help other people, like minded individuals and I benefited tremendously from podcasting just from learning. And of course now with hands on training, being … working in an environment in the tech space you're learning things every day. So one, learn by doing. Two, reach out for the resources like podcasting. And then the third thing I would say too that is when you reach a point when you could come up for air I would encourage to try to go to different networking events and meet other individuals and just get their perspective outside of your own that they might share that maybe you wouldn't hear at podcasts. It might be more frank or direct or they might have encountered a situation that they can actually help you … give you advice for a scenario where as a podcast it's more educational and you're listening but you can't just jump in and ask the questions so to speak. So those are the three areas that I would focus on.

Mark: Okay, cool. I'm going to change gears completely here and spend our last 10 minutes or so. I want to talk about the growth with your company. And in my experience, because I watched a lot of companies grow, you know people that I'm just friends with and we talk about the challenges. But then also people that I have been advising as well. And I tend to find that there is this … there are certain choke points with companies where they have troubles turning certain corners. You know when you're first starting up a company oftentimes that's when your revenues start hitting 250 300,000 and then there's another choke point once you get to about seven figures and trying to get up to the higher seven figure range so on and so forth. What's been your experience? You came on at a critical point with this company when you guys weren't really sure about the future and then you've been able to grow it since. What has been your experience with some of these choke points within the company's growth, the company's culture and I guess I should probably ask instead of assuming I mean have you guys experienced that?

Dustin: Absolutely. You know it's funny because… and this is a great topic. We should spend some time on this. As an entrepreneur or as a small business owner on the startup of a small company and I kind of am speaking more in the vein of like bootstrapping because we've been self-funded from the beginning. We've never taken any rounds of funding so I don't have experience to speak on there. But as far as doing it yourself one thing I can say is focusing on … or I usually think that hiring people right is going to solve your problems. And it does … that comes into play later but it comes in very strategically later but what I figured out was that … like for example our biggest our advantages when we were smaller became our biggest challenges as we try to turn corners. And I'll elaborate a little bit on that and so for example in our industry we were bootstrapped, we're a small team, we're still a small team. We're competing side by side with companies that are Goliath's in the industry that have either been acquired or have raised funds and are billion dollar companies. And we're competing with these guys directly and we're a very small team. So we're probably 15 people in our office and then additional people in terms of remote resources outside of that. But what I'm getting at is that that worked into our advantage when we were small. So when you think about it we were able to think about it and have a conversation today and then we could start building it tomorrow. And we could … we were very efficient and we push and we work hard so we could roll things out at tremendous speed. And that kind of led some of the innovation that we now have that's really industry leading now at this point because we were small and we can move fast. We're still small but now that we've grown in size it's … you face new challenges right? And so the challenge for us now is now it's our disadvantage being this small. Because now we need to accelerate growth beyond where we are and our capacity is limited in terms of what our team could do beyond what they're doing now. Because as I mentioned earlier everybody is pushing, everybody is already at capacity. And so even though you feel like conceptually okay well I … we're managing the advertising so to speak, all the PPC and all that stuff. It's been self-managed all the way up until this year. We had to bring on a team to help manage that. We've had to bring on team members to help us in different areas from SEO, content marketing, we've expanded our dev team. So the other things that we're doing now to help turn the corner but what you realize is that you could keep iterating and moving but when your smaller you can solve problems quickly. Because the problems you have are generally something that can be solved quickly. When you grow, the challenge has become not overnight fixes. So you're going to spend a longer time fixing it and then for your growth, there's a reason why not everybody grows to be giant companies it's because it gets harder, it doesn't get easier. And so what we've realized too is we could see an opportunity and seize it and go take that hill so to speak and then we experience growth. We open up a new channel and we experience growth. Where we are now is we actually have to have a strategy and team to forecast ahead six months or more so we can invest in that today and then experience that growth hopefully six months, 12 months from now. So that's one area that we have certainly run into a wall on and had to figure out how to maneuver around it. Because you get used to thinking that your core strength and your competitive advantage is always your competitive advantage. So it's something like we've got to always be objective and look in the mirror and say oh wait a second is that now [inaudible 00:31:10.2] is this now the one thing that's holding us back? Maybe it's not so great. I need to think that was like what we hang our hat on but now you really got to think how to move forward and you have to remain objective about it.

Mark: Why do you think that is? I mean why do you think that as companies grow … and this sounds actually by the way very similar to the same conversation I had with Rob Walling from Drip because they were the same sort of environment. A few dabs working together and they had an idea for something, they rolled it out and coded it out and pushed it out within a day and that was it. They were able to do that and then as they grew the same sort of challenges. Why do you think that is that as you grow it's not as easy to just flip out new solutions? Is it because there's more people involved or is it because the growth and the changes that you need to make are more sophisticated or … I mean what's going on there?

Dustin: I think it's competition. Because once you kind of turn corners or try to go to the next level it's a new game. You're playing against different competitors and their strengths and what they do best and why they were in the top positions that you're taking market share away from is because they're doing something really well. And so you have to be able to then compete directly with them and do what they did well and take market share from them. So you have to constantly evolve. It's not just internally what's happening but just in the industry for competition, nothing in business is just standstill. So you're in the gaining realm or losing realm and when you reach new heights or next levels the competition gets more fierce and you have to have even deeper strategies. You have to be thinking future, you have to have more of a focus because we could cover a lot of ground and a lot of places and growth but it might be more short sighted. It might be just low hanging fruit and we're catching that. But at some point, you're going to run out of low hanging fruit. And so once you run out of low hanging fruit it becomes all about strategy and long term strategy because you have to build things that are scalable and you have to compete against these guys in the course of six to 12 months and beyond. So it really takes a different mindset to turn the corners. I mean you can operate in the same manner as the same culture and the same type of people and teammates but the game and the rules become more fierce.

Mark: You said something a little bit ago about you used to think that the scale you just hired or something to that effect but then you kind of learned that that wasn't the case. Why is that? I mean obviously you need to hire to scale at some point but—

Dustin: I think a lot of people try to scale too fast and I don't … I mean some people can do it and some people are that experience so they can pull it off. For us, if we could have hired earlier then we potentially could have got further faster. We were reluctant to hire rapidly because we knew we were growing but we didn't want to take the growth for granted. Expecting the growth to come so we would make sure that we had the business, captured the business and then when the need was dire we bring somebody in. But honestly, if we would have brought somebody in and forecasted at six months in advance we might have been able to keep the momentum going faster. But looking back in hindsight I do think there was some benefits of not hiring faster because again we focused on product and we focused on our customers. And so the product was constantly improving and essentially when you think about scaling what are you really scaling right? You've got to have a strong foundation to scale or build on top of it. So not hiring people at that time … I mean the last several years and the investments we've made and you know we weren't … in our industry we were known but outside our industry, it's not like we're flying on anybody's radar. And that's because we have our head down and we were just building the product. And now that the product and the machine and so on is really strong in terms of foundation now we're hiring rapidly in a sense. We're really trying to accelerate it and bring on very strategic hires to fill specific niches or voids that we need to fill in terms of areas of expertise. And so it's working for us now in terms of hiring for your right and not to hire to scale but at the same time if we wouldn't have focused so much on the product and building the foundation that is … you know everything innovative and automated that we have it could be the death of us. We could grow too fast and then if the machine doesn't work then you got sizable problems and when you're talking about thousands of users and thousands of people on your platform, it's not just two people calling and saying [inaudible 00:36:02.9] we're talking about your phones ringing by the thousands and people trying to get those needs resolved.

Mark: It's fascinating. With culture and when you're growing a company like that and you're bringing on people and hiring quickly after a certain amount of time because you need to be able to support that growth. Have you guys been able to keep that kind of grinder spirit that you seem to exude with every time I talk to you? You know it's that classic entrepreneur hustle. Have you been able to keep that culture with your company?

Dustin: We have. So that's a big deal for us too. I mean the people that you worked alongside with and the people that you entrust in helping to make decisions and contribute they kind of have to be in line with your philosophy and with the rest of the team. Otherwise, they're searching between team or there's a conflict of philosophies. And it's a lot easier if there's a culture fit to be able to rally everybody together for the common good and push forward. So in a lot of ways … in our case we certainly want people who are capable but if we had a scale of one to 10 and the most talented person was a ten we would still rather work with eight. Let him come on to the team out work everybody, fit with the culture and then we're not going to have the kind of pitfalls or speed bumps that we may have if we have friction with somebody. So we definitely identify and work better with those types of folks and at the same time, I think that they appreciate that about us as well. Because depending on what environment they came from if they had the same spirit or they're a fit for our culture generally it's a place they like to work and with an environment people that they want to invest their time with. So I think that's been huge for us and up until this point it's work and as we continue to scale and grow it becomes more of a challenge to try to keep everybody in the same culture fit. But it's important to hire slow and make sure you get the right people than to hire fast and then be reverse engineering that and figuring out how to let them go and get somebody else then. It's counterproductive.

Mark: Right we've gone a little bit over time but mainly because it has been a fascinating conversation so any last bits that you would want to put in or if anyone wants to reach out to you are they able to do so?

Dustin: Yeah, absolutely my e-mail address is [email protected] I'm on LinkedIn, Facebook, my name is Dustin Ray or my handle on Instagram or anywhere else would be drayonline. But if I was going to leave any other nugget of information with folks just from our experience or my experience one thing that people kind of find interesting but I think is very important is that a lot of people in our society try to focus on self-improvement. We all work on self-improvement but I think it kind of gets lost in transition with entrepreneurs because we're constantly … we're builders and we want to improve but society kind of teaches us in a way to work on our weaknesses. If you're already good at something don't worry about that, you've got to worry on what you're not good at and improve in that area. And really just through experience life not just business, I kind of think it's more important to focus on your strengths as for a self-improvement and be self-aware to say this is the area that I'm good at let me build you, fill gaps, and bring on people to help me execute whatever the task at hand is. But I think too many people focus on improving on what they're not good at. Like for example, we ran a graphic design business for a while, okay I was interested in design. I like design. If I stuck there and invested my time into getting better at design and using Photoshop yeah I'm going to improve. I'm going to get better. But at the end of the day, my best is going to be mediocre. So I'm never going to be able to compete with the guy who's a phenomenal designer. So rather than focusing on your weaknesses just be mediocre at them, I think you got to double down on your strengths. Be self-aware and know what you're good at. And I think it kind of encompasses more of a positive mindset when you're focusing with confidence on what you're good at. You know even when you're trying to improve on what you're not good at it's kind of a negative feeling right? It's kind of you know you're not good at it and you're kind of getting down about it because that's human nature but if you … you know the entrepreneur journey is tough so if you focus on your strengths and bring people on to help you where you need I think you could get further faster.

Mark: Well, don't tell my kids that because I keep telling them to work on the stuff that they're struggling with in school. But I think when you are applying it where you're applied it you're 100% right.

Dustin: Your kids they're learning right so they don't know exactly what they're good at and what they're not so I do the same for my kids.

Mark: Right.

Dustin: You're teaching them to work through the problems. More problem solving than self-improvement at this point.

Mark: Right. Exactly and also if you want to become an all-around good person work on finding those things. But you're right as far as with your business and entrepreneurs and we see this with buyers all the time. Buyers that just kill it are the buyers who come in and they know their strengths. They might be CRO gurus, they might be SEO gurus, they might be really really good at just setting up operations or what have you and they look for the businesses that are deficient in those areas so that they can take them. And those are the guys that come back with two X, three X, five X businesses in a few years because they've taken their strengths and they're not going to bother trying to work on the stuff that they're bad at. They're going to outsource that if they have to, make sure that somebody else is taking care of it and they won't deal with it and it works.

Dustin: That is so true. I gave up Mark … I gave up on trying to be smarter. I said well I'm going to self-improve but I'm not going to get any smarter so now I tend to focus more of my time on becoming a better leader than trying to get smarter. And so you can only build a company so big on your own so if you want to get smarter you're only going to get it so big, you're going to have to work with more people and bring in people to grow a sizeable company. So for myself today I try to focus on being a better leader and working with people and empowering them to be the smartest person in the room. Because their areas of expertise, they are always going to be smarter and better than I would be in that space. So I just try to focus on becoming a better leader and I gave up on trying to be smarter.

Mark: I love it. That sounds like a great way to end this episode of you on the podcast. Thank you so much for coming on this has been awesome.

Dustin: No, I can't thank you enough for inviting me. I hope your audience gets something from it and I'm looking forward to catching up with you soon.

Mark: Sounds good.

Links and Resources:

IncFile

Dustin's Instagram

Dustin's LinkedIn

Brad Wayland may be the only QLB broker that was asked to join our team. Others amy dispute that, but they were not interviewed today, so they don't have a voice! Brad has been with Quiet Light Brokerage for less than a year now, and has already established himself as an honest, hardworking and driven entrepreneur and broker.

Prior to joining Quiet Light, Brad spent his time focused on SEO for a custom t-shirt firm (Blue Cotton) where he is a partner. From there Brad built a portfolio of content & affiliate sites and eventually sold them to a private equity firm in 2015. In all, Brad completed 30 transactions between 2010 and 2016. Mostly as a buyer, with four sold.

Brad learned quickly how to find the right opportunities and work out a deal that made sense for both the seller and himself. And he gained a reputation as the person to sell to, where sellers reached out to him to sell their business.

Episode Highlights:

• [3:22] Who is Brad Wayland?
• [8:10] Why is the custom t-shirt business the most difficult ecommerce niche?
• [8:40] Buying and building a portfolio of content sites.
• [11:15] Wall street style negotiations, or nice guy everyone is happy?
• [11:45] Name dropping. Yep, Brad met Warren Buffett.
• [13:50] How to implement economies of scale.
• [14:45] Outsourcing and keeping things simple, streamlined and with little effort.
• [16:10] How Brad set up the corporate structure(s).
• [17:00] How to work with investors and set up a win/win.
• [19:40] Why having investors can turn pretty uncomfortable, quickly.
• [20:30] Brad's recommendation on deal structure for investors.
• [23:10] What interest rate do you pay investors?
• [23:30] How the multiple of SDE changes with larger net numbers.
• [27:15] Brad's view of PE monies and what's happening in the industry
• [28:40] Google "freshness" is critical to long term content portfolio success.
• [29:50] Content multiples are strong, the nich is hot and buyers are in abundance.
• [30:30] QLB closes a content site for just under $9,000,000
• [32:30] Bryan @ QLB has a supplement business under LOI for $18,000,000.
• [33:55] The worst conversations we have as brokers are…
• [35:35] Near death accident: Wayland Falls – the newly named mountain in North Carolina.

Joe: So Mark the more we bring on brokers here at Quiet Light the less I feel like I've achieved anything in my life. I think you and I are just a couple of slackers compared to the people that have joined the company.

