Acquisitions Anonymous - #1 for business buying, selling and operating - A $1.6mm revenue Amazon-based supplier of pet products / $300k vendor of bath tools and brushes - e20

Episode Date: March 2, 2021

New episode with special guest Molson Hart of Viahart!We look at two companies for sale:- a $1.6mm revenue Amazon-based supplier of consumable pet products like shampoo- a $300k / year Amazon-based vendor of bath tools and brushesLet us know what you think!** Do you have a deal we should evaluate on the show? email michael @ girdley . com **-----* Do you love Acquanon and want to see our smiling faces? Subscribe to our Youtube channel.* Do you enjoy our content? Rate our show!* Follow us on twitter @acquanon Learnings about small business acquisitions and operations.-----Past guests on Acquanon include Nick Huber, Brent Beshore, Aaron Rubin, Mike Botkin, Ari Ozick, Mitchell Baldridge, Xavier Helgelsen, Mike Loftus, Steve Divitkos, Dzmitry Miranovich, Morgan Tate and more.-----Additional episodes you might enjoy:#62 Two Landscaping Businesses for Sale - Mike Loftus CEO of Connor's Landscaping#66 Analyzing Software Businesses for Sale with Steve Divitkos, experienced industry CEO#42 $900k Moving and Storage Company / $500k Rural Mini-Storage#61 Two Manufacturing Businesses for Sale - Brent Beshore - Founder and CEO at Permanent Equity#24 $5mm pool services and lifeguard staffing co / $2mm septic services business -  featuring baller @WilsonCompanies as a special guest!#45 $800k/yr cleaning business in Midland, TX / a $565k/yr window cleaning business in San Antonio, TX #48 Two Landscaping Businesses for Sale - Mike Botkin of Benchmark Group--- Support this podcast: https://anchor.fm/dealtalk/supportSubscribe to weekly our Newsletter and get curated deals in your inboxAdvertise with us by clicking here Do you love Acquanon and want to see our smiling faces? Subscribe to our Youtube channel. Do you enjoy our content? Rate our show! Follow us on Twitter @acquanon Learnings about small business acquisitions and operations. For inquiries or suggestions, email us at [e-mail]

All right. We're back for another week of Acquisitions Anonymous. So I'm Michael Gridley. I guess we got some feedback on Twitter that I need to do a better job of announcing who we are and what the podcast is about. So yeah, so there's a podcast about small business and A. The three of us, me, Bill and Mills get together each week and record a live discussion of deals for sale in the small to medium business space, usually under $20 million in value. So good morning, Bill and Mills. Good morning, Michael. Good to be here. Absolutely. Yeah. And we have a special guest today, live from his bedroom, Mr. Moulson Hart. So Mulsin, you're coming with a lot of expertise and interest in the space. I love to give the audience like a one-minute introduction if you don't mind. Sure. Yeah. So my name is Moulson Hart. I'm the CEO and founder of an educational toy company that focuses on the e-commerce channel. It's called Viahart. Make products called BrainFlakes, which is an interlocking plastic distal. and a few others. We sell a lot on Amazon, and I founded this business 11 years ago. I haven't gone bust yet. That broke yet is a good sign for business success. So well done. Cool. All right. So we have, we've picked some deals that I think are close to Moulson's wheelhouse. And based on the pre-discussion are going to generate some lively commentary. So hopefully we'll replicate that here. But so, Bill, you have both of these and over to you.

All right. So I've got the first deal today. This first one is an Amazon FBA pet brand. This was for sale about a year or two ago. At the time, it was a couple years old, about three years old. Really interesting growth story. Their first year, they did about $114,000 in sales. Then they did $82,000 in sales.

And then they did kind of TTM when this business was for sale, $1.5 million in sales. So pretty rapidly growing, and they're doing about 480K of SDE. Their kind of SCE trajectory was 51 to 265 to 479. So this business makes pet products. You know, they've got six skews. So think kind of pet shampoo, you know, chewing supplements for pets, you know, anything you might kind of spray on your pet or give to your pet as a treat. And they're doing almost entirely Amazon.

They've got pretty good skew diversification, but their channel diversification is not that impressive. It's almost entirely Amazon and Chewy. They say they've got website and Walmart and eBay, but those are kind of small percentages. So it's primarily Amazon. They have not posted a list price here. So they're kind of open to offers. So their SD is 480. It's been growing pretty quickly.

