How Is AI Reshaping Digital Marketplaces Today with Andy Allaway

Welcome to the B2B Growth Blueprint podcast, where we talk with entrepreneurs, founders, and leaders at B2B services, tech, and SaaS companies to learn the systems and processes they've used to create success for their business. We'll also learn from marketing and sales experts, uh, to provide insights to help you grow your business. I'm your host, Mark Osborne, and the podcast is brought to you by Modern Revenue Strategies and their 10X ROI B2B Growth Guarantee. Schedule a free diagnostic call to learn the fastest path to double your B2B revenues in just 90 days. Hello and welcome to another episode of the B2B Growth Blueprint Podcast.

I'm your host, Mark Osborne, and today I'm very excited to welcome my guest, Andy Alloway. Andy is the CEO of Empire Flippers, the number one curated marketplace for buying and selling online businesses. Empire Flippers has completed over $560 million in deal volume and facilitated over 2,000 deals, including nearly 100 7- and 8-figure transactions.

So Andy, welcome to the show.

Thanks. Good to be here. Appreciate you having me.

So you have such a unique perspective on businesses and sort of the business M&A marketplace, and I definitely want to get to all that. But before we get into it, I kind of want to learn a little more about what brought you to this role and sort of the twists and turns in your career. Tell us a little bit about that.

Yeah, cool. So I'll kind of give you the brief version. I've been at Empire Flippers, I guess, getting on for 9 years now. Prior to that, my background was kind of sales, sales management in big corporates. I basically like, I hit 30 and I was like, this is boring. I want to go and do something more fun. A fun thing about Empire Flippers is from the start we've been like 100% remote company. And so previously we were all based in Southeast Asia. So I kind of, when I joined the company, flew to Vietnam, lived there for kind of a year and stuff. And so that's very much in our heritage. And that was kind of early days of Empire Flippers when I joined. We have 2 US co-founders and then, yeah, I've kind of been part of the management team and over the last couple of years kind of taken over the running of the company day to day. So that's kind of the brief version. Happy to dig into anything else which is interesting. I'm based in the UK, by the way, as well.

Okay.

So from Vietnam to the UK or back to the UK maybe as you're Probably true. Yeah.

I mean, it's funny how full circle these things come. When I joined Empire Flippers, like I say, back when I was in my early 30s, there was nothing I wanted more than to not live in the UK and to live somewhere exciting. And you think you'll be like that forever. And now I'm wired the complete opposite. I love being around my family and my friends, and I've just had to travel for a conference and now I begrudge it a little bit. It's funny how that changes.

Yeah, I know exactly what you mean. I know exactly what you mean there. So I do want to get into this because you do have such a unique perspective on, you know, sort of the buying and selling marketplace specifically for, you know, online and digital businesses. Share with us some of, you know, sort of the trends that you're seeing and, um, you know, maybe some, do a little bit of gazing into your crystal ball and, uh, tell us some forecasts, things that you think might be on the horizon and 2026?

Yeah, of course. I mean, it's been, it's been, like I said, I've been here 9 years nearly, and it's been a pretty wild 9 years. And I think a lot of what we've seen in our industry is reflected in probably the offline work, the offline business world as well, and in the economy in general. But, you know, back when I joined 2017, the business was growing really nicely, and I think like the space was growing really nicely. And then, you know, COVID, while COVID was bad for a lot of businesses, for like online businesses, COVID was pretty phenomenal, right? Because everybody was buying things online.

Okay.

