Acquisitions Anonymous - #1 for business buying, selling and operating - Amazon FBA Supplements Business at 10x Multiple: Is It Worth It?

Episode Date: December 27, 2024

Discover the challenges and opportunities of acquiring an Amazon FBA supplements business in this engaging episode with special guest Travis Jamison.Business Listing - https://quietlight.com/listings/15830388/This episode is brought to you by our sponsors:Capital Pad: Your platform for connecting investors with searcher and independent sponsor deals. Learn more at https://www.capitalpad.com.HoldCo Conference: The premier event for holding company entrepreneurs. Don't miss your chance to connect and learn. Visit https://www.holdcoconference.com for details.Travis Jamison joins the show to break down an Amazon FBA supplements business listed for a whopping 10x multiple. With his deep expertise in e-commerce and Amazon FBA, Travis explores the risks and rewards of buying into a highly competitive niche. We discuss supply chain strategies, the sustainability of growth claims, and why some FBA deals might not be worth the risk—plus insights into more resilient investment opportunities.Subscribe 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]

The sales job on this thing is impressive. Wow, this might be the best listing we've ever done on the show. This business essentially competes in the most difficult Amazon niche that exist. These businesses scare the bejesus out of me. It just could go away so quickly. This is Acquisition Anonymous. Hello, another episode of Acquisitions Anonymous. We don't have 100% here.

Hello, everyone, and welcome back to another episode of Acquisitions Anonymous. I am one of your hosts, Bill Dallisandro, and the episode, you're about to listen to is one of my favorite ones we have ever done because it features my very, very good friend, Travis Jameson. I push Travis to come on the pod. He's one of the smartest internet entrepreneurs I've ever known. And he now has a new business venture called CapitalPad that helps match searchers and investors in search funds. So he's looked at a ton of deals. And today we do an Amazon supplements business, which is actually how Travis made a big chunk of his initial money. So he's an expert in the space. It's a really entertaining deal. The broker just did some really funny things. And it's a

great business. It's nearly a million bucks of you dying, growing. So, and the asking price is a little silly. So we had a great time with this one. It's a really interesting business. Travis has great opinions about supplements, and we talk a little bit about why investing in small businesses is different than investing in e-commerce businesses. So I think you will really love this one. I really enjoyed recording it. I hope you enjoy this episode of Acquisitions Anonymous. Hey, everyone, it's Bill, and I want to tell you about maybe the most exciting sponsor we've had in a long time on the pod. It's called CapitalPad, and it is the thing that I wish, when I started my journey of operating and investing in small businesses. So CapitalPad is a

marketplace for acquisition entrepreneurs that is people who want to buy a business and need capital to list their deals and solicit capital from other people who want to invest in acquisition deals. So if you want to back somebody buying a small business, CapitalPad is a place to do it. And if you want to buy a business and need capital, you can go on CapitalPad to be introduced to investors. So the really great thing, too, from the investor side is that CapitalPad takes care of all of the details that can get hairy with small business acquisitions. They handle standardized terms, standardized governance, standardized distributions all up front in black and white. Basically, CapitalPad professionalizes investing in small businesses,

and the returns can be really, really good. I'm so stoked they exist. It's founded by my friend Travis, who is a phenomenal entrepreneur in his own right. So if this sounds like something that's appealing to you, if you want to buy a small business and need capital, or if you want to invest in small businesses, go check out CapitalPad.com and tell them that Acquisitions Anonymous sent you. All right. So Michael just hit record because we're just like shooting the shit here for after too long. Michael's like, we're doing this.

We got a time slot. So welcome to Acquisitions Anonymous. This is, I don't know when you're hearing this, but we're coming up on Christmas. So hope everybody's having a happy holidays. Merry Christmas. Today, we have my very, very good friend, Travis Jameson on the podcast with us. Travis, how you doing, man? Glad to be here.

I'm fantastic. I'm really stoked to be here. I love your guys' show. So it's a pleasure to be here. Awesome. So Travis and I have been friends for, Travis is one of like my classic internet friends. Like I don't really remember when we first met, but like became real good friends on the internet and then became real life friends been up to Asheville to visit him been

rafting in the river done all kinds of great stuff so God bless the internet I've met such great people on it right we were not friends when we lived in the same city that's right that's right totally missed that so Travis being that you're our guest today give the people a little bit of just like a minute on your background and what you do and and why you're here all right real quick background serial entrepreneur been in everything from SaaS to marketing agencies, to communities, to e-commerce, like literally just about everything. Sold about half of those companies, about like six of them over the years, and the rest of them, I kind of have the management team running them because they're way better at running them than me.

And now it's pretty much an invest in stuff. So kind of naturally over time, moved towards a lot of like, you know, self-funded searcher deals and like independent sponsor deals. and now running Capital Pad, which is the marketplace that is sponsoring this. It's like an investment platform where sponsors can bring their deals and get funding for it and investors can invest in these types of deals that we're going over here. Cool. So basically all day long, you are looking at self-funded search deals and also talk to investors

who want to invest in those deals. Yep. That's all I do now, yes. That's awesome. So that's why I want to have Travis here because he sees deals all the time and has opinions and fun ones. So we wanted him to come and review a deal. So this is not a capital pad deal.

This is from Quietlight. We pluck this off the internet, but it is right in Travis's wheelhouse. So it is an online Amazon supplements business, which Travis has extensive experience in. So I think Gerds has decided that he is going to be our MC. Will you read it for us? Yes, I would be enthusiastic read it. I think we decided that because I was going to have the least insights on this deal. So if this would give me a chance to do my usual talking.

