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

[00:00:00] Ronald Skelton: Hello and welcome to the How2Exit Podcast. Today I'm here with George Moulos and we are going to go into all things buying and selling companies. Particularly, I think you do a lot of marketing agencies or agencies and e commerce businesses, have a background in that. So, I look forward to this conversation and let's see where it goes. Thank you for being here today.

[00:00:21] George Moulos: Thank you. It's a pleasure to be here. Yeah, definitely. We, uh, we do a lot of agencies. We do a lot of Shopify, Amazon, even SaaS. We do a lot, but we also actually do some brick and mortar more and more these days, but, our specialty definitely is online businesses.

[00:00:36] Ronald Skelton: You and I were talking before the show a little bit. You're more of a world traveler than I am. Born in Greece, you live in Australia, but you're currently in Europe, right? So, uh, where are you, where are you coming from today on the, on the call here?

[00:00:48] George Moulos: So, today I'm in a Barcelona office. I was born in Australia. My parents immigrated from Greece. I left Australia when I was 19. And bounced basically between New York and Europe ever since. But definitely love traveling, uh, as kind of more and more as my clients moved to be majority from the U S and Canada. That's when I kind of moved that way, because although I mainly sell an e commerce, brokers mainly sells online businesses and you don't need to meet your clients, I do. 

I'm old school in that way. I know we were chatting a bit about cold calling and how we kind of prefer cold calling. I'm, I'm young, but I love old school methods of, uh, relationship building in business. So I love, uh, to meet my clients.

[00:01:28] Ronald Skelton: There's nothing that, can, uh, ever replace looking somebody in the eyes and shaking their hand. I get that. I'm 52. Maybe, maybe I'm a little old school, but, like, and I say that now everything I do is on, you know, it's sitting here. 'Cause I consider myself one of those digital nomads where I told you before we travel and right now we're living in the, like a very remote area of Northern California.

Somebody said, well, what do you mean very remote? Like the closest fast food restaurants about 18 miles away. So there's some fancier restaurants because of vacation destination. But if my kids want a Taco Bell or a McDonald's, we're looking at it, you know, uh, a 15, 20 minute or 15, 20 mile drive. So talk about the different types of e commerce or first of all, you started e commerce businesses, right?

That's kind of how you got into the space. Tell us your origin story. How did you end up being a broker? 

[00:02:15] George Moulos: Sure. So it started back when I was 13 years old. 13 years old and 9 months you can start working at McDonald's. So I applied the day after my birthday and started working McDonald's within a month. And I realized I didn't love it. Like most people, I didn't love it. I was getting paid $8 and 60 cents an hour. That's Australian. 

So that's about $5 American an hour. And my parents, my dad was a forklift driver. My mom worked at the airport, stamped passports and putting luggage on the plane. And I realized everyone in my ancestry, worked via manual labor and I didn't want the same for me. I didn't want to work tough jobs and I might've worked weekends and holidays at McDonald's, but I also did a, demolition and, uh, labor work, unloading shipping containers.

And that was my teenage years. I didn't really have the, the fun, you know, some experiences in the movies of a kid. I was working. And I realized very early on, I didn't want to be working like that for the rest of my life. I picked up a one or two entrepreneurial books. How with friends and influence people, think and grow rich and, you know, crush it by Gary V.

And I didn't even hesitate. Even a week after I read some of these books and I started Facebook groups. So this is back when Facebook groups were, pretty rare, to be honest. It would have been around 2010, 2011, 2011. And I created Facebook groups for students in high school. So I created a Facebook group for my year, the years below the years above.

And every day I would just add some memes. I was just looking at memes myself. So I said, why don't I just add some memes? And then from there, the engagement was really, really good. It was all just user generated memes. And some people would add some helpful educational notes. Here's my physics notes. Here's my ancient history notes.

And it really grew into its own community. And then I said, Hey guys, if you like the Facebook group, join, go and like the Facebook page. If you like the page, join the email list, you can see this week's best notes, best, best memes. Then I created a website. So every group had its own group, Facebook page, email list, website.

And then I said, Hey, I'm paying, and most of these kids were private school kids. And I was not well from a wealthy family. And I, and I realized I was paying $20 a week for MailChimp of my McDonald's money that I was dying to, trying to make for these private school kids. I said, okay, now it's time to monetize about three months after I started.

And then I called up spring break companies that did holidays for students, tutoring companies, basically any company that I would consider spending money on as a student. I was going in cold calling and saying, Hey, can I sell your products for one or 2 percent commission? And most said, sure, here's a code. Good luck. 

But the first client, which was a spring break company, it's called schoolies. com. We did 130 K of sales, which is about 80, 000 American within the first month. And I made whatever, four or five grand, which was a billion dollars to a 13 year old working at McDonald's. But yeah, from there, it really kind of started.

And that was my, the, the start of the affiliate businesses I had. So I created multiple of those years and then I slowly monetize them for about a year, then started to sell them off to the biggest affiliate. So children, companies, spring break companies, those are my first exits. Then I went into my first, um,digital product business. Which was, I said, wait, I have one or two of these groups left that are, highly engaged, the students, very engaged.

They know my name very well. I said, what about a business where we sell PDFs just with the best notes, like physics, final exam notes from the best students from the year before, they got the best, uh, best scores. You can buy it for $10, just the whole PDF. And I just created a poll. I validated in one day, I was broke.

I remember it was Thursday and I had my other, my marketing agency, which was called Moulos Media. Where we were doing just Facebook ads and Google ads for clients on the side. And I overspent on my Facebook ads. I was negative $200 in my account. And I said, I need to make some money quick. And I immediately, I just went and created a poll on one of these Facebook groups and said, would you buy $10 notes, PDF form?