We also had like some industry-specific like tailwinds as well. So, you know, we sell a lot of Amazon businesses, right? Amazon FBA businesses. And there was a lot of money raised to kind of roll up these companies and stuff like that. So for us, that like 2019, I guess the 2022 period was crazy. You know, everything was up and to the right. We couldn't list businesses quickly enough. And then, you know, the kind of our market changed as the world changed towards like end of '22 into 2023, interest rates going up and inflation and all these kind of things. So, you know, 2023 was a pretty tough year. It was a funny year. Like we still got a lot of deals under LOI and into due diligence, but definitely like the market had changed, you know, like buyers were willing to pay less and sellers were still kind of married to their 2 years ago valuations, which just weren't realistic anymore. And then I'd say like the 2 years since then has been a bit of like a return to normality. I think sellers now understand like where the market is at and that the 2020, 2021 period was the anomaly. And so I think that the market is pretty healthy and vibrant now. We still sell a lot of e-commerce businesses, both like on and off of Amazon. We do SaaS, we do services like agencies, we do like things like YouTube channels are super popular at the moment. And yeah, and I guess like looking into the future, you know, we as a business will, our transactions size and number will grow really nicely year on year this year. I certainly hope for some more of that next year as well. You know, we're still betting big on e-commerce. You know, like previously going back a few years, we used to sell a lot of like content sites, like blogs, affiliate websites, those kind of things. And we still sell some of that, but obviously that's been pretty heavily impacted by the AI user interface and stuff like that. People just aren't navigating to those sites in the same way. And so we sell SaaS businesses, but you also see some like how AI impacts SaaS over the coming years, particularly like small SaaS tools. I think there's reason to ask that question. But like we got a really good heritage in e-commerce and we, you know, out of all of this like AI landscape, most of the AI use cases I see, I think are mostly additive to e-commerce, right? They can make e-commerce businesses run more effectively. As best I know, like ChatGPT still hasn't like magicked out a product that gets, you know, sent to you at your house at the end. So like there will always be a need for e-commerce of some sort, right?

Yeah, that makes a lot of sense. So you raised up a couple things that are, that I think are worth diving into. So in the, you talked about, you know, a few years back that there was a lot of private equity money rolling up some of those Amazon FBA businesses. Are you seeing any trends in private equity or, you know, larger groups rolling up businesses of a certain type? Or do you have any sort of gut feel on something that like, That, that may happen in the near future?

Yeah, I mean, we still see that. We still have institutional buyers that are buying businesses. I think the thing which has changed, and I'd say that's across, you know, definitely in SaaS, but also in e-commerce and even things like agencies as well. I think the thing that has changed from like a few years ago is we mostly see companies that are rolling up like a handful of businesses. So like even in the Amazon FBA space, we still have people that are buying like a few FBA businesses, But, you know, like back in kind of the aggregator peak period, I mean, those guys were trying to roll up hundreds of FBA businesses and like definitely that has passed.

Yeah. Now, do you think that was because the size of those businesses were smaller and so they were trying to get to like a critical mass and now they can pick up a few businesses that are of larger size and achieve that same kind of critical mass? Or do you think it's some other driver?

Well, I think it's, I mean, a lot of these were pretty big businesses that the aggregators were buying. I mean, they raised billions. Some of them, I think it's more that the when you you know let's take 100 FBA businesses like the spreadsheet math on rolling those up and you know what the bigger the company is worth and all of that stuff and the economies of scale like that all looks great. But I think the realities of like running 100 Amazon FBA businesses are different. And of course, like you know that business model was also impacted by like some external stuff, you know, like the shipping, you know, and tariffs and all that kind of stuff. But yeah, I think it's a team who really understands e-commerce businesses or a certain type of monetization can do really well having a few different businesses that they cross-pollinate and not have like the complexity of, like I say, 100 FBA businesses basically.

Right. Yeah, that spreadsheet math is so true. And I work with a couple clients that are part of private equity, you know, sort of holding portfolio companies. That the portfolio, you know, private equity group thought, oh, we're gonna, you know, if I just bring together 5 companies that do the same thing, we'll then dominate the marketplace. But it's really not true because each of them was finding success serving different customers, addressing different niches, providing different types of services. You can't just smush them all together and get, you know, something that's necessarily 2 plus 2 equals 5.