They're open to offers. They seem to have good reviews. It's pretty well-branded product. Obviously, we can't say the name on the air here. But the branding is good. I don't have any problem with that. Looks like they've done a good job. They've outsourced almost everything from kind of PPC management to accounting.

They've got kind of contractors doing customer support. So this is kind of your classic, you know, seems like I run it from my bedroom and my bathrobe, FBA business. They have a picture of the owners and these are like the prototypical pet parents. Yes. Like if you're like, show me a picture of pet parents. I'm like, it's these people. Yes, it's like, it's like taken in the fall.

There's like leaves. They're holding their dog. Yeah, yeah, yeah. So it's rapid growth, you know, good profitability. There's a lot of people out there looking to buy exactly this business. So that's why we wanted to cover this one on the podcast. It's hot space, you know, it's pet, and it's Amazon FBA, and it's run from my bedroom and my bathrobe, you know, kind of type of style.

So this was for sale, and I'm sure it went for a solid number. What do you guys think of this business? Maybe Moulson. We'll start with you as our guest, Vaugh. Jared. Yeah. So basically, this is probably one of the best FBA businesses I've ever seen for sale in my life. I haven't looked at like thousand of these, but I've looked at quite a few.

And this looks really good for a whole bunch of different reasons. I think this was selling in 2019. So the buyers actually did quite well because they got that COVID e-commerce bump. So they probably did well on it, provided they didn't pay too much in terms of earnings. What I like about it is it's a situation. it's basically like a subscription repeatable purchase. And what makes that type of thing special is that you can kind of use Amazon as lead in the sense that you can get people to purchase your product on Amazon one time.

And then you can put some stuff on your packaging that can divert future sales to your website, ideally through a subscription. And because you're doing like a subscription, because presumably like you have to wash your pet, some sort of like pet washing. liquid goo. You have to do that, like, you know, multiple times and repeatedly throughout a year, you can get someone on like a monthly or a quarterly subscription. The branding looks pretty solid.

USA manufacturers are, you know, that's kind of cool. And I even checked it out on Amazon like a year or months later. And it looks like the buyer is doing very well with it. Good reviews. As far as I can tell, there's not too much hanky-panky going on in that category. or buy Amazon reviews are fake. So this looks pretty good to me. You bring up an interesting point, Mulsin,

because we've talked about this with other FBA businesses and the relative ease or difficulty of transitioning away from FBA and onto your own e-commerce. And Bill, as kind of our resident expert, says that that's one thing to say and a totally different thing to do. And you kind of shared, like, maybe some different ways to do that. But between the two of you, if you were buying this and you were trying to transition it,

what would be the difficulties of doing that? I mean, Amazon obviously has an interest in keeping their hooks in you. Yeah, I've said that going from all these FBI businesses, they always sell, and like number one growth opportunity, they say, is take this to Shopify, go direct to consumer. And of course, you go, well, why the hell haven't you done it if it's so easy? And I've kind of repeatedly said this is one of the hardest things to do in e-commerce. So I think it's worth unpacking this topic a little bit.

Also, what are your thoughts on the issue of going from Amazon? Amazon 2.com. Yeah, I think you're absolutely right when people are saying, yeah, why haven't you done this thing that you say is this huge opportunity? Like, why haven't you gone international? That's like the other one that tends to appear in these Sims, right? Why haven't you transitioned more sales to Shopify? Because I checked out their website and it still doesn't look like they've done it as far as I know. It's really hard to do that, but it's also somewhat category dependent. So like conceivably, you get this like pet washing solution and you open it up and you could be upsold on a subscription based on a discount, that would be the mechanic of how I would do it if I were buying this business.

I try to create some sort of compelling reason, either at discount or maybe it's like a donation to some sort of pet charity that pet owners are really into. It's like how can I just transition? not going to make this one single time low profit margin sale become something like a repeatable high profit margin sale on my website. And I'm willing to spend a little bit of CAQ customer acquisition dollars on that because I know that if my churn is not too high, if this stuff actually works and people are going to continue to buy it for some time. So it's all about basically using the packaging to move from Amazon

to transition that revenue over to your website. And you can do that for subscription consumable products like this. More easily than you can do it for plush animals, which is something that we sell. Yeah. I think the point you make that's good here is essentially your only tool is the physical product because Amazon's not going to let you email these people and say, come to our website and buy.