Mark: You know I feel the exact same way. We were at the capitalism.com just a few weeks ago and I was standing next to Walker, you know the last picture he sent me was of him in the lineup with Bill Nye the Science Guy right next to him. And he's casually mentioning over a dinner about the different documentaries he's been a part of and all that right? But it goes for every single person on the team. Amanda, when we were talking to her there and I was just consistently feeling like boy I need to get my butt in gear.

Joe: Yeah I don't try to have in-depth conversations with Amanda about business because I just feel stupid.

Mark: Right, I mean she just starts going off and you're like oh okay I … everything I thought I knew yeah it could pale as in comparison. Brad though is one of those guys and I remember the first time we did a companywide call; we do this once in a while with Quiet Light Brokerage because we're all over the world. All over the country but all over the world and so I don't know maybe once a quarter we have a companywide Zoom conference call where we can see everybody and there was Brad on top … in his office overlooking his factory floor. And I think everyone was just kind of like oh this guy has actually done and accomplished some real things.

Joe: Yeah Jason was calling from his kitchen. Amanda was calling from a car. Chuck was from home. I was from home. You, of course, have to get out of your house because you have got a basketball team and a half in your house … well, maybe not that much I exaggerated. I love to exaggerate about the number of kids you have by the way.

Mark: Hey it changed since the last time by the way. We've had like four more kids. It's attractive to … you know and it's hard to-

Joe: Completely different podcast right there.

Mark: But Brad was somewhere in the world. We have no idea. I think he was in Cuba or Costa Rica or something.

Joe: Oh right he's always somewhere else, some other exotic location. But yeah Brad is an impressive guy. A very low key but man he's sharp. He talks about his history, talks about what he did at the Blue Cotton T-shirt company. It takes 22 hands to make one t-shirt. It gets touched 22 two times but he stepped in, focused on SEO, and that company blew up after a couple years of him being there. But that's not really what the podcast is about. It's about him and his experience but I'd really focused in on his content portfolio. At one point while running … or while being a partner at blue cotton he built a small little multimillion dollar content portfolio on the side and eventually sold it. And he outsourced everything. He had a reasonably low workload and he used initially other people's money. You have to listen to find out whose money he used. It's kind of interesting and fun but he did very well. And he talks about that approach and I think it's something that any listener can get something out of it in terms of whether they're building their own portfolio of physical products companies, drop ship companies, SaaS companies, or content companies. And of course get to know Brad along the way as well which is kind of the purpose of the podcast. But I think there's so much more to it than just getting to know Brad Wayland.

Mark: Yeah I think one of the things I love about this company is it seems like everybody that we bring on just seems to up the ante as far as their qualifications. I mean two or three years from now we're going to have Elon Musk asking us for a job.

Joe: Okay, got to be very sad for all the investors of Tesla, sorry folks.

Mark: I don't know maybe they'll kick him up and who knows. All right enough of me talking, enough of you talking, let's listen to Brad.

Joe: Hey folks it's Joe at Quiet Light Brokerage and today we have one of our very own on the podcast with us. Now don't get bored he actually has a life time of entrepreneurial experience. He's bought and sold many businesses. He's kind of a big deal. I think he bought and sold more than I have for sure; probably more than most of us. His name is Brad, most of you folks listening know who he is. Brad Wayland welcome to the Quiet Light Podcast.

Brad: Hey Joe thanks for having me on.

Joe: How are you doing?

Brad: I'm doing well.

Joe: Are you ready to tell all of these people everything about you?

Brad: I'm ready to tell them but I would contest your point that I'm kind of a big deal. In fact, I was on another podcast with Chris Guthrie that you had on the Quiet Light Podcast a couple of months ago and several years ago. He did an intro and he said most of you probably don't know Brad Wayland. He's what I call a silent baller. Am I right? All right well-

Joe: He subscribes to HBO there.

Brad: Yeah I would call myself pretty well unknown. But I have had a lot of experience and I hope that I can share some things today that will help our listeners.

Joe: Well you are humble. There is that and you're part of the Quiet Light team because of that vast amount of experience that you do have. And you're one of the few … actually, maybe the only one where Mark actually said "hey maybe you should do this" versus the rest of us which reached out to Mark and said "hey can we do this?" that's right isn't it, Mark asked you to join the team?

Brad: Well there's different versions of that story but I specifically remember that I asked Mark. I knew Chuck from the buying and selling world so I kind of made a joke at Mark about [inaudible 00:06:41.6] Chuck on I guess if things don't go well on the buying and selling world you might end up doing some brokering. And he was like I think you might be interested in doing some brokering with Quiet Light and that's where the conversation kind of started. And then over about a six month period he kind of showed me the Quiet Light way and I started getting more and more interested. And I really enjoyed my time at Quiet Light so far, it's good for people. And really every day when we get on the phone calls with buyers and sellers I'm just blown away by how impressed they are with the team we have at Quiet Light. Just the knowledge is there, its entrepreneurs. I tell everybody every day, its entrepreneur led. These are people that have bought, sold, built, operated in through hard times so I really do enjoy it. And I think brokers sometimes have like a little bit of a stigma attached to them. And I think that we are kind of definitely leading the way in kind of changing that. Because I find that people really look at Quiet Light as a breath of fresh air.

Joe: Yeah I would have to agree. I was just at Brand Builder Summit down at Austin and really for the first time in a long time, I mean I started in 2012 the broker stigma had an icky feel to it. You and I have been self-employed for years … decades probably and people are starting to reach out to brokers for the experience and expertise that we do have. So it's good but let's talk about your experience and expertise. Who the heck are you? Tell us about your entrepreneurial history and when you started? Kind of how many things you bought so on and so forth.

Brad: I started having some interest in the internet world around 2003 and I had graduated from college with a finance degree and was working as an accountant for a publicly traded company. And I really hated the work and actually thought you know what I'm going to get fired from this job before I can find another job because I felt like I was doing such a poor job. I just wasn't really built for the check in to your cubicle at 8 AM and checks out at 5 PM. I needed something a little more challenging for me and maybe a little less structured. And so I was thinking I would go into financial planning because I had a degree in it and had an offer. And a couple of friends of mine said "Hey would you like to come on and work on some business development for us in our t-shirt company?" And they had just crossed a million in sales and they have launched a website and it's called Blue Cotton. And so I came on and quickly I became enamored with search engine optimization and spent a lot of time trying to figure it out. And honestly I fumbled it around like four years and even to the point where I think they thought does this guy have any idea what he's doing at all? But around 2005, I started realizing what we needed to do and that was rebuild the site. It had not been built where it could really ever rank the way that certain things were structured and basically the site was just a giant image. So we rebuilt it. It took two years to rebuild it and when we launched it we were on the front page of Gizmodo within 24 hours from just people finding it. And back then there was-

Joe: Gizmodo, what the heck is Gizmodo?

Brad: It's a popular tech blog. I'm sure you probably heard of it.

Joe: Clearly I haven't, so thank you.

Brad: Well it crashed the site. And so that first day we launched it [inaudible 00:10:02.2] spent two years working on this project, it's never going to do anything. And that morning we got a phone call from the developers, our phones are ringing off the hook and they said something's going on. There's tons of traffic on the site. Back then you didn't even have Google analytics. We were paying for index tools back then. And so they … Gizmodo crashed the site, we had something like five million people trying to get to the site and it couldn't happen.

Joe: Wow.

Brad: You know it was just some crazy situation and there was no social media. So a lot of the traffic back then went through these popular blogs. That's how people … they have their RSS readers on their desktop and they would go through and read their articles and stuff. So they did that and then we had built a design studio where people would create their t-shirts in Flash. And a month later Adobe awarded us the site of the day which didn't crash site but it gave us a page rank 9 of 10 link from Adobe's website.

Joe: Wow.

Brad: Adobe was the most … at the time Adobe was the most went to website in the world. And the combination of Gizmodo … well because of Acrobat and I mean think of all the click here is that you have for Flash, for PDF reader, for all those things. It had tons of links coming in. And so the combination of those two things propelled us and we went on a crazy tier of growth. It grew up 50% a year for nine years on average.

Joe: Woah, we'll let the listeners do the math on that unless you're going to tell us. 50% percent a year for nine years and you wouldn't want to know.

Brad: Well we went … we grew from … I mean we were small. We were like a million dollars in sales but that ride took us from like, it probably took us to about seven million. I still own my equity in that company. I didn't start that way. We kind of after the web kind of took over the two owners came to me and said hey 85% of our revenue is coming through this thing you've helped us work on so we need to come up with an arrangement here. So we ended up doing that in 2008 and today Blue Cotton is still a thriving business. It's got … we're, I would call us a medium sized business now. We'll be considered a low eight figure business in terms of revenue. We've got 125 employees, 110,000 square feet of production capabilities which one I'm using all of that now. We use about 55,000 [inaudible 00:12:27.3]. So I did that and just to kind of quickly summarize that when you're in the custom t-shirt world you are making money in the most difficult way possible. A custom t-shirt has to be touched by about 20 people before it goes out the door. And if you order one for your family reunion then it's got Joe Valley's Family Reunion 2018, it's time sensitive. You've got a specific idea and you don't want to be the guy that ordered them and your family says "Man, Joe these are awful. You did a terrible job designing them." So there's a lot of anxiety in the purchase and so I became pretty interested in content. And around 2010 a friend of mine who was … is a pretty big name in the vector space, like image vectors, he was looking at a blog for sale and it was on Flippa. And he … it was it was a $50,000 purchase price and he said you know what it's only worth 25 grand to me in high five. Man, that thing has content and ads like that's the most amazing business model I've ever seen. You don't have to do anything.

Joe: Especially compared to 22 hands per t-shirt.

Brad: Right. So I ended up buying that site for $50,000. And that started a new trajectory for me. From 2010 I started getting heavily involved into content and affiliate and just bought and sold a lot of stuff from 2010 and 2015. 2015 I divested a lot of it up to private equity but the-

Joe: Can you ballpark how many you bought and sold in that time period?

Brad: Yeah so I did 30 transactions between 2010 and 2016 and most of it was buying. I had basically four sales everything else was purchase. I kind of quickly … the space was the web design space so the blog that I bought … economy was kind of in the tank in 2010 and so the blog that I bought I quickly made my money back on it. It's a $50,000 purchase and I made the money back in like 10 months. And I thought this is like too good to be true. So I started kind of keeping my eyes open for opportunities and found another one that was for sale and overpaid for it compared to what I had done. So I paid 72,000 for the second one and it was starting on that same trajectory but after those first two, economy was really not doing well and I started having people reach out to me. And so I had a guy reach out and say hey I hear you're the guy that buys web design sites, you've bought this one and this one would you want to buy mine while I was tapped down on cash. I had spent all my kind of extra money that I had to kind of do something like that with and so I told him you know what I'll give you about 80% of what you made in the last year but that's the best I can do and I can do it today.

Joe: And they said?

Brad: And he said I'll take it.

Joe: So let's talk about that on … just for a moment because you've got experience, I mean you bought 30 businesses, 30 transactions over the last several years. Was your process New York Wall Street walls to the wall top negotiating or was it nice guy that really likes you and you built a relationship and you made it work both in the end?

Brad: I'm probably me there. I'm a quick decision maker. When I was in … when I graduated from college I had the opportunity to meet Warren Buffet at a finance event that went on in my hometown here at Bowling Green. And Warren Buffet said that he plays bridge, and he drinks diet Coke, and he takes 13 phone calls a day, and he doesn't have a computer in his office and one of the questions was how do you evaluate companies? He had bought Fruit Of The Loom which is why he was in town and they said how do you evaluate it? And he said honestly I don't spend a lot of time on it. I go with my gut. I look at the few things that I think I have but I usually make a decision within a matter of hours about whether or not I want to buy something, the price, everything which is not the way M&A is done.

Joe: Wow.

Brad: I know. He's a great capitalist in terms of what he does and that's not me. So I'm not trying to embarrass Warren Buffet but there is one element that is like me and that is I don't waste time. I like to put deals together. I'm not very patient. And that kind of benefited me in the buying and selling world. So I did things very unconventional. Like my transactions, I would never use escrow. I would try to do it as fast as possible, meet them in person, come up with an arrangement of I'm going to wire half here and then you're going to transfer this. Or I'm going to wire it all you're going to transfer these things at the same time. I just did a lot of things that weren't kind of the norms because I'm just not very patient. I kind of wanted to get my hands on it that second. I didn't want to wait 60 days for things to pan out.

Joe: So no long drawn out contract negotiations on asset purchase agreements or SBA deals anything like that?

Brad: No.

Joe: Pretty simple.

Brad: And I would say that I focused less on making sure I got this exact price that I wanted at that exact multiple that I wanted. And I focused more on trying to find things that I knew I could immediately do something with. When I got into the design space I don't know anything about design. In Blue Cotton, we have nine designers that work there. I don't know anything about it. I don't know anything about web design really. I know I can tell you some names of like what post would be like but I know nothing. If you put me inside one of those Adobe programs I'm totally lost, I know nothing about it. But what I did learn pretty quickly is that there are some economies of scale to having things that are alike each other. And so when I had one blog and an advertiser would come through it was like what would happen if I had five of these blogs? Or what I could do is I could leverage the advertiser for five times the amount and have the same amount of contact. And so I did a lot of that and I did it on the affiliate side. You know I couldn't negotiate better affiliate deals for my company because I would say well here's all the traffic I have in total and they would look at me and be like oh well if you've got that much then we want to do this size e-mail send or we want to do this size add by and so I started to feel that … and a lot of the … so about 15 of my 26 purchases were in the design space.

Joe: And did you have writers that were consistently focused on the design space, outsource VA's, or did you do it all yourself?

Brad: Yeah so in the design space there's a lot of writers available. You go to some of the popular sites like Smashing Mag or some of these other big names. You'll see a new name every day. And so I again I kind of always try to structure things in a way where I didn't have to spend a whole lot of time on them. So you know one of the things that I did is I found writers that were okay at being paid once a month because I didn't want to be jumping into PayPal 15 times a month to pay writers. So I found writers that could go across several sites that wanted to do like a substantial amount of work. And so I'd have four or five of them and then at the end of the month, I would just one time pay everybody for all their posts. I found people that knew what I wanted instead of me having to review every single post I found people and I was like okay you did these three posts for me this is exactly what I want, go down that road. Some of them would send me like here's what I'm thinking about doing this month, some of them were just like I know what he wants and they would just do it. And I just always try to streamline things to a … the most hands off as possible. I did not want to hire people to support the network. I didn't want to … I wanted to keep it very like the opposite of the teacher business. I wanted it to be something that I could do a lot with a little time.

Joe: Did you put all 30 of the properties or 26 when you sold four off, did you put them all in one LOC did you have them separate? How did that work out?