Cool. Travis, by the way, welcome. Also a huge fan of yours. So thank you for being here. Cool. All right. So Quietlight deal. This is a fast-growing health supplement Amazon FBA business with 6,000 plus subscriptions and 32% net margins. Man, I love a good quiet light deal. It's just, it's like, it's like, do you want a beer or do you want to take LSD? And I choose LSD when a quiet light shows up. All right. Revenue is 2.4 million. Income is 7801,000. And the multiple is 10.24 million. Whoa. Okay. Sorry. I'll keep reading. Asking prices $8 million plus inventory. Launched in 2020, this Amazon FBA private label supplement brand specializes in manufacturing, high quality, dietary, dietary supplements,

a GMP certified facility in China. In China. Made in China. That sound view here is my blood pressure going to like 180 over 120. The editor should just cut to Travis's video right now. Because you took a supplement made in China and you don't know what's in it. That's why your blood pressure is spiking. It's GMB certified though, Trump.

Doesn't that make it fine? Anything's bribable. Like, come on to China. Yeah. I have several rules in life. I have several rules in life. One is never put anything that I buy off of Amazon inside my body. So anyway, in 2022, the business was selling approximately 10 units per day.

And today, the business sells over 500 units per day. The seller has plans to grow the business to $3 million SDE over the next year and is eyeing a $15 million sale when he arrives at that point. With this business, a buyer is presented with the opportunity to acquire a $3,000,000, arriving at a reputable health supplement brand at a significant discount to where the seller believes the value will be 12 months from now. The seller has the brand and reputation today to dominate his industry. He also has the playbook that will take his brand from $2 million to $8 million of revenue and he has plans to launch 15 new A-sense, so skews by the end of 2024. These Amazon

reviews and star ratings are off the charts with this brand. The product averages 4.5 stars in an aggregate, there are thousands of reviews. Today, they boast 6,000 subscribers on the Amazon platform, and that number grows every single day. A subscriber's average order size is 5875, while a non-subscriber spends 3676. The best-selling products are magnesium, iron, biotin, and D3. There are about 30 A cents today. The supply chain for this business is extremely impressive. He has two overseas vendors. He orders, he orders product almost every day and generally, generally, generally, carries $150,000 or less in inventory at any given time. Gummies take 30 days to arrive, liquids take 20 days, and soft gels and capitals take 15 days. The product is sent directly from

the overseas suppliers to Amazon FBA warehouses. The seller has been running businesses for many years. He has watched many friends sell their businesses, and that has inspired him to take some chips off the table and allow a new owner to come in and execute on the vision. listed by our advisor Brad Wayland, who I think we've looked at some of his deals before, Bill. Is that right? Yeah. Wow. Brad.

The bang-up job by Brad. The sales job on this thing is impressive. Wow. This is my best thing we've ever done on the show. They had me at gummies. Okay. So. Okay.

What do you even start with this? There's like infinite. infinite things to hop into. I mean, the China part to start with. And then like the numbers, the reviews that the niches that they're in, like there's specific products. Like those are, those are no man's land. You don't any of those products. They're impossible. So tell me more about that, Travis. So let's just set the scene for the listeners like, what does this business do? And why is that so hard? This business essentially competes in the most difficult Amazon niche that exist. Worse than cell phone cases?

They're probably right up there. Yeah. No, all right. I'll give them that. Cell phone cases probably win, but it's easily top five. And, you know, it'd be one thing if this was like testosterone boosters and stuff like that. Like, I could see that. But with, if you're making magnesium iron biotin D3, like you're competing with the big boys. This isn't just random private label people. These are the big, you know, billion dollar companies. also selling these types of things. I know this because I've been in this exact space before and know like if you don't carve out some little tiny micro niche of it, like there's just no way. But these are like D3 or like magnesium. These are what you call like generics kind of, right?

Like these are the primary supplements that so many people take, huge red ocean markets, big tam, really competitive. Yeah. Now I totally believe the numbers that they're saying. I mean, it's quiet a lot. They're not going to bullshit us like that. But like, how are they getting those things? I mean, Chinese sellers are kind of notorious for, like, the games they can play that other sellers can't to make their stuff work. That's kind of my worst thing. So is it, I mean, these are also relatively inexpensive. Like, is potentially his niche price because he's having it made in China.

He's sending it, it sounds like, direct into Amazon FBI, which means he's probably using Amazon global logistics. So he's got this kind of just in time supply chain made in China. shipped via AGL right into Amazon FBA. So this is a 100% Amazon business, obviously. I would imagine the costs are pretty low. His manufacturing costs, his freight costs. Do you think he's competing on price? That is a really, really good point.