You can't call them. You can't really put anything in the box, you know, any inserts, you know, really besides the product. it's all against TOS. So you've got to somehow physically. They know, what's TOS? Oh, Terms of Service. Amazon's Terms of Service does not allow you to, what they call redirect the sale.

So if you put any kind of link to your own website and email to a customer, they will strip it and they will suspend you. They get very, very angry about trying to redirect the sale from Amazon to your website. So Amazon makes this on purpose extremely difficult. So like Moulson said, one of your only. levers is to somehow physically attach something to the product, be it like a hang tag or some part of the packaging. Some people, if the product is boxed, they'll put an insert inside the box so Amazon doesn't see it. But you've got to be physically attached and use that to try to coupon people back to your dot com. It's still technically against terms of service, but it's hard

to get caught. Another thing that I'll say, so that's really hard. The other way you could do it, And this is kind of akin to starting your business over from scratch, is you have to find a way to run Facebook ads for this product and point people to your website. So you're essentially starting over, right? You've got to figure out a way to run a to film and then spend money on a compelling Facebook ad that's going to drive sales directly to your website. Now, the thing you'll notice is being huge on Amazon does not help you at all in this endeavor. you really have to totally attract new customers.

So saying, oh, you could just easily go to dot com, that would be like saying, oh, you could just easily start a totally new brand in this niche. It's almost the same thing if you want to grow it that way. But honestly, though, that's pretty much the only thing that I found to ever work. And Mulsin, I'd be interested to know if you've seen people just using the package inserts that have been able to go from FBA and build a real sustainable, large dot com presence, but I don't think I've ever seen it just with that lever. I have.

Yeah. Yeah. So as far as I can tell, I know a guy who sells vitamins. And basically, yeah, he just uses Amazon as a lead gen tool to upsell people on subscriptions to Shopify website. I know a guy who does it for human shampoo, which is another type of shampoo, not just shampoo for pets. And is it cheaper on the website? Or just deep discount on the first one on the website? Is that the idea?

Deep discount via the subscription, basically. And yeah, and it's kind of to your point, right? So they also use the Facebook ads for lead gen. And they use influencers, which is another way to do it on YouTube. Of course, like if you manage to like swing some sort of retail deal, there are other ways that you can lead gen to your website. But it's tough. And even if you do a Facebook ad, you have to understand that like every prime member

who fancies your Facebook ad is going to check that product on Amazon. So if you want to actually transition sales over to your website using those Facebook ads, like what you actually have to do, and correct me if I'm wrong bill, is you have to price them at the same level superficially on your website versus Amazon. I explain why and then offer some sort of coupon on your website. The reason why you can't just have your website sales lower than your Amazon, have your website prices lower than your Amazon prices is because Amazon will actually suppress your listings

if your prices are lower on your website. So Amazon really has you controlled, as it were. Like it's worth noting here to do that the company has like almost zero organic traffic in terms of the way that they're managing their social media, like less than a thousand Instagram followers. You know, like they're not, they haven't created any organic flow. this is an Amazon company, and they're 10% of their sales on Chewy, but this is an Amazon company. I agree with Mulsin. As far as Amazon companies go, this is a pretty damn good one, for sure.

My concern would be how much growth is there left on Amazon, and can we ever get off the Amazon platform? I happen to own a business in the pet space, and we have some tricks of the trade to do that. So I actually, I was digging through my sim, and I go, why do we not buy this? back when it was for sale. I can't remember why we didn't buy it, but it's a pretty solid one. Let's talk a little bit before we move on about valuation. So it's $1.5 million in sales,

a little under $500K in SDE, and they have not listed a price. Moulson, we'll let you take first crack. Roughly, what would you bid for this business? What do you think it's worth? Well, so this business was sold in 2019. Yeah, what are we think? That was my question.

there's a 2019 price and then there's the 2021 price. So I'm curious what are the one of the two answers. Yes. Well, I'm not I've never actually bought a business. So I'm not really that qualified to pull that out. But like if you if you paid for you know, assuming that the numbers are real and those seller discretionary earnings are always BS in some ways like four times earnings, which was like a quote unquote rich price in 2019, you did fantastic because 2020 had just like a massive bump in sales because of COVID. And pets. Huge bump in pets in 2020 also.