Brad: Well I had to … we hadn't gotten into how I built the portfolio so I will tell you that I quickly ran out of my own cash and had to start looking for help. So I did end up having three different LOCs total and that was because of the way I had to go find capital for the deals.

Joe: Okay.

Brad: And then I kind of got tired of that and so I basically rolled all of those partners up and blown and got them out and took everything over 100%. And you know the thing is when you're … there's guys that it was their pockets that are out there raising money and I had a conversation with one of our … someone who's buying a property from us yesterday about it. When you're trying to raise money from people instead of going out and asking for everything you think they could possibly muster up one of the best ways to convince people that you give them good returns on their money is to do something good with some … with a small amount of money, something that you know is not a big deal to them. And I didn't really do that on purpose. It's just that my deal started out kind of small. I started around this $50,000 range and by the time I was done I wasn't interested in $50,000 transactions. I didn't do anything that was all that large but I did a couple of three hundreds. I did two $500,000 transactions. And the thing about those transactions is I put that money together in a few days and it wasn't coming out of my bank account. So I had people that believed in what I was doing and I could literally pick up a fund and say hey I've got this opportunity and they would say I'm in.

Joe: For those that are listening that have portfolio folks that might do that but for those folks that are investing that haven't ever done it before are they getting equity or are they getting return on investment and how quickly do you start paying them back?

Brad: Yes. So the way that I was kind of pitched it I didn't have anybody that I was connected to that was like used to investing in tech … so I'm talking about people that have some extra income or extra savings but they're not people that were like highly technical. So, my parents, you know the first people I went to were my parents and I said "Hey would you guys want to invest a little bit of your money into an idea?" And they said, "Sure, what's the terms?" Well, my terms were terrible for me in my opinion. I said well if you'll put up the money I'll give you 50%. That's where I started.

Joe: Oh.

Brad: And I talked to someone yesterday he said that that was absolutely ridiculous. They are like you gave them 50%? I was like well I didn't have … I wasn't going to be able to buy it [inaudible 00:22:40.7].

Joe: They could praise you so that … you know they ultimately lost money on the flunk transaction called Brad Wayland.

Brad: Still that's true. There are some things in our past, there's some car situations and things like that but it definitely cost them some money and a hard day. But I started with them and … but I became concerned also about … oh wait a second, they're willing to put a lot into this after we started going. They're willing to put more into this and I started thinking I don't really want to be responsible for my own livelihood and know that I could potentially tank theirs.

Joe: Right.

Brad: So I started to get kind of concerned about that. And they didn't have unlimited funds anyway. But around that time I started looking to partner with other folks and I partnered with some people that I didn't know as well as my parents. So people that had told me like hey I want to get in and my relative over here is willing to invest in me. So I did that kind of deal and I became pretty uncomfortable with those pretty quick. And the reason why is because when you're working with your parents or if you're working with a close friend you kind of know we're not going to end up in a courtroom somewhere.

Joe: Right.

Brad: You know that that's not going to happen. You know now you could ruin your relationship or you could have that little mark on your relationship where you're like well remember that time when I lost like $400,000 of your money? Sorry about that. You know like that's not a good situation. But I started getting uncomfortable with having partners at all in the space when I took on partners I didn't know.

Joe: So how did you determine … you know once you've got beyond that experimental stage and your relatives and friends of relatives and giving them too much, what would you recommend to somebody that's listening that wants to build a portfolio of sites? Is getting money from people are not used to investing? What would you say? Look if I were to do it all over again with what I know I'd probably offer them X, Y, Z, and pay them how often? Can you summarize what you know?

Brad: Yeah. So if I could do it all over again I probably would do it the same way. I understand that giving up 50% sounds like … I don't know if that sounds like a lot or not. One guy I talked to yesterday said yeah it sounds like a lot. It probably was a lot. They weren't doing anything. And I was … you asked a minute ago were they getting paid? If I took a check they got a check. And I was looking for cash flow because I wanted to build up and be able to go buy more and do things. So I wanted to realize real gains and kind of do something with them. So I would give a lot early but I would structure the agreements to where you control the situation. And that is one thing I did. I just … when you have all the knowledge and the other side doesn't really have an opinion, they're like hey I don't know really know what you're doing with the money over there. I just know that you're operating these websites out here and you're making us money. When you have that kind of arrangement those people are more willing to say well you tell us what the investment is going to look like? And so from my perspective I kind of went down the road of just saying look I want to … I still want to pay you your money but I don't want to have partners any more for various reasons. Like I want to structure this in such a way that makes sure that you get your return but also make sure that I benefit from it in the way that I think I should long term. And so I'd like to roll out … basically, I bought them out. I just came up with a structure and said this is how I would value the properties and I can [inaudible 00:25:59.2] the properties to pay this off. And so I rolled everything out into basically a Seller Finance note and I was able to get it done in 20, 30 days. As opposed to an SBA loan or trying to go out and raise … when you do a situation like that where people are giving you their cash and you're dealing with multiple investors, if you are able to call the shots then when you're ready for that change you can do it very quickly and efficiently.

Joe: How many different investors did you have at that time where you had to get them out?

Brad: So I only had really three people that had invested at that time but at the same time I was looking to buy more. So when I rolled it out into a loan I actually brought on three new investors but I brought them on as just debt.

Joe: Got you, okay then you paid them a higher than normal interest rate.

Brad: I did. So it depends on who it was but my interest rates were 6 to 9% on the deals that I did.

Joe: Okay.

Brad: So it just depends on who it was. And I never really nickeled and dimed people over the interest rate, I try to find people that I thought would be able, that would trust that I would do the right thing with the money and [inaudible 00:27:07.6] plus trying to get the exact interest rate.

Joe: Let's talk about for those listening thinking about rolling up different properties into a portfolio. Let's talk about multiples and returns on investment. You know we talk all the time about a business that's doing 100,000 that's five years old with one employee is worth a certain multiple but an equal business with one employee and work load that same age that's doing a million in discretionary earnings not only is it worth 10 times more in terms of numbers but it's also that multiple goes up right? So instead of two and a half to three and a half times in terms of value, the multiple because of the size and breadth of the business that multiple might jump to four or five times. Did you find the same thing to be true when you rolled up essentially 30 small content sites, 30 small blogs into one portfolio and sold off to a private equity firm where they pay a much larger multiple?

Brad: Yeah okay. So … just so you know the private equity firm that I sold it out to I sold it at four and a half multiple. So just to kind of … that was a high multiple, I was very pleased with the transaction.

Joe: Okay.

Brad: So in my sale, I definitely saw an increased multiple. Okay, so from my perspective I did transactions that were … I did a lot of them in the 50,000 range and then as I got further down the road I did a lot of 125, 300, a couple of 500s. And here's what I found from my perspective, the properties in the … at least in the web design blog space that we're selling for more were higher quality properties. So where we deal with every day like we're talking to someone who's selling on Amazon, we could find someone who's selling on Amazon that's doing $50,000 a year in discretionary earnings, it's got … doing everything but they're in a small category. Whereas you could find someone who's doing a million dollars in discretionary earnings that's doing everything perfect as well but they're in a broader category. So we would see that where it's like hey they're both doing great they're … you know but they just happen to make less. In the design blog space, it wasn't so much like that. It was like if you're doing great then you are bigger and you are earning more. And so they did command higher multiples. I don't know off the top of my head I know one of my 500,000 transactions was a two and a half multiple and … but I know that one of my $300,000 transactions was a three point maybe one or two.

Joe: And you talked about when you purchased it.

Brad: When I purchased; yeah. So [inaudible 00:29:46.2] a lot of that.

Joe: When you sold it was all lumped together and one multiple was applied. They didn't look at the individual blogs and sites and say we'll give you this for that and this for the other one, it was all-

Brad: Right and the and the private equity plays … I mean I'm sure that you've talked to people just like I have, the private equity world is … we're seeing some changes I think in the industry right now with private equity. I think there's kind of two things going on. One is private equity is scooping up a lot of sides, stripping out all of the cost out of them, and literally just let them die and because the return on the money is good even then. That's one thing that I've seen private equity doing and that's what happened with mine. It killed them off. I mean there's no way.

Joe: It killed them off.

Brad: Yeah but having said that, that company that bought it is thriving. So I think through the acquisition they learned some things about what they wanted to do and what they were good at. So I don't know that they would look at it as a failure because I think that if they were able to use the information to then go and build a much bigger company that's doing some pretty big things. On the other hand, I had mentioned the other way that private equity is going like we just had a transaction that closed this week that I … where you've got an operational group that is under private equity. So we see the private equity guys a lot of times, they're like hey we want five million on EBITDA. Well, we don't have a lot of sites that come our way that have got these big seller discretionary numbers. So what I think is happening in the industry right now is there are these operational groups that are saying hey we'll go deal with 10 or 15 of these things, we'll still get you your … whatever you're looking for, several million dollars in sellers discretionary earnings but we'll operate all these things underneath you and kind of keep them running. And I do think that they'll like hold on to the content and just let it die. I think that Google especially is fighting against that right now specifically. I think their Freshness algorithm has kind of taken over and kind of prevented people from being able to do that effectively. And so I don't think that strategy is advised or a good idea and I think it will go away completely.

Joe: You mean in the algorithm updates or having those sites die off a lot faster if you're not doing anything?

Brad: They do. They just … they track what you're doing and I've even done some experiments. So I analyzed it on a small content portfolio and I have a marketing firm that runs those forming. They basically do all the content and everything. And we have experimented and seen Google Freshness is a very real algorithm that if you fall asleep on a blog or something that has any kind of time sensitivity at all then you will pay the price and it doesn't take very long.

Joe: Got you. So for anybody listening that thinks that Quiet Light is only a physical products e-commerce brokerage firm, Brad is obviously showing us that the experience that we have is pretty vast. Jason's been in the affiliate space. We've all done SaaS, affiliate, content, advertising, physical products, but Brad obviously I think probably the bulk of transactions that you've closed so far with Quiet Light as an advisor you had been in the physical product space. But you've got a tremendous amount of experience in content as well correct?

Brad: Yeah but to me, the content is hard to come by. I don't know if you feel that way or not but I don't get them a lot. I did a transaction last month for a guy that I actually had bought three websites from in my buying days. And it was a really interesting dynamic because I was able to … when the buyer has been on the phone and saying can I trust this guy? I was able to say you know what I did three deals with him myself and I can tell you it went exactly like this [inaudible 00:33:21.0]. So that was kind of a neat thing. But you know he came to me and said hey I want to sell a content site and he was monetizing it through digital downloads, and not a big transaction, a couple of hundred thousand dollar transaction. And you know he said what should I expect? And I said you know what the content is pretty hot, we don't get tons and tons of content people trying to sell these days. People want to hold onto it because it's very low workload and it's very high earnings for what people are doing and they seem to be getting very good multiples for it. So we priced it out at a 3.25 multiple and we got about 96% or something of the asked within 72 hours, I think you sent me an e-mail and said both your listings this week are going to be under a lot. By the weekend you are right one was 48 hours, one was 72 hours that transaction was closed in three weeks start to finish.

Joe: Yeah content is easier to do due diligence on as well. I just had a content site closed. What is … we're recording on I think Wednesday right?

Brad: Yeah.

Joe: So 10 days ago. Less than 10 days ago I had one sell and it's interesting I'll give you the details of it. Daily updates, hundreds of thousands of visitors to it and Google was rewarding it like crazy because of the vast amount of new content on a daily basis. And the revenue took off like a rocket. It was just under a nine million dollar transaction and a very very high multiple. Higher than yours but it was explosive growth. It was very big. A lot of … their discretionary earnings is obviously very high. So the bigger the discretionary earnings, perk of the growth that you've got there the higher the multiple as well. So content sites if you're out there listening and you've got a portfolio of them or you're an individual person running one and you think that you're hearing things that are not worth all that much, truth of the matter is that we saw lots. And there's lots of good buyers for them.

Brad: And I think that's your point, you asked the question earlier. Are we seeing the multiples go up the same way? And I think across the board you just have a supply and demand issue when you get into larger sites. There's just not a lot of them available and we're seeing that our buyers are ready to go on larger transactions. You just don't get as many large transactions to come by. And the example that you gave, I'm pretty sure you had competing offers on that deal.

Joe: I did. I had three offers and they kept … they update each other and grew it up. Bryan-

Brad: Three offers on a nine million dollar property, that's something.

Joe: Yeah. Bryan's got the physical products business; its nutritional supplements. It was listed at 15 million and is under contract at higher than that because there were multiple offers on it. So don't be afraid. I hear people tell me look I think I should sell before it gets too big because there's not going to be as many buyers out there. That's not what I'm finding. It's not the case. Would you agree that there's a ton of money out there for the right business? If it's a good quality business it's going to last.

Brad: Well it will sound very counterproductive to what we're trying to do at Quiet Light but every week I talk to people on the phone and I just basically tell them if you've got the willingness to keep working on your business you should not sell. I mean you just shouldn't because you should grow it as big as you can. Because it's not easy to build a business that does what your business is doing. Whatever it is, anyone that we're talking to is having some level of success because they're talking about selling and they know they've got cash flow and things like that. And I just always tell them if you're done let's go. If you're ready to be done or you've got other plans or you want to travel or you want to do this or that or you want to … you've got a new venture that you're thinking about sure let's list it. Let's get it done. But if you've got the willingness to keep going then we're here when you're ready but honestly keep going. Go as far as you can take it.

Joe: And Mark calls that reckless honesty because it's not necessarily in our best interest but it's what we all do. He did it for me when I sold back in 2010. The difference I'll tell you now for those that are thinking they're emotionally tired and done really you've got to sort of tap yourself in the chest and say do I have the heart?

Brad: Yeah.

Joe: Because the worst conversations I've had are when I say look, you want X value, your business realistically is only worth Y. If you hang on another 12 months and you reinvest your energies, you set some goals, you get that traffic back up, and you get that revenue going again at a higher level you'll get Y but it's going to take 12 months. The worst conversations I have are when they come back to me in 12 months and say you know I didn't do any of it. The revenue has gone down 20%, can I still get the X you talked about? And the answer is no because they didn't have the heart. Those were the worst conversations.

Brad: Right.

Joe: So always, I tell people tap in my chest if you've got a heart do it. But like you say, if you're emotionally done; if you're ready we're ready. I think some people … I've been doing this six years as you know and occasionally we tell people look it's in your best interest to hold off. Sometimes they'll interpret that as we don't want to list their business. That's not the case at all.

Brad: Yeah not.

Joe: When they're ready, we will do it. We'll get that buyer. And just from the few examples that we've talked about, there are buyers and situations where we get it under contract very very quickly. Listen Brad we are running short on time you shared a lot of information here that I think will give people good insight into you into building a portfolio of either content businesses or any businesses the way that they can sort of piece it together the way you did and then exiting which is fantastic. I do want to talk about one thing briefly though. Personal in nature if you don't mind, can we? I won't go too far I promise but say yes.