What's a yes, yes, or yes. Basically it was the poll. And we've got like a thousand responses for yes. I immediately, uh, said, great, you know, what subjects? And then we were just cashing in 50 bucks, 40 bucks for four or five different subjects. And within four days, my friend, who's much smarter than me, put together these notes and networked with a bunch of the high achievers.

And that was the first, business that was e commerce, more e commerce than, uh, affiliate. And then I, after that, he was, then I sold that to a, to a tutoring company. Then I started adrop shipping that moved to 3PL, which was physical products. Then the marketing agency, which was kind of behind all these at the same time.

I'd sold that because we were focused on real estate agents and making real estate videos, and making websites initially for plumbers, electricians, and restaurants that, that moved also to real estate agents. Then we sold the whole client list. And I realized this whole process, I was always selling stuff and buying and selling stuff because I was always running a few businesses at once, but I was always selling my own businesses.

I was always looking to acquire Instagram handles and YouTube accounts and Facebook groups for myself to attach onto other businesses of my own. Or if I could flip them and many, many times I had conversations with business brokers, but old school, brick and mortar business brokers back in Australia. And they just didn't understand what the hell I was talking about when I was saying online businesses, what they might be valued for.

And that's why since 2011, since I sold my first affiliate business, I started e commerce brokers just as a, as a function of my marketing agency saying, Hey, I'll sell your business if you want.If you're, so for my clients, right? So my marketing clients, when they wanted to sell an asset of their business or their business as a whole, I'll say, great, I'll sell it for free if you can stay on as a client, as a recurring client. 

And so when I sold my agency, e commerce brokers became its own thing, I didn't sell that part. And so the real, uh, start of e commerce brokers is almost, 12, 13 years ago now. And we went full time right after I sold the agency. And since then, it's just been, buy side sell side brokering. Mainly e commerce, mainly online, but we've expanded now to, even brick and mortar businesses too.

I left Australia about seven years ago. And, like I said, bouncing between the U S and Europe. We hit the Forbes 30 and then 30 back in Greece, in Europe, which was great to, you know, kind of come full circle in the immigrants journey. But yeah, now, we have a long, long list of happy customers, video testimonials, written testimonials.

We have clients like Gary V who, uh, we help acquire businesses for. And we've done over 100 million of deals bought and sold. So, it's been a long journey. I'm still young, but I feel old cause it's been so long. But, yeah, that's kind of the, the longest short of my journey. 

[00:09:00] Ronald Skelton: That's awesome. Awesome. I, uh, I've reached out a couple times trying to get him on the show. He's, nobody's even responded. So I don't know if I'm not big enough. So I haven't, I've got some of the cool big authors and stuff, but none of the, the big superstars yet. So, and it's partially because it's a totally a hundred percent remote show.

So there's not even room, room in my studio for another chair. So, I probably could rearrange stuff in here and make it happen. If Gary V. C. did show up.I go buy a couch or something. We'll figure this out.

[00:09:27] George Moulos: You might need to fly and go to New York.

[00:09:30] Ronald Skelton: Yeah. So, uh, I love what you're doing and I love that your fault, I tell the passion and what you're, that you enjoy what you do. And you said you'd even do some brick and mortar stuff now. And the last probably, I've only been in this space for two and a half, three years now. And I've noticed there's a huge uptick in acquisition entrepreneurship, ETA, there's a dozen nicknames for it.

But uh, does that help your business now? I mean, when I first got in, I was in your space a long time ago. I'll give you an example. The first, I used to buy and sell websites. I used to be a domainer, if you know what that is. So, I, I own, at one point I owned 3000 domains. I think I still have about a hundred that I, you know, cherry picked and keep around.

That said, back when I started, there was no flip, or, e commerce brokers. com. There's none of that stuff, right. What there was was warrior forums. So we would, you know, these, these little, chat rooms and we would buy and sell our websites on these chat rooms. I actually, I would flip sites, right?

I'd buy a site, fix it up. I'd buy something that was built, you know, in the days of prodigy and still had rough graphics and stuff like that but they had an email list. They had customers, they had the components I was looking for. And I would have my team revamp it, make it look nice, do the latest and greatest, you know, graphics and layout.

And then we turn around and sell it. What happened, the reason I got out of that space, I probably would have stuck with it, so I got burned really bad. It got really easy to fake like the performance numbers, the traffic and everything, email addresses. Somebody sold me one that looked great. I did my vetting.

I don't think I missed a check, checklist, but, uh,I paid like 30 grand for it, which is a lot of money for me at that time. And, it was worth nothing. Within, they had their own private link, or private blog network, all the traffic was from them. And the second they sold it to me, they just, you know, changed all the links on theirs.

They basically unplugged me from their network and it just zeroed out. Like, they're doing 1500 to $2, 000 a month to zero. 

[00:11:27] George Moulos: We see that. I mean, we, we see a lot of on our buy side, our buy side service elite acquirers. A lot of our clients that come into us, people who've been burnt. And it happens, especially with the big marketplaces. I won't name names, but, uh, a certain marketplace for online businesses, and this was his story.

One of my clients stories who successfully acquired with us and he's still running, we still hear from him. He bought a hundred thousand dollar business from this marketplace. Now this marketplace, you can plug in your Shopify and it will say your revenue. And then you can say, yes, I see the revenue.

It's plugged in. They can't lie about that. But what this, and he bought it from, an Indian seller. This Indian seller had one solid website that was real, but he sold another domain. So the domain wasn't the one that was given the analytics. So this guy bought this business. Which was the wrong bit based on the wrong, false analytics.