This was a double whammy. Okay. Cool. And then also I see that there's some French bulldogs. So maybe if you can somehow find Lady Gaga's dogs, you can maybe get an extra $500,000. Yeah, I think, I don't know, four times in 2019, five times in 2019, you'll do fine. Again, this is actually the best FBI business. I have ever seen for sale.

I mean, like, the fact that the owners are, so I have this, I'm much less experienced to you guys, but I have this like pneumonic for buying businesses. And it's like the four D's or something. Like you're not getting a deal unless it's like a divorce, a death, debt, right? Because they need to sell it and they're going bankrupt. And the fourth one is dumbass, if I'm allowed to say that. And I don't think these people are that at all. But you have to wonder, like, why are these two young people?

who've built this massively growing business. Like, why are you selling now? Like, why not keep riding this? I think that's a great point. So I look at this and it scares the living daylights out of me because the business has more than 10x top line in two years. So if I own this business, if I happen to fall backwards into owning this, I am getting out as fast as humanly possible. Because to me, like no Main Street business, no lower middle market business, 10x is in two years. And so, like, if you saw an HVAC contractor or, you know, just some like industrial service business or, you know, like a company that installs LED lighting in, you know, offices, like any of those businesses, if they had 10x in two years, you, like, you would not believe it.

It's just not conceivable that it would actually happen unless they just had a massive infusion of cash. So I look at the FBA Wild West Mills. So I look at this and I'm like, there's no way I'm paying a premium, right, for this amount of growth because it can't, like by default, it cannot be sustainable, right? And I'm even going, how sustainable is the 500,000 in SDE? Not to knock what you guys are saying. I totally get the validity of it. But my question, I think, goes to not just valuation and the risk that I price in, but how does somebody actually finance this deal, Bill? Like if it's 500,000 in SDE, That's too big probably for, you know, a mom and pop to come out of pocket. Does a lender, I mean, does the, I don't know. This is SBA all day, baby. This is SBA all day. Okay.

Even, even with relatively no collateral. Yep. Well, PG and SBA guarantee. Yeah. This is what SBA is made for. I'm sure this business was bought. If it was not bought by someone like Drassio or Elton's brands, I believe it was bought with an SBA.

I can tell it was bought. because I looked at the new company. It was bought and they did well, very well, as far as I can tell. Yeah, whoever bought this at almost any price toned. I mean,

like you could buy it and then you could flip it like a year later for a higher multiple, probably at a higher SDE because you've got that COVID bump. Yeah. Yeah, I just, this is when I saw this, I was like, wow,

this is the sweet spot. This is the best FBI business I've ever seen for sale. Yeah. So I have defined. What do you think this would trade in 2021 right now with all the thrasios and folks running around with pockets of cash? This would trade at 5X SDE right now, which is- That feels right. It's rich, but I think that's right.

So to give you guys an idea in 2019, I bet it traded in the high threes-ish, so maybe 3.75x. So on kind of 480, so I bet they paid $1.8 million for it. And of course, this is a complete shot in the dark, but I bet it has doubled since they they bought it. So I bet they're close to 900k of SDE and I think it's worth probably 5x. That's 4.5 million. So whoever bought this went from 1.8 to 4.5 million in enterprise value in about two years. Yeah. And if they bought it with debt, like, I don't even know what the math is that. Like what is that? Is that 10x 20xing your money? Probably put in between three and 500k of equity and now

are sitting on 3 million plus in equity. It's probably a 10x in two years. Large part of that is right place, right time, COVID bump, Amazon bump because of that, pet bump over the past two years. But I can also tell from look at this business, the buyer executed well. The products are well branded. They've leaned in. Interestingly, there are still only six skews have not expanded beyond that. So there's probably even meat on the bone still. But yeah, I think this business probably trades for 5x today. So just a rip off of this briefly before you go to the next one, this is kind of a super dumb question. but it seems like to me the most value that can be extracted. And Bill, I know I'm saying something that's contrary to your core thesis,

but the most value that can be extracted is taking, creating something out of nothing, right? Getting a business started incubating it and getting it to some level of a million to two million in revenue and maybe 300,000 to 600,000 in SDE because there's so much, there's so much competition to buy an asset like that. that has any amount of differentiation. But then where you are in the food chain bill is the step above that, you're the acquirer of those. And it's fiercely competitive.