Brad: Yes.

Joe: Okay. So I understand you went hiking in North Carolina recently and they're renaming a mountain after you.

Brad: Yeah.

Joe: Do you … what happened there?

Brad: Well my wife and I have five boys from range two to 11. So we're pretty busy living life. And for our 16th anniversary, we decided to go to Asheville North Carolina, leave the kids at home. My parents came to town to take care of them and we went to Catawba Falls … which you can Google it. There has been many fatal accidents there. In fact, there's been a fatal accident there since I left. Pisgah National Forest has many accidents from what I've come to learn. But we were hiking up a trail at Catawba Falls and then we entered a closed section of the trail. I didn't know it was a ropes kind of situation so we're climbing up ropes and going up a rocky kind of cliff.

Joe: Let me just clarify for the attorneys out there that's thinking they can help you. You entered a closed section of the trail; closed.

Brad: I didn't know. Here's the thing, I've got some lawyer friends that have reached out to me about it and here's the other thing the Pisgah National Forest is owned by the US government. So if you decide that you want to sue them just know that the US government does not take lawsuits kindly. And they take zero liability. So I had friends reach out to me and say you need to pursue this and then I was like I was in the Pisgah National Forest and they're like no, that's not going to work. You're going to lose that. But basically, it depends on the state. North Carolina does not have very friendly laws for stuff like that anyway. It's one of the least friendly states for that. But I hiked up, I saw a beautiful waterfall … actually and filmed in the movie The Hunger Games and that's why we wanted to go up and see it. So we went up there, saw the waterfall, we needed to kind of get a move on it because we had hiked a lot longer than we had expected so we're moving very quickly on the way down.

Joe: You and your wife and kids or just you and your wife?

Brad: No just me and my wife. The kids were at home. I vacated the ropes for a minute, I don't … I saw a path; it seemed like a reasonable thing to do. It was only going to be like 10 ft. and honestly I don't remember anything after that. I fell 40 ft. down a very rocky slope and I don't remember anything until the paramedics and the firemen were there. They tried to life like me up they couldn't do it. And I broke my arm, dislocated my shoulder, collapsed my lung, I had deep bruises and things like that. I did not have a concussion surprisingly.

Joe: You got to thank God.

Brad: Three and a half hours to get … yeah, I did. It took them to three and a half hours to get me out in to the hospital.

Joe: Wow.

Brad: And anyway thank God it was just a lucky situation, very scary for my wife. She was talking to me for a long time without me really knowing what was going on. For 45 minutes she thought she's lost his mind.

Joe: Well the first thing I think we all did a Quiet Light was you know thankfully you're okay and we were doing little prayers for you and all that stuff. And then we start like man that guy is just not so bright going on the closed trails. For everybody listening, if anybody is foolish enough to do what Brad did, we bought him the inflatable … what do they call it, the inflatable?

Brad: They're like these big bubbles that you get inside with your family.

Joe: We bought Brad a bunch of those and I started a petition here in North Carolina to change Catawba Falls to Wayland Falls but nobody listened. Nobody listened at all.

Brad: Unfortunately.

Joe: I've been there and next time I go again I'm not going on the closed trails I don't think but.

Brad: You may not know where the closed trails are. I didn't know it was closed.

Joe: Okay. I've been there because I know that it was like oh look that's where the Hunger Games was filmed.

Brad: Yeah.

Joe: I'm going to bring a sign and I'm going to drop it in there. I'm going to take a sledge hammer and put it in the ground call and Catawba Falls and take a picture for you.

Brad: Yeah.

Joe: See if anybody takes it out. It could be there for-

Brad: It was a crazy accident and I'm thankful for all the support I got. From Quiet Light, from friends of family, it was a … I recovered very quickly. I've got a pretty gnarly scar right here that is still … I'm hoping it's going to turn the color of my skin is it looks like I got really depressed or something.

Joe: He's holding up his wrist ladies and gentlemen and it looks like he decided to take his own.

Brad: Tried … that's what it looks like.

Joe: Is there a pin in there now?

Brad: Yeah there's a play and about a dozen screws in that arm but I've got full mobility back. I'm free of therapy. I can't do pushups yet but I'm getting closer.

Joe: And you did it all while we started at Quiet Light and you had listings and not a single client really knew what was going on and they … I mean it's because you worked anyway which is amazing so that's awesome. Well again Catawba Falls, I'm going to try to get it changed to Wayland Falls but let's see if that happens or not.

Brad: Good luck with that.

Joe: Brad, thank you. I learned a lot.

Brad: Thank you.

Joe: I learned a lot about you and I appreciate your time. Hopefully, everybody here has did as well and we'll keep doing what we did here at Quiet Light. Thanks, man.

Brad: Okay thanks a lot for having me on.

Links:

Brad's LinkedIn Profile

[email protected]

About Brad Wayland on QLB

Two years ago, Brett Curry from OMG Commerce would not have recommended advertising on YouTube. But today, he sees it the way we now look back at Facebook. When cost was cheap and the audiences were huge. YouTube gets a billion views a day, a billion! Brett's company knows all about advertising on paid channels…be it Amazon or the multitude of Google channels.

Recently Brett has seen opportunities on YouTube that allow his clients to advertise on a fixed cost per acquisition basis (my favorite)! In this podcast shares what he finds works and what does not. No need to hire his firm…if you want to learn how to do it yourself, good news! He's created a course with Ezra Firestone. See the show notes.

Episode Highlights:

• YouTube has always been a great content platform. How recent ad types make YouTube much easier to monetize.
• Youtube is used as a product search engine more than people realize. Viewers (and now shoppers) on YouTube are actively doing something, these new campaigns can target people based on that activity.
• Nothing sells like video if it's done right. Brett explains the pre-roll and true view options.
• The key tips on how ecommerce business owners can approach the daunting task of video ad producing that can be profitable.
• Some companies use agencies and others are hiring full time video people in house.
• Search behaviors are different on YouTube than on google. The integration of the platforms allows for hitting more people in order to make more money.
• Why Youtube is an invaluable re-marketing platform.
• If you give Youtube the right audiences to go after and you and you have a video that's powerful, over the time the machine will start hitting that CPA target.
• These platforms can successfully follow the journey of the buyer. The importance of getting all the campaigns working together and connected.

Mark: The world of search engines has changed significantly since about 10 years ago right? Google has been the king for a long time. I believe they started around 1997, 1998 and they've dominated and kind of set the tone for what we think a search engine is supposed to be. But in today's world, if you're in e-commerce or if you're in online business in any way you have to think about different avenues for search. For example, Amazon is the number one search engine for products at this point. But the number two search engine in the world is also owned by Google and that's YouTube. For a lot of us especially those who have been in the online world for a long time we sometimes just think narrowly about Google because that's what we've always done. But there's a lot of other opportunities where people are actually searching and have that direct intent and that's going to be YouTube as one of these things that we need to look at. And Joe I guess you talked to somebody who's really been focusing on YouTube as an advertising channel to be able to acquire customers for a business and he gave you some insights into how to use this channel more effectively.

Joe: Yeah I spoke to Brett Curry from OMG Commerce. I saw him do a presentation specifically on monetizing through YouTube. I guess the best way to explain this is once upon a time on radio I had a campaign, a niche model called Per Inquiry. And we would pay the radio station per inquiry that converted to an actual customer. It's cost per acquisition that we call it now. YouTube has that opportunity now. So Brett really honed in on advertising physical product companies and doing it cost per acquisition … I'm stumbling like crazy here folks sorry, cost per acquisition on YouTube. It's not something we think of out of the gate when we think of YouTube because we're just watching the latest sports, concert, whatever it might be but people are starting to really use YouTube for searching for products and then clicking that link and converting. There are video opportunities where you only pay if someone watches the entire 30 seconds. That's something else we talked about but the one that excites me the most is the cost per acquisition model when he gets into that detail.

Mark: Now I think video is something that all of us need to start opening our eyes to. I think there's just tons of opportunity when it comes to video. And you know fortunately, I think it's a little bit intimidating for most of us. And I say fortunately because if you can get over that intimidation if you can get over some of the worry about "man this is actually pretty expensive to produce" there is a world of opportunity out there if you can start getting it. So I'm excited to listen to this because I've really only just toyed a little bit with YouTube advertising. I haven't actually gotten in and tried to understand it fully so this would be a good primer.

Joe: Yeah it's great. And don't fear the production costs folks because some of the best converting videos according to Brett are the ones that are actually customer produced. So consider that in terms of presenting to on YouTube. That's it, I'm done talking. Let's go see what Brett has to say.

Joe: Hey folks it's Joe Valley with Quiet Light Brokerage and today I have Brett Curry from OMG Commerce with me on the line. How are you Brett?

Brett: I am doing fantastic Joe thanks for having me on the show. I'm excited to be here.

Joe: You're also a podcaster too right? You've got a podcast what is the-

Brett: Yeah. I love podcasting and usually I'm the one firing off the questions and listening. Honestly, I think listening is the harder job of the two here. So I'm looking for just to talking up a storm here talking about YouTube.

Joe: Awesome. Well, I want to talk about a whole bunch of things because I think we met at the … for the folks that don't know we met at the Blue Ribbon Mastermind Conference in Denver. It's part of … I'm going to get that chain of events here wrong probably, it's part of the Smart Marketer Group, right? You guys … how long have you been part of that group with Ezra?

Brett: Yeah. So I met Ezra Firestone at a Traffic and Conversion Summit event like six years ago. It was in San Francisco. It's a long time ago. I met Ezra there. He was just launching his Mastermind Group called Blue Ribbon and I thought to myself this is a dude that I need to know. And so we kind of striked up a conversation, I joined the mastermind group, the rest is history. So I think that was I think years ago believe it or not.

Joe: And I've been going to mastermind Groups and we talk about them here on the podcast whether it's Rhodium Weekend or eCommerceFuel things of that nature. Blue Ribbon right up there for those listening if you can … if your business is big enough and you've got the revenue reach out. Find Ezra somehow through Smart Marketer probably right?

Brett: Yes smartmarketer.com you got to consider it. I'm a huge eCommerceFuel fan as well. Andrew Youderian is a friend of mine. I think they do a killer job but yeah those two are right up there man. If you're serious about e-commerce and growing check out both of those and you're welcome Ezra and Andrew for the club.

Joe: And for those listening if you're not in a Mastermind group or you're a buyer and you think how am I going to learn all this? It's through these mastermind groups. They didn't exist for me. I sold in 2010 as Ezra was saying I spoke to him on an earlier podcast. They really didn't exist when I started and now they're available for so many people to get so much more success I think than I had at the time. But listen I want to talk about OMG Commerce. I want to talk about you. You did a presentation at Blue Ribbon Mastermind on monetizing through YouTube and then kind of blew me away with the specifics of that and then all the other things that you do around that at your company. We want to talk about that. Can you give us … the people listening some background on yourself, on your company and how you started, what you do and then I want to jump into that.

Brett: Yeah, absolutely. So right out of college in 2002 dating myself a little bit, I launched an agency; a small agency helping local businesses with TV, radio, and print; so kind of traditional old school media. I became a marketing junkie in college and I was introduced to Dan Kennedy and Jay Abraham and some of those kind of marketing gurus. I fell in love with the psychology of marketing and I kind of fancied myself as a copywriter for a little bit. And so I launched this agency, I started doing SEO in 2004 and somewhat just clicked. No pun intended it just fit my personality. I liked it and so I kind of became and SEO nerd. But still thinking about copy and the conversion rate and things like that. And then moved into AdWords and then really things took off in 2012 when I got hooked on Google AdWords and kind of … really we started our agency OMG, my business partner Chris Brewer and I we started the agency in 2010. But 2012 we kind of got hooked on Google Shopping. I wrote The Ultimate Guide to Google Shopping after months and months of testing and perfecting things. Shopify published that and then that kind of helped ignite the agency. And so since then, I've been speaking at events like Traffic and Conversion Summit and Ezra's events in social media marketing world and internet retail and things like that. And so really the agency is built on driving traffic to e-commerce stores and primarily using Google Ads; so Google Search, the text ads, Google Shopping, Display Network, and more recently YouTube. I've always been a fan of You Tube. Recent ad types make it much easier to monetize and much easier to track and create measurable results. So I'm doing a lot with YouTube. And then kind of the other side of the business is Amazon. Helping companies with their Amazon ads as well and so … but I spend most of my time in the Google Ads ecosystem.

Joe: Well I tell this story and I'm sorry for the podcasters that have to … listeners that hear me repeat this but you know I spent a lot of money on Google Ads and I didn't have any experience. I didn't have any training. And I think there are too many people out there doing that. They were like me. The problem is that I've discovered is that you try someone who claims to be an expert and in fact, they're not. And they take your budget and they blow it up and you cost per acquisition goes up and your profit goes down and you know this is six months before you want to sell and all of a sudden the value of your business goes down as well. When you get up and presented … I knew first and foremost because you are at Blue Ribbon you are going to be top notch. But then I dug deeper. I sat by Chris, we talked for a while and you talked specifically about YouTube and I know that you can't do that alone and that you've got to package everything else in there. But some of the things that you talked about were … and I'm going to let you dig into it and tell us about it, some specific fix targeted cost per acquisition and only paying if somebody views the full 30 seconds and a whole bunch of things that I don't think is out there for the average person that's doing all of the marketing channels themselves to figure out. So tell us about that a little bit.

Brett: Yeah absolutely and I think I'll just … I'll set the stage really quickly if that's cool just talking about YouTube in general. And you know I've been a fan of YouTube forever. It's always been a great content platform. Everybody is on YouTube. A billion monthly users, average session duration is like 40 minutes which is longer though on Facebook. And the cool thing about YouTube is it's full of a lot of learn, do, and buy moments. So if I'm on YouTube I'm actively doing something. I'm looking for how to fix my lawnmower, how to fix my washing machine although I try to avoid that at all costs and just pay people. But if I'm at pinch go to Google or go to YouTube to learn how to do things or researching products. That's something that a lot of people don't know is that YouTube is used as a product search engine pretty frequently where people are looking for unboxing videos and demo videos and things like that. And so … or just you know how to, my kids use YouTube all the time from everything to how to play the piano to … my 16 year old son now is looking at how to pick up chicks which will it make you proud or worried I'm not sure. But yeah you can learn anything on YouTube right? So when someone's on YouTube they're actively engaged in what they're doing and so the beauty of that is you can target people based on what they're doing on YouTube. But then like you alluded to now there's these ad formats that just really make it powerful. And so it's kind of combination now of better targeting than ever before so we can make sure we're reaching the right person better than we ever have before on YouTube. Everybody is there but how do we get to the ideal person for a particular e-commerce business. And then how do we have like a bidding and ad format that people want to click on and want to take action on and we're paying a rate that makes sense. And so that's kind of the backdrop. But yeah, so you talked about only paying if someone engages. That's called YouTube TrueView and so for those that don't know that's the pre roll or before ad. So if you go to YouTube to watch a clip from The Office or something and then there's an ad that pops up before that or the place before that you've got five seconds until that magical Skip Ad button pops up. And so the way that works is if a user skips the ad before the 30 second mark or before the end of the ad whichever comes first then the advertiser doesn't pay. So you know I could watch 28.9 seconds of an ad, click skip and the advertiser doesn't pay a penny for that. And so … or someone has to click through to the sites. If they're watching and they think ooh this is cool I'm going to click on the ad and go to the site and then the advertiser is charged for that as well but really an awesome concept. You know I used to in the previous agency days, I did quite a bit of TV and it was my favorite medium pre … before I got really deep in online marketing just because the power of video right? Nothing sells like video if it's done right and so … but if you're running a TV spot you pay for the spot regardless of if people walk out of the room or change the channel or whatever. With TrueView you're only paying if someone watches or engages so it's pretty powerful.