Yeah, for sure. I think, you know, I know a few people that are, Still acquiring portfolios of businesses, but I think they're just doing it in a more intelligent way where they're sure that, okay, I have this particular agency. If I get another agency which has a slightly different skillset, then I have a pretty good gauge that I can cross-pollinate that and it'll add up to a bit more than the sum of the two. So yeah, I think it's still happening just with a little more caution.

I'm definitely hearing that in the agency space that, you know, there's a lot of fragmentation, which is ripe for, you know, sort of colliding or condensing. And then the other thing that I'm hearing, I'm just curious if you've seen this in the home services space. So like, again, this is offline, but in the HVAC and in the, you know, pool services, like there was a lot of roll-ups in that space, dental practices over the last several years.

Yeah.

And I'm hearing now that the SaaS products that are designed to serve those kind of businesses are going through a similar kind of roll-up. Are you, do you happen to have much visibility into that?

We've seen like bits and pieces of that. I've definitely heard of similar things happening and it makes sense. I think it kind of lines up with like what I'm saying about like just slightly more deliberate picking of businesses that make sense. Yeah.

So you obviously have a very transactional focus. I mean, you are a marketplace for businesses, and so you have a lot of visibility into something that, you know, a lot of entrepreneurs might do once in their life. You know, they'll found a company, they'll run it for a long time, and then they'll have one exit, one sale. Um, but so you bring a lot of, you know, expertise there. What are some of the, you know, sort of pitfalls that you see? Uh, and, and you and I have talked about this a little bit before, of kind of the differences in how you run a business if you're going to run it forever, or at least 10 or more years, versus the things that you should be doing in your business if you're thinking about preparing it to sell. What are, what's some advice that you might offer to, you know, folks that are thinking about maybe within 5 years, I'm going to think about, you know, selling. What are some of the things they should start doing?

Yeah, it's a good question. I'll answer it a little more directly in a second, but firstly, I'll say that like, there actually is a lot of things that make your business sellable that are actually really good practice for just running a great business anyway. So, like having well-documented SOPs, having a business where like not completely reliant on the founder and stuff like that. So all of that stuff is kind of super important anyway. I think particularly when you're more like 2 years out from exiting, yeah, that's probably the time where you want to think more deliberately about What the package of your business looks like when it comes to sell, and it's things like you know probably like less experimental marketing and stuff like that. You know a conversation we have all the time is sellers who will be like well yeah I had that X marketing expense but like that didn't really work and it's not really contributing to the numbers so let's add that back into the PNL and like buyers hate that stuff because it's like that back yeah. Yeah, for sure. I mean, I don't know what your marketing attribution is like in your business, but if it's anything like ours, you're able to be that precise about what worked and what didn't. I mean, it's tricky.

Right.

And then, you know, I think like building off the back of that as well is making sure that the financials are really, really solid. And by solid, I just mean like well-documented, you know, that you have a CPA that's like kind of doing the books for you and stuff like that. Particularly now, I mean, financing is obviously always a part of M&A, but again, as with the kind of slightly less availability of cash now versus a few years ago, I mean, a good chunk of particularly our larger deals are gonna involve financing of some sort. And so just having like the numbers completely buttoned up, it's just, you know, it's just, it's the worst thing in the world when a buyer is having to like pull apart different numbers and it's like, oh yeah, actually this relates to my other business or stuff like that. It's just like, it's a nightmare.

Yeah. Well, and there's that old phrase, like, if one number's wrong, every number's wrong.

Exactly. I mean, when it comes to the due diligence period, so much of it really, okay, yeah, it is digging into the specifics of the business, but it's also just a huge trust-building exercise, right? And if the buyer and the seller trust each other, small things that come up can be overcome. But yeah, if you give the buyer a reason to doubt one thing, and then of course they're like, well, what else do I need to second-guess in this thing?