And there's not enough actual, you know, viable assets to go around. You know what's more competitive? Starting one of these. There's a billion. Like, what you have here is survivorship bias. Like you see this one. There's 10 that didn't make it or more that didn't make it for everyone that gets to sale bill here to 2 million.

Moulson, I don't know what you think, but like obviously being biased, like where we have chosen to play is to outsource all of kind of the venture style, try 10 times, get here once to the market and we choose, you know, if there's money you made, it's going to be competitive either way. We compete in the competitive to buy the good ones. So Mulsin, I'm interested to hear what you think as to what, where's the better place to be? Start from scratch or try to buy something that already has some momentum. I think it depends on when you're asking that question.

So if you're asking that question in like 2014, 2015, there's nothing to buy. There's just not a lot of this out there. You have to remember that these guys started in 2017. And in 2017, this space was a great deal less competitive. So you could have started in 2017 and you were going to make like a ton of money unless you weren't competent. Today, it's a highly competitive space for starting. It's more competitive than it's ever been. So, well, let me go back a year or two.

Maybe in 2019, the best opportunity, 2019, my own business had a pretty tough year because of competition. We had to make some changes in order to, like, continue our growth and profitability. In 2019, maybe the thing to do was not to start because it was competitive and a lot of these guys who, you know, started these businesses wanted out. So 2019 was the time to buy. 2021 is I don't really know it's it's interesting I mean like probably now is the time to sell if that

makes sense so I like you know what bill is doing I don't know how much I can talk about that I don't know how much I even know but there's like you know this has certainly become a hot space and you can do things like earnings arbitrage earnings multiple arbitrage and stuff like that so now maybe the time it's time to roll these things up I'm not really sure but so basically what's happened is like 2020 was like supply was fixed but demand skyrocketed and when that happens like everyone's profits go way up 2021 it seems like we're going to get a lot more competition but I don't know what's going to happen and generally I feel quite bullish again to be one of these companies because what I'm seeing is you've seen like a ton of competition kind of on the Amazon side

So previously, like a lot of these companies didn't have companies like my own, e-commerce companies. We didn't have many options in terms of where we could sell. And now I feel like, you know, Shopify and Walmart, they're really investing massive amounts of money into building out fulfillment networks and stuff like that. So it's good when you go from like having kind of a single supplier, as it were, to having multiple. So maybe it does make sense to be bullish about these type of businesses again. But it's like it's like kind of like, I don't know, like why does Warren Buffett avoid technology? It's because it like changes often. And I don't know if you can call FBA pure technology, but in a sense it is technology.

So like this, this space is just constantly flipping upside down. And we could get like, we could get legislation, for example. I could make it like significantly more difficult for Chinese competition to come into the U.S. market. And that overnight would kind of have like COVID bump if you're an American e-commerce seller. So there are all sorts of different things that can change the dynamics of this business. And I wish I had an answer for you, but I don't really know what's happening. Yeah, it is. There's a lot of market dynamics and beyond just the individual company dynamics when you invest in the space. So any more comments before you move on in deal number two?

Yeah, that was awesome. Let's do deal number two. Let's do deal number two. So this one is also interesting. So this is also an FBI business. It was launched in 2013. So kind of about this, you know, even a little earlier than the one we just discussed, you know, and as Moulson mentioned at a time where you could basically spit in a cup and make money, you know, on Amazon. This business actually came out of the amazing selling machine, which was a big hot course for teaching people, you know, how to get rich quick online. Years ago, this person took the course. they started this business and I guess it kind of work. So they have the size of the business, it's 360 or so in revenue and about 145 in SDE.