Joe: Well let's talk about … for the people that are listening and that have a physical product and let's say they're just doing Google AdWords and they wanted to reach out to you how did that … how does it start, how … to me the idea of producing video if that's something you've never done is kind of daunting. How do you try to approach that?

Brett: Yeah it really is and so this is what separates YouTube from say Google Shopping or Google Search ads which are just the text ads. You know a text ad that you can create in about three minutes. Or if you did research it takes a little bit longer than that but it's really easy. Google Shopping, the ads are pretty easy. There's just data feed involved, there's product feed involved which can be a little bit tricky. But a video, man that's tougher. You got to hire a video crew potentially. You got to hire an actor or you've got to be comfortable on camera, whatever. Ultimately though you really can create a video even using an iPhone if you wanted to but my advice on the video itself is be straightforward first. So I think … because we've all grown up seeing ads we have all kinds of ideas of what works and what doesn't work. So we know the funny Super Bowl commercials that we like and so we think we need to recreate something along those lines right? So I need to come up with something like the what's up guys from Budweiser. I'm a believer in direct response. So that's the type of ad we suggest that you run because most physical product companies if you're not huge a pure branding play is going to be tough so you want something that's direct response. And so I prefer a kind of straightforward approach. But a couple of things you can think about is one, you do need to hook someone immediately. So that Skip Ad button comes up in the first five seconds so hook them immediately. So what do you got to say, what question are you going to ask, are you going to be like running up to the camera, are you going to be doing something interesting to make someone say okay I was going to skip because I don't like ads but there's something about this that I need to watch. So hooking them in the first five seconds is key. I believe you got to lead with the strongest benefit. So what is the benefit that your product provides? Is it time savings or is it status or what is that major benefit and then dramatize that. Bring that to life even if it's just you talking and showing the product. So that's important. You also got to incorporate some social proof. So do you have a testimonial, do you have an endorsement, do you have something … are you endorsed by somebody that is trusted by your marketplace; some kind of social proof. And I think and kind of part of this you want to show don't tell you know. A talking head video can work but you want to show as much as you can. That is few of the things to consider to [inaudible 00:15:24.2] have to get in to but things like [inaudible 00:15:27.5] sort of moving the risk. What are the risks that someone has in their head before they buy? So if you're selling apparel or footwear or something what if it doesn't fit? Then what do I to overcoming some of those objections in the video is important. And then a really strong call to action, so like hey what do you … what do I want you as the viewer to do next? If you leave that … oh but this is just crazy to me, you know most people think "well it's a compelling ad people will naturally click". Not necessarily, you kind of have to ask them to. Like go here, get this free shipping code, or check out this, or watch this further demo, or join our email list to get a discount; something, some kind of call to action and then push people to do that. And the nice thing is there are some new ad formats that really make those CTA's or calls to action pop. But that's just kind of few of the things that make for a good video. But I admit making a good video is much harder than other ad formats, it just is.

Joe: Through your agency do you guys have a referral program … people that you say okay these guys have done a good job and you refer people to agencies or do you find that the entrepreneur is creative and ingenious and can create a video on their own and make it work?

Brett: Well, yeah it's interesting. So we're seeing now a handful of our clients are hiring full time video people because of their product videos. So video can be useful on a lot of ways right and different types of videos. So maybe I just have a pure product demo video and I put that on my product detail pages and then I'm cranking out little short clips for my Facebook advertising and then I'm launching maybe YouTube content that I'll try to get to rank organically and then I'm running YouTube ads and I've got someone creating that. So surprisingly this is something that I don't think existed with the size of companies we're working with now. You know kind of two million to 10 million a year and really up to pretty 20 million whatsoever, a lot of our clients are in that range. Those companies now have full time video people.

Joe: Okay.

Brett: There are a few agencies I could name but we don't do any of the creative work ourselves but I can make recommendations.

Joe: So let's go to that assumption then that the client has video … has access to it or produced their own, why YouTube though? Why … like when I go and I search … like I did a search today on how to export a profit and loss statement from Xero because a client said it can't be done and I'd seen it done. I get them all the time. Oh yeah? Well let me send a video. So I did that and I sent him, I skipped the Quiet Light Brokerage banner ad because we don't need to click on it.

Brett: Yeah.

Joe: But it never really occurred to me to buy through YouTube. So what … people know that when you do sponsored Ads inside of Amazon or you spend money on Google Ad Words or Facebook that there's going to be a certain volume you can get to in return on investment. Is it worth it to advertise on YouTube? I know it has a billion viewers but how many people are really thinking products? And is it worth it; a bang for the buck? Should people be paying attention to advertising on YouTube?

Brett: Yeah, the quick answer is this; absolutely. And this is one of those answers that even just probably two years ago my answer would have been a little bit different. It kind of would have been a maybe. Like I said YouTube has always been a powerful platform. If you're a good content creator and you created good content and got organic traffic and then YouTube has always been a good source for running a business. But from an ad platform, I believe it's just become viable for a lot of businesses. I would say most e-commerce businesses should consider it and that's a relatively new development. So aside from everybody being on there and aside from people being actively engaged where like you're looking at how to pull a report from … it was Xero?

Joe: Xero.

Brett: So how to pull a report, if there'd been an ad related to something like that maybe it would have captured your interest or maybe not. But you can target people based on what they're doing on YouTube plus much more. So, of course, YouTube is owned by Google and so now you can target people based on their behavior that Google sees even off YouTube. So one of the options you have is keyword targeting. So if maybe I've got a new Xero alternative so better than Quick Books better than Xero whatever I'm going to … I want to woo people over to my new accounting software; which sounds like just the worst job in [inaudible 00:20:04.7] accounting software. But anyway we'll [crosstalk]. Exactly, I think I just fell asleep as I was mentioning it. But so then I could use keyword targeting and I could target people looking for Xero and Quick Books and Quick Books Online and Quick Books online tutorial. And maybe I'd even target things like why is Quick Books doing this; like some pain points around Quick Books like Quick Books keeps crashing things like that. So those are some of things people type into YouTube kind of just to find a fix. Well then if I've got the alternative to Xero and Quick Books then I run my pre-roll ad for somebody watching a video on how to fix a pain point inside of Quick Books. So there's this keyword targeting that's based on content on YouTube which is really powerful. But then going to what I alluded to a minute ago you can also target people based on what they're searching for on Google. So I think it'd probably be a toss-up like who has more information about you; Google or Facebook? I don't know really. They both know everything about us. And so I don't know about you, my search behavior on Google is different than it is on YouTube. Often if I'm going to YouTube I'm just watching music videos and stuff like that like sort of as in background even. But I search on Google for all kinds of stuff. So then you can target people on YouTube based on what they're searching for on Google. So if I sell running shoes I can look at a whole host of search terms that someone maybe typing on in on Google and I can build an audience around that and then target those users the next time they're on YouTube.

Joe: So it sounds like if someone is doing any paid advertising on Google whether it's AdWords or Google Shopping or whatever it might be that they need to think of YouTube as just what it is which is an extension of Google. They're owned by Google. It is Google.

Brett: Yeah.

Joe: And all those same tools and resources are there that you just got to think visually. So it's really the last couple of years you started to see your advertising work better and get … Google's getting better at it to allow you to do a better job. Can you give me an example without naming any client names on in terms of what it's done for them so that somebody doesn't go "oh, wow, okay"?

Brett: Sure.

Joe: And what other channels within Google they're also spending money on?

Brett: Yeah absolutely and so I'll kind of mention this first, I think YouTube is for a long time have been good at creating brand lift. So even kind of before some of the new targeting options and before some of the new ad options it was good at getting people to be aware of a product. So we'll use Boom by Cindy Joseph because Ezra wouldn't mind if I talk about it and we run all of the Google ads for Boom. But if we ran YouTube ads introducing people to Boom … let's just say we had no call to action I think at the end which we wouldn't do that but let's just say we did, that would likely cause a brand lift. More people would start searching for Boom on Google. After watching the video they'll be intrigued and say oh what is this let me check out a little bit more. And so that's always been kind of the platform or always been a benefit of the platform. But then kind of beyond that the next thing I would recommend someone to do is look at using YouTube for remarketing. So for people that visit your site whether they go to product detail page only or whether they add to cart and abandon, let's remarket to them. So let's use YouTube as a remarketing platform. And so that's what I've been doing for a while as well, taking our remarketing list like you alluded to all of this is built in the Google ads platform and it's now rebranded as Google Ads, not Google AdWords. So it's all in that platform so we can upload our remarketing list, we can start segmenting that and running YouTube ads to those people. So we typically segment break out site visitors, break out PPC viewers, break out cart abandoners, and kind of have different ads that we run from them. But then kind of beyond that we're looking at a new format called TrueView for action. And you kind of mentioned this before too where you're … this is where you're bidding on a CPA basis. So basically what we're doing is we're telling YouTube hey I'm willing to pay X, I'm willing to pay 100 bucks or 80 bucks or 50 bucks or whatever for a conversion and over time YouTube gets really good at dialing that in. So if you give YouTube the right audiences to go after and you have a video that's powerful over time the machine will start hitting that CPA target provided your site converts as well.

Joe: Google TrueView?

Brett: So as- what's that?

Joe: Did you call it Google TrueView?

Brett: It's TrueView for action. So it's a subset of TrueView. So you could just run standard TrueView which is the ad format I talked about before where someone has to watch 30 seconds or the whole video or you don't pay. So that's kind of standard TrueView. With standard TrueView, you're paying a cost per view. So you're telling Google I'm willing to pay five cents, two cents, 20 cents per-

Joe: Yeah, risk … there's risk there but it sounds like the TrueView for action is look you're not going to pay unless it converts which is-

Brett: Yeah exactly.

Joe: But is there volume there?

Brett: There is immense volume and that's one of those things where we've seen people be able to scale pretty quickly. So with Boom by Cindy Joseph, we went from not even really a channel to a pretty large channel quickly. And we were able to start kind of dialing in and hitting their CPA target within a couple of weeks. And then it will sustain that now for several months.

Joe: What happens in the first two weeks when you're … if you're doing TrueView for action aren't you always hitting that CPA target?

Brett: No. So you're not. And you give Google the CPA you want to hit and you set a daily budget.

Joe: Okay.

Brett: But the machine is experimenting in the beginning. And this is something where this is a little bit different than let's say Facebook ads as an example I know … and I'm not a Facebook ads guy. I don't run … I don't run our Facebook even but I know there is kind of this thought that with Facebook ads you build a bunch of an ad sets and you let them … you know each one spends 30 bucks, if it doesn't convert kill it, whatever. Really search pruning quickly. That doesn't work on YouTube, not with TrueView for action. You need to give the machine time to learn. So you're maybe going to be letting it run for seven or 10 days. Obviously, you could pause it if nothing's happening. But usually that CPA, it's going to be above the CPA initially and then it's going to start getting closer and closer to it. So we found again with the right video, the right targeting you can usually hit your CPA target if you let the machine kind of dial in.

Joe: Okay, and you guys don't do any of the Facebook stuff. You're focused on most of the Google platforms and then you do the Amazon platform as well.

Brett: Yeah exactly.

Joe: And is it because that you integrate the Google Shopping, YouTube ads, Google AdWords, PPC whatever they've rebranded it you integrate them all together.

Brett: Yeah.

Joe: Do you think they help each other? Is it Google has gotten to the point where is it intelligent enough to pull resources from one to the other to help improve cost per conversion?

Brett: Yeah absolutely and then one of the things that Google just really stepped their game up in the last couple years in the last six months even is audience targeting. So being able to apply some of those audiences even to your search campaigns and a few of the audiences to your shopping campaigns. But it is all connected because if you think about it if I'm in product research mode, if I'm looking at buying a new … let's say I'm buying a new [inaudible 0027:37.5] a couple of this things for a house and then I'm researching on Google then maybe after I find a few things I'm going to YouTube to watch a video or some unboxing videos or installation videos now I'm going back to Google. And so what you can do if you've got all of the campaigns setup and part of a … we call it a full funnel approach or a team of campaigns, we're not viewing search and shopping in YouTube as this completely separate entities but how do they work together because they do. So if someone finds us on search or shopping when they don't convert then let's use YouTube as the remarketing vehicle. If someone discovers us on YouTube and they watch a video and they become engaged with us but they don't purchase well then let's add them to a remarketing list and target them with search and shopping ads. Because maybe someone learns about your brand on YouTube they don't buy, their next activity is going to be I'm going to go to Google and search. I'm going to go search for this company now or find out more and so we can target them that way. So that's another piece we look at as we create a list of people that have viewed a video as an ad. And then we layer that into our search and shopping campaigns. And we've seen this … let's just go back to the Boom by Cindy Joseph example; we even created some campaigns where we only target people that have seen a video ad. And a lot of those people then go back to Google and they can't really remember the brand name but they remember seeing the video or whatever like something's caught their attention so they're just they're typing in a bunch of random things. Like make up for older women or you know things that would've been mentioned in the ad. And then we're able to target them because we built a list of people that viewed the video as an ad but actually converted them to research a shopping campaign. So if we just think about it, if we kind of step back and think about our own journey like what's my journey as a buyer? I really just click on one ad and buy. I don't just see one ad for a brand new product I've never heard of and purchase immediately. That doesn't happen. I'm usually going to search for something, be exposed to it, click around, visit, and then see another ad and then convert. So we would … we like to get all the campaigns kind of working together and connected.

Joe: So let's say that someone is managing their advertising campaign themselves and business is getting big enough to they want to elevate themselves to more of the captain of the ship instead of a navigator if you want instead of just focusing on one part like the marketing are there resources out there to learn everything you need to learn about for the Google ads platform within Google and outside of it or is it simply your 20 years of expertise that … and what, staff of 17 that allow you to be better than any Tom, Dick, or Harry that's going to try to do it for their own business?

