Acquisitions Anonymous - #1 for business buying, selling and operating - When E-commerce Goes Wrong: Lessons from a $2.9M Deal

Episode Date: July 23, 2024

In this episode of Acquisitions Anonymous, we take a close look at a $2.9 million knife ecommerce business and discuss whether it’s a wise investment or a risky choice. We break down the business’s numbers, challenges, and market issues to help you understand why this deal might or not be the best bet. We hope you enjoy itCheck out this listing hereThanks to this week's sponsor:Have you ever wished that your business's software better fits your needs?IvyWorks can help. They specialize in building custom solutions for SMB’s complex processes.Book a free discovery session, and we’ll make you an actionable project scope document that any software firm can execute—no strings attached.Visitivy.works to learn more.Get more deals like this every week. Subscribe to our NewsletterSubscribe 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]

So what's the deal? Are you not allowed to sell knives on the internet anymore? Is that the problem? Right. So who care? Like, I don't care how many people on the list. I just care what fraction of their revenue is coming from email. And, you know, the seller always has that advantage over you as a buyer. They know. They know a lot that you don't know. Welcome to another episode of Acquisitions Anonymous. I'm Heather Anderson. And today I spoke with Bill and Michael. And we talked about a knife business, an e-commerce knife business. And it's very interesting. We got into some details about what happened with SEO and a Google. change, you might be pretty interested in what Bill has to say about that. Of course, I got around to a very obvious joke at one point, and hopefully you'll stay tuned for that part. So take a listen to it and let us know what you think. Today's episode is brought to you by Ivyworks, a Boston-based

software engineering firm dedicated to crafting tailored solutions for SMBs. Are you tired of off-the-shelf software that doesn't quite fit your needs? IvyWorks understands. Specializing in operations and client-facing software, they guide you from discovery to design, engineering, With the track record including projects like AI-powered drones for roof scanning and mobile apps for managing large-scale operations, IvyWorks is not your average firm. Led by founders Callan and Sam, they prioritize transparency and personal attention, involving you in every step of the process. Act now and receive a free discovery session complete with systems, architecture design, and feasibility study. And even if you don't choose IvyWorks, you'll walk away with a comprehensive project scope.

Don't settle for generic software solutions. Visit IvyWorks today and mention Acquisitions Anonymous for your free project discovery walkthrough. Let's build the software your business truly deserves. All right. Well, happy post 4th of July. Everybody's back. I'm back from the beach.

Michael and Heather, did you guys go to the beach or like at least drink beer or grilled burger? What did you guys do for the fourth? I didn't go to the beach for the fourth. I went the week before the fourth because it's too crazy here on the fourth. But I did just fun stuff around my neighborhood. Michael, he must have been working. That's what you're supposed to do.

Neighborhood block party, right? Yeah, exactly. It was fun. Yeah. Michael, did you just work all day on the fourth selling fireworks? Yeah. I didn't sell anything. I drive around looking at other people selling fireworks.

Well, I didn't buy them from Alamo, because I'm in North Carolina. But I did buy fireworks in South Carolina and shoot them off and thought about you, Michael. Thank you. Thank you. Try and support the economy. So the funniest thing, like, you know, I was. CEO of the fire company for a long time. And so the funniest things I would have friends, it'd be like, Michael, love you to death.

I came and bought some fireworks this season, want to support the cause. And then they send me a photo with their phone of the fireworks. And it would be fireworks from another vendor. And early on in my life, I would be like, oh, hey, just so you know, those are not ours. That's for the other company. And then later in my life, I'm just like, I just wrote back, thank you. I really appreciate the support. Just easier.

Just easier. Well, I feel like it's not fireworks or burgers, but the deal today is a little bit American. It's a knife business on the internet, which I'm kind of excited about doing because there's some really hard things about selling knives online that we can talk about. Who has it? Who has got the deal? It's from our friends at Quiet Light, who at least in my opinion, is they're one of the I think best e-com brokers out there, usually right over the middle on value.

They don't take a lot of the kind of scammyer listings. So there's a little bit of due diligence baked in with a Quietly deal, which is probably worth mentioning kind of the value or the signal in who's brokering a deal. Like I see it in e-com. Like, you know, Michael or Heather, have you guys seen it in other industries, you know, where the broker is doing half your diligence for you just by taking the line? list. I have seen some very good brokers. Yeah, there are some very good brokers who do some great diligence, but there's not as many industry specialist brokers as I think there needs to be.