And because he used escrow. com instead of this certain marketplaces own platform, they kicked him off the platform. So they couldn't, he couldn't even, you know, resolve it. So it was just 100 K straight lost, which was super scary when you think about it. But that's why,that's why we always say, you know, use a broker, use vetted due diligence services because an extra set of eyes is going to save you much more than what we might cost.

[00:12:43] Ronald Skelton: Back then, you know, people wouldn't give me their username and password to their PayPal or something like that. That's how they got paid, but they would do screenshot captures. And, photo, there was no AI photo editing, so you had to be really good. And I'm a satellite imagery tech by, by military training, right?

I know what image, you know, I'm trained on detecting anomalies in photos. That was part of our training. That said, these guys were really good at a Photoshop. They Photoshopped all their PayPal statements. The font was right. Everything was right. You kick yourself a lot after you make a mistake like that.

After you buy something that goes sour. I pulled everything up and I zoomed way in and stuff, it looked legit. They did a on, they did a stellar job of making all their, all the images of all their accounts and everything looked good. Nowadays, these software do, all these softwares do log in. And if I were to buy something like that, I was like, I just have to force them, like, look, you got to give me a username and password.

Most of those services now you can give a non admin password to, so somebody can crawl on look. So, but uh, yeah, it's a different game now because you, the due diligence is, is more thorough, but, uh, you know, imagine there's a way to game that too, even now. 

[00:13:50] George Moulos: It's tough. It's scary. I mean, I've been burned too. We, I got burned very young with, with a big Instagram account that we built up that we were looking to sell and then we got burnt with like a basically a, an escrow function. Like they, again with PayPal, but that's it. And now it is much harder, but if a new buyer who's never bought a business before or quite such a big asset online before, it's quite easy to get burned if you don't have those extra set of eyes.

[00:14:16] Ronald Skelton: So what is the current, I mean, they fluctuate up and down. What does the current market look like for e commerce sites? What are they trading that as far as, I could give you example. A small company, I won't give any names here because I'm, I'm still friends with the guy. We were looking at one, an e commerce site, in the last couple of weeks.

They used to do two, two and a half million dollars in revenue, but since COVID hit and everything else, they really downsized and kind of just letting it idle. And they run it about 40 percent profit margins that are doing, let's just be nice and say they're doing 100K sellers discretionary earnings on idle, right?

How do these things trade these days? Is it a multiple of earnings or is it like, I know from the blogs, cause I buy, still buy some content sites and newsletters. It's usually 12, trailing 12, there's, those are so high profit margin. It's usually, you're looking at the trailing 12 months of their revenue and you're buying at a multiple of say 24 to 48 months revenue for that, because they're so high. But what does the valuation model look for like for e commerce site now?

[00:15:20] George Moulos: Sure. So I'll, I'll answer, with two answers. One with what's happened in the past five years in terms of trade. And two, where are we at now? Where are things trading? So pre, that there has been big trends over the last 10 years, but nothing even remotely as big in upswing or downswing as what has happened in the last five years.

So 2019 was a normal year for everyone in buying and selling businesses. COVID was insane. One, because there was this aggregated boom where everywhere, our industry got VC attention. So these massive aggregators, Perch, Thrasio, Boost Commerce, Heroes and Berlin Brands, group these European and American. They raised over $7 billion to buy online businesses.

So this is, there was this massive influx of, uh, of capital and interest rates were so low. People were, even high net worth individuals, individual investors were buying a lot of businesses too. So between 2020 and late 2021, the numbers coming from e-commerce businesses, their revenue, their profit, and especially FBA, Amazon FBA, were insane.

And so their valuations were in the five to even 9x. We had a buyer that we advised saying we should not pay over 4. 5x for any business, but their investors said, we need to buy at the end of this month, a certain number of businesses that are doing a certain amount of net profit and pay whatever.

They ended up paying 9x for a business. And they, and we said,we don't, you know, we don't sign off on this, but if you want to buy it, it's, you know, you're the buyer. Things were crazy. And all these companies who were massively inflated valuations were buying so many businesses that they didn't even have the ability to recruit managers to manage them.

So a lot of these buyers and almost all of these aggregators are out of business now. They bankrupt. All these billions of dollars of investment are up in flames, up in smoke. There's maybe one or two aggregators that have bought all the good businesses from the other aggregators, which is very few, but they're basically dead.

And they're, they were memory now. From the start of 2022 to now, e commerce revenue is dipped. So those, and so that means two things. Sellers don't have the confidence to list. And if they do list their expectations are lower than 3. 5 to 4x, for example. Now it's more like they expect something like 1. 5 to 3x. Now that's with a broker.

Without a broker, they expected 1 to 3x. And I'm talking just based on trailing 12 months net profit. In online businesses, when we're talking Shopify, Amazon, and agencies, revenue is almost unimportant. It's just, what are you taking home EBITDA more than anything. And right now, since from 2022 to now, it's gone consistently worse as interest rates have gone up and, uh, these VCs and FBA aggregators have evaporated.

Now it's, uh, it's pretty bad. It's pretty bad to sell a business. But as a buyer, it's pretty amazing right now. And I would call this era, the SBA era because interest rates are too high. So most people aren't using bank loansto buy businesses because the rates are too high. But they are using SBA loans because the updated SBA rules are getting consistently better.

There might be strict, but if you can, uh, if you can be eligible to buy a business and the business is eligible, the terms are quite great. You can put down 10 percent to buy a business. So this really is the SBA era. That's why we like to list businesses that are SBA eligible. But buyers, buyers, you can get so much more creative with the, with earned out financing, with seller financing.

And, yeah, I mean, you can really push the needle here. You can really push what you can get. I wouldn't say low ball, but kind of you can. But as a seller is, on the sell side, what we've experienced at e commerce brokers, because we only sell a max of 30 businesses a year. So we want to make sure that the quality and we don't scale through selling more businesses.