Brett: Yes. So I mean there is a learning curve and I think the learning curve is a little steeper with Google ads than it is other platforms potentially. It's one of those things where learning the basics is not that complicated but then seeing how everything interacts and how one change leads to other implications is a little trickier. So there's a little bit of a learning curve but there are some good resources. So on the Google Shopping side, I wrote the Ultimate Guide to Google Shopping a few years ago. Shopify published that. It's totally free.

Joe: Do you have to update that on a regular basis? Is it changing?

Brett: Yeah, I just updated it a year ago. I needed another round of updates. The core of it is still good but it needs to be updated.

Joe: Okay.

Brett: I'm working on a course with Ezra Firestone. We launched the beta version on all of Google Ads. So it kind of starts with-

Joe: Oh, excellent.

Brett: -that foundation of Google ads.

Joe: That's what I was looking for and I didn't know that. For everybody listening, I didn't know that by the way.

Brett: Yeah.

Joe: Because look some people are going to be hesitant to work with an agency.

Brett: Sure.

Joe: And historically I've been anti-agency although I owned one. I owned a media buying agency specifically for radio back in the day.

Brett: Yeah.

Joe: And my experience is as an agency owner is that you're going to work really really hard because you want to client to keep spending money because you get a percentage of that money that he spent. So you want them to be successful but as an e-commerce owner, my experience was … God, they blew it, my gosh my cost per acquisition went way up. Everything is destroyed. They're not paying any attention to anything that I said but what you did and what you presented was great and different. So that's … I wasn't going there but thank you for going there. So you've created a course on the Google ads platform with Ezra which will be done when?

Brett: So probably by the time this … I don't know when is this is going to live but it will … it's launched in September of 2018 is when it will launch officially.

Joe: Okay.

Brett: So it should be available here pretty quick.

Joe: So people can find that probably on smartmarketer.com right?

Brett: Smartmarketer.com

Joe: And OMG Commerce I would assume as well?

Brett: Yeah well, have some links to it as well.

Joe: Okay so let's assume that a certain group of people are going to be I'm never working with an agency and they'll Google and they find that there and they'll get that expertise and training which is exactly what I want. I want people to get the best advice and expertise.

Brett: Yeah. And one thing I would maybe add to that is I would recommend that everybody get educated at least to a certain degree. Even if you plan on outsourcing it or hiring internally for it, learn the basics of the platform. Learn how everything kind of ties together. Because then you'll be able to analyze does this agency I'm going to be getting they know what they're talking about, is this person that I'm hiring do they know what they're talking about? So I think as a business owner you got to educate yourself at least on the basics and kind of see how the full funnel works and things like that. But yeah you don't have to hire an agency. You can hire someone in-house and train them up and that could be great for some businesses.

Joe: Unless they quit.

Brett: Exactly, yeah. That's true, yeah. Good to be diversified a little bit.

Joe: I agree. Well listen, Brett I appreciate it, I appreciate your time coming on here just sort of unraveling the mystery of YouTube because again to me I've never thought about buying something there. Now that we've talked and I saw your presentation it's every time I'm seeing an ad and I've actually watched a few which is interesting but I haven't clicked through to buy yet. And I think that that's going to change. And I think that people will get ahead of it and start learning it now and being one of the early adopters of advertising on YouTube. They'll get ahead of the curve like those that focused on Facebook first.

Brett: Exactly and I think it's … I think Facebook's going to be a viable ad platform for the foreseeable future. I think You Tube is going to be as well but I would liken where YouTube is now to where Facebook was a few years ago where it's pretty affordable to be on YouTube. Those costs will go up over time as more people hop on to the platform but it's a great place to be. And yeah we've seen from skin care to apparel to automotive to tech; all those verticals in e-commerce are getting good results on YouTube so it's worth exploring for sure.

Joe: Fantastic, so YouTube is today where Facebook was a few years ago.

Brett: I think so, yeah.

Joe: That's a good way to end it. But for anybody that does want to talk to you, I think they can find you at OMGcommerce.com is that right?

Brett: Yup OMGcommerce.com I'm happy to chat, happy to do an audit potentially of existing efforts and I'll let you know how we could potentially help. So yeah OMGcommerce.com.

Joe: Well put that down in the show notes and if this is out before the course is done we'll go back and we'll put it in the course after the fact so that those that just want to learn on their own and maybe bring it in-house can learn from that as well.

Brett: Yeah awesome.

Joe: Thanks for your time Brett I appreciate it.

Brett: Okay thanks Joe I really appreciate it. [inaudible 00:35:07.7] All right see you.

Links:

• OMGCommerce Website
• ecommerce Evolution Podcast – Get to know Brett
• How to Use YouTube to Scale Ecommerce Ads – Online eCourse

I've seen Ezra Firestone speak at events, online, and in his "how to" courses. But until I got to chat with him one on one for 30 minutes about work/life balance, did I realize he's the next Tony Robbins (OK, of the ecommerce world, and without the banana hands.) No kidding, Ezra is inspiring and full of passion. And he does what he does (rock 30 million a year in revenues without breaking a sweat) while giving back to others, focusing on family, and taking care of his health.

If you're are a corporate exec wanting to live the ecommerce lifestyle, Ezra's approach is spot on. If you are an ecommerce owner and want to be the "navigator" of your business instead of the jack of all trades, listen and try to really hear what Ezra is saying. It will make a difference in your business, your bank account and your family life.

Episode Highlights:

• Highlights from Ezra's unique upbringing and how he grew up with e-commerce.
• We follow the journey of his professional life from poker to yoga to where he is today, earning thirty million per year in revenue.
• Ways the apprenticeship model can be beneficial to young entrepreneurs. Ezra reveals the pivotal moment where he understood the freedom he could achieve from acquiring a skill and mastering it.
• How Ezra found his "mastery" in e-commerce after trying several things.
• Every type of e-commerce business requires the same kind of marketing. All the marketing that goes with the product: before, during and after is what smart marketers need to focus on.
• The easiest business to run at scale is the physical product in e-commerce.
• The importance of going premium in e-commerce. There are buyers for every level of the market.
• Why Ezra chose not to sell on the subscription model.
• Using consistent ongoing marketing content in customer communication can generate revenue by sending the customers back to the website over and over.
• Ezra describes how he made the transition from driver to navigator.
• The importance of setting boundaries. Work will fill the time that you give it but it is necessary to scale in order to create balance.
• Balance as an entrepreneurial leader allows you to give the autonomy to those around you to step into roles that they can be motivated to succeed at.
• Ezra runs his business based on the practice of permaculture. Serve the world unselfishly and profit, that is his philosophy.

Mark: I saw an ad on Facebook the other day Joe and it made me think of our guest today. The ad was for anyone … any guy who has just a regular hairdo like I do and it was a man bun attachment. You could actually buy a man bun attachment to put on the top of your head if you wanted to have a man bun.

Joe: Don't say his name now, don't say his name.

Mark: I want a minute here and think who in the industry … in the world of marketing is known for his man bun?

Joe: You know when we had Syed Balkhi on the podcast I actually went out and bought myself a Florida gator hat to wear during part of the podcast. I seriously thought about going on Amazon and ordering a man bun and putting it on for this podcast. That's what I wanted to do. But you know what I don't know the guest well enough. I've seen him at events and we were a host, we're not a sponsor on his last event. Today we're on this podcast is the first time I really got to sit down and talk with him for 30 minutes or so. I guess we can say is name now is Ezra Firestone. If you don't know his name where the hell have you been? Because essentially he is … in my view he's the Tony Robbins of the e-commerce world without the banana hands if you've ever seen Shallow Hal. He's very impressive. When he starts talking you just sit back and listen and you go "What? Really, wow that's incredible. That's incredible." He's so full of energy and so passionate about what he does that you would think that he works all the time. And that's kind of the takeaway from this podcast for me. There are lots of great insights to how to run a more effective e-commerce business in different channels and philosophies that someone like Ezra applies. And look he's doing 30 million dollars a year in revenue growing month over month and does incredible things. He does not get out of bed … well, I shouldn't say bed; he does not start his day until 10 o'clock in the morning. And that doesn't mean he works until 10 o'clock at night. He works maybe till 5 o'clock unless he's out doing events; like he's going to be at Blue Ribbon Mastermind next week which is just incredible … doing 30 million a year in revenue and not working 40 hours a week; a really impressive guy.

Mark: Absolutely you know I have a confession to make. You know these courses, these e-courses online that are super expensive, I usually look at these and I'm like yeah who in the world would ever pay for this? So my confession is this, I've actually bought one before and it was one of Ezra's. It was on Facebook Marketing which is a little bit off from what you're talking about. But I can honestly say it was worth every single penny. I think those who have actually gone to Ezra's events and listened to his advice bought one of his courses and have followed him. He's big. He's known because he's a real deal. Starting work at 10 AM is an awesome testament to the idea of this work life balance and making sure that we're working so that we can live our lives. We're not living so that we can work our lives. That's awesome. I want to hear this because right now I'm working so much and Joe I know you are too. So hopefully you did pull away a few things from this as well.

Joe: I did. I did and people don't want to hear you and I anymore so let's just go to Ezra.

Mark: Let's go.

Joe: Hey folks it's Joe Valley from the Quiet Light Podcast and today I have Ezra Firestone on the line with me. Hey Ezra how are you doing?

Ezra: Happy to be here man. Thank you so much for having me on the show. I love doing stuff like this.

Joe: So so glad to have you here. You and I have … we've been to a couple of events together, I've been to your Smart Marketer and Blue Ribbon Mastermind but we've never had a half hour to talk to each other so I'm loving the fact that I got your crew to schedule this. So thank you first and foremost, I know you're a busy guy. As I mentioned earlier we don't do a fancy introduction so for those that don't know who you are if you could tell us a little bit about yourself and your background that'd be fantastic.

Ezra: Sure. Thanks. I am currently sitting in a presidential cabinet room, so that's my current location in the world.

Joe: For those listening and not watching, get online and look.

Ezra: Yeah get up take a look. This is actually an off … my wife and I bought 76 acres of land about 20 minutes from here that we're intending to sort of develop and build a home on and have kids on and stuff. We're renting this home and the person who lived here before was like some kind of a lawyer or something. And this room … it's all cabinets and for me for some reason that is confronting. Like I don't know why but I walk into this [inaudible 00:05:02.0] in my office and I love … I love it. I love that I have a space where I can work but all the cabinetry it kind of freaks me out because it's very not … much not my vibe. So I'm like putting in plants, I've got like a skateboard over here. You know I'm kind of trying to make it feel a little less intense. Anyways a little bit about me business wise is I never went to college. I went straight from high school to New York City to play poker for a living which I did really well as a teenager and into my early 20's. I was really fun but eventually, I sort of came across the concept of not trading time for money and began looking at building systems to generate revenue and resource for me without my direct time input all the time and sort of fell into e-commerce. Because you know e-commerce was really coming up in society at that time. We're talking 2004, 2005, 2006. It was my first years in e-commerce and I've been fortunate enough to grow up in this industry. And this was a time before events and before podcast and before this industry was … everyone, when you said you were an Internet marketer they thought you were into porn or gambling.

Joe: That's right.

Ezra: It was not looked at as a good thing. And so long story short is I've been doing e-commerce full time for about 13 years. I have grown and sold several companies. I currently have four different brands that generate about 25 million a year in revenue and 70 employees on my team around the country. And I'm just a guy. I'm just some random guy who loves this stuff. I really really love it and I think timing wise I came into it at the right time and fell in love with it at the right time and have been putting my full energy and attention in the direction of online businesses and e-commerce in particular physical products. Although I do have other business models e-commerce is my most successful model over the last decade.

Joe: That's impressive. First and foremost the fact that you didn't go to college and you went right to life and you're a professional poker player. I don't tell my kids this, as I mentioned before I've got two boys, 14 … oh almost 15 and 17, some of the most successful people I know didn't go to college. One of the guys I worked with up in Portland Maine, Rob Graham if you're listening, absolutely one of the most successful people I know and he just … he got it. He worked hard, he was smart, he used common sense and intelligence which you have to have a combination of so kudos to you.

Ezra: Thanks, man. By the way, you can't give me too much credit for that decision. There were no colleges that would take me with my problem. I just didn't fit the mold. I sort of always had this idea, you know I haven't … I had an alternative lifestyle. I grew up in an intentional community in the Bay Area of California with flower children hippie parents and so I kind of had some alternative views on life from my upbringing. And one of them was that the school system really felt like a system that was farming me into a model … into a workforce that I didn't want to join. You know sitting at a desk for eight hours a day and then you'll be trained to go sit in the cubicle eight hours a day. And I believe that in life you get what you want from people who have it. That's how … you find someone like you Joe and you learn about how to sell businesses from someone who is doing that. And I have always sort of believed in that apprenticeship model. And you know I looked around at college, I mean I attempted to get in, nobody would take me but there was like nothing there for me you know. The teachers didn't have anything that I wanted. I couldn't really see a future for myself there and I was a very good hustler. I always had little businesses and I was the guy at school … I almost had, I would have to go on to those stories but I always had something going on to make money because we weren't rich. We grew up without much means and I always had this goal of generating resource so that I could use it for causes that I found noble like taking care of my family and taking care of my community and participating in the world in ways that you can only do when you have access to resources. So I always kind of had my attention on that and yeah I fell in to entrepreneurship sort of because of that.

Joe: So if people are reading in between the lines and the threads and lines here, we've got somebody that … you used the word hustle, you know I think the harder you work the luckier you get. You take from people who have it, in other words, you associate from … or with people that they can help you and you're in turn helping them it's never a one sided-

Ezra: Totally.

Joe: -you would think. And the noble cause is giving back. I have to ask though when you give the visual of 76 acres that you and your wife have bought, you're going to build a home and when … I just what state are we talking about? I keep hearing New York and Hawaii but I think you're up in New York.

Ezra: Yeah so I live in upstate New York now, about two hours north of the city and I grew up in Hawaii and California. Moved to New York at 18 to play poker and just fell in love with the East Coast. I met my wife when I was 20 and this is kind of where our life is and where our community is and our friends are and just sort of I'm a big fan. I love it, it's a really really good place and yeah we got our problems, we got ticks and we've got the winter and like there are things you know. But it's like anywhere you go there's going to be stuff.

Joe: Well you can have your events in the southern regions of the country so that you can get out of New York when it's 10 degrees and 18 inches of snow out there. Talk to me about that transition that you had from okay online poker or playing poker up in New York is not cutting it and you wanted to step into the e-commerce world, did you … was there a day, a moment, a person that you met that made a difference and you said okay this is the path I think I'm going to try it?