You know, there's very few, actually. It definitely happens also when you get into investment banking, right? And Bill, I think you saw this in your career. Like, if some deal comes from Joe Schmo's investment bank, you know, in Kansas, that is totally different than if Goldman Sachs brings you a deal in terms of the caliber and size of stuff that people will take. And it also was fascinating to me as I've dealt with investment bankers. Like it goes like the worst their website looks or like the more bare bones their website is. Like typically the more badass the firm was. So like one time I ran into a TMT firm that basically was just their logo and like their address,

which was a PO box. And that was like the whole investment bank. That was their website. I was like, these guys have to be total badasses. And it turns out they were. They only did a billion-dollar-plus EV deals. But their website was just basically like as bad as the Berkshire Hathaway website. It's pretty funny.

Yeah, it's like the flex. We don't need a website. Everybody knows we're great. All right. Who's reading this one? I can read it if you like. All right. Go for it.

Go ahead, Heather. Go ahead. 20-year-old. Oh, you want to read it? You want to do it? No. No. I don't want to rain on your parade.

Okay. All right. 20-year-old knife business, 22% repeat customer rate, $90 average order value, $2,100 plus reviews, revenue 888,735, income 157,622, multiple 1.74X. Asking price, 275,000 plus inventory. established in 2004, the company is a leading online retailer of knives and related accessories. The business boasts a loyal customer base with 150,000 email subscribers, and a 22% repeat customer rate, a healthy $90 average order value, an impressive 4.5 star average rating from 2100 reviews, and a low 2.5% return rate. Since its 2022 acquisition, the company's current owners have successfully streamlined operations by transitioning from drop shipping to in-house inventory management.

This strategic move has resulted in faster shipping and improved customer experience. The business carries approximately 1,100 skews from around 10 U.S.-based vendors. Top selling products include personalized knives, assisted opening knives, and throwing knife sets. Whoa. Although, yeah, although impacted by Google's helpful content update, the company has a strong foundation and prime for a resurgence. Key growth opportunities include optimizing marketing strategies, introducing private label products,

expanding to Amazon, diversifying the product catalog, and resolving SEO challenges. A small team currently manages the company's operations, marketing, development, and finance, with owners spending minimal time on day-to-day tasks. However, a full-time owner and a part-time operation support staff could effectively run the business. The company presents an excellent opportunity for a motivated buyer to acquire a well-established e-commerce business, with a respected brand and multiple promising avenues for growth. With some focused effort to address SEO and expand marketing and product offerings, the business is poised for solid growth in the coming years.

It's listed by a guy named John Haynstock at Quiet Light as we talked about. So what do you guys think? I feel finally found a broker who. So what's the deal? Are you not allowed to sell knives on the internet anymore? Is that the problem? So you're allowed to sell knives on the internet. The hard thing is advertising knives on the internet.

So they don't basically all the platform don't want to take your money. So plowing a whole bunch of money into Facebook or Google or YouTube or whatever ads is just not allowed. And that is why I really feel for the people who bought this business in 2022. because when you can't grow the business through all these other avenues, pretty much the only thing left is SEO, is trying to rank for something like personalized knives or best personalized knife or whatever it might be. And so if something happens like a Google helpful content update,

which Google updates their algorithm. We don't need to get into it for this podcast, but Google updates their algorithm every so often. And every time they update the algorithm, there are winners and losers. You tend to hear about the losers a lot online because it can kill businesses, especially businesses like this one that rely a lot on SEO. So what I'm reading between the lines here is the current owner ownership group

or whoever it may be bought it in 2022, they got whacked by Google update during their ownership and the business in a toilet and they're about to take a bath on it. That's sort of my read because a business like, this, Knives is so dependent on SEO. So when I see that their SEO is in trouble, I'm extrapolating the business. The trajectory is probably not great since the current ownership group bought it. I've seen, I've seen this happen to another e-commerce brand. And it's sort of happened when the, and I'm going to forget what this was called, Bill, where people opted out of being