That's the only thing that actually makes sense to me here. Because, yeah, if you're making it in the U.S., it's going to be more. I mean, there's just no way around it. Because the U.S., they buy their raw ingredients from China and then make it in the U.S. with more expensive labor. Right? And more oversight probably. So yeah, that's huge, huge advantage right there. I mean, I would hate to compete on price with these things, but if they're making it work, they're making it work. Yeah. I mean, there's there's a acronym that is missing from this. So you see GMP, so

GMP by the way is good manufacturing practices, which basically means like there's not rat, we're not grinding up rats along with the vitamin D3 and putting them into the capsules. But the three letters that are conspicuously missing here are FDA, which you would get in the United States with the United States manufacturer, but you are not getting here with a Chinese manufacturer, which basically means we can't really be sure at all what's in these pills. Yeah. So the one possible counter, and I don't want to give a big counter here, but the one possible, like Gurdley, you said, like, you won't put pills sold on Amazon in your body, and I don't necessarily blame you. But Amazon has really cracked down on this.

lot. Like, you know, I own a big chunk of a company that sells supplements on Amazon. And I'm not active in the company. I'm just a passive owner. But they are, they're requiring all kinds of third party testing now. You can't get around it. I don't know if it's for all of the subcategories of supplements or just certain ones, but we spend a fortune getting tested from Eurofins. And it's not even just like any random third party provider. It has to be like a specific approved list doing a certain way. So I think everybody, is pretty much using Eurofins, which is like the gold standard there. So, I mean, I still don't trust it, but Amazon is doing a much better job with these things. And they were even like two or three years

ago. That's true. That's true. They have cracked down a lot. So it seems like, so I mean, let's just let's attack this kind of top down here. So they were selling 10 units a day in 2022, which is already after the business. Oh, it's already happened, right? The business is launched in 2020. So they went from zero to 10 in two years and they went from 10 to 500 in two years. That's what I'm saying. Yes. What do they mean by units here? Is that like bottles of one order? One order. Yeah. One order. Okay. So 500 units a day. Remember, their annual revenue is 2.4 million. So you can, you know, kind of do that math, 500 a day times, but that's probably their bleeding edge. I bet a year ago it was 250. So let's say it's 300 orders a day average of the last year,

divided by, you know, 2.4 million, that means that their average order value, I got to multiply by 365 here, their average order value is $22 or so, roughly, which would make sense for these categories, which are kind of generic categories. What I find interesting, though, is that they say their average order value is 3686 for a non-subscriber and 5875 for a subscriber, which is actually pretty good. Can we talk about, because I don't know anything about the way subscribe, subscriptions work on Amazon as a, as a seller. Is there value to that? It's not like your own dot com and you have somebody's credit card and, you know, that, that to me would be worth something. Is it worth anything in Amazon? What do you think, Travis? How important is subscribe and save

Amazon? I don't really know, to be honest. I mean, it's definitely worth more than the other. Like, I mean, I assume you guys have subscribe and save set up. Oh, yeah. A certain product. and like you ship more. You don't have to rethink it. So like, yeah, it's definitely a higher value. Yeah. I like this better than somebody selling pencils with no subscribe and save on Amazon for sure. This is repeat revenue.

With subscribe and save, though, Amazon's saying, look, I mean, yeah, we still control the customer. You're not getting any more data than you would otherwise. And you are going to take the hit, right? If it's an 8% discount or 12% discount or whatever, Amazon's not sharing that with. you, right? It just comes right off the top for you. I think a lot of these people are building on their models, though. I mean, even all the time now, you see like list price $2,99, but like actual price $19.99. It's like, I don't know. I mean, I think, I think on average sellers on Amazon are

far more savvy now than they were just a few years ago during like the FBA gold rush. Because they've had to be, right? That's one of the reasons I left. It's, it's too hard. And it's certainly still a huge, wonderful opportunity for the right people with the right skill sets. 100%. You can still print a ton of money. But like you don't just roll into this easily and put up a spatula. So I want you to talk a little bit more about that, Travis, because I think one of the things we talk a lot about in this podcast is buyer business fit.

And, you know, try to buy a business that you can bring value to as a buyer and kind of know how to run. And people get in a lot of trouble when they step into a business and they don't even understand how deep the pond is. So maybe just like as this is an issue, you know something about. And I'm not saying that you do or don't do any of things that you may or may not talk about coming up. But give the listeners a sense for in order to grow from zero to two million sales in two years in the most competitive niches in human supplements on Amazon.

What is what do you have to do? Like what are table stakes here? Why do you say it's so hard? All right. So I know the gray area stuff. The black area stuff, which is done all the time, I'm just not as knowledgeable on anymore. It's using bots and manipulation.

I don't even know at all. The gray area stuff is you're just going to have to give away a lot of products. And Amazon has cracked down on that. I mean, several years ago, but it's still done, and you just have to be a little more nimble with it. Because you have to, in order to rank on Amazon. So if you know, like, SEO for Google, it's like, you know, on page SEO and then backlinks. For Amazon, it's like on page SEO, and then your backlinks are order volume. And so you have to mimic that.

And so just like you can buy backlinks to rank on Google, you give away a bunch of your product to rank on Amazon. And there's all kinds of like nifty tricks to do that. But so like, you know, if you happen to have, if you're an influencer and you have a huge email list, wow, you can really launch a product on Amazon. And there are companies doing it really, really well. Like, you know, pretty stand-up companies doing it. But I don't know how they, how a Chinese seller, if they're, yeah, they're a Chinese seller. If they're a Chinese seller went from zero to this with like huge email list.

Like that's, that's difficult. Yeah. So either, either they're running whole giveaway campaigns where they're giving products away or they're telling people to buy products, then reimbursing them after they leave a review to generate kind of this false transaction volume. So you can get up to rank. And by the way, if they're doing that and then you buy this business and, stop doing that, you're toast, right? Because they're providing kind of this like constant booing to their order volume because all their other competitors are doing it too. So if you're, that's the thing about the supplement space is it's so competitive that all the sellers are doing

all of the gray hat stuff and some are doing the black hat stuff. So if you buy this business and you don't even know that there's anything but the white hat stuff that's explained on the Amazon seller central FAQs, right? If you don't even know how deep this pool is, your business will immediately collapse because you'll stop doing all the black hat stuff that seller was doing. Yeah. But if you know this world, and I don't know these guys were doing black hat, I don't know. They're certainly doing gray hat. There's no question.