So smaller business, kind of an entry level business. They are asking 2.75X and this was last year during COVID. So they're asking 400K for 145K of earnings. They say it is not SBA eligible. I'm not sure why that is. They don't expand on it. This business was interesting. It was sort of declining in 2019, and then they experienced a COVID bump, and then it was

selling kind of in the middle of COVID, kind of late summer, last year. So I definitely would have some questions as to why they had a terrible business almost probably reduced by a third over the course of 2019 before it got a huge kick in the pants from COVID. So what they make is they make kind of like body massagers, like things like that, like basically stuff you could buy from China, screenprint your label on and sell on Amazon. Plastics, kind of brushes, massagers, things like that. I wouldn't say they have a very strong brand at all. This is kind of your classic commodity Alibaba FBA business, right? Go on Alibaba, find a skew,

screen print your name on it, sell it on Amazon. So they're selling. They've got about six or seven products. It is almost entirely, though, like one or two hero skews. They say they've not planned to launch any new products. This person lives abroad. As far as I can tell, this business is on complete and total autopilot. Like, you know, they don't really think much about it at all. But they think it's time to sell. So, Moulson, what are your thoughts here? This business is track. This business is a crime against capitalism. This is a crime. This is an entrepreneur. ownership crime. I mean, to start a business and to start an Amazon business in 2013, not only to start a business in Amazon business in 2013, but to have a course, right?

It's not to just like discover Amazon, but to like buy a course, which is what Bill was talking about with the Amazon selling machine in 2013, it teaches you how to make a profitable Amazon business. And then like eight years later to only have 175K and seller discretionary earnings, that is like a, that is like, you know, getting like an email from some guy named Satoshi Nakamoto in 2009, reading it and be like, okay, I like this Bitcoin thing. I'm actually going to do it. And then like not ending up with like $100 million. Like this is, this is crazy. It's just there was such a massive opportunity. This is what I'm saying between 2013 and 2021 to build a massively profitable business and to only end up with

175K. And I think that's what it was. There's like under 200K and seller discretionary earnings. is basically a massive failure. I mean, I could keep going. I mean, these products are undifferentiated. They're just literally like a brush from China that you could get at any factory. There's no design patents. It's not their own design. You're going to get destroyed by Chinese competition to believe it or not can also figure out

to buy brushes and sell them. And it just blows my mind. Like, I looked at this business. This business got sold. I think the reason why it wasn't SBA eligible is actually because it was based in maybe in the United Kingdom. Yeah, but this business got sold to someone in my hometown or in a town where I may or may not live trying to keep the name maybe. How much of the contribution to this being a relatively unattractive business is the fact that these are products that are not consumables, right? I think that was the big takeaway I had from the pet discussion was like, oh, like, you can build up a recurring revenue stream from people if you have consumables.

These are plastic things that last for centuries, right? Like, is that a big contribution to why this sucks or is there other stuff that sucks too about it? There's a million contributions as to why this sucks. That's definitely one of them. You know, all else being equal, yes, I would, I much prefer, I mean, at Elements brands, we prefer consumables strongly. I think the biggest reason that this is brutal is because the products are completely on different chain. What about the price point, Bill?

You've talked a lot about price point on Amazon. This is typically under 10 bucks. Isn't that like a graveyard? Yeah, I kind of say anything under 15 bucks price point is the death zone. It's hard to have any money available kind of for customer acquisition cost at that price because you've got kind of fixed shipping expense. So, you know, if you sell a bottle of cream for, 50 bucks or you sell a bottle of cream for 10 bucks, you know, there's a lot more margin in the $50 one

that you can spend on ads and grow your business. Either way, it costs three to four dollars to ship it at FBA, right? So just having more margin available for customer acquisition is preferable. So this thing is, these are cheap this business's products. I think it's definitely in that death zone below 15 bucks. But honestly, for me, like this just, there's no way to convince anyone that this product is at all different than any of the other products exactly like this on Alibaba. And even if somehow you come up with a super catchy Facebook ad and like it blows up, you will attract a billion competitors that undercut the crap out of you, draft on your marketing spend, and take all your customers.

Because ultimately your product's the same as their product. So you're going to be spending all this money on Facebook ads with a higher price. and then the same guy that's selling to you in China is going to slap his name on it. That's two letters different than your name and put it on Amazon at half the price and you're going to get cream. So that to me is why I hate this because totally on differentiating. In this deck, there's like a Q&A element. And one of the question is, you know, what opportunity did you see? Basically, why did you enter this product category with this product?