followed, you know, from platform to platform on something that they might have looked into. What, what was that called? iOS 14.5. So Apple, short version, Apple updated iOS, and it really made it a lot harder for Facebook to track you. And so it decreased the efficiency of online advertising and buy a lot in 2022, 2021, 2022. So do you think that's part of what happened here or just the Google update? This is not that. I mean, the net effect is a similar type of, you know, platform changes the rules. you get whacked. But this business probably was not dependent on meta ads at all because you can't. You've never seen it. Oh, I see what you're saying. Yeah. Okay. Make sense. So they are not advertising on meta, but their version of that is what happened to them,

is that their platform, Google, changed the rules and got way less efficient. They got a whole bunch less free traffic. And now they're probably struggling. That makes sense. I feel for these guys, because they probably bought it and they probably had this thesis of, it sounds like it's probably drop shipping knives. And they probably have this thesis to bring inventory in-house, improve the margins, and then try to grow the business. And they probably did all that right. And then out of nowhere, Google changed the algorithm and their revenue probably got cut in half overnight, which is just wicked. The key phrase here that I think the key phrase here that's super interesting is that you would diversify the product catalog.

If you want to fix the business, the broker says you diversify the product catalog and you resolve SEO challenges. They precisely use coded languages to describe exactly what you're talking about, Bill, in terms of what's happening in this business. Yeah. Now, in defense of the broker here, they priced it accordingly. It's priced at 1.75X. TTM. What, you know, tells you like this declining business, it's in trouble. It's not that big.

It's 157 of net income. And they want 275 plus inventory. The thing about, you know, Michael, as you called out, resolve SEO issues. It is frequently very, very difficult to just do that, just to wave your wand, right? Because Google has said this site is not relevant. Basically what Google has said is, we. realized that we made a mistake by showing this site as relevant in the past. We are now no longer going to do that. So you have to wholesale kind of redo everything and get a lot more relevant.

But the problem is you're now competing with a whole bunch of other sites that Google thinks is relevant. So it's not like there's just a vacuum of no relevant sites for personalized knives or something in this case. You immediately are slugging it out with all the people who Google has just said, oh, actually we just realized they're very relevant. Right. And you've got to now try to outrank them. So the same, the, the, what felt like a moat that delivered this business a ton of free traffic for years and nobody could compete with them, suddenly they're on the outside looking in. And that mode is great when it works for you and it's hard to crack when it's working against you. And back to what you said earlier, you know, Quiet Light is listing it.

And it is, it does look like, you know, it's priced correctly. What do you think about price plus inventory in a business like this? You know, the plus inventory part is always, it's always a challenge for someone like me who thinks about the financing and, you know, it's hard then to say, well, what is the real multiple? Because I don't know what the inventory is going to cost. What do you think about that? Yeah. Well, Heather, at risk of getting on the soapbox about the whole concept of plus inventory

pricing, which I just think is so stupid, but our industry is really set on sticking with. The reason it's stupid is because it incentivizes the seller to do one of two things, it really incentivizes them to order a whole bunch of stock they may or may not need and then just give it to you and make it your problem, right, versus run with a normal level of stock and give you a healthy business. The problem with a slowing business like this one that holds inventory is inventory that might have been four or five months of inventory last year is suddenly a year of inventory or suddenly two years of inventory.

And you don't know how long it's going to take you to turn that in. to cash. So you might, knowing this business was bigger. So now the $275,000 asking price, let's say they had $100,000 of inventory. The business was twice as big. It would have been a $500,000 business. The business is now half as big. Now inventory is a significantly larger part of the purchase price. And it's probably, if it used to be six months, now it's 12 months. And so you don't know, now you've got to sink an increasing amount of dollars into the questionable inventory asset, a larger percentage of your transaction, and you don't know when you're getting your money back. So that is a really sticky wicket on this one. Yeah. And I am so, I have a

soapbox too about businesses with inventory and financing them because all the same things that you just said, you know, I need to know how fast this inventory is turning and that is always a moving target. We need a hard count of the inventory before we close. We need to eliminate any obsolete inventory, which is not always easy to spot. And this is kind of one of those areas where when I talk to clients who have closed on a deal, either my clients or they just come to me afterwards with questions, those deals that had a lot of inventory often have a lot of challenges after they close because they miss some things in diligence or they didn't do the proper diligence on the inventory

itself and figure out that cash conversion cycle very, very well. So I am, whenever I see inventory in a deal, I, it's a little bit of a yellow flag that might turn into a red flag really quick when I ask some questions. Well, I think you just have to diligence it, right? Like one of, one of my favorite episodes that we did that sticks in my mind is a long time ago on the show, we did a Halloween costumes business. Michael, you probably remember it. Yeah, Heather, I don't remember if this was before or after your time.