That's right. And I want to pick back up on something you mentioned a minute ago because it's so true. So we work, you know, building marketing and sales systems for companies. And, you know, when we're working with an early-stage company or one that's trying to scale from, you know, $0 to $100 million or whatever it might be, we do experiment and we do make strategic bets and we do invest in strategy. But when that business is actually preparing to sell and they've got, you know, sort of regular Uh, revenues and maybe their strategy could be better. We don't invest in strategy. We don't test and learn. We improve those processes and those SOPs because they have a positive ROI on day 1. Like, as soon as you start improving those SOPs, that increases the multiple that you're able to get for your business. It probably also increases the EBITDA and the, you know, the bottom line revenue that you're getting too, because it improves that efficiency. But it absolutely makes it more transferable, easier for another owner to see themselves running it. And so that sort of strategic shift of focusing on processes versus strategy and test and learn for growth is such an interesting thing to see the difference in how it can make such a big difference for companies as they prepare to exit.

Yeah, that makes total sense. And I'd say kind of semi-related that another area I sometimes see sellers go wrong Is that they they overfixate on what that net profit, that EBITDA number is to the point of like you know not running a business that is very transferable. You know, so I'll regularly have conversations with people who are like you know my my profit is X. I'm working fifty hours a week in the business. Like I I could employ someone, but that would ding my profit down to whatever. And like the impact of you getting out of the business is going to way outweigh whatever you kind of pay someone to come in and do those tasks. I mean, the thing which I like. repeat ad nauseam is the number one question a buyer is asking when they're looking at a business is like, what happens when I take the seller out of this business? Right? And if the seller is like at the center of everything, then like it doesn't matter how juicy that net profit number is because buyers are just going to be spooked by like the one-man show.

That's right. Well, and not only the one-man show, which you're absolutely right, that sort of key man dependency and owner dependency is really key. And even if it's not just the owner, if it's, you know, A small team where everyone's working those 50-hour weeks. But even just sort of other kind of basic infrastructure stuff, like we call it, you know, burning the furniture to keep from turning on the heat. Like, it looks really good on paper, but then you walk into the building and you're like, well, where do you sit? Well, we sit on the floor. Like, we don't want to, you know, buy any chairs.

Yeah.

It's an interesting thing. So you talked about that, you know, ways of getting your financials in order, uh, and this sort of focus on kind of juicing that profitability. And there's the phrase that, you know, all revenue is delicious, but recurring revenue is the most delicious. And I, I know that especially in the, the online space, there's a, a big emphasis on, you know, setting up the systems and processes that turn, you know, one-time revenue into recurring revenue and recurring revenue into really recurring revenue and more SaaS models. Have you seen any sort of innovative ways that companies have done that to move from just, well, we sell something and then we hope they come back to, well, we have repeat customers because of this, or even subscription customers because of this?

Yeah, I mean, as you say, you know, the kind of the obvious example is just that generally SaaS businesses are valued higher than other online businesses because they tend to have that recurring element. And yeah, it's a predictability thing, right? It's kind of much easier to model the business and know roughly where you'll be. So yeah, I mean, we do see that with SaaS businesses. I think a few other ways, things that kind of membership type things, depending on what the business is like. Obviously some products lend themselves more to a recurring nature than others. Yeah, we have seen in the past as well, kind of like subscription box style businesses, they're always super popular because they have a lot of the same dynamics. So I think, you know, where it lends itself and where there is the possibility to do recurring, it makes sense. I think even for businesses that don't necessarily do that, the kind of like the step in that direction that they can do is kind of do the best that they can to have their owned assets, right? So whether it's like email lists, whether it's social media following, all of that kind of stuff. Whether it's being utilized or not, those are things that buyers will put a lot of weight on because, okay, it's not recurring, but it's like recurring relationship stuff, if you like. And it opens the door to be able to do some of that stuff. So yeah, I think any assets, and it's particularly because we do sell things like Amazon businesses where you kind of, you don't own the customer and stuff like that. So anything you can do via your own site or via other stuff, To kind of be able to kind of build those assets can be really helpful too.

