How To Build A Sellable Brand: 7 & 8-Figure Exits w/ Coran Woodmass #BrandBuilderPodcast

So what do investors want in this seven and eight figure range? Because that's all we're wanting, like big exits, right? So we've distilled this into five key elements of what it takes to build a brand that will always sell, regardless of market conditions.

Welcome to the Brand Builder podcast presented by capitalism.com I'm Max Kerwick and I advise physical product brands to find their story.

I'm Ryan Daniel Moran and I invest in physical products brands. A physical products brand is arguably the most predictable path to a seven figure business and we advise them, build them, buy them and sell them.

The show goes behind them, tracks their success and hands you the keys to what's working.

Let's dive in.

Hey brand Builders. This is c money with capitalism.com Many entrepreneurs I've met dream of the big payday. Selling a business for a million, three, five, ten million dollars or more. I've also learned that even if you never have any intention of selling, building your brand as though you had the intention of making it attractive to investors can be the fastest way to accelerate your audience growth and revenue. In this presentation from the Brand Builder Summit, Corin Woodmass shares his secrets on on what brands are getting bought and sold today. Corin is a business broker who focuses exclusively on businesses that sell physical products online. In this talk you'll find out what's killing it in the E commerce space and what criteria business buyers look at before making an acquisition. To find out when the next Capitalism event is happening, go to capitalism.com events.

Enjoy.

Hey gang, I'm interrupting you briefly to talk about cash flow and investing. My strategy for financial independence for the rest of my life is to build businesses and invest the profits. But the investing piece can be confusing sometimes. Where do you start if you're just starting out in your journey? I always suggest looking into dividend paying stock. It's an easy way to generate cash flow, but if you're further along in your journey, the foundation of my strategy is by setting up a wealth warehouse. A wealth warehouse is kind of like a second bank account except it's tied to the market so it goes up in value, but it does not go down in value. It's a really cool strategy that a lot of my really wealthy friends use and Tony Robbins recommends this in his book Money Master the Game as well. And the team that I use to set this up is wealthwarehouse.com it's run by my buddy Sam Prentice. He is the sharpest person that I have met on this topic. He also has access to some really cool investment opportunities to buy cash flow as well. He shares them in some of the podcasts that we've done. But if you go over to wealthwarehouse.com or if you search for my name and Sam Prentice, you'll find any of the podcasts that we have done together as well as some of the opportunities that are available when you deploy this strategy. It's who I use. He's one of our backroom partners and it's the team that I go to for some insider investment recommendations as well as setting up my wealth warehouse, which is the foundation of my strategy. That's wealthwarehouse.com.

Please welcome Corin Woodmass.

Thanks, brother. Appreciate you, dude. Okay, checks in the mail, mate. Awesome. Hey everyone. I can't believe I'm here speaking. I get to speak about my favorite topic. He wasn't joking. I do. I can't believe I get paid to do what I do. It's awesome. Okay, so seven and eight figure business sales. What's killing it right now? Okay, who am I and why should you listen to me? So other than drinking wine at this guy's house, I'm also the founder and managing partner of the FBA Broker. Now we were the first business brokerage to focus except exclusively on selling businesses that sell physical products that have an Amazon sales channel. We also about two years ago started putting out a monthly guide called FBA Business Price Guide. Some of you may have seen we've been tracking and reporting on all of the public business sales in the industry for two years.

And in the last 12 months we've noticed a really alarming trend.

The market is flooded, absolutely flooded with low quality small businesses.

Which leads to low sell through rate. Really low. Let me show you what I mean in one sec. So right now we're tracking 217 different businesses for sale right now as of this Monday and about 63 odd brokers worldwide. So what's not killing it right now? As you can see here in the 100 to $500,000 list price of businesses, the sell through rate year to date for the first six months of this year is only 13%.

And you can read more about that half yearly review at our website. We put this out a couple weeks ago.

