E217: The Current State of Buying and Selling E-commerce Businesses with George Moulos - Watch Here

About the Guest(s):

George Moulos is an entrepreneur and the founder of Ecommerce Brokers, a company specializing in buying and selling online businesses, especially within the e-commerce, agency, and SaaS spaces. With a background that ranges from starting businesses at a young age—including Facebook groups and affiliate marketing—to building and exiting various digital assets, George now helps others navigate the intricacies of online mergers and acquisitions. His firm assists a range of clients from first-time acquirers to private equity firms. George's dedication to old-school methods of relationship-building coupled with his innovative approach to the online space has led Ecommerce Brokers to success, including notable deals and acquisitions.

Episode Summary:

In this enlightening episode of the How2Exit podcast, host Ronald Skelton engages with George Moulos to unravel the complexities of buying and selling businesses in the digital realm. George's journey from young entrepreneur to established online business broker presents a multitude of insights for those interested in e-commerce transactions.

George dives into his early beginnings and entrepreneurial streak, explaining how his work ethic and vision led to his first business exits and eventual specialization in e-commerce business brokering. He provides valuable insights into current market trends and offers strategic advice for both buyers and sellers in the online business space.

Key Takeaways:

• The Buyer's Advantage: The current market is trending in favor of buyers, making the next twelve months an opportune time for acquisitions.

• Seller's Market Shift: While sellers have faced challenges in recent years, the market is slowly improving for them. This shift signifies potential balance restoration in e-commerce M&A.

• Importance of Due Diligence: Buyers should approach acquisitions carefully, utilizing advisors, accountants, and attorneys to ensure a secure transaction.

• Shopify Over Amazon: George emphasizes investing in D2C businesses on platforms like Shopify that allow ownership of the customer relationship over reliance on third-party platforms like Amazon.

• Financing Strategies: In light of high interest rates, George suggests exploring avenues such as SBA loans, seller financing, and earnouts to facilitate better deals in acquiring an e-commerce business.

Notable Quotes:

• "At the end of the day, you need to own your own business. You can't build your business on someone else's platform."

• "The weird thing that we've seen is the few good businesses that are listed, we actually still have competition because the core solid e-commerce business buyers that were here before... they're still here buying good businesses."

• "A lot of people are now slowly realizing if my options... is property, stocks, crypto, or running an online business... this is still a better option than all the others."

• "Small, boring businesses with a technical twist. Great investment."

Article:

Thriving in the E-Commerce M&A Space: Strategies for Buyers and Sellers

Navigating the intricate world of buying and selling businesses requires a nuanced understanding of market trends, valuation practices, and strategic negotiation. In a revealing conversation with George Moulos of E-commerce Brokers, we dive deep into the world of online business transitions, exploring key strategies for buyers and sellers in a fluctuating market. From the impact of interest rates on deal-making to the vulnerability of businesses heavily reliant on platforms like Amazon, this discussion offers valuable insights into the dynamic e-commerce landscape.

Key Takeaways:

• Buyer's Market Opportunities: Current market conditions favor buyers, offering an opportune time to acquire businesses with favorable terms.

• Seller Financing and Earn-outs: Creative financing strategies like seller financing and earn-outs can be leveraged to facilitate deals in high-interest environments.

• Due Diligence is Critical: Both buyers and sellers should prioritize robust due diligence to avoid pitfalls and ensure successful transactions.

Navigating E-commerce Valuations: A Seller's Guide

The valuation of an e-commerce business is both an art and a science. As Moulos astutely points out, the rationality of valuation metrics has fluctuated significantly, reaching heights of irrational exuberance during the COVID-19 pandemic. Today, sellers must adjust their expectations to more conservative profitability multiples, typically ranging from 1.5 to 3 times the trailing twelve months of net profit for online businesses. However, beyond the hard numbers, Moulos emphasizes the importance of storytelling in the selling process:

"What is the story of this exit? Because if the story is it ran really well during COVID it did good numbers, but since then it's been coming down and it's really just dying. No one wants to buy that."

In the current landscape, sellers must craft a compelling narrative for their business, showcasing its potential and rationalizing its valuation in a way that resonates with buyers who are more cautious amidst economic uncertainty.

Bridging the Buyer-Seller Divide with Creative Deal Structuring

For transactions to occur in a high-interest rate environment, creative deal structuring becomes essential. Seller financing and earn-out arrangements enable sellers to achieve satisfactory valuations while providing buyers with attractive terms.

As Moulos explains, sellers are becoming more open to such arrangements in light of market conditions:

"Right now, since from 2022 to now, it's gone consistently worse as interest rates have gone up."

By offering attractive terms like partial seller financing or structuring payouts contingent on future business performance, sellers can not only entice buyers but also potentially secure a higher overall purchase price, albeit over an extended time frame.

E-commerce Businesses: The SBA Era

Another key trend highlighted by Moulos is the SBA era's advent, a testament to the commoditization of e-commerce and its assimilation into mainstream finance. In an environment where traditional lending has lost allure due to escalating interest rates, the SBA offering stands as a lighthouse for buyers navigating turbulent waters:

"This really is the SBA era... You can put down 10% to buy a business."

The SBA loans' more attractive terms mean buyers can leverage their capital better, enabling them to acquire larger or more businesses than they otherwise could. This democratization of acquisition financing heralds a maturation phase for e-commerce M&A, bringing a wave of new entrants who can scale their operations rapidly with the backing of judicious debt.

Maximizing E-Commerce Business Value for a Successful Exit

When it's time to sell an e-commerce business, the maximization of its value doesn't happen overnight. The preparation for sale is a strategic process that should be undertaken with the aid of professionals who understand the nuances of online business valuations. The aim should be to articulate the business's growth story and potential robustly, to not only justify the valuation but to also make it an irresistible proposition to prospective buyers. In considering this strategic exit, Moulos advises:

"Be careful, take your time... If you ever feel rushed in an acquisition, take your time, be careful."

The preparation involves ensuring all financial documentation is orderly, growth strategies are clearly outlined, and any potential risks are mitigated. Such due diligence is not just for the benefit of the buyer, but it can also substantively contribute to the seller's narrative, enhancing the business's perceived value.

Brokering Success in E-Commerce M&A

E-commerce M&A is a dynamic and rapidly evolving field, shaped by economic forces and technological advancements. The insights from George Moulos offer a manual for navigating these seas as either a buyer looking for value or a seller aiming for a profitable exit. Applying strategic financing, robust due diligence, and recognizing market trends' impact are essential components of any successful e-commerce M&A transaction.

As the market adjust to new norms, and buyer and seller expectations align, the e-commerce M&A space is ripe with opportunities for those equipped with the right knowledge and strategies. Whether you are on the cusp of entering the e-commerce playing field or contemplating an exit, the current climate is one of potential and promise, a time where informed decision-making can lead to unprecedented success in the digital marketplace.

---- MORE COOL STUFF ---

Are you ready to take your podcast listening to the next level? Subscribe to "DEEPER by How2Exit" newsletter and never miss out on our latest episodes. Join our  newsletter  HERE

Want to stay in touch with what's happening in the Main Street M&A Space?  Subscribe to Growth & Acquisitions(Formerly The Hub)