Yeah. I heard this great story from the offline world the other day that is so powerful of, you know, the company that does roofs. And so, you know, you do a roof and then supposedly it's going to last for 10 years. Like, you know what I mean? Like, if you're doing a good job, it's really hard to have repeat customers. And so this million-dollar-a-year, just to use a round number, roofing company, You know, had a certain valuation, uh, you know, call it, you know, 3x, uh, of their, the multiple against that revenue or that EBITDA. And by making a simple change, which was, you know, we've got all the ladders when we do the roof, why don't we ask the folks if they would, in exchange for a lower price on the roof, sign up for, we'll wash your windows and clean your gutters all year long. Mm-hmm.

Yeah.

You pay less for the roof now, and you get this valuable service on an ongoing basis. You just got to sign up for 1 year and we'll, you know, it's even a good deal at that. Now, not only did they turn this once every 10 years into this ongoing relationship, they had a lot more predictability in their cash flow. 2 to 3 more turns on that. So they took a million-dollar-a-year business You know, valued at $3 million to sell. It's now valued at $5 million by making that one simple change and just turning that one-time event into an ongoing sort of subscription.

Yeah, that's super cool. I like it. That's a really interesting example because, you know, you can obviously model the pricing with that year one so that it makes sense. And then obviously the average person, you know, I haven't changed my window cleaner in like the 5 years I've lived here. So it's Sticky too, right?

Yeah. Well, and it gives you a much deeper relationship. Now, you know for sure in 10 years you'll be the person they call and you've got a chance to, you know, have a conversation with your valued customer that likes you about, hey, well, what about those people over there? I can see their roof sagging a little bit. Can you make an introduction to your neighbor? And, uh, yeah, I see online businesses doing that too. There's an accounting firm that, you know, they kind of, you know, worked with their clients once a year. And so they spun up a little bit of software that keeps track of expenses and receipts for their clients. And so now it's a subscription and turned that into, you know, much more, you know, ongoing revenue instead of just one-time revenue.

Yeah, it's funny, we talk about that in our business actually. I mean, we have, you know, we built out our kind of valuation logic and our tools to the point that like, you know, we have APIs into like Amazon and Shopify and all these different things. And we think we talk a lot about like, you know, is there, whether it's paid or not, I don't know, but like a product that makes it stickier for people who maybe want to exit in 2 years. And we're like, well, we have all the tools for you to track your exact P&L over that period. And so like, you know, even in a business like ours, there's opportunities to do that kind of thing.

Yeah, that's right. That's right. So I'm curious if you've seen, you know, other sort of transference of things from offline into online businesses or online into offline that has maybe been interesting to you over the sort of 9 years or just sort of trends in how online businesses have become more similar to offline businesses?

I think the thing that comes to mind at the moment is kind of on the financing side of things. Yeah. Because I think Obviously, offline businesses, typically there's financing of some sort involved, whether it's SBA or whatever. And a lot of those businesses have kind of tangible assets that kind of make it easier to do that. That's been less true, obviously, in the online space. You do get kind of lenders based on— this goes back to the recurring thing as well. One of the reasons that recurring businesses can be more valuable is because they're easier for people to lend on the future incomes of them, basically.

Correct.

But we definitely have seen like a shift in the financing options available in online businesses. Yeah, we do a reasonable amount of deals via SBA. It's funny, a few years ago, like we wouldn't even do SBA deals because they would be like locked up for 6 months and half the time they wouldn't go through in the end. And so we always felt like we were kind of missing cash buyers. But that process seems to, uh, to have got a lot slicker. The government shut down the site at the moment. Um, so, so yeah, I think some of that financing stuff seems to have like made its way more into the online world over the last few years.

Interesting. Well, and I guess also is just, you know, the financial markets become more accustomed, uh, to these types of businesses and they, they realize that internet thing's not going away. Uh, it makes it easier.