But it was priced just like this, plus inventory. And we got into it and we realized that a significant portion of the industry or the inventory, rather, was kind of like meme Halloween costume that we're not going to be cool next year. Like it was like from some Will Ferrell movie or something that is not going to be, nobody's going to dress like that next year. So it was effectively not worth anything. But the seller was trying to sell all of it at cost. And you as a buyer need to be really careful to make sure you are not bailing the seller

out of poor inventory decisions. So that, just like you are diligent, the financial performance of the business to justify that price, you separately need to diligence the inventory value of this business to justify that other price, which is a significant portion of the purchase price, to make sure that you are not just bailing a seller out of stuff he should have never bought in the first place and letting him sell it to you in bulk functionally. Yeah, that Halloween costume is a perfect example because that's an easy one to understand. But in all these other types of businesses, when you really get into the nuances, that's when you

start to learn, wait a minute, some of this inventory is never going to sell. You know, and it takes quite a bit of diligence to figure that out. And, you know, the seller always has that advantage over you as a buyer. They know some, they know a lot that you don't know. And it takes a lot of digging and asking questions for you to figure something as nuanced as obsolete inventory out sometimes. Yeah. Now, that being said, I'm not sure that is on the face of it the case with this business. Like knives don't go bad. You know, you could, you could sell through over time. Like, yeah, you have the declining business, so months of stock stretch out problem, but you may not have the obsolescence problem that Halloween costumes have. The one thing I did like about this business is it looks like the first thing they go to is top selling products include personalized knives.

And that is something that is harder for other people to compete with. You've probably got an engraver. You know, you can start to carve out a little bit of a moat in that way. So I like that they're not just slinging commodity knives from other brands at map pricing and just trying to compete with no product differentiation. I did like that. How do you feel about the 150,000 person email list? Because it seems like knives are the types of things that like, it's kind of like

people who own snakes, you know, people who own snakes never seem to own just one snake. I think that knives are like that. Yep, exactly. So I didn't like that. It's men who have been owned snakes. They did. So I like that. Michael,

right, a 22% repeat customer rate, which is initially high than you would think for something that is not consumable, like a knife, you know, because people are collecting them or they're gifting them. Anytime someone gives me a headline,

150,000 email subscribers list, like great. That means nothing besides how much you're paying your email list for platform to keep them active. I want to know how many people open the email every time you send one. right like what is your engagement rate on those 150,000? And I have seen, you know, especially older businesses, they've been around for 10 years and they've aggregated everybody who's ever bought

something from them. But, you know, most, the average duration of the person on that list is five years and they have an open an email in three years. You don't get to count them. You know, you need to count just the engaged segment of people who are actually at the very least opening or ideally buying. Yeah. I saw that in the other e-commerce business where they,

you know, they got hit by the SEO change and could no longer find their customer that way. And they had always thought that they could pivot to this large email list and it didn't work. I mean, it worked so much less effectively than their SEO had been working, that it was a huge, huge difference. So I kind of agree with you. There's a lot more to know than just how many email subscribers they have. Yeah. And I think the only time you might say, like it might be,

view the email list as an asset is if it's a business that's doing a lot of transactions, right? So you have fresh emails on the list or people are signing up for the list. And then they're never emailing. Right. If they're actually not doing any email marketing and you have a fresh list, then you might say, okay, I think I can send two campaigns a week. I think each campaign will yield $2,000 to $3,000. I think it's that much incremental revenue. And then, yes, that's a growth opportunity. But you need to have a plan for the tactics, how you're actually going to exploit that rolodex of people. You can't just say, oh, I'll blast 200,000 people with emails. That's probably not going to drive very much revenue unless they've not been doing that. If they're

already blasting those people, it's baked in, right? So who care? Like, I don't care how many people on the list. I just care what fraction of their revenue is coming from email. And if it's a meaningful portion like that's cool and I like that because it's not dependent on all the big social media platforms and not dependent on Google algorithm updates because you can actually reach your people. So I do like if a business has a lot of email revenue, but I don't really directly care how many people are on the list. Good points. Okay, so we have a melting ice cube here, it appears, that is potentially distressed.