And he says that it had a low BSR. What is that? Best seller rank. That means like, so in this. case, low is actually good. So like the product with the number one BSR would be the best selling product on Amazon.com. It's probably an iPhone case or a, you know, a cable or a phone or something like that. So a low BSR means that it's ranking well in its category. That being said, Moulson, I don't know what your thoughts are here, but that's not like a reason to buy a

business. If you're, if you're number one in a super small category, I mean, you can see this business has three or four hundred K of sales. Like that's, I'm more impressed by the sales than BSR right? Well, aren't there, aren't there like some services out there, like websites that will kind of help you just analyze the vast amounts of data on Amazon to say, hey, look, look for a product that, you know, maybe has this type of price point, it doesn't have a lot of competition, you know, aren't there kind of products or software kind of services that help guide you towards, hey, here's categories you should look after? Yeah. Yeah, this, the question here is what opportunity did you see in entering the category, basically, why,

seller are you selling these products? And they said it was a product with low BSR and low competition. And that's really what, you know, when you're analyzing these, you know, these niches on Amazon, you're looking for bad competition. You're looking for high search volume and bad competition. So that's probably what the seller is saying here that they launched at the time in 2013. I guarantee you like that's not still true. You know, if they were able to get started this easily, like eight years later, there's probably a hope that the Amazon. probably a wash in you. So if you were starting from scratch, what you typically look for is there tools out there that you can kind of plug in keywords and it can say, based on the results for this

search, here's how many this tool thinks they're selling, you know, and then you look at the results and go, these are poorly optimized. I think I can optimize better. I think I make my product better. I think I can sell either more cheaply or I can add value here in a way that these results aren't. And you kind of pick your targets. That's how you launch products on Amazon. I mean, also anything to add, I know you've done a ton of this. Well, I mean, I agree with everything you said. I might move the, except for maybe one thing, I might move the death zone down a little bit from $15.15 is depending on the price of things.

You can eke out like a per unit profit. One of our best sellers was like 15 bucks. Yeah, but like I just said, I agree with everything Bill just said. Maybe it would be kind of interesting you think, all right, like how could you make a, how could you make a profitable brush business? Like, what would you need to change in order for this to actually work? Right? Like, to Bill's point, it's currently undifferentiated.

Like, can you figure out a way to make, like, a patented brush design that in some way is a significant improvement to the typical brush design? Or can you at least, like, have a custom shape that's interesting in some way that is, has, like, you know, What's a good example of this? I don't know. Like a distinct shape to the brush that isn't actually functional, but is actually beautiful in some way. Can you get a design patent on it?

Can you be, if you own a brush factory in China, like that'll work in terms of like creating some nice barriers to entry? I have an idea. I have an idea. Those brushes are nasty bacteria farms. I think figure out a way to keep them from looking exactly like that. So play the clonliness, healthiness game. I think you'll get a premium for that stuff. Yeah, maybe that's the source of

like how you'd patent it. Like can you make this like a copper bristle brush in some sort of way because copper is an anti-nicrobial. Something. Yeah. Material. Love it. You got to do something like that. Otherwise, you're just going to get totally wiped out by the Chinese guy who either owns a factory or his brother owns a factory or his brother works at the factory. And they're just going to come in at a lower price. And they're going to, you know, they're going to have good marketing images too because they figured out how to do that. I mean, it's important to know about Chinese business culture that they won't feel bad about that. They kind of view it as like, if I can take advantage of you, it's not unethical for me to do that. It's kind of on you for leaving your back

door open. So you should just, you just kind of have to expect it versus American business culture, you know, is kind of like, if I was selling you, Moulson, you know, the plush toys, I wouldn't also be selling the plush toys, right? Because like that would be unethical. You know, if I were Chinese, I would say, well, you know, Molson never asked me if I was selling the same thing out the back door. And the contract doesn't say that I can't. So I'm perfectly within my rights to do it. And I will sleep great at night. Yeah. My grandfather went through that once. You know, we've been importing from China for a long time. And he sent this infamous telegram in the 70s to a Chinese supplier who was telling him it was okay to be cutting him

out as a middleman. And my grandfather said him a telegram that said, don't piss on my back and tell me that it's raining. It was the best. It was the best. I remember that forever. Yep. Did he keep doing it? Oh, they kept doing it and we cut out the supplier. We just said, there's nothing in it for us if you're going to screw us. We're not going to promote your brand anymore. It's happened to me so many times. over and over again. I've even been like, hey, don't do that. That won't work out for you. And then they're like, okay. And then they just do it. And then it doesn't work out for them. But I don't know. They can't help themselves. Humorously enough, the company that was doing it is the Black Cat brand, the guys who own Black Cat brand now.