Now the average FBA business, in my opinion, my prediction is these types of businesses will become completely unsellable within the next six to 12 months. Now what do I mean by a FBA business? So this might sound strange whether FBA broker. Why am I bagging on FBA businesses? What I mean by this is when a couple years ago we literally had buyers with millions of dollars come to us and say we will buy anything that sells via Amazon, that is no longer the case. And the reason, like I showed before, is how many businesses. There's 194 listings in that 1 to 500,000 range, which is the bulk of the market. There's so much choice that even a novice buyer looking at 20, 30 deals will start to see as comparison what's a good business and what's not a good business. So we're going to talk a little bit about that now. At the same time as this low sell through rate, record low sell through rate is happening on the other side, record levels of capital are being raised to acquire product brands. Now, last year, according to Prequin, the industry leader in tracking the global private equity funds combined raised a record $453 billion with a B. You may have seen this last week movement. There was an announcement that movement's been acquired. And the initial payment, I've got this highlighted, I hope you can see it is approximately $100 million. And then obviously Ryan talks a little bit about Rxbar by Kellogg's for 600 million. So there's a lot of money in the market for brands, for product brands.

So what is killing it? So as you can see in this, in this slide in the 2 to 5 million dollars range in the same time period, the sell through rate is actually 39%. And I'm going to talk about the differences between say $100,000 listing and a $2 million listing. So I'll walk you through this. But for the most part it's brands. So what do investors want in this seven and eight figure range? Because that's all we're wanting, like big exits, right? So we've distilled this into five key elements of what it takes to build a brand that will always sell regardless of market conditions. The first one, surprise, surprise, is what we're all here for. We're at a brand builder summit. This is what private equity, this is what strategic buyers want. They want to acquire brands. So we're talking about brand synergy here as the main key. So if you have a brand that's selling products to one demographic, that's brand synergy. Your whole product suite sells to that demographic, preferably over and over again. The two highlighted things that aren't really talked about in the rest of the sessions, as far as I'm aware, is why I've highlighted them, is you need, when you Go to position for sale. Unless you're in the Waterloo categories where you're selling as multiples of revenue in smaller brand acquisitions, your, your multiple will be based on your basically your annual net profit. Right. So your net margin needs to be strong. And out of the businesses that sold last year, we tracked about 317 million in public transactions in this space. With an Amazon channel, the average net margin of those sold businesses was almost 30%. So you really need to aim high here to get the best result as an exit. Next, you want product uniqueness and diversification. So as we saw with native, just product uniqueness itself and repeat purchase can actually lead to a great outcome. You also want some diversification. So in the products themselves, what that means is each individual product, ideally you don't want a Hero product making 80, 90%. You'd want at least 30%, no more than 30% per product. In a perfect world there are some nuances to that and also the same goes for revenue diversification, so sales channels. So if you're selling on Amazon predominantly, that's a single channel risk. If you've got your own website doing 30, 40, 50%, that's a great thing. So the keep in mind the 30% rule. The next thing is size. So we're often seeing these larger buyers that have larger budgets that will pay more for your brand. They don't really get interested much below 1 million in revenue. And that's some of them are in the 1 million net profit range is the minimum they'll go. Absolutely. Next, you want year over year growth trend, not ghost trend, growth, growth trend. So year over year growth, you want to be selling into growth.

Now how do I know this? Well, over the last two years, all the buyers we've been talking to and that have registered with us have $830 million over $830 million available right now just for product brands. That's all we do. So that's our current registered buyers. Here's an example of some buyer criteria.

Budget 5 million on the top left here. Gross margins 70%. Oh, this has come out a little bit weird. Sorry guys. Operating margins of 30%. They want healthy margins. There's a $50 million buyer here. EBITDA 20 to 30% margins again EBITDA SDE depending on the business size. The $40 budget buyer in the middle here is seeking to build a portfolio of next generation brands that have high repeat customers in high frequency loyalty categories. So this is what the buyers are actually asking us for right now.

So what if your brand doesn't have these five key elements. What do you do? Well, you can build this, which is what everyone else is talking about here today, and make your business more desirable to an investor or you can acquire it.