We scale through selling bigger businesses. So what, 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 comm business buyers that were here before aggregated, the aggregated boom before 2019, they're still here buying good businesses.

So there is very few good businesses and the same amount of good buyers. So we still see competition for them and we still sell for an average of 3. 9 X. Trailing 12 months, net profit.

[00:19:52] Ronald Skelton: So in the b2b world or sorry the b2b world. In the brick and mortar world, when you say something like this, given a good example. A lot of people, if you're listening to this and you hear, well, I, you know, well, I see online that my multiple for my industry is 11, but you're, those industry multiples you get from collegiate worlds those are for the strategic buyers and the PE firm. 

So you have to be able to wake up the giants to even get those multiples. So if you step, somebody says, marketing agencies, the multiple is 11 X, right? Well, yeah, if you're above three to four million dollars in EBITDA and you can wake up a private equity firm, right?

Now you can get 11x, potentially. Probably gonna get seven, eight right now. That said, everybody kind of goes off that number and you got to be, there's a, it's, there's an arbitrage game inside of this. If you're below a certain amount of SDE, your multiple is one thing, you get above. In some industries it's two to, two million in EBITDA. Some industries it's four million in EBITDA. You wake up the private equity and strategic buyers. 

There's another level when you get close to $10 million in EBITDA, now you get the big boys waking up and you can get big multiples, 10, 11 X, 12 X sometimes, cause they don't care. There's, as long as it's above the, what's their stocks, or below what their stocks trading at. They get an instant bump when they bring you in. That said, and the brick and mortar companies, the mom and pop shops, the rule of thumb has always been one X to three X, and potentially more if you really well ran.

But usually, what I'm leading up to is the difference between a one X and a three X is performance of the company. Is it growing? Is it growing month over month, year over year? Is it well run? There's a manager required to stay on, right? There's how, you know, how involved are the, you know, is the management of the company, that type of stuff.

And every little Dean you have, you start off at three X, like a perfectly run company gets three X. You know, the, the owner pulls 40 hours a week. Okay, now you're at 2. 5 X. Oh, you were at 2 million last year. You're, you know, three, two years ago, you were at 2 million in revenue and you're 40 percent profit margin.

Then you went to, last year, you're at one and now you're at 800 K. Now you're like, you're knocked way down to your, your, your, uh, well, 1. 5 X or two X cause you're in a declining market. Is that the same way with the e commerce businesses? If they're not, you know, if they can't show steady growth, well performed, what's the multiple of a company that's just kind of idling by in, in that space.

[00:22:14] George Moulos: It massively affects the valuation. And more than anything, it's even ability to sell at all. And the question that we ask is 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.

It's not even about valuation. No one wants to buy that. And look we talk a lot about valuation, but what is, what matters just as much is also terms. We're seeing a lot of deals now where the valuation is good, but the terms are terrible and it's not even worth taking. So we get a lot of offers, a lot of local offers from tie kickers, as we call them. Where people will put, say, Hey, I'll put 20, 30 percent down and I'll pay the rest in earn out over three years.

We're not gonna take that deal. And then they'll say the valuation is on a Forex multiple. Well, that's great, but an earnout, you know, if you wanted to really see the potential of the business, you could just hang onto it. So the terms is definitely important. But for a business that's not been going well, it's even more so the case that these businesses are worth nothing.

They're not even sellable. Because with online businesses, what are you really buying? You're not buying some, you know, any, at least with the brick and mortar business, well, it's got some foot traffic. At least something will come in. There's no just random food traffic on the internet. Unless you're building real organic or you're doing solar paid ads.

There's nothing just walking in. There's nothing just walking by. So I would say even more so there is a cliff that, that e commerce and online businesses drop off on as soon as they stop, stop operating. Well, that absolutely no one will buy their business unless they are bringing in consistent, stable revenue. Yeah.

[00:23:47] Ronald Skelton: That's awesome. And that a lot of these, like the one we were looking at, it was e commerce. It was all drop ship. Meaning that they had, you know, hundreds, if not thousands of brands, tens of thousands of products in their store. But it's all drop shipped. I can't say what it is cause the NDA, we didn't do an NDA, but just out of respect for him, I'm not going to say the name of the website or anything. That said the, it's kind of on idle mode right now, right?

They do Facebook ads, they do some other stuff. That's where, like you said, nobody just walks in the door. I'm sure people do find it. There's repeat orders. Cause they do, they have some B2B business, where, you know, the B2B side are still doing their orders. But as far as, new customers, it's because they're running pay for click ads or running, they're running ads. 

And,well, we made our offer. We did,we were looking at buying. It's the reason we're having this conversation. When we made our offer, we, we literally offended the guy because he thought he was worth four X. And we kind of said, you're kind of worth one X, 1. 5 X, because you're just under, a hundred K a year in profit and it's on idle. 

You're not doing anything with it. The only reason we were even considering it is because we have an interesting, we have another industry that we're buying up, that this sells products to that industry. It would, it would basically give us an e commerce arm. 

[00:25:00] George Moulos: Yeah, that's, that's the thing like, especially if it's under a hundred K EBITDA, it's delusion. And we tell our, the first time we talk with sellers, I have no interest in telling a seller one thing, your business is worth four to 10 X and then slowly bringing them down to a multiple that works. I tell them day one, I'm going to set you some serious expectations here.

This is the data that we have for your niche, over the last 12 months, businesses sold. Now I'll tell them 3. 3 to 3. 7 is what you can expect. This is also what you can expect deal terms wise. Then they say, Oh, that's less than I thought. Well, whatever you thought was not based on data. So I don't know where you were getting your data from, but this is the reality.