Who should buy this business? I don't know. Somebody that owns a lot of snakes. You know what they say, you don't want to try to. to catch a falling knife. Well, that is perfectly. Oh, boy. There.

I can't believe that took so long, took us this long to get to that time. 20 minutes in, we have our first dad joke. Nice. Well done, Heather. Nice. I don't know. I mean, it's, I think, I think you would have to get into it and look at it and go, is it, you kind of hope it's mismanaged and it got whacked by Google.

The thing that actually gives me a little bit of hope. about this listing is towards the bottom, where it says the small team currently manages the company's operations, marketing, development, and finance with owners spending minimal time on day-to-day tasks. So what I'm reading between the lines here a little bit, if it got bought in 2022, that was kind of the tail end of the e-commerce boom. You could have had somebody that didn't know what they were doing, either a somebody or a fund or an aggregator of some kind. in a capital pool who maybe didn't really know what they were doing operationally, who bought this thing, put in a bunch of outsourcers and kind of expected it to run on autopilot,

like the most dangerous word in business buying ever, right? I'll just put this on autopilot. And then on top of it, and probably the business would have struggled anyway, and then they got whacked by a Google update. So I think that pieces would have to be, I'm going to come in here, I'm going to assume that the SEO traffic doesn't, really recover. You know, and I got to pay a price that implies it doesn't really recover or minimally. But then you hope you also find some mismanagement or some under-exploited

opportunities or some, you know, the person from Thailand who's running this has no idea why Americans buy personalized knives or assisted opening knives or whatever it is, right? So you hope to see some disconnect between the people running the business and the customer and say, geez, I can come in here and actually, like, all these skews are bad. We need to turn over the product catalog. Like, the marketing is not right. It's not in the voice of the customer. We're going to take it to Etsy to do engraving.

We're going to take it to, you know, Amazon to do non-knife stuff and do engraving. We're going to use our engraving machines and process to engrave other things that are not knives so I can actually run ads. So maybe some people will come to the website to buy an engraved, I don't know, ashtray and then also buy a knife. You know, you need a thesis like that. But the death thesis here is, I'm going to buy this. I'm going to hire an SEO agency to fix the SEO and everything will be fine.

That's a great way to go to zero. What is an assisted opening knife? The switchblade. Press a button in the blight show. Oh, okay. See, I am not the customer for this business. And they're illegal in some states, I think, and they're definitely illegal to advertise. So like that assisted opening knives are the class.

classified different, like it's almost a gun. It's like more like a weapon. It's much more controlled. And that's another thing that reinforces to me that they can't advertise. And SEO was everything and that's why they're in pain. Makes a lot of sense now. So somebody sold these folks this business in 2022. Is that perhaps one of the greatest e-commerce trades in history besides all the people that sold the Thrasio, I guess? Well, I was going to say, besides there are thousands and thousands of e-commerce businesses that sold At the top, yeah. This is one of the many great trades that happened at that time.

Yeah. I think that's, man, watching this cycle go through over the past decade, I think that's a big, like, takeaway for me. Like, I am much more hyper aware of tailwinds turning into headwinds and vice versa. Like, and I think this is one of those ones where it's just like, wow, like, so bummed for these people. You know, you can't help but feel sympathy for. for them. I mean, it's so interesting for me, right? Because, you know, I'll take that I'm a relatively young person, right? I'm 38. And so I, you know, a lot of people, they talk about the tech bust.

You know, they talk about various bubbles and busts, right? But I had never really seen one, like up close. Like, I was pretty young for the, you know, I was 21 for the financial crisis. I didn't have a lot of investable assets. Didn't really affect me that much, even though I was working in finance. You know, the tech bubble I was young for. But this, the e-commerce, Amazon, on aggregator ramp and pop, I saw from as close up as you possibly could. And I feel like it was such a valuable life experience for me to watch what a bubble looks like as it inflates and as it bursts. And because I watched people who had no business by an e-commerce businesses, by businesses that I knew were patently awful. And it was not making any sense. And I'm looking around and going,

am I the idiot? Because all these horrible businesses are drained for crazy multiples. Maybe I'm the idiot. And it turned out that, you know, everything did come back down to earth. But to be familiar with that feeling, I really won't ever forget it. I think it'll serve me well. I agree. There is another feeling.