Ezra: Totally. I think that entrepreneurs, in general, are chasing some form of freedom; financial freedom, location freedom, freedom of where they can spend their time and they're running away from pain in general. And then you kind of reach different levels of entrepreneurship that I'll talk about in a minute as I've gone through all the phases of like I started … my wife didn't like the idea of me being out all night sleeping all day under fluorescent lights with a bunch of degenerates just eating Butterfingers and just being like a New York City underground poker scene guy. I mean that is not an attractive package so she wasn't to excited about that so I took what I call a square job where it was one of my first ever jobs where I actually worked for someone else running this yoga studio in Manhattan. And this was at a time when Bikram Yoga was still in its heyday. It just kind of like we're talking 2007, I was running this studio. It was the biggest Bikram Yoga studio in Manhattan. I was the manager, the youngest manager. I was 21. I ran the whole thing and this was before everyone found out that Bikram was a creep and a rapist and the whole kind of Bikram thing fell apart. It was sort of as yoga was going main stream in society and that was a really fun gig being in service that … you know in the world service running a studio. But man I would be there 60 hours a week and I didn't like not having the … not being able to have choice in where my time was spent. And so that was the initial sort of pain point that pushed me towards man the poker gig was better than this because I had more flexibility of where I've got to put my attention. And I think that in life what you put your attention on grows and what you ignore gets smaller. You put your attention on your health it gets better, if you ignore your health it gets worse. If you put your attention on your relationship it gets better. If you ignore it, it gets worse like … just where you're directing your attention is everything. And I think that really as a human being the skillset you want to develop is the skillset of mastery which is simply the willingness to put your attention in one area consistently over time. Pick up the instrument for 30 minutes a day after a month you're better at it. It's a willingness to place attention and direct it consistently over time and I think that … so I kind of was playing poker for a living and I met a guy. Now, this guy was a really fascinating guy and he was a coach and a coach of coaches before coaching was mainstream. So now you know about relationship coaches, health coaches, life coaches, business coaches, coaching has really penetrated society as a mainstream concept. Back in '04, '05, '06 it really was not that big and this guy was an early life coach. He'd started the International Coaching Federation one of these things he started that was a life coaching sort of governing body. And the thing about coaching is there is no real governing body, any schmoe off the street can call themselves a coach and start charging. And that is both good and bad, right? You end up with access and to opportunity for people but also some people are you know schmucks and not so good at it or they're selling you stuff … you know they're not qualified. Anyways long story short this guy … we're talking '05, he was selling business opportunity information products, e-books, digitally delivered courses, DVD sets, and these were how to become a life coach, how to start a life coaching business, how to make your own money and have a practice as a life coach. And the way that he generated visibility for this offer was with the search engine optimization which was the traffic source of the day for internet businesses. You would rank on Google and you would buy query based traffic from Google Ad Words when someone typed in a search query like how to make money he would show up. And so I taught him how to play poker and he taught me search engine optimization. And that was like my first foray into … you know this guy worked from his laptop, he was making a bunch of money and I was like men his life and his production cycle is a much more effective production cycle than mine. If we're looking at like we both have the goal of generating wealth, the way he is doing it is far more appealing than the way I'm doing it sitting behind a desk selling people water and coconut water and being yelled at about how we don't have any towels. It was like your hustle is smarter man you got to teach me this. So I taught him how to play poker he taught me search engine optimization. I ended up taking over his business and running this life coaching information product business, learning about things like landing page optimization and conversion rate optimization, sales webinars, and product launches, and upsells, and just like traditional direct response internet marketing as it relates to the sale of information. And this was really where I cut my teeth as a marketer and I love that business. It was a lot of fun. And ultimately once I had developed the skill set of the ability to generate visibility for an offer which was not that hard back then, it was buying Ad Words and doing article marketing, link building, and SEO, I thought to myself man selling information is wonderful but it's got a couple of downsides which is you're reliant on a single influencer. You are only as … you only have as much value as the next month's cash, it's not … you can't sell the thing. It's not an asset, it's a cash flow business by its very nature because it's built around, in general, a particular persona and you can't ever sell that. And there's a number of reasons why I wanted a different model and I tried a whole bunch of them. You know I had a seven figure services agency. I currently run a multi seven figure software as a service business. I did coaching and consulting. I did development for people. I've done all kinds of models and e-commerce appeals to me as the number one model and has been my most successful model and the model that I've enjoyed most for a number of reasons and I'll go through those now. I don't even know if this is the answer to your question. I'm kind of rambling. Can I tell you about why I like e-commerce?

Joe: Keep going, please I love this.

Ezra: So if you look at the three main areas that result in a business's success … now I will determine a business at scale as a business that's doing between half a million and a million dollars a year and has at least three employees and consistent processes. I'm going to label that as "scale", so being someone who has run probably 10 different business models, you know affiliate marketing … I've done everything in the last 15 years or so. At scale, e-commerce is my favorite for a number of reasons. When you look at what I believe to be the three things that you've got to have in place to scale a business there's … the first one is product. You need supply chain; you need the ability to produce this product at scale in a way that is not going to take over your life. So if you look at e-commerce, I literally sell tubs of goo. Okay this is not a tub of goo this is a stick of goo but basically, it's a plastic stick there's some goo in it. I mean and you can see here on the visual this is very very good goo, it's handmade goo.

Joe: It's like fantastic all natural goo.

Ezra: Yeah, it's really really good but it's like I got a tub and I got some goo and I got some labels right? At scale I buy more tubs, I mix more goo and I have more labels. Now let's look at product and supply chain at scale for software as a service which are also sold at scale. Software as a service I need front end engineers, back end engineers, QA's, I need to actually be creating new code and updating the product and integrations all the time. Like the product is morphing every single week; it's not the same product. It changes every week and then whatever I change breaks and then once I develop the product I have to document what I did for the people who are actually using it. And then I have to train and now we move into the second pillar; support. So you have a product you want to ask me something about that product?

Joe: I want to point out that the products that you have in your hand also they get used up and reordered and auto shipped so it's a key differentiator between selling a water bottle [inaudible 00:18:06.6]-

Ezra: Hey smart marketer all right.

Joe: -versus a tub of goo.

Ezra: [inaudible 00:18:12.7] is I mean obviously subscription based revenue things that are consumed is really really phenomenonal. If you look at information marketing the beauty of the product side of selling information is you create it once and then you don't have any more cost of goods. Every time I need to buy another one of these it cost me six bucks. When I create an informational course, I create it once and I can continue to sell it but the product goes bad after about six months to a year because it's outdated information. It's not self-help. I mean I sell very specific here's how you run Facebook ads that might need to be updated every six months. So it's very hard to keep that product up to date. Services, I struggled with the product side of setting boundaries. I had a multi seven figure consulting agency doing advertising for e-commerce businesses back in '09 and my problem was always around where does the service end? People would ask me for more. I would then do it like I just didn't have a … I wasn't good at boundaries and so I found that product very hard to fulfill on and as much as I had a very hard time. And this is maybe not other people's issues, I had boundary issues and it's therefore I failed as a services agency and I did well but like the model was not super profitable because I could not figure how to set boundaries. So as far as the product goes e-commerce has been the easiest one to scale without my direct involvement. And I'm looking for the ability to generate wealth and resource and have the most pleasurable model possible. And when you look at the most pleasurable models to run for me it's e-commerce. Let's talk about the support side because as your business scales you have to engage with and support your customers. And with software as a service, those support people need to be very high level. They need to understand the software, the highest level and be able to talk to customers about it. It's way more intense than support for e-commerce where it's like what's in the product, can I get a refund? You know I mean like the support is not anywhere near as high level for e-commerce. So if you look at I have a 1.5 million dollar a year in annual recurring revenue software as a service business that I launched about 24 months ago it will be about 2 million this year and 20 something but the point is that business at 2 million dollars a year has double the amount of employees that BOOM! does at 20 million dollars a year. Double the amount of employees at only 2 million a year because I need people for the product; i.e. front end, back end, engineers, QA people, project managers, I need more support people for the number of customers than I do for BOOM!. So support is something that you have to figure out and support on the agency's side if you're running an agency is very difficult because you got to get on the phone. You got to talk to people; you got to show them results, you're the punching bag when things don't go well. It's very difficult to be … do services well and on the support side it can be really tough. So support for e-commerce is easiest for me in my experience of every model that I've been involved in. And then the one thing that e-commerce requires is marketing. Every other model requires marketing as well, that's sort of the third pillar right? Product, supply chain, support, and marketing; I mean really this is like what we are doing at the end of the day. I mean there's other stuff but like everything kind of is an offshoot of one of those. So the marketing side which is storytelling, sales funnels, content, copywriting, social media, all this kind of stuff is what I excel at; that's my real specialty. It's one of the reasons why every model that I've engaged in I've done some kind of well at because I understand how to comment on a collective experience. And so this is my frame for it. I feel like every business that I have is serving a particular group of people who are having a collective experience and my goal as a marketer is to comment on that experience in a way that resonates with that particular group of people who's having that experience and then push them in the direction of my products ultimately. And so the example you know this product line is sold to women over 50 who are all having the experience of aging and everyone telling them that that is wrong. That's the group of people and that's the collective experience they're having and then I comment on that with my marketing. And so that for me is the same with every business. Every business requires the same kind of marketing; creating videos, amplifying them via advertising, creating sales funnels and technology stacks that push people through a 60 to 90 day sales cycle with retargeting, and then once they buy having content marketing and engagement to keep their attention and then up sells and cross sells after they've consumed with constant content post purchase all of that stuff. And so since that is what I excel at is the marketing side and then I'm looking for okay you know and some people struggle with that but that just happens to be my particular skillset. The model that I am most in love with and I think is the easiest to run at scale is physical product e-commerce because the supply chain is easy and the support is easy and marketing is the same level of difficulty as any other business at scale.

Joe: That's a good point. You know I never thought of it. I was at a Mastermind a year and a half ago, someone got up on stage, talked about importing from China and she went into such detail about how important it is to determine the thickness of the corrugated box when you're importing from China. For when it's on that container ship, when it gets to UPS, when it gets to the fulfillment center and all of it … I got to tell you I practically fell asleep and said to myself I never ever want to own any physical products e-commerce business again.

Ezra: Don't import from China. I don't.

Joe: Don't import from China. I didn't. I had nutritional supplements and it's all US based. So I think it's the ideal business model if you're an e-commerce is something with a consumable product recurring revenue that is manufactured here in the United States.

Ezra: I would agree and I would also argue that if you look at e-commerce you might as well go premium because there's buyers for every level of the market. Let's say you have supplements that cost $10 a bottle versus supplements that cost $90 a bottle. I'm always going to sell the $90 a bottle. The reason is it's about the same level of difficulty to generate the sale. And if you go premium you have much more margin that you can then reinvest back in to better product, better score, and better marketing. And so I fall more and more … and you look at the companies that are scaling, Purple Mattress like a lot of these companies have discovered all birds shoes for example by $90 … $5 a pair, it cost them like 10 bucks, they got $80 of margin to spend on growing the brand. So I really believe in premium, consumable … and it doesn't have to necessarily be consumable but line expansion, so if you are selling water bottles also have water bottle coolers and you know what I mean like [crosstalk 00:24:25.2] expand the line but-

Joe: And an expansion of that line that is something that can be shipped on a continuity basis.

Ezra: Yeah, ideally for sure. I mean listen I don't sell subscription. There's no subscription in my brand though 40% of my revenue comes from repeat customers.

Joe: So why the choice not to sell subscription?

Ezra: Well, you don't necessarily need to actually have someone on a credit card ding every month to have a high level of repeat business. All you have to have is really good marketing. And my particular demographic is afraid of subscription. And as much as they've experienced a whole bunch of people not letting them off subscription when they get on subscription … so I get all questions every day like is this subscription? Can I cancel my subscription? People don't want to feel obligated, they want to come back and buy when they want to buy. And my view point is that you can have … and my experience is that you can have a recurring business model without actually having people on subscription programs like I do with this product if your products are worth it.

Joe: And the product in your hand and this is from experience, not everyone's going to go through that product in the same amount of time. And so that 30 day renewing charge to the credit card is going to be too quick for some, just right for others and too long for others. So you're an expert at reaching out to them and giving them what they need is hey it's time to reorder at click, reorder … that's your … instead of auto shipment you're reaching out to them with I would assume an automated email campaign or through a messenger or something like that.

Ezra: Well, we do consistent ongoing content. So we're always sending out videos and articles and so we could generate a lot of revenue just from sending people back to our website.

Joe: You mean you're helping customers?

Ezra: Yeah, we're adding value to their lives by commenting on the conversations that they're already having.

Joe: So to the newbies out there listen to that, adding value to their lives by helping them with the information that they have and making their lives better. That's ideal marketing right there.

Ezra: And every six weeks we run a sale event. And I would say about 70% of our revenue from repeats comes from those sale events every six weeks with those sale events and 30% comes from just the random content emails. Those sale events work a lot better when the audience is engaged in ongoing content. So then when we do ask them to buy something, they've been hearing from us, they've been engaged with our content, they've seen our videos on Facebook and their feeds that are just interesting fun videos that are about beauty and help and stuff like that. And then they see this oh they're having a sale, I like these people, I know these people, I engage with their content every now and again. So the ongoing content strategy actually acts as a supporter of our ongoing sales. And when you do the sales every six weeks without the ongoing content they don't work anywhere near as well.

Joe: You know it's almost like you just said how do I help more people not how do I sell more product.

Ezra: I want to do both but yes.

Joe: By doing the first you're doing the second. So it's more of a mature, seasoned approach to growing a brand where you're helping more people and generating more revenue. That's the end result and I'm saying this in a way that sometimes I see businesses from all shapes and sizes, we're doing four to five valuations a week and there's a team of eight of us here at Quiet Light and so we see a lot of different variations of businesses. And the toughest ones to sell are those that are just trying to make a quick buck. They've built a little … slapped their brand on it and they're to get it out there and they're going to get eaten up alive by guys like you in time. They can make a little dent but it's not going to last. What you're doing is something that I think is going to last and eventually will build a much bigger value and someday have a lifetime … if you ever choose to a lifetime event sale where you can say okay I'm done. I don't really ever need to work again but it sounds like you're full of passion, you'd probably be working for a long time.

Ezra: Yeah, I feel like if you like what you're doing and you're enjoying it and you have a nice balance … because the problem that most entrepreneurs experience at some point and I can recognize this from across the room at an event and everyone goes through it at some point in the entrepreneurial journey or at least my experience has been like everyone I've talked to and I've talked to thousands of entrepreneurs that have gotten to this place at some point which is burn out.

Joe: Yeah.