But everyone is. It's just part of it. And occasionally you get suspended, but you get unsuspended. Like for the most part, unless you do anything crazy, like no one stays suspended anymore. But if someone has the skills and comes in and buys a business like this, maybe not at a 10x multiple, but like a business like this, like they can, they can do quite well. still, but I don't think someone without the experience can come in. It's just too complicated now. As a guy who used to be deep in this space, it's too complicated for me. I can't, I couldn't buy this. I mean, lists of things that happen. Like, competitors do negative one star review attacks on your

listings where they will pay people to leave one stars on your listings. You then need to appeal them one by one or pay people to do five star reviews on your listing to counterbalance them. Competitors will report your products for not having the appropriate testing, even though they do. Amazon's bot will flag it. you then have to work the case and submit your testing, but the whole time you're down missing sales. I mean, there are a million hand-to-hand knife fight things

that go on like this on Amazon. And if every time it happens to you, it's the first time you've ever seen it, you'll be down for longer. You won't know how to handle it. You might not get back up. Like, this is a freaking knife fight supplements on Amazon. And you would have no idea

if you had never sold on Amazon. So the company that I still own a big chunk of, I still get the notifications all the time. We used to panic. You know, like something, something's, you know, been removed from Amazon, it's restricted. It's just a daily thing now. You see it and, you know, I occasionally check that inbox. I'm like, oh, yeah, this is banned, this is man, this is ban, this is ban.

We've been flagged. Like, you get it unbanned, you get it unflagged because we're not doing anything super sketch. It's just how it is. It's just how the game goes. And so it's, you're all, what's that like, that old Greek thing of like the guy pushing the huge stone up the hill? It's a fist. Yeah. Yeah, yeah.

Like, it's just this. All day long, you're, you're pushing. pushing this up. It's a constant battle. But when you accept that it's a constant battle like that, like all entrepreneurship, but when you accept it, then it becomes a little easier. Like you sleep all and I like, oh, okay, well, tomorrow there's going to be new things happening and that's just part of it. We have an SOP for it and then we get unbanded and it has to be part of running this business. Yeah. Guys, are there supplements that are worth owning? Like, are there supplements businesses that are worth owning? If you, if you're saying this is kind of bottom of the barrel,

where it's made, doesn't have FDA, and it's in a very crowded category. If you had read something other than magnesium and biotent and D3, what would make your eyes just explode and you would go, I have to own this? Well, I personally would not like to own an FDA supplement business. Totally get that. Yeah.

In FDA, I mean, sorry, on Amazon, I don't know. Is it just like the more nichey, the better? Like, it needs to be some like obscure vegan, like, hard-the-source. Or is nothing proprietary? FBI is very much like SEO, Google SEO to me. It's a SERP position, right? I think, Bill, you've said this a million times. Like, it's just a search result.

And maybe you have a really big moat around. that. You see this sometimes where a company's been around for a long time. They've got like 10,000 good reviews. The other competitors can't compete. They have a good product. It's at a fair price. Like that's a really good one to have. They're kind of really hard to disrupt. Those are good. They're a little more niche probably. But like the general stuff, that's really, really tough. Because again, you're not, you're competing against the cutthroat people, but you're always also competing against like, you know, pure therapeutics and Thorne and these like, just, like, enormous brands doing it all right with special relations in the back end of Amazon.

Like those guys aren't getting banned. So I don't, but I don't like there's a lot of reasons to be scared of this. But let's let's kind of differentiate. I'm scared of this versus I hate this. Like I actually don't hate it. Like their margins are amazing, right? At 32% net. We'll get to the growth in the price.

But it seems like it's growing nicely. Their supply chain is incredible. that they're doing just in time supply of this stuff out of Asia and they're holding 150,000 of inventory, which is two weeks of inventory at two and a half million in sales roughly. I mean, like, first of all, I would hold more inventory than that. Like, there's no reason to run so just a time and like one boat is late and you're out of stock and out of stock on Amazon kills your rank. Like, they're making this business unnecessarily fragile by running it so just in time,

but it's very impressive that they can, right? this business is probably growing. It's got great average order values. There's a lot to really like about this. So I like this business, but I'm also scared about the sustainability of this business, if that makes sense. I have a, which would impact your. This to me smells a lot like kind of the drop shipping era, right, where people were drop shipping stuff and creating really no value and eventually kind of got wiped out as like a business opportunity. The arbitrage got done really fast. So, like, why would I not be worried about, like, the Chinese kind of doing what they're doing with everything else, which is bypassing me and trying to capture my margin here? Is it because I have a moat of, like, these established products already on Amazon and I don't think they can come and attack those? Or, like, is that a fear here? There are moats on Amazon.

And then there are definitely those that don't have the moat. I can't give me any more without knowing. What's an example of a moat? What's an example of something with a mode or a product type with a mode or what would you look for to know if something has a mode on Amazon? Hey, Michael here, I want to let you know that I'm hosting a conference, first time I've ever done it. And it's called Holdco Conference 2025. If you want to learn how to manage multiple businesses at once, how to incubate new companies, or how other WholeCo owners and operators run their fleet of companies, then should come to Utah next spring. We've got a ton of great speakers, including Walker Dybel, who wrote Buy Then Build and founded Acquisition Lab.