And I think Heather's gone through it, which is there's really only been like three times as an adult in that kind of business, like my business life. pushing 30 years now, where I felt like I wasn't sure the economy was going to keep going, right? And it was 2008. It happened to some extent in California, 2001. There was like a two-week period during COVID, and then it snapped back. But I think that's another one of those things that was really telling to me. Like, we're three for three on the economy eventually restarted, but I remember at each one of those moments thinking maybe this is where the economy finally grinds to a halt and we have a giant depression. And it was, I don't know, it was like, like I saw, I mean, during COVID, I saw, I was on calls before they announced PPP, the paycheck stuff.

Like, I remember getting on calls with like other CEOs and it'd be like 10 of us. And everybody's like, okay, based on what's happening right now, I'm going to have to fire everyone in my company like on Monday. Yeah. And that was like right before the PPP got announced. I don't know if you guys remember that. But that was like the, that was like the third time in my career that I was like, oh, if they don't do something, this whole thing is going to melt down. Yeah. We had, I had scenario plans where like each week we were going to start cutting people.

And then I was like, we got, can I go to everybody? Ask them to cut their salary in half, you know, in order for us not to have to fire everybody. Like, I had all these scenarios. And then, you know, because we didn't know. Luckily, e-commerce then took off like a shot. And we didn't have to do any of them. But it was really scary. It was.

I mean, I was a banker in a bank for PPP. And it was a really strange sensation. Like the email traffic was just intense. We could not keep up with people reaching out, worrying that the, you know, the PPP was going to run out before they got their application. And so there was this like desperation. It just felt really, really strange to be on the receiving end of that, trying to help people, trying to sort things out. And thank goodness it all kind of ended well. I think, relatively speaking.

But yeah, I'll never forget it. It was a very strange time, very strange. Yeah. So what is, so it's 2024, right? How do you guys think history looks at the PPP program? Like, let's leave aside the employee retention tax credit, which I think has gotten, you know, gamed and exploited to no end.

You know, focusing just on the PPP program, you know, do you think history, it was phenomenally expensive, like, phenomenally expensive? But do you think history looks at that as a good idea already? ultimately? I think it was a good idea that was executed poorly because they didn't feel like they had time to figure out rules. So they just sort of kind of stripped all the rules out and just said here, just, you know, everybody gets it. Everybody gets it. Kind of like Oprah. Everybody gets a car. So let's see. We did just so make sure my memory is correct. We had PPPV1, which was announced

within like the third week of COVID, right, when everything was starting to melt down. and then we had PPP v2 and wasn't there a third iteration of it where they kept shoveling money of people and then ERC showed up and there was EIDO. The third was EIDO. There was two PPPs, one EIDO

and then ERC, yeah. So we had two ERCs, two PPPs. I think here's my judgment on it, Bill. I think that the economy would have melted down if not for the very first PPP. I think the second PPP may have been justified. It's a question mark there. The ERC thing was just a total like boondoggle.

Like it was not necessary. Even I looked up and I was like, why are we doing this? Like the economy had already roared back and like disaster was averted. It was just a total waste of money. But the very first PPP, like I think that was some of the best government ever done. Like the whole economy would have gone to zero. And yeah, I know it was horribly implemented and they pulled some crap off the shelf and expected the SBA to like help with this and all these poor SBA lenders are dealing with. There was a ton of a ton of fraud.

But it was the best of a bad situation, which was literally like, I'm not joking. I was on a call with like 10 CEOs and they're like I'm there. We went around the room. They're like, I'm firing 50 people on Monday. I'm firing 300 people. Like I'm firing 400 people. Like that was the discussion going on and the economy would have melted down except PPP stopped. at all, like stop that whole process from happening. And we would have gone to a great depression

if they hadn't done it. Seriously. Yeah, I agree. I think it was really, really good government. I mean, the purple hearts are owed to everybody in the entire SBA value chain, including you, Heather, for administering like that giant, you know, horse needle of capital to the ass of the economy. We were all, anyone that was actually processing those, we were working until the wee hours of the morning over and over and over. And I remember we would have these conference calls where somebody that was in charge of the PPP for our bank would just say, just keep working. Just keep working.

I was like, I can't. I have to sleep, too. But it was, it was rough. Yeah, but it was literally, I mean, it was saving the economy, right? I mean, it was real. We felt good about it. We felt good about what we were doing. Absolutely.