Totally. Yeah. And I Tied into that as well, I mean, the whole online business space has like really matured, you know, over the last 5 or so years.

Yeah.

You know, I mean, back when I first joined Empire Flippers, you know, we would typically smaller businesses back then, but, you know, we would put, we would put businesses up and then, you know, we would have that day people just like wiring, multiple people wiring the money to our bank account to the point that like we used to have this concept of the wire race, right? Which was literally whoever's money hits our account first, they're the ones that get the business. And that would happen on like quite, you know, quite big businesses, kind of, you know, exclusive due diligence. That was a real rarity. You know, it'd be like we would have multiple people doing their due diligence. Now, you know, almost any deal, particularly of like a certain size that goes through is having, you know, a formal LOI and exclusive DD period and all of that kind of stuff. So that, you know, alongside the financing, there has just been like a general growing up and maturing of the space as well, I think.

Well, and that attracts more investment and so it helps it to mature even further.

Yeah.

So you're obviously an expert in a lot of interesting topics that we could spend all day on, but I gotta be mindful of your time. But before I let you go, like, give us the pitch. Like, who should reach out to Empire Flippers? How can you help them?

Yeah. So our main thing is that we're a vetted, curated marketplace. Um, so we have a, you know, a very substantial vetting team. Um, and every business is— every business that gets listed on our marketplace goes through our vetting process. Um, we reject upwards of like 90% of the submissions that we get. Um, and so, you know, on the buy side, you know, of course, do buyers always have to do their due diligence, but they can come to our marketplace knowing that there's like a certain threshold of like checks that have been done. Um, you know, so they're not completely wasting their time. And then, you know, on, on the seller side, we, I think we're positioned in a really interesting place. So in our space, you have what I think of as like the true marketplaces, right? And these are, you know, very tech-heavy, but like DIY-ish type marketplaces where for certain sellers who are like super clued up, that can be a good option. And then a lot of our, you know, like the offline M&A world, a lot of our space is kind of more traditional old-school brokers, you know, Rolodex, high personal touch, but low tech and processes and stuff like that. And I think we're positioned nicely in the middle, which is we have— we've put hundreds of thousands of dollars into our platform, and we have a full-time engineering team who look after that. But we've also got 40-odd people here who are— we have vetting, migration, sales guys. So we're doing plenty of AI stuff, but we're not trying to replace our team with AI. We're betting on our people to be the difference. And so I think from a seller's perspective, you get all of the tech stuff, but you also have our team who will kind of help guide you through the process. And, you know, we put hundreds of calls a week into prospective buyers and all that kind of stuff as well. So yeah, that's kind of like the elevator pitch I'd give on both sides of our marketplace, basically.

Fantastic. And for folks that are interested either in buying or selling, what's the best way for them to engage?

Yeah, so definitely empireflippers.com is the best starting point, and it's you know there are ways to like schedule calls with our team and stuff like that. We're super happy that by the way, we're super happy to do that even if you're like multiple years out from exiting. You know, a big part of what we do is is kind of an extension of some of the exit planning stuff we were chatting about. We're very happy to jump on calls, and our guys who have like seen hundreds and hundreds of businesses exit can kind of can kind of give tailored advice on your business. Yeah, empireflippers.com also like I'm. Well, reasonably active on LinkedIn. Should be a bit more active according to our marketing team. But yeah, feel free to add me on LinkedIn as well. I'm kind of active there.

Fantastic. Well, Andy, thank you so much for taking the time. As someone who has personally actually transacted through Empire Flippers, I can give you the thumbs up and the endorsement. It was an excellent experience for me and my team that actually purchased a business more than 10 years ago. So before you were there, but Uh, I'm sure it's matured a lot since then. So thank you again for taking the time to join us today. I really enjoyed it. I'm sure our audience learned a lot.

Cool. Total pleasure. Me too.

Thanks, Andy.

Thanks.

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