And they're actually the ones who do like all the gap close, HEP here in San Antonio. Like they're a huge provider for them. They do all kinds of, they're a huge sourcing firm now. But they started out in fireworks. Lee and Fung company, it's super interesting. Oh, yeah, they're huge. Most of, when you get ripped off, do you get ripped off on brain flakes or on the plush toys? Mostly brain flakes. Really? Everything.

Uh-huh. Like, it's kind of like goes back to what you said, anything with a low BSR. So anything that sells well, you will get ripped off on. The better it sells, the more likely you are to get ripped off. What kind of, I mean, what kind of protection do you have on that? So I had a client in the past who had a trademark. on their name, which you have on Brainflakes. And they were originally selling really heavily on Etsy. And other people were not necessarily calling their product by the same name, but they were

putting tags on Etsy with that same name for a similar product that looked very similar that violated trade dress. And an attorney just sent an email to Etsy and Etsy shut down the competitor's store. But how does that work today with Amazon? So I got an article that's not like salesy or anything, but you can check it out. I think it's like how to start a physical products company, you're going to need a lawyer. It's like a pretty good article. People like it. You should read it talking to the listeners. So basically my theory on that is that you need to set up like a minefield around your product. And I would call it a minefield because the minds are hidden, especially when it comes to the Chinese competition, because they're just brain dead at intellectual

property. They just like really struggle to like understand it, even at like a basic fundamental mental level. And so you're going to set up copyrights. So what you're going to do is if you have really good images, as soon as you see those images start to get copied, because like you have access. So one of the few competitive advantages that us Americans have is we have access to like white models, which are super hard to come by in China unless you like want to use their like a Russian model or something like that. So maybe take some photos with like white models as opposed to Chinese kids or Chinese models, whatever. Then you're going to register those as copyrights.

Then you, like you said, like your client had, you need to have like a registered trademark with a good name. If your name sucks, the registered trademark isn't going to be as effective. So what ends up happening for us is people sell other interlocking plastic discs. And they also call them brain flakes. They call them creative flakes or snowflakes and whatever. And then if possible, you want to have some patent protection as well. So there are two types of patent protection.

One type of patent protection is like the shape, the non-functional shape. So I'm making like an hourglass figure because I'm talking about a Coca-Cola bottle. So that special Coca-Cola bottle shape is kind of like you can get a design patent for shapes that are non-functional. And then you have the conventional utility patent, which you can get for like a special device that is able to open a Coca-Cola bottle in just the right way. So you basically want to set up a minefield around your product in order to protect it. And then once you have that minefield, which is expensive to set up and requires a lot of time thinking to do, then you have to figure out how to enforce it in a way that is not too costly to your business because lawyers are expensive and terrible. Well, hey, hey, guys, we're starting to run up on time here.

I think in closing, Moulson, it would be great to hear a little bit about how people can find you, can find some of your writing. also potentially buy your products? Like, how can our listeners support you? Yeah. So you guys should all check out that article. I just mentioned starting a physical product. You're going to need a lawyer. It's super helpful for anyone who's interested in founding or buying an e-commerce business. It gives you all the pricing on like how much it costs to register that, how to enforce it and all that stuff.

And yeah, if you're interested, why not? Go check out our best selling product. It's called Brainflakes. Our company mission is all about inspiring confidence in capability and children. It's not just about the money. I mean, we try to make money, too. But that product is, like, really good at, like, building, like, 3D spatial thinking and what we're trying to do is create America's next generation of engineers.

Because it feels like we really need that. And so Brainflakes is part of that. And I guess you can follow me on Twitter, too. I'm probably not safe for work. But my name is Molson underscore Hart on Twitter. Nice. All right, guys. Excellent job today with that.

I think we'll wrap it up. Yep. Sound good? All right. Thanks, awesome. Cool. I will click the stop button and we'll be back next week.