Plus, we're hosting it in an all-inclusive mountain resort so you can hit the slopes at the end of the day. So please go to holdcodeconference.com for your tickets and get 10% off with your discount AAPOD. That's holdcodeconference.com and use code AAPod for 10% off. Now, back to the show. It'll be a little more of a niche product. And then like if people are raving about it on Reddit and talking about it, like using that, you know, instead of, I think tissue papers and Kleenex, right? If someone's using that brand name as the thing, then yeah, that does pretty well. But moats are hard in the supplement space.

You do see people doing it. And like there's a company like, I can out them because they're not doing anything sketchy, like double wood, double with supplements. Classic. They crush it. Crush it. Crush it. I would never want to compete against them. Like they have, I mean, I would, I would happily be part of buying that company.

It's way out of my price range. But yeah, they're because they, their prices are on the lower end, like not the cheapest, but cheap enough like you can't compete on that. Their execution, their ranking strategies are fantastic. Like they just kill it all the time. Like, that is a moat in a company right there. So let's unpack doublewood supplements for a second because they actually got bought, Travis, like three or four years ago by private equity. It was juicy.

Yes. And the founders did great. But they do. So the thing that I think Doublewood does really well to kind of build on your nichiness. So they don't just sell a magnesium supplement. They are like trolling through the biohacking subredits and figuring out which type of magnesium, like the nerdy type, like magnesium L3 and 8 is it's the one on the homepage is why I picked it. We're sharing it on the screen right now.

Like that is how double would build this business. They kind of went in as you scroll through. They built, you know, they picked out like the nichey nerdy supplements that the biohackers were doing, started ranking for those, built their brand that way and then expanded into kind of the vitamin Ds, like the broader appeal stuff. And so I think that's what Travis is saying. like if something on Amazon has a brand, there's nothing about the Amazon listing itself. That's the moat.

The moat is that the brand has transcended its position in the search ranking on Amazon, right? People are actually searching for the brand or recognizing the brand and they trust the brand. And that's what Doublewood was able to do, starting nichey and then broadening out. And Doublewood was purely in Amazon play as far as I know. Then they just became like they're kind of a household name to people in the industry at this point. yeah yeah they've crushed it but like michael as you scroll this like there are supplements here that on their homepage that you i can't even pronounce and have never heard of like go back up just a little bit um i'll give just a few examples if you're not watching unfortunately michael screen shares are

working so i will look at mine um but like it seems like they have done so many good things you versus ben photamine yeah like what is sulbutamine versus ben fatamine like i don't know what either of those are. But like, somebody wants to read that article. Like, they plucked that out of a subreddit, you know, people debating about that. And those are the types of things they built their brand on. Sorry, I have to do a dad joke. You should go Fedogia agretzis yourself, Bill. There it is. Thanks, Michael. You too. I'm at value. If you're listing, that's a five-star joke right there. Please leave us a review. So like this, so the content on this page is impressive, right? Because that is probably showing up because somebody somewhere is Googling,

you know, what is Fidoja-A-Grethus? And then they have a whole thing about it's a shrub from Nigeria. And the content, though, is driving people to this website, their own.com. I googled it too. And Amazon shows up on the first page, but it's not the top link. Yep. So let's get back to this deal. And I, we have to talk about the valuation and the price. and the positioning from the broker. The giant elephant in the room, the 10x multiple. So just to refresh, if you were listening at the top of the pod, this business has $2.4 million in revenue. It has $780,000, round up to $800,000 of net income.

They're asking $8 million for it plus inventory. So it's a 10x multiple for this. And the justification I thought was just really, really stellar. The seller has plans to grow the business to 3 million of profit from the 800,000 news today over the next year and is eyeing a $15 million sale when he arrives at that point, which by the way would be a 5x multiple. Right. So right here in the, he's implying that he would sell it when it gets bigger for 5x.

And then they go into and says a buyer is presented with the opportunity to acquire this thriving and reputable health supplement brand at a significant discount, of course. we're doing you a favor. This is a discount to where the seller believes the value will be 12 months from now. The seller has the brand and reputation today to dominate his niche. He also is the playbook that will take this brand from the $2 million to the $8 million in revenue. And I assume they're calculating the same margins on $8 million of revenue gets them $3 million. He has plans to launch 15 new Aesons by the end of 2024, which is implied are necessary in order to reach that growth rate.

And then I just love the end, the punchline here. The seller has been running this business for many years. He has watched many friends sell their businesses, and that has inspired him to sell his business to you to take some shifts off the table and allow a new owner to come in and do all of this stuff. Where would you guys like to start? It's a psychological web that is being spun, you know? It's great. It's fantastic. I love it.

I love it. The best part about this, the listing is Brad, who looks like a lovely young man. I just kind of imagine it in his voice trying to convince somebody of the logic of that thing. Right. If you just kind of imagine Brad talking, you're like, oh, cool. I get it. Thanks, Brad's stone cold seller right here, Brad. Look, you don't get it if you don't ask.

And Brad did his team. They're asking. Can't blame them. Can't knock the hustle. So, I mean, the natural tension here is that people, you know, they pay up for growth. And we don't have like a monthly breakout of revenue. But this company's obviously been growing over the past two years. It's grown, you know, whatever that's 50 times in terms of just daily units from 10 to 500.