Yeah. The subsequent grounds, I'm not defending that. That's just so we're all clear. They're total boondoggles BS. I don't know why we're still handing out free money at that point. But back to these bankers, like, you know, to some extent, that was back when we were still worried that subsequent iterations of COVID were going to be fatal. Like, a lot of these folks, like bankers, I know, like, they never left the office. Like, they were like, I mean, they were as much kind of the, like, the frontline workers trying to save the economy as some of these, like, health care folks and stuff like that.

And it's, I mean, obviously it's different when you're, like, dealing with some of these strains and you're, like, having to put people on ventilators. But to some extent, like, there was a lot of bravery amongst those bankers, you know, getting out of their house because it was a super scary time. We didn't know which variants were going to show up and what happened. So a lot of testament to, you know, what those people did. And the other thing that was funny in Heather, I think you could speak to it. Like, PPP by and large, didn't pay the banks very well.

Like, they weren't making money on some of these loans. They were making some bees and stuff. But like, based on the size of them and how it works, it's like, okay, we're going to do all this work. for $80,000 loan. You know, it's just like, you know, banks, most of them can't make money at that size. There were fintechs out there kind of trying to automate it in real time so that they could do it more and make some money off it. And I think a few were sort of marginally successful, but, you know, it was just the Wild West.

It really was, really was crazy. But people calmed down after the first round. After they got the first round, they realized, you know, this, like the second round wasn't needed as bad. and they had to show more need by the second round. It was a lot easier by then. It was the first round that was really, really scary for everybody because people felt if they didn't get their application in,

soon they wouldn't get the money. Yeah. The best part of like looking back on PPP, like nine months later, was like there were some officials and they were like, oh, you know what this did? This totally like inspired entrepreneurship in America. Look at all these companies that were formed during COVID. You know, it's an entrepreneurship boom.

And I'm looking at it. I'm like, I'm like, these are just dudes in Miami, like forming LLCs and committing fraud to buy Lambos. That's what's going on here. Like, there was no entrepreneurship boom. It was a fraud boom. And it was just like, oh, man, like taking credit for something that isn't true whatsoever. Yeah. Well, okay.

So the knife business. Okay. Here's the thesis. Go back to 2022. Don't buy this business. Put your money into T-bills and go down to some Caribbean island. That's my answer to these people. It's a time machine. Isn't that though, Michael, like isn't that the real rub with all business? Is that like, if you're in business for long enough, a substantial portion of the things that you do, you would have been better off with the time machine in T-bills. Right? I mean, correct. just is what it is. You work for huge portions of your career for nothing or value destruction, right? And then you have wins that hopefully counterbalance it. Yeah. Correct. Now, what you just hope is that that power law of wins, you have some 50x returns or 500 X returns, and that makes up for your negative 100% returns on a few things. I feel from people that incinerated capital on the knife business. Tough, tough to do. I mean,

in the grand scheme of things like at least they didn't spend four million dollars on a knife business right like it you know like I mean it could be worse oh yeah and someone might buy someone might buy what and you don't know by the way that this is not brascio or open store or like one of these other aggregators either by the way yeah um so well whoever signs the NDA we'll find out I think someone could buy this and do okay um like I wouldn't say that this is is radioactive. I think the people that took the blow already took the blow. And as long as you come into this, you pay the right place and you have an actual strategy beyond fix the SEO. Pay the right price. Don't overpay for the inventory. Actually have a business strategy. I think you could do it right with this. Yeah. That being said, that is in too hard pile for me at this point. Thumbs down. Too hard pile for me. This fellow demer says two thumbs down. I know lots of gluttons for punishment out there.

I have friends in e-com that are gluttons for punishment that do stuff like this. And I just, I got enough gray hair already. No, thanks. Turns out I'm a glutton for punishment. Terely. That's what I've learned. I want to keep my hair not white and at least on the top of my head. So I'm passing.

But someone could do well with this one. All right. Heather's going to buy. Heather's going to buy it. No, I am thumbs downing on just the plus inventory alone. They lost me right there. Plus inventory, thumbs down always. Heather, I think those knives are illegal in California as well.

That's right. I can't even buy them anyway. You're out. All right. Well, let's wrap this up. Thanks for listening. If you like this episode of Acquisitions Anonymous, go on our website, ACQU, Anon,

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