I'm not looking to offend, blah, blah, blah. But like, if you want to make a good exit, a happy, successful exit, is 3. 3 to 3. 7. Non broker deals are more in the two range, low twos and maybe one. So if you want to do it right, if you want to win, winning isn't $1 million. And a lot of, I'll say this to a lot of sellers.

I'll say, what number makes you happy? They'll say 2 mil. I'll go, why not 2 mil and 1? They're like, what are you talking about? I'm like, well, it's just a number, right? You're going to basing off any, any multiple, any equation, any data, you're just picking a number cause it's clean. That makes no sense.

Like, yeah, I guess that's true. I'm like, okay, let's look at the real data. Let's look at how people actually sell businesses. Now, with all this being said, I will, you know, can't even cut myself off and saying a business is worth what someone is willing to pay for. And we're still seeing this, in this year now where it's tough to sell businesses.

However, the good business brokers, I, and I would only put four brokerages in there, including myself. We're consistently able to sell businesses because we find good businesses. We properly set expectations and we properly find buyers who are interested. And that requires work, but the seller expectations that are through the roof and you see them on acquire. com. 

Acquire. com they'll list businesses for like 50 X and is negative 200 K, it's insane. Like people will look at them and be like, what are you talking about? Now, if, for example, they said, look, we're open to offers, we're open to a deal, some cash upfront, we'll stay on for a period, they would have gotten more buyers having conversations with them.

But they're so buyers are so, baffled by insane multiples that they won't even have conversation. So setting proper expectations is the job of the broker and a bad broker will bullshit, to be honest, to get the contract and then bring them down. So then that leaves seller unsatisfied and buyer who had to look like at a crazy valuation is also unhappy. So it's a lose lose, to be honest.

[00:27:34] Ronald Skelton: Yeah. So if somebody is out there and you're, and you're, you're thinking about buying, let's do buy side first. If you're thinking about buying something, what's working really well right now? So I've got this natural resistance to go B2C. It's just me. Most of my business, you know, and, and knowledge, even when I was like, I had a marketing firm for a while, but it was all marketing, coaching and stuff.

So all my customers were business owners. So I've always kind of been in that mode where entrepreneurs are my people. I know how to, I know how to communicate with them and how to work with them and stuff. The general consumer market, it just never really done well in that space. Other than the commercial, I mean, residential real estate, right.

Where I'm buying houses from homeowners and selling them to other wannabe homeowners. It's the only place I've ever been done really well in the B2C. But, what do you see right now is the good spots where money's still being made. It's great to be in e commerce. It's not, it's pretty steady. It doesn't fluctuate.

You know, what, if you were to buy, if I gave you an investment and said, Hey, I, I've got X number of dollars, you know, say $250, 000 to a million dollars right now, what would you suggest somebody buy?

[00:28:38] George Moulos: For sure. So the first thing I would say is go and see if you can get approved for an SBA loan, because that just 10 X is literally 10 X is your buying power. Now if you can, or you can't, even the second thing I would do is I would look for seller finance and earn out arrangements. So if you're putting down, let's say you have a minimum of 250 K or even if you have like 50 K, you can buy a business around the 200, 300 K mark.

That's doing some decent numbers, 30, 40 K, 50 K net profit, 30 to even 70 K net profit. Now, if you have up to 250 K, a million dollars in cash, you can buy some decent sized businesses that are doing very respectable numbers. Enough to not work a normal job, for example, a normal salaried, a C level position.

And a lot of our clients are C level execs who want to retire and want to work from home. Now, when we're making a decision, that's where we're going to the table with. We have our cash portion, SBA approval letter, and we want to be talking about S uh, seller financing and earnouts. Now, the first place I look, and the first thing I say to my buyers that come to us is, let's look at Shopify.

Amazon is interesting because it's highly automated, but you do not own your customers. Amazon owns your crazy customers. And at the end of the day, you can get very easily suspended for absolutely no reason. And for three months, you're going to have your hands tied. And then they'll say, Oh, no, you're back up.

And there's no repercussions to that. I'm always cautious of Amazon. I have no problem with a Shopify business that's 60, 70, even 50 percent Shopify that has a good Amazon portion. That's fine. But 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 other reason I don't like Amazon so much is it's very commoditized. If you're selling, for example, we saw a business the other day that was selling cups. Like, uh, drinking cups. Anyone can sell drinking cups. The cheapest option is that, get, that has a couple of decent reviews is going to be the one that people buy.

There's no brand equity, but with Shopify, Shopify really isn't even, when we say Shopify businesses, it could be on Magento. It could be on WooCommerce. It doesn't matter. But what matters is they own the business. They own the domain. They can go take that domain. They can take it over to WordPress. WooCommerce doesn't matter.

But at the end of the day, you're building your own lists and you're repeating customers, yours. You bought, like, for example, there'll be a lot of, Amazon businesses that have repeat customers, but they're paying every time the commission to Amazon. However, on Shopify you might be, you might be paying, uh, you know, Shopify payments or Stripe, for example. But your recurring customers,you buy them in terms of, as a customer advertising costs once, and then they're yours basically.

And you can upsell them. You can cross sell them. You can do all these other stuff. So I, that's why I love Shopify. I like that it's your actual brand. Is brand equity. You can have your own trademarks. You can really build a moat around your business. And that's where I like to start. I like to start with businesses with Shopify businesses, maybe a small one.

If someone has 250 K even up to a mil, say let's buy something small if it's your first acquisition. Start small, let's get that right. Make the acquisition, get a well structured deal. Maybe it's 50 percent seller financing, 10, 20 percent earn out. You put that small cash up front portion and you pay that, the finance amount of a year or two with 0 percent interest, we can usually negotiate. And then what we're able to do when, when we represent our buyers is we bring the price down anywhere from 15 to 35%. And we get our financing, like we said, up to even 60%. So a lot of our buyers will pay less upfront and less overall. So the deal structure over one year, our post acquisition, a lot of the time, they come back to sell with us and we sell at a high valuation.