So there are reasons to pay up for growth. But how do you do that as a buyer? I think this is the crux question is how do you do that as a buyer and protect yourself and not go, oh, you know what? We didn't get to $3 million in SDE like they said. How do you not be the patsy in this in terms of structure? Also, I think growth on Amazon for a lot of people, they're just launching new products. And when you do that, you're essentially doing keyword research.

You're doing like what Doublewood did. You're finding these little niches and launching it and hoping it works. And, you know, maybe you have a hit percentage, maybe 35% of time you can get a good hit and another time you kind of lose it a little bit. So that's the way that growth will happen. It kind of like, do they have a really good launch strategy playbook that they're going to share with you. Like, that might be interesting to me. I'd also want to track, like, to your point, Travis, he says he's launching 20 or 15 new Aisons over the next month or two. And what you want

to understand is what you're lapping. Like, look at your, you can't just look at the whole company. You've got to look at each product like its own company. Like, what is the trajectory of the products that we launched last year? Like, did they do six months of great sales and then they fell off? Or are we layering cohorts or products on top of products here that each have their own growth trajectories and are sustainable. Because there are definitely businesses I've seen on Amazon where you launch something new, it pops, and then all the profit gets competed away over time. And you're running this hit machine. You have to always be launching, right? Those are much worse businesses than businesses where you can launch sustainably profitable products. And the niche

matters a lot. I wonder if you can get somebody to stick in supplements, it can be really great. But I wonder if the hit rate in supplements are going to be lower than the hit rate in other categories, just because it's so competitive. So that's what I want to understand is growth rate is revenue trajectory by product, not just for the whole company. All right. So with the company that I'm involved with, we basically put it in passive mode a few years ago.

And, you know, it was kicking off like good profit, you know, obviously when you're growing, especially in commerce, like it means you don't really get to take any profit. And so we were just letting it go. And the products would last a couple years. And then they all started declining because it takes like active marketing to kind

of keep these up. which a lot of people don't think about for Amazon. Like it does require active marketing to keep most of these up, unless your name's Thorne or maybe doublewood. I don't know. So that kind of changes it a little bit with like, what's the longevity of this? Maybe longer than you can wait to see for buying a business like this.

So the positioning on this is buyer. This is going to get to $8 million in sales and $3 million in profit in a year. And then it will be worth a modest 5x multiple. And that would be 15 million. So we're going to give you $5 million if you buy it today for $10 million. That's basically the positioning here. Great copyrighting. Great copy. I completely agree. But what is what is this business worth today based on the trailing financials at 800,000 in SDE? I mean, so last I checked the FBI multiples, what is this? 800,000. I see, I mean, it's like a they're like,

3x right now, right? Obviously, discounting this massive growth rate, but I think there might be 3x for this size. It was a little bit lower. It's finally starting to come back a little, I think. So at 4x 800K, it's worth 3.2 million bucks. At 3x, it's worth 2.4 million bucks. So this business is likely worth using market comps about $3 million, maybe $4 million, like if it's really growing nicely and you get a 5x multiple. And they're asking, here. And they're in doing it entirely based on a growth trajectory saying that it's growing so fast. There's so much exciting stuff in the next 12 months that it will be worth 15 million in 12 months. You know what I say to that? Sell it then. What are we doing here? If you're so

sure, and you didn't say at the bottom, seller's wife has three months to live. Right. And he wants spend every second one. It's not something like that. seller is under the gun and so has to sell now. What it says is seller has been running this business for many years and watched his friends get rich and now he has foam up. You should have my friends are rich and I want to be rich too. That's why he wants you to overpay for this, Travis. My friends sold to thraccio and I missed the boat so now I'm selling to you. Pretty much. My friends are rich and I'm not. Please give me money. We don't we don't have a resident banker on but I don't think that this deal gets done under traditional financing terms. Sorry, Heather.

That's probably not, Heather. To steal Heather's, Heather's Thunder. So the only person who can buy this is somebody who is probably, you know, a consolidator of some sort. Somebody who has a bigger balance sheet they can leverage. It's not just this deal on a standalone basis. I think the people who are doing that, though, aren't paying up for this. So it's a conundrum. It's a catch 22. I don't think you can't put debt of any sort, not even SBA, like this could not support debt because it could disappear with a blink of an eye. Yeah.

Well, the way you put debt on this is you find a bank that doesn't understand that, of which there are many. And you find a buyer who doesn't understand that. And then this thing gets loaded up with some debt. And then, you know, it's a very high risk transaction. But you're right, Travis. I would not put debt on this. It's scary. And I just, there is no world in which this sells for $8 million.

If it is truly the rocket ship, I say, hold it for a year, seller. Like, if you believe it to be worth $15 million, sell it for $15 million then in 12 months. This deal is going to take four to six months to get done anyway, right? Hold it. And if it's, or like, fine, we'll go under L.O.I seller. I will pay you 5x trailing 12 on the day of close, right? If it is truly such a rocket ship, I'll let you realize the, you know, the growth during the diligence period. and we'll pay you a dynamic price based on a fixed multiple.

Or you say, okay, seller, you think it's worth $8 million a day. You think it's worth $15 million in a year. Great. I'm going to pay you $3 million at close and we're going to set up an earner now. And if, you know, or I'm going to let you roll equity, right? And you can roll equity and own a piece. And then if it is worth this much, you'll get a second bite of the Apple and maybe you will ultimately walk with $8 million. if everything, you know, goes true.