I'll talk more about that in a sec. So the next question I get from people constantly, clients, friends, friends of friends, is when do you actually know when to sell a business or when to hold it? How do you know when this, this perfect time is? Well, there's no real perfect time to sell a business, but I'll give you some of my thoughts here. So to sell now, I'll use an example. But basically your business.

I'll start with the example. It'll make more sense. A friend of mine, we've actually listed his brand for sale right now. About four months ago we started talking and I was saying to him, don't sell your business. Which is weird for a broker to say don't sell your business. I think this brand is set to explode. With more time, even this thing will become more valuable. The thing for him was the business was always built to sell. So this was his goal from day one. And the market price for this brand, I think we can actually overachieve what this minimum was. But his minimum time target is a fuck yes number for him. Okay, it's 100% yes, let's do this. So, okay, I can't. I'll help you. You know, you're my mate, let's do this. Or if you have other plans. So also he has all three of these things so he wants to go try mountain biking around the world and then snowboarding around the world for a year. Sounds like a pretty cool plan.

So when would you sell later? So a lot of the brands we're talking to or that are up on stage that you'll see talking around here today and over the weekend, they really, they have a mission so they're driven. They selling is not selling to them is not to take the cash and run. It's like native to get more capital in, take some risk off the table and keep quite growing this thing. Maybe you're on a growth trajectory and you can actually fund that yourself comfortably and you're happy with maybe lower growth or it's fast growth to you and you're happy with that. Maybe that's a sell later scenario.

So let's go back to build or acquire. So what I'm going to challenge you here might get a little bit uncomfortable is to think like a bigger business now this isn't for everyone. 100% if you're a lifestyle business, you like what you're doing, taking the cash, by all means do that. We're only talking about how to get the most in an exit scenario here. So first up, think like a bigger business. So not sure. Yeah, this comes out. Okay. So a lot of regular people would think of Facebook as a massive success because Mark Zuckerberg was a genius at coding and this thing organically grew, which partially is true. Now, I don't work for Facebook, and I don't know the ins and outs, but when I researched this, because I know they've done some acquisitions, I couldn't actually put it on one screen. There was varying reports. Crunchbase, I trust. So there's some massive acquisitions here. There's a 20 million, 2 billion for Oculus. Can't wait for that to actually be what it's going to be. 19 billion for WhatsApp. So you can see they're pretty active. They actually started acquiring back in 2007, so it was before they were public. Really interesting stuff. But you might be thinking, that's all good for them. I don't want to buy a billion dollar brand. I don't have a billion dollars. So this isn't relevant. Does anyone here watch the TV show the Profit? Yep. Okay. This is hands down my favorite TV show. I wish they'd go back to the old stuff and have less crying, though. That would be awesome. But anyway, if you go back to the original season of the Prophet, I was back then thinking, why the hell is this guy with the big, big businesses he has looking at a single shop, a single store, this little brand, what is he doing? And over time, you thought, okay, maybe he's taking these national. That makes sense. This is a good concept. We'll roll it out. But what really. In the latest season, what I've noticed is specifically with the ML Fashion Group, or whatever it's called, he's actually centralizing a lot of the operations and leveraging the other brands he's acquiring. So he just invested in this. The last one I saw was some baby men's baby diaper bag thing out in la, and he acquired this one immediately, walked them over into the offices. Now he's around all these other entrepreneurs, these other brands doing huge things. They have shared services. They'll blow all of those brands up together. You could potentially do this yourself.

And the biggest thing, the biggest roadblock I have when I talk to people about this concept is they say, okay, well, I'm doing eight figures in revenue, seven figures in revenue. Maybe I could go buy a brand. Doing $100,000. That's not really the way to get scale here. What I want to challenge you to think about is looking.

Oh, there you go. This is awesome. So look for larger brands, larger companies.