Pay off the seller that, the original seller and then we go to sell the business and that's a lot of what we do. We do a lot of portfolio building, but then that's when they'll make the big acquisition. More at the 1, 2 and $3 million mark. So, that's for the most part, what we do and what I would recommend to anyone with at least six figures in the bank to, in the business buying world.

[00:32:43] Ronald Skelton: It's interesting. I,I share your sentiment about, Amazon and the fact that I don't like any business where a single player can wake up and have a bad day and wreck your day. Right? I have personal contacts, people I know from Dallas area and Tulsa area that were doing considerable amount of money in the Amazon stores, right?

They did random products to everything from, heavy duty cell phone charging cables to, small electronics, flashlights, and that type of stuff. And, you know, one of the guys, he had at least, I think he has about eight products and two of them were top sellers on there. Like he had two, two products doing more than a million dollars a year in revenue. Not of course, not in profit because the profit, they squeeze the profit margin way down on the, you know, 'cause it's commoditized. 

But Amazon reached out and said, Hey, we're going to do an Amazon branded product in your space. We'd like to buy your, you know, business, or are you going to be competing with us? What do you do when you're the number one guy and Amazon says, we're going to do an Amazon, branded, you know, product, and

[00:33:42] George Moulos: At least they were nice enough to say, Hey, we'll buy you. I mean, I, I'm sure it wasn't a great number,

[00:33:48] Ronald Skelton: It wasn't.

[00:33:48] George Moulos: So many cases where they just did it and they just copied it. And then that was just over for, for the competitors.

[00:33:56] Ronald Skelton: But, uh, he ended up selling it to him and they, he worked, I can't say what it was or anything when he sold it to him and, he worked with them and they, they worked with his manufacturer. Cause that, that was one of the reasons that they were interested in buying it. It was something that, was, like I said, he was one of the top sellers.

And they were going to do a generic version, you know, you see the Amazon brand. Like I would never sell batteries. Ever. Unless I'm Duracell, right? I would never sell batteries on Amazon because there's Amazon batteries. There's Amazon, all these little Amazon products that, they're a hundred percent commodity. 

You know, a billion dollar corporation can get away with a, you know, a 0. 5 or a 1 percent profit margin where you can't survive on that.Let's talk about, so, the other thing inside of that space though, is I don't know that if I want something, it would be a hundred percent Shopify too. I, you know, I liked the idea that not one person can wake up and have the bad day, but I get your point,

[00:34:47] George Moulos: No one written, you can't get because it's just essentially it's a shop, it's a software, sorry.

I mean, you can be, we,we've sold a Magento, um, and WooCommerce. Really everyone use Shopify because it's got the best plugins, it's the smoothest. But when we say Shopify, we do mean just D2C, to be honest.

It's kind of hard to define sometimes, but no one, I don't know anyone ever being banned from Shopify.

[00:35:10] Ronald Skelton: Yeah. I can tell you, I personally, my business partner, I got banned from Shopify. But we got banned before even we, before we even started. So, I told you I have an aversion to going direct consumer and there's a joke I have is I don't do what I call S. I. B. Businesses, and I'll be very nice for the podcast and say stuff in a box.

So I don't, I don't want to do logistics based businesses where I have stuff in a box and stuff has to go in a warehouse. I have to ship stuff. I have to get returned stuff. And I don't usually word, use the word stuff, but an SIB business. So a business coach and friend of mine challenged me and said, Hey, you start businesses all the time.

Let's do something out of your comfort zone. Let's go ahead and do a SIB business. So, uh, he went out and bought the domain S I B, LLC. And we were setting up our Shopify and the guy on the, the, uh, he had to do, he called support to set something up and the support rep asked him, and this guy's a, an attorney.

He's a friend of mine. But anyway, this is just a couple of years ago. The guy says, well, what does SIB stand for? What does SIB LLC stand for? And he's like, shit in a box. And the guy's like, what? No, you know, like, like, no, it's just, it's just, we're joking around.

Like we're, we're gonna, we have products. We have, here's our product line. And the guy's like, you know, but we never put that, all of our sites, all of our LLC, never explained what S I B stood for. It just says S I B L L C and they thought it was so unfunny. They basically told him he could never do business on there.

And cause they got in a little bit of argument and he, I think he's, like I said, he's in law school. It's like, you can't stop me from being on there, right. Not because you don't like the name of my domain. And they're like, they said, Oh yeah, we'll stop you. So basically, uh, SIB products, or we had in second LLC was SIB productions because we were going to manufacture some of the stuff. And we were picking out and they said, yeah, you guys are not allowed to be on there ever.

So it wasn't my name directly, but that's the only one I've ever heard of. But I think that there's a lot of junk on there and they took offense to the fact that, you know, we were just calling it out and say, yeah, we're going to sell plastic crap like everybody else. Right. So, um, anyway, okay, so let's go into, I, I like what you said on the buy side, how you identify what looking for. On the sell side,I've been running a website for a while.

I've got a second product now, and I'm kind of getting bored with the previous one. That's the story I get a lot of times when I, you know, I see people trying to sell an e commerce site. They've, their side gig out, outran their main one, and now they've got two products, right. So, what is the process, I know what the process is on a, on a brick and mortar company. You got, you have a two to three year prep cycle to really get the top valuation out of it. For e commerce what does somebody need to do to really get the maximum multiple for their e commerce business when they decide it's time to sell?