You get three million at close. And then when we all sell it, you'll still own 33% of the business. We sell it for 15 million. You walk with another five and boom, you got your $8 million. Like that's the way if, if this deal gets done at all, you know, and the guy will tweet about it and say he sold his business for $8 million, by the way, even though it's going to be, you know, like two and a half at close and mostly earn out out and rolled equity.

But that's how you, the only way you can do this. These businesses scare the bejesus out of me. I just, it just could go away. way so quickly. It just totally scares me. So I think with a lot of these types of business, also think similar like affiliate websites and stuff like that, they're great businesses to start because it's, you know, pretty low capital. If it hits like this one, you're printing money. You know, you can, you know, if you got a little bit of cash put back, you can afford to like launch like 10 of these and maybe one of them hits, like the venture capital model. But to buy it, to buy it is a

whole different thing. It's just like, poof, can disappear. Yeah, the great business to, I mean, how cool is this business, right? This guy has less than $200,000 of inventory. He's slinging POs almost daily, and I guarantee he's not doing it. Some spreadsheet is doing it and some VA is probably doing it. It's cutting POs daily. And he's got just this pipeline from a Chinese factory to through Amazon Global Logistics straight to FBA. And every day, he gets a check. By the way, there's $2.5 million a year of sales, which means every day he's doing $7,000 in sales at a 30% margin. And this guy's making two or three thousand dollars a day. From nothing just a couple years ago.

Like that's amazing. That's amazing. Do that. Never touches a supplement. Never touches it. I guarantee this business is totally automated. Doesn't take his own supplements at all. Wouldn't dare put that stuff in his body.

Michael, is this you? Has it been you this whole time? Yeah, that would be a great conclusion of this podcast. It would be like, surprise. This is my suckers. And I sold it last week, you know, like that. That would be the best. Not only is it you, but somebody actually paid $9 million.

Drops the mic, walks away. Peace out. No. All right. Sorry. I don't have this kind of gumption. Yeah, but thumbs down. So not a great search fund deal is what you're saying.

Not a great. Yeah. Oh, yeah. So we have a rule, even on Capital Pad. Like, if it's FBI, like, this is a polite no. Like, maybe it will still be a good deal. deal, but like, we can't back it. There's just no way.

Yeah, this, this is a tough one. So, well, Travis, if you can't back FBI, sexy FBI supplement deals like this one, what type of deals are on Capital Pat? I like, I mean, to borrow everyone else's terms, like the boring businesses, you know, the, the plumbers. So we've done, like, dry cleaners, like luxury dry cleaners, even, like commercial kitchen repair services, like all stuff like that. boring things that are kind of hard to kill, which also like really, I was really attracted to this

because I made on my money with like internet businesses, right, which are easier to kill, but easier to spend up. But I want to like keep it in businesses that are like much harder to kill longevity. They're like, they're not really susceptible to AI. They're in the in vogue right now. These people can charge whatever they want. Like you guys called a plumber recently. You have to like, you have to hope they answer your phone. And then when they come, they'll charge you whatever. you back. Thank you. Thank you. Yes. Yes. My shower handle broke and I tried to fix it. I couldn't figure it out. It cost me $300. I had the part in my hand from Home Depot. It was a $15 part. But the trip charge is $300 just to come out. It's crazy. Yeah, these guys are winning.

Yes. So, Travis, I know that for regulatory reasons, you can't talk about specific deals on CapitalPad. Can you maybe talk about like a deal that you did that is personally before Capital Pad that is similar to the types of things that are on capitol. Yeah. So, well, it was a different dry cleaner. I've been involved in a couple of dry cleaners at this point. It was like a high-end, I think like luxury dry cleaner in Miami. They do, they do like normal people's clothes. They also do like couture clothing and like they pick up on people's laundry from their yachts in the marina and stuff like that. Sweet. Absolutely amazing business. Here's the interesting part. It took a long time to get the deal closed

because the owner was always on his boat. It took months longer. Yeah. I love that. That's the business you want to buy. Owner always on his boat. That says so much in one sense. It's like a $5 million deal,

like a 3x multiple, maybe a little bit more because it was kind of a, maybe it was like a 3.2 or 3.3 because it was a good business. The couture stuff played in there. People are not price sensitive if they're sending their fancy bags in there. So how did you source that? I mean, I know that's kind of the problem capital of that solved, but like how in the world would you do that if there wasn't a platform for it?

This is one of the reasons we made the platform. And I'm not just pitching my stuff. Like this is the truth. Like I discovered these like searcher deals and like independent sponsor deals, but they're so difficult to get access to that it took me like a couple years of just building up my network to where I started getting these things presented to me. And so it's not easy. You don't just be like, oh, I want to invest in these and you hop in and you. You see all these deals and you invest them? No, it's difficult. And the check sizes were quite large

as well for a lot of these deals, which makes it prohibitive for a lot of people to enter the space. Absolutely. Not on the platform. The capital pad numbers are a lower though, right? Yeah, capital bad minimums are up 10,000 each for accredited investors only, obviously. Okay, cool. So this, the dry cleaner deal is an example. You didn't buy it personally. You backed a searcher who now runs that business as the CEO. Yeah. Yeah. So, I mean, you know, I think that deal is roughly like $5 million. It was like 3.5 in SBA debt, a nice little seller note on there. And maybe it was like $5 or $600,000 in equity they raised from investors.