The biggest key here in the US right now is looking offline. This is something no one will ever talk about. We're all online people, right? We don't want a store, we don't want staff in a location. Are you crazy? Well, some, some do here, but anyway, you know what I mean. So Brent Beshaw, I love this guy. He's on a ton of podcasts. You should really go and read his stuff. Anyway, he runs a company called Adventures. They're essentially building somewhat of a Berkshire Hathaway now. He put out a 2017 year in review and this is what he had to say came out early this year. US based businesses valued under $50 million present the greatest legal investment opportunity currently available. The next 15 years will be the largest intergenerational transfer of private businesses in the history of the world, worth an estimated $10 trillion. And the best part is at the end, there aren't enough qualified buyers. Offline multiples suck and no one wants them. Shit, it's going red. Okay, think strategic team. Think vertical horizontal operations, shared services, logistics, supply chain. What you're really getting a taste of here is multiple arbitrage. So you can buy low, combine it together, sell for a much higher multiple. You could buy two to three times even in the online space. Two to three times cash flow, sell for five, eight, even higher. There's no real limit here. So the next question I get is, that's all great, but where the fuck do I get the money? So the good news is, people, there is absolutely zero shortage of capital in the world. And even better, in this room and hallways, there's no shortage of capital. The shortage is entrepreneur led operational teams that know how to deal with product brands and good companies, good deals. So if you can find a good deal, you can get the capital. If you have an operations team and you find a deal, you can get all the capital you want.

And I just want to remind you that what you're building here is a gold mine. It really is. And the biggest difference, I speak to a lot of clients in this space, a lot of people in the product space. And the biggest difference I see between a seven figure entrepreneur, eight figure entrepreneur is mindset. The guys that are doing eight figures in revenue get there because they believe they can do it. So as a parting thought, pay Attention to your mindset. Thinking back to that baby bag, I can't even remember the name. Should have wrote it down. This guy was in trouble after years of being in business and it was very clear it was his mindset that was the problem. So read as much as you can. Go to events like this. Hang out with people that aren't in a 9 to 5 holding you back, saying your dreams are crazy. Go be with those people. Pay for access, pay for the next thing. Pay for the VIP section. I had some amazing conversations at lunch. It's worth it. Join Ryan's backroom. They're right out the back there. It's all available to you. All it takes is a little bit of cash, some commitment to do something and you can get to where you want to go faster because there's people there doing it. It's a no brainer. That's the one thing I invest in without thinking. It's just hell yes every time. So as parting thoughts, focus on building a better business. Whether you build or acquire, focus on those five key elements to make your business sellable regardless of market conditions and get your eight figure exit. That's what we're all here to figure out how to do right?

Just before I leave, I'm not sure, probably don't have time for questions. Sorry Team two books I want you to read. I love Capitalism by Ken Langone. It's my favorite book of the last year. He's the co founder of Home Depot. If you want to get your mindset right, think way bigger than you are right now. Read that Also the Snowball. It's the closest thing we'll ever get to an autobiography of Warren Buffett. It's a commissioned right for him and it's his whole story. I learned a lot from this one. And one more that I wanted to add that isn't actually on here is Shoe Dog. It's the autobiography of Phil Knight who created co creator, co founder of Nike. And I was listening to some product stories, some brand stories, brand growth stories here and it reminded me so much of his story. He started from nothing, had insane obstacles to overcome. Anyway, I hope that was helpful. I don't think we've got time for questions but if you want to ask anything, sales at the FBA Broker is the best way to get there. Me or one of the team will get back to you. I'll be around the whole weekend. And thank you so much for having me.

Gordon Woodmass everybody.

Thanks brother. Thank you sir.

Genius.

Hey brand builders. We hope you enjoyed this podcast by capitalism.com check out our website for upcoming events and additional content about building businesses, building brands, and investing. My name is Max Perwick and my mission in life is to transform businesses into brands. If you have any feedback about the show, any guests you want to see, case studies covered, topics explored, or frankly, just any questions about branding in general, just shoot me an email@maxmaxrandbuilderstrategy.com again, that's maxrandbuilderstrategy.com and I'd love to hear from you. One quick note, if you could subscribe to the podcast or even leave us a review on itunes. These things really do make a big difference in helping us book amazing guests and then also helping people just like you find the podcast. So thanks and we'll see you next time.

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