[00:37:52] George Moulos: For sure. Well, I, what I think is very interesting is, I think a lot of buyers sometimes don't see this is, the reason why people sell a certain price ranges, so between, let's call it 100 K to 300 K. That price range, the most reason that the most common reason people sell is they, this skillset only lets them, allows them really to launch a business, take it to about, let's say a cap of 100 K net profit.

They don't have the time, the bandwidth, maybe they're burnt out, the capital, the experience, whatever it might be, the connections to take it to a million dollars, for example. So from zero to 300 K, those valuations are for starters, not for people who feel like they can continue to run a business. And a lot of the time, those are the businesses that someone started on the side and they'd like, you know what?

Someone take this, let me grab some cash and go to the next thing. For 300 K to a mil, those are people who are great at starting, pretty good at running a business, but now it's, they're taking their themselves to a corporate level, where they have to basically inject a massive amount of capital. We usually have to pay off a bunch of debt as well.

So now they're seriously considering cashing out or staying on for a period. They just really want to just, either just do something new because they feel like they're starters. Not initially, they're not a corporate type because at that point, sellers aren't working in the business as much.

They're working on the business more of a,a strategic role. So these are the different brackets. Now for people who want to come and sell, the process is that come into a brokerage like mine, e commerce brokers. They'll book a call with a broker, myself, or one of my colleagues. Now we'll go through some initial questions, trying to augment their profit.

Usually they've already sent a, a PNL our way so we can give them a rough valuation based on data from similarly sold businesses in the last 12 months. And terms, what they can expect upfront as opposed to finance over a couple of years. And then we'll, we'll go through, how we sell their business.

And we go through our own network that we've built up over 12, 13 years. We go, of course, advertise on our website. Now, if we know our specific, the specific niche, for example, if we're selling a health focused, marketing agency. Now, as we just did about three weeks ago, we will go and buy private equity lists, email lists, and contact them because we know that they are interested in these niches.

Now we have existing clients as well, which will get our team to cold call and say, Hey, Well, like warm cold, because a lot of these leads are quite warm. So, Hey, you said that this is your acquisition criteria, you're looking for this type of business. Well, we have that here for you. We'll walk them through that.

And in that way, we bring in a lot of leads within the first three to four weeks. And two or three of those will be bidding against each other. And then we'll close on one of those LOIs, 30 days, finished your DD, sign the APA by the last day and transfer assets. So it's super quick. DD is quite simple because, well, there's a third, there's usually third party due diligence services that come in. So it's near impossible to, commit any fraud because there's so many eyes and qualified eyes on it. And it's so quick to close in comparison to brick and mortar. 30, even 45 days is lightning speed, but that's the very quick version of, uh, how we sell.

[00:41:10] Ronald Skelton: It's interesting. I think the reason it takes so long to prep a business for selling the brick and mortar world is because you have so many hard assets and so many deduction, deductions and all that other stuff in the brick and mortar world. Where, maybe for the last five years you've been running and trying to minimize your income because you don't want to pay big taxes on it.

So you have all these depreciable access and everything else. Where the online e commerce just doesn't have that space, right? They don't have, so there's not a lot of correction where I've got to run this thing for three years at a higher revenue model, a higher profit margin, and not worry about my taxes as much so I get a bigger multiple. 

So you're saying from the inception of, the idea of, like, I need to, I need to probably sell this and do something else to actual closing is probably what, 60, 90, 180 days, as opposed to years in the brick and mortar world? 

[00:41:59] George Moulos: Yeah. I mean, we, we do have like exit planning courses. So we have a, sell your agency course that is free online. Anyone can Google that and get access to it. So, a lot of the time we do that and they might, they might be a year out, but then they come to us and then we sell within two months.

But we do have a lot of leads, of course, come straight to our website and they'll list with us. Of course, if they're, they're eligible to list with us. And then again, our average sell time from the time they sign with us to close money in their account, is two and a half months.

[00:42:30] Ronald Skelton: You see anything in the industry trends? Anything coming down the pipe where you're like, okay, this is going to make a difference in the industry?

[00:42:36] George Moulos: Things are getting better for sellers. Interest rates, I believe just went up, but slowly by sentiment is improving. Sales in the e commerce world are improving, which gives sellers confidence to list. So we slowly get more listings as well. Things have been bad. I don't want to sugarcoat anything.

Things have been bad in online M& A for sellers in the last two years. But things are slowly getting better, which is good. And I think there are still, on the buy side, there are fantastic deals to be done. There are bargains out there and I think that gap is slowly going to close over the next six to 12 months.

So I would encourage buyers to snap up really, really, really, uh, good deals at the moment.

[00:43:17] Ronald Skelton: So do you think some of that is what word I'm looking for, being acclimated to the interest rates? So, when the interest rates shoot up, the first thing I think is I'm going to wait until they go down. But after a while you just start realizing, well, they're probably not coming back down anytime soon. I got to continue being in business.

So therefore you start reworking your math and trying to, how do I make this work as opposed to it doesn't look appealing. Do you think that has something to do with why it's starting to warm back up?

[00:43:43] George Moulos: 100%. I think a lot of people realize these rates, the interest rates are super high, so I'm not even going to look at buying a business, but they're saying, you know what, how can I work around this? Well, one, I can get an SBA loan and those rates aren't as bad. And what I'm willing, what the, the SBA is willing to back me on are quite good loans.

Number two is, you can get a loan from the seller. So if you can seller finance and get a loan with an interest rate of three or two or zero, which we appreciate a lot of the time for our buyers is that's fantastic. That's insane, right? And let alone get an earn out. So people are now slowly realizing,if my, uh, if my options with a million cash or 250 K in cash is property, stocks, crypto, or running an online business and I can actually get good terms, this is still a better option than all the others.