They put in a little bit themselves. Yeah. And you get really good terms too. I mean, it's like a, that one was like a 15% preferred return. One X liquidation preference. I think it was like a 2 or a 2.5x step up. It was freaking beautiful from. And again, it's a really old company.

It's been around for a long time. It's hard to kill. like from the investor point of view like this is great. And since they acquired it, again, because the owner was always on his boat. The owner was checked out because he's making, what, like a million and a half a year? He's like in the 60s.

Like he doesn't care. And so you get somebody who's hungry to grow it and they come in. They've already grown it. There are all these like corporate accounts that no one is doing anything with. So they come in and just like put a salesperson on it. And I don't know. They ramped up growth like 10% in a year. Like it's really nice.

And does it actually cash flow? Like do you get checks? Yes. No, this particular one, no, because they are implementing a roll-up strategy. But a lot of them, you do get, like, quarterly distributions. Like, I'm in a towing company, and yeah, every quarter, they send me my pro rata of the check. And that's literal mailbox money. Amazing.

Yeah, yeah, it's the best one. But unlike, I mean, I'm kind of a real estate hater, but unlike real estate money where it's like, here's your little teeny tiny percentage. Like, this is small business money. Like, I don't know, you're buying this good business at a 3x, you know, you can easily distribute 20% of the profits. a year. I mean, 20% of the revenue comes back in profits and distributions each year. You could probably be getting 20% of your capital back every year also, like your principal. So, yes, a lot of these deals, unless it's a roll up deal, those are a little bit special. But for these regular ones, you know, I want to see my 100% of my capital back in like three years.

Four years if it's like something extra special. But that's incredible. You don't see this anything else. I mean, I used to play in the Metro Capital space a lot. And I still have stuff from like over 10 years ago. still no no liquidity of an insight right yeah yeah and with these like you have a hundred percent your money back in three years and you now own passively part of like a a nice small business that'll be around forever um that that's like the dream for me especially coming from again like internet money where you have to like continually reinvent yourself you can't just rest in your laurels for a decade like it's kind of nice to be able to have something like that yeah i tell people like you know why business so hard like i compete with every single

supplement company in the world all day, every day, 24-7, right? Like this business we just look at. I would way rather compete with, like, the three trucking companies in Mecklenburg County where I live. You know what I mean? It's just easier, you know? I'm so bullish on opportunities like this for people with those skills that skills like you and I have. We know how to do stuff digitally and you're seeing these like small local businesses who just don't know this stuff. You know, most of the time it's been started by a founder who's like a take. technician in the space. And he really knows how to do plumbing. And so he kind of just kind of just naturally builds up over the years. He has no idea how to do anything else. So maybe he's hired

somebody, but you know, if you hire some like marketing person, like what does that really catch you? Sometimes it's okay. But then, you know, if you come in with this skill set and how to do stuff and you understand ads and some SEO and just like make a website that works, you add in like you answer your phone calls and like it's just there's so much low hanging fruit for businesses that are doing like millions a year in profit sometimes. It's, it's, it's The way I describe it is that I think e-commerce entrepreneurs are absolute weapons because it's so hard. And then I've watched some of my friends sell their e-commerce business and go do something different, like another industry. Like I have a friend who sold his e-commerce business and he went into land, like wholesaling land.

He's rolling up land. And he did like he deployed so much money in the first year. He took a course. This is a hilarious story. He took a course within like three months. he had deployed more money than anyone who had ever taken the course. The guy who made the course approached him and goes, if you ever need money, I want to invest in all of your deals.

And this was just like somebody Googled, like how to buy land or whatever. And he's like, you mean like I can just spin up automated postcards, automated emails. My Filipino team is like crushing the lead gen. And he's just ripping through this industry. I mean, he owns like huge portions of estate now. It's unbelievable. And has raised money and he's crushing it. It's just go to easier industries, like the ones we talk about on this podcast.

We're seeing these deals all the time. I mean, there's a deal, I forget what it was. Like, you know, like two million a year in EBITA, no website, right? Not even, not even a website. Half the time, they're barely functional. Another, like, great home service business. They did one thing. They advertised at the back of, like, the baseball field.

They had one of those little, like, posters. On the board. Yeah, on the board. That was all the advertisement they did. I'm just like, oh, my God, like the, the, and, you know, You routinely see people with like huge email lists of just like past service things. They've never even touched them. Again, like just really nice opportunities.

And not always. There's a lot of pitfalls and like landmines in there of where the, you know, the owner is the business and there have all the relationships. But if that's not the case, and I think there's a lot of opportunity for a lot of these. Yeah. My favorite is my dentist emails me on Christmas every year to mush me, Merry Christmas. That's it.

All right. We're coming up on time. So we got to wrap this one up. But Travis, I just want to say, thanks for being here, man. It's always fun to talk business with it. Ah, this is a lot of fun. Thanks so much, fellas. Thanks for coming.

Hell of an episode. 10X. All right. You guys like this one. If you like e-commerce business, if you like supplements businesses, go on our website, ACQU andan.com, and we have them all tag. There's tons of e-com deals on there. And if you're interested in learning more about CapitalPad, I assume it's just Capitalpad.com, right,

Travis? Yeah, Capitalpad.com. All right. And you tend to learn about some of the deals like the ones we talked about today. So thanks for coming. Thanks for listening. We'll see you next time.