Ezra: They're overwhelmed, overstimulated, they've taken on too much responsibility, and they feel at the mercy shackled to their production cycle … shackled to their business operation. And you know my big transformation in the last two years has been going from driver to navigator. So you know I spent my career driving on the road, taking turns, doing everything and as I've scaled I've seen that really like my most valuable skillset is that of the person who navigates the ship. If you're on the road making the turn you can't see the mountains in the distance. And so at some point you have to make the transition or at least part time the transition to a person who is setting strategy, who is reviewing what's going on, who's going out and meeting new people and bringing in deal flow, who's actually like holding the container and the vision for the operation. And then reviewing what the team is doing and delegating responsibility and giving autonomy and freedom to the people around you to step up in the roles like lead copywriter or lead advertiser or lead project manager or you know all the stuff that you might be doing yourself. And I think that when you are able to do that it affords you the ability to relax a little bit and kind of have a little bit more space for your business. The other thing I will say that people don't do enough of is set real clear boundaries around their work life. Because as an entrepreneur, particularly as an internet entrepreneur your business is with you at all times. I've got my cellphone on my hand but if you … you know it's like your wallet, just always with you and so you don't end up with separation between your life and your business. And when you look at the people who are burned out you find that oh they've been ignoring their bodies and their health. Oh, they've been ignoring their relationships and their intimacy and their connection and their social life and their hobbies. Oh, they've been ignoring like the home front. Like it's … the burnout stems from lack of balance between production cycle and other cycles. And work will fill the time that you give it, it really will. It will fill whatever time that you give it. So I don't actually put my attention on work until about 10 AM and I stop around 5:30 or 6, that's my time frame. I wake up, I move my body, I meditate, I hang out my wife, we have breakfast, we do our little morning thing. It's super fun. A couple of hours in the morning where I'm just partying and having fun and then I start out my work day and I'll work for a couple hours and then I'll have lunch. I'll put in a couple more hours and then I'll stop and that'll be it. And I'll enjoy my evening and my … I do that four solid days a week, sometimes five, and sometimes I don't work at all Friday, Saturday, and Sunday, sometimes I do and it's like you might think oh like my business is to crazy I can't actually do that. I promise you if you do not start working until 10 and you stop at 6 everything that important to get done you will get done. And that's so much working time that is your whole life man, 10 to 6, four days a week it's like you are asking too much of yourself if you're trying to put more of that in your production cycle. And then look I understand that sometimes you've got to run 14 hours a day for four weeks in a row because you're doing a product launch. It's like okay … cool but that … it's a marathon, not a sprint. [inaudible 00:31:25.8] explain this thing you're going to fail. And I can tell you that as someone who has gone through the stages of entrepreneurship from working off the couch with a full time job moonlighting the business to now running an eight figure set of brands with 70 members and a lifestyle that I really really enjoy. I've been there and you really … if you don't set the boundaries and don't set the container it will not exist and the work will permeate your entire existence and you will have no separation from it and you have no relaxation and no space. And a lot of times your best ideas come when you're not working. When you have space and you're enjoying yourself. It's like it is necessary to scale to set constraints around your work life. And people are unwilling to do this because they feel it will be a detriment to their success. But actually in my experience and the experience of everyone who has done this that I know it works the opposite.

Joe: And a lot of folks that come from the corporate world when they're putting in 50, 60 hours a week traveling all over the world and they just want to get out of the rat race and they want to be an entrepreneur. And they buy an online e-commerce business and they feel like they need to put in 40, 50, 60 hours a week. And I said look the guy that you're buying it from has been working 15 hours a week, you've got some learning to do so just maybe cap it at 25. But don't work to the point where you're trying to fix things that are not broken, just learn. Go to events, go to Smart Marketer and things like that. You just don't have to work that much and you've worked so hard that it's time to take care of your own health and wellness as well.

Ezra: And I think that totally and like hey go for it put in a full eight hour day or 10 hours a day multi work weeks as you're getting in to the game but like at least have the goal of setting some boundaries and containers around your work life because you will be a happier person. And like what is the point of all of this? Is the point just wealth creation because mine certainly is not. I would love to generate as much resource and I'm using resource as a lingo word to describe generating wealth so that I can then direct that resource towards causes that I find noble. Take care of my community where I grew up, take care of my family, provide a lifestyle for my wife that she's really excited about and our family, do other things that are … that have meaning to me like saving lands and all kinds of stuff. So not a lot of people have figured out how to generate resource, everyone is failing at this. Everyone thinks that success is the goal and they're running in the direction of success and most people are failing at it and most people are miserable. And it's like the goal … fun is a much less popular but more fulfilling goal than success. So if you can figure out how to have fun and enjoy yourself which means setting fucking boundaries around your work life and having hobbies and having a social life and taking care of your body you will have more success. You're guaranteed to be a winner if you're chasing a good time and fun. You're not guaranteed to have fun if you chase success. So it's like what the hell is the point? What are you doing person? I want to grab you by the shoulders and smack you around and say listen, stop it. Focus on enjoying your life. And yes but obviously focus on the production cycle and the success.

Joe: We're not talking about being poor and happy we're talking about a combination of both [inaudible 00:34:37.5] which are successful businesses with recurring revenue models and a very happy and healthy home life. I think it's amazing that you really generally don't start work until 10 unless you're out at an event to a sponsorship or something like that and then you're walking away. Do you actually put that device down and walk away; that phone that's in your hand?

Ezra: Oh yeah. There's no phones in the bedroom dude. Turn off the computers, get off the digital medium. I mean you're shackled to it, man. You're on it all day every day, give yourself a freaking break and all of a sudden you feel better and life is better. And you hop on in the morning and you respond to the emails and the slacks and then you start creating. I kind of use my morning time for my creation, strategy, content you know I create a lot in the mornings and then like throughout the rest of the day I'll be … I'm at a place in my business now where I have a lot of reviewing and talking to people about what's going on. And my job is a lot of like sort of directing, hey okay yeah this is good let's move it over here. I'm doing a lot of like kind of holding and sort of directing things and if you don't have the visual of my hands [inaudible 00:35:39.8] but … and that I find is so easy to do in the later parts of the day. And in the early parts of the day, I do my creation.

Joe: Creation as in … you like, what does that mean you're?

Ezra: Well creation as in like for me-

Joe: Like creating content? What is it?

Ezra: Yeah. Well for me it's like thinking about marketing campaigns, looking at strategy, thinking about what we should be doing, thinking … anything that involves thinking of new stuff or doing new stuff or like you know I do a lot of … for my SaaS business and my information marketing business I do a lot of content creation and blog videos and webinars and sales videos and writing scripts. And I do a lot of creating things and also creating strategies. And I find that that is easiest for me in the early parts of the day and then in the later parts of the day reviewing stuff that other people did, talking to them about it, directing things just a little bit. I know it doesn't require as much focus. I mean it's still focused but it's not like I don't have to be fully locked in I could kind of be doing other stuff and you know.

Joe: I got you. Hey, you mentioned the word meditation I want to jump right in to that if you don't mind. Just are you up and meditating every day? Did you read a number of books? You've been doing it for a lifetime; I would imagine based upon the way you grew up.

Ezra: Yeah I mean you know this hippie commune that I grew up on was not what you think of. It wasn't like crunchy granola, everyone meditated and you know we didn't have animals. It's very different than what you think. It wasn't one of these places where you had to subscribe to some ideology to be a part of it. A lot of these intentional communities in order to get in them you have to be a … you have to hold a certain set of viewpoints. I describe the difference between an intentional community and a cult in these ways because a lot of people are like oh you grew up in a cult like the group of … any time you get a group of people living somewhere with different viewpoints people call it a cult right? So let's just let me give you my description for this, from my perspective a cult is something that is easy to join and hard to leave. An intentional community is something that is very hard to join and very easy to leave. It's like hard to get in to the party and then if you want to go at any time you could get out of here. That's sort of the difference between those two models. And particularly in the place I grew up it wasn't like built around a hey you must believe these things to live here. It was like a bunch of hippies who sort of wanted to step away from traditional mainstream society and focus on how to live pleasurably in a group and do cool things like run charities. And yeah I mean there was definitely some alternative viewpoints and they definitely teach courses on things like communication and relationships and all kinds of stuff. It's a really really cool place but meditation was not like a part of my life as a kid. I was just like … I went to normal, I went to high school normal school. I was a normal kid. I just went home to a different place than most people and I didn't go home to the suburbs. So you know I kind of came across meditation through my wife. She was a yoga teacher when I met her. And she was all into this sort of Eastern philosophies and stuff. And we go through phases where we will be meditating 30 minutes in the morning and 30 minutes at night and then we won't do it for a couple months. We kind of like … I think that people think that they're failing if they don't stick to their routines. And it's like routines are meant to be broken. Part of the fun of having a routine is breaking it and coming back to it. It's like the goal is not to just do the same thing all the time. You notice if you work out and you do the same work out over and over your body gets used to it. So we go through phases where we'll do it a lot and we won't do it that much. I do find that when we are doing it I feel better. I feel clear and I like it. And you know when we restart we'll start with just like 10 minutes in the morning, and then maybe like 15 minutes, and then we're like 20 minutes, and I actually found this really cool meditation seats on Amazon. They're like a tiny little plank with a cushion on it and two short little legs and you kneel on them. And man they've been awesome because they keep you upright. But yeah I like meditation; I'm a fan of it. And I think that really it's less about the specific formula that you subscribe to and more about the intention to take time for yourself and take care of yourself. Have a bath in the evening, pay attention to what you're putting into your body, move your body. It's like … it's more about the intention of wellness rather than the particular formula that you are subscribing to for wellness has been my experience with it.

Joe: Yeah.

Ezra: Because … different strokes for different folks man. Different shit works for different people.

Joe: Absolutely. We're running a little short on time but I can talk to you for another hour and a half but I want to talk quickly about the helping that you do in terms of the Smart Marketer. Because the people out there listening they've heard you mention a few different things. I first met you at the Smart Marketer conference in Austin last year, I was just at Blue Ribbon with you in Denver which is your Mastermind group and then I think you're going to Capitalism next week in Austin as well?

Ezra: Brand Builders, are you coming?

Joe: Brand Builders, yes we'll be there as well.

Ezra: Hey, maybe we could actually talk to each other in person.

Joe: I know, how about that? That'd be awesome wouldn't it? But you know with Smart Marketer Mark actually bought your Facebook program but you know I'm constantly talking to people about what they're doing within their e-commerce businesses and where to go what resources to look at. Can you just talk briefly in terms of what you do and what programs you have in there and what resources are available for those people that are listening that are e-commerce folks that want to grow their businesses but at the same time do it in a shorter day like yours is.

Ezra: For sure let me introduce to you the concept of permaculture. Are you familiar with that concept? Permaculture, it's a farming term.

Joe: No.

Ezra: What it means generally … what kind of the high level meaning is to reuse all of your resources to their greatest benefit; so capture the rain water, water the garden, take the chicken shit use it for your compost. Reuse of resources. So I spend all of my time with my focus on innovation in the direction of e-commerce and I do a really good job at it. And then with Smart Marketer I document whatever is working and I share that with my community of business owners through my free blog and through educational courses where I have how we run Facebook ads or how we do conversion optimization on our website or how we run project management for our brand or how we run social media for our brand or whatever. I have all these different courses but what they are is they're a direct documentation of what's worked for me and my brands. I then take the money that I make from Smart Marketer and I reinvest back into the e-commerce businesses. And in my e-commerce businesses I'm also developing software. I'm developing things to make them function better. So anything that works really well I open source that and share it with my community of business owners in the form of software as a service. Any money that software as a service brand makes I dump back in to e-commerce. So all of these things sort of work together. The e-commerce is the heart that pumps the blood to the information which then takes revenue and puts it back into e-commerce which then lets me do developments which then I use for my software as a service brands so kind of all works together and Smart Marketer, in particular, is do and then document. And I only have two products, I have digitally delivered courses … digitally delivered educational courses in the forms of videos, PDF's, and handwritten notes on what they are that teach you the things that I have found to be most effective. Paid amplification, how to run Google traffic and Facebook traffic to your website, project management, how to run your e-commerce business with systems and processes at scale and hire people, social media, how to have ongoing content and engagement for people who bought from you in the past. I have all these different courses and they're on my website but I have digitally delivered educational courses and I have a Mastermind. A Mastermind is only for million dollars sellers basically. If you're doing 500 grand minimum most people are doing five million, 10 million, etcetera … then this group is for the high achievers; the people who have really made it. It's a more intimate intense program where it's like very high level 100 people all really kicking butt. So I have that Mastermind and I have the digitally delivered courses. And that's all Smart Marketer is. It's just my personal journey being documented and open sourced for business owners and thankfully for me, I think again timing was a big issue … a big thing here. I was the first you know. I was the kind of first e-commerce influencer and as much as I started a blog about my e-commerce journey before people were doing it really really and it got real popular early on. And I've kind of continued to put energy towards it because I love doing it and I feel really fortunate that people care about what I have to say. It was like really awesome that people want to hear this stuff because for me it's like you have to be a total nerd to be interested in this. It's like kind of dry content, it's not like … it's not dry but it's like if you're not into internet businesses you're not going to be interested in this blog. I mean yeah I talk about relationships and lifestyle and stuff like that too and that's fun but I think that like the real sort of core to base of subscribers are internet business owners and e-commerce business owners, and so that's that model.

Joe: That's fantastic. I'm always impressed when you speak. I'm always impressed with your energy, your enthusiasm, and the fact you'd really really trying to help people more than anything else. And it comes back to you. It's not like you're doing it for free and whatnot. Then you're not trying to earn a living for you and your family and whatnot. Obviously, you are but you do it in a manner that is beneficial to others that comes back to you which I commend you for.

Ezra: Serve the world unselfishly and profit; that's my motto in business.

Joe: And you came on here not even knowing fully what we were going to talk about. It wasn't a pitched Smart Marketer or any of your services. Really it was to talk about work life balance which you laid out very very well. I loved your journey. I love your approach. I love your philosophy. And I'm really hoping that people go back and listen to this again and actually read the article that will be produced from it as well so that can really hone in on what you do and focus on it to, maybe get out to see you at some of these events that you put on and get to Smart Marketer and get better at what they do.

Ezra: Thanks man, and I would totally share this. Let me know when it comes out I'll put it out.

Joe: Absolutely. Thank you for that. We'll put it down and I'll put all the details on how to reach you and how to reach your courses and whatnot down on the show notes. And I will reach you when we get it wrapped up and ready for the world. Listen to it and watch it and thanks for your time, Ezra. I appreciate it.

Ezra: Thanks man, talk to you later.

Links:

• Smartmarketer.com
• Free Facebook Video Ad Training
• Full Course Selection
• Blue Ribbon Mastermind
• Ezra on Twitter
• Ezra on LinkedIn