[00:44:35] Ronald Skelton: It's more reliable too. I mean, with the others, you're kind of counting on the market doing something where this, when you get a little more control in it, you still, you're still at, you're still at like, what happens to the market still impacts you.

You're right. You're still at, but you have a lot more control and you can apply pressure. You can take actions to influence your revenue, your influence, your profit margins, to make more money. To where if you're investing in crypto or a stock, any actions you take to make more money after investing in a stock like that, are probably illegal here in the United States.

It's called stock manipulation and they don't like it much. So individually being able to influence the price of a particular investment. This,

[00:45:14] George Moulos: Say the same thing to young people. Anyone in their twenties and thirties, they will put 10, 30, 50, a hundred K into what they call shit coins and cross their fingers, and in the hope that he doubles or triples or goes to a hundred X. Or buy a carwash. Buy a small website, apply some fixes that you can practically do with your own two hands, and that will improve a business that's already making revenue.

So you can make that actually improve that. And slowly young people are picking this up, that there's this massive tidal wave of baby boomers who are retiring now, and their kids don't want to run their old boring businesses. But so young people who can see the opportunity can pick up these businesses, apply a few fixes and actually build up a portfolio of really strong businesses.

As opposed to putting money into what's essentially gambling with crypto. I mean, it's, for me, it's a no brainer, but it's hard work. Sure. It's hard work and research and due diligence and so on, but it's way more successful than doing crypto stuff. In my opinion.

[00:46:15] Ronald Skelton: One of the close ones I've seen, I'm trying to get him on here. I know a gentleman who buying up car washes. And he's a tech nerd by previous trade, but he merged the two. So he built a website. He built an app on phones, both iPhone and the Android phone for his car washes. And he has a membership program.

So you, and he has like six locations. He has in, in one town and five or six in another town. So basically you, you pull up there. It says hey, you know, we'll give you a discount on your car wash if you just download the app and pay with the app. And then it says okay, well, you can have weekly car washes for a discount too. So he sells subscriptions to them and he goes, oh, by the way now that you're signed up there's six locations.

You can show up to, to any locations. Then the next thing he did is he has he, the line to get into like, cause some of them are pretty busy. There's a line, there's a VIP line now, right? So the line merges and it's like, uh, you ever seen how the toll on like, uh, toll roads here in the United States, they have lights to let traffic control in. So if you pull up and you've got the HOV lane, your light comes on faster.

So he does the same thing where if you've got a VIP pass, if you have the VIP pass inside of your phone, you can pull up to a car wash. It's got six cars waiting into the other line and you're the next one you get to cut in front of everybody. And he charges a premium for that. And I think that there's a brilliant idea about taking brick and mortar companies. One, turning it into a retro, recurring revenue model, and two, adding technology to them that, people your generation and, even my generation at 50, we kind of expect. Technology, we've been around technology so much. We kind of expect technology to be involved in everything. So, I've seen vending machines now where you can walk up to your cell phone and do Apple pay right on the vending machine and, you know, and to get something.

[00:47:53] George Moulos: I know it was on the story of I think I believe it was Coz-, I know it was Hormozi, Alex Hormozi. He, um, he invested in a, uh, taxi billboard company that would just have like a billboard on the top of the taxi. Now what he did, this is a good business. It's sure it's the revenue is not bad. However, what if you digitized it?

You made it a, like a screen. That immediately increased the revenue of the business. Small, boring businesses with a technical twist, great investment.

[00:48:21] Ronald Skelton: Yeah. So, how do people reach out to you? What is, first of all, what is your sweet spot? Everybody has a sweet spot as far as like, this is the company we, we hunt down. Here's who we're cold calling the list or to, to do acquisitions for. Is it sub $1 million kind of what is the, what is the ideal customer for you?

So if somebody is listening, they know right what to expect.

[00:48:42] George Moulos: So on the sell side, we get quality over quantity. We want to sell businesses anywhere from 500 K to 50 mil. That's Shopify. That's Amazon. Those are marketing agencies, SaaS. Those are our specialty. We are the white glove concierge option in the industry. Now on the buy side, we help first time acquirers who are corporate their whole life.

Want to make the first move into entrepreneurship. We help private equity firms on the high end, family offices, high net worth individuals. So on the sell side, quality on the buy side, we also do quality, but we can do a lot of volume since we're working so closely with one client. So anyone really with at least a hundred, 150 K cash, we can help acquire a business on the buy side.

And of course you can contact me at e commerce dash brokers. com. Of course, you can book a call with me or any brokers. And YouTube, we also have a YouTube channel, George Moulos. My name, M O U L O S. We have over a hundred videos on how to buy, sell, how to do due diligence, where to look, reviews, you name it. So, um, yeah, you'll, you'll definitely find us.

[00:49:46] Ronald Skelton: Awesome. And then. If somebody can only remember one or two things from the show today, what would you want the key takeaways to be? What would you want people to,to walk away learning from the show?

[00:49:56] George Moulos: I would say right now, number one is, right now is the market trends are in the buyer's favor. So buying something over the next 12 months is very interesting. Might be a bit of pressure, but these next 12 months are going to be the best time to do a deal. The other thing, the second thing I would say is we talked a bit about, the risk of buying an online business.

Be careful, take your time at the same time, uh, you know, applying a bit of pressure with, uh, saying you should buy the next 12 months. It is, you should be able to take your time. If you ever feel rushed in an acquisition, take your time, be careful, bring in an advisor, bring in an accountant, bring in an attorney and take your time.

And that's what I would say is the two, my two pieces of advice.

[00:50:34] Ronald Skelton: Awesome. Well, I want to thank you for being here today and hang out for a few minutes after the show. We'll call that a show.

[00:50:39] George Moulos: Sounds